Condensed Consolidated Financial Statement Details

9 Months Ended

Sep. 30, 2019

Condensed Consolidated Financial Statement Details [Abstract]

Condensed Consolidated Financial Statement Details

Cash and Cash Equivalents

As a result of the assets acquired in the Worldpay acquisition, the Company included restricted cash in the cash and cash equivalents balance reported in the Condensed Consolidated Statements of Cash Flows (Unaudited). The reconciliation between cash and cash equivalents in the Condensed Consolidated Balance Sheets (Unaudited) and the Condensed Consolidated Statements of Cash Flows (Unaudited) is as follows (in millions):



	September 30, 2019		December 31, 2018
Cash and cash equivalents on the Condensed Consolidated Balance Sheets (Unaudited)	$	1,305	$	703
Merchant float (in Settlement deposits and merchant float)	2,000		—
Other restricted cash (in Other noncurrent assets)	525		—
Total Cash and cash equivalents per the Condensed Consolidated Statements of Cash Flows (Unaudited)	$	3,830	$	703

Property and Equipment, Intangible Assets and Computer Software

The following table shows the Company’s Condensed Consolidated Financial Statement (Unaudited) details as of September 30, 2019 and December 31, 2018 (in millions):



	September 30, 2019						December 31, 2018
	Cost		Accumulated depreciation and amortization		Net		Cost		Accumulated depreciation and amortization		Net
Property and equipment	$	2,026	$	1,215	$	811	$	1,645	$	1,058	$	587
Intangible assets	$	19,855	$	3,772	$	16,083	$	6,122	$	2,990	$	3,132
Computer software	$	4,511	$	1,486	$	3,025	$	3,103	$	1,308	$	1,795

The Company entered into other financing obligations of $24 million and $1 million during the three months and $59 million and $1 million during the nine months ended September 30, 2019 and 2018, respectively, for certain computer hardware and software. The assets are included in property and equipment and computer software, and the other financing obligations

are classified as long-term debt on our Condensed Consolidated Balance Sheets (Unaudited). Periodic payments are included in repayment of borrowings and other financing obligations on the Condensed Consolidated Statements of Cash Flows (Unaudited).

As of September 30, 2019, intangible assets, net of amortization, includes $15,606 million of customer relationships and other amortizable intangible assets, $435 million of finite-lived trademarks, as well as $42 million of non-amortizable indefinite-lived trademarks. Amortization expense with respect to these intangible assets was $481 million and $162 million for the three months and $794 million and $498 million during the nine months ended September 30, 2019 and 2018, respectively.

Goodwill

Changes in goodwill during the nine months ended September 30, 2019 are summarized below (in millions). Prior-period amounts have been reclassified to conform to the new reportable segment presentation as discussed in Note 13.



							Capital
	Merchant			Banking			Market
	Solutions			Solutions			Solutions			Total
Balance, December 31, 2018	$	730		$	7,991		$	4,824		$	13,545
Goodwill attributable to acquisition (1)	34,951			3,477						38,428
Foreign currency adjustments	(35		)	(11		)	(37		)	(83		)
Balance, September 30, 2019	$	35,646		$	11,457		$	4,787		$	51,890


(1)	The amount of goodwill attributable to the acquisition of Worldpay, including its allocation to reportable segments, is preliminary and subject to change.

Effective August 31, 2018, FIS sold substantially all the assets of the Certegy Check Services business unit, resulting in a pre-tax loss of $54 million, including goodwill distributed through the sale of business of $43 million.

Asset Impairments

During the three months ended September 30, 2019, the Company recorded pre-tax asset impairments of $87 million, primarily related to certain computer software resulting from the Company's net realizable value analysis.

During September 2018, as a result of entering into an agreement to unwind the joint venture ("Brazilian Venture") that the Company operated with Banco Bradesco, the Company recorded pre-tax asset impairments totaling $95 million, including $42 million for the Brazilian Venture contract intangible asset, $25 million for goodwill, and $28 million for assets being held for sale that were transferred to Banco Bradesco upon closing of the agreement (see Note 11).

