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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | ACQUISITIONS Afterpay On August 1, 2021, the Company entered into a definitive agreement (the “Afterpay Agreement”) with Afterpay Limited (“Afterpay”) to acquire Afterpay by way of a court-approved Scheme of Arrangement (the “Scheme”) for 0.375 share of the Company’s Class A common stock or 0.375 CHESS Depositary Interests, traded on the Australian Stock Exchange, representing ownership interest in Square Class A common stock for each outstanding Afterpay ordinary share (the “Afterpay Transaction”). Based on the Company's closing Class A common stock price of $239.84 as of September 30, 2021 and the outstanding shares of Afterpay as of the same date, the aggregate consideration, excluding the value of replacement equity awards, is estimated at $26.6 billion, comprising approximately 111 million shares of Class A common stock of the Company. The determination of the final value of the purchase consideration will depend on the Company's stock price and the outstanding shares of Afterpay at the closing of the Afterpay Transaction. The Afterpay Transaction is subject to customary closing conditions, including, among others: (i) approval by Afterpay shareholders of the Scheme by the requisite majorities under the Australian Corporations Act, (ii) approval by Company stockholders of the issuance of new shares of Class A common stock of the Company in connection with the Afterpay Transaction by the requisite majority (which approval was obtained at the special meeting of Company stockholders on November 3, 2021), (iii) expiration or earlier termination of any applicable waiting period and receipt of regulatory consents, approvals and clearances under relevant antitrust/competition and foreign investment legislation in the United States and other relevant jurisdictions, (iv) the absence of any final and non-appealable order, decree or law preventing, making illegal or prohibiting the completion of the Afterpay Transaction and (v) no events having occurred that would have a material adverse effect on Afterpay or the Company. The Afterpay Agreement may be terminated by either the Company or Afterpay under certain circumstances including but not limited to: (i) an adverse change in recommendation for the Afterpay Transaction by the other party’s board of directors, (ii) a material breach of a term of the Afterpay Agreement by the other party, or (iii) if the Scheme has not become effective on or before August 2, 2022, in each case in accordance with the Afterpay Agreement. Afterpay may also terminate the Afterpay Agreement if Afterpay’s board of directors determines in accordance with the Afterpay Agreement that an Afterpay Competing Transaction is an Afterpay Superior Proposal (in each case as defined in the Afterpay Agreement). Either the Company or Afterpay may be required to pay a termination fee of A$385 million (approximately $283 million) to the other party in connection with the termination of the Afterpay Agreement under certain circumstances. TIDAL On April 30, 2021, the Company acquired an 86.23% ownership interest in TIDAL, a global music and entertainment platform that brings fans and artists together through unique music, content, and experiences. The acquisition extends Square’s purpose of economic empowerment to musicians. The Company has the option, but not the obligation, to acquire any portion of the remaining noncontrolling interest any time after a three year period has elapsed from the execution of the merger agreement at a price based on the fair value of TIDAL shares. The purchase consideration was comprised of $227.2 million in cash and 41,138 shares of the Company’s Class A common stock with an aggregate fair value of $10.1 million based on the closing price of the Company’s Class A common stock on the acquisition date. The purchase consideration is subject to adjustments for the final determination of the closing working capital. Third-party acquisition-related costs were immaterial. The results of TIDAL’s operations have been included in the condensed consolidated financial statements since the closing date. The acquisition was accounted for as a business combination. This method requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the difference between the fair value of the consideration paid for the acquired entity and the fair value of the net assets acquired be recorded as goodwill, which is not amortized but is tested at least annually for impairment. The table below summarizes the consideration paid for TIDAL and the preliminary assessment of the fair value of the assets acquired and liabilities assumed at the closing date (in thousands, except share data).The Company is in the process of completing the determination of the fair values of certain intangible assets acquired, liabilities assumed and noncontrolling interests, including reviewing third party valuations, and accordingly, the preliminary values reflected in the table are subject to change. These changes will primarily relate to the fair value assigned to intangible assets acquired, royalty liabilities assumed, and evaluation of contingencies and tax effects related to the acquisition.
Consideration: |
Cash | $ | 176,663 |
Deferred consideration | 50,528 |
Stock (41,138 shares of Class A common stock) | 10,071 |
| $ | 237,262 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |
Current assets (inclusive of cash acquired of $12,358) | $ | 33,294 |
Intangible customer assets | 69,000 |
Intangible technology assets | 29,000 |
Intangible trade name | 35,000 |
Intangible other assets | 8,000 |
Other non-current assets | 33,443 |
Accrued expenses and other current liabilities | (67,789) |
Other non-current liabilities | (52,547) |
Total identifiable net assets acquired | 87,401 |
Noncontrolling interests | (48,192) |
Goodwill | 198,053 |
Total | $ | 237,262 |
Goodwill from the acquisition was primarily attributable to the value of expected synergies created by incorporating TIDAL product and operations into the Company's technology platform and the value of the assembled workforce. An estimated amount of approximately $90.3 million of the goodwill generated from the TIDAL acquisition and approximately $112.3 million of the acquired intangible assets are expected to be deductible for US tax purposes based on the preliminary values. Additionally, the acquisition would have resulted in the recognition of US deferred tax assets; however, the realization of such deferred tax assets depends primarily on the Company's ability, post-acquisition, to generate taxable income in future periods of which there is not sufficient evidence of such income as of September 30, 2021. Accordingly, a valuation allowance was recorded against the net acquired deferred tax asset in accounting for the acquisition. Deferred consideration in the aggregate amount of $50.5 million relates to pre-acquisition contingencies, and includes a portion of purchase consideration withheld, for a period of up to 4 years, as security for TIDAL's indemnification obligations related to general representations and warranties, in addition to certain potential exposures. The Company recognized certain liabilities for acquired pre-existing potential exposures, and an indemnification receivable in the amount of $24.5 million has been recorded related to such exposures in accordance with the terms of the indemnification agreement. Such amounts may change depending on the outcomes associated with the exposures, including the determination of claims that would be attributed to pre-acquisition matters. The amounts have been determined in accordance with ASC 740, Income Taxes, and ASC 450, Contingencies. The Company prepared an initial determination of the fair value of the assets acquired and liabilities assumed as of the acquisition date using preliminary information. Subsequently, the Company has recognized measurement period adjustments to the purchase consideration and the jurisdictional allocation of the fair value of certain assets and liabilities assumed as a result of further refinements in the Company’s estimates. The net effect of these adjustments on the preliminary purchase price allocation was an increase of $13.2 million in both goodwill and deferred tax liabilities assumed, respectively. There was no impact to the consolidated statements of operations as result of these adjustments. The Company continues the process of completing the evaluation of contingencies and tax effects related to the acquisition. Accordingly, the preliminary values reflected in the table above are subject to change. In addition to the deferred consideration, an additional amount of $30.5 million in purchase consideration has been withheld related to defined post-acquisition activities. Because these amounts relate to post-acquisition activities, in accordance with ASC 805, Business Combinations, such amounts will be recognized as expenses in future periods, as incurred. The noncontrolling interest was recorded based on the fair value on the date of acquisition. The acquisition of TIDAL did not have a material impact on the Company's condensed consolidated financial statements. Accordingly, pro forma financial information has not been presented. Other Acquisitions On July 13, 2021 the Company completed an acquisition for total consideration of $20.5 million which resulted in the recognition of additional intangible assets and goodwill. None of the goodwill generated from the acquisition or acquired intangible assets are expected to be deductible for tax purposes.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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