SOX and mark-to-market 2653



  • Hello,
    I’ve been doing some research on SOX and can’t determine where it recommends the usage of mark-to-market (i.e. from which part of SOX was FAS 157 derived?). Might seem to be a simple question, but does anyone know where SOX states this? Thanks.



  • The Sarbanes-Oxley Act (SOA) does not contain any sections that deal with accounting standards for specific transactions. You will not find anything concerning mark-to-market accounting in the SOA. There are only provisions in there that specify the funding mechanism of the Financial Accounting Standards Board (FASB) and that issuers that use non-GAAP financial measures in their disclosures have to provide a reconciliation to the closest GAAP measure.



  • Thanks for the very quick reply.



  • The Sarbanes-Oxley Act (SOA) does not contain any sections that deal with accounting standards for specific transactions. You will not find anything concerning mark-to-market accounting in the SOA. There are only provisions in there that specify the funding mechanism of the Financial Accounting Standards Board (FASB) and that issuers that use non-GAAP financial measures in their disclosures have to provide a reconciliation to the closest GAAP measure.
    With regards to the last line you wrote ‘issuers that use non-GAAP financial measures in their disclosures have to provide a reconciliation to the closest GAAP measure’
    How does this correlate to mark-to-market accounting (FAS 157)?
    Thanks.



  • Non-GAAP financial measures have nothing to do with mark-to-market accounting (FAS 157).
    The SEC’s final rule concerning conditions for the use of non-GAAP measures can be found at sec.gov/rules/final/33-8176.htm
    As I already said, the Sarbane-Oxley Act does not include any provisions that concern mark-to-market accounting.



  • It might also be worth adding that issuers who prepare accounts under IAS no longer need to provide a reconciliation to US GAAP



  • If I remember the Sarbanes-Oxley Act provision and the SEC’s rule correctly, this has nothing to do with the reconciliation from foreign GAAP to US GAAP, but with the reconciliation of non US-GAAP (sub-) totals and financial ratios to standard US GAAP (sub-) totals.
    For example EBITDA (earnings before interest, depreciation and amortization) is a non-GAAP financial measure because US GAAP does not contain such a subtotal in the statement of operations (income statement). Also recurring profit from operations (however you define it) is an example of a non-GAAP financial measure.


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