Collective/Group-Level ECL Examples for IFRS
- Nancy Cohn (Deactivated)
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.Â
Amortized Cost with FX Rate of 1.00
 | Amortized Cost |  |  |  |
|---|---|---|---|---|
Transaction 1 | Â | ECL Local | FX Rate | ECL Base |
1/15/2017 | Book ECL Collective Level panel | 200.00 | 1.00 | 200.00 |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-AC | Â | 200.00 | Â | 200.00 |
5001000902 | Impairment Expense for ECL-AC | 200.00 | Â | 200.00 | Â |
Fair Value-OCI with FX Rate of 1.00
 | Fair Value-OCI |  |  |  |
|---|---|---|---|---|
Transaction 1 | Â | ECL Local | FX Rate | ECL Base |
1/15/2017 | Book ECL Collective Level panel | 200.00 | 1.00 | 200.00 |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-FV-OCI | Â | 200.00 | Â | 200.00 |
5001000902 | Impairment Expense for ECL-FV-OCI | 200.00 | Â | 200.00 | Â |
Amortized Cost with FX Rate of .80
 | Amortized Cost |  |  |  |
|---|---|---|---|---|
Transaction 1 | Â | ECLÂ Local | FXÂ Rate | ECL Base |
1/15/2017 | Book ECL Collective Level panel | 200.00 | 0.80 | 250.00 |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-AC | Â | 200.00 | Â | 250.00 |
5001000902 | Impairment Expense for ECL-AC | 200.00 | Â | 250.00 | Â |
Fair Value-OCI with FX Rate of .80
 | Fair Value-OCI |  |  |  |
|---|---|---|---|---|
Transaction 1 | Â | ECLÂ Local | FXÂ Rate | ECLÂ Base |
1/15/2017 | Book ECL Collective Level panel | 200.00 | 0.80 | 250.00 |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-FV-OCI | Â | 200.00 | Â | 250.00 |
5001000902 | Impairment Expense for ECL-FV-OCI | 200.00 | Â | 250.00 | Â |
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)
 | Amortized Cost |  |  |  |
|---|---|---|---|---|
Transaction 2 | Â | ECLÂ Local | FXÂ Rate | ECLÂ Base |
2/15/2017 | Book ECL Collective Level panel | 300.00 | 0.75 | Â |
 | ECL Prev | 200.00 |  | 250.00 |
 | Increase | 100.00 | 0.75 | 133.33 |
 | Total ECL | 300.00 |  | 383.33 |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-AC | Â | (200.00) | Â | (250.00) |
5001000902 | Impairment Expense for ECL-AC | (200.00) | Â | (250.00) | Â |
1010010419 | Allowance for ECL-AC | Â | 300.00 | Â | 383.33 |
5001000902 | Impairment Expense for ECL-AC | 300.00 | Â | 383.33 | Â |
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))
 | Amortized Cost |  |  |  |
|---|---|---|---|---|
Transaction 3 | Â | ECL Local | FX Rate | ECL Base |
3/15/2017 | Book ECL Collective Level panel | 180.00 | none | 230.00 |
 | ECL Prev | 300.00 |  | 383.33 |
 |  |  |  |  |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-AC | Â | (300.00) | Â | (383.33) |
5001000902 | Impairment Expense for ECL-AC | (300.00) | Â | (383.33) | Â |
1010010419 | Allowance for ECL-AC | Â | 180.00 | Â | 230.00 |
5001000902 | Impairment Expense for ECL-AC | 180.00 | Â | 230.00 | Â |
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