Tan plc has the following assets originated on 1 January 2016:
(i) A loan receivable generated from lending £100,000 to a customer of the company. The loan carries interest at 7% per annum payable in arrears and is classified at amortized cost. The 12-month expected credit losses on the loan are 2% of the principal amount.
(ii) A loan receivable Tan plc acquired has classified as fair value with gains and losses in other comprehensive income. The investment is recognized at £150,000, but Tan plc expects 12-month expected credit losses to be 2% of the amount recognized.
By 31 December 2016 the 12-month expected credit losses have increased to 212% but the credit position of the assets is not assumed to have significantly deteriorated.
Requirement
Show the journal entries for the creation of the loss allowance under IFRS 9 at 1 January 2016, and the movement in the loss allowance at 31 December 2016?