Mark to Market

The buzz word floating around today is Mark to Market losses. Millions of dollars of reported losses are pointed towards this alien word called “Mark to Market”. It was shameful that I never understood this though everyone is talking about it. What if someone in my group asks me about it? What a shame!


I became determined to explore this complex set of words ‘Mark to Market”.

Let me start with young guys, I thought. The best area to catch them is the “Smoking Zone”. I have seen these young dudes take a deep drag and enter into a pensive mood. I always felt that they will be at their intellectual heights as soon as they have their first drag. I caught one as soon as he took that first drag.

“Well, excuse me?” I said.

Not expecting this intrusion, he started coughing.

“Sorry. Do you know what “Mark to Market” is?

“Hmm! Mark to Market. Hmm! Sounds good. Must be a Rock Band.”

“This dude is cool” I thought as I left that place.

During my morning walks in the park, I have seen several old, wise men discussing everything from poetry to politics. I have seen some of those loud spoken ones opinions are often taken as perfect judgment. I approached one of those loud spoken old, wise man and asked him about Mark to Market.

“You see, nowadays, everything depend on marks. You need good marks to get an engineering or medical seat. You need marks even for government jobs. Every private organization conduct tests and based on the marks, they employ people. The situation is so marks dependent, that even the market is given marks. Mark to Market means “marks” the exchange has got based on the sensex”. The old, wise man passed his judgment.

Somewhere in mind, I felt that this can’t be so simple. I continued my exploration.

I went to a well known chartered accountant. He was extremely busy with several individuals and organizations tax filing data. He told me he had just five minutes for me. That was exactly what I wanted. I wanted to de-mystify this “Mark to Market” with a simple definition. I asked him to concisely tell me what the “Mark to Market “is.

“Mark-to-market or fair value accounting refers to the accounting standards of assigning a value to a position held in a financial instrument based on the current fair market price for the instrument or similar instruments”. He said.

“What does that mean?” I asked.

“That is exactly what I told you”. Irritation was all over his face. I left never understanding a word.

The next stop was a management institute. I met the dean of Financial Management. He took me to an empty class and filled the black board with bar charts, pie charts, complex formulae and bored me to death for one hour. I ran out, the moment I realized that I had almost forgotten my question.

Nowhere else to go, I approached our CFO and pleaded to help me out. He laughed and said.

“Look, let us be clear. What is your issue? Is it “Mark to Market” definition or is it the shame that you are not able to explain?”

“I think it is the latter”. I admitted.

“Don’t worry. I don’t think anybody has understood this. All you need to do is to use the following answers to any question that is related to Mark to market Losses. Sometimes you have to use all of them”.

“What are those?” I was curious.

“Note down”. He said and I promptly took out my pen and the book.

1. “It all depends on whether Rupee appreciates or depreciates”

2. “It depends if we hedge, but we have to hedge”

3. “It is bad but it can be good”

4. “Our exposure is quite limited. Again it depends on how much we hedge”

5. “Everyone is exposed to it. We are no exception”

6. “It is a loss, but it is actually not a loss”

7. “ This year it was a loss, next year it can be a profit or it can be a loss”

“That’s it?” I asked.

“That’s it” He smiled.

Copyright© Ram Mohan

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PS: This is a fictitious humorous article and the characters and situations are my imagination. If it resembles any real life persons or situations, it is purely coincidental.