Impairments ECL Scenarios for IFRS

The following scenarios describe ledger entries for impairments when you use asset-level expected credit loss (ECL) with an IFRS accounting basis. 

About Impairments and Asset-Level ECL

When you use asset-level ECL, you can process any impairment of the asset using the Book Impairment Adjustment panel. The impairment event checks to see if there is an expected credit loss on the lot and reduces the expected credit loss accordingly.

Note that because you book ECL onto the system at the lot level, you must set the Impairment Processing Flag field on the panel to a value of Lot in order to reduce ECL as part of the impairment. If you set the Impairment Processing Flag to a value of Position, the system does not reduce any ECL on the lot.

Impairment for IFRS – FVOCI

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.

Ledger Account

Ledger Acct Name

Dr

Cr

Ledger Account

Ledger Acct Name

Dr

Cr

1010000100

COST OF INVESTMENTS-FV-OCI

900

 

2002000100

INVESTMENT PAYABLE

 

900

5001000902

IMPAIRMENT EXPENSE FOR ECL-FV-OCI

30

 

3005000406

ALLOWANCE FOR ECL-FV-OCI

 

 30

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

Ledger Account

Ledger Acct Name

Dr

Cr

Ledger Account

Ledger Acct Name

Dr

Cr

1010000100

COST OF INVESTMENTS-FV-OCI

 

20

3005000406

ALLOWANCE FOR ECL-FV-OCI

20

 

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked. The writedown first reduces the Allowance for ECL and any excess is recoded as an impairment expense. The entire amount of the writedown reduces the Cost of Investment.

Ledger Account

Ledger Acct Name

Dr

Cr

Ledger Account

Ledger Acct Name

Dr

Cr

1010000100

COST OF INVESTMENTS-FV-OCI

 

50

4004000303

REALIZED LOSSES – IMPAIRMENTS-FV-OCI

20

 

3006000104

REALIZED LOSSES-FV-OCI-FROM OCI

 

20

3003000302

UNREALIZED LOSSES-FV-OCI -OCI

20

 

3005000406

ALLOWANCE FOR ECL-FV-OCI

30

 



Expected Credit Loss offsets to Allowance for ECL until no ECL remains, any remaining amount offsets to Realized Losses – Impairments.

Impairment for IFRS – AC

On 1 January 2020, the entity purchases one lot of a loan-backed security, par of 1,000 and a cost of $900. The lot subsequently has an expected credit losses of $30 applied to it.

Ledger Account

Ledger Acct Name

Dr

Cr

Ledger Account

Ledger Acct Name

Dr

Cr

1010000100

COST OF INVESTMENTS-AC

900

 

2002000100

INVESTMENT PAYABLE

 

900

5001000902

IMPAIRMENT EXPENSE FOR ECL- AC

30

 

1010010419

ALLOWANCE FOR ECL-AC

 

30 

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $880 so the writedown is for ($900 - $880 = $20).

The following ledger entries are booked.

Ledger Account

Ledger Acct Name

Dr

Cr

Ledger Account

Ledger Acct Name

Dr

Cr

1010000100

COST OF INVESTMENTS-AC

 

20

1010010419

ALLOWANCE FOR ECL-AC

20

 

This security is deemed to be impaired. You book a writedown transaction which updates the stage to 3. The new amortized cost is $850 so the writedown is for ($900 - $850 = $50).

The following ledger entries are booked.

Ledger Account

Ledger Acct Name

Dr

Cr

Ledger Account

Ledger Acct Name

Dr

Cr

1010000100

COST OF INVESTMENTS- AC

 

50

4004000303

REALIZED LOSSES – IMPAIRMENTS-AC

20

 

1010010419

ALLOWANCE FOR ECL-AC

30

 

The Expected Credit Loss offsets to Cost until no ECL remains. Any remaining amount offsets to Realized Losses – Impairments.