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The following scenarios describe ledger entries for paydowns when you use asset-level expected credit loss (ECL). 

Paydown for IFRS – FVOCI

The entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900 and a factor of 1. The lot subsequently has an expected credit losses of $30 applied to it.Ledger entries follow for an IFRS accounting basis with an FVOCI (Fair Value - Other Comprehensive Income) regulatory category. 
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-FV-OCI900
2002000100INVESTMENT PAYABLE
900
5301000902IMPAIRMENT EXPENSE FOR ECL-FV-OCI30
3305000406ALLOWANCE FOR ECL-FV-OCI
 30

10% of the position is paid down with a gain of $10. Because 10% of the position is being closed, $3 of ECL is proportionally reduced, the gain becomes $13.

Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Realized Gain/Loss

.

Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-FV-OCI
90
1002000100INVESTMENT RECEIVABLE100
3303000301UNREALIZED GAINS FV-OCI - OCI
13
3306000103REALIZED GAINS FV-OCI – FROM OCI13
3006000101REALIZED GAIN ON INVESTMENTS - FV-OCI
13
3305000406ALLOWANCE FOR ECL-FV-OCI3


Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Accelerated Amortization

.

Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-FV-OCI
90
1002000100INVESTMENT RECEIVABLE100
4001000401AMORTIZATION OF PREMIUM
10
5301000902IMPAIRMENT EXPENSE FOR ECL-FV-OCI
3
3305000406ALLOWANCE FOR ECL-FV-OCI3

Paydown for IFRS – AC

The entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900 and a factor of 1. The lot subsequently has an expected credit losses of $30 applied to it.Ledger entries follow for an IFRS accounting basis with an AC (Amortized Cost) regulatory category. 
Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AC900
2002000100INVESTMENT PAYABLE
900
5601000902IMPAIRMENT EXPENSE FOR ECL-AC30 
1610010419ALLOWANCE FOR ECL-AC
 30

10% of the position is paid down with a gain of $10. Because 10% of the position is being closed, $3 of ECL is proportionally reduced, the gain becomes $13.

Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Realized Gain/Loss

.

Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AC
90
1002000100INVESTMENT RECEIVABLE100
3006000101REALIZED GAIN ON INVESTMENTS
13
1610010419ALLOWANCE FOR ECL-AC3




Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Accelerated Amortization

.

Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AC
90
1002000100INVESTMENT RECEIVABLE100
4001000401AMORTIZATION OF PREMIUM
10
5601000902IMPAIRMENT EXPENSE FOR ECL-AC
3
1610010419ALLOWANCE FOR ECL-AC3

Paydown for US GAAP – AFS

The entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900 and a factor of 1. The lot subsequently has an expected credit losses of $30 applied to it.Ledger entries follow for a GAAP accounting basis with an AFS (Available for Sale) regulatory category. 
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-AFS900
2002000100INVESTMENT PAYABLE
900
5301000902IMPAIRMENT EXPENSE FOR ECL-AFS30
1310010419ALLOWANCE FOR ECL-AFS
 30

10% of the position is paid down with a gain of $10. Because 10% of the position is being closed, $3 of ECL is proportionally reduced. Note that the gain/loss is not impacted by the reduction in ECL.

Principal Loss on Paydown Processing Flag (Tag 2925) on

accounting basis

Accounting Basis = Realized Gain/Loss

.

Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AFS
90
1002000100INVESTMENT RECEIVABLE 100
5301000902IMPAIRMENT EXPENSE FOR ECL-AFS
3
1310010419ALLOWANCE FOR ECL-AFS3
3006000101REALIZED GAIN ON INVESTMENTS
10
3306000103REALIZED GAINS-AFS-FROM OCI10
3303000301UNREALIZED GAINS-AFS-OCI
10

Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Accelerated Amortization

.

Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AFS
90
1002000100INVESTMENT RECEIVABLE 100
5301000902IMPAIRMENT EXPENSE FOR ECL-AFS
3
1310010419ALLOWANCE FOR ECL-AFS3
4001000401AMORTIZATION OF PREMIUM
10

Paydown for US GAAP – HTM

The entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900 and a factor of 1. The lot subsequently has an expected credit losses of $30 applied to it.Ledger entries follow for a GAAP accounting basis with an HTM (Held to Maturity) regulatory category. 
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-HTM900
2002000100INVESTMENT PAYABLE
900
5501000902IMPAIRMENT EXPENSE FOR ECL-HTM30
1510010419ALLOWANCE FOR ECL-HTM
30 

Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Realized Gain/Loss

.

Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-HTM
90
1002000100INVESTMENT RECEIVABLE100
5501000902IMPAIRMENT EXPENSE FOR ECL-HTM
3
3006000101REALIZED GAIN ON INVESTMENTS
10
1510010419ALLOWANCE FOR ECL-HTM3


Principal Loss on Paydown Processing Flag (

Tag

tag 2925) on

accounting basis

Accounting Basis = Accelerated Amortization

.

Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-HTM
90
1002000100INVESTMENT RECEIVABLE100
5501000902IMPAIRMENT EXPENSE FOR ECL-HTM
3
4001000401AMORTIZATION OF PREMIUM
10
1510010419ALLOWANCE FOR ECL-HTM3

Impairments ECL Scenarios

The following scenarios describe ledger entries for impairments when you use asset-level expected credit loss (ECL). 

Impairment for IFRS – FVOCI


On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-FV-OCI900
2002000100INVESTMENT PAYABLE
900
5301000902IMPAIRMENT EXPENSE FOR ECL-FV-OCI30
3305000406ALLOWANCE FOR ECL-FV-OCI
 30

  1. This security is deemed to be impaired, the user books a writedown transaction which will update the Stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-FV-OCI
20
3305000406ALLOWANCE FOR ECL-FV-OCI20

  1. This security is deemed to be impaired, the user books a writedown transaction which will update the Stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-FV-OCI
50
4304000303REALIZED LOSSES – IMPAIRMENTS-FV-OCI20
3306000104REALIZED LOSSES-FV-OCI-FROM OCI
20
3303000302UNREALIZED LOSSES-FV-OCI -OCI20
3305000406ALLOWANCE FOR ECL-FV-OCI30
Expected Credit Loss offsets to Cost until no ECL remains, any remaining amount offsets to Realized Losses – Impairments

Impairment for IFRS – AC

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.
Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AC900
2002000100INVESTMENT PAYABLE
900
5601000902IMPAIRMENT EXPENSE FOR ECL- AC30
1610010419ALLOWANCE FOR ECL-AC
30 

  1. This security is deemed to be impaired, the user books a writedown transaction which will update the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS-AC
20
1610010419ALLOWANCE FOR ECL-AC20

  1. This security is deemed to be impaired, the user books a writedown transaction which will update the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1610000100COST OF INVESTMENTS- AC
50
4604100303REALIZED LOSSES – IMPAIRMENTS-AC20
1610010419ALLOWANCE FOR ECL-AC30

Note: the Expected Credit Loss offsets to Cost until no ECL remains, any remaining amount offsets to Realized Losses – Impairments

Impairment for GAAP – AFS

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 and Non-Credit loss of $40 applied to it (i.e. the present value is deemed to be $870, the market value is $830).

Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-AFS900
2002000100INVESTMENT PAYABLE
900
1310010600NON-CREDIT IMPAIRMENT - AFS40
3305000400NON-CREDIT IMPAIRMENT - OCI - AFS
 40
5301000902IMPAIRMENT EXPENSE FOR ECL-AFS30
1310010419ALLOWANCE FOR ECL-AFS
 30

  1. This security is deemed to be impaired, the user books a writedown transaction against the lot. The new amortized cost is $880 so the writedown is for ($900 - $820 = $20). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1310000100COST OF INVESTMENTS-AFS
20
1310010419ALLOWANCE FOR ECL-AFS20
1310010600NON-CREDIT IMPAIRMENT - AFS
40
3305000400NON-CREDIT IMPAIRMENT - OCI - AFS40

Non-credit balance should be reversed completely.

  1. This security is deemed to be impaired, the user books a writedown transaction against the lot. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50). The following ledger entries will be booked:

    Ledger AccountLedger Acct NameDrCr
    1310000100COST OF INVESTMENTS-AFS
    		50
    1310010419ALLOWANCE FOR ECL-AFS30
    4304000303REALIZED LOSSES – IMPAIRMENTS-AFS20
    3306000102REALIZED LOSSES-AFS-FROM OCI
    		20
    3303000302UNREALIZED LOSSES- AFS -OCI20
    1310010600NON-CREDIT IMPAIRMENT - AFS
    		40
    3305000400NON-CREDIT IMPAIRMENT - OCI - AFS40


    Non-credit balance should be reversed completely.
    In each case, the Expected Credit Loss offsets to Cost until no ECL remains, any remaining amount offsets to Realized Losses – Impairments.

    Impairment for GAAP – HTM

    On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.

    Ledger AccountLedger Acct NameDrCr
    1510000100COST OF INVESTMENTS-HTM900
    2002000100INVESTMENT PAYABLE
    		900
    5501000902IMPAIRMENT EXPENSE FOR ECL-HTM30
    1510010419ALLOWANCE FOR ECL-HTM
    		30 


  2. This security is deemed to be impaired, the user books a writedown transaction against the lot. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1510000100COST OF INVESTMENTS-HTM
20
1510010419ALLOWANCE FOR ECL-HTM20

  1. This security is deemed to be impaired, the user books a writedown transaction against the lot. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50). The following ledger entries will be booked:
Ledger AccountLedger Acct NameDrCr
1510000100COST OF INVESTMENTS-HTM
50
5501000902IMPAIRMENT EXPENSE FOR ECL-HTM20
1510010419ALLOWANCE FOR ECL-HTM30


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