Corporate Reports: Mark-to-Market and Sustainability Analysis

This report provides a comprehensive analysis of corporate reports, specifically focusing on mark-to-market accounting and sustainability reporting. The first part of the report delves into the benefits and risks associated with mark-to-market accounting, exploring its impact on financial statements and asset valuation. The second part examines sustainability reporting, emphasizing the implementation of Global Reporting Initiative (GRI) Standards and their associated costs and benefits. The report highlights the usefulness of mark-to-market accounting in asset valuation and the importance of sustainability reporting for building trust and improving internal processes within organizations. The analysis covers the advantages and disadvantages of each approach, providing a well-rounded understanding of their practical implications in corporate finance.

Running head: CORPORATE REPORTS
Corporate Reports
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Part 1................................................................................................................................................1
Part 2................................................................................................................................................8

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Part 1
Executive Summary
The main objective of this report is to analyze and evaluate different aspects of Mark-to-Market
Accounting. The first part of the study involves in the evaluation of the benefits of adopting
mark-to-market accounting in the companies. In the next part of the report, the risk involved in
for the companies in the adoption of mark-to-market accounting is discussed on a detailed basis.
After that, the last part of the report evaluates the usefulness of mark-to-market accounting mark-
to-market accounting in the reporting of the values of various assets and liabilities of the
company in the financial statements.

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Introduction
Mark-to-market accounting refers to the process of determining the fair value of the
company’s assets and liabilities based on the market price of those similar assets and liabilities.
On a more specific note, mark-to-market is the reasonable value of an asset or liability that varies
over the period depends on the market value of that assets and liability (Ball, Jayaraman and
Shivakumar 2012). Most of the business organizations all over the world use mark-to-market
accounting as an accounting tool in the process of recording the value of an assets or liability in
respect to the current market prices of that asset or liability. Thus, based on the above discussion,
it can be seen that there are some major advantages of mark-to-market accounting. It also needs
to be mentioned that there are also some disadvantages of mark-to-market accounting. All these
aspects are discussed below.
Benefits of Mark-to-Market Accounting
It can be seen that most of the companies all over the world have adopted the mark-to-
market accounting process for the valuation of their assets and liabilities. The major reason of the
adoption of mark-to-market accounting is that the companies get many benefits from the
adoption of mark-to-market accounting. The major benefit of mark-to-market accounting for the
business organizations is that it helps in the process to keep the financial statements of the
companies more realistic. This is done by measuring the values of the assets and liabilities of the
companies on the fair value basis. For this reason, the financial statements of the companies are
able to reflect the true financial position of the companies’ and the stakeholders and investors
can actually judge whether the financial position of the company is in danger or not. Another
major benefit of mark-to-market accounting is that it helps the companies from over-extending

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their financial leverage. Thus, the companies can gain control over their borrowings against their
total liabilities (Ellul et al. 2014).
As a result, debt position of the companies becomes stronger. Without the restriction over
the process of borrowing against the assets, the companies might misinterpret the value of the
assets in order to disguise a falling business. In this regard, it needs to be mentioned that the
adoption of mark-to-market accounting injects major disciplines in the financial service
organizations like banks and various other financial institutions (Ashton, Maguire and Spilsbury
2016). Most of the accountants all over the world consider mark-to-market accounting as a self-
correcting mechanism that helps in the reduction of companies risk profile at the time of market
decline and financial crisis. On the contrary, at the time of the rise of the company’s market
value of assets, the use of mark-to-market accounting helps the companies to increase their
financial leverage. Another major benefit of the adoption of mark-to-market accounting is the
effective treatment of business losses for the companies. Under the use of mark-to-market
accounting, companies get the opportunity for capital gains from the losses (Amel‐Zadeh and
Meeks 2013). Thus, based on the above discussion, it can be seen that the companies can get
major benefits from the use of mark-to-market accounting.
Risks in Mark-to-Market Accounting
In the earlier discussion, it has been mentioned that apart from the benefits, business
organizations have to take certain risks in the process of mark-to-market accounting and these
are some major risks. A large number of controversies are related with the mark-to-market
accounting as this accounting process demands the companies to mark their assets and securities
in the market value or market price. For the financial institutes like banks, it is difficult for them

