NationStates

Galloism wrote:Um, no, it isn't. Not at all. Not in any way whatsoever.

The method of mark to market accounting was nonetheless used by Enron or Arthur Anderson to "cook the books" for Enron's financial statements. If Mark to Market's flaws are too many, I can't trust it compared to historical cost accounting.

https://corporatefinanceinstitute.com/r ... n-scandal/

In general, mark-to-market accounting runs the risk of being inaccurate. The market value of something at any given time may not reflect the true worth of an asset. If its undervalued, all is usually well. But if its overvalued and really worthless, it means huge trouble and lots of people losing money once the world finds out.

Saiwania wrote:

Galloism wrote:Um, no, it isn't. Not at all. Not in any way whatsoever.

The method of mark to market accounting was nonetheless used by Enron or Arthur Anderson to "cook the books" for Enron's financial statements. If Mark to Market's flaws are too many, I can't trust it compared to historical cost accounting.

https://corporatefinanceinstitute.com/r ... n-scandal/

In general, mark-to-market accounting runs the risk of being inaccurate. The market value of something at any given time may not reflect the true worth of an asset. If its undervalued, all is usually well. But if its overvalued and really worthless, it means huge trouble and lots of people losing money once the world finds out.

So, Enron’s tactic would be more accurately described as “mark to model”, because the underlying assets were not publicly traded and there was no agreed upon way they could be valued.

Also, it was basically killed by the Sarbanes-Oxley act.

This is fundamentally different than what is being talked about here, where the assets are assets with readily determinable objective fair market value, as it is high volume publicly traded.

How do they pay the interest?

Forsher wrote:How do they pay the interest?

If you mean on the money they borrow against the stock, usually by borrowing money to pay the interest. But the interest isn’t much - especially in this day and age.

Galloism wrote:

Forsher wrote:How do they pay the interest?

If you mean on the money they borrow against the stock, usually by borrowing money to pay the interest. But the interest isn’t much - especially in this day and age.

Wait, is this just a never ending spiral of borrowing money to pay (however little) interest?

Forsher wrote:

Galloism wrote:If you mean on the money they borrow against the stock, usually by borrowing money to pay the interest. But the interest isn’t much - especially in this day and age.

Wait, is this just a never ending spiral of borrowing money to pay (however little) interest?

Yes, because it’s cheaper than paying the tax - even on a long scale.

Bombadil wrote:I suppose the main challenge is that whoever does the valuations will be tied up in litigation for years, how do you correctly assess a painting, or a diamond necklace.. i can even see the value of property being squabbled over endlessly.

Just adapt the medieval solution - the owner has an obligation to sell a given piece of property if they receive an offer that is above some multiple of the value they declared for it.

So if you declare your house to be worth $100 and pay taxes accordingly, if I present you an offer of $150 then you have to sell it to me.