The History of Mark-To-Market Accounting

Some history from the SEC study:

Prior to the development of mandatory accounting standards following the Great Depression, companies had significant latitude in selecting their own accounting practices and policies. There is evidence that the use of “current values” or “appraised values” for assets, and the recording of upward asset revaluations, were common in the early-twentieth century in the period prior to the Depression. During this period, balance sheets often included upward revaluations of long-term assets such as property, plant, equipment, and intangible assets.

For example, a survey of 208 large industrial firms between 1925 and 1934 revealed that 75% of the sample firms recorded upward or downward asset revaluations during this period, including 70 write-ups of property, plant, and equipment, seven write-ups of intangibles, and 43 write-ups of investments.

Further, prior to 1938, banking organizations were required for supervisory purposes to use market value accounting for their investment securities portfolios. Serious concerns on the part of the U.S. Treasury and the bank regulators over how this affected the banks’ financial performance and investment decisions led the agencies to abandon in that year the use of this accounting concept for supervisory purposes.

Comments

[certified financial planner]

The Current Values and Market Values have always been a topic for the actual worth of assets or properties.

[ClubPenguin]

Thanks! Further, prior to 1938, banking organizations were required for supervisory purposes to use market value accounting for their investment securities portfolios.