Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements


			Page
Consolidated Statements of Income			53
Consolidated Statements of Comprehensive Income			54
Consolidated Balance Sheets			55
Consolidated Statements of Equity			56
Consolidated Statements of Cash Flows			57
Notes to Consolidated Financial Statements			58
Schedule II - Valuation and Qualifying Accounts			104
Report of Independent Registered Public Accounting Firm			105

Fiserv, Inc.

Consolidated Statements of Income


In millions, except per share data
Year Ended December 31,	2020		2019		2018

Revenue:
Processing and services (1)	$	12,215	$	8,573	$	4,975
Product	2,637		1,614		848
Total revenue	14,852		10,187		5,823
Expenses:
Cost of processing and services	5,841		4,016		2,324
Cost of product	1,971		1,293		745
Selling, general and administrative	5,652		3,284		1,228
Gain on sale of businesses	(464)		(15)		(227)
Total expenses	13,000		8,578		4,070
Operating income	1,852		1,609		1,753
Interest expense, net	(709)		(473)		(189)
Debt financing activities	—		(47)		(14)
Other income (expense)	28		(6)		5
Income before income taxes and income from investments in unconsolidated affiliates	1,171		1,083		1,555
Income tax provision	(196)		(198)		(378)
Income from investments in unconsolidated affiliates	—		29		10


Net income	975		914		1,187
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	17		21		—
Net income attributable to Fiserv, Inc.	$	958	$	893	$	1,187


Net income attributable to Fiserv, Inc. per share – basic	$	1.42	$	1.74	$	2.93



Net income attributable to Fiserv, Inc. per share – diluted	$	1.40	$	1.71	$	2.87



Shares used in computing net income attributable to Fiserv, Inc. per share:
Basic	672.1		512.3		405.5
Diluted	683.4		522.6		413.7

(1)Includes processing and other fees charged to related party investments accounted for under the equity method of $236 million, $112 million and $28 million for the years ended December 31, 2020, 2019 and 2018, respectively (see Notes 9 and 20).

Fiserv, Inc.

Consolidated Statements of Comprehensive Income


In millions
Year Ended December 31,	2020		2019		2018

Net income	$	975	$	914	$	1,187
Other comprehensive (loss) income:
Fair market value adjustment on cash flow hedges, net of income tax (provision) benefit of ($2 million), $46 million and $2 million	5		(134)		(5)
Reclassification adjustment for net realized gains on cash flow hedges included in cost of processing and services, net of income tax benefit of $0 million, $0 million and $0 million	(1)		(1)		(1)
Reclassification adjustment for net realized losses on cash flow hedges included in net interest expense, net of income tax provision of $5 million, $3 million and $2 million	16		10		4
Unrealized losses on defined benefit pension plans, net of income tax benefit of $2 million and $1 million	(6)		(4)		—
Foreign currency translation	(186)		8		(11)
Total other comprehensive loss	(172)		(121)		(13)
Comprehensive income	$	803	$	793	$	1,174
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	17		21		—
Less: other comprehensive income (loss) attributable to noncontrolling interests	35		(8)		—
Comprehensive income attributable to Fiserv, Inc.	$	751	$	780	$	1,174

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Consolidated Balance Sheets


In millions
December 31,	2020		2019

Assets
Cash and cash equivalents	$	906	$	893
Trade accounts receivable, less allowance for doubtful accounts	2,482		2,782
Prepaid expenses and other current assets	1,310		1,503
Settlement assets	11,521		11,868
Total current assets	16,219		17,046
Property and equipment, net	1,628		1,606
Customer relationships, net	11,603		14,042
Other intangible assets, net	3,755		3,600
Goodwill	36,322		36,038
Contract costs, net	692		533
Investments in unconsolidated affiliates	2,756		2,720
Other long-term assets	1,644		1,954
Total assets	$	74,619	$	77,539
Liabilities and Equity
Accounts payable and accrued expenses	$	3,186	$	3,080
Short-term and current maturities of long-term debt	384		287
Contract liabilities	546		492
Settlement obligations	11,521		11,868
Total current liabilities	15,637		15,727
Long-term debt	20,300		21,612
Deferred income taxes	4,389		4,247
Long-term contract liabilities	187		155
Other long-term liabilities	777		941
Total liabilities	41,290		42,682
Commitments and Contingencies (see Note 19)
Redeemable Noncontrolling Interests	259		262
Fiserv, Inc. Shareholders’ Equity:
Preferred stock, no par value: 25.0 million shares authorized; none issued	—		—
Common stock, $0.01 par value: 1,800.0 million shares authorized; 789.6 million shares issued	8		8
Additional paid-in capital	23,643		23,741
Accumulated other comprehensive loss	(387)		(180)
Retained earnings	13,441		12,528
Treasury stock, at cost, 120.5 million and 111.5 million shares	(4,375)		(3,118)
Total Fiserv, Inc. shareholders’ equity	32,330		32,979
Noncontrolling interests	740		1,616
Total equity	33,070		34,595
Total liabilities and equity	$	74,619	$	77,539

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Consolidated Statements of Equity


	Fiserv, Inc. Shareholders’ Equity

	Number of Shares		Amount
In millions	Common Shares	Treasury Shares	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Noncontrolling Interests		Total Equity

Balance at January 1, 2018	791	376	$	8	$	1,031	$	(54)	$	10,240	$	(8,494)	$	—	$	2,731
Net income									1,187						1,187
Other comprehensive loss							(13)								(13)
Share-based compensation					73										73
Shares issued under stock plans		(3)			(47)						69				22
Purchases of treasury stock		26									(1,915)				(1,915)
Cumulative-effect adjustment of ASU 2014-09 adoption									208						208
Cumulative-effect adjustment of ASU 2017-12 adoption							3		(3)						—
Cumulative-effect adjustment of ASU 2018-02 adoption							(3)		3						—
Balance at December 31, 2018	791	399	8		1,057		(67)		11,635		(10,340)		—		2,293
Net income (1)									893				4		897
Shares issued to acquire First Data (see Note 4)		(286)			22,582						7,478		1,731		31,791
Distributions paid to noncontrolling interests (2)													(111)		(111)
Other comprehensive loss							(113)						(8)		(121)
Share-based compensation					229										229
Shares issued under stock plans		(5)			(127)						137				10
Purchases of treasury stock		4									(393)				(393)



Balance at December 31, 2019	791	112	8		23,741		(180)		12,528		(3,118)		1,616		34,595
Net income (loss) (1)									958				(22)		936
Measurement period adjustments related to First Data acquisition (see Note 4)													(126)		(126)
Distributions paid to noncontrolling interests (2)													(37)		(37)
Net adjustment to noncontrolling interests from dissolution (see Note 4)					(36)								(726)		(762)
Other comprehensive (loss) income							(207)						35		(172)
Share-based compensation					369										369
Shares issued under stock plans		(5)			(231)						178				(53)
Purchases of treasury stock		16									(1,635)				(1,635)
Retirement of treasury stock (see Note 20)	(2)	(2)			(200)						200				—
Cumulative-effect adjustment of ASU 2016-13 adoption									(45)						(45)
Balance at December 31, 2020	789	121	$	8	$	23,643	$	(387)	$	13,441	$	(4,375)	$	740	$	33,070

(1)The total net income presented in the consolidated statements of equity for the years ended December 31, 2020 and 2019 is different than the amount presented in the consolidated statements of income due to the net income attributable to redeemable noncontrolling interests of $39 million and $17 million, respectively, not included in equity.

(2)The total distributions presented in the consolidated statements of equity for the years ended December 31, 2020 and 2019 exclude $42 million and $7 million, respectively, in distributions paid to redeemable noncontrolling interests not included in equity. In addition, the total distributions presented in the consolidated statements of equity for the year ended December 31, 2020 exclude $25 million in distributions to Bank of America related to the Banc of America Merchant Services Joint Venture (see Note 4) not included in equity.

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Consolidated Statements of Cash Flows


In millions
Year Ended December 31,	2020		2019		2018

Cash flows from operating activities:
Net income	$	975	$	914	$	1,187

Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Depreciation and other amortization	1,077		615		382
Amortization of acquisition-related intangible assets	2,133		1,036		163
Amortization of financing costs, debt discounts and other	47		127		11
Net foreign currency gain on financing activities	—		(50)		—
Share-based compensation	369		229		73

Deferred income taxes	71		47		133
Gain on sale of businesses	(464)		(15)		(227)
Income from investments in unconsolidated affiliates	—		(29)		(10)
Distributions from unconsolidated affiliates	42		23		2
Settlement of interest rate hedge contracts	—		(183)		—
Non-cash impairment charges	124		48		3

Other operating activities	(16)		(3)		4
Changes in assets and liabilities, net of effects from acquisitions and dispositions:
Trade accounts receivable	320		(7)		(108)
Prepaid expenses and other assets	(167)		(82)		(6)
Contract costs	(289)		(212)		(137)
Accounts payable and other liabilities	(146)		238		116
Contract liabilities	71		99		(34)
Net cash provided by operating activities from continuing operations	4,147		2,795		1,552
Cash flows from investing activities:
Capital expenditures, including capitalized software and other intangibles	(900)		(721)		(360)
Proceeds from sale of businesses	579		51		419
Payments for acquisitions of businesses, net of cash acquired and including working capital adjustments	(139)		(16,005)		(712)
Distributions from unconsolidated affiliates	109		113		—
Purchases of investments	(1)		(45)		(3)
Other investing activities	11		5		(7)
Net cash used in investing activities from continuing operations	(341)		(16,602)		(663)
Cash flows from financing activities:
Debt proceeds	8,897		20,030		5,039
Debt repayments	(10,918)		(5,043)		(4,005)
Short-term borrowings, net	(6)		—		—
Payments of debt financing, redemption and other costs	(16)		(247)		—
Proceeds from issuance of treasury stock	133		156		75
Purchases of treasury stock, including employee shares withheld for tax obligations	(1,826)		(561)		(1,946)

Distributions paid to noncontrolling interests and redeemable noncontrolling interests	(104)		(118)		—
Other financing activities	4		(26)		(5)
Net cash (used in) provided by financing activities from continuing operations	(3,836)		14,191		(842)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	16		1		—
Net change in cash, cash equivalents and restricted cash from continuing operations	(14)		385		47
Net cash flows from discontinued operations	—		133		43
Cash, cash equivalents and restricted cash, beginning balance	933		415		325
Cash, cash equivalents and restricted cash, ending balance	$	919	$	933	$	415
Discontinued operations cash flow information:
Net cash used in operating activities	$	—	$	—	$	(7)
Net cash provided by investing activities	—		133		50
Net change in cash, cash equivalents and restricted cash from discontinued operations	$	—	$	133	$	43

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Description of the Business

Fiserv, Inc. and its subsidiaries (collectively, the “Company”) provide payments and financial services technology solutions to clients worldwide. The Company provides account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover® cloud-based point-of-sale solution. The Company serves clients around the globe, including banks, credit unions, other financial institutions and merchants.

On July 29, 2019, the Company acquired First Data Corporation (“First Data”) by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition for a total purchase price of $46.5 billion (see Note 4). First Data provides a wide-range of solutions to merchants, including retail point-of-sale merchant transaction processing and acquiring, e-commerce services, mobile payment services and the cloud-based Clover point-of-sale operating system, as well as technology solutions for bank and non-bank issuers. The consolidated financial statements include the financial results of First Data from the date of acquisition.

Effective in the first quarter of 2020, the Company realigned its reportable segments to reflect its new management structure and organizational responsibilities (“Segment Realignment”) following the acquisition of First Data. The Company’s reportable segments are Merchant Acceptance (“Acceptance”), Financial Technology (“Fintech”) and Payments and Network (“Payments”). Segment results for the years ended December 31, 2019 and 2018 have been restated to reflect the Segment Realignment. Additional information regarding the Company’s business segments is included in Note 21 to the consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of Fiserv, Inc. and its subsidiaries in which the Company holds a controlling financial interest. Control is normally established when ownership and voting interests in an entity are greater than 50%. Investments in which the Company has significant influence but not control are accounted for using the equity method of accounting, for which the Company’s share of net income or loss is reported within income from investments in unconsolidated affiliates and the related tax expense or benefit is reported within the income tax provision in the consolidated statements of income. Significant influence over an affiliate’s operations generally coincides with an ownership interest in an entity of between 20% and 50%. All intercompany transactions and balances have been eliminated in consolidation.

