Manage Debt Transactions for Expected Credit Losses for US GAAP

In certain Receive and Buy transaction panels, you can manually book a trade for a debt transaction associated with expected credit losses (ECL). 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 write-up and write-down, and account for them differently to properly capture variations in FX rate.

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Conversion/Buy/Receive Transactions ECL Scenarios for US GAAP

You can define ECL information in the following trade panels for debt securities with expected credit losses:

Open Debt Bond. For detailed information, see Book Trades for Debt Bonds.
Open Discount Bond (LT/ST). For detailed information, see Book Trades for Discount Bonds.
Open Inflation Linked Bond. For detailed information, see Book Trades for ILBs.
Open MBS/ABS/IO/PO. For detailed information, see Book Trades for MBSs.
Open TBA. For detailed information, see Book Trades for TBAs.
Receive Security. For detailed information, see Process a Manual Receive and Deliver Transaction.

Each of panels listed includes the Expected Credit Loss Information fields specific to long transactions on debt securities associated with expected credit loss. These fields can apply to a lot that an accounting basis with the ECL Method set to:

Non-US Treatment with regulatory categories of FVOCI/AC. This ECL method applies to IFRS.
US Treatment with regulatory categories of AFS/HTM. This ECL method applies to GAAP.

Note that while any expected credit losses entered on a trade panel are not basis specific, the system only applies credit losses to the accounting basis/regulatory category combinations that qualify for ECL. Also, the system stores any Expected Credit Losss Stage election only on the IFRS basis, even if the portfolio is multi-basis and IFRS is not primary accounting basis.

Accounting basis/regulatory category combinations that qualify for ECL include accounting bases of IFRS or GAAP, where the ECL Method is set to Non-US Treatment with regulatory categories of FVOCI/AC for IFRS, or where the ECL Method is set to US Treatment with regulatory categories of AFS/HTM for GAAP.

The following figure shows the Open Debt Bond panel’s Expected Credit Loss Information fields.

Open Debt Bond panel - Expected Credit Loss Information

WRITERS NOTE: Under what conditions do the below new fields appear? Does it look at all accounting bases or primary? Panel is showing Basis/ECL Method/Regulatory Category as hidden. What if there are multiple bases?

Option	Tag	Description
Expected Credit Loss Information
Purchased Impaired	16999	Indicates whether the trade is credit impaired. Options include: No. Default. The trade is not credit impaired. Yes. The trade is credit impaired. The system sets the Expected Credit Loss Stage (IFRS) field to a value of Stage 3 and hides that field.
Expected Credit Loss Local	16990	Specifies the value of the local Expected Credit Loss allowance. If you specify a value, you must additionally specify a value for the Expected Credit Loss Stage field.
Expected Credit Loss Base	16991	Displays the value of the base Expected Credit Loss allowance.
Expected Credit Loss Stage (IFRS)	7100	Identifies the Expected Credit Loss stage. The stage tracks the credit quality status of financial instruments. This value applies only to the trade’s IFRS basis. You must specify a value if you enter a value for the Expected Credit Loss Local field. Options include: Stage 1. Have not deteriorated significantly in credit quality or have low credit risk. Stage 2. Deteriorated significantly in credit quality since initial recognition (unless low credit risk at reporting date) and not having objective evidence of impairment. Stage 3. The system assigns this value if you set Purchased Impaired to Yes . WRITERS NOTE: This is required sometimes. When are you required to specify a stage? If any basis is Non-US Treatment? Based on Reg Category? If you enter a value for the Expected Credit Loss Local field AND you have something else?