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Business Combinations, Goodwill, And Intangible Assets | 12 Months Ended
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Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
Business Combinations, Goodwill, And Intangible Assets | Business combinations, goodwill, and intangible assets Business combinations Acquisition of a payment services company in Chile On December 13, 2021, the Company, through its subsidiaries Mercado Pago LLC and SFSC LLC, completed the acquisition of 100% of the equity interest of Redelcom S.A., a payment services provider that also offers point-of-sales terminals with the latest technology to retailers in the Republic of Chile. Redelcom is located and organized under the laws of Chile. The objective of the acquisition was to consolidate the Company’s value proposition in Chile and enhance the growth of its multiple payment tools and digital financial solutions. The aggregate purchase price for the acquisition was $24 million, measured at its fair value amount, which included: (i) the total cash payment of $16 million; (ii) an escrow of $3 million and (iii) $5 million of contingent consideration. The Company’s consolidated statements of income include the results of operations of the acquired business as from December 2021. The net loss before intercompany eliminations of the acquired Company included in the Company’s consolidated statement of income since the acquisition amounted to less than $1 million for the year ended December 31, 2021. In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred. The following table summarizes the purchase price allocation for the acquisition:
| Redelcom S.A. (In millions)
Cash and cash equivalents | $ | 1 |
Convertible notes agreements | 1 |
Other net tangible liabilities | (2) |
Total net tangible assets acquired | $ | — |
Platform | 1 |
Goodwill | 23 |
Purchase Price | $ | 24 |
The purchase price was allocated based on the final measurement of the fair value of assets acquired and liabilities assumed considering the information available as of the initial accounting date. The valuation of identifiable intangible assets acquired reflects Management’s estimates based on the use of established valuation methods. The Company recognized goodwill for this acquisition based on Management’s expectation that the acquired business will improve the Company’s business. Arising goodwill was allocated to each of the segments identified by the Company’s Management, considering the synergies expected from this acquisition and it is expected that the acquisition will contribute to the earnings generation process of such segments. Goodwill arising from this acquisition is not deductible for tax purposes. The results of operations for periods prior to the acquisitions, individually and in the aggregate, were not material to the Company’s consolidated statements of income and, accordingly, pro forma information has not been presented. Acquisition of a shipping company in Brazil On November 3, 2021, the Company, through its subsidiary eBazar.com.br Ltda., completed the acquisition of 100% of the equity interest of Kangu Participações S.A. and its subsidiaries, a logistics technology platform which connects sellers, e-commerce companies, carriers, third-party logistics providers and consumers through its vertically integrated network of drop-off and pick-up points throughout Brazil, Mexico and Colombia. The Company is located and organized under the laws of Brazil. The objective of the acquisition was to enhance the capabilities of the Company in terms of logistics. The aggregate purchase price for the acquisition was $53 million, measured at its fair value amount, which included: (i) the total cash payment of $38 million at the time of closing; (ii) an escrow of $4 million and (iii) $11 million related to the fair value at the acquisition date of a call option to purchase 20% of the equity interest of Kangú Participações S.A. As result of the acquisition, the Company recognized a gain for the fair value amount of the option. The Company’s consolidated statements of income include the results of operations of the acquired business as from November 2021. The acquired business contributed net income of $1 million for the period from November 3, 2021 to December 31, 2021. In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred. The following table summarizes the purchase price allocation for the acquisition:
