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Fair Values of Assets and Liabilities | 12 Months Ended
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Dec. 31, 2017
Fair Value Disclosures [Abstract] |
Fair Values of Assets and Liabilities | Fair Values of Assets and Liabilities We elected the fair value option with respect to our investments in equity securities as well as our credit card loans and fees receivable portfolios, the retained interests in which we historically recorded at fair value under securitization structures that were off balance sheet prior to accounting rules changes requiring their consolidation into our financial statements. With respect to our equity securities, we decided to carry these assets at fair value due to our intent to invest and redeem these investments with expected frequency. For our credit card loans and fees receivable portfolios underlying our formerly off-balance-sheet securitization structures, we elected the fair value option because, in contrast to substantially all of our other assets, we had significant experiences in determining the fair value of these assets in connection with our historical fair value accounting for our retained interests in their associated securitization structures. Because we elected to account for the credit card receivables underlying our formerly off-balance-sheet securitization structures at fair value, accounting rules require that we account for the notes payable issued by such securitization structures at fair value as well. For our other credit card receivables that have never been owned by our formerly off-balance-sheet securitization structures, we have not elected the fair value option, and we record such receivables at net realizable value within loans and fees receivable, net on our consolidated balance sheets. For all of our other debt other than the notes payable underlying our formerly off-balance sheet credit card securitization structures, we have not elected the fair value option. Nevertheless, pursuant to applicable requirements, we include disclosures of the fair value of this other debt to the extent practicable within the disclosures below. Additionally, we have other liabilities that we are required to carry at fair value in our consolidated financial statements, and they also are addressed within the disclosures below. Where applicable as noted above, we account for our financial assets and liabilities at fair value based upon a three-tiered valuation system. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Where inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input that is significant to the fair value measurement in its entirety. Valuations and Techniques for Assets Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The table below summarizes (in thousands) by fair value hierarchy the December 31, 2017 and December 31, 2016 fair values and carrying amounts of (1) our assets that are required to be carried at fair value in our consolidated financial statements and (2) our assets not carried at fair value, but for which fair value disclosures are required:
Assets – As of December 31, 2017 (1) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Carrying Amount of Assets
Loans and fees receivable, net for which it is practicable to estimate fair value |  | $ | — |  |  | $ | — |  |  | $ | 324,945 |  |  | $ | 293,972 |
Loans and fees receivable, at fair value |  | $ | — |  |  | $ | — |  |  | $ | 11,109 |  |  | $ | 11,109 |
Assets – As of December 31, 2016 (1) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Carrying Amount of Assets
Loans and fees receivable, net for which it is practicable to estimate fair value |  | $ | — |  |  | $ | — |  |  | $ | 248,171 |  |  | $ | 223,783 |
Loans and fees receivable, at fair value |  | $ | — |  |  | $ | — |  |  | $ | 15,648 |  |  | $ | 15,648 |
(1) | For cash, deposits and other short-term investments, the carrying amount is a reasonable estimate of fair value.
For those asset classes above that are required to be carried at fair value in our consolidated financial statements, gains and losses associated with fair value changes are detailed on our fees and related income on earning assets table within Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components.” For our loans and fees receivable included in the above tables, we assess the fair value of these assets based on our estimate of future cash flows net of servicing costs, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk. For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the year ended December 31, 2017 and 2016:
| Loans and Fees Receivable, at Fair Value
| 2017 |  | 2016
Balance at January 1, | $ | 15,648 |  |  | $ | 26,706 |
Total gains—realized/unrealized: |  |  |  |
Net revaluations of loans and fees receivable, at fair value | 3,456 |  |  | 1,587 |
Settlements | (8,049 | ) |  | (12,335 | )
Impact of foreign currency translation | 54 |  |  | (310 | )
Balance at December 31, | $ | 11,109 |  |  | $ | 15,648 |
