Condensed Consolidated Financial Statement Details

9 Months Ended

Sep. 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):


	September 30, 2020		December 31, 2019
Cash and cash equivalents on the consolidated balance sheets	$	1,826	$	1,152
Merchant float restricted cash (in Settlement deposits and merchant float)	2,009		1,519
Other restricted cash (in Other noncurrent assets) (1)	—		540
Total Cash and cash equivalents per the consolidated statements of cash flows	$	3,835	$	3,211

(1) See Visa Europe and Contingent Value Rights discussion below.

Property and Equipment, Intangible Assets and Computer Software

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


	September 30, 2020						December 31, 2019
	Cost		Accumulated depreciation and amortization		Net		Cost		Accumulated depreciation and amortization		Net
Property and equipment	$	2,366	$	1,452	$	914	$	2,177	$	1,277	$	900
Intangible assets	$	18,791	$	4,567	$	14,224	$	18,564	$	2,766	$	15,798
Software	$	5,308	$	2,007	$	3,301	$	4,820	$	1,616	$	3,204

As of September 30, 2020, intangible assets, net of amortization, includes $13,840 million of customer relationships and other amortizable intangible assets, $341 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 $602 million and $481 million for the three months and $1,794 million and $794 million for the nine months ended September 30, 2020 and 2019, respectively.

Goodwill

Changes in goodwill during the nine months ended September 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	(11)		57		245		—		291
Foreign currency adjustments	16		(21)		39		—		34
Balance, September 30, 2020	$	35,548	$	12,261	$	4,666	$	92	$	52,567

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 September 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 September 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 proceeds from Visa Inc. in the form of cash ("cash consideration") and convertible preferred stock ("preferred stock"), the value of which may be reduced by losses incurred relating to ongoing interchange-related litigation involving Visa Europe ("the litigation"). The preferred stock becomes convertible into Visa Inc. Class A common stock ("common stock") 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, which is recorded as a liability ("CVR liability") on the consolidated balance sheets, and agreed to segregate the cash consideration to be paid as part of the CVR liability, which was recorded as restricted cash.

On September 17, 2020, the Company executed an amendment ("the amendment") with the former Legacy Worldpay owners to pay approximately one-third of the cash consideration component of the CVR liability, or $185 million, to the former Legacy Worldpay owners upon amendment execution, and to pay the remaining, approximately two-thirds of the cash consideration on October 12, 2027, subject to reduction due to losses incurred by Visa Inc. relating to the litigation. The partial payment of the cash consideration was recorded as a reduction of the CVR liability and reflected as Other financing activities, net, on the consolidated statement of cash flows for the nine months ended September 30, 2020. The amendment also removed the segregated cash requirement resulting in no restricted cash recorded at September 30, 2020, as compared to $540 million recorded at December 31, 2019, reflected in Other noncurrent assets on the consolidated balance sheet. Additionally, as Visa Inc. releases preferred stock for conversion into common stock, over time and subject to any losses incurred by Visa Inc. relating to the litigation, 90% of the net-of-tax proceeds from the sale of the common stock will be paid to the former Legacy Worldpay owners in accordance with the amendment. A payment was made in the fourth quarter of 2020 related to Visa Inc.'s release of preferred stock in September 2020.

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 component of the 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 future preferred stock releases for conversion into common stock and an estimate of the potential losses that will result from the ongoing litigation involving Visa Europe, which are unobservable. The fair value of the preferred stock was $593 million at September 30, 2020, with $540 million recorded as Prepaid expenses and other current assets for the preferred stock that has been released to date and $53 million recorded as Other noncurrent assets for the remaining preferred stock. The fair value of the preferred stock was $400 million at December 31, 2019, recorded in Other noncurrent assets.

The Company also records the cash consideration component of the CVR liability at fair value under ASC 825. As a result of the amendment, the estimated fair value of the cash consideration component of the CVR liability is determined using Level 3-type measurements, including a discount rate based on the bond yield for the Company's credit rating and remaining payment term as the significant unobservable input. The fair value of the CVR liability was $779 million at September 30, 2020, with $394 million recorded as Accounts payable, accrued and other liabilities for the preferred stock that has been released to date and $385 million recorded as Other noncurrent liabilities for the remaining preferred stock and cash consideration components. The fair value of the CVR liability was $838 million at December 31, 2019, recorded in Other noncurrent liabilities on the consolidated balance sheet.

Pursuant to ASC 825, the Company remeasures the fair value of the preferred stock and CVR liability each reporting period. The net change in fair value was $48 million and $74 million during the three and nine months ended September 30, 2020, respectively, recorded in Other income (expense), net on the consolidated statements of earnings.