GASB Considering Shift To Mark-To-Market Accounting

The Governmental Accounting Standards Board (GASB), which establishes standards for state and local governmental accounting and financial reporting, is considering a policy shift to mark-to-market accounting procedures.

Whereas GASB’s current standards values assets over the long term, they would instead be revalued daily based on market values.

Concerns have been raised that the new policy would unnecessarily call into question whether some public pensions are fully funded. Applying mark-to-market accounting could drop an otherwise 90 percent funded pension to 80 percent, 70 percent or even 60 percent. It depends on the market and each fund’s overall financial situation.

Pensions that are 80 percent funded or below are considered unhealthy.  Does it make any sense to substitute a daily market price to a long term economic value (cashflow)?  We are as aware of how woefully underfunded public pensions are.  The least of the problems are how the assets are accounted for.  This pours salt into the wound for no good effect.