By the way, before the valuation of PDLs was mandated to follow...

By the way, before the valuation of PDLs was mandated to follow the “fair value” ruling, CCP and, I think, the sector generally, applied the emerging-value amortisation approach. That is, when a PDL is purchased, the buyer assumes what would be collected over say five years and when. That pattern is then used to distribute the amortisation rate applied to actual collections in a tax year. This method is described at https://iknow.cch.co.nz/document/ik...-certain-new-zealand-company-limited-6-method. Note that APD (acquired bad debts) is used in that link to mean PDL (purchased debtors ledger). The gazetted version is at https://www.gazette.govt.nz/notice/id/2012-go7704.

Irrespective of what happens on the collections front, a PDL would be fully amortised over the selected amortisation period – say five years, as used in the foregoing link. CCP may have used six years. If the money collected fell short of what was expected, a negative adjustment to revenue would be made, and if it exceeded expectation, the money collected would be booked as revenue without further amortisation. If the debt purchaser were good at analytics, and purchased multiple PDLs, the gap between expected total collections and actual collections in any tax year would be very close.

CCP has implemented the mandatory “fair value” model in a way that mirrors the older emerging-value amortisation model. Consequently, although PDL amortisation no longer exists as a concept under the fair-value accounting model, CCP still supplies the implied amortisation value to allow historical comparison, and to make patent that it is not fudging profit by what is in effect under amortisation.

Typically, CCP chooses a rate of return that it wants, and by applying that rate to the expected collections in a DCF calculation, it derives the price it pays for the PDL. Consequently, the effective interest rate and the required rate return are the same. If CCP later thinks the pattern of collections is going to be meaningfully different from earlier expectations, it can reflect the change via “adjustments”, as it did in 2020 when it impaired PDL value to reflect an expected decline in collections arising because of Covid-19. There is little reason to adjust profit in the opposite direction by partly reversing impairments, because that correction is made automatically when the unexpected money is actually collected – see the underlined words in the second paragraph of this post.

If you look at the historical difference between CCP's PDL effective amortisation and that of CLH and PNC, you might conclude that the latter indulged in profit recognition earlier than CCP did. The corollary of aggressive profit recognition is overvalued assets, which may explain why the latter duo recently had hassles with auditors on asset values, and CCP did not.

As an aside, apart from things mentioned above (profit recognition and asset value), CCP differs from the likes of CLH, PNC, Enron and Intrum in respect to debt leverage. CCP uses very little debt leverage, and hence is a safer investment.