Company: CPSS
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001683168-25-003436
Chunk: 103

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 8
Chunk 103
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 the reported periods.

Finance Receivables Measured
at Fair Value

Effective January 1, 2018, we adopted the fair
value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we
consider the price paid on the purchase date as the fair value for such receivable. We estimate the cash to be received in the future
with respect to such receivables, based on our experience with similar receivables acquired in the past. We then compute the internal
rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value. Thereafter,
we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest
rate. Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value
of the receivables.

     8 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

We re-evaluate the fair value of such receivables
at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment
would be required.

Anticipated credit losses are included in our
estimation of cash to be received with respect to receivables.  In accordance with the fair value accounting standards, credit losses
are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses,
as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated
credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable
to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual
principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of
acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred.

Other Income

The following table presents the primary components
of Other Income for the three-month periods ending March 31, 2025, and 2024:

    Schedule of other income