Thanks tectol ... I can now see some potential in how there could be profits held on the balance sheet. Nonetheless, it is an interesting situation and although I am not an expert on European GAAP and loathe that the FASB caved on mark to market accounting, (should Canada follow suit I will give up my status of professional accountant) I can at least theorize on how this exists. Its pretty complex accounting but I would be interested in others thoughts ifthey agree.

I'm not an accountant. But mark to market was forcing the financial institutions, insurers, and hedge funds to deal with the reality of the situation. Namely, that assets listed as somehow beneficial to the comapanies were in fact (at least for the time) worthless.

That is what the risk for those same assets was all along. The rest is all smokescreens, mirrors, and ridiculously leveraged balance sheets. Triple A investment ratings on these investmants should not have existed, but they did. Keep mark to market in place and institutions will live in fear of the rules and of their companies blowing up.

Mark to market is part of the solution, not the problem. When did it become so popular to encourage companies to lie? Politicians should be ashamed. But then, they have mastered the art.