In the Book Asset-Level panel, you can manually apply expected credit losses (ECL) to debt security lots as an adjustment entry. This allows you to apply adjustments of expected credit losses on open lots/holdings. You can book ECL against domestic or foreign assets to capture all asset-level accounting. You can book ECL against foreign assets where the accounting system properly differentiates between write-up and write-down and accounts for them differently to properly capture variations in FX rate.
WRITERS NOTE: above 2 last sentences copied from group-level section. Determine whether to use write-up and write-down terminology.
To apply an expected credit loss adjustment to a lot, the lot must have an accounting basis with the ECL Method set to:
Non-US Treatment with regulatory categories of FVOCI/AC. This ECL method applies to IFRS. You can update the expected credit loss amount or the stage.
US Treatment with regulatory categories of AFS/HTM. This ECL method applies to GAAP. You can update the expected credit loss amount. If the regulatory category is AFS, you can update the regulatory intent and can apply non-credit losses.
The panel displays lot detail information, such as quantity, trade date, settlement date, current cost, and allows you to specify information specific to expected credit losses. For your initial expected credit loss transaction on the lot, you can select the ECL Transition option if you need the ability to change the Purchased Impaired status.
WRITERS NOTE: are we booking this to a single basis? should we repeat and adapt discussion under Process Group-Level Expected Credit Loss Transactions. GroupTo apply an expected credit loss adjustment to a lot when you use IFRS, you must have an accounting basis with the ECL Method set to Non-US Treatment with regulatory categories of FVOCI/AC. You can update the expected credit loss amount or the stage.
The panel displays lot detail information, such as quantity, trade date, settlement date, current cost, and allows you to specify information specific to expected credit losses. For your initial expected credit loss transaction on the lot, you can select the ECL Transition option if you need the ability to change the Purchased Impaired status.
Process Transactions with the Book ECL Asset-Level Panel
To book an asset-level ECL lot adjustment transaction to debt security lots when using IFRS:
In Accounting Center, in the left navigation pane, click Transactions > Adjustments > Expected Credit Loss Transactions > Book ECL Asset-Level.
You see the Book ECL Asset-Level panel.In the Entity Information section, specify the entity and accounting basis associated with the lot you are adjusting.
You see the entity base
currency, and the regulatory category and ECL Method for the selected entity/basis grouping. Because you selected an entity with an accounting basis of IFRS, the Regulatory Category is AC or FVOCI, and the
ECL Method
is Non-US Treatment.
In the Security Information by Option section, identify the security associated with the lot you are adjusting.
In the Accounting Information section, identify the lot you are adjusting and date criteria.
If you are entering an initial transaction, you can set ECL Transition to Yes to have the option to the change the Purchased
The options available on the panel vary if you are adjusting a lot that uses Non-US Treatment with regulatory categories of FVOCI/AC or a lot that uses US Treatment with regulatory categories of AFS/HTM.
If you adjust a lot using Non-US Treatment ECL Method (IFRS) with a regulatory category of FVOCI/AC, you can update the ECL Stage field value.
You can view the Prior ECL Stage value.
If you adjust a lot using US Treatment ECL Method (GAAP) with a regulatory category of AFS:
- You can update the Regulatory Intent Information field to Intent to Sell, Likely required to Sell, or Not Likely Required to Sell.
- If you select Not Likely Required to Sell, you can update the Non-Credit Loss Local field value. This allows you to book non-credit loss adjustments for AFS securities that have a regulatory intent of Not LIkely Required to Sell.
Impaired value for your initial transaction.
The options available on the panel vary if you are adjusting a lot that uses the Non-US Treatment ECL method for IFRS with regulatory categories of FVOCI/AC or a lot that uses the US Treatment ECL method for US GAAP with regulatory categories of AFS/HTM.In the Credit Quality Stage Information section, if you adjust a lot using Non-US Treatment ECL Method (IFRS) with a regulatory category of FVOCI/AC, you can update the ECL Stage field value.
You can view the Prior ECL Stage value.In the Expected Credit Loss Information section,in the Local Loss Allowance box, specify the expected credit loss allowance.
In the Expected Credit Loss Activity section, you can review previous expected credit loss allowance information.
In the Other Information section,complete the remaining options on the Book ECL Asset-Level panel, as needed
For more information about each option, see the following table
.