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to mark all their loans, as it does not always reflect the true value of their loans. When this type
of risk occurs, either the financial institutes forced to sell some portion of their portfolio or they
have to retain money for reserve. In both of the cases, the companies have to face risk. Most of
the famous accountants all over the world consider the fact that the adoption of mark-to-market
accounting increased the financial crisis of 2008 (Magnan, Menini and Parbonetti 2015).
It can be seen that there are some major negative aspects in the organizations as a result
of the adoption of mark-to-market accounting. Sometimes, mark-to-market accounting creates a
vicious circle in the financial system of the companies that lead to a huge amount of papers
losses for the companies. Some of the other financial risks associated with the adoption of mark-
to-market accounting are the reduction in the security holdings, decline in credit worthiness,
decline in credit ratings, limit in the borrowing capacity of the companies and others. It needs to
be mentioned that all these aspects together can lead the financial organizations towards
insolvency. Thus, based on the above discussion, it can be seen that there are some major risks
involved in the adoption of mark-to-market accounting. Hence, all the companies need to
consider these aspects at the time of adopting the mark-to-market accounting (Palea 2014).
Usefulness of Mark-to-Market Accounting in Asset Valuation
There is major usefulness of mark-to-market accounting for the reporting of value of the
assets in general purpose corporate financial statement. It is a fact that financial institutes have
mostly higher proportionate of assets and liabilities in their balance sheet. With the help of mark-
to-market accounting, the business organizations can report the value of their assets and
liabilities with the help of various accounting concept (Bowen and Khan 2014). The value of the
financial assets are recognized based on fair value accounting and thus, they reflect the true value

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of them in the financial statements. In addition, any changes in the value of the assets and
liabilities are reported in the profit and loss account. This same principle is also available for the
measurement of liabilities in the organizations. Under the regulation of mark-to-market
accounting, business organizations are required to prepare and report the annual reports of the
companies on a yearly basis. Moreover, all these documents need to be presented as per the
regulations of International Financial Regulatory Standard (IFRS). As per the regulations of
IFRS, all the assets and liabilities need to be measured by using fair value (Flannery 2014).
Conclusion
Based on the above discussion, it can be seen that mark-to-market accounting has its own
benefits and it has risk involved. The major benefit of mark-to-market accounting is that it helps
to reflect the true financial position of the company by valuing their assets and liabilities in the
fair value basis. However, the major risk in the adoption of mark-to-market accounting is that
this process is not always applicable for the accounting of various financial institutes like banks
and others. As per the above discussion, mark-to-market accounting helps the companies to
report their assets and liabilities in the true manner.

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References
Amel‐Zadeh, A. and Meeks, G., 2013. Bank failure, mark‐to‐market and the financial
crisis. Abacus, 49(3), pp.308-339.
Ashton, D., Maguire, M. and Spilsbury, M., 2016. Restructuring the labour market: The
implications for youth. Springer.
Ball, R., Jayaraman, S. and Shivakumar, L., 2012. Mark-to-market accounting and information
asymmetry in banks.
Bowen, R.M. and Khan, U., 2014. Market reactions to policy deliberations on fair value
accounting and impairment rules during the financial crisis of 2008–2009. Journal of Accounting
and Public Policy, 33(3), pp.233-259.
Ellul, A., Jotikasthira, C., Lundblad, C.T. and Wang, Y., 2014. Mark-to-market accounting and
systemic risk: evidence from the insurance industry. Economic Policy, 29(78), pp.297-341.
Flannery, M.J., 2014. Contingent capital instruments for large financial institutions: A review of
the literature. Annu. Rev. Financ. Econ., 6(1), pp.225-240.
Magnan, M., Menini, A. and Parbonetti, A., 2015. Fair value accounting: information or
confusion for financial markets?. Review of Accounting Studies, 20(1), pp.559-591.
Palea, V., 2014. Fair value accounting and its usefulness to financial statement users. Journal of
Financial Reporting and Accounting, 12(2), pp.102-116.

