Collective/Group-Level ECL Examples for IFRS

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

Expected Credit Loss: Initial Entry

The following four examples show the ledger entries that post for ECL for amortized cost and FVOCI. 

Amortized Cost with FX Rate of 1.00

Fair Value-OCI with FX Rate of 1.00

Amortized Cost with FX Rate of .80

Fair Value-OCI with FX Rate of .80

Expected Credit Loss: Increase

This example describes a scenario where the new ECL local amount is greater than the previous local amount. For domestic increases, the new local and base amounts are equal. For foreign increases, 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 Loss: Decrease

This example describes a scenario where the new ECL local amount is less than the previous local amount. For domestic decreases, the new local and base amounts are equal. For foreign decreases, 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))