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Dear sir,
I am a little bit confused with the following:
In accordance with the answer part of the question, initially the 12 month ECLs ($0,4m) for the debt instrument, which is measured FVOCI, were recognized in OCI, and at the reporting date when an impairment loss was charged ($0,7m), only $0,3m was recognized in OCI and $0,4m was charged in PL.
Could you please briefly explain the reason?
And why didn’t the ECLs reduce the carrying amount of the debt instrument?
Thank you!
Double entry
Dr P&L 0.4 – because borrower is a bad credit risk
Dr OCI 0.3 – because of changes in market interest rates
Cr Allowance for impairment losses 0.7.The allowance account will be netted off against the financial asset account. So the CA will reduce.
FOR FUTURE POSTS USE TOPIC NOT THE QUESTION NAME AS THREAD HEADER.
🙂 🙂
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