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 | Acct # | Description | Local | Base | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
Transaction 1 | ECL Local | FX Rate | ECL Base | 1010010419 | Allowance for ECL-HTM | 200.00 | 200.00 | |||
1/15/2017 | Book ECL Collective Level panel | 200.00 | 1.00 | 200.00 | 5001000902 | Impairment Expense for ECL-HTM | 200.00 | 200.00 | ||
Held To Maturity | Acct # | Description | Local | Base | ||||||
Transaction 1 | ECL Local | FX Rate | ECL Base | 1010010419 | Allowance for ECL-HTM | 200.00 | 250.00 | |||
1/15/2017 | Book ECL Collective Level panel | 200.00 | 0.80 | 250.00 | 5001000902 | Impairment Expense for ECL-HTM | 200.00 | 250.00 |
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)
Held To Maturity | Acct # | Description | Local | Base | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
Transaction 2 | ECL Local | FX Rate | ECL Base | 1010010419 | Allowance for ECL-HTM | (200.00) | (250.00) | |||
2/15/2017 | Book ECL Collective Level panel | 300.00 | 0.75 | 5001000902 | Impairment Expense for ECL-HTM | (200.00) | (250.00) | |||
ECL Prev | 200.00 | 250.00 | 1010010419 | Allowance for ECL-HTM | 300.00 | 383.33 | ||||
| Increase | 100.00 | 0.75 | 133.33 | 5001000902 | Impairment Expense for ECL-HTM | 300.00 | 383.33 | |||
| Total ECL | 300.00 | 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))
Held To Maturity | Acct # | Description | Local | Base | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
Transaction 2 | ECL Local | FX Rate | ECL Base | 1010010419 | Allowance for ECL-HTM | (300.00) | (383.33) | |||
2/15/2017 | Book ECL Collective Level panel | 180.00 | NO FX RATE | 230.00 | 5001000902 | Impairment Expense for ECL-HTM | (300.00) | (383.33) | ||
ECL Prev | 300.00 | 383.33 | 1010010419 | Allowance for ECL-HTM | 180.00 | 230.00 | ||||
| 5001000902 | Impairment Expense for ECL-HTM | 180.00 | 230.00 |
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