itsa figures for oct to dec 2011, page-23

browny144, extracted the following for you this morning which also provides some illumination

"Within the debt services part of the business, revenue is booked as the npv of fees arising from debt-servicing agreements that are set up between debtors and creditors. These are carried as receivables in the balance sheet. When agreements pick up you get an increase in revenues due to the added npv of the new agreement fees (remember that each agreement yields ~$100 a month per client, for typically 4 years?). However, when it becomes apparent that debtors can no longer service their repayments and creditors agree to a restructuring, then the length of time the agreement lasts is reduced, and the npv of future fees from the contract is reduced. This leads to impairment of receivables, reduced revenue, and lower earnings. All this is in no way a deal breaker, but worth considering in terms of why earnings have been volatile – and also worth considering in terms of (recoverable) nta/share."

This is phrased in a different way, but pretty much agrees with what's suggested. "When agreements pick up you get an increase in revenues" – revenues suggest we have around a 6% increase in total agreement numbers (the net of type 1 and 2). On the other hand, the build up of type 2 that's promoted, underpins the receivables rise. When creditors approve an agreement, it's the estimate of the NPV of fees over the term of the agreement - that is booked as revenue and creates the receivable. This makes some sense, though the % booked must be reasonably high to produce the figures we have.

We're estimating future unsecured fee recoveries from debtors with a history. Not a deal breaker in my opinion. When accruals of this nature get so high, estimates play a very big role in reported results.