The unrealized gains and losses for assets within the Level 3 category presented in the tables above include changes in fair value that are attributable to both observable and unobservable inputs. Impacts related to foreign currency translation are included as a component of other operating expense on the consolidated statements of operations. Net Revaluation of Loans and Fees Receivable. We record the net revaluation of loans and fees receivable (including those pledged as collateral) in the fees and related income on earning assets category in our consolidated statements of operations, specifically as changes in fair value of loans and fees receivable recorded at fair value. The net revaluation of loans and fees receivable is based on the present value of future cash flows using a valuation model of expected cash flows and the estimated cost to service and collect those cash flows. We estimate the present value of these future cash flows using a valuation model consisting of internally developed estimates of assumptions third-party market participants would use in determining fair value, including estimates of net collected yield, principal payment rates, expected principal credit loss rates, costs of funds, discount rates and servicing costs. Accrued interest income on receivables underlying our asset classes that are carried at fair value in our consolidated financial statements is recorded in Interest income - Consumer loans, including past due fees in our Consolidated Statements of Operations. For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of December 31, 2017 and December 31, 2016:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements |  | Fair Value at December 31, 2017 |  | Valuation Technique |  | Unobservable Input |  | Range (Weighted Average)
Loans and fees receivable, at fair value |  | $ | 11,109 |  |  | Discounted cash flows |  | Gross yield |  | 15.8% to 27.4% (24.5%)
|  |  |  |  |  |  | Principal payment rate |  | 1.9% to 3.6% (2.6%)
|  |  |  |  |  |  | Expected credit loss rate |  | 9.4% to 10.4% (9.7%)
|  |  |  |  |  |  | Servicing rate |  | 10.2% to 12.3% (10.5%)
|  |  |  |  |  |  | Discount rate |  | 6.0% to 14.2% (12.8%)
Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements |  | Fair Value at December 31, 2016 |  | Valuation Technique |  | Unobservable Input |  | Range (Weighted Average)
Loans and fees receivable, at fair value |  | $ | 15,648 |  |  | Discounted cash flows |  | Gross yield |  | 24.2% to 35.8% (26.1%)
|  |  |  |  |  |  | Principal payment rate |  | 2.2% to 3.5% (2.4%)
|  |  |  |  |  |  | Expected credit loss rate |  | 11.8% to 18.0% (12.9%)
|  |  |  |  |  |  | Servicing rate |  | 8.6% to 9.6% (8.8%)
|  |  |  |  |  |  | Discount rate |  | 5.8% to 13.6% (12.5%)
Valuations and Techniques for Liabilities Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability. The table below summarizes (in thousands) by fair value hierarchy the December 31, 2017 and December 31, 2016 fair values and carrying amounts of (1) our liabilities that are required to be carried at fair value in our consolidated financial statements and (2) our liabilities not carried at fair value, but for which fair value disclosures are required:
Liabilities – As of December 31, 2017 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Carrying Amount of Liabilities
Liabilities not carried at fair value |  |  |  |  |  |  |  |
Revolving credit facilities |  | $ | — |  |  | $ | — |  |  | $ | 160,854 |  |  | $ | 160,854 |
Amortizing debt facilities |  | $ | — |  |  | $ | — |  |  | $ | 65,384 |  |  | $ | 65,384 |
Senior secured term loan |  | $ | — |  |  | $ | — |  |  | $ | 40,000 |  |  | $ | 40,000 |
5.875% convertible senior notes |  | $ | — |  |  | $ | 43,588 |  |  | $ | — |  |  | $ | 61,393 |
Liabilities carried at fair value |  |  |  |  |  |  |  |  |  |  |  |
Notes payable associated with structured financings, at fair value |  | $ | — |  |  | $ | — |  |  | $ | 9,240 |  |  | $ | 9,240 |
Liabilities - As of December 31, 2016 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Carrying Amount of Liabilities
Liabilities not carried at fair value |  |  |  |  |  |  |  |  |  |  |  |
Revolving credit facilities |  | $ | — |  |  | $ | — |  |  | $ | 83,184 |  |  | $ | 83,184 |
Amortizing debt facilities |  | $ | — |  |  | $ | — |  |  | $ | 57,982 |  |  | $ | 57,982 |
Senior secured term loan |  | $ | — |  |  | $ | — |  |  | $ | 40,000 |  |  | $ | 40,000 |
5.875% convertible senior notes |  | $ | — |  |  | $ | 40,609 |  |  | $ | — |  |  | $ | 60,791 |
Liabilities carried at fair value |  |  |  |  |  |  |  |  |  |  |  |
Notes payable associated with structured financings, at fair value |  | $ | — |  |  | $ | — |  |  | $ | 12,276 |  |  | $ | 12,276 |
For our material notes payable, we assess the fair value of these liabilities based on our estimate of future cash flows generated from their underlying credit card receivables collateral, net of servicing compensation required under the note facilities, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk. Gains and losses associated with fair value changes for our notes payable associated with structured financing liabilities that are carried at fair value are detailed on our fees and related income on earning assets table within Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components.” For our 5.875% convertible senior notes due 2035 (“5.875% convertible senior notes”), we assess fair value based upon the most recent trade data available from third-party providers. We have seen no data that would suggest that the fair value of our other Credit and Other Investments segment debt is materially different from its carrying amount as evidenced in recent financing arrangements obtained with similar terms. See Note 9, “Notes Payable,” for further discussion on our other notes payable. For our material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the year ended December 31, 2017 and 2016.
