Condensed Consolidated Financial Statement Details

6 Months Ended

Jun. 30, 2020

Condensed Consolidated Financial Statement Details [Abstract]

Condensed Consolidated Financial Statement Details

Cash and Cash Equivalents

The Company includes restricted cash in the cash and cash equivalents balance reported in the consolidated statements of cash flows. The reconciliation between cash and cash equivalents in the consolidated balance sheets and the consolidated statements of cash flows is as follows (in millions):


	June 30, 2020		December 31, 2019
Cash and cash equivalents on the consolidated balance sheets	$	1,183	$	1,152
Merchant float restricted cash (in Settlement deposits and merchant float)	1,732		1,519
Other restricted cash (in Other noncurrent assets)	543		540
Total Cash and cash equivalents per the consolidated statements of cash flows	$	3,458	$	3,211

Property and Equipment, Intangible Assets and Computer Software

The following table shows the Company's consolidated financial statement details as of June 30, 2020, and December 31, 2019 (in millions):


	June 30, 2020										December 31, 2019
	Cost		Accumulated depreciation and amortization		Net		Cost		Accumulated depreciation and amortization		Net
Property and equipment	$	2,240	$	1,353	$	887	$	2,177	$	1,277	$	900
Intangible assets	$	18,523	$	3,934	$	14,589	$	18,564	$	2,766	$	15,798
Software	$	5,141	$	1,849	$	3,292	$	4,820	$	1,616	$	3,204

As of June 30, 2020, intangible assets, net of amortization, includes $14,184 million of customer relationships and other amortizable intangible assets, $362 million of finite-lived trademarks, as well as $43 million of non-amortizable indefinite-lived trademarks. Amortization expense with respect to these intangible assets was $594 million and $158 million for the three months and $1,192 million and $314 million for the six months ended June 30, 2020 and 2019, respectively.

Goodwill

Changes in goodwill during the three months ended June 30, 2020, are summarized below (in millions). Prior-period amounts have been reclassified to conform to the new reportable segment presentation as discussed in Note 12.


					Capital		Corporate
	Merchant		Banking		Market		And
	Solutions		Solutions		Solutions		Other		Total
Balance, December 31, 2019	$	35,543	$	12,225	$	4,382	$	92	$	52,242
Goodwill attributable to acquisitions (1)	(37)		57		245		—		265
Foreign currency adjustments	(525)		(41)		(1)		—		(567)
Balance, June 30, 2020	$	34,981	$	12,241	$	4,626	$	92	$	51,940

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

We assess goodwill for impairment on an annual basis during the fourth quarter or more frequently if circumstances indicate potential impairment. We concluded as a result of our fourth quarter 2019 step zero annual impairment tests that it remained more likely than not that the fair value of each of our reporting units continued to exceed their carrying amounts. Due to the economic impact of the COVID-19 pandemic, we evaluated if events and circumstances as of June 30, 2020, indicated potential impairment. We performed a qualitative assessment by examining factors most likely to affect our valuations and considered the impact to our business from the COVID-19 pandemic. The factors examined involve significant use of management judgment and included, among others, (1) forecasted revenue, growth rates, operating margins, and capital expenditures used to calculate estimated future cash flows, (2) future economic and market conditions and (3) FIS' market capitalization.

Based on our interim impairment assessment as of June 30, 2020, we concluded that it remained more likely than not that the fair value of each of our reporting units continued to exceed their carrying amounts; therefore, goodwill was not impaired. However, it is reasonably possible that future developments related to the economic impact of the COVID-19 pandemic on our Merchant Solutions business, such as an extended duration of the pandemic and/or government-imposed shutdowns, prolonged economic downturn or recession, or lack of governmental support for recovery, could have a material impact on one or more of the estimates and assumptions used to evaluate goodwill impairment and could result in future goodwill impairment.

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. As part of the disposal, Legacy Worldpay received consideration from Visa Inc. in the form of cash and convertible Visa Inc. Series B preferred stock ("preferred stock"), the value of which may be reduced by settlement of potential liabilities relating to ongoing interchange-related litigation involving Visa Europe. The preferred stock becomes convertible in stages based on developments in the litigation and becomes fully convertible no later than 2028 (subject to a holdback to cover any pending claims). Also 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 finalization of the proceeds from disposal.

The Company has elected the fair value option under ASC 825, Financial Instruments ("ASC 825"), for measuring its preferred stock asset and related CVR liability. The estimated fair value of the preferred stock and related CVR liability are determined using Level 3-type measurements. Significant inputs into the valuation of the preferred stock include the Visa Inc. Class A common stock price per share and the conversion ratio, which are observable, as well as the expected timing of the preferred stock conversion into Visa Inc. Class A common stock and an estimate of the potential losses that will result from the ongoing litigation involving Visa Europe, which are unobservable. The Company engaged third-party valuation specialists and external counsel to assist management in making the fair value determination for the preferred stock. The fair value of the preferred stock was $579 million and $400 million at June 30, 2020, and December 31, 2019, respectively, recorded in Other noncurrent assets on the consolidated balance sheets.

The fair value of the CVR liability is determined based on 90% of the net-of-tax proceeds from the disposal, including the preferred stock and the cash consideration. The portion of the cash consideration that is payable as part of the CVR liability is

segregated pursuant to contractual provisions and reflected as restricted cash in the amount of $543 million and $540 million at June 30, 2020, and December 31, 2019, respectively, recorded in Other noncurrent assets on the consolidated balance sheets. The fair value of the CVR liability was $975 million and $838 million at June 30, 2020, and December 31, 2019, respectively, recorded in Other noncurrent liabilities on the consolidated balance sheets. Pursuant to ASC 825, the Company remeasures the fair value of the preferred stock and related CVR liability each reporting period. The net change in fair value was $46 million and $26 million during the three and six months ended June 30, 2020, respectively, recorded in Other income (expense), net on the consolidated statement of earnings.