Canada IFRS9: Expected Credit Losses (ECL) for Fair Value through Other Comprehensive Income (FVOCI) Instruments

Nov 1, 2023
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Hello the community,

I found this illustration on Expected Credit Losses (ECL) for Fair Value through Other Comprehensive Income (FVOCI) instruments from a PwC doc (photos below or link – p21). I am not sure I understand all the accounting treatments, so could you please help me with the following:

  1. I understand the CU30 ECL is recognized when the instrument is acquired on Dec 15 (and NOT on Dec 31), is that correct?
  2. When ECL is recognized, the accumulated impairment loss account, which is a contra asset account, is credited (decreased) by CU30, with no impact on the Financial asset – FVOCI account which remains at faire value (FV) on the balance sheet, correct?
  3. On Dec 31, when the FV of the instrument has decreased to CU950, I don’t understand why the ECL is recognized in the P&L. I understood ECL for FVOCI instruments has no impact on the P&L? The contra asset account “accumulated impairment loss account” is debited (increase in value) by the same amount at the same time correct?
  4. On Dec 31, why is a new ECL of CU50 not created? And instead the existing ECL (CU30) is recognized, and the remaining portion (CU20) is recognized as a loss in OCI? Why isn’t the entire amount (CU50) recognized as a loss in OCI?
  5. Let’s consider the reverse scenario: the purchase of CU1,000 debt instrument with a value of CU1,050 at Dec 31. What would be the impact on ECL and the financial statements?
Thanks in advance for your help!

PwC Illustration 1.PNG
PwC Illustration 2.PNG

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