Fair Value Measurement |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | 9. FAIR VALUE MEASUREMENT Recurring The following table presents the fair value hierarchy for the Group’s assets and liabilities that are measured and recorded at fair value on a recurring basis as of December 31, 2021 and 2022:
The fair value of the Group’s restricted term deposit and short-term investments is determined based on the prevailing interest rates for similar products in the market (Level 2). For the off‑balance sheet loans funded by certain Institutional Funding Partners, as the Group’s financial guarantee provided does not trade in an active market with readily observable quoted prices, the Group uses significant unobservable inputs to measure the fair value of these guarantee derivative assets or liabilities (Level 3). For the off-balance sheet loans acquired or purchased by the Group that are not traded in an active market with readily observable prices, the Group uses discounted cash flow methodology involving significant unobservable inputs to measure the fair value of these loans (Level 3).
Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair value of the assets and liabilities became unobservable or observable in the current marketplace. These transfers are considered to be effective as of the beginning of the period in which they occur. The Group did not transfer any assets or liabilities in or out of Level 2 and Level 3 during each of the periods presented. Significant Unobservable Inputs The Group uses a discounted cash flows model to estimate fair value of the guarantee derivative assets or liabilities, and fair value of loans acquired or purchased. The following table presents quantitative information about the significant unobservable inputs used for the Group’s Level 3 fair value measurement as of December 31, 2021 and 2022:
(i) Expressed as a percentage of the original principal balance of the loans. (ii) Expressed as a percentage of the principal balance of the loans acquired/purchased. The following table summarizes the activities related to fair value of the guarantee derivatives:
(i) Recognized as “Change in fair value of financial guarantee derivatives, net” on the Consolidated Statements of Operations.
The following table summarizes the activities related to fair value of the loans acquired or purchased:
(i) Recognized as “Change in fair value of loans at fair value” on the Consolidated Statements of Operations.
Significant Recurring Level 3 Fair Value Liability Input Sensitivity Changes in certain of the unobservable inputs noted above may have a significant impact on the fair value of the guarantee derivative assets and liabilities. The following table summarizes the effect adverse changes in estimate would have on the fair value of the guarantee derivative assets and liabilities as of December 31, 2021 and 2022, respectively, given hypothetical changes in the cumulative loss rates:
(i) Expressed as a percentage of the original principal balance of the loans. (ii) Expressed as a percentage of the original cumulative loss rates. Changes in certain of the unobservable inputs noted above may have a significant impact on the fair value of the loans at fair value. The following table summarizes the effect adverse changes in estimate would have on the fair value of the loans at fair value as of December 31, 2021 and 2022, given hypothetical changes in the expected future recovery rates:
(i) Expressed as a percentage of the principal balance of the loans acquired/purchased. (ii) Expressed as a percentage of the original expected future recovery rates.
Other financial instruments The followings are other financial instruments not measured at fair value on the Consolidated Balance Sheets, but for which the fair value is estimated for disclosure purposes. Cash and cash equivalents, current restricted cash, short-term investments, amounts due from related parties, deposits to insurance companies and guarantee companies, short-term financing receivables and short-term contract assets and receivables are financial assets with carrying amounts that approximate fair value due to their short-term nature. Accounts payable, amounts due to related parties, short‑term borrowings, short‑term funding debts and convertible notes are financial liabilities with carrying amounts that approximate fair value because of their short-term nature. Non‑recurring The Group measures certain financial assets at fair value on a non-recurring basis only if an impairment charge were to be recognized. The Group’s long-term equity investments are measured at fair value on a nonrecurring basis under measurement alternative, if an impairment loss is charged or fair value adjustment is made for an observable price change in an orderly transaction for identical or similar investments of the same issuer. The related inputs used are classified as Level 3 fair value measurement. The Group’s non‑financial assets, such as property, equipment and software, would be measured at fair value only if they were determined to be impaired. |