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

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. 

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

Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization

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. 

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

Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization

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