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Investment in Receivable Portfolios, Net | 6 Months Ended
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Jun. 30, 2018
Receivables [Abstract] |
Investment in Receivable Portfolios, Net | Investment in Receivable Portfolios, Net In accordance with the authoritative guidance for loans and debt securities acquired with deteriorated credit quality, discrete receivable portfolio purchases during the same fiscal quarter are aggregated into pools based on common risk characteristics. Common risk characteristics include risk ratings (e.g. FICO or similar scores), financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic region or location. Portfolios acquired in business combinations are also grouped into these pools. During any fiscal quarter in which the Company has an acquisition of an entity that has portfolio, the entire historical portfolio of the acquired company is aggregated into the pool groups for that quarter, based on common characteristics, resulting in pools for that quarter that may consist of several different vintages of portfolio. Once a static pool is established, the portfolios are permanently assigned to the pool. The discount (i.e., the difference between the cost of each static pool and the related aggregate contractual receivable balance) is not recorded because the Company expects to collect a relatively small percentage of each static pool’s contractual receivable balance. As a result, receivable portfolios are recorded at cost at the time of acquisition. The purchase cost of the portfolios includes certain fees paid to third parties incurred in connection with the direct acquisition of the receivable portfolios. In compliance with the authoritative guidance, the Company accounts for its investments in receivable portfolios using either the interest method or the cost recovery method. The interest method applies an internal rate of return (“IRR”) to the cost basis of the pool, which remains unchanged throughout the life of the pool, unless there is an increase in subsequent expected cash flows. Subsequent increases in expected cash flows are recognized prospectively through an upward adjustment of the pool’s IRR over its remaining life. Subsequent decreases in expected cash flows do not change the IRR, but are recognized as an allowance to the cost basis of the pool, and are reflected in the consolidated statements of operations as a reduction in revenue, with a corresponding valuation allowance, offsetting the investment in receivable portfolios in the consolidated statements of financial condition. With gross collections being discounted at monthly IRRs, when collections are lower in the near term, even if substantially higher collections are expected later in the collection curve, an allowance charge could result. The Company accounts for each static pool as a unit for the economic life of the pool (similar to one loan) for recognition of revenue from receivable portfolios, for collections applied to the cost basis of receivable portfolios and for provision for loss or allowance. Revenue from receivable portfolios is accrued based on each pool’s IRR applied to each pool’s adjusted cost basis. The cost basis of each pool is increased by revenue earned and portfolio allowance reversals and decreased by gross collections and portfolio allowances. If the amount and timing of future cash collections on a pool of receivables are not reasonably estimable, the Company accounts for such portfolios on the cost recovery method as Cost Recovery Portfolios. The accounts in these portfolios have different risk characteristics than those included in other portfolios acquired during the same quarter, or the necessary information was not available to estimate future cash flows and, accordingly, they were not aggregated with other