GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
Finance charge reversal liability
Our Bank Partners offer certain loan products that have a feature whereby the account holder is provided a promotional period to repay the loan principal balance in full without incurring a finance charge. For these loan products, we bill interest each month throughout the promotional period and, under the terms of the contracts with our Bank Partners, we are obligated to pay this billed interest to the Bank Partners if an account holder repays the loan balance in full within the promotional period. Therefore, the monthly process of billing interest on deferred loan products triggers a potential future finance charge reversal ("FCR") liability for the Company. The FCR component of our Bank Partner contracts qualifies as an embedded derivative. The FCR liability is not designated as a hedge for accounting purposes and, as such, changes in its fair value are recorded within cost of revenue in the Consolidated Statements of Operations.
The FCR liability is carried at fair value on a recurring basis in the Consolidated Balance Sheets and is estimated based on historical experience and management’s expectation of future FCR. The FCR liability is classified within Level 3 of the fair value hierarchy, as the primary component of the fair value is obtained from unobservable inputs based on the Company’s data, reasonably adjusted for assumptions that would be used by market participants. The following table reconciles the beginning and ending fair value measurements of our FCR liability during the periods indicated.
(1) Includes: (i) incentive payments from Bank Partners, which is the surplus of finance charges billed to borrowers over an agreedupon portfolio yield, a fixed servicing fee and realized net credit losses, (ii) cash received from recoveries on previously charged-off Bank Partner loans, and (iii) the proceeds received from transferring our rights to Charged-Off Receivables attributable to previously charged-off Bank Partner loans. We consider all monthly incentive payments from Bank Partners during the period to be related to billed finance charges on deferred interest products until monthly incentive payments exceed total billed finance charges on deferred products, which did not occur during any of the periods presented.
(2) Represents the reversal of previously billed finance charges associated with deferred payment loan principal balances that were repaid within the promotional period.
(3) A fair value adjustment is made based on the expected reversal percentage of billed finance charges (expected settlements), which is estimated at each reporting date. The fair value adjustment is recognized in cost of revenue in the Consolidated Statements of Operations.
Table:
 |  | Year Ended December 31, | 
 | 2019 | 2018 | 2017
Beginning balance | $138,589 | $94,148 | $68,064
Receipts(1) | 159,527 | 129,153 | 109,818
Settlements(2) | (262,449) | (181,590) | (127,029)
Fair value changes recognized in cost of revenue(3) | 170,368 | 96,878 | 43,295
Ending balance | $206,035 | $138,589 | $94,148


Question: How was the fair value adjustment made for the fair value changes recognized in cost of revenue?
Answer: based on the expected reversal percentage of billed finance charges (expected settlements), which is estimated at each reporting date.