Mark to Market (MTM) in Australia: 2025 Trends, Policy, and Practical Insights

Mark to market (MTM) might sound like a technical term reserved for accountants and finance professionals, but its impact ripples through the portfolios of everyday investors, the balance sheets of major Australian companies, and even the stability of our broader economy. As we head through 2025, shifts in accounting standards, regulatory scrutiny, and market volatility have put MTM back in the spotlight. Here’s what you need to know—and why it matters more than ever.

What Is Mark to Market (MTM)?

Mark to market is an accounting method that values assets and liabilities based on their current market price, not their historical cost. This approach aims to provide a real-time snapshot of an entity’s financial position. In Australia, MTM is commonly applied to financial instruments like derivatives, equities, and certain debt securities. Under Australian Accounting Standards Board (AASB) guidelines, particularly AASB 13 (Fair Value Measurement), MTM is central to transparent and up-to-date reporting.

• Example: A super fund holds shares in a listed company. At the end of the reporting period, those shares are valued at their current ASX price—even if the fund bought them for much less (or more).

• Contrast: Traditional cost accounting would keep the asset on the books at its purchase price, regardless of market swings.

2025 Updates: Policy Shifts and Regulatory Focus

Several regulatory and market developments in 2025 have shaped the application and oversight of MTM in Australia:

• Enhanced Disclosure Rules: The Australian Securities and Investments Commission (ASIC) has tightened reporting standards for managed funds and listed investment vehicles, increasing transparency around MTM valuations. This comes in response to concerns about valuation risks during periods of high volatility, such as the tech-driven rally and subsequent corrections seen in late 2024 and early 2025.

• Superannuation Fund Scrutiny: APRA’s 2025 review has pushed super funds to adopt more rigorous MTM processes for unlisted assets, particularly commercial property and infrastructure. Funds are now required to justify their valuation methodologies and ensure consistency with global best practices.

• Crypto and Digital Asset Guidance: The ATO and ASIC have released updated guidance for marking crypto assets to market, following the mainstreaming of tokenised investment products on the ASX Digital Exchange. MTM is now standard for funds holding liquid digital assets.

Risks, Rewards, and Real-World Impacts

MTM delivers a truer picture of an organisation’s financial health, but it’s not without challenges:

• Volatility: MTM can cause wild swings in reported profits and losses, especially in turbulent markets. For example, during the March 2025 correction, several listed property trusts saw their net asset values drop sharply due to revised MTM valuations on commercial real estate.

• Liquidity Gaps: Some assets (like unlisted infrastructure or private equity) lack a clear market price. MTM for these often relies on modelled valuations, which can be contentious and subject to revision. This was a key topic in the Productivity Commission’s 2025 review of unlisted asset pricing in super funds.

• Credit and Counterparty Risk: For banks and derivatives traders, MTM is vital for daily risk management. A sharp change in MTM values can trigger margin calls and expose counterparties to sudden losses, as seen during the recent ASX energy futures volatility.

On the flip side, accurate MTM helps prevent hidden losses and gives investors, regulators, and boards a clearer view of risk—potentially avoiding the kind of mispricing that fuelled past financial crises.

How MTM Affects Your Investments and Business Decisions

Whether you’re an individual investor, a small business owner, or a finance leader, MTM matters:

• Super Funds: Your retirement balance reflects MTM valuations, especially as funds shift more assets into alternatives. Keep an eye on your fund’s disclosures and valuation practices.

• SMEs with Hedging Contracts: If your business uses forward contracts or swaps to manage currency or commodity risk, expect your financial reports to show MTM gains and losses—sometimes with big swings.

• Property Investors: Listed REITs now report property values closer to real-time, which can impact share prices and distributions.

• Crypto Investors: Funds and ETFs marking crypto assets to market can see rapid changes in unit prices—amplifying both risk and opportunity.

For all investors, understanding how MTM works can help you interpret financial statements, assess risk, and make more informed choices in 2025’s dynamic markets.