The Company maintains majority controlling interests in certain entities, mostly related to consolidated merchant alliances (see Note 20). Noncontrolling interests represent the minority shareholders’ share of the net income or loss and equity in consolidated subsidiaries. The Company’s noncontrolling interests presented in the consolidated statements of income include net income attributable to noncontrolling interests and redeemable noncontrolling interests. Noncontrolling interests are presented as a component of equity in the consolidated balance sheets and reflect the minority shareholders’ share of acquired fair value in the consolidated subsidiaries, along with their proportionate share of the earnings or losses of the subsidiaries, net of dividends or distributions. Noncontrolling interests that are redeemable upon the occurrence of an event that is not solely within the Company’s control are presented outside of equity and are carried at their estimated redemption value if it exceeds the initial carrying value of the redeemable interest (see Note 13).

Stock Split

On February 21, 2018, the Company’s board of directors declared a two-for-one stock split of the Company’s common stock and a proportionate increase in the number of its authorized shares of common stock. The additional shares were distributed on March 19, 2018 to shareholders of record at the close of business on March 5, 2018. The Company’s common stock began trading at the split-adjusted price on March 20, 2018. The impact on the consolidated balance sheet of the stock split was an increase of $4 million to common stock and an offsetting reduction in additional paid-in capital.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

See accompanying notes to consolidated financial statements.

Risks and Uncertainties

In 2019, a novel strain of coronavirus (“COVID-19”) was identified and has since continued to spread. In March 2020, the World Health Organization recognized the COVID-19 outbreak as a pandemic. In response to the COVID-19 pandemic, the governments of many countries, states, cities and other geographic regions have taken actions to prevent the spread of COVID-19, such as imposing travel restrictions and bans, quarantines, social distancing guidelines, shelter-in-place or lock-down orders and other similar limitations, adversely impacting global economic activity and contributing to significant volatility in financial markets.

Global economic and market conditions impact levels of consumer and business spending, which have been negatively impacted as a result of the COVID-19 pandemic. Consequently, the Company’s operating performance, primarily within its merchant acquiring and payment-related businesses, which earn transaction-based fees, has been adversely affected, and may continue to be adversely affected, by the economic impact of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s future operational and financial performance will depend on, among other matters, the duration and intensity of the pandemic; the level of success of global vaccination efforts; governmental and private sector responses to the pandemic and the impact of such responses on the Company; and the impact of the pandemic on the Company’s employees, clients, vendors, operations and sales, all of which are uncertain and cannot be predicted. These changing conditions may also affect the estimates and assumptions made by management. Such estimates and assumptions affect, among other things, the valuations of the Company’s long-lived assets, definite-lived intangible assets and equity method investments; the impairment assessment of goodwill; the Company’s deferred tax assets and related valuation allowances; the estimate of current expected credit losses; and certain pension plan assumptions. Changes in any assumptions used may result in an impairment or other charge that, if incurred, could have a material adverse impact on the Company’s results of operations, total assets and total equity in the period recognized. Events and changes in circumstances arising subsequent to December 31, 2020, including those resulting from the impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods.

Revenue Recognition

The Company generates revenue from the delivery of processing, service and product solutions. Revenue is measured based on consideration specified in a contract with a customer, and excludes any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer which may be at a point in time or over time. Additional information regarding the Company’s revenue recognition policies is included in Note 3 to the consolidated financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and investments with original maturities of 90 days or less. Cash and cash equivalents are stated at cost in the consolidated balance sheets, which approximates market value. Cash and cash equivalents that were restricted from use due to regulatory or other requirements are included in other long-term assets in the consolidated balance sheets and totaled $13 million and $40 million at December 31, 2020 and 2019, respectively.

Allowance for Doubtful Accounts

The Company analyzes the collectability of trade accounts receivable by considering historical bad debts, client creditworthiness, current economic trends, changes in client payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs. The allowance for doubtful accounts was $48 million and $39 million at December 31, 2020 and 2019, respectively.

Leases

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), and its related amendments using the optional transition method applied to all leases. Prior period amounts have not been restated. Additional information about the Company’s lease policies and the related impact of the adoption is included in Notes 2 and 11 to the consolidated financial statements.

The Company maintains certain leasing receivables associated with its point-of-sale terminal leasing businesses. Leasing receivables are included in prepaid expenses and other current assets and other long-term assets in the consolidated balance sheets. Interest income on the Company’s leasing receivables is recognized using the effective interest method, and is included within product revenue in the consolidated statements of income. Initial direct costs are expensed as incurred if the fair value of the underlying asset is different from its carrying amount at the commencement date of the lease.

Prepaid Expenses

Prepaid expenses represent advance payments for goods and services to be consumed in the future, such as maintenance, postage and insurance and totaled $348 million at both December 31, 2020 and 2019.

Settlement Assets and Obligations

Settlement assets and obligations result from timing differences between collection and fulfillment of payment transactions primarily associated with the Company’s merchant acquiring services. Settlement assets represent cash received or amounts receivable from agents, payment networks, bank partners or directly from consumers. Settlement obligations represent amounts payable to merchants and payees. Certain merchant settlement assets that relate to settlement obligations are held by partner banks to which the Company does not have legal ownership but has the right to use the assets to satisfy the related settlement obligations. The Company records corresponding settlement obligations for amounts payable to merchants and for payment instruments not yet presented for settlement. Additional information regarding the Company’s settlement assets and obligations is included in Note 6 to the consolidated financial statements.

Reserve for Merchant Credit Losses

With respect to the Company’s merchant acquiring business, the Company’s merchant customers have the legal obligation to refund any charges properly reversed by the cardholder. However, in the event the Company is not able to collect the refunded amounts from the merchants, the Company may be liable for the reversed charges. The Company’s risk in this area primarily relates to situations where the cardholder has purchased goods or services to be delivered in the future. The Company requires cash deposits, guarantees, letters of credit or other types of collateral from certain merchants to minimize this obligation. Collateral held by the Company is classified within settlement assets and the obligation to repay the collateral is classified within settlement obligations on the Company’s consolidated balance sheets. The Company also utilizes a number of systems and procedures to manage merchant risk. Despite these efforts, the Company experiences some level of losses due to merchant defaults.

The aggregate merchant credit losses incurred by the Company was $113 million and $40 million for the years ended December 31, 2020 and 2019, respectively, included within cost of processing and services in the consolidated statements of income. The amount of collateral held by the Company was $1.2 billion and $510 million at December 31, 2020 and 2019, respectively. The Company maintains a reserve for merchant credit losses that are expected to exceed the amount of collateral held. The reserve includes an estimated amount for anticipated chargebacks and fraud events that have been incurred on merchants’ payment transactions that have been processed but not yet reported to the Company (“IBNR Reserve”), as well as an allowance on refunded amounts to cardholders that have not yet been collected from the merchants. The IBNR Reserve, which is recorded within accounts payable and accrued expenses in the consolidated balance sheets, is based primarily on the Company’s historical experience of credit losses and other relevant factors such as economic downturns or increases in merchant fraud. The aggregate merchant credit loss reserve was $59 million and $34 million at December 31, 2020 and 2019, respectively.

Property and Equipment

Property and equipment is reported at cost. Depreciation of property and equipment is computed primarily using the straight-line method over the shorter of the estimated useful life of the asset or the leasehold period, if applicable. Property and equipment consisted of the following at December 31:



(In millions)	Estimated Useful Lives	2020		2019
Land	—	$	54	$	61
Data processing equipment	3 to 5 years	1,666		1,483
Buildings and leasehold improvements	5 to 40 years	555		540
Furniture and equipment	5 to 8 years	636		576
		2,911		2,660
Less: Accumulated depreciation		(1,283)		(1,054)
Total		$	1,628	$	1,606

Depreciation expense for all property and equipment totaled $523 million, $247 million and $92 million in 2020, 2019 and 2018, respectively (see Note 17 for a description of accelerated depreciation under certain finance lease agreements).

Intangible Assets

Customer related intangible assets represent customer contracts and relationships obtained as part of acquired businesses and are amortized using an accelerated amortization method which corresponds with the customer attrition rates used in the initial valuation of the intangibles over their estimated useful lives, generally ten to twenty years. Acquired software and technology represents software and technology intangible assets obtained as part of acquired businesses and is amortized using the straight-line method over their estimated useful lives, generally four to ten years. Trade names are amortized using the straight-line method over their estimated useful lives, generally eight to twenty years.

The Company continually develops, maintains and enhances its products and systems. Product development expenditures represented approximately 6% of the Company’s total revenue in 2020 and 8% in both 2019 and 2018. Research and development costs incurred prior to the establishment of technological feasibility are expensed as incurred. Routine maintenance of software products, design costs and other development costs incurred prior to the establishment of a product’s technological feasibility are also expensed as incurred. Costs are capitalized commencing when the technological feasibility of the software has been established.

Purchased software represents software licenses purchased from third parties and is amortized using the straight-line method over their estimated useful lives, generally three to five years. Additional information regarding the Company’s identifiable intangible assets is included in Note 7 to the consolidated financial statements.

Capitalized software development costs represent the capitalization of certain costs incurred to develop new software or to enhance existing software which is marketed externally or utilized by the Company to process client transactions. Capitalized software development costs are amortized using the straight-line method over their estimated useful lives, generally five years.

The Company may, at its discretion, negotiate to pay an independent sales organization (“ISO”) an agreed-upon up-front amount in exchange for the ISO’s surrender of its right to receive commission payments from the Company related to future transactions of the ISO’s referred merchants (“residual buyout”). The amount that the Company pays for these residual buyouts is capitalized and subsequently amortized using the straight-line method over the expected life of the merchant portfolios, generally six years to nine years.

Goodwill

Goodwill represents the excess of purchase price over the fair value of identifiable assets acquired and liabilities assumed in a business combination. The Company evaluates goodwill for impairment on an annual basis, or more frequently if circumstances indicate possible impairment. Goodwill is tested for impairment at a reporting unit level, which is one level below our reportable segments. When assessing goodwill for impairment, the Company considers (i) the prior year’s amount of excess fair value over the carrying value of each reporting unit, (ii) the period of time since a reporting unit’s last quantitative test, (iii) the extent a reorganization or disposition changes the composition of one or more of the reporting units and (iv) other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, the Company assesses numerous factors to determine whether it is more likely than not that the fair value of its reporting units are less than their respective carrying values. Examples of qualitative factors that the Company assesses include its share price, its financial performance, market and competitive factors in its industry and other events specific to its reporting units. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative impairment test by comparing reporting unit carrying values to estimated fair values.

In connection with the Segment Realignment described above, certain of the Company’s reporting units changed in composition as a result of which goodwill was allocated to such reporting units using a relative fair value approach. Accordingly, the Company performed an interim goodwill impairment assessment in the first quarter of 2020 for those reporting units impacted by the Segment Realignment and determined that its goodwill was not impaired based on an assessment of various qualitative factors, as described above. The Company’s most recent annual impairment assessment of its reporting units in the fourth quarter of 2020 determined that its goodwill was not impaired as the estimated fair values exceeded the carrying values. However, it is reasonably possible that future developments related to the economic impact of the COVID-19 pandemic on certain of the Company’s recently acquired (recorded at fair value) First Data businesses, such as an increased duration and intensity of the pandemic and/or government-imposed shutdowns, prolonged economic downturn or recession, or lack of governmental support for recovery, could have a future material impact on one or more of the estimates and assumptions used to evaluate goodwill impairment. There is no accumulated goodwill impairment for the Company through December 31, 2020. Additional information regarding the Company’s goodwill is included in Note 8 to the consolidated financial statements.

Asset Impairment

The Company reviews property and equipment, lease right-of-use (“ROU”) assets, intangible assets and its investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company reviews capitalized software development costs for impairment at each reporting date. Recoverability of property and equipment, ROU assets, capitalized software development costs and other intangible assets is assessed by comparing the carrying amount of the asset to either the undiscounted future cash flows expected to be generated by the asset or the net realizable value of the asset, depending on the type of asset. The Company assesses lease ROU assets that are exited in advance of the non-cancellable lease terms by comparing the carrying values of the ROU assets to the discounted cash flows from estimated sublease payments. The Company’s investments in unconsolidated affiliates are assessed by comparing the carrying amount of the investments to their estimated fair values and are impaired if any decline in fair value is determined to be other than temporary. Measurement of any impairment loss is based on estimated fair value.

Fair Value Measurements

The Company applies fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in its consolidated financial statements on a recurring basis. Fair value represents the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company uses the hierarchy prescribed in Accounting Standards Codification (“ASC”) 820, Fair Value Measurements, and considers the principal or most advantageous market and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability. The three levels in the hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the

measurement date.

