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The following scenarios describe ledger entries for impairments when you use asset-level expected credit loss (ECL) . WRITERS NOTE: do we need to specify that this is using ECL panels rather than legacy impairment panels? Should we mention legacy impairment panels here or mention ECL on those legacy panels? with an IFRS accounting basis. 

About Impairments and Asset-Level ECL

When you use asset-level ECL, you can process any impairment of the asset using the Book Impairment Adjustment panel. The impairment event checks to see if there is an expected credit loss on the lot and reduces the expected credit loss accordingly.

Note that because you book ECL onto the system at the lot level, you must set the Impairment Processing Flag field on the panel to a value of Lot in order to reduce ECL as part of the impairment. If you set the Impairment Processing Flag to a value of Position, the system does not reduce any ECL on the lot.

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.

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked. The writedown first reduces the Allowance for ECL and any excess is recoded as an impairment expense. The entire amount of the writedown reduces the Cost of Investment.

Expected Credit Loss offsets to Cost until Allowance for ECL 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.

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

This security is deemed to be impaired, . You book a writedown transaction which updates the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked.

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 (that is, 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

This security is deemed to be impaired. You 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 are 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. You book a writedown transaction against the lot. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are 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

. 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. You book a writedown transaction against the lot. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

Ledger Account

Ledger Acct Name

Dr

Cr

1510000100

COST OF INVESTMENTS-HTM

20

1510010419

ALLOWANCE FOR ECL-HTM

20

This security is deemed to be impaired. You book a writedown transaction against the lot. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are 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