Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2017

NOTE 14 — FAIR VALUE OF FINANCIAL INSTRUMENTS

As of September 30, 2017 and December 31, 2016, the Company held certain assets that were required to be measured at fair value on a recurring basis. The following is a summary of fair value measurements at September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017:



	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds ⁽¹⁾	$	105,747	$	105,747	$	—	$	—
Purchase price adjustment receivable ⁽²⁾	1,247		—		—		1,247

As of December 31, 2016:



	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds ⁽¹⁾	$	20,088	$	20,088	$	—	$	—

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(1) Classified in cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets.

(2) Classified as other assets in the accompanying unaudited condensed consolidated balance sheet and as a component of other sales and revenues in the accompanying unaudited condensed consolidated statements of operations.

The fair value of the purchase price adjustment receivable is determined based on the extent to which the Company’s estimated performance of the underlying finance receivables exceeds the purchaser’s estimated performance of the underlying finance receivables as of measurement dates specified in the Master Purchase and Sale Agreement. The Company develops its estimate of future cumulative losses based on the historical performance of finance receivables it originated with similar characteristics as well as general macro-economic trends. The Company then utilizes a discounted cash flow model to calculate the present value of the expected future payment amounts. Such fair value measurement is considered Level 3 under the fair value hierarchy.

The carrying amounts of restricted cash, accounts payable and accrued liabilities and accounts payable to related party approximate fair value because their respective maturities are less than three months. The carrying value of the Floor Plan Facility was determined to approximate fair value due to its short-term duration and variable interest rate that approximates prevailing interest rates as of each reporting period. The carrying value of notes payable was determined to approximate fair value as each of the notes has prevailing interest rates, which have not materially changed as of September 30, 2017. The fair value of finance receivables, net was determined to be approximately $39.1 million and $25.6 million as of September 30, 2017 and December 31, 2016, respectively, utilizing the estimated sales price based on the historical experience of the Company. Such fair value measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy.

- 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.

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