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MARKET VALUE ACCOUNTING AND THE BANK BALANCE SHEET
Author(s) -
MENGLE DAVID L.
Publication year - 1990
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1990.tb00592.x
Subject(s) - balance sheet , market value , business , mark to market accounting , asset (computer security) , economics , fair value , accounting , monetary economics , finance , financial system , accounting information system , financial accounting , computer security , computer science
Market value accounting for depository institutions is frequently suggested as a means of limiting losses to the deposit insurance funds. But opponents argue that market value accounting is too costly to be worth the effort. This article examines each balance sheet category to determine the feasibility of marking bank portfolios to market. One can assume that almost two‐thirds of the asset side and over half of the liability side already are at market. In addition, securities and loans to less‐developed countries are traded in secondary markets. Thus, the major cost of market value accounting would be computing current values of commercial loans through discounted cash flow analysis. But efforts now are under way in the private sector to develop less costly ways to determine market values. If market value accounting is adopted, then it will likely have its greatest effect on institutions with large holdings of loans to less‐developed countries.