THE ROLLER-COASTER MECHANISM IN THE WORLD ECONOMY. Mark-to-Market and transactions outside the market

  • Marking-to-market is a concept which has started to invade a significant portion of both accounting and cross-border contracts. As a concept it is good, as it makes accounts more informative, but it also introduces problems.
  • One of the problems is that it accelerates losses when markets collapses, and therefore constitute a risk of being one of the elements that make companies go bankrupt in a crisis. This can be avoided by changing the accounting guidelines for mark-to-market accounting.
  • Another problem is that mark-to-market contracts, where the asset sits in another country, most often in a tax haven, creates the perfect opportunity for companies to transfer untaxed funds to tax havens, reducing taxes in the country where the company resides. The solution is to tax the mark-to-market profit through easily available mechanisms.
Written by: 
Frian Aarsnes
Publication date: 
December 2017