SYNOPSIS: I propose that all debt instruments held as assets be accounted for using a combination of reported amounts that reflect a measurement at the initial recognition date and fair value. The proposal eliminates the “incurred loss” and “other-than-temporary-impairment (hereafter, OTTI)” models and replaces them with a valuation account that adjusts the amortized reported amounts to fair value each reporting date. Disclosures, on a disaggregated basis, about the debt instruments, charge-offs, and fair value measurements will provide significantly more information than currently provided. The advantages of this proposal are to (1) reduce accounting complexity through use of a single objective for reporting all debt instruments held as assets; (2) use the most relevant, representationally faithful, and verifiable measurement attribute for the assets; and (3) increase transparency and information about the assets.

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