| Notes Payable Associated with Structured Financings, at Fair Value
| 2017 |  | 2016
Beginning balance, January 1 | $ | 12,276 |  |  | $ | 20,970 |
Total (gains) losses—realized/unrealized: |  |  |  |  |
Net revaluations of notes payable associated with structured financings, at fair value | (2,315 | ) |  | (3,773 | )
Repayments on outstanding notes payable, net | (721 | ) |  | (4,921 | )
Ending balance, December 31, | $ | 9,240 |  |  | $ | 12,276 |
The unrealized gains and losses for liabilities within the Level 3 category presented in the table above include changes in fair value that are attributable to both observable and unobservable inputs. We provide below a brief description of the valuation techniques used for Level 3 liabilities. Net Revaluation of Notes Payable Associated with Structured Financings, at Fair Value. We record the net revaluations of notes payable associated with structured financings, at fair value, in the changes in fair value of notes payable associated with structured financings line item within the fees and related income on earning assets category of our consolidated statements of operations. The net revaluation of these notes is based on the present value of future cash flows utilized in repayment of the outstanding principal and interest under the facilities using a valuation model of expected cash flows net of the contractual service expenses within the facilities. We estimate the present value of these future cash flows using a valuation model consisting of internally developed estimates of assumptions third-party market participants would use in determining fair value, including: estimates of net collected yield, principal payment rates and expected principal credit loss rates on the credit card receivables that secure the non-recourse notes payable; costs of funds; discount rates; and contractual servicing fees. Accrued interest expense on notes payable underlying our notes payable associated with structured financings, at fair value is recorded in Interest expense in our Consolidated Statements of Operations. For material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of December 31, 2017 and December 31, 2016:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements |  | Fair Value at December 31, 2017 |  | Valuation Technique |  | Unobservable Input |  | Weighted Average
Notes payable associated with structured financings, at fair value |  | $ | 9,240 |  |  | Discounted cash flows |  | Gross yield |  | 25.9 | %
|  |  |  |  |  |  | Principal payment rate |  | 2.5 | %
|  |  |  |  |  |  | Expected credit loss rate |  | 9.4 | %
|  |  |  |  |  |  | Discount rate |  | 14.2 | %
Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements |  | Fair Value at December 31, 2016 |  | Valuation Technique |  | Unobservable Input |  | Weighted Average
Notes payable associated with structured financings, at fair value |  | $ | 12,276 |  |  | Discounted cash flows |  | Gross yield |  | 24.6 | %
|  |  |  |  |  |  | Principal payment rate |  | 2.2 | %
|  |  |  |  |  |  | Expected credit loss rate |  | 11.8 | %
|  |  |  |  |  |  | Discount rate |  | 13.6 | %
Other Relevant Data Other relevant data (in thousands) as of December 31, 2017 and December 31, 2016 concerning certain assets and liabilities we carry at fair value are as follows:
As of December 31, 2017 |  | Loans and Fees Receivable at Fair Value |  | Loans and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value
Aggregate unpaid principal balance within loans and fees receivable that are reported at fair value |  | $ | 4,416 |  |  | $ | 11,349 |
Aggregate fair value of loans and fees receivable that are reported at fair value |  | $ | 1,869 |  |  | $ | 9,240 |
Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) |  | $ | 5 |  |  | $ | 17 |
Aggregate excess of balance of unpaid principal receivables within loans and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans and fees receivable |  | $ | 107 |  |  | $ | 369 |
As of December 31, 2016 |  | Loans and Fees Receivable at Fair Value |  | Loans and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value
Aggregate unpaid principal balance within loans and fees receivable that are reported at fair value |  | $ | 6,251 |  |  | $ | 16,614 |
Aggregate fair value of loans and fees receivable that are reported at fair value |  | $ | 3,484 |  |  | $ | 12,164 |
Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) |  | $ | 6 |  |  | $ | 22 |
Aggregate excess of balance of unpaid principal receivables within loans and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans and fees receivable |  | $ | 204 |  |  | $ | 562 |
Notes Payable |  | Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2017 |  | Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2016
Aggregate unpaid principal balance of notes payable |  | $ | 101,314 |  |  | $ | 102,035 |
Aggregate fair value of notes payable |  | $ | 9,240 |  |  | $ | 12,276 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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