Reference no: EM133141419

Question - You are the vice president of marketing of a regional bank. If the net income of the bank exceeds $10 million, you get a bonus. This year the bank is doing well, comfortably above the $10 million net income. There is talk of a recession in the next few months, and you are concerned the bank will not meet this target next year. One of the major estimates a bank must make is its provision for loan losses; in other words, what loans will not be repaid and how much of a reserve should be set up for it. This is, of course, a judgment call based on a number of factors. Under the cover of "conservatism," would it be appropriate to push up the allowance a bit in the current year so next year you will have a better opportunity to get that bonus? What factors would you consider in making this decision?