During 2013, the FASB directed its staff to move forward withthe drafting of an impairment standard containing a “CurrentExpected Loss (CECL) Model” with the purpose to better disclose tocorporate stakeholders a net realizable measurement for financialassets and liabilities. This FASB measure came about specificallyto address the concerns from the Great Recession regarding the truenet value of long-term financial assets, like mortgage loan assetsheld by financial institutions and traded debt, such as the $30billion in mortgage debt sold to the public during 2008 before itwent bankrupt. Currently, Jed Miller is the corporate controllerfor ABC Corporation looking to purchase high-yielding Citibankmortgage assets at low market price.
Required: As an accountant of ABC Corporation, after reading thetwo articles in required reading and locating two additionalpeer-reviewed sources on the topic, provide an appraisal of theexpected loss model for Mr. Miller of the CECL. Be sure to compareit to the allowance for doubtful accounts for accounts receivablesand address the huge monetary loss the CECL model might have savedABC Corporation, who purchased Lehman mortgage assets in 2008.
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