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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 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

Principal Loss on Paydown Processing Flag (Tag 2925) on accounting basis = Accelerated Amortization.

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

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 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 entries follow for a GAAP accounting basis with an AFS (Available for Sale) regulatory category. 

Ledger Account

Ledger Acct Name

Dr

Cr

1310000100

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

3

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.

1010000100

COST OF INVESTMENTS-AFS

900

2002000100

INVESTMENT PAYABLE

900

5301000902

5001000902

IMPAIRMENT EXPENSE FOR ECL-AFS

30

1310010419

1010010419

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 tag 2925) on accounting basis Accounting Basis = Realized Gain/Loss.

Ledger Account

Ledger Acct Name

Dr

Cr

1610000100

1010000100

COST OF INVESTMENTS-AFS

90

1002000100

INVESTMENT RECEIVABLE

 100

5301000902

5001000902

IMPAIRMENT EXPENSE FOR ECL-AFS

3

1310010419

1010010419

ALLOWANCE FOR ECL-AFS

3

3006000101

4004000101

REALIZED

GAIN ON INVESTMENTS

GAINS-AFS

10

3306000103

3006000103

REALIZED GAINS-AFS-FROM OCI

10

3303000301

3003000301

UNREALIZED GAINS-AFS-OCI

10

Principal Loss on Paydown Processing Flag (Tag tag 2925) on accounting basis Accounting Basis = Accelerated Amortization.

Ledger Account

Ledger Acct Name

Dr

Cr

1610000100

1010000100

COST OF INVESTMENTS-AFS

90

1002000100

INVESTMENT RECEIVABLE

 100

5301000902

5001000902

IMPAIRMENT EXPENSE FOR ECL-AFS

3

1310010419

1010010419

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

1010000100

COST OF INVESTMENTS-HTM

900

2002000100

INVESTMENT PAYABLE

900

5501000902

5001000902

IMPAIRMENT EXPENSE FOR ECL-HTM

30

1510010419

1010010419

ALLOWANCE FOR ECL-HTM

30 

Principal Loss on Paydown Processing Flag (Tag tag 2925) on accounting basis Accounting Basis = Realized Gain/Loss.

Ledger Account

Ledger Acct Name

Dr

Cr

1610000100

1010000100

COST OF INVESTMENTS-HTM

90

1002000100

INVESTMENT RECEIVABLE

100

5501000902

5001000902

IMPAIRMENT EXPENSE FOR ECL-HTM

3

3006000101

4004000101

REALIZED

GAIN ON INVESTMENTS

GAINS-HTM

10

1510010419

1010010419

ALLOWANCE FOR ECL-HTM

3


Principal Loss on Paydown Processing Flag (Tag tag 2925) on accounting basis Accounting Basis = Accelerated Amortization.

Ledger Account

Ledger Acct Name

Dr

Cr

1610000100

1010000100

COST OF INVESTMENTS-HTM

90

1002000100

INVESTMENT RECEIVABLE

100

5501000902

5001000902

IMPAIRMENT EXPENSE FOR ECL-HTM

3

4001000401

AMORTIZATION OF PREMIUM

10

1510010419

1010010419

ALLOWANCE FOR ECL-HTM

3

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 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

  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 Account

Ledger Acct Name

Dr

Cr

1310000100

COST OF INVESTMENTS-FV-OCI

20

3305000406

ALLOWANCE FOR ECL-FV-OCI

20

  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 Account

Ledger Acct Name

Dr

Cr

1310000100

COST OF INVESTMENTS-FV-OCI

50

4304000303

REALIZED LOSSES – IMPAIRMENTS-FV-OCI

20

3306000104

REALIZED LOSSES-FV-OCI-FROM OCI

20

3303000302

UNREALIZED LOSSES-FV-OCI -OCI

20

3305000406

ALLOWANCE FOR ECL-FV-OCI

30

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 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 

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 Account

Ledger Acct Name

Dr

Cr

1610000100

COST OF INVESTMENTS-AC

20

1610010419

ALLOWANCE FOR ECL-AC

20

  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 Account

Ledger Acct Name

Dr

Cr

1610000100

COST OF INVESTMENTS- AC

50

4604100303

REALIZED LOSSES – IMPAIRMENTS-AC

20

1610010419

ALLOWANCE FOR ECL-AC

30

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 Account

Ledger Acct Name

Dr

Cr

1310000100

COST OF INVESTMENTS-AFS

900

2002000100

INVESTMENT PAYABLE

900

1310010600

NON-CREDIT IMPAIRMENT - AFS

40

3305000400

NON-CREDIT IMPAIRMENT - OCI - AFS

 40

5301000902

IMPAIRMENT EXPENSE FOR ECL-AFS

30

1310010419

ALLOWANCE 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 Account

Ledger Acct Name

Dr

Cr

1310000100

COST OF INVESTMENTS-AFS

20

1310010419

ALLOWANCE FOR ECL-AFS

20

1310010600

NON-CREDIT IMPAIRMENT - AFS

40

3305000400

NON-CREDIT IMPAIRMENT - OCI - AFS

40

Non-credit balance should be reversed completely.

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 Account

Ledger Acct Name

Dr

Cr

1310000100

COST OF INVESTMENTS-AFS

50

1310010419

ALLOWANCE FOR ECL-AFS

30

4304000303

REALIZED LOSSES – IMPAIRMENTS-AFS

20

3306000102

REALIZED LOSSES-AFS-FROM OCI

20

3303000302

UNREALIZED LOSSES- AFS -OCI

20

1310010600

NON-CREDIT IMPAIRMENT - AFS

40

3305000400

NON-CREDIT IMPAIRMENT - OCI - AFS

40

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 Account

Ledger Acct Name

Dr

Cr

1510000100

COST OF INVESTMENTS-HTM

900

2002000100

INVESTMENT PAYABLE

900

5501000902

IMPAIRMENT EXPENSE FOR ECL-HTM

30

1510010419

ALLOWANCE FOR ECL-HTM

30 

  • 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 Account

    Ledger Acct Name

    Dr

    Cr

    1510000100

    COST OF INVESTMENTS-HTM

    20

    1510010419

    ALLOWANCE FOR ECL-HTM

    20

    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 Account

    Ledger Acct Name

    Dr

    Cr

    1510000100

    COST OF INVESTMENTS-HTM

    50

    5501000902

    IMPAIRMENT EXPENSE FOR ECL-HTM

    20

    1510010419

    ALLOWANCE FOR ECL-HTM

    30

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