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A common solution for the consideration of expected credit losses in the balance sheet is the posting of “D Risk provision expense C risk provision”. These entries will be reversed on the following posting date. Instead of posting incremental changes in the ECLExpected Credit Loss, this approach posts the full amount of ECLExpected Credit Loss.
For stages 1 and 2, the solution operates with a fixed accounting logic. It generates, for each individual deal, a record that contains exactly one debit entry on an expense account and one credit entry on a risk provision account.
Which The account that is to be posted for the an individual deal will be posted, is subject to the configuration in a specific table. For Multiple general ledger accounts can be defined for each group of accounts (expense of risk provision), multiple general ledger accounts can be defined. The appropriate general ledger account will be identified for each individual deal on the basis of descriptive parameters.
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