Book Asset-Level ECL to Debt Security Lots for US GAAP

Owned by Nancy Cohn (Deactivated)
Last updated: May 19, 2023
3 min read

 

In the Book ECL Asset-Level panel, you can manually apply expected credit losses (ECL) to debt security lots as an adjustment entry. This allows you to apply adjustments of expected credit losses on open lots/holdings. You can book ECL against domestic or foreign assets to capture all asset-level accounting. You can book ECL against foreign assets where the accounting system properly differentiates between increases and decreases.

To apply an expected credit loss adjustment to a lot when you use US GAAP, the lot must have an accounting basis with the ECL Method set to US Treatment with regulatory categories of AFS/HTM. You can update the expected credit loss amount. If the regulatory category is AFS, you can update the regulatory intent and can apply non-credit losses.

The panel displays lot detail information, such as quantity, trade date, settlement date, current cost, and allows you to specify information specific to expected credit losses. For your initial expected credit loss transaction on the lot, you can select the ECL Transition option if you need the ability to change the Purchased Impaired status.

Asset-level ECL transactions are basic-specific events. These transactions/events process only on the accounting basis you specify in the panel, even in cases when the entity has more than one accounting basis. Eagle Accounting can differentiate between increasing expected credit losses for a dummy asset and decreasing expected credit losses for a dummy asset, and accounts for them differently.

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Process Transactions with the Book ECL Asset-Level Panel

To book an asset-level ECL lot adjustment transaction to debt security lots when using US GAAP:

  1. In Accounting Center, in the left navigation pane, click Transactions > Adjustments > Expected Credit Loss Transactions > Book ECL Asset-Level. 
    You see the Book ECL Asset-Level panel.

  2. In the Entity Information section, specify the entity and accounting basis associated with the lot you are adjusting. 
    You see the entity base currency, and the regulatory category and ECL Method for the selected entity/basis grouping. Because you selected an entity with an accounting basis of GAAP, the Regulatory Category is AFS or HTM, and the ECL Method is US Treatment.

  3. In the Security Information by Option section, identify the security associated with the lot you are adjusting.

  4. In the Accounting Information section, identify the lot you are adjusting and date criteria.

  5. If you are entering an initial transaction, you can set ECL Transition to Yes to have the option to the change the Purchased Impaired value for your initial transaction.
    The options available on the panel vary if you are adjusting a lot that uses the Non-US Treatment ECL method for IFRS with regulatory categories of FVOCI/AC or a lot that uses the US Treatment ECL method for US GAAP with regulatory categories of AFS/HTM.

  6. In the Regulatory Intent Information section, if you adjust a lot using US Treatment ECL Method (GAAP) with a regulatory category of AFS, you can update the Regulatory Intent field.
    Options include:
    - Intent to Sell
    - Likely required to Sell
    - Not Likely Required to Sell

  7. In the Expected Credit Loss Information section, in the Local Loss Allowance box, specify the expected credit loss allowance.

  8. In the Expected Credit Loss Activity section, you can review previous expected credit loss allowance information.

  9. In the Non-Credit Loss Information section, if you set Regulatory Intent to Not Likely Required to Sell, you can update the Non-Credit Loss Local field value.
    This allows you to book non-credit loss adjustments for AFS securities that have a regulatory intent of Not Likely Required to Sell.

  10. Complete the remaining options on the Book ECL Asset-Level panel, as needed.
    For more information about each option, see the following table.

  11. Click Submit. 

After you make a lot adjustment, you can view the adjustment activity on the Open Adjustments tab of the Cost object within the Position Viewer tool. Any subsequent ECL transactions to the same ECL position insert an adjustment row in order to update the balance or other information. When you update the current balance or regulatory intent, the system moves the current value to a “previous” field on the adjustment row in order to store the prior value.

Book ECL Asset-Level Panel Example for US GAAP

In the following figure, you use the Book ECL Asset-Level panel with an entity/basis for GAAP, where the ECL Method is US Treatment and the Regulatory Category is AFS (Available for Sale). Under Regulatory Intent Information, notice that you set Regulatory Intent to Not Likely Required to Sell.

Book ECL Asset-Level panel (US Treatment) for US GAAP

Book ECL Asset-Level Panel Options