Click Submit.
The following table describes these options in detail. After you make a lot adjustment, you can view the adjustment activity on the Open Adjustments tab of the Cost object within the Position Viewer tool. Any subsequent ECL transactions to the same ECL position insert inserts an adjustment row in order to update the balance or other information. When you update the current balance, regulatory intent, or stage, the system moves the current value to a “previous” field on the adjustment row in order to store the prior value.
??? Review prior paragraph. do we need an example?
Bookyou update the current balance or stage, the system moves the current value to a “previous” field on the adjustment row in order to store the prior value.
Book ECL Asset-Level Panel Example for IFRS
In the following figure, you use the Book ECL Asset-Level panel with an entity/basis for IFRS, where the ECL Method is Non-US Treatment and the Regulatory Category is AC (Amortized Cost). Under Credit Quality Stage Information, notice that you set ECL Stage to Stage 2.
Book ECL Asset-Level Panel Options
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In the Book ECL Asset-Level panel, you can apply expected credit losses (ECL) to debt security lots as an adjustment entry. Note that options may vary according to your selections. The options available on the panel vary if you are adjusting a lot that uses an ECL method of Non-US Treatment with regulatory categories of FVOCI/AC for use with IFRS or a lot that uses an ECL method of US Treatment with regulatory categories of AFS/HTM for use with US GAAP.
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Local to Base FX Rate
87
Specifies the foreign exchange rate used to calculate the Base Loss Allowance. This is the local to base exchange rate. If you do not select a foreign denomination, this field is unavailable.
WRITERS NOTE: is it ever editable and when? does it display only under certain conditions?
Base Loss Allowance
16991
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WRITERS NOTE: only appears for ECL Transition FX ? confirm conditions when this field appears
Expected Credit Loss Activity
Prev ECL Local
7350
Displays the previous value for the Local Loss Allowance. When you update the current balance or stage, the system moves the current value to this previous field to store the prior value.
Prev ECL Base
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ECL Delta Local
7351
Displays the local ECL delta value.
WRITERS NOTE: determine conditions when these 3 fields appear. Non US Treatment? Foreign?
Local to Base FX Rate
7961
Displays the foreign exchange rate used to calculate the ECL Delta Base. This is the local to base exchange rate.
WRITERS NOTE: determine conditions when these 3 fields appear. Non US Treatment? Foreign?
ECL Delta Base
7431
Displays the value of the base ECL delta. The system uses the current local-to-base exchange rate to calculate the base delta amount for ECL transactions where the security is foreign denominated.
WRITERS NOTE: determine conditions when these 3 fields appear. Non US Treatment? Foreign?
Total ECL Base = Prev Base + Delta Base
7432
Displays the Total ECL Base value. This represents the Prev ECL Base field previous value for the Base Loss Allowance plus the EC: De;ta Base field delta base.
Non-Credit Loss Information
Prev Non-Credit Loss Local
2702
Displays the lot’s previous Non-Credit Loss Local amount. This field appears for lots with a US Treatment ECL Method (GAAP) with a regulatory category of AFS when you set the Regulatory Intent to a value of Not Likely Required to Sell.
WRITERS NOTE: confirm conditions when this section appears
Prev Non-Credit Loss Base
2703
Displays the lot’s previous Non-Credit Loss Base amount. This field appears for lots with a US Treatment ECL Method (GAAP) with a regulatory category of AFS when you set the Regulatory Intent to a value of Not Likely Required to Sell.
Non-Credit Loss Local
2704
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Other Information
Trade Ticket Number
761
Specifies the origin of the trade ticket number.
Transaction Notes
56
Specifies the comments about the transaction.
Sample Panel US GAAP
In the following figure, you use the Book-Asset Level panel with an entity/basis for GAAP, where the ECL Method is US Treatment and the Regulatory Category is AFS (Available for Sale). Under Regulatory Intent Information, notice that you set Regulatory Intent to
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Sample Panel IFRS
In the following figure, you use the Book-Asset Level panel with an entity/basis for IFRS, where the ECL Method is Non-US Treatment and the Regulatory Category is AC (Amortized Cost). Under Credit Quality Stage Information, notice that you set ECL Stage to Stage 2.
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