The amounts are mainly related to receivables from credit/debit card issuers and acquirers originated from transactions through PagSeguro Group platform, and from the sales of credit/debit card readers. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
The provision for impairment of note receivables, however based on PagSeguro Brazil's risk assessment the need of provision is immaterial because the note receivables are mainly comprised of transactions approved by large financial institutions that have a low level risk based on ratings received from major credit rating agencies. Additionally, these financial institutions are the legal obligors to the note receivables. See Note 24.
Note receivables are initially recorded at the present value of expected future cash flows. The note receivables from installment transactions is an estimate based on the present value of the future cash flows, using average appropriate terms and rates, which are in accordance with the terms of these transactions.
PagSeguro Group incurs financial expenses when an election to receive early payment of note receivables from financial institutions is made. The finance expense is recognized at the time the financial institution agrees to liquidate a note receivable due in installments on a prepaid basis, and it is recorded as Financial expenses in the statement of income.