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ORGANIZATION AND BASIS OF PRESENTATION (Policies) | 6 Months Ended
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Jun. 30, 2022
ORGANIZATION AND BASIS OF PRESENTATION |
Basis of Presentation | Basis of Presentation These interim unaudited condensed consolidated financial statements have been prepared in accordance with GAAP as established by FASB for interim financial information and with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenues and expenses. On an ongoing basis, management evaluates its estimates based upon historical experience, observance of trends, information available from outside sources and various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. Beginning in the first quarter of 2022, the Company updated the financial statement captions within its condensed consolidated statements of income for both periods presented to better reflect the Company’s diversified products, expansive geographical reach, and overall business strategy. Below is a summary of the changes to the financial statement captions. The changes do not have a financial impact on the Company’s reported revenue, revenues less cost of revenues, reported net income, or cash flows from operations. Revenues
| ● | Cash and spot markets – includes associated transaction and clearing fees, the portion of market data fees relating to associated U.S. tape plan market data fees, associated regulatory fees, and associated other revenue from Cboe’s North American Equities, Europe and Asia Pacific, Global FX, and Digital segments.
| ● | Data and access solutions – includes access and capacity fees, proprietary market data fees, and associated other revenue across Cboe’s six segments.
| ● | Derivatives markets – includes associated transaction and clearing fees, the portion of market data fees relating to associated U.S. tape plan market data fees, associated regulatory fees, and associated other revenue from Cboe’s Options, Futures, Europe and Asia Pacific, and Digital segments.
Cost of Revenues
| ● | Royalty fees and other cost of revenues – includes royalty fees and other cost of revenues across the Company’s six segments.
Segment information | Segment Information The Company previously operated as five reportable business segments as of March 31, 2022. As a result of the ErisX acquisition, as of June 30, 2022, the Company operates as six reportable segments: Options, North American Equities, Europe and Asia Pacific, Futures, Global FX, and Digital which is reflective of how the Company's chief operating decision-maker reviews and operates the business. See Note 14 (“Segment Reporting”) for more information.
Update to Significant Accounting Policies | Update to Significant Accounting Policies With the exception of the change in the accounting for digital assets and liabilities safeguarded as a result of the adoption of Securities and Exchange Commission Staff Accounting Bulletin No. 121 (“SAB 121”) (as discussed below in “Recent Accounting Pronouncements - Adopted”) and the new accounting policies for digital assets as a result of the acquisition of ErisX, there have been no new or material changes to the significant accounting policies discussed for the Company for the period ended June 30, 2022, that are of significance, or potential significance, to the Company.
(a) | Digital Assets Held
In the current period, the Company determined that digital assets held should be accounted for under FASB Accounting Standards Codification (“ASC”) 350, Intangibles — Goodwill and Other, and included on the condensed consolidated balance sheets within intangibles, net. As there is no inherent limit imposed on the useful life of the digital assets, they are classified as indefinite lived intangible assets and are not subject to amortization. Instead, they must be tested for impairment annually or more frequently if events or circumstances change that indicate that it’s more likely than not that the asset is impaired (i.e., if an impairment indicator exists). Therefore, the value of digital assets is determined at the date of acquisition and will only be remeasured in the event the Company concludes impairment exists. The Company will not record any increases in value during the period the digital assets are held; the only gains that will be recorded will be upon disposition (if the proceeds exceed the carrying value at the time of the disposition).
(b) | Digital Assets – Safeguarded Assets and Liabilities
In accordance with SAB 121 the Company recorded a safeguard liability with respect to its obligation to safeguard customers’ digital assets along with a corresponding safeguard asset. The safeguard asset and liability are remeasured at fair value on a recurring basis with no impact to the condensed consolidated statement of income. In the event that the Company or its vendors fail to safeguard the customers’ digital assets, any resulting loss will reduce the safeguard asset with a corresponding loss recorded in other expenses in the condensed consolidated statement of income.
Recent Accounting Pronouncements | Recent Accounting Pronouncements - Adopted On March 31, 2022, the SEC issued SAB 121, which sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguarded digital assets that an entity holds for its platform users. The guidance requires an entity to recognize a liability for the obligation to safeguard the users’ assets and recognize an associated asset for the digital assets held for users. Both the liability and asset will be measured initially and subsequently at the fair value of the digital assets being safeguarded. The guidance also requires additional disclosures related to the nature and amount of digital assets held on behalf of its platform users, with separate disclosure for each significant digital asset, and the vulnerabilities the entity has due to any concentration in such activities. The guidance, effective for interim or annual periods ending after June 15, 2022, was adopted by the Company as of June 30, 2022. As a result of adopting SAB 121, the Company recorded digital assets - safeguarded assets, with corresponding digital assets - safeguarded liabilities of $22.4 million, with no impact to the condensed consolidated statements of income and cash flows. Recent Accounting Pronouncements - Issued, not yet Adopted There were no applicable material accounting pronouncements that have been issued, but not yet adopted as of June 30, 2022.

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