Note G - Fair Value Measurements

3 Months Ended

Jul. 31, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

G – Fair Value Measurements

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Topic 820 describes three levels of inputs that may be used to measure fair value:

● Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.

● Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Because no market exists for certain of the Company’s financial instruments, fair value estimates are based on judgments and estimates regarding yield expectations of investors, credit risk and other risk characteristics, including interest rate and prepayment risk. These estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

The methodology and assumptions utilized to estimate the fair value of the Company’s financial instruments and other assets are as follows:

Financial Instrument and Other Assets	Valuation Methodology
Cash, cash equivalents, and restricted cash	The carrying amount is considered to be a reasonable estimate of fair value due to the short-term nature of the financial instruments (Level 1).
Repossessed inventory	The fair value approximates wholesale value (Level 1).
Finance receivables, net	The Company estimated the fair value of its receivables at what a third-party purchaser might be willing to pay. The Company has had discussions with third parties and has bought and sold portfolios and has had a third-party appraisal in October 2022 that indicates a range of 34% to 39% discount to face would be a reasonable fair value in a negotiated third-party transaction. The sale of finance receivables from Car-Mart of Arkansas to Colonial is made at a 38.5% discount. For financial reporting purposes these sale transactions are eliminated (Level 2).
Accounts payable	The carrying amount is considered to be a reasonable estimate of fair value due to the short-term nature of the financial instrument (Level 2).
Contingent consideration payable for acquisition	The fair value is based upon inputs from the earn-out projection for the applicable acquisition (Level 2).
Revolving line of credit	The fair value approximates carrying value due to the variable interest rates charged on the borrowings, which reprice frequently (Level 2).
Notes payable	The fair value is based upon inputs derived from prices for similar instruments at period end (Level 2).

The estimated fair values, and related carrying amounts, of the financial instruments and other assets included in the Company’s financial statements at July 31, 2024 and April 30, 2024 are as follows:

	July 31, 2024				April 30, 2024
(In thousands)		Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	4,748	$	4,748	$	5,522	$	5,522
Restricted cash		93,873		93,873		88,925		88,925
Inventory - Repossessions		18,102		18,102		18,182		18,182
Finance receivables, net		1,126,271		901,134		1,098,591		882,764
Accounts payable		35,582		35,582		21,379		21,379
Contingent Consideration		6,536		6,536		3,193		3,193
Revolving line of credit, net		184,846		184,846		200,819		200,819
Warehouse facility, net		148,828		148,828		-		-
Non-recourse notes payable, net		448,666		456,644		553,629		553,003