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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 Account
Ledger Acct Name
Dr
Cr
1310000100
COST OF INVESTMENTS-FV-OCI
900
2002000100
INVESTMENT PAYABLE
900
5301000902
IMPAIRMENT EXPENSE FOR ECL-FV-OCI
30
3305000406
ALLOWANCE 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 2925) on Accounting Basis = Realized Gain/Loss
Ledger Account
Ledger Acct Name
Dr
Cr
1310000100
COST OF INVESTMENTS-FV-OCI
90
1002000100
INVESTMENT RECEIVABLE
100
3303000301
UNREALIZED GAINS FV-OCI - OCI
13
3306000103
REALIZED GAINS FV-OCI – FROM OCI
13
3006000101
REALIZED GAIN ON INVESTMENTS - FV-OCI
13
3305000406
ALLOWANCE FOR ECL-FV-OCI
3
Ledger Account
Ledger Acct Name
Dr
Cr
1310000100
COST OF INVESTMENTS-FV-OCI
90
1002000100
INVESTMENT RECEIVABLE
100
4001000401
AMORTIZATION OF PREMIUM
10
5301000902
IMPAIRMENT EXPENSE FOR ECL-FV-OCI
3
3305000406
ALLOWANCE FOR ECL-FV-OCI
3
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 Account
Ledger Acct Name
Dr
Cr
1610000100
COST OF INVESTMENTS-AC
900
2002000100
INVESTMENT PAYABLE
900
5601000902
IMPAIRMENT EXPENSE FOR ECL-AC
30
1610010419
ALLOWANCE 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 2925) on Accounting Basis = Realized Gain/Loss
Ledger Account
Ledger Acct Name
Dr
Cr
1610000100
COST OF INVESTMENTS-AC
90
1002000100
INVESTMENT RECEIVABLE
100
3006000101
REALIZED GAIN ON INVESTMENTS
13
1610010419
ALLOWANCE FOR ECL-AC
3
Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization
Ledger Account
Ledger Acct Name
Dr
Cr
1610000100
COST OF INVESTMENTS-AC
90
1002000100
INVESTMENT RECEIVABLE
100
4001000401
AMORTIZATION OF PREMIUM
10
5601000902
IMPAIRMENT EXPENSE FOR ECL-AC
3
1610010419
ALLOWANCE FOR ECL-AC
with a GAAP accounting basis.
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 Account | Ledger Acct Name | Dr | Cr |
1310000100 | COST OF INVESTMENTS-AFS | 900 | |
2002000100 | INVESTMENT PAYABLE | 900 | |
5301000902 | IMPAIRMENT EXPENSE FOR ECL-AFS | 30 | |
1310010419 | ALLOWANCE 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 = Realized Gain/Loss
Ledger Account | Ledger Acct Name | Dr | Cr |
1610000100 | COST OF INVESTMENTS-AFS | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
5301000902 | IMPAIRMENT EXPENSE FOR ECL-AFS | 3 | |
1310010419 | ALLOWANCE FOR ECL-AFS | 3 | |
3006000101 | REALIZED GAIN ON INVESTMENTS | 10 | |
3306000103 | REALIZED GAINS-AFS-FROM OCI | 10 | |
3303000301 | UNREALIZED GAINS-AFS-OCI | 10 |
Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization
Ledger Account | Ledger Acct Name | Dr | Cr |
1610000100 | COST OF INVESTMENTS-AFS | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
5301000902 | IMPAIRMENT EXPENSE FOR ECL-AFS | 3 | |
1310010419 | ALLOWANCE FOR ECL-AFS | 3 | |
4001000401 | AMORTIZATION 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 Account | Ledger Acct Name | Dr | Cr |
1310000100 | COST OF INVESTMENTS-HTM | 900 | |
2002000100 | INVESTMENT PAYABLE | 900 | |
5501000902 | IMPAIRMENT EXPENSE FOR ECL-HTM | 30 | |
1510010419 | ALLOWANCE FOR ECL-HTM | 30 |
Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Realized Gain/Loss
Ledger Account | Ledger Acct Name | Dr | Cr |
1610000100 | COST OF INVESTMENTS-HTM | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
5501000902 | IMPAIRMENT EXPENSE FOR ECL-HTM | 3 | |
3006000101 | REALIZED GAIN ON INVESTMENTS | 10 | |
1510010419 | ALLOWANCE FOR ECL-HTM | 3 |
Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization
Ledger Account | Ledger Acct Name | Dr | Cr |
1610000100 | COST OF INVESTMENTS-HTM | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
5501000902 | IMPAIRMENT EXPENSE FOR ECL-HTM | 3 | |
4001000401 | AMORTIZATION OF PREMIUM | 10 | |
1510010419 | ALLOWANCE FOR ECL-HTM | 3 |