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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

3

Paydown 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. 

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 = Realized Gain/Loss

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

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. 

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