Paydowns ECL Scenarios for IFRS

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

Paydown for IFRS – FVOCI

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

Ledger entries follow for an IFRS accounting basis with an FVOCI (Fair Value - Other Comprehensive Income) regulatory category. 

10% of the position is paid down with a gain of $10. Because 10% of the position is being closed, $3 of ECL is proportionally reduced, the gain becomes $13.

Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Realized Gain/Loss

Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization

Paydown for IFRS – AC

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

Ledger entries follow for an IFRS accounting basis with an AC (Amortized Cost) regulatory category. 

10% of the position is paid down with a gain of $10. Because 10% of the position is being closed, $3 of ECL is proportionally reduced, the gain becomes $13.

Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Realized Gain/Loss

Principal Loss on Paydown Processing Flag (tag 2925) on Accounting Basis = Accelerated Amortization

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