Company: HGBL
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0000950170-25-038691
Chunk: 95

Company: Heritage Global Inc.
Filing Date: 2025-03-13
Form: 10-K
Item: Item 1B
Chunk 95
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 loan receivables on a quarterly basis to determine if any indicators exist that suggest the loan will not be fully recoverable. As of December 31, 2024, the SCALE rate increased to 1.3644% and our credit loss rate specific to notes receivable was 3.7%. The increase over the SCALE rate was due to both risks with the concentrated balance and declining collections industry-wide. As of December 31, 2024 and December 31, 2023, our allowance for credit losses related to notes receivable outstanding was $0.4 million and $0.7 million, respectively. 

See Note 2 and Note 3 to our consolidated financial statements for further detail.

Equity Method Investments

As noted above, we conduct a portion of our business through Joint Ventures. Transactions in which our ownership share meets the criteria for the equity method investments under ASC 323 are accounted for using the equity method of accounting whereby our proportionate share of the Joint Venture’s net income (loss) is reported in the consolidated income statement as earnings of equity method investments. At the balance sheet date, our investments in these Joint Ventures are reported in the consolidated balance sheet as equity method investments. We monitor the value of each Joint Ventures’ underlying assets and liabilities, and record a write down of our investments should we conclude that there has been a decline in the value of the net assets. These investments have historically been classified as non-current in our consolidated financial statements due to the uncertainties relating to the timing of resale of the underlying assets as a result of the Joint Venture relationship. 

Upon adoption of ASC 326 on January 1, 2023, we evaluated the receivable balances held by our affiliated Joint Ventures and recorded an adjustment to reduce earnings from equity method investments by our share of the allowance for credit losses recorded on the Joint Ventures’ books of $0.2 million. Similar to notes receivable, the loans held by the Joint Ventures are evaluated on a quarterly basis to determine if an adjustment to the allowance for credit losses is needed. As of December 31, 2024, the SCALE rate increased to 1.3644% and the credit loss rate specific to equity method investments was 4.5%. The increase over the SCALE rate was due to both risks with the concentrated balance and declining collections industry-wide. As of December 31, 2024 and December 31, 2023, we have recorded an allowance for credit losses related to its equity method investments of $1.0 million