This section describes several examples of the ledger entries that result when you use collective-level, or group-level, Expected Credit Loss (ECL).
Expected Credit Loss: Initial Entry
The following examples show the ledger entries that post for ECL for amortized cost and FVOCI.
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))
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