Company: ATLCL
Filing Date: 2025-02-06
Form Type: CORRESP
Source: 0001437749-25-002991
Chunk: 1

Company: Atlanticus Holdings Corp
Filing Date: 2025-02-06
Form: CORRESP
Chunk 1
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 it impacts expected cash flows (as an inflow of cash). We believe (and have observed through our negotiations with both new and existing retail partners) that in a market transaction, participants assume a transaction flow with similar terms to our merchant fee. We believe that this approach is most consistent with the objectives of ASC 820 and is consistent with market valuation practices used by acquirers of similar receivable portfolios. The fair value model also considers other below market terms that may be inherent within a consumer receivable, such as below market billable yields on consumer receivables, which impact expectations of future cash receipts associated with the receivable.

Company Response:

The terms of consumer financial products vary, and the fair value of a receivable is calculated at the offer level based on the expected performance of such receivable. Below is an illustrative example of the accounting entries for the acquisition of a private label credit receivable. For ease, we assume that a consumer has applied and been approved for financing through our bank partner for the purchase of a $100 good from Vendor A. Further, we assume that the discounted cash flow analysis results in a fair value of $87.50 at the end of the same period. The fair value is determined by considering yields based on the consumer’s loan agreement with our bank partner and the expected payment, chargeoff, purchase (including associated merchant fees) and servicing rates experienced with similar assets. These inputs will then produce an expected cash flow associated with the receivable that is discounted using a rate that best approximates the return requirements used by third-party market participants. We have separately presented the entries associated with merchant fees as those fees are part of a transaction between us and our Retail Partners, separate from the acquisition of the receivable from our bank partner.

| Dr. Loans at fair value                                                     |     | $ | 100.00 |     |   |        |   | Balance Sheet    |
| Cr. Accounts payable and accrued expenses                                   |     |   |        |     | $ | 100.00 |   | Balance Sheet    |
| - To record the acquisition of receivable from Bank Partner                 |     |   |        |     |   |        |   |                  |
| Dr. Accounts payable and accrued expenses                                   |     | $ | 100.00 |     |   |        |   | Balance Sheet    |
| Cr. Cash                                                                    |     |   |        |     | $ | 100.00 |   | Balance Sheet    |
| - To record settlement of