Visa Europe and Contingent Value Rights

As part of the Worldpay acquisition, the Company acquired certain assets and liabilities related to the June 2016 Worldpay Group plc (Legacy Worldpay) disposal of its ownership interest in Visa Europe to Visa, Inc. In connection with the disposal, Legacy Worldpay agreed to pay former Legacy Worldpay owners 90% of the net-of-tax proceeds from the disposal, known as contingent value rights (“CVR”), pending the resolution of certain historical claims and the finalization of the proceeds from disposal. At September 30, 2019, the value of the CVR liability to the former owners was $700 million recorded in Other long-term liabilities on the Condensed Consolidated Balance Sheets (Unaudited). The related proceeds from the disposal are recorded primarily as restricted cash and as Visa, Inc. Series B preferred shares in Other noncurrent assets on the Condensed Consolidated Balance Sheet (Unaudited). The resolution of the CVR liability is expected to occur no later than June 2028, at which time the Visa, Inc. Series B preferred shares are subject to mandatory conversion into Visa, Inc. Class A Common Stock.

Settlement Activity and Merchant Float

Banking Solutions

We manage certain payment services and programs and wealth management processes for our clients that require us to hold and manage client cash balances used to fund their daily settlement activity. Settlement deposits represent funds we hold that were drawn from our clients to facilitate settlement activities. Settlement receivables represent amounts funded by us. Settlement payables consist of settlement deposits from clients, settlement payables to third parties or clients, and outstanding checks related to our settlement activities for which the right of offset does not exist or we do not intend to exercise our right of offset. Our accounting policy for such outstanding checks is to include them in settlement payables on the Condensed Consolidated Balance Sheets (Unaudited) and operating cash flows on the Condensed Consolidated Statements of Cash Flows (Unaudited).

Merchant Solutions

Settlement deposits and merchant float, settlement receivables, and settlement payables represent intermediary balances arising from the settlement process which involves the transferring of funds between card issuers, merchants and Sponsoring Members. Funds are processed under two models, a sponsorship model and a direct member model. In the U.S., the Company operates under the sponsorship model, and outside the U.S., the Company operates under the direct membership model.

Under the sponsorship model, in order for the Company to provide electronic payment processing services, Visa, MasterCard and other payment networks require sponsorship by a member clearing bank. The Company has an agreement with various banks and financial institutions (the “Sponsoring Member”) to provide sponsorship services to the Company. Under the sponsorship agreements the Company is registered as a Visa Third-Party Agent and a MasterCard Service Provider. The sponsorship services allow us to route transactions under the Sponsoring Members' membership to clear card transactions through MasterCard, Visa and other networks. Under this model, the standards of the payment networks restrict us from performing funds settlement and as such require that these funds be in the possession of the Sponsoring Member until the merchant is funded. Accordingly, settlement receivables and settlement payables resulting from the submission of settlement files to the network or cash received from the network in advance of funding the network are the responsibility of the Sponsoring Member and are not recorded on the Company’s Condensed Consolidated Balance Sheets (Unaudited).

Settlement receivables and settlement payables are also recorded in the U.S. as a result of intermediary balances due to/from the Sponsoring Member. The Company receives funds from certain networks which are owed to the Sponsoring Member for settlement. In other cases the Company transfers funds to the Sponsoring Member for settlement in advance of receiving funds from the network. These timing differences result in settlement receivables and settlement payables. The amounts are generally collected or paid the following business day. Additionally, U.S. settlement receivables and settlement payables arise related to interchange expenses, merchant reserves and exception items.

Under the direct membership model, the Company is a direct member in Visa, MasterCard and other payment networks as third party sponsorship to the networks is not required. This results in the Company performing settlement between the networks and the merchant and requires adherence to the standards of the payment networks in which the Company is a direct member. Settlement deposits and merchant float, settlement receivables and settlement payables result when the Company submits the merchant file to the network or when funds are received by the Company in advance of paying the funds to the merchant. The amounts are generally collected or paid the following business day.

Under the direct membership model, merchant float represents cash balances the Company holds on behalf of merchants when the incoming amount from the card networks precedes when the funding to merchants falls due. Merchant float funds held in segregated accounts in a fiduciary capacity are considered restricted cash.