How to accrue and account for loan loss provisions (finance)

On the balance sheet date, confirm loan impairment losses:

Debit: asset impairment Losses

Credit: Loan loss provision

At the same time:

Debit: Loan—impaired

Credit: Loan—Principal

—Interest adjustment (or debit)

Interest receivable (if there is uncollected interest)

According to the actual interest rate method, the amortized cost is Basic recognition of interest income:

Debit: loan loss provision

Credit: interest income (beginning amortized cost × actual interest rate)

(At this time, " The interest receivable calculated and determined by "Contract principal × contract interest rate" is registered off-balance sheet and does not need to be confirmed.)

Debit: Deposit with banks, etc. (principal or interest received after impairment)

Credit: Loan - Impaired

Debit: Asset impairment loss (amortized cost - present value of future cash flows)

Credit: Loan loss provision

(When subsequent impairment is made, there is no need to transfer the principal and interest adjustments to "Loans - Impaired" because the processing has already been done in the first period of impairment.)

Loans that are truly irrecoverable will be written off as bad debts after approval according to management authority:

Debit: loan loss provision

Credit: loan—impaired

At the same time, the interest receivable and uncollected registered off-balance sheet will be written off after approval according to management authority, and the amount of "interest receivable and uncollected" off-balance sheet will be reduced.

Loans that have been confirmed and written off are later recovered:

Debit: Loan - Impaired (the balance of the impaired loan that was originally written off)

Credit: loan loss provision

Debit: deposits from banks/banks, etc. (actual amount received)

Credit: loan—impairment loss on impaired assets (difference, or debit).

Loan loss reserve adequacy ratio calculation formula! Teach you how to calculate!

The bank will set aside reserves every quarter based on the situation of the loan business, which must comply with local regulations and the current repayment ability of the loan borrower. Among them, the loan loss reserve adequacy ratio is an important indicator. , the specific calculation formula is as follows.

1. Calculation formula of loan loss reserve adequacy ratio

Calculation formula = actual loan provision/required provision. This ratio should be greater than 100. The assets for which loan loss provision is provided include Customer loans, placement funds, discounted assets, syndicated loans, trade financing, agreement overdrafts, credit card overdrafts, on-loans and advances, etc.

Every quarter, the bank will analyze the loan situation and determine the actual amount to be accrued. The loss reserve adequacy ratio should not be less than 100, because according to regulations, credit risk monitoring must exceed the estimated value. Including non-performing asset ratio, single group customer credit concentration, all correlations, loan loss reserve adequacy ratio and other indicators, which are stipulated in the "Core Indicators of Commercial Bank Risk Management" in 2006.

2. What is the difference between loan loss reserve adequacy ratio and provision coverage ratio?

The calculation methods of these two values ??are different. One is the ratio of actual loan loss provisions to the required loan provisions, and the other is the ratio of actual loan loss provisions to loan loss provisions.

The ratio requirements between the two are also different. The loss reserve adequacy ratio should not be less than 100, while the optimal provision coverage ratio is 100.

The loss reserve adequacy ratio is the amount of reserves accrued based on the degree when there is objective evidence that a loan has incurred a loss. The provision coverage ratio reflects whether the bank's finances are sound and whether risks are controllable.

How should the company's loan loss provisions be accrued? Is it accrued according to the five-level classification or 1 of the loan balance, or both?

There are two ways to deal with it. :

1. Adjust according to the 1 standard stipulated in the tax law, and transfer back the excess provision

Debit: Borrowing loss provision Loan: Adjustment of profit and loss in previous years

Debit : Previous years’ profit and loss adjustment credit: Surplus reserve

Undistributed profits

2. Directly press the provision, and adjust it by 1 when calculating income tax. The tax paid and If the actual provision is different, it will be included in the deferred income tax assets.

When calculating income tax, the difference in income tax paid is included in deferred income tax assets

For example, if the income tax expense in accounting is 100,000, the income tax payable is 15.

Debit : Income tax expense 10 Deferred income tax assets 5 Credit: Income tax payable 15

Extended information

The calculation formula for loan loss reserves allowed by financial enterprises before tax deduction for the current year is as follows: Tax allowed for the current year Pre-deducted loan loss reserves = Balance of loan assets allowed to withdraw loan loss reserves at the end of this year × 1 - Balance of loan loss reserves that have been deducted before tax as of the end of the previous year.

If the amount calculated by the financial enterprise according to the above formula is negative, it shall increase the taxable income of the year accordingly.

Financial companies do not bear risks and losses for entrusted loans, agency loans, government bond investments, dividends receivable, reserves handed over to the central bank, and debt and equity divested by financial companies, fiscal discounts receivable, and central bank accounts. assets, loan loss reserves shall not be deducted before tax.

For qualified loan losses incurred by financial enterprises, they should first offset the loan loss reserves that have been deducted before tax. The insufficient offset can be deducted when calculating the taxable income of the year based on the actual situation.