Which term describes accounting for the fair value of an asset based on current market prices?

The term that describes accounting for the fair value of an asset based on current market prices is "Mark to Market." This accounting practice involves adjusting the value of assets and liabilities to reflect their current market value rather than their book value. This is particularly relevant in volatile markets where asset prices can fluctuate significantly over short periods.

Using "Mark to Market" helps provide a more accurate and realistic view of a company's financial status since it takes into account the most recent prices at which those assets could be sold. This is crucial for financial reporting and analysis, as it enables stakeholders to assess the true economic value of assets at any given time.

In contrast, alternatives like "Mark to Model" involve estimating the fair value using models rather than relying strictly on market prices, while "Cash accounting" focuses on recording revenues and expenses when cash changes hands, not considering market values. "Book accounting" typically refers to recording transactions at their historical costs, which can misrepresent the current values of assets in today's changing market conditions.