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 |
| ECL Local | FX Rate | ECL Base |
1/15/2017 | Book ECL Collective Level panel | 200.00 | 1.00 | 200.00 |
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-HTM |
| 200.00 |
| 200.00 |
5001000902 | Impairment Expense for ECL-HTM | 200.00 |
| 200.00 |
|
Held to Maturity FX Rate of .80
| Held To Maturity |
|
|
|
|---|---|---|---|---|
Transaction 1 |
| ECL Local | FX Rate | ECL Base |
1/15/2017 | Book ECL Collective Level panel | 200.00 | 0.80 | 250.00 |
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-HTM |
| 200.00 |
| 250.00 |
5001000902 | Impairment Expense for ECL-HTM | 200.00 |
| 250.00 |
|
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 |
| ECL Local | FX Rate | ECL Base |
2/15/2017 | Book ECL Collective Level panel | 300.00 | 0.75 |
|
| ECL Prev | 200.00 |
| 250.00 |
| Increase | 100.00 | 0.75 | 133.33 |
| Total ECL | 300.00 |
| 383.33 |
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-HTM |
| (200.00) |
| (250.00) |
5001000902 | Impairment Expense for ECL-HTM | (200.00) |
| (250.00) |
|
1010010419 | Allowance for ECL-HTM |
| 300.00 |
| 383.33 |
5001000902 | Impairment Expense for ECL-HTM | 300.00 |
| 383.33 |
|
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 |
| 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 |
|
|
|
|
|
Acct # | Description | Local Dr | Cr | Base Dr | Cr |
|---|---|---|---|---|---|
1010010419 | Allowance for ECL-HTM |
| (300.00) |
| (383.33) |
5001000902 | Impairment Expense for ECL-HTM | (300.00) |
| (383.33) |
|
1010010419 | Allowance for ECL-HTM |
| 180.00 |
| 230.00 |
5001000902 | Impairment Expense for ECL-HTM | 180.00 |
| 230.00 |
|