The CFO, like many other financial leaders (including the VP of Marketing), has expressed frustration with the new CECL requirements for adjusting the loss rate. However, she has raised the possibility of using the new rules to improve future earnings. Since the company's financial results are strong this year, she has suggested increasing the loss rate so that they will

The CFO, like many other financial leaders (including the VP of Marketing), has expressed frustration with the new CECL requirements for adjusting the loss rate. However, she has raised the possibility of using the new rules to improve future earnings. Since the company's financial results are strong this year, she has suggested increasing the loss rate so that they will have a higher bad debt expense and allowance this year, allowing them to record smaller expenses in the future. 

Assuming you feel that this suggestion would be misleading to investors, What business arguments could you use to convince the CFO not to create these "cookie jar reserves" for future years?

Expert Answer

There are several business arguments that can be used to convince the CFO not to create "cookie jar View the full answer