Discontinued Operations

9 Months Ended

Sep. 30, 2023

Discontinued Operations and Disposal Groups [Abstract]

Pending Sale of Worldpay Merchant Solutions Business

The following table represents a reconciliation of the major components of discontinued operations, net of tax, presented in the consolidated statements of earnings (loss) (in millions). The Company's presentation of discontinued operations excludes general corporate overhead costs which were historically allocated to the Worldpay Merchant Solutions business.


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Major components of discontinued operations before income taxes:
Revenue	$	1,201	$	1,189	$	3,636	$	3,620
Cost of revenue	(193)		(613)		(1,462)		(1,978)
Selling, general, and administrative expenses	(520)		(498)		(1,486)		(1,470)
Asset impairments	(4)		—		(6,843)		(18)
Interest income (expense), net	4		2		15		3
Other, net	(30)		(60)		17		(5)
Earnings (loss) from discontinued operations related to major classes of pretax earning (loss)	458		20		(6,123)		152
Loss on assets held for sale	(1,549)		—		(1,549)		—
Earnings (loss) from discontinued operations	(1,091)		20		(7,672)		152
Provision (benefit) for income taxes	(382)		(11)		(327)		5
Earnings (loss) from discontinued operations, net of tax	$	(709)	$	31	$	(7,345)	$	147

The following table represents the major classes of assets and liabilities of the disposal group classified as held for sale presented in the consolidated balance sheets as of September 30, 2023, and December 31, 2022 (in millions). Assets held for sale are reported at the lower of their carrying value or fair value less cost to sell and are not depreciated or amortized.


	September 30, 2023		December 31, 2022
Major classes of assets included in discontinued operations:
Cash and cash equivalents	$	1,356	$	1,732
Settlement assets	5,243		5,264
Trade receivables, net of allowance for credit losses of $60 and $44, respectively	1,753		1,864
Prepaid expenses and other current assets	150		130
Total current assets	8,502		8,990
Property and equipment, net	143		153
Goodwill	10,711		17,460
Intangible assets, net	5,854		6,488
Software, net	1,226		1,183
Other noncurrent assets	490		450
Total noncurrent assets	18,424		25,734
Less valuation allowance	(1,549)		—
Total assets of the disposal group classified as held for sale	$	25,377	$	34,724


Major classes of liabilities included in discontinued operations:
Accounts payable, accrued and other liabilities	$	1,068	$	1,171
Settlement payables	6,210		6,140
Other current liabilities	45		55
Total current liabilities	7,323		7,366
Deferred income taxes	586		861
Other noncurrent liabilities	458		510
Total noncurrent liabilities	1,044		1,371
Total liabilities of the disposal group classified as held for sale	$	8,367	$	8,737

The following table presents cash flows from operating and investing activities for discontinued operations (in millions).


	Nine months ended September 30,
	2023		2022
Cash provided by (used in) operating activities - discontinued operations	$	1,509	$	1,639
Cash provided by (used in) investing activities - discontinued operations (1)	$	(260)	$	(24)
Cash provided by (used in) financing activities - discontinued operations	$	(188)	$	(435)

(1)Our capital expenditures from discontinued operations for the nine month periods ended September 30, 2023 and 2022, were $260 million and $292 million, respectively. The nine month period ended September 30, 2022, includes $269 million net proceeds from the sale of Visa preferred stock.

Settlement Assets

The principal components of the Company's settlement assets of the disposal group are as follows (in millions):


	September 30, 2023		December 31, 2022
Settlement assets
Settlement deposits	$	86	$	55
Merchant float	2,259		2,625
Settlement receivables	2,898		2,584
Total Settlement assets	$	5,243	$	5,264

Held-for-sale Disposal Group Measurement

In accordance with ASC 360, a held-for-sale disposal group is measured at the lower of its carrying value or fair value less cost to sell. Measuring the disposal group is a two-step process requiring the carrying amount of the disposal group's assets outside the scope of ASC 360, such as goodwill, which is tested for impairment under ASC 350, to be first adjusted by applying other relevant guidance before adjusting the carrying value of the overall disposal group.

The Company evaluated the goodwill of the disposal group for impairment as of September 30, 2023, by performing a quantitative assessment that estimated the fair value of the disposal group using a market approach based on the price at which the Company agreed to sell a majority interest in the Worldpay Merchant Solutions business. As of September 30, 2023, the estimated fair value of the disposal group approximated its carrying value, inclusive of related deferred tax liabilities assigned to the reporting unit for purposes of the goodwill impairment assessment in accordance with ASC 350 but not classified as liabilities held for sale in accordance with ASC 360 because these deferred tax liabilities will not be transferred in the transaction. Based on the assessment, no goodwill impairment was recorded.

The carrying value of the overall disposal group was then assessed by comparing its value, inclusive of cumulative translation adjustment losses and exclusive of deferred tax liabilities not classified as part of the disposal group's assets held for sale, to the estimated fair value less estimated cost to sell. Based on this assessment, the carrying value of the disposal group was reduced by $1.5 billion, primarily as a result of the exclusion of certain deferred tax liabilities that will not be transferred in the transaction. The reduction was recorded as a valuation allowance against the Company's assets held for sale, and the allowance will continue to be updated as the disposal group continues to be remeasured at each subsequent reporting date until the sale has closed.

Asset Impairments

During the second quarter of 2023, the Company recorded a $6.8 billion goodwill impairment because the estimated fair value of the Worldpay Merchant Solutions reporting unit, now reported as assets held for sale, was less than its carrying value. To estimate the fair value of such reporting unit, we used a market approach based on the price, inclusive of estimated selling price adjustments and fair value of contingent consideration, at which the Company had subsequently agreed to sell a majority interest in the Worldpay Merchant Solutions business to GTCR, as discussed in Note 1.

Commitments and Contingencies of the Disposal Group

Chargeback Liability

Through services offered in the Worldpay Merchant Solutions disposal group, the Company is exposed to potential losses from merchant-related chargebacks. A chargeback occurs when a dispute between a cardholder and a merchant, including a claim for non-delivery of the product or service by the merchant, is not resolved in favor of the merchant and the transaction is charged back to the merchant resulting in a refund of the purchase price to the cardholder. If the Company is unable to collect this chargeback amount from the merchant due to closure, bankruptcy or other reasons, the Company bears the loss for the

refund paid to the cardholder. The risk of chargebacks is typically greater for those merchants that promise future delivery of goods and services rather than delivering goods or rendering services at the time of payment.