portfolios. Under the cost recovery method of accounting, no revenue is recognized until the carrying value of a Cost Recovery Portfolio has been fully recovered. Accretable yield represents the amount of revenue the Company expects to generate over the remaining life of its existing investment in receivable portfolios based on estimated future cash flows. Total accretable yield is the difference between future estimated collections and the current carrying value of a portfolio. All estimated cash flows on portfolios where the cost basis has been fully recovered are classified as zero basis cash flows. The following table summarizes the Company’s accretable yield and an estimate of zero basis future cash flows at the beginning and end of the period presented (in thousands):
| Accretable Yield |  | Estimate of Zero Basis Cash Flows |  | Total
Balance at December 31, 2017 | $ | 3,695,069 |  |  | $ | 369,632 |  |  | $ | 4,064,701 |
Revenue from receivable portfolios | (249,821 | ) |  | (31,188 | ) |  | (281,009 | )
Allowance reversals on receivable portfolios, net | (8,082 | ) |  | (1,729 | ) |  | (9,811 | )
Reductions on existing portfolios, net | (24,945 | ) |  | (39,529 | ) |  | (64,474 | )
Additions for current purchases | 285,172 |  |  | — |  |  | 285,172 |
Effect of foreign currency translation | 57,577 |  |  | 643 |  |  | 58,220 |
Balance at March 31, 2018 | 3,754,970 |  |  | 297,829 |  |  | 4,052,799 |
Revenue from receivable portfolios | (258,698 | ) |  | (33,964 | ) |  | (292,662 | )
Allowance reversals on receivable portfolios, net | (15,411 | ) |  | (2,221 | ) |  | (17,632 | )
Additions on existing portfolios, net | 136,267 |  |  | 5,824 |  |  | 142,091 |
Additions for current purchases | 345,006 |  |  | — |  |  | 345,006 |
Effect of foreign currency translation | (97,448 | ) |  | (597 | ) |  | (98,045 | )
Balance at June 30, 2018 | $ | 3,864,686 |  |  | $ | 266,871 |  |  | $ | 4,131,557 |
| Accretable Yield |  | Estimate of Zero Basis Cash Flows |  | Total
Balance at December 31, 2016 | $ | 3,092,004 |  |  | $ | 365,504 |  |  | $ | 3,457,508 |
Revenue from receivable portfolios | (211,105 | ) |  | (38,733 | ) |  | (249,838 | )
Allowance reversals on receivable portfolios, net | (613 | ) |  | (1,519 | ) |  | (2,132 | )
(Reductions) additions on existing portfolios, net | (90,138 | ) |  | 57,446 |  |  | (32,692 | )
Additions for current purchases | 200,728 |  |  | — |  |  | 200,728 |
Effect of foreign currency translation | 38,712 |  |  | 467 |  |  | 39,179 |
Balance at March 31, 2017 | 3,029,588 |  |  | 383,165 |  |  | 3,412,753 |
Revenue from receivable portfolios | (224,310 | ) |  | (39,097 | ) |  | (263,407 | )
Allowance reversals on receivable portfolios, net | (7,121 | ) |  | (1,708 | ) |  | (8,829 | )
Additions on existing portfolios, net | 225,021 |  |  | 9,888 |  |  | 234,909 |
Additions for current purchases | 258,687 |  |  | — |  |  | 258,687 |
Effect of foreign currency translation | 66,927 |  |  | (753 | ) |  | 66,174 |
Balance at June 30, 2017 | $ | 3,348,792 |  |  | $ | 351,495 |  |  | $ | 3,700,287 |
During the three months ended June 30, 2018, the Company purchased receivable portfolios with a face value of $2.9 billion for $359.6 million, or a purchase cost of 12.5% of face value. The estimated future collections at acquisition for all portfolios purchased during the three months ended June 30, 2018 amounted to $704.4 million. During the three months ended June 30, 2017, the Company purchased receivable portfolios with a face value of $2.4 billion for $246.4 million, or a purchase cost of 10.1% of face value. The estimated future collections at acquisition for all portfolios purchased during the three months ended June 30, 2017 amounted to $505.0 million. During the six months ended June 30, 2018, the Company purchased receivable portfolios with a face value of $4.7 billion for $636.3 