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