Level 2 – Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including but

not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or

liabilities and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 – Unobservable inputs reflecting management’s judgments about the assumptions that market

participants would use in pricing the asset or liability, including assumptions about risk.

Additional information regarding the Company’s fair value measurements is included in Note 10 to the consolidated financial statements.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following at December 31:



(In millions)	2020		2019
Trade accounts payable	$	437	$	392
Client deposits	702		650
Accrued compensation and benefits	419		378
Accrued taxes	130		137
Accrued interest	220		224
Other accrued expenses	1,278		1,299
Total	$	3,186	$	3,080

Foreign Currency

The United States (“U.S.”) dollar is the functional currency of the Company’s U.S.-based businesses and certain foreign-based businesses. Where the functional currency differs from the U.S. dollar, assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenue and expenses are translated at the average exchange rates during the reporting period. Gains and losses from foreign currency translation are recorded as a separate component of accumulated other comprehensive loss. Gains and losses from foreign currency transactions are included in determining net income for the reporting period.

The Company has designated its Euro- and British Pound- denominated senior notes as net investment hedges to hedge a portion of its net investment in certain subsidiaries whose functional currencies are the Euro and the British Pound (see Note

14). Accordingly, foreign currency transaction gains or losses on the qualifying net investment hedge instruments are recorded as foreign currency translation within other comprehensive (loss) income in the consolidated statements of comprehensive income and will remain in accumulated other comprehensive loss on the consolidated balance sheet until the sale or complete liquidation of the underlying foreign subsidiaries.

Derivatives

Derivatives are entered into for periods consistent with related underlying exposures and are recorded in the consolidated balance sheets as either an asset or liability measured at fair value. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive loss and recognized in the consolidated statements of income when the hedged item affects earnings. The Company’s policy is to enter into derivatives with creditworthy institutions and not to enter into such derivatives for speculative purposes.

Employee Benefit Plans

The Company maintains frozen defined benefit pension plans covering certain employees in Europe and the U.S. The Company recognizes actuarial gains/losses and prior service cost in the consolidated balance sheets and recognizes changes in these amounts during the year in which changes occur through other comprehensive (loss) income. The Company uses various assumptions when computing amounts relating to its defined benefit pension plan obligations and their associated expenses (including the discount rate and the expected rate of return on plan assets). Additional information regarding the Company’s employee benefit plans is included in Note 15 to the consolidated financial statements.

Cost of Processing, Services and Product

Cost of processing and services consists of costs directly associated with providing services to clients and includes the following: personnel; equipment and data communication; infrastructure costs, including costs to maintain software applications; client support; certain depreciation and amortization; and other operating expenses.

Cost of product consists of costs directly associated with the products sold and includes the following: costs of materials and software development; personnel; infrastructure costs; certain depreciation and amortization; and other costs directly associated with product revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of: salaries, wages, commissions and related expenses paid to sales personnel, administrative employees and management; advertising and promotional costs; certain depreciation and amortization; and other selling and administrative expenses.

Interest Expense, Net

Interest expense, net consists of interest expense primarily associated with the Company’s outstanding borrowings and finance lease obligations, as well as interest income primarily associated with the Company’s investment securities. The Company recognized $716 million, $507 million and $193 million of interest expense and $7 million, $34 million and $4 million of interest income during the years ended December 31, 2020, 2019 and 2018, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Liabilities are established for unrecognized tax benefits, attributable to differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements. In establishing a liability for an unrecognized tax benefit, assumptions are made in determining whether, and the extent to which, a tax position will be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized reflects the largest benefit the Company believes is more likely than not to be realized upon ultimate settlement. As additional information becomes available, the liability for unrecognized tax benefits is reevaluated and adjusted, as appropriate. Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax.

Net Income Per Share

Net income per share attributable to Fiserv, Inc. in each period is calculated using actual, unrounded amounts. Basic net income per share is computed by dividing net income attributable to Fiserv, Inc. by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income attributable to Fiserv, Inc. by the weighted-average number of common shares and common stock equivalents outstanding during the period. Common stock equivalents consist of outstanding stock options, unvested restricted stock units and unvested restricted stock awards, and are computed using the treasury stock method. The Company excluded 1.3 million weighted-average shares in 2020 and 1.1 million in both 2019 and 2018 from the calculations of common stock equivalents for anti-dilutive stock options. The computation of shares used in calculating basic and diluted net income per share is as follows at December 31:




(In millions)	2020	2019	2018
Weighted-average common shares outstanding used for the calculation of net income attributable to Fiserv, Inc. per share – basic	672.1	512.3	405.5
Common stock equivalents	11.3	10.3	8.2
Weighted-average common shares outstanding used for the calculation of net income attributable to Fiserv, Inc. per share – diluted	683.4	522.6	413.7

Supplemental Cash Flow Information



(In millions)
Year Ended December 31,	2020		2019		2018
Interest paid	$	673	$	291	$	165
Income taxes paid	156		197		259
Treasury stock purchases settled after the balance sheet date	—		6		26
Distribution of nonmonetary assets (see Note 4)	726		—		—
Financed software arrangements	308		—		—

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing hosting arrangement that is a service contract within the requirements under ASC 350 for capitalizing implementation costs incurred to develop or obtain internal-use software. For public entities, ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Entities are permitted to apply either a retrospective or prospective transition approach to adopt the guidance. The Company adopted ASU 2018-15 effective January 1, 2020 using a prospective approach, and the adoption did not have a material impact on its consolidated financial statements.

In 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which removes, clarifies and adds certain disclosure requirements of ASC Topic 715, Compensation - Retirement Benefits. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. Entities must apply the disclosure updates retrospectively. The Company adopted ASU 2018-14 for the year ended December 31, 2020, and the adoption did not have a material impact on its disclosures.

In 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which removes, modifies, and adds certain disclosure requirements of ASC Topic 820, Fair Value Measurement. ASU 2018-13 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019 with the additional disclosures required to be applied prospectively and the modified and removed disclosures required to be applied retrospectively to all periods presented. The Company adopted ASU 2018-13 effective January 1, 2020, and the adoption did not have a material impact on its disclosures.

In 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13” or “CECL”), which prescribes an impairment model for most financial instruments based on expected losses rather than incurred losses. Under this model, an estimate of expected credit losses over the contractual life of the instrument is to be recorded as of the end of a reporting period as an allowance to offset the amortized cost basis, resulting in a net presentation of the amount expected to be collected on the financial instrument. For public entities, ASU 2016-13 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019. For most instruments, entities must apply the standard using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption.

The Company adopted ASU 2016-13 effective January 1, 2020 using the required modified retrospective approach, which resulted in a cumulative-effect decrease to beginning retained earnings of $45 million. Financial assets and liabilities held by the Company subject to the “expected credit loss” model prescribed by CECL include trade and other receivables, net investments in leases, settlement assets and other credit exposures such as financial guarantees not accounted for as insurance.

In 2016, the FASB issued ASU No. 2016-02, which requires lessees to recognize a lease liability and a ROU asset for each lease with a term longer than twelve months and adds new presentation and disclosure requirements for both lessees and lessors. The accounting guidance for lessors remains largely unchanged. The recognized liability is measured at the present value of lease payments not yet paid, and the corresponding asset represents the lessee’s right to use the underlying asset over the lease term and is based on the liability, subject to certain adjustments. For income statement and statement of cash flow purposes, the standard retains the dual model with leases classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. The standard prescribes a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. ASU No. 2016-02 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842; ASU No. 2018-11, Leases (Topic 842) - Targeted Improvements (“ASU 2018-11”); ASU No. 2018-20, Narrow-Scope Improvements for Lessors; and ASU No. 2019-01, Leases (Topic 842) - Codification Improvements. ASU No. 2018-11 provides an additional transition method allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. For public entities, ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018.

The Company adopted ASU No. 2016-02 effective January 1, 2019 using the optional transition method in ASU 2018-11. Under this method, the Company has not adjusted its comparative period financial statements for the effects of the new standard or made the new, expanded required disclosures for periods prior to the effective date. The Company elected the package of practical expedients permitted under the transition guidance in ASU 2016-02 to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. The Company also elected the practical expedient not to separate the non-lease components of a contract from the lease component to which they relate.

The adoption of the new lease standard resulted in the recognition of lease liabilities of $383 million and ROU assets of $343 million, which include the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheet as of January 1, 2019 for real and personal property operating leases. The adoption of ASU 2016-02 did not have a material impact on the Company’s consolidated statements of income or consolidated statements of cash flows.

In 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), to clarify the principles of recognizing revenue and to create common revenue recognition guidance between U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific requirements. It also includes guidance on accounting for the incremental costs of obtaining and costs incurred to fulfill a contract with a customer. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This model involves a five-step process for achieving that core principle, along with comprehensive disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. For public entities, the new revenue standard is effective for annual and interim periods beginning after December 15, 2017. Entities have the option of adopting this new guidance using either a full retrospective or a modified approach with the cumulative effect of applying the guidance recognized at the date of initial application.

The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective transition approach applied to all contracts, which resulted in a cumulative-effect increase in the opening balance of retained earnings of $208 million, primarily related to the deferral of incremental sales commissions incurred in obtaining contracts in prior periods.

Recently Issued Accounting Pronouncements

In 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”), which clarifies certain interactions between the guidance to account for certain equity securities, investments under the equity method of accounting, and forward contracts or purchased options to purchase securities under Topic 321, Topic 323 and Topic 815. For public entities, ASU 2020-01 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020. The adoption of ASU 2020-01 will not have a material impact on the Company’s consolidated financial statements or disclosures.

In 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which introduces a number of amendments that are designed to simplify the application of accounting for income taxes. Such amendments include removing certain exceptions for intraperiod tax allocation, interim reporting when a year-to-date loss exceeds the anticipated loss, reflecting the effect of an enacted change in tax laws or rates in the annual effective tax rate and recognition of deferred taxes related to outside basis differences for ownership changes in investments. ASU 2019-12 also provides clarification related to when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. In addition, ASU 2019-12 provides guidance on the recognition of a franchise tax (or similar tax) that is partially based on income as an income-based tax and accounting for any incremental amount incurred as a non-income-based tax. For public entities, ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 will not have a material impact on the Company’s consolidated financial statements.

3. Revenue Recognition

Significant Accounting Policy

ASU 2014-09 and its related amendments (collectively known as “ASC 606”) outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The core principle, involving a five-step process, of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Revenue is measured based on consideration specified in a contract with a customer, and excludes any amounts collected on behalf of third parties. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

Nature of Goods and Services

The Company’s operations are comprised of the Acceptance segment, the Fintech segment and the Payments segment. Additional information regarding the Company’s reportable segments is included in Note 21. The following is a description of principal activities from which the Company generates its revenue. Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of goods and services as described below.

Processing and Services

Processing and services revenue is generated from account- and transaction-based fees for data processing, merchant transaction processing and acquiring, electronic billing and payment services, electronic funds transfer and debit/credit processing services; consulting and professional services; and software maintenance for ongoing client support.

The Company recognizes processing and services revenues in the period in which the specific service is performed unless they are not deemed distinct from other goods or services in which revenue would then be recognized as control is transferred of the combined goods and services. The Company’s arrangements for processing and services typically consist of an obligation to provide specific services to its customers on a when and if needed basis (a stand-ready obligation) and revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer. These services are typically provided under a fixed or declining (tier-based) price per unit based on volume of service; however, pricing for services may

also be based on minimum monthly usage fees. Fees for the Company’s processing and services arrangements are typically billed and paid on a monthly basis.

Product

Product revenue is generated from print and card production sales, as well as software license sales. For software license agreements that are distinct, the Company recognizes software license revenue upon delivery, assuming a contract is deemed to exist. Revenue for arrangements with customers that include significant customization, modification or production of software such that the software is not distinct is typically recognized over time based upon efforts expended, such as labor hours, to measure progress towards completion. For arrangements involving hosted licensed software for the customer, a software element is considered present to the extent the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and it is feasible for the customer to either operate the software on their own hardware or contract with another vendor to host the software. In certain instances, the Company may offer extended payment terms beyond one year. To the extent a significant financing component exists, it is calculated as the difference between the promised consideration and the present value of the software license fees utilizing a discount rate reflective of a separate financing transaction, and is recognized as interest income over the extended payment period. The cash selling price of the software license fee is recognized as revenue at the point in time when the software is transferred to the customer.

The Company also sells or leases hardware (POS devices) and other peripherals as part of its contracts with customers. Hardware typically consists of terminals or Clover devices. The Company does not manufacture hardware, rather it purchases hardware from third-party vendors and holds such hardware in inventory until purchased by a customer. The Company accounts for sales of hardware as a separate performance obligation and recognizes the revenue at its standalone selling price when the customer obtains control of the hardware.

Significant Judgments in Application of the Guidance

The Company uses the following methods, inputs and assumptions in determining amounts of revenue to recognize:

Identification of Performance Obligations

To identify its performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. For multi-element arrangements, the Company accounts for individual goods or services as a separate performance obligation if they are distinct, the good or service is separately identifiable from other items in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. Determining whether goods or services are distinct performance obligations that should be accounted for separately may require significant judgment.

Technology or service components from third parties are frequently embedded in or combined with the Company’s applications or service offerings. Whether the Company recognizes revenue based on the gross amount billed to a customer or the net amount retained involves judgment that depends on the relevant facts and circumstances including the level of contractual responsibilities and obligations for delivering solutions to end customers.

Determination of Transaction Price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. The Company includes any fixed charges within its contracts as part of the total transaction price. To the extent that variable consideration is not constrained, the Company includes an estimate of the variable amount, as appropriate, within the total transaction price and updates its assumptions over the duration of the contract.

Assessment of Estimates of Variable Consideration

Many of the Company’s contracts with customers contain some component of variable consideration; however, the constraint will generally not result in a reduction in the estimated transaction price for most forms of variable consideration. The Company may constrain the estimated transaction price in the event of a high degree of uncertainty as to the final consideration amount owed because of an extended length of time over which the fees may be adjusted.

Allocation of Transaction Price

The transaction price (including any discounts or rebates) is allocated between separate goods and services in a multi-element arrangement based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells each good or service. For items that are not sold separately, the Company estimates the

standalone selling prices using available information such as market conditions and internally approved pricing guidelines. In instances where there are observable selling prices for professional services and support and maintenance, the Company may apply the residual approach to estimate the standalone selling price of software licenses. Significant judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount the Company expects to receive in exchange for the related good or service.

Contract Modifications

Contract modifications occur when the Company and its customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by the Company. When a contract modification occurs, it requires the Company to exercise judgment to determine if the modification should be accounted for as (i) a separate contract, (ii) the termination of the original contract and creation of a new contract, or (iii) a cumulative catch up adjustment to the original contract. Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract, including the allocation of revenue to the remaining performance obligations and the period of recognition for each identified performance obligation.

Disaggregation of Revenue

The tables below present the Company’s revenue disaggregated by type of revenue, including a reconciliation with its reportable segments. The Company’s disaggregation of revenue for the years ended December 31, 2019 and 2018 have been restated to reflect the Segment Realignment. The majority of the Company’s revenue is earned domestically, with revenue generated outside the United States comprising approximately 13%, 12% and 6% of total revenue in 2020, 2019 and 2018, respectively.



(In millions)	Reportable Segments
Year Ended December 31, 2020	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	4,696	$	1,426	$	4,348	$	58	$	10,528
Hardware, print and card production	714		51		771		—		1,536
Professional services	29		465		233		1		728
Software maintenance	—		563		3		2		568
License and termination fees	28		189		68		—		285
Output solutions postage	—		—		—		864		864
Other	55		207		81		—		343
Total Revenue	$	5,522	$	2,901	$	5,504	$	925	$	14,852



(In millions)	Reportable Segments
Year Ended December 31, 2019	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue




Processing	$	2,205	$	1,382	$	3,110	$	166	$	6,863
Hardware, print and card production	323		51		458		—		832
Professional services	4		483		172		10		669
Software maintenance	—		570		3		15		588
License and termination fees	9		255		59		2		325
Output solutions postage	—		—		—		572		572
Other	30		201		107		—		338
Total Revenue	$	2,571	$	2,942	$	3,909	$	765	$	10,187



(In millions)	Reportable Segments
Year Ended December 31, 2018	Fintech		Payments		Corporate and Other		Total

Type of Revenue




Processing	$	1,345	$	1,900	$	163	$	3,408
Hardware, print and card production	41		304		—		345
Professional services	483		86		8		577
Software maintenance	577		3		15		595
License and termination fees	277		32		4		313
Output solutions postage	—		—		308		308
Other	194		83		—		277
Total Revenue	$	2,917	$	2,408	$	498	$	5,823

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers at December 31:



(In millions)	2020		2019		2018
Contract assets	$	433	$	382	$	171
Contract liabilities	733		647		469

Contract assets, reported within other long-term assets in the consolidated balance sheets, primarily result from revenue being recognized where payment is contingent upon the transfer of services to a customer over the contractual period. Contract liabilities primarily relate to advance consideration received from customers (deferred revenue) for which transfer of control occurs, and therefore revenue is recognized, as services are provided. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

During the year ended December 31, 2020, contract assets and contract liabilities increased primarily due to customer discounts and deferred conversion revenue associated with long-term contracts obtained during the year. The Company recognized $492 million of revenue during the year ended December 31, 2020 that was included in the contract liabilities balance at the beginning of the period.

During the year ended December 31, 2019, contract assets and contract liabilities increased $153 million and $117 million, respectively, due to the acquisition of First Data. The Company recognized $380 million of revenue during the year ended December 31, 2019 that was included in the contract liabilities balance at the beginning of the period.

Transaction Price Allocated to Remaining Performance Obligations

The following table includes estimated processing, services and product revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at December 31, 2020:



(In millions)
Year Ending December 31,
2021	$	2,000
2022	1,658
2023	1,355
2024	982
Thereafter	1,825

The Company applies the optional exemption under ASC 606 and does not disclose information about remaining performance obligations for account- and transaction-based processing fees that qualify for recognition under the as-invoiced practical expedient. These multi-year contracts contain variable consideration for stand-ready performance obligations for which the exact quantity and mix of transactions to be processed are contingent upon the customer’s request. The Company also applies

the optional exemptions under ASC 606 and does not disclose information for variable consideration that is a sales-based or usage-based royalty promised in exchange for a license of intellectual property or that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service in a series. The amounts disclosed above as remaining performance obligations consist primarily of fixed or monthly minimum processing fees and maintenance fees under contracts with an original expected duration of greater than one year.

Contract Costs

The Company incurs incremental costs to obtain a contract as well as costs to fulfill contracts with customers that are expected to be recovered. These costs consist primarily of sales commissions incurred only if a contract is obtained, and customer conversion or implementation related costs. Capitalized sales commissions and conversion or implementation costs were as follows at December 31:



(In millions)	2020		2019
Capitalized sales commissions	$	402	$	357
Capitalized conversion or implementation costs	290		176

Capitalized contract costs are amortized based on the transfer of goods or services to which the asset relates. The amortization period also considers expected customer lives and whether the asset relates to goods or services transferred under a specific anticipated contract. These costs are primarily included in selling, general and administrative expenses and totaled $124 million, $105 million and $106 million during the years ended December 31, 2020, 2019 and 2018, respectively. Impairment losses recognized during the years ended December 31, 2020, 2019 and 2018 related to capitalized contract costs were not significant.

4. Acquisitions and Dispositions

Acquisition of First Data

On July 29, 2019, the Company acquired First Data, a global leader in commerce-enabling technology and solutions for merchants, financial institutions and card issuers, by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. The acquisition, included within the Acceptance and Payments segments, increases the Company’s footprint as a global payments and financial technology provider by expanding the portfolio of services provided to financial institutions, corporate and merchant clients and consumers.

As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. The Company also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio as described in further detail within Note 16. In addition, concurrent with the closing of the acquisition, the Company made a cash payment of $16.4 billion to repay existing First Data debt. The Company funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand and proceeds from debt issuances as discussed in Note 12.

The total purchase price paid for First Data is as follows:



(In millions)
Fair value of stock exchanged for shares of Fiserv, Inc. (1)	$	29,293
Repayment of First Data debt	16,414
Fair value of vested portion of First Data stock awards exchanged for Fiserv, Inc. awards (2)	768
Total purchase price	$	46,475

(1)The fair value of the 286 million shares of the Company’s common stock issued as of the acquisition date was determined based on a per share price of $102.30, which was the closing price of the Company’s common stock on July 26, 2019, the last trading day before the acquisition closed the morning of July 29, 2019. This includes a nominal amount of cash paid in lieu of fractional shares.

(2)Represents the portion of the fair value of the replacement awards related to services provided prior to the acquisition. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period. See Note 16 for additional information.

The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and liabilities assumed

based on the estimated fair values at the date of 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 is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency.

The assets and liabilities of First Data have been measured at estimated fair value as of the acquisition date. During the current year through the measurement period ended July 29, 2020, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. These measurement period adjustments resulted in an increase to goodwill of $304 million. The offsetting amounts to the change in goodwill were primarily related to customer relationship intangible assets, noncontrolling interests, property and equipment, payables and accrued expenses including legal contingency reserves, and deferred income taxes. The Company recorded a measurement period adjustment of $155 million to reduce the fair value of customer relationship intangible assets as a result of refinements to attrition rates. A measurement period adjustment of $126 million was recorded to reduce the fair value of noncontrolling interests based on changes to the fair value of the underlying customer relationship intangible assets and the incorporation of additional facts and circumstances that existed as of the acquisition date. A measurement period adjustment of $25 million was recorded to reduce the fair value of property and equipment to the estimated fair value of certain real property acquired. Measurement period adjustments were recorded to increase payables and accrued expenses by $37 million, reduce investments in unconsolidated affiliates by $23 million, and increase other long-term liabilities by $21 million. The remaining $169 million of adjustments were primarily comprised of deferred tax adjustments related to the measurement period adjustments. Such measurement period adjustments did not have a material impact on the consolidated statements of income. The allocation of purchase price recorded for First Data was finalized in the third quarter of 2020 as follows:



(In millions)
Assets acquired (1)
Cash and cash equivalents	$	310
Trade accounts receivable	1,747
Prepaid expenses and other current assets	1,047
Settlement assets	10,398
Property and equipment	1,156
Customer relationships	13,458
Other intangible assets	2,814
Goodwill	30,811
Investments in unconsolidated affiliates	2,676
Other long-term assets	1,191
Total assets acquired	$	65,608

Liabilities assumed (1)
Accounts payable and accrued expenses	$	1,613
Short-term and current maturities of long-term debt (2)	243
Contract liabilities	71
Settlement obligations	10,398
Deferred income taxes	3,671
Long-term contract liabilities	16
Long-term debt and other long-term liabilities (3)	1,261
Total liabilities assumed	$	17,273

Net assets acquired	$	48,335
Redeemable noncontrolling interests	252
Noncontrolling interests	1,608
Total purchase price	$	46,475

(1)In connection with the acquisition of First Data, the Company acquired two businesses which it intended to sell and subsequently sold in October 2019. Therefore, such businesses were classified as held for sale and were included within prepaid expenses and other current assets and accounts payable and accrued expenses in the above allocation of purchase price (see Note 5).

(2)Includes foreign lines of credit, current portion of finance lease obligations and other financing obligations (see Note 12).

(3)Includes the receivable securitized loan and the long-term portion of finance lease obligations (see Note 12).

The fair values of the assets acquired and liabilities assumed were determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that are judgmental. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. Intangible assets consisting of customer relationships, technology and trade names were valued using the multi-period excess earnings method (“MEEM”), or the relief from royalty (“RFR”) method, both are forms of the income approach. A cost and market approach was applied, as appropriate, for property and equipment, including land.

Customer relationship intangible assets were valued using the MEEM method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors.
Technology and trade name intangible assets were valued using the RFR method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue attributable to the asset, applicable tax rate,

royalty rate, and other factors such as technology related obsolescence rates), the discount rate, reflecting the risks inherent in the future cash flow stream, and the tax amortization benefit, among other factors.

The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.
The market approach, which estimates value by leveraging comparable land sale data/listings and qualitatively comparing them to the in-scope properties, was used to value the land.
An income approach was applied to derive fair value for both consolidated investments with a noncontrolling interest and equity method investments accounted for under the equity method of accounting. The significant assumptions used include the estimated annual cash flows, the discount rate, the long-term growth rate, and operating margin, among other factors.

The Company believes that the information provided a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities.

