This definition suggests to me:1. When receivables are growing...

This definition suggests to me:

1. When receivables are growing quickly, Net Losses will be understated.
2. When receivables are contracting, Net Losses will be overstated.
3. When receivables are flat, Net Losses will become more reflective of reality.

Example 1: Say write-offs are $30m, mostly from loans that are 2 years old. But receivables recently grew quickly from $0.3b to $1.2b YoY. It might be calculated as $30m / $0.85b = 3.5% net losses. If the write-offs were mainly from the $300m loans, it would have been 10% Net Losses had the growth not happened.

Example 2: Say write-offs are $70m, mostly from loans that are 2 years old. But receivables recently contracted from $1.3b to $1.1b YoY (almost realistic scenario). It might be calculated as $70m / $1.2b = 5.8% net losses. If the write-offs were mainly from the $1.3b loans, it would have been 5.4% had the contraction not happened.


So I think we have to consider growth or contraction in receivables when looking at the Net Loss number, to judge whether the number is good or bad.

Am I right?



So I'm not really seeing an uptick in bad debts post-COVID and high inflation, after considering the point above.

So equalizing for the growth rate, I think Net Losses have stayed fairly static. Though I think credit quality has been improving over time, so it might have been reasonable to expect to see a reduction rather than flat? So flat could be considered to be 'worse' due to the economy etc.

There's probably a chart in the annual report that would give a more thorough analysis. Eg. bad debts by loan cohort. My examples above assume that bad debts start to flow through about a year after loan origination.


It'll be complicated if I try to think how AASB 1032 or Net Loss relate or don't relate, to cash flow or balance sheet.

Eg. AASB forces an impairment immediately upon originating a loan? But Net Losses are based on 'Write-offs' in the period, vs Gross Receivables? Are those separate/distinct things, or inter-related?