Ann: Response to ASX Aware Letter, page-2

I do not recall that Management gave a reason for increasing the life of PDLs from six years to eight years. I preferred the six-years life, because it was more conservative, even though it tended to delay statutory profit recognition. Encore Capital uses ten years. Maybe the auditors, or management, suggested eight years was more realistic, particularly as the collection on USA PDLs takes longer than has historically been the norm for the type of PDLs that CCP buys in Australia.

As an aside, Australian tax accounting for debt default is different from statutory accounting that allows provisioning for doubtful debts. The debt must be written off to be eligible for tax, rather than simply provisioned. Extending the PDL life to eight years may bring statutory profit closer to the taxable profit.

I have always suspected that the huge impairment of the value of PDL's made in FY2023 of $45.6 million (after tax) for the US PDL impairment made in H1 FY2024 was, as usual for CCP, exaggerated. Subtracting $15.1 million (after tax) for the change in estimated PDL collection life from six to eight years may have been an alternative way to partially reverse that over impairment, and it also aligns the life of PDLs closer to reality - thus killing two birds with one stone.