How should a security be accounted for according to market value?

Accounting for a security according to its market value involves recognizing the current value that the security would fetch in the marketplace, rather than any nominal or historical cost associated with it. This approach is essential for providing an accurate representation of a financial institution's assets and aligning the financial statements with a more realistic financial position.

Using market value ensures that the financial records reflect any current fluctuations in the value of the security due to market conditions, investor sentiment, and economic factors. Accounting at market value is particularly relevant for investment securities that are actively traded, as this method provides stakeholders with a timely and relevant assessment of the institution's asset holdings.

In practice, this accounting method helps users of financial statements understand the potential gains or losses that could be realized if the securities were sold at their current market prices. It aligns with the fair value measurement principles that are emphasized in financial reporting standards, ensuring that the reported values of securities are reflective of their actual worth in the market.