That’s regardless of whether or not the company intends to hold those Treasury bonds until maturity, at which point they could be redeemed for the full face value. But using mark to market accounting can give investors a full picture of how market conditions have affected a company’s investments.
Mark to market accounting gives shareholders and potential business partners a better understanding of a company’s current balance sheet.
If a lender makes a loan, it ought to account for the possibility that the borrower will default. If it can’t collect on the loan, the loan has no value. Therefore, a contra asset marked as an allowance for bad debt can ensure the balance sheet is marked to market.
Wholesalers use mark to market accounting when they need to adjust the value of their accounts receivable asset. Many wholesalers will offer discounts to purchasers if they pay sooner. Depending on the percentage of customers likely to accept a discount for shorter payment terms, a wholesaler will need to mark down its accounts receivable to the market value using a contra asset account.
