Collective/Group-Level ECL Examples for US GAAP
- 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 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 FX Rate of 1.00
 | Held To Maturity |  |  |  |
|---|---|---|---|---|
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-HTM | Â | 200.00 | Â | 200.00 |
5001000902 | Impairment Expense for ECL-HTM | 200.00 | Â | 200.00 | Â |
Held to Maturity FX Rate of .80
 | Held To Maturity |  |  |  |
|---|---|---|---|---|
Transaction 1 | Â | ECL Local | FX 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-HTM | Â | 200.00 | Â | 250.00 |
5001000902 | Impairment Expense for ECL-HTM | 200.00 | Â | 250.00 | Â |
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 |  |  |  |
|---|---|---|---|---|
Transaction 2 | Â | ECL Local | FX Rate | ECL 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-HTM | Â | (200.00) | Â | (250.00) |
5001000902 | Impairment Expense for ECL-HTM | (200.00) | Â | (250.00) | Â |
1010010419 | Allowance for ECL-HTM | Â | 300.00 | Â | 383.33 |
5001000902 | Impairment Expense for ECL-HTM | 300.00 | Â | 383.33 | Â |
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 |  |  |  |
|---|---|---|---|---|
Transaction 2 | Â | ECL Local | FX Rate | ECL Base |
2/15/2017 | Book ECL Collective Level panel | 180.00 | NO FX RATE | 230.00 |
 | ECL Prev | 300.00 |  | 383.33 |
 |  |  |  |  |
Â
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-HTM | Â | (300.00) | Â | (383.33) |
5001000902 | Impairment Expense for ECL-HTM | (300.00) | Â | (383.33) | Â |
1010010419 | Allowance for ECL-HTM | Â | 180.00 | Â | 230.00 |
5001000902 | Impairment Expense for ECL-HTM | 180.00 | Â | 230.00 | Â |
Â