The amounts allocated to intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	13,458	15 years
Acquired software and technology	2,324		7 years
Trade names	490		9 years
Total	$	16,272	14 years

The financial results of First Data are included in the consolidated results of the Company from July 29, 2019, the date of acquisition. For the year ended December 31, 2019, the results of operations for First Data, included within the accompanying consolidated statement of income, consisted of $4.1 billion of revenue and $1.0 billion of operating income.

The Company incurred transaction expenses of approximately $175 million for the year ended December 31, 2019. Approximately $77 million of these expenses were included in selling, general and administrative expenses and $98 million were included in debt financing activities within the Company’s consolidated statement of income for the year ended December 31, 2019.

The following unaudited supplemental pro forma combined financial information presents the Company’s results of operations for the years ended December 31, 2019 and 2018 as if the acquisition of First Data had occurred on January 1, 2018. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the Company’s operating results that may have actually occurred had the acquisition of First Data been completed on January 1, 2018. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of First Data.



(In millions, except for per share data)	2019		2018
Total revenue	$	15,775	$	15,284
Net income	1,520		1,125
Net income attributable to Fiserv, Inc.	1,457		1,040
Net income per share attributable to Fiserv, Inc.:
Basic	$	2.14	$	1.50
Diluted	$	2.10	$	1.47

The unaudited pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisition had occurred on January 1, 2018 to give effect to certain events the Company believes to be directly attributable to the acquisition. These pro forma adjustments primarily include:

a net increase in amortization expense that would have been recognized due to acquired intangible assets;
an adjustment to interest expense to reflect (i) the additional borrowings of the Company in conjunction with the acquisition and (ii) the repayment of First Data’s historical debt in conjunction with the acquisition;
a reduction in expenses for the year ended December 31, 2019 and a corresponding increase in the year ended December 31, 2018 for acquisition-related transaction costs and other one-time costs directly attributable to the acquisition;
a reduction in operating revenues due to the elimination of deferred revenues assigned no value at the acquisition date;
an adjustment to stock compensation expense to reflect the cost of the replacement awards as if they had been issued on January 1, 2018; and
the related income tax effects of the adjustments noted above.

Acquisition of Elan Assets

On October 31, 2018, the Company acquired the debit card processing, ATM Managed Services, and MoneyPass® surcharge-free network of Elan Financial Services, a unit of U.S. Bancorp (“Elan”), for approximately $659 million. Such purchase price includes an initial cash payment of $691 million, less post-closing working capital adjustments of $57 million, plus contingent consideration related to earn-out provisions estimated at a fair value of $12 million (see Note 10) and future payments under a transition services agreement estimated to be in excess of fair value of $13 million. This acquisition, included within the Payments segment, deepens the Company’s presence in debit card processing, broadens its client reach and scale and provides new solutions to enhance the value proposition for its existing debit solution clients.

During 2019, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. The measurement period adjustments resulted in a decrease in goodwill of $24 million with an offset to intangible assets and prepaid expenses and other current assets. The following allocation of purchase price for Elan was finalized in 2019:



(In millions)
Trade accounts receivable	$	20
Prepaid expenses and other current assets	98
Property and equipment	9
Intangible assets	373
Goodwill	214
Accounts payable and other current liabilities	(55)
Total purchase price	$	659

Goodwill, deductible for tax purposes, is primarily attributed to synergies, including the migration of Elan’s clients to the Company’s debit platform, and the anticipated value created by selling the Company’s products and services outside of card payments to Elan’s existing client base. The amounts allocated to intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	370	15 years
Trade name	3		8 years
Total	$	373	15 years

In conjunction with the acquisition, the Company entered into a transition services agreement for the provision of certain processing, network, administrative and managed services for a period of two years. The financial results of Elan are included in the consolidated results of the Company from October 31, 2018, the date of acquisition. For the year ended December 31, 2018, the results of operations for Elan, included within the accompanying consolidated statement of income, consisted of $29 million of revenue and $6 million of operating income. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

Other Acquisitions

On March 2, 2020, the Company acquired MerchantPro Express LLC (“MerchantPro”), an independent sales organization that provides processing services, point-of-sale equipment and merchant cash advances to businesses across the United States. MerchantPro is included within the Acceptance segment and further expands the Company’s merchant services business. On March 18, 2020, the Company acquired Bypass Mobile, LLC (“Bypass”), an independent software vendor and innovator in enterprise point-of-sale systems for sports and entertainment venues, food service management providers and national

restaurant chains. Bypass is included within the Acceptance segment and further enhances the Company’s omni-commerce capabilities, enabling enterprise businesses to deliver a seamless customer experience that spans physical and digital channels. On May 11, 2020, the Company acquired Inlet, LLC (“Inlet”), a provider of secure digital delivery solutions for enterprise and middle-market billers’ invoices and statements. Inlet is included within the Payments segment and further enhances the Company’s digital bill payment strategy.

The Company acquired these businesses for an aggregate purchase price of $167 million, net of $2 million of acquired cash, and including earn-out provisions estimated at a fair value of $45 million (see Note 10). The purchase price allocations for these acquisitions resulted in software and customer intangible assets totaling approximately $46 million, residual buyout intangible assets of approximately $35 million, goodwill of approximately $90 million, and net assumed liabilities of approximately $4 million. The purchase price allocation for the MerchantPro acquisition was finalized in the third quarter of 2020, and for the Bypass and Inlet acquisitions in the fourth quarter of 2020. Measurement period adjustments did not have a material impact on the consolidated statements of income. The goodwill recognized from these transactions is primarily attributed to synergies and the anticipated value created by selling the Company’s products and services to the acquired businesses’ existing client base. Approximately $36 million of goodwill is expected to be deductible for tax purposes.

The amounts allocated to intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	32	14 years
Residual buyouts	35		9 years
Acquired software and technology	14		8 years
Total	$	81	11 years

The results of operations for these acquired businesses have been included in the accompanying consolidated statements of income from the dates of acquisition. Pro forma information for these acquisitions is not provided because they did not have a material effect on the Company’s consolidated results of operations.

On January 22, 2021, the Company acquired Ondot Systems, Inc., a digital experience platform provider for financial institutions. This acquisition, to be included within the Payments segment, will further expand the Company’s digital capabilities, enhancing its suite of integrated solutions spanning card-based payments, digital banking platforms, core banking, and merchant solutions to enable clients of all sizes to deliver frictionless, digital-first and personalized experiences to their customers.

Dispositions

Effective July 1, 2020, the Company and Bank of America (“BANA”) dissolved the Banc of America Merchant Services joint venture (“BAMS” or the “joint venture”), of which the Company maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The remaining activities of the joint venture will consist of supporting the transition of the business to each party and an orderly wind down of remaining BAMS assets and liabilities. Pursuant to the separation agreement, the joint venture retains the responsibility for certain contingencies that may arise from pre-dissolution activities, including potential credit losses for specified merchants in excess of established reserves and certain legal claims and contingencies. The Company may be obligated to fund a proportionate share of any such losses as incurred.

The transfer of value to BANA was accounted for at fair value as a non pro rata distribution of nonmonetary assets, resulting in the recognition of a pre-tax gain of $36 million, with a related tax expense of $13 million. The pre-tax gain included the revaluation of client contracts allocated to BANA to a fair value of $700 million, as well as an estimated $24 million for certain additional consideration due from the Company to BANA in connection with the dissolution. The pre-tax net gain is recorded within gain on sale of businesses and the tax expense is recorded within the income tax provision in the consolidated statement of income for the year ended December 31, 2020. Noncontrolling interests of the Company have been reduced by $726 million and the Company’s additional paid-in capital was reduced by $36 million to account for the wind down of the joint venture and the transfer of a proportionate share of the joint venture’s fair value to BANA. The transfer of value to the Company was accounted for at carryover basis as the Company maintains control of such assets. The business transferred to the Company will continue to be operated and managed within the Company’s Acceptance segment.

The fair value of the client contracts upon dissolution of the joint venture was determined using the MEEM method, a form of the income approach. The determination of the fair values required estimates about discount rates, growth and attrition rates,

future expected cash flows and other future events that are judgmental in nature. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors.

The Company will continue to provide merchant processing and related services to former BAMS clients allocated to BANA, at BAMS pricing, through June 2023. The Company will also provide processing and other support services to new BANA merchant clients pursuant to a five-year non-exclusive agreement which, after June 2023, will also apply to the former BAMS clients allocated to BANA. In addition, both the Company and BANA are entitled to certain transition services, at fair value, from each other through June 2023.

On February 18, 2020, the Company sold a 60% controlling interest of its Investment Services business, subsequently renamed as Tegra118, LLC (“Tegra118”), which is reported within Corporate and Other following the Segment Realignment. The Company received pre-tax proceeds of $578 million, net of related expenses, resulting in a pre-tax gain on the sale of $428 million, with the related tax expense of $112 million recorded through the income tax provision, in the consolidated statement of income for the year ended December 31, 2020. The pre-tax gain included $176 million related to the remeasurement of the Company’s 40% retained interest based upon the enterprise value of the business. The revenues, expenses and cash flows of the Investment Services business were consolidated into the Company’s financial results through the date of the sale transaction. In conjunction with the sale transaction, the Company also entered into transition services agreements to provide, at fair value, various administration, business process outsourcing, technical and data center related services for defined periods to Tegra118 (see Note 20). The Company’s remaining ownership interest in Tegra118 is accounted for as an equity method investment (see Note 9). On February 2, 2021, Tegra118 completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined new entity, Wealthtech Holdings, LLC.

On March 29, 2018, the Company sold a 55% controlling interest of each of Fiserv Automotive Solutions, LLC and Fiserv LS LLC, which were subsidiaries of the Company that owned its Lending Solutions business (collectively, the “Lending Joint Ventures”). The Lending Joint Ventures, which were reported within the Fintech segment, included all of the Company’s automotive loan origination and servicing products, as well as its LoanServ™ mortgage and consumer loan servicing platform. The Company received gross sale proceeds of $419 million from the transactions. In 2018, the Company recognized a pre-tax gain on the sale of $227 million, with the related tax expense of $77 million recorded through the income tax provision, in the consolidated statement of income. The pre-tax gain included $124 million related to the remeasurement of the Company’s 45% retained interests based upon the estimated enterprise value of the Lending Joint Ventures. In 2019, the Company recognized a pre-tax gain on the sale of $10 million, with the related tax expense of $2 million recorded through the income tax provision, as contingent special distribution provisions within the transaction agreement were resolved and thereby realized. In August 2019, the Sagent Auto, LLC joint venture, formerly known as Fiserv Automotive Solutions, LLC, completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined entity, defi SOLUTIONS Group, LLC (“defi SOLUTIONS”). The Company recognized a pre-tax gain of $14 million within income from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $3 million, in 2019, reflecting the Company’s 31% ownership interest in defi SOLUTIONS. The Company’s remaining ownership interests in the Lending Joint Ventures are accounted for as equity method investments (see Note 9). See Note 20 for information regarding transition service agreements with the Lending Joint Ventures.

5. Discontinued Operations

In connection with the acquisition of First Data, the Company acquired two businesses, which it intended to sell. In October 2019, the Company completed the sales, at acquired fair value, of these two businesses for aggregate proceeds of $133 million. The sale proceeds are presented within discontinued operations in the consolidated statement of cash flows since the businesses were never considered part of the Company’s ongoing operations. The financial results of these businesses from the date of acquisition were not significant.

In January 2018, the Company completed the sale of the retail voucher business, MyVoucherCodes, acquired as part of its acquisition of Monitise plc in September 2017 for proceeds of £37 million ($50 million). The corresponding proceeds received in 2018 are presented within discontinued operations since the business was never considered part of the Company’s ongoing operations. There was no impact to operating income or gain/loss recognized on the sale in 2018. Cash flows from discontinued operations in 2018 also included tax payments of $7 million related to income recognized in 2017 from a litigation settlement related to a prior disposition.

6. Settlement Assets and Obligations

Settlement assets and obligations represent intermediary balances arising from the settlement process which involves the transferring of funds between card issuers, payment networks, merchants and consumers. The Company records settlement assets and obligations upon processing a payment transaction. Settlement assets represent amounts receivable from agents and from payment networks for submitted merchant transactions, and funds received by the Company in advance of paying to the merchant or payee. Settlement obligations represent the unpaid amounts that are due to merchants or payees for their payment transactions.

