In an article published in Banking Day on September 8, "Fintechs disappoint on credit quality", we reported that online retail finance company Afterpay had a ratio of impairments to receivables of 7.5 per cent in the year to June.The company has responded by arguing that this standard loss ratio measure should not be applied to its business.Afterpay provides finance that allows consumers to make an online purchase and pay for the item in four equal fortnightly instalments. The average transaction value in 2015/16 was around $150.The company says it has a receivables cycle of about 30 days and 12 customer payment cycles a year. The receivables balance of $7.5 million at June 30 represented approximately one payment cycle, according to the company, while the bad and doubtful debt expense related to 12 payment cycles.The company measures its loss rate by comparing the impairment expense with underlying sales, which were $37.3 million in the year to June. The bad and doubtful debt expense was $567,481. On this measure the loss rate for the year was around 1.5 per cent."Comparing bad debt related losses for a whole year to receivables at year end is not a relevant metric for transaction loss performance," the company says.The company's prospectus (it was listed on the ASX in May) spells out its approach to measuring losses and then adds the caveat that it is a non-IFRS measure and should be considered as a supplement and not a replacement for information presented in accordance with the accounting standards.The article has been updated on the Banking Day website to reflect the company's views.