Loss allowance reconciliation

Learning objectives

• Explain the reconciliation of the loss allowance: opening balance, charge, transfers between stages, amounts used or written off, recoveries and closing balance.L2
• Calculate the closing loss allowance from the opening balance and the movements of the period.L3
• Record the charge and then the write-off applied against the loss allowance.L2, L3

Normative references

• IFRS 7 §35HThe entity provides, by class of financial instrument and in a table, a reconciliation from the opening to the closing balance of the loss allowance, showing separately the changes in the allowance measured at 12-month expected credit losses, in the allowance measured at lifetime expected credit losses (significant increase in credit risk without impairment, credit-impaired assets, receivables and assets under the simplified approach) and in that for purchased or originated credit-impaired financial assets, with the total undiscounted expected credit losses at initial recognition for the latter; para. 35I and guidance B8D give examples of explanations of the changes.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• Borée Banque SA prepares the reconciliation of the loss allowance for expected credit losses on its loans. Opening allowance {opening_allowance}; charge for the year {charge}; loans written off and charged against the allowance {write_offs}. The draft note shows a closing allowance of {reported_closing} (case data; no other movement). Calculate the closing loss allowance, then the difference between the draft and your calculation.L3
• Fluor SA writes off a loan with a gross carrying amount of {loan_gross}. The loan was already covered by a loss allowance of {allowance_held}, that is, its full amount (case data). Record the write-off entry.L2
• A trainee summarises the reconciliation of the loss allowance for expected credit losses. Which of the trainee's sentences is wrong?L2