8. Off-Balance Sheet Finance Receivable Securitization Transactions

The following disclosures apply to the Company's term asset-backed securitization activities prior to 2009, when pre-2009 term asset-backed securitization transactions utilized off-balance sheet QSPEs that qualified for accounting sale treatment under prior U.S. GAAP. During 2009, the FASB issued new accounting guidance within ASC Topic 810 and ASC Topic 860 which ultimately required the Company to consolidate these formerly off-balance sheet QSPEs.

Prior to 2009, the Company sold retail motorcycle finance receivables through securitization transactions utilizing QSPEs. As part of these transactions, the Company retained an interest in excess cash flows, subordinated securities and cash reserve account deposits, collectively referred to as investment in retained securitization interests (a component of finance receivables in the Company's Consolidated Balance Sheets). The investment in retained securitization interests was recorded at fair value. Key assumptions in the valuation of the investment in retained securitization interests and in calculating the gain or loss on current year securitizations were credit losses, prepayments and discount rate.

On March 30, 2009, the Company adopted new guidance codified within ASC Topic 320 "Investments-Debt and Equity Securities" regarding the recognition and presentation of other-than-temporary impairments. In accordance with this guidance, if management has no intent to sell the other-than-temporarily impaired investment and it is more likely than not that it will not be required to sell, only the credit loss component of the impairment is recognized in earnings, while the rest of the impairment is recognized as an unrealized loss in other comprehensive income. The credit loss component recognized in earnings is identified as the amount of cash flows not expected to be received over the remaining life of the investment as projected using assumptions for credit losses, prepayments and discounts rates as discussed below.

During the nine months from the date of adoption to December 31, 2009, the Company recorded other-than-temporary impairments related to its investment in retained securitization interests. The impairments were due to higher actual and anticipated credit losses partially offset by a slowing in actual and expected prepayment speeds on certain securitization portfolios. As prescribed by the new guidance within ASC Topic 320, the Company recognized the credit component of the other-than-temporary impairment in earnings and the non-credit component in other comprehensive income as the Company did not intend to sell the investment and it was more likely than not that the Company would not be required to sell it prior to recovery of its cost basis. The components of the impairment were as follows for the nine months ended December 31 (in thousands):


	2009
Total other-than-temporary impairment losses	$	22,240
Portion of loss reclassified from other comprehensive income		6,000

Net impairment losses recognized in earnings	$	28,240

The following activity only applied to other-than-temporary impairments on investment in retained securitization interests for which a component of the impairment was recognized in earnings and a component was recognized in other comprehensive income. The total credit component of other-than-temporary impairments recognized in earnings for all investment in retained securitization interests held as of December 31, 2009 was as follows for the nine months ended December 31 (in thousands):


	2009
Balance, beginning of period	$	29,686
Credit component recognized in earnings during the period		28,240
Reductions due to sale/repurchase⁽¹⁾		(954	)

	$	56,972

(1)	The Company exercised its 10% clean up call repurchase option for certain securitization trusts.

Prior to March 30, 2009, if an impairment existed and management deemed it to be other-than-temporary, the entire impairment was recorded in the consolidated statements of operations. During the three months ended March 29, 2009, the Company recorded an other-than-temporary impairment charge of $17.1 million related to its investment in retained securitization interests which included both the credit and non-credit components.

Expected cumulative net credit losses were a key assumption in the valuation of the investment in retained securitization interests. As of December 31, 2009, weighted-average expected net credit losses for all active securitizations were 5.70%. The table below summarizes, as of December 31, 2009, expected weighted-average cumulative net credit losses by year of securitization, expressed as a percentage of the original balance of loans securitized for all securitizations completed during the years noted.


Expected weighted-average cumulative net credit losses (%) as of :	2008			2007			2006
December 31, 2009		5.75	%		6.12	%		5.32	%

The following table provides information regarding certain cash flows received from and paid to all motorcycle loan securitization trusts during the year ended December 31 (in thousands):


	2009
Proceeds from new securitizations	$	—
Servicing fees received	$	26,693
Other cash flows received on retained interests	$	69,418
10% clean-up call repurchase option	$	(161,390	)