Yes it is legal. In fact, the mark-to-market method got official recognition in April 2009 by the Financial Accounting Standards Board (FASB). read more
It is extremely prevalent, and that's because it is a good thing. The point to be noted is that it is usually a good thing while marking losses to market. It's prudent to quantify the current value of your loss and provide for it. read more
Mark-to-market (MTM or M2M) or fair value accounting refers to accounting for the "fair value" of an asset or liability based on the current market price, or for similar assets and liabilities, or based on another objectively assessed "fair" value. read more
Mark-to-market accounting can change values on the balance sheet as market conditions change. In contrast, historical cost accounting, based on the past transactions, is simpler, more stable, and easier to perform, but does not represent current market value. It summarizes past transactions instead. read more