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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 follow for an IFRS accounting basis with an FVOCI (Fair Value - Other Comprehensive Income) regulatory category.
Ledger Account | Ledger Acct Name | Dr | Cr |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS-FV-OCI | 900 | |
2002000100 | INVESTMENT PAYABLE | 900 | |
5001000902 | IMPAIRMENT EXPENSE FOR ECL-FV-OCI | 30 | |
3005000406 | 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 |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS-FV-OCI | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
3003000301 | UNREALIZED GAINS FV-OCI - OCI | 13 | |
3006000103 | REALIZED GAINS FV-OCI – FROM OCI | 13 | |
4004000101 | REALIZED GAINS FV-OCI | 13 | |
3005000406 | 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 |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS-FV-OCI | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
4001000401 | AMORTIZATION OF PREMIUM | 10 | |
5001000902 | IMPAIRMENT EXPENSE FOR ECL-FV-OCI | 3 | |
3005000406 | 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 |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS-AC | 900 | |
2002000100 | INVESTMENT PAYABLE | 900 | |
5001000902 | IMPAIRMENT EXPENSE FOR ECL-AC | 30 | |
1010010419 | 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 |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS-AC | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
4004000101 | REALIZED GAINS-AC | 13 | |
1010010419 | 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 |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS-AC | 90 | |
1002000100 | INVESTMENT RECEIVABLE | 100 | |
4001000401 | AMORTIZATION OF PREMIUM | 10 | |
5001000902 | IMPAIRMENT EXPENSE FOR ECL-AC | 3 | |
1010010419 | ALLOWANCE FOR ECL-AC | 3 |