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The objectives of this paper are to: discuss the relevancy vs. reliability of current financial reporting practices, survey the literature that describes the impact of mark-to-market accounting, critically examine current GAAP financial statements by comparing them to market value financial statements. With theoretical discussions and a case study, this paper shows that the mark-to-market accounting could present better about the economic reality of transactions and, therefore, tends to provide more useful and relevant information than does historical cost financial reporting. This study suggests that if the objective of financial reporting is to provide "useful" information to the users, existing GAAP financial reporting requirements need to be substantially changed in the direction of market value financial reporting.


Originally published:

Shim, E. Daniel and Joseph M. Larkin. "Towards Relevancy in Financial Reporting: Mark-to-Market Accounting." Journal of Applied Business Research 14.2 (1998): 33-42.