Charge-offs

An industrial organization must decide whether to charge off air pollution control costs as a corporate charge, so that the plant manager does not include them in the accounts or the reverse, so that the plant manager must show a profit for the plant as a cost center, after including costs of air pollution control. 

Reasons Implementation needs to work with full capacity to charge off ... 

The supervisor immediately shuts off the healer and charges off to pass on to the operator several... 

Note The bullet should be slanted downward with a I metal tube extending from It, blocked at the end with paper, so that the flash sets the charge off at the bottom middle. Better yet, put the detonator below the charge so the bullet rests at the bottom. 

Throughout this discussion, we consider the electrode reaction A + e P to take place at a mercury-coated electrode in a solution of A that also contains an excess of a supporting electrolyte. We have again left the charges off of A and P for clarity. We further assume that the initial concentration of A is while that of P is zero and that P is not soluble in the mercury. Finally, we assume that the reduction reaction is rapid and reversible so that the concentrations of A and P in the layer of solution immediately adjacent to the electrode are given at any instant by the Nernst equation ... 

Depreciation, Amortization, and Depletion. The federal government allows a company to charge off a portion of an asset due to wear and tear as well as obsolescence each year as an operating expense. This is a paper transaction and is not a cash item. Amortization is the decline in useful value of an intangible asset such as a patent. Depletion is the diminution of a natural resource, such as coal in a mine. All these paper allowances appear as one item in most income statements. 

Since energy cost is continuous and capital costs are one time, it is assumed that the capital costs are amortized over a period of Y years, the economic lifetime of the pipeline. The reciprocal of this (X = 1/T) is the fraction of the total capital cost charged off per year. The capital cost and the energy cost per year combine to give the total cost. (There are other costs, such as maintenance, etc., but these are minor and will not materially influence the result.)... 

The depreciation, amortization, and depletion are paper transactions. The federal government allows a company to charge off a portion of an asset due to wear and tear as well as obsolescence... 

Let us consider the formation of a single I I complex Ml- from metal nm M and ligand i.. Once again, wc leave the charges off for generalilx ... 

Straight-line depreciation Equal amounts are charged off over the... 

Often there is a need to drain or dissipate electrical charges off polymeric surfaces. Aramids are likely to collect electrical charges. Therefore, there is an inherent threat of sparking on discharge. Sulfonated poly(anihne) can be added to aramid in order to increase the electrical conductivity. ... 

EXHIBIT 11.16 Charge-off Rates in Holmes Financing Transaction (%)... 

Losses in master trust mortgage transactions can be recorded as an annualised charge-off rate in a similar manner to the standard method in credit card transactions. However, losses on prime mortgages are generally very small and intermittent so this measure will tend to be relatively volatile. The results for the Holmes Financing transaction provide a good illnstra-tion of this point (see Exhibit 11.16). 

Advanced seasoning is a positive attribute for a trust as the portfolio is more likely to exhibit stable collateral performance than a relatively unseasoned portfolio. This is because a pool of new receivables usually experiences increasing losses for the first 18 months after which the losses usually decline and then level out. Over time, positive selection occurs as the lower quality and riskier accounts become charged-off and removed from the pool, leaving the higher quality accounts which should demonstrate more stable performance. 

The key performance indicators for analysing credit card portfolios include portfolio yield, monthly payment rate (MPR), delinquencies, charge-offs, and excess spread. For most European credit card ABS, these performance indicators are published on a monthly basis on Bloomberg. The high degree of standardisation in terms of which performance indicators are published and how they are calculated makes the credit card ABS market very transparent. This also allows us to construct meaningful indices which help us track the performance of the whole (or a significant part) of the credit card market. 

We will discuss portfolio yield, monthly payment rate (MPR), delinquencies, charge-offs, and excess spread as well as excess spread efficiency (ESE) and charge-off coverage (COC) the latter two are combinations of the first five performance indicators. The various performance indicators will be shown for European and US credit card collateral. We will use our BECCI for European collateral and Standard Poor s Credit Card Quality Indexes (S P Index) for US collateral. 

Delinquencies refer to the number of days that a customer has failed to make payments when due and tends to be a reliable indicator of the (anticipated) trend of charge-offs in a portfolio. 

When analysing the delinquencies of a particular credit card portfolio, the reported levels should be reviewed on a like-for-like basis, that is, it is important to know about the originator s policies towards delinquencies and charge-offs. Exhibit 13.17 shows receivables that have... 

Note Charge-off policies ARRAN (365 days), MBNA (180 days) Source Bloomberg. 

Charge-offs are credit losses experienced by the portfolio. Peak losses for credit card accounts are generally observed at about 18 to 24 months of seasoning. Exhibit 13.19 shows charge-offs for the BECCI and the S8cP Index. 

As with delinquencies, charge-offs for Europe and the United States show similar patterns. However, the significant gap between charge-offs in Europe and the United States shows the relative attractiveness of European credit card collateral compared with US collateral, reflecting the intensity of competition in the US market and the greater tendency to file for individual bankruptcy. 

Excess spread is a particularly important measure of the health of a credit card portfolio and negative excess spread will usually trigger early amortisation. Excess spread is portfolio yield less servicing fees, note coupon, charge-offs, and other costs. Exhibit 13.20 shows 3-month average excess spread for European and US credit card collateral. 

Excess spread for European credit card collateral has traditionally been higher than excess spread for US collateral. This is due both to higher portfolio yield and significantly lower charge-offs in Europe. 

Excess spread is important because it is the first line of protection for noteholders in that it absorbs charge-offs. While this is true, two portfolios with similar levels of excess spread can behave very differently in a worsening economic environment. Exhibit 13.21 shows excess spread for two different credit card portfolios. 

Portfolio Yield MPR Charge- Offs Excess Spread Excess Spread Efficiency Charge-Off Coverage... 

However, we are introducing two ratios to help predict the severity of change in collateral performance with a worsening economic environment. The two ratios are excess spread efficiency (ESE) and charge-off coverage (COC). 

The two key quantitative performance indicators for analysing portfolios of auto and consumer loan receivables are delinquencies and charge-offs. 

The performance of a pool of assets is affected by the borrowers willingness and ability to repay their debt. A key performance characteristic that measures this is the amount of delinquencies in a pool. Delinquencies refer to the number of days that a borrower has failed to make payments when due and tends to be a reliable indicator of the (anticipated) trend of charge-offs in a portfolio. 

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