CASE 10-9 WHAT IS MEANT BY VALUING LIABILITIES AT CURRENT VALUES?

John Jex, CPA, had just delivered a keynote address to a banker's organization on the merits of valuing loan portfolio assets at market values that reflected changing interest rates. During the question-and-answer period he was asked wtiy bank liabilities should not be valued using current interest rates if assets are to be revalued for interest rate changes. His answer did not seem to satisfy the banker, and the meeting soon adjourned. After the meeting, John was asked by a listener to explain the impact changing interest rates would have on liabilities if a revaluation were to occur How would you respond to such a request?