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Fair Value of Financial Instruments
9 Months Ended
Jun. 30, 2011
Fair Value of Financial Instruments [Abstract]  
Fair Value of Financial Instruments
Note 13: Fair Value of Financial Instruments
FASB ASC 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practicable to estimate that value. Because there are a limited number of market participants for certain of the Company’s assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other risk characteristics, including interest rate and prepayment risk. These estimates are subjective in nature and involve uncertainties and matters of judgment, which significantly affect the value of the estimates.
The carrying value of consumer receivables acquired for liquidation was $122,201,000 and $147,031,000 at June 30, 2011 and September 30, 2010, respectively. The Company computed the fair value of the consumer receivables acquired for liquidation using its forecasting model and the fair value approximated $144,359,000 and $179,730,000 at June 30, 2011 and September 30, 2010, respectively. The Company’s forecasting model utilizes a discounted cash flow analysis. The Company’s cash flows are an estimate of collections for all of our consumer receivables based on variables fully described in Note 3: Consumer Receivables Acquired for Liquidation. These cash flows are then discounted using our estimated weighted average cost of capital to determine the fair value.
The carrying value of debt and subordinated debt (related party) was $74,228,000 and $94,869,000 at June 30, 2011 and September 30, 2010, respectively. The majority of these loans are variable rate and short-term; therefore, the carrying amounts approximate fair value.