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Part 2
Executive Summary
The main aim of this report is to analyze and evaluate various aspects of sustainability reporting
for the business organizations. The first part of the study involves the analysis and evaluation of
the implementation of Global Reporting Initiative Standards for the business organization. The
next part of the study includes the discussion of the implementation costs of Global Reporting
Initiative Standards in the business organizations. Based on the above discussion, a conclusion is
drawn at the end.

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Introduction
Twenty-first centuries is known for the development of businesses all over the world. It
has been seen that the businesses are progressing in a fast pace. In this regard, it needs to be
mentioned that the business operations of the companies are affecting the environment,
community and people of community for a large manner. This became one of the major concerns
for the people all over the world. Out of this concern, there was the development of the concept
of sustainable reporting (Milne and Gray 2013). As per this concept, the business organizations
to make positive as well as negative contribution towards the achievements of sustainable goals
and objectives. In the process of sustainable development, Global Reporting Initiative Standards
play an integral part. As per GRI standard, every business organizations need to disclose their
different practices against the impact of their business operations on economic, environmental
and social aspects.
Benefits of Global Reporting Initiative (GRI) Standards
The aspect of sustainability reporting under Global Reporting Initiative Standards is one
of the major steps for the achievement of sustainable global economy. With the help of Global
Reporting Initiative Standards, the accountability of the companies regarding the impact of their
business operations can be enhanced and this process leads to the development of trust among
the stakeholders of the company. This is a major process towards the development of a cohesive
society. Global Reporting Initiative Standards helps in the availability of sustainability related
information of the companies so that the government can access them in order to assess the
impact and contribution of the companies regarding sustainable initiatives. Thus, it can be
observed that in the business organizations, there are some major benefits of sustainability

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reporting under Global Reporting Initiative Standards. Some of the major advantages are
discussed below:
Building of Trust: With the help of Global Reporting Initiative Standards, business
organizations can publish the details of their non-financial performances like the performance of
the companies in sustainability reporting. This total process helps to create a positive image of
the company in the community and as a result, reduction in reputational risk can be seen. In
addition, with the help of Global Reporting Initiative Standards, the business organizations can
open up dialogues with different stakeholders of the company like shareholders, investors,
customers, people of the community and others. This whole process helps to increase the
transparency of the business organizations regarding sustainable reporting and as a result,
development of trust can be seen between the stakeholders and the companies
(globalreporting.org 2017).
Improvement in Process and System: With the help of Global Reporting Initiative Standards,
the business organizations have the option to improve the internal management of the
organizations. In addition, the decision-making process of the companies can be examined and
improved with the help of Global Reporting Initiative Standards. In addition, the business
organizations can reduce the overall cost of the organization by measuring and monitoring
various organizational issues related with energy consumption, use of material, waste
management and others (Tschopp and Nastanski 2014).
Progressive Vision and Strategy: Some of the major aspects of sustainability reporting of the
companies are analysis of strengths and weaknesses; level of engagement with the stakeholders
and others. Global Reporting Initiative Standards helps the companies in the development t of