| Kangu Participações S.A. (In millions)
Cash and cash equivalents | $ | 3 |
Other net tangible assets | 1 |
Total net tangible assets acquired | $ | 4 |
Customer lists and non-compete agreements | 1 |
Hubs network | 3 |
Goodwill | 45 |
Purchase Price | $ | 53 |
The purchase price was allocated based on the final measurement of the fair value of assets acquired and liabilities assumed considering the information available as of the initial accounting date. The valuation of identifiable intangible assets acquired reflects Management’s estimates based on the use of established valuation methods. The Company recognized goodwill for this acquisition based on Management’s expectation that the acquired business will improve the Company’s business. Arising goodwill was allocated to each of the segments identified by the Company’s Management, considering the synergies expected from this acquisition and it is expected that the acquisition will contribute to the earnings generation process of such segments. Goodwill arising from this acquisition will be deductible for tax purposes in case of a merger between eBazar.com.br Ltda. and Kangu Participações S.A. The results of operations for periods prior to the acquisitions, individually and in the aggregate, were not material to the Company’s consolidated statements of income and, accordingly, pro forma information has not been presented. Goodwill and intangible assets The composition of goodwill and intangible assets is as follows:
| December 31,
| 2022 |  | 2021
| (In millions)
Goodwill | $ | 153 |  |  | $ | 148 |
Intangible assets with indefinite lives |  |  |
- Trademarks | 4 |  |  | 7 |
- Digital assets (1) | 9 |  |  | 21 |
Amortizable intangible assets |  |  |
- Licenses and others | 13 |  |  | 13 |
- Non-compete agreements | 4 |  |  | 4 |
- Customer lists | 12 |  |  | 13 |
- Trademarks | 12 |  |  | 8 |
- Hubs network | 4 |  |  | 3 |
- Others | 3 |  |  | 3 |
Total intangible assets | $ | 61 |  |  | $ | 72 |
Accumulated amortization | (36) |  |  | (27) |
Total intangible assets, net | $ | 25 |  |  | $ | 45 |
(1)Digital assets are net of $21 million and $9 million of impairment losses as of December 31, 2022 and December 31, 2021, registered in General and Administrative expenses. Goodwill The changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021 are as follows:
| Year ended December 31, 2022
| Brazil |  | Argentina |  | Mexico |  | Chile |  | Colombia |  | Other Countries |  | Total
| (In millions)
Balance, beginning of the year | $ | 56 |  |  | $ | 10 |  |  | $ | 37 |  |  | $ | 37 |  |  | $ | 6 |  |  | $ | 2 |  |  | $ | 148 |
Effect of exchange rates changes | 4 |  |  | — |  |  | 2 |  |  | — |  |  | (1) |  |  | — |  |  | 5 |
Balance, end of the year | $ | 60 |  |  | $ | 10 |  |  | $ | 39 |  |  | $ | 37 |  |  | $ | 5 |  |  | $ | 2 |  |  | $ | 153 |
| Year ended December 31, 2021
| Brazil |  | Argentina |  | Mexico |  | Chile |  | Colombia |  | Other Countries |  | Total
| (In millions)
Balance, beginning of the year | $ | 20 |  |  | $ | 10 |  |  | $ | 32 |  |  | $ | 17 |  |  | $ | 4 |  |  | $ | 2 |  |  | $ | 85 |
Business Acquisitions | 37 |  |  | — |  |  | 6 |  |  | 23 |  |  | 2 |  |  | — |  |  | 68 |
Effect of exchange rates changes | (1) |  |  | — |  |  | (1) |  |  | (3) |  |  | — |  |  | — |  |  | (5) |
Balance, end of the year | $ | 56 |  |  | $ | 10 |  |  | $ | 37 |  |  | $ | 37 |  |  | $ | 6 |  |  | $ | 2 |  |  | $ | 148 |
Intangible assets with definite useful life Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, hubs network, acquired software licenses and other acquired intangible assets including developed technologies and trademarks. Aggregate a mortization expense for intangible assets totaled $9 million, $6 million and $5 million for the years ended December 31, 2022, 2021 and 2020, respectively. The following table summarizes the remaining amortization of intangible assets with definite useful life as of December 31, 2022:
For year ended 12/31/2023 | $ | 4 |
For year ended 12/31/2024 | 3 |
For year ended 12/31/2025 | 1 |
For year ended 12/31/2026 | 1 |
Thereafter | 3 |
| $ | 12 |

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