Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Changes and Error Corrections [Abstract]

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10–Q and Rule 10–01 of Regulation S–X. Accordingly, they do not include all information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements that are included in the Company’s Annual Report on Form 10–K for the year ended December 31, 2018, filed with the SEC on March 18, 2019 and our Form 10–K/A filed with the SEC on March 20, 2019. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results for any future periods or the year ending December 31, 2019.

In August 2018, the SEC issued an amendment to Rule 3–04 of Regulation S–X requiring both year-to-date information and subtotals for each interim period. We have elected to expand our analysis of changes in stockholders’ equity as of June 30, 2019 in statement form for each of the current and comparative quarter-to-date and year-to-date periods.

Effective in the first quarter of 2019, the Company modified the presentation of the unaudited condensed balance sheets to separately classify its restricted cash payable. The prior period has been reclassified to conform with this presentation, which did not change current liabilities.

We apply the same accounting policies in preparing our quarterly and annual financial statements, with the exception of the new leasing standard which was required to be adopted on a prospective basis beginning January 1, 2019 (refer to Note 2, Recent Accounting Pronouncements).

The Company rounds amounts in the unaudited condensed consolidated financial statements to thousands and calculates all per-share data from underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot or recalculate based on reported numbers due to rounding.

New Accounting Standards



Standard	Description	Date/Method of Adoption	Effect on financial statements or other significant matters
Adopted During the Six Months Ended June 30, 2019
ASU 2016–02	This standard requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements.	The Company adopted ASU 2016–02 effective January 1, 2019, using the modified retrospective approach, and all practical expedients permitted under the transition guidance.	In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016–02, Leases (Topic 842), which requires leases with a duration greater than twelve months to be recognized on the balance sheet as right-of-use (“ROU”) assets and lease liabilities. We adopted the new standard using the modified retrospective approach and have elected the package of practical expedients permitted under the transition guidance, including the hindsight practical expedients for expired or existing contracts, which allowed us to carryforward our historical determination of (i) whether a contract is or contains a lease, (ii) lease classification and (iii) initial direct costs. Additionally, we elected the practical expedients which allowed us to (i) not perform an allocation of lease and non-lease components for real estate leases, (ii) continue to account for short-term leases under Topic 840 and (iii) utilize our incremental borrowing rate (“IBR”), rather than the rate implicit in each lease, to calculate the present value of the remaining lease payments. As such, the unaudited condensed consolidated financial statements for the period ended June 30, 2019 are presented under the new standard, while comparative periods presented continue to be reported in accordance with Topic 840. The most significant impact of adoption was the recording of operating lease ROU assets and operating lease liabilities on our unaudited condensed consolidated balance sheets at January 1, 2019. Refer to Note 14, Leases, for more information. The standard did not materially impact our results of operations or cash flows.
ASU 2018–15	This standard clarifies the accounting for capitalizing implementation costs in a cloud computing arrangement that is a service contract. The standard provides that implementation costs be treated using the same criteria used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement.	Effective January 1, 2019, the Company early adopted ASU 2018–15 on a prospective basis.	Under the standard, we now capitalize implementation costs related to our cloud migration of technology platforms to the cloud. Such amounts are amortized over the lesser of the term of the hosting arrangement, considering any explicit renewal options for which we are reasonably certain to exercise, or the useful life of the underlying hosted software. This standard did not materially impact our results of operations, cash flows or consolidated financial position.

Not Yet Adopted as of June 30, 2019
ASU 2016–13	This standard requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The measurement of expected credit losses will be based on historical experience, current conditions and reasonable and supportable forecasts that impact the collectability of the reported amount.	The standard is effective January 1, 2020.	The current expected credit loss model outlined in the ASU differs from existing US GAAP as it based on expected rather than incurred losses. The standard requires a cumulative effect of initial application to be recognized in retained earnings at the date of initial application. The Company has established a cross-functional task force charged with evaluating the requirements of the new standard, the availability and extent of historical data, relevant economic indicators and the impact this standard will have on our processes, systems and internal controls. We are currently in the process of gathering historical data, selecting our credit loss model, assessing system requirements and evaluating disclosure requirements. Though the Company continues to assess the impact of adoption, we currently believe the most significant effects of the ASU will be incorporating economic factors into our credit loss reserve methodologies and providing expanded disclosures on expected credit losses. At this time, the impact on credit loss reserves is not expected to be material.

Receivables

In general, the Company’s trade accounts receivable provide for payment terms of 30 days or less. Receivables not paid within the terms of the agreement are generally subject to late fees based upon the outstanding receivable balance.

The Company extends revolving credit to certain small fleets, which are subject to interest charges based on the revolving balance not paid in full.

Earnings per Share

Basic earnings per share is computed by dividing net income attributable to shareholders by the weighted average number of shares of common stock and vested deferred stock units (“DSUs”) outstanding during the year. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and assumed issuance of unvested performance-based awards for which the performance condition has been met as of the date of determination using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the average unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase the Company’s common stock at the average market price during the period.

Derivative Instruments

The Company is exposed to certain market risks relating to its ongoing business operations. From time to time, the Company enters into derivative instrument arrangements to manage various risks including interest rate risk

Fair Value of Financial Instruments

The fair value of the Notes is based on market rates for the issuance of our debt and is classified as Level 2 in the fair value hierarchy.

2016 Credit Agreement

The Company determines the fair value of the amount outstanding under its 2016 Credit Agreement based on the market rates for the issuance of the Company’s debt, which are Level 2 inputs in the fair value hierarchy.The Company determines fair value based upon quoted prices when available or through the use of alternative approaches, such as model pricing, when market quotes are not readily accessible or available. These valuation techniques may be based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

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Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.


•	Level 3 – Instruments whose significant value drivers are unobservable.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Investment Securities

When available, the Company uses quoted market prices to determine the fair value of investment securities; such inputs are classified as Level 1 of the fair-value hierarchy. These securities primarily consist of an open-ended mutual fund, which is invested in fixed-income securities and is held in order to satisfy the regulatory requirements of WEX Bank. For mortgage-backed and asset-backed debt securities and municipal bonds, the Company generally uses quoted prices for recent trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced using such methods are generally valued using Level 2 inputs.

Leases

We have operating leases for buildings, primarily for office space. For building leases with terms greater than twelve months, we account for lease and non-lease components as a single lease component. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Short-term lease payments are recognized on a straight-line basis and variable short-term lease payments are recognized in the period in which the obligation is incurred. We determine whether or not a contract contains a lease at inception of the contract. Many of our lease agreements contain renewal or termination clauses that we factor into our determination of the lease term if we are reasonably certain to exercise any such options.

Segment Information

The Company determines its operating segments and reports information in accordance with how the Company’s chief operating decision maker (“CODM”) allocates resources and assesses performance. The Company’s CODM is its Chief Executive Officer. The operating segments are aggregated into the three reportable segments described below.


•	Fleet Solutions primarily provides customers with payment and transaction processing services specifically designed for the needs of commercial and government fleets. This segment also provides information management services to these fleet customers.


•	Travel and Corporate Solutions focuses on the complex payment environment of business-to-business payments, providing customers with payment processing solutions for their corporate payment and transaction monitoring needs.

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Health and Employee Benefit Solutions provides healthcare payment products and SaaS consumer directed platforms, as well as payroll related benefits to customers.