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sustainability reporting strategies. As a result, sustainability becomes one of the major parts of
the organizational strategies (Junior, Best and Cotter 2014).
Reduction of Compliance Cost: At the time of the business operations, the business
organizations have to comply with different kinds of regulations and legislatives. With the help
of the measurement of performance in sustainability, the business organizations become able to
meet the regulatory requirements on an effective way. This aspect leads to the reduction of
various compliance costs of the companies. On the other hand, the companies can gather various
data in a most cost effective way (Abeysekera 2013).
Competitive Advantage: It can be seen that the business organizations can earn goodwill to their
customers as well as people of community with the help of adopting Global Reporting Initiative
Standards. This process differentiates the companies with the non-sustainable companies. Thus,
it can be said that the adoption of Global Reporting Initiative Standards helps the business
organizations to gain necessary competitive advantage for their businesses. These are the major
benefits of Global Reporting Initiative Standards in the companies.
Cost o the Adoption of Global Reporting Initiative Standards
As per the regulations of Global Reporting Initiative Standards, the business
organizations have to bear the cost of the adaptation of Global Reporting Initiative Standards.
However, based on the nature, type and size of the organizations, the cost for the adoption of
Global Reporting Initiative Standards varies (globalreporting.org 2017). In this regard, it needs
to be mentioned that there are certain factors in the reporting of Global Reporting Initiative
Standards that incur huge costs for the companies. Some of them are mentioned below:

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 Time needed for the management and other senior level officers for the discussion of
sustainable report content
 The development and implementation of data gathering system
 Time needed to input the required data
 Implementation of sustainability reporting related processes that includes the staff
training
 Time needed for the checking of data and information
 Preparation of sustainability reporting
 Verification of external factors that includes auditing (globalreporting.org 2017)
These major processes in the organizations incur huge amount of costs for the companies. In
addition, it needs to be mentioned that the amount of investment needed for the implementation
of Global Reporting Initiative Standards largely depends on the size of the companies. Thus, for
different kinds and sizes of organization, the cost of the implementation of Global Reporting
Initiative Standards varies from €2000 to €100000 (globalreporting.org 2017). However, this
cost is not significant for the companies that have not adopted the principle of Global Reporting
Initiative Standards for sustainability reporting. However, it is important for the business
organizations to give importance of this cost regarding sustainability. Thus, based on the above
discussion, it can be said that the cost of Global Reporting Initiative Standards depends on the
size and nature of the business organizations.
Conclusion
Based on the above discussion, it can be seen that it is important for the business
organizations to adopt the strategy of Global Reporting Initiative Standards regarding sustainable
development. From the above discussion, it can be seen that there are some major benefits of the

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adoption of Global Reporting Initiative Standards. The major benefits are to get competitive
advantage, the reduction in compliance costs, to bring transparency, the development of trusts
and many others. As per the above discussion, it can be seen that the cost of the implementation
of Global Reporting Initiative Standards largely depends on the nature, type and size of the
organizations. The cost can be from €2000 to €100000 for the organizations.

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References
Abeysekera, I., 2013. A template for integrated reporting. Journal of Intellectual Capital, 14(2),
pp.227-245.
globalreporting.org. (2017). Cost and burden of reporting. [online] Available at:
https://www.globalreporting.org/resourcelibrary/Cost-and-burden-of-reporting.pdf [Accessed 7
Sep. 2017].
Globalreporting.org. (2017). GRI Standards Download Homepage. [online] Available at:
https://www.globalreporting.org/standards [Accessed 7 Sep. 2017].
Globalreporting.org. (2017). GRI Standards. [online] Available at:
https://www.globalreporting.org/standards/?g=e298dddc-e26e-4195-8da5-64b5c48be5b6
[Accessed 7 Sep. 2017].
globalreporting.org. (2017). The benefits of sustainability reporting. [online] Available at:
https://www.globalreporting.org/resourcelibrary/The-benefits-of-sustainability-reporting.pdf
[Accessed 7 Sep. 2017].
Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: A historical
analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.
Milne, M.J. and Gray, R., 2013. W (h) ither ecology? The triple bottom line, the global reporting
initiative, and corporate sustainability reporting. Journal of business ethics, 118(1), pp.13-29.
Tschopp, D. and Nastanski, M., 2014. The harmonization and convergence of corporate social
responsibility reporting standards. Journal of Business Ethics, 125(1), pp.147-162.

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