It’s late, but I want to tell you mark-to-market is the best way to expose the cheaters.
For example, your friend paid $500,000 cash for his house. He tells you how great everything there is. The Book Value would be $500,000.
But now say he wants to borrow money from you and use his half-a-million dollar house as collateral
You sir, aren’t an idiot so you decide to take a look at his house first. bedroom shack in-between a low rent trailer park and a nuclear waste dump. You wouldn’t pay more that $2,000 for that house - and only if you lost a bet. The $2,000 would be the mark-to-market value.
Do you make the loan to your friend based on the book value of his house or the mark-to-market value?
The problem with rationalistic solutions is that they often prove to have unintended consequences. That is why the conservative tradition looks for empirical truths learned through time tested methods.
Jeff Skilling had one qualifier before he took the helm at Enron. Remember what that was? That Enron commit, and have its auditors commit, to using Mark-to-Market accounting methods.
MTM easily can become Mark-to-Make-Believe
Even your anology points this out if looked at from my view. Mark to Market allows that seller to name the value -- not the careful buyer. In the closed world of a company, the finacial officers say what he assets are worth and those outside have to guess if truth is there. Appreciation and related profits are made on paper before any real sale and can easily be lost without accounting for them if the pressure is too high.
Book value is always confirmed by audits or appraisals, both somewhat outside the control of the finacial accounting management although influenced by the Board.
Is there a place for some of that method applied in a careful manner -- surely, but lets not make it a panecia.