This section introduces some concepts used with asset-level Expected Credit Losses (ECL) for IFRS accounting bases.
About the Non-US Treatment ECL Method
Eagle’s accounting solution offers two methodologies for processing for asset-level Expected Credit Losses. It uses the ECL Method of Non-US Treatment for processing IFRS accounting bases. If you use US GAAP accounting bases, the ECL Method of US Treatment is also available.
About Tracking Stages with Asset-Level ECL
With asset-level ECL used in conjunction with IFRS, you can track changes related to the stage, or /status of credit quality of fixed income financial instruments. You identify the stage at the transaction level rather than for the SMF. These statuses include:
Stage 1. Have not deteriored deteriorated significantly in credit quality or have low credit risk.
Stage 2. Deteriorated significantly in credit qualtity quality since initial recognition (unless low credit risk at reporting date) and not having objected objective evidence of impairment.
Stage 3. Objected Objective evidence of impairment at reporting date.
About Event Priority for Asset-Level ECL Events
WRITERS NOTE: NEW 10/2020 Needs review
In Eagle Accounting every event has an event priority which tells the system in what order to process events when rollback replay occurs. The event priority for Asset-Level Expected Credit Loss events ensures that ECL events are processed subsequent to any open and close transactions that occur on the same trading day with the exception of Impairments. This ensures more accurate ECL processing because the calculation for ECL is typically based on the end of day position of the underlying asset. For more information, see About Event Types and Event Priorities.
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. For more information, see Manage Impairments and Impairments ECL Scenarios for IFRS.
WRITERS NOTE: NEW 1/29/2021 Needs review