Mark to market

Mark-to-market is an accounting and tax practice in which the value of assets or liabilities is adjusted to reflect their current fair market value on a specific date, rather than their original purchase price or book value. This ensures that financial statements and tax computations reflect the true economic value of holdings.

Key Features: Ensures accurate representation of financial positions in statements. Commonly applied to securities, derivatives, and investment portfolios. Gains or losses arising from MTM adjustments may be recognized for tax purposes in certain jurisdictions. Helps investors, regulators, and management assess real-time performance and risk.

Example: An investor buys shares worth ₹1,00,000. At the end of the year, the market value rises to ₹1,20,000. Under mark-to-market accounting, the investor’s portfolio is reported at ₹1,20,000, and the unrealized gain of ₹20,000 may be considered for tax or financial reporting purposes.