NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Contract liabilities, which relate to advance consideration received from customers (deferred income) before transfer of control occurs and
therefore revenue is recognized, is not material to the Companys Consolidated Financial Statements.
Remaining Performance Obligations
ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations;
however, as permitted by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. As discussed above, the
Companys core performance obligation consists of variable consideration under a stand-ready series of distinct days of service and revenue from the Companys products and service arrangements are generally billed and recognized as the
services are performed. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.
Changes in Accounting Policies
noted above, the Company adopted ASC 606, effective January 1, 2018, using the modified retrospective method, applying the standard to contracts that are not complete as of the date of initial application. Therefore, the comparative information
has not been adjusted and continues to be reported under ASC 605. The details of the significant changes are set out below.
606, the Company capitalizes commission fees as costs of obtaining a contract when they are incremental and expected to be recovered and expenses commission fees when there is a required ongoing obligation. The Company amortizes these capitalized
costs consistently with the pattern of transfer of the good or service to which the asset relates. If the expected amortization period is one year or less, the commission fee is expensed when incurred. The Company previously recognized sales
commission fees related to contracts as sales and marketing expenses when incurred. Except for the change in revenue recognition and the recording of network fees and other costs as a reduction of revenue, the Company has consistently applied the
accounting policies to all periods presented in these Consolidated Financial Statements.
3. BUSINESS COMBINATIONS
Acquisition of Legacy Worldpay
January 16, 2018, the Company completed the acquisition of Legacy Worldpay by acquiring 100% of the issued and outstanding shares (the Acquisition). The approximately $11.9 billion purchase price consisted of Legacy Worldpay
shareholders receiving a $1.5 billion cash payment and 133.6 million shares of the Companys Class A common stock. The acquisition-date fair value of the shares of the Companys Class A common stock issued was
$10.4 billion and was determined based on the share price of $77.60 per share, the opening price of the Companys Class A common stock on the New York Stock Exchange on January 16, 2018 since the acquisition closed before the
market opened on January 16, 2018.
The Acquisition creates a leading global payments technology company that is uniquely positioned
to address clients needs with innovative and strategic capabilities.
The Acquisition was accounted for as a business combination
under ASC 805, Business Combinations (ASC 805). The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of the Acquisition. The excess of the purchase price
over the fair value of the net assets acquired was allocated to goodwill, none of which is deductible for tax purposes. Goodwill, assigned to Technology Solutions, Merchant Solutions and Issuer Solutions, consists primarily of the acquired workforce
and growth opportunities, none of which qualify as an intangible asset.
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