The principal components of the Company’s settlement assets and obligations were as follows at December 31:



(In millions)	2020		2019
Settlement assets
Cash and cash equivalents	$	1,825	$	1,656
Receivables	9,696		10,212
Total settlement assets	$	11,521	$	11,868
Settlement obligations
Payment instruments outstanding	$	483	$	345
Card settlements due to merchants	11,038		11,523
Total settlement obligations	$	11,521	$	11,868

The changes in settlement assets and obligations are presented on a net basis within operating activities in the consolidated statements of cash flows. However, because the changes in the settlement assets balance exactly offset changes in settlement obligations, the activity nets to zero.

7. Intangible Assets

Identifiable intangible assets consisted of the following at December 31:



(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
2020
Customer relationships	$	15,271	$	3,668	$	11,603
Acquired software and technology	2,562		879		1,683
Trade names	618		172		446
Purchased software	913		207		706
Capitalized software and other intangibles	1,332		412		920
Total	$	20,696	$	5,338	$	15,358

(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
2019
Customer relationships	$	16,187	$	2,145	$	14,042
Acquired software and technology	2,607		639		1,968
Trade names	620		105		515
Purchased software	680		173		507
Capitalized software and other intangibles	942		332		610
Total	$	21,036	$	3,394	$	17,642

Gross software development costs capitalized for new products and enhancements to existing products totaled $462 million, $339 million and $193 million in 2020, 2019 and 2018, respectively.

Amortization expense associated with the above identifiable intangible assets was as follows for the years ended December 31:



(In millions)	2020		2019		2018
Amortization expense	$	2,563	$	1,299	$	347

Amortization expense during the year ended December 31, 2020 includes $56 million of accelerated amortization associated with the termination of certain vendor contracts (see Note 17).

The Company estimates that annual amortization expense with respect to intangible assets recorded at December 31, 2020 will be as follows:



(In millions)
Year Ending December 31,
2021	$	2,451
2022	2,262
2023	2,010
2024	1,616
2025	1,342
Thereafter	5,677
Total	$	15,358

8. Goodwill

The following table presents changes in goodwill during 2020 and 2019. Prior period amounts have been restated to reflect the Segment Realignment.



	Reportable Segments
(In millions)	Acceptance		Fintech		Payments		Corporate and Other		Total
Goodwill - December 31, 2018	$	—	$	2,102	$	3,380	$	220	$	5,702
Acquisitions and valuation adjustments	21,178		2		9,302		—		30,482
Dispositions	—		(2)		—		—		(2)
Goodwill reclassified to assets held for sale	—		—		—		(220)		(220)
Foreign currency translation	11		2		63		—		76
Goodwill - December 31, 2019	21,189		2,104		12,745		—		36,038
Acquisitions and valuation adjustments	332		—		62		—		394

Foreign currency translation	(113)		4		(1)		—		(110)
Goodwill - December 31, 2020	$	21,408	$	2,108	$	12,806	$	—	$	36,322

In December 2019, the Company entered into a definitive agreement to sell a 60% controlling interest of its Investment Services business, and subsequently completed the sale on February 18, 2020, which is reported within Corporate and Other following the Segment Realignment (see Note 4). As a result, the corresponding assets of the Investment Services business, including $220 million of goodwill, were classified as held for sale within prepaid expenses and other current assets in the Company’s consolidated balance sheet at December 31, 2019.

9. Investments in Unconsolidated Affiliates

The Company maintains investments in various affiliates that are accounted for as equity method investments at both December 31, 2020 and 2019, the most significant of which are related to the Company’s merchant bank alliance affiliates. The Company’s share of net income or loss from these investments is reported within income from investments in unconsolidated affiliates and the related tax expense or benefit is reported within the income tax provision in the consolidated statements of income.

Merchant Alliances

The Company maintains ownership interests of significant influence in various merchant alliances and strategic investments in companies in related markets. A merchant alliance, as it pertains to investments accounted for under the equity method, is an agreement between the Company and a financial institution that combines the processing capabilities and management expertise of the Company with the visibility and distribution channel of the bank. A merchant alliance acquires credit and debit card transactions from merchants. The Company provides processing and other services to the alliance and charges fees to the alliance primarily based on contractual pricing (see Note 20). The Company’s investment in its merchant alliances was $2.4 billion and $2.5 billion at December 31, 2020 and 2019, respectively, and is reported within investments in unconsolidated affiliates in the consolidated balance sheets.

Other Equity Method Investments

Following the sale of a controlling financial interest of the Investment Services business (see Note 4), as of December 31, 2020, the Company maintained a 40% ownership interest in Tegra 118 which is accounted for as an equity method investment. The Company also maintains a 45% ownership interest in Sagent M&C, LLC (formerly known as Fiserv LS, LLC) and a 31% ownership interest in defi SOLUTIONS, which are accounted for as equity method investments (see Note 4). The Company’s aggregate investment in these entities was $212 million and $56 million at December 31, 2020 and 2019, respectively, and is reported within investments in unconsolidated affiliates in the consolidated balance sheets.

The Lending Joint Ventures maintain variable-rate term loan facilities with aggregate outstanding borrowings of $385 million in senior unsecured debt and variable-rate revolving credit facilities with an aggregate borrowing capacity of $45 million with a syndicate of banks, which mature in March 2023. Outstanding borrowings on the revolving credit facilities at December 31, 2020 were $13 million. The Company has guaranteed this debt of the Lending Joint Ventures and does not anticipate that the Lending Joint Ventures will fail to fulfill their debt obligations. See Note 10 for additional information regarding the Company’s debt guarantee arrangements with the Lending Joint Ventures.

Summary of Financial Information

The following tables present a summary of financial information for the Company’s unconsolidated affiliates accounted for under the equity method of accounting:



(In millions)
December 31,	2020		2019
Total current assets	$	5,534	$	4,288
Total long-term assets	769		1
Total assets	$	6,303	$	4,289

Total current liabilities	$	5,478	$	4,243
Total long-term liabilities	336		—
Total liabilities	$	5,814	$	4,243

The primary components of assets and liabilities are settlement asset and obligation related accounts similar to those described in Note 6 to the consolidated financial statements.



(In millions)
Year Ended December 31,	2020		2019
Total revenue	$	963	$	467
Total expenses	597		249
Operating income	$	366	$	218
Net income	$	351	$	215

The Company’s share of investee’s net income or loss includes the amortization basis difference between the estimated fair value and the underlying book value of equity method intangible assets.

The Company classifies distributions from its investments accounted for using the equity method in the consolidated statements of cash flows using the cumulative earnings approach. Under this approach, distributions received from

unconsolidated affiliates are classified as cash flows from operating activities to the extent that the cumulative distributions do not exceed the cumulative earnings on the investment. To the extent the current period distribution exceeds the cumulative earnings on the investment, the distribution is considered a return of investment and is classified as cash flows from investing activities. The Company received cash distributions from unconsolidated affiliates of $151 million, $136 million and $2 million, of which $109 million, $113 million and $0 million were recorded as cash flows from investing activities in the Company’s consolidated statements of cash flows during 2020, 2019 and 2018, respectively.

The Company also maintains investments in various equity securities without a readily determinable fair value. Such investments totaled $160 million and $167 million at December 31, 2020 and 2019, respectively, and are included within other long-term assets in the Company’s consolidated balance sheets. The Company reviews these investments each reporting period to determine whether an impairment or observable price change for the investment has occurred. When such events or changes occur, the Company evaluates the fair value compared to its cost basis in the investment. Gains or losses from a change in fair value are included within other income (expense) in the consolidated statement of income for the period. Adjustments made to the values recorded for these equity securities during 2020, 2019 and 2018 were not significant.

10. Fair Value Measurements

The fair values of cash equivalents, trade accounts receivable, settlement assets and obligations, accounts payable, and client deposits approximate their respective carrying values due to the short period of time to maturity. The Company’s derivative instruments are measured on a recurring basis based on foreign currency spot rates and forwards quoted by banks and foreign currency dealers and are marked-to-market each period (see Note 14). Contingent consideration related to the 2020 acquisitions of MerchantPro and Bypass and 2018 acquisition of Elan (see Note 4) is estimated based on the present value of a probability-weighted assessment approach derived from the likelihood of achieving the earn-out criteria. The fair value of the Company’s contingent liability for current expected credit losses associated with its debt guarantees, as further described below, is estimated based on assumptions of future risk of default and the corresponding level of credit losses at the time of default.

Assets and liabilities measured at fair value on a recurring basis consisted of the following at December 31:



			Fair Value
(In millions)	Classification	Fair Value Hierarchy	2020		2019
Assets
Cash flow hedges	Prepaid expenses and other current assets	Level 2	$	9	$	4

Liabilities
Contingent consideration	Accounts payable and accrued expenses	Level 3	$	46	$	—
Contingent consideration	Other long-term liabilities	Level 3	—		1
Contingent debt guarantee	Other long-term liabilities	Level 3	8		—

The Company’s senior notes are recorded at amortized cost, but measured at fair value for disclosure purposes. The estimated fair value of senior notes was based on matrix pricing which considers readily observable inputs of comparable securities (Level 2 of the fair value hierarchy). The carrying value of the Company’s term loan credit agreement, revolving credit facility borrowings, foreign lines of credit and debt associated with the receivables securitization agreement approximates fair value as these instruments have variable interest rates and the Company has not experienced any change to its credit ratings (Level 2 of the fair value hierarchy). The estimated fair value of total debt, excluding finance leases and other financing obligations, was $22.5 billion and $22.6 billion at December 31, 2020 and 2019, respectively, and the carrying value was $19.9 billion and $21.5 billion at December 31, 2020 and 2019, respectively.

The Company maintains a liability for its non-contingent obligations to perform over the term of its debt guarantee arrangements with the Lending Joint Ventures (see Note 9), which is reported primarily within other long-term liabilities in the consolidated balance sheets. The non-contingent component of the Company’s debt guarantee arrangements is recorded at amortized cost but measured at fair value for disclosure purposes. The carrying value of the Company’s non-contingent liability of $18 million and $26 million approximates the fair value at December 31, 2020 and 2019, respectively (Level 3 of the fair value hierarchy). Such guarantees will be amortized in future periods over the contractual term. In addition, the Company has recorded, in conjunction with the adoption of CECL, a contingent liability ($8 million at December 31, 2020, as reported within other long-term liabilities in the consolidated balance sheet), representing the current expected credit losses to which the Company is exposed. This contingent liability is estimated based on certain financial metrics of the Lending Joint Ventures and historical industry data, which is used to develop assumptions of the likelihood the guaranteed parties will default and the level of credit losses in the event a default occurs (Level 3 of the fair value hierarchy). The Company recognized $13 million,

$7 million and $5 million during the years ended December 31, 2020, 2019 and 2018, respectively, within other income (expense) in its consolidated statements of income related to its release from risk under the non-contingent guarantees as well as a change in the provision of estimated credit losses associated with the indebtedness of the Lending Joint Ventures. The Company has not made any payments under the guarantees, nor has it been called upon to do so.

In addition, certain of the Company’s non-financial assets are measured at fair value on a non-recurring basis, including property and equipment, lease ROU assets, equity securities without a readily determinable fair value, goodwill and other intangible assets, and are subject to fair value adjustment in certain circumstances. Additional information about fair value adjustments recorded on a non-recurring basis during the years ended December 31, 2020 and 2019 is included in Note 17 to the consolidated financial statements.

11. Leases

The Company adopted ASU 2016-02 and its related amendments (collectively known as “ASC 842”) effective January 1, 2019 using the optional transition method in ASU 2018-11. Therefore, the reported results and financial position as of and for the years ended December 31, 2020 and 2019 reflect the application of ASC 842, while the reported results for the year ended December 31, 2018 were not adjusted and continue to be reported under the accounting guidance, ASC 840, Leases, in effect for this prior period.

Company as Lessee

The Company primarily leases office space, data centers and equipment from third parties. The Company determines if a contract is a lease at inception. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term begins on the commencement date, which is the date the Company takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Many of the Company’s leases contain renewal options for varying periods, which can be exercised at the Company’s sole discretion. Leases are classified as operating or finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. Certain leases include options to purchase the leased asset at the end of the lease term, which is assessed as a part of the Company’s lease classification determination. The Company elected the package of practical expedients permitted under the transition guidance within ASU 2016-02 to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. The Company’s leases have remaining lease terms ranging from one month to 17 years.

The Company uses the right-of-use model to account for its leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. ROU assets are based on the lease liability and are increased by prepaid lease payments and decreased by lease incentives received. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the ROU assets and lease liabilities to the extent they are variable in nature. These variable lease costs are recognized as variable lease expenses when incurred. As a practical expedient, lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes. The Company estimates contingent lease incentives when it is probable that the Company is entitled to the incentive at lease commencement. The Company elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, lease payments are recognized as lease expense on a straight-line basis over the lease term. The depreciable life of the ROU assets and leasehold improvements are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option. The Company uses its incremental borrowing rate to discount future lease payments in the calculation of the lease liability and ROU asset based on the information available on the commencement date for each lease. The Company’s leases typically do not provide an implicit rate. The determination of the incremental borrowing rate requires judgment and is determined using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization, currency and term to align with the terms of the lease.

Lease Balances



(In millions)
December 31,	2020		2019
Assets
Operating lease assets (1)	$	504	$	684
Finance lease assets (2)	267		235
Total lease assets	$	771	$	919

Liabilities
Current
Operating lease liabilities (1)	$	125	$	140
Finance lease liabilities (2)	104		78
Noncurrent
Operating lease liabilities (1)	471		603
Finance lease liabilities (2)	271		144
Total lease liabilities	$	971	$	965

(1)Operating lease assets are included within other long-term assets, and operating lease liabilities are included within accounts payable and accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the consolidated balance sheets.

(2)Finance lease assets are included within property and equipment, net and finance lease liabilities are included within short-term and current maturities of long-term debt (current portion) and long-term debt (noncurrent portion) in the consolidated balance sheets.

Components of Lease Cost



(In millions)
Year Ended December 31,	2020		2019
Operating lease cost (1)	$	198	$	207
Finance lease cost (2)
Amortization of right-of-use assets	150		40
Interest on lease liabilities	21		8
Total lease cost	$	369	$	255

(1)Operating lease expense is included within cost of processing and services, cost of product and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, in the consolidated statements of income. Operating lease expense includes approximately $50 million and $56 million of variable lease costs for the years ended December 31, 2020 and 2019, respectively.

(2)Finance lease expense is recorded as depreciation and amortization expense within cost of processing and services, cost of product and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, and interest expense, net in the consolidated statements of income. Finance lease expense includes $62 million of accelerated amortization associated with the termination of certain vendor contracts during the year ended December 31, 2020 (see Note 17).

Rent expense for all operating leases was $118 million during the year ended December 31, 2018.

Supplemental Cash Flow Information



(In millions)
Year Ended December 31,	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	155	$	139
Operating cash flows from finance leases	21		8
Financing cash flows from finance leases	187		37

Right-of-use assets obtained in exchange for lease liabilities: (1)
Operating leases	$	46	$	441
Finance leases	399		288

(1)Amounts in 2019 include the right-of-use assets and lease liabilities obtained through the acquisition of First Data.

Lease Term and Discount Rate



December 31,	2020		2019
Weighted-average remaining lease term:
Operating leases	6 years		7 years
Finance leases	4 years		3 years
Weighted-average discount rate:
Operating leases	2.9	%	3.0	%
Finance leases	3.5	%	3.5	%

Maturity of Lease Liabilities

Future minimum rental payments on leases with initial non-cancellable lease terms in excess of one year were due as follows at December 31, 2020:



(In millions)
Year Ending December 31,	Operating Leases (1)		Finance Leases (2)
2021	$	136	$	107
2022	120		103
2023	103		98
2024	86		71
2025	66		28
Thereafter	146		3
Total lease payments	657		410
Less: Interest	(61)		(35)
Present value of lease liabilities	$	596	$	375

(1)Operating lease payments include $6 million related to options to extend lease terms that are reasonably certain of being exercised.

(2)Finance lease payments exclude $30 million of legally binding minimum lease payments for leases signed but not yet commenced. Finance leases that have been signed but not yet commenced are for equipment and will commence in 2021 with lease terms of up to 6 years.

Company as Lessor

The Company owns certain point-of-sale (“POS”) terminal equipment which it leases to merchants. Leases are classified as operating or sales-type leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. The terms of the leases typically range from one month to five years. For operating leases,

the minimum lease payments received are recognized as lease income on a straight-line basis over the lease term and the leased asset is included in property and equipment, net in the consolidated balance sheets and depreciated over its estimated useful life. For sales-type leases, selling profit is recognized at the commencement date of the lease to the extent the fair value of the underlying asset is different from its carrying amount. Selling profit is directly impacted by the Company’s estimate of the amount to be derived from the residual value of the asset at the end of the lease term. The residual value of the asset is computed using various assumptions, including the expected fair value of the underlying asset at the end of the lease term. Unearned income is recognized as interest income over the lease term. For sales-type leases, the Company derecognizes the carrying amount of the underlying leased asset and recognizes a net investment in the leased asset in the consolidated balance sheets. The net investment in a leased asset is computed based on the present value of the minimum lease payments not yet received and the present value of the residual value of the asset.

Components of Lease Income



(In millions)
Year Ended December 31,	2020		2019
Sales-type leases:
Selling profit (1)	$	48	$	20
Interest income (1)	76		33
Operating lease income (2)	257		36

(1)Selling profit includes $106 million and $48 million recorded within product revenue with a corresponding charge of $58 million and $28 million recorded in cost of product in the consolidated statements of income for the years ended December 31, 2020 and 2019, respectively. Interest income is included within product revenue in the consolidated statements of income.

(2)Operating lease income includes a nominal amount of variable lease income and is included within product revenue in the consolidated statements of income for each of the years ended December 31, 2020 and 2019.

Components of Net Investment in Sales-Type Leases



(In millions)
December 31,	2020		2019
Minimum lease payments	$	355	$	376
Residual values	23		34
Less: Unearned interest income	(141)		(160)
Net investment in leases (1)	$	237	$	250

(1)Net investments in leased assets are included within prepaid expenses and other current assets (current portion) and other long-term assets (noncurrent portion) in the consolidated balance sheets.

Maturities of Future Minimum Lease Payment Receivables

Future minimum lease payments receivable on sales-type leases were as follows at December 31, 2020:



(In millions)
Year Ending December 31,	Sales-Type Leases
2021	$	153
2022	114
2023	63
2024	22
2025	3
Thereafter	—
Total minimum lease payments	$	355

Lease Payment Receivables Portfolio

The Company accounts for lease payment receivables in connection with POS terminal equipment as a single portfolio. The Company recognizes an allowance for expected credit losses on lease payment receivables at the commencement date of the lease by considering the term, geography and internal credit risk ratings of such lease. The internal credit risk ratings are established based on lessee specific risk factors, such as FICO score, number of years the lessee has been in business and the nature of the lessee’s industry, which are considered indicators of the likelihood a lessee may default in the future. The established reserve for estimated credit losses on lease payment receivables upon adoption of ASU 2016-13 on January 1, 2020 was $56 million. Such reserve for estimated credit losses at December 31, 2020 was $64 million.

The Company determines delinquency status on lease payment receivables based on the number of calendar days past due. The Company considers lease payments that are 90 days or less past due as performing. Lease payments that are greater than 90 days past due are placed on non-accrual status in which interest income is no longer recognized. Lease payment receivables are fully written off in the period they become delinquent greater than 180 days past due. The amortized cost balance of net investment leases at December 31, 2020 and 2019 was $237 million and $250 million, respectively. Lease payment receivables that were determined to be on non-accrual status were nominal at each of December 31, 2020 and 2019.

12. Debt

The Company’s debt consisted of the following at December 31:



(In millions)	2020		2019
Short-term and current maturities of long-term debt:
Lines of credit	$	144	$	150
Finance lease and other financing obligations	240		137
Total short-term and current maturities of long-term debt	$	384	$	287

Long-term debt:
2.700% senior notes due June 2020	$	—	$	850
4.750% senior notes due June 2021	400		400
3.500% senior notes due October 2022	700		700
3.800% senior notes due October 2023	1,000		1,000
0.375% senior notes due July 2023 (Euro-denominated)	612		559
2.750% senior notes due July 2024	2,000		2,000
3.850% senior notes due June 2025	900		900
2.250% senior notes due July 2025 (British Pound-denominated)	709		687
3.200% senior notes due July 2026	2,000		2,000
2.250% senior notes due June 2027	1,000		—
1.125% senior notes due July 2027 (Euro-denominated)	612		559
4.200% senior notes due October 2028	1,000		1,000
3.500% senior notes due July 2029	3,000		3,000
2.650% senior notes due June 2030	1,000		—
1.625% senior notes due July 2030 (Euro-denominated)	612		559
3.000% senior notes due July 2031 (British Pound-denominated)	709		687
4.400% senior notes due July 2049	2,000		2,000
Receivable securitized loan	425		500
Term loan facility	1,250		3,950
Unamortized discount and deferred financing costs	(155)		(160)
Revolving credit facility	22		174
Finance lease and other financing obligations	504		247
Total long-term debt	$	20,300	$	21,612

Annual maturities of the Company’s total debt were as follows at December 31, 2020:



(In millions)
Year Ending December 31,
2021	$	384
2022	1,323
2023	2,222
2024	3,329
2025	1,643
Thereafter	11,938
Total principal payments	20,839
Unamortized discount and deferred financing costs	(155)
Total debt	$	20,684

Senior Notes

The Company has outstanding $18.3 billion of various fixed-rate senior notes, as described above. The indentures governing the Company’s senior notes contain covenants that, among other matters, limit (i) the Company’s ability to consolidate or merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to, another person, (ii) the Company’s and certain of its subsidiaries’ ability to create or assume liens, and (iii) the Company’s and certain of its subsidiaries’ ability to engage in sale and leaseback transactions. The Company may, at its option, redeem the senior notes, in whole or, from time to time, in part, at any time prior to the applicable maturity date. Interest on the Company’s U.S. dollar-denominated senior notes is paid semi-annually, while interest on its Euro- and British Pound-denominated senior notes is paid annually. The interest rate applicable to certain of the senior notes is subject to an increase of up to two percent in the event that the credit rating assigned to such notes is downgraded below investment grade.

On May 13, 2020, the Company completed an offering of $2.0 billion of senior notes comprised of $1.0 billion aggregate principal amount of 2.25% senior notes due in June 2027 and $1.0 billion aggregate principal amount of 2.65% senior notes due in June 2030. The senior notes pay interest semi-annually on June 1 and December 1, commencing on December 1, 2020. The indentures governing these senior notes contain covenants that are substantially the same as those set forth in the Company’s senior notes described above. The Company used the net proceeds from these senior notes offerings to repay the outstanding principal balance of $850 million under its 2.7% senior notes due in June 2020 and outstanding borrowings under its amended and restated revolving credit facility totaling $1.1 billion.

On June 24, 2019 and July 1, 2019, the Company completed various offerings of senior notes for the purpose of funding the repayment of certain indebtedness of First Data and its subsidiaries on the closing date of the acquisition (see Note 4). Such offerings consisted of the following:



(In millions)	Interest Rates	Maturities	Aggregate Principal Amount
U.S. dollar denominated senior notes	2.750% - 4.400%	July 2024 - 2049	$	9,000
Euro denominated senior notes	0.375% - 1.625%	July 2023 - 2030	€	1,500
British Pound denominated senior notes	2.250% - 3.000%	July 2025 - 2031	£	1,050

The Company used a portion of the net proceeds from the 2019 senior note offerings described above in June 2019 to repay outstanding borrowings totaling $790 million under the Company’s amended and restated revolving credit facility. On July 29, 2019, concurrent with the acquisition of First Data, the Company used the remaining net proceeds from the 2019 senior notes offerings described above, as well as the net proceeds of the term loan facility and a drawing on its revolving credit facility described below, to repay $16.4 billion of existing First Data debt and to pay fees and expenses related to such repayment, the First Data acquisition and related transactions.

At December 31, 2020, the 4.75% senior notes due in June 2021 were classified in the consolidated balance sheet as long-term and within the debt maturity schedule above as maturing in September 2023, the date that the Company’s revolving credit facility expires, as the Company has the intent to refinance this debt on a long-term basis and the ability to do so under its revolving credit facility.

Term Loan Facility

On February 15, 2019, the Company entered into a term loan credit agreement with a syndicate of financial institutions pursuant to which such financial institutions committed to provide the Company with a senior unsecured term loan facility in an aggregate amount of $5.0 billion, consisting of $1.5 billion in commitments to provide loans with a term of three years and $3.5 billion in commitments to provide loans with a term of five years. On July 29, 2019, concurrent with the closing of the acquisition of First Data, the term loan credit agreement was funded. Loans drawn under the term loan facility are subject to amortization at a quarterly rate of 1.25% for the first eight quarters and 1.875% each quarter thereafter (with loans outstanding under the five-year tranche subject to amortization at a quarterly rate of 2.5% after the fourth anniversary of the commencement of amortization), with accrued and unpaid amortization amounts required to be paid on the last business day in December of each year. Borrowings under the term loan facility bear interest at variable rates based on LIBOR or on a base rate, plus in each case, a specified margin based on the Company’s long-term debt rating in effect from time to time. The variable interest rate on the term loan facility borrowings was 1.41% at December 31, 2020. The term loan credit facility contains affirmative, negative and financial covenants, and events of default, that are substantially the same as those set forth in the Company’s existing amended revolving credit facility, as described below.