million, or a purchase cost of 13.6% of face value. The estimated future collections at acquisition for all portfolios purchased during the six months ended June 30, 2018 amounted to $1,260.6 million. During the six months ended June 30, 2017, the Company purchased receivable portfolios with a face value of $4.1 billion for $465.1 million, or a purchase cost of 11.3% of face value. The estimated future collections at acquisition for all portfolios purchased during the six months ended June 30, 2017 amounted to $924.4 million. All collections realized after the net book value of a portfolio has been fully recovered (“Zero Basis Portfolios”) are recorded as revenue (“Zero Basis Revenue”). During the three months ended June 30, 2018 and 2017, Zero Basis Revenue was approximately $34.0 million and $39.1 million, respectively. During the three months ended June 30, 2018 and 2017, allowance reversals on Zero Basis Portfolios were $2.2 million and $1.7 million, respectively. During the six months ended June 30, 2018 and 2017, Zero Basis Revenue was approximately $65.2 million and $77.8 million, respectively. During the six months ended June 30, 2018 and 2017, allowance reversals on Zero Basis Portfolios were $4.0 million and $3.2 million, respectively. The following tables summarize the changes in the balance of the investment in receivable portfolios during the following periods (in thousands, except percentages):
| Three Months Ended June 30, 2018
| Accrual Basis Portfolios |  | Cost Recovery Portfolios |  | Zero Basis Portfolios |  | Total
Balance, beginning of period | $ | 3,013,519 |  |  | $ | 10,622 |  |  | $ | — |  |  | $ | 3,024,141 |
Purchases of receivable portfolios | 359,580 |  |  | — |  |  | — |  |  | 359,580 |
Disposals or transfers to assets held for sale | (2,033 | ) |  | (262 | ) |  | — |  |  | (2,295 | )
Gross collections(1) | (460,478 | ) |  | (252 | ) |  | (35,363 | ) |  | (496,093 | )
Put-backs and Recalls(2) | (8,484 | ) |  | — |  |  | (24 | ) |  | (8,508 | )
Foreign currency adjustments | (101,921 | ) |  | (577 | ) |  | — |  |  | (102,498 | )
Revenue recognized | 258,698 |  |  | — |  |  | 33,964 |  |  | 292,662 |
Reclassification adjustments(3) | — |  |  | 798 |  |  | (798 | ) |  | — |
Portfolio allowance reversals, net | 15,411 |  |  | — |  |  | 2,221 |  |  | 17,632 |
Balance, end of period | $ | 3,074,292 |  |  | $ | 10,329 |  |  | $ | — |  |  | $ | 3,084,621 |
Revenue as a percentage of collections(4) | 56.2 | % |  | 0.0 | % |  | 96.0 | % |  | 59.0 | %
| Three Months Ended June 30, 2017
| Accrual Basis Portfolios |  | Cost Recovery Portfolios |  | Zero Basis Portfolios |  | Total
Balance, beginning of period | $ | 2,422,299 |  |  | $ | 13,719 |  |  | $ | — |  |  | $ | 2,436,018 |
Purchases of receivable portfolios | 245,246 |  |  | 1,169 |  |  | — |  |  | 246,415 |
Disposals or transfers to assets held for sale | (2,697 | ) |  | — |  |  | — |  |  | (2,697 | )
Gross collections(1) | (404,918 | ) |  | (459 | ) |  | (40,805 | ) |  | (446,182 | )
Put-backs and Recalls(2) | (3,237 | ) |  | — |  |  | — |  |  | (3,237 | )
Foreign currency adjustments | 53,466 |  |  | (94 | ) |  | — |  |  | 53,372 |
Revenue recognized | 224,310 |  |  | — |  |  | 39,097 |  |  | 263,407 |
Portfolio allowance reversals, net | 7,121 |  |  | — |  |  | 1,708 |  |  | 8,829 |
Balance, end of period | $ | 2,541,590 |  |  | $ | 14,335 |  |  | $ | — |  |  | $ | 2,555,925 |
Revenue as a percentage of collections(4) | 55.4 | % |  | 0.0 | % |  | 95.8 | % |  | 59.0 | %
________________________
(1) | Does not include amounts collected on behalf of others.
(2) | Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represent accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).
(3) | Reclassification relating to certain Zero Basis Revenue that was classified as collections in cost recovery portfolios in prior periods.
