Impairments ECL Scenarios for IFRS

The following scenarios describe ledger entries for impairments when you use asset-level expected credit loss (ECL). 

WRITERS NOTE: do we need to specify that this is using ECL panels rather than legacy impairment panels? Should we mention legacy impairment panels here or mention ECL on those legacy panels? 

Impairment for IFRS – FVOCI

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked.

Expected Credit Loss offsets to Cost until no ECL remains, any remaining amount offsets to Realized Losses – Impairments.

Impairment for IFRS – AC

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

This security is deemed to be impaired, You book a writedown transaction which updates the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked.

The Expected Credit Loss offsets to Cost until no ECL remains, any remaining amount offsets to Realized Losses – Impairments

Impairment for GAAP – AFS

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 and Non-Credit loss of $40 applied to it (that is, the present value is deemed to be $870, the market value is $830).

This security is deemed to be impaired. You books a writedown transaction against the lot. The new amortized cost is $880 so the writedown is for ($900 - $820 = $20).

The following ledger entries are booked.

Non-credit balance should be reversed completely.

This security is deemed to be impaired. You book a writedown transaction against the lot. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked.

Non-credit balance should be reversed completely.

In each case, the Expected Credit Loss offsets to Cost until no ECL remains, any remaining amount offsets to Realized Losses – Impairments.

Impairment for GAAP – HTM

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.

This security is deemed to be impaired. You book a writedown transaction against the lot. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

This security is deemed to be impaired. You book a writedown transaction against the lot. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked.