Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 1387

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 8
Chunk 1387
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ables
consists of small-balance homogeneous contracts that are collectively evaluated for impairment on a portfolio basis. We report delinquency
on a contractual basis. Once a Contract becomes greater than 90 days delinquent, we do not recognize additional interest income until
the obligor under the Contract makes sufficient payments to be less than 90 days delinquent. Any payments received on a Contract
that is greater than 90 days delinquent are first applied to accrued interest and then to principal reduction.

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.

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. For the twelve-month period ended December 31, 2024 include a $21.0 million positive mark to the
carrying value of the portion of the receivables portfolio accounted for at fair value. The Company recorded a $12.0 positive mark to
for the twelve-month period ended December 31, 2023.

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