(4) | Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.
| Six Months Ended June 30, 2018
| Accrual Basis Portfolios |  | Cost Recovery Portfolios |  | Zero Basis Portfolios |  | Total
Balance, beginning of period | $ | 2,879,170 |  |  | $ | 11,443 |  |  | $ | — |  |  | $ | 2,890,613 |
Purchases of receivable portfolios | 636,342 |  |  | — |  |  | — |  |  | 636,342 |
Disposals or transfers to held for sale | (5,105 | ) |  | (262 | ) |  | — |  |  | (5,367 | )
Gross collections(1) | (915,621 | ) |  | (1,423 | ) |  | (68,151 | ) |  | (985,195 | )
Put-backs and Recalls(2) | (12,175 | ) |  | — |  |  | (153 | ) |  | (12,328 | )
Foreign currency adjustments | (40,331 | ) |  | (227 | ) |  | — |  |  | (40,558 | )
Revenue recognized | 508,519 |  |  | — |  |  | 65,152 |  |  | 573,671 |
Reclassification adjustments(3) | — |  |  | 798 |  |  | (798 | ) |  | — |
Portfolio allowance reversals, net | 23,493 |  |  | — |  |  | 3,950 |  |  | 27,443 |
Balance, end of period | $ | 3,074,292 |  |  | $ | 10,329 |  |  | $ | — |  |  | $ | 3,084,621 |
Revenue as a percentage of collections(4) | 55.5 | % |  | 0.0 | % |  | 95.6 | % |  | 58.2 | %
| Six Months Ended June 30, 2017
| Accrual Basis Portfolios |  | Cost Recovery Portfolios |  | Zero Basis Portfolios |  | Total
Balance, beginning of period | $ | 2,368,366 |  |  | $ | 14,443 |  |  | $ | — |  |  | $ | 2,382,809 |
Purchases of receivable portfolios | 463,973 |  |  | 1,169 |  |  | — |  |  | 465,142 |
Disposals or transfers to held for sale | (7,468 | ) |  | — |  |  | — |  |  | (7,468 | )
Gross collections(1) | (804,922 | ) |  | (1,099 | ) |  | (81,024 | ) |  | (887,045 | )
Put-backs and Recalls(2) | (4,994 | ) |  | — |  |  | (33 | ) |  | (5,027 | )
Foreign currency adjustments | 83,486 |  |  | (178 | ) |  | — |  |  | 83,308 |
Revenue recognized | 435,415 |  |  | — |  |  | 77,830 |  |  | 513,245 |
Portfolio allowance reversals, net | 7,734 |  |  | — |  |  | 3,227 |  |  | 10,961 |
Balance, end of period | $ | 2,541,590 |  |  | $ | 14,335 |  |  | $ | — |  |  | $ | 2,555,925 |
Revenue as a percentage of collections(4) | 54.1 | % |  | 0.0 | % |  | 96.1 | % |  | 57.9 | %
________________________
(1) | Does not include amounts collected on behalf of others.
(2) | Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represent accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).
(3) | Reclassification relating to certain Zero Basis Revenue that was classified as collections in cost recovery portfolios in prior periods.
(4) | Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.
The following table summarizes the change in the valuation allowance for investment in receivable portfolios during the periods presented (in thousands):
| Valuation Allowance
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Balance at beginning of period | $ | 94,317 |  |  | $ | 136,325 |  |  | $ | 102,576 |  |  | $ | 137,037 |
Provision for portfolio allowances | 1,720 |  |  | 682 |  |  | 2,660 |  |  | 682 |
Reversal of prior allowances | (19,352 | ) |  | (9,511 | ) |  | (30,103 | ) |  | (11,643 | )
Effect of foreign currency translation | (1,556 | ) |  | 3,179 |  |  | (4 | ) |  | 4,599 |
Balance at end of period | $ | 75,129 |  |  | $ | 130,675 |  |  | $ | 75,129 |  |  | $ | 130,675 |

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5074-111524 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02(4)) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03(a)(5)) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5162-111524 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5066-111524 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02(3)) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03(7)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-04(6)) -URI http://asc.fasb.org/extlink&oid=6488278&loc=d3e603758-122996 + Details
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