Collective/Group-Level ECL Examples for US GAAP

This section describes several examples of the ledger entries that result when you use collective/group-level Expected Credit Loss (ECL) with US GAAP.

Expected Credit Losses: Initial Entry

The following examples show the ledger entries that post for collective/group-level ECL, Held to Maturity.

Held to Maturity FX Rate of 1.00

Held to Maturity FX Rate of .80

Expected Credit Losses: ECL Increase

An ECL increase describes the situation where the new ECL local amount is greater than the previous local amount. For a domestic increase, the new local and base amounts are equal. For a foreign increase, the new base amount is equal to the prior base amount plus the base delta.

Example:

Previous Local Amount    200
Previous Base amount     250

New Local Amount          300 Current Fx Rate .75
New Base Amount           383.33 (250 + (100 ecl increase/.75) = 383.33)

Expected Credit Losses: ECL Decrease

An ECL decrease describes the situation where the new ECL local amount is less than the previous local amount. For a domestic decrease, the new local and base amounts are equal. For a foreign decrease, the new base amount is calculated by taking the previous base amount and reducing it proportional to the local change, ignoring any FX rate.

Example:

Previous Local Amount    300
Previous Base Amount     383.33

New Local Amount          180
New Base Amount           230

ECL local amount reduction = 40%. New base amount = 230 (383.33 – (.40 *383.33 previous base))