Revolving Credit Facility

The Company maintains an amended and restated revolving credit facility, which matures in September 2023, with aggregate commitments available for $3.5 billion of total capacity. Borrowings under the amended and restated revolving credit facility bear interest at a variable rate based on LIBOR or a base rate, plus in each case a specified margin based on the Company’s long-term debt rating in effect from time to time. The variable interest rate on the revolving credit facility borrowings was 1.18% at December 31, 2020. There are no significant commitment fees and no compensating balance requirements. The amended and restated revolving credit facility contains various restrictions and covenants that require the Company, among other things, to (i) limit its consolidated indebtedness as of the end of each fiscal quarter to no more than three and one-half times the Company’s consolidated net earnings before interest, taxes, depreciation, amortization, non-cash charges and expenses and certain other adjustments (“EBITDA”) during the period of four fiscal quarters then ended, subject to certain exceptions, and (ii) maintain EBITDA of at least three times its consolidated interest expense as of the end of each fiscal quarter for the period of four fiscal quarters then ended.

On February 6, 2019, the Company entered into an amendment to its amended and restated revolving credit facility to (i) amend the maximum leverage ratio covenant to permit it to elect to increase the permitted maximum leverage ratio from three and one-half times the consolidated EBITDA to either four times or four and one-half times the Company’s consolidated EBITDA for a specified period following certain acquisitions and (ii) permit it to make drawings under the revolving credit facility on the closing date of its acquisition of First Data subject to only limited conditions. In November 2019, the Company elected to increase the permitted maximum leverage ratio to four times the Company’s consolidated EBITDA pursuant to the terms of the amendment described above. The Company was in compliance with all financial debt covenants during 2020.

Foreign Lines of Credit and Other Arrangements

The Company maintains certain short-term lines of credit with foreign banks and alliance partners primarily to fund settlement activity. These arrangements are primarily associated with international operations and are in various functional currencies, the most significant of which are the Australian dollar, Polish zloty, Euro and Argentine peso. The Company had amounts outstanding on these lines of credit totaling $144 million and $150 million at a weighted-average interest rate of 21.98% and 13.42% at December 31, 2020 and 2019, respectively.

Receivable Securitized Loan

The Company maintains a consolidated wholly-owned subsidiary, First Data Receivables, LLC (“FDR”). FDR is a party to certain receivables financing arrangements, including an agreement (“Receivables Financing Agreement”) with certain financial institutions and other persons from time to time party thereto as lenders and group agents, pursuant to which certain wholly-owned subsidiaries of the Company have agreed to transfer and contribute receivables to FDR, and FDR in turn may obtain borrowings from the financial institutions and other lender parties to the Receivables Financing Agreement secured by liens on those receivables. FDR’s assets are not available to satisfy the obligations of any other entities or affiliates of the Company, and FDR’s creditors would be entitled, upon its liquidation, to be satisfied out of FDR’s assets prior to any assets or value in FDR becoming available to the Company. The receivables held by FDR are recorded within trade accounts receivable, net in the Company’s consolidated balance sheets. FDR held $811 million and $773 million in receivables as part of the securitization program at December 31, 2020 and 2019, respectively. FDR utilized the receivables as collateral in borrowings of $425 million and $500 million as of December 31, 2020 and 2019, respectively, at an average interest rate of 1.00% and 2.61%, respectively.

At December 31, 2020, the collateral capacity under the Receivables Financing Agreement was $625 million, and the maximum borrowing capacity was $500 million. The term of the Receivables Financing Agreement is through July 2022.

Deferred Financing Costs

Deferred financing costs are amortized as a component of interest expense, net over the term of the underlying debt using the effective interest method. Deferred financing costs related to the Company’s senior notes, term loan and receivable securitized loan totaled $117 million and $120 million at December 31, 2020 and 2019, respectively, and are reported as a direct reduction of the related debt instrument in the consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facility are reported in other long-term assets in the consolidated balance sheets and totaled $5 million and $7 million at December 31, 2020 and 2019, respectively.

Debt Financing Activities

On January 16, 2019, in connection with the definitive merger agreement to acquire First Data (see Note 4), the Company entered into a bridge facility commitment letter pursuant to which a group of financial institutions committed to provide a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of $17.0 billion for the purpose of funding the repayment of certain indebtedness of First Data and its subsidiaries on the closing date of the acquisition of First Data, making cash payments in lieu of fractional shares as part of the acquisition consideration and paying fees and expenses related to the acquisition, the refinancing and the related transactions. The Company recorded $98 million of expenses, reported within debt financing activities in the consolidated statements of income, related to the bridge term loan facility during the year ended December 31, 2019. The aggregate commitments of $17.0 billion under the bridge facility commitment letter were replaced with a corresponding amount of permanent financing through the term loan credit agreement and issuance of senior notes, as described above, resulting in the termination of the bridge term loan facility effective July 1, 2019.

In June 2019, the Company entered into foreign exchange forward contracts to minimize foreign currency exposure to the Euro and British Pound upon settlement of the proceeds from the foreign currency-denominated senior notes, as described above. The foreign exchange forward contracts matured on July 1, 2019, concurrent with the closing of the offering of the foreign currency-denominated senior notes. The Company realized foreign currency transaction gains of $3 million, reported within debt financing activities in the consolidated statement of income during the year ended December 31, 2019, from these foreign exchange forward contracts. Further, upon completion of the acquisition of First Data, the Company designated its Euro- and British Pound-denominated senior notes as net investment hedges to hedge a portion of its net investment in certain Euro- and British Pound-denominated subsidiaries (see Note 14). Prior to designating the foreign currency-denominated senior notes as net investment hedges, the Company realized foreign currency transaction gains of $69 million, reported within debt financing activities in the consolidated statement of income during the year ended December 31, 2019, as a result of changes in the U.S. dollar equivalent of the Euro- and British Pound-denominated senior notes due to fluctuations in foreign currency exchange rates. In addition, the Company held a portion of the proceeds from the issuance of these foreign currency-denominated senior notes in Euro- and British Pound-denominated cash and cash equivalents. The Company realized foreign currency transaction losses of $19 million, reported within debt financing activities in the consolidated statement of income during the year ended December 31, 2019, as a result of changes in the U.S. dollar equivalent of the Euro- and British Pound-denominated cash due to fluctuations in foreign currency exchange rates.

In September 2018, the Company completed an offering of $2.0 billion of senior notes comprised of $1.0 billion aggregate principal amount of 3.8% senior notes due in October 2023 and $1.0 billion aggregate principal amount of 4.2% senior notes due in October 2028. The Company used the net proceeds from such offering to repay the outstanding principal balance of $540 million under its then-existing term loan and the then-outstanding borrowings under its amended and restated revolving credit facility totaling $1.1 billion. In addition, the Company commenced a cash tender offer in September 2018 for any and all of its then-outstanding $450 million aggregate principal amount of 4.625% senior notes due October 2020. Upon expiration of the tender offer on September 26, 2018, $246 million was tendered. In October 2018, the Company retired the remaining outstanding $204 million aggregate principal amount of 4.625% senior notes. The Company recorded a pre-tax loss, reported within debt financing activities in the consolidated statements of income, on early debt extinguishment of $14 million during the year ended December 31, 2018 related to these activities.

13. Redeemable Noncontrolling Interests

The Company maintains two redeemable noncontrolling interests which are presented outside of equity and carried at their estimated redemption values. Each minority partner owns 1% of the equity in the joint venture; in addition, each minority partner is entitled to a contractually determined share of the entity’s income. The agreements contain redemption features whereby interests held by the minority partner are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within the Company’s control. The minority interests have a total estimated redemption value of $259 million at December 31, 2020, which may be terminated by either party for convenience any time after September 1, 2021 and

December 31, 2024, respectively. In the event of termination for cause, as a result of a change in control, or for convenience after the predetermined date, the Company may be required to purchase the minority partner membership interests at a price equal to the fair market value of the minority interest.

The following table presents a summary of the redeemable noncontrolling interests activity during the years ended December 31:



(In millions)	2020		2019
Balance at beginning of year	$	262	$	—
Acquired First Data interests (see Note 4)	—		252
Distributions paid to redeemable noncontrolling interests	(42)		(7)
Share of income	39		17
Balance at end of year	$	259	$	262

14. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component, net of income taxes, consisted of the following:



	Year Ended December 31, 2020
(In millions)	Cash Flow Hedges		Foreign Currency Translation		Pension Plans		Total
Balance at December 31, 2019	$	(141)	$	(33)	$	(6)	$	(180)
Other comprehensive (loss) income before reclassifications	5		(221)		(6)		(222)
Amounts reclassified from accumulated other comprehensive loss	15		—		—		15
Net current-period other comprehensive (loss) income	20		(221)		(6)		(207)
Balance at December 31, 2020	$	(121)	$	(254)	$	(12)	$	(387)



	Year Ended December 31, 2019
(In millions)	Cash Flow Hedges		Foreign Currency Translation		Pension Plans		Total
Balance at December 31, 2018	$	(16)	$	(49)	$	(2)	$	(67)
Other comprehensive (loss) income before reclassifications	(134)		16		(4)		(122)
Amounts reclassified from accumulated other comprehensive loss	9		—		—		9
Net current-period other comprehensive (loss) income	(125)		16		(4)		(113)


Balance at December 31, 2019	$	(141)	$	(33)	$	(6)	$	(180)

The Company has entered into forward exchange contracts, which have been designated as cash flow hedges, to hedge foreign currency exposure to the Indian Rupee. The notional amount of these derivatives was $259 million and $178 million, and the fair value totaling $9 million and $4 million is reported primarily in prepaid expenses and other current assets in the consolidated balance sheets at December 31, 2020 and 2019, respectively. Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2020, the Company estimates that it will recognize gains of approximately $8 million in cost of processing and services during the next twelve months as foreign exchange forward contracts settle.

In March 2019, the Company entered into treasury lock agreements (“Treasury Locks”), designated as cash flow hedges, in the aggregate notional amount of $5.0 billion to manage exposure to fluctuations in benchmark interest rates in anticipation of the issuance of fixed rate debt in connection with the refinancing of certain indebtedness of First Data and its subsidiaries. In June 2019, concurrent with the issuance of U.S dollar-denominated senior notes (see Note 12), the Treasury Locks were settled

resulting in a payment, included in cash flows from operating activities, of $183 million recorded in accumulated other comprehensive loss, net of income taxes, that will be amortized to earnings over the terms of the originally forecasted interest payments. Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2020, the Company estimates that it will recognize approximately $20 million in interest expense, net during the next twelve months related to settled interest rate hedge contracts.

To reduce exposure to changes in the value of the Company’s net investments in certain of its foreign currency-denominated subsidiaries due to changes in foreign currency exchange rates, the Company uses its foreign currency-denominated debt as an economic hedge of its net investments in such foreign currency-denominated subsidiaries. In conjunction with the acquisition of First Data (see Note 4), the Company designated its Euro- and British Pound-denominated senior notes (see Note 12) as net investment hedges to hedge a portion of its net investment in certain subsidiaries whose functional currencies are the Euro and the British Pound. Accordingly, foreign currency transaction gains or losses on the qualifying net investment hedge instruments are recorded as foreign currency translation within other comprehensive (loss) income in the consolidated statements of comprehensive income and will remain in accumulated other comprehensive loss in the consolidated balance sheets until the sale or complete liquidation of the underlying foreign subsidiaries. The Company recorded a foreign currency translation loss, net of tax, of $151 million and $62 million in other comprehensive (loss) income from the Euro- and British Pound-denominated senior notes during the years ended December 31, 2020 and 2019, respectively.

15. Employee Benefit Plans

Defined Contribution Plans

The Company and its subsidiaries maintain defined contribution savings plans covering the majority of their employees. Under the plans, eligible participants may elect to contribute a specified percentage of their salaries and the Company makes matching contributions, each subject to certain limitations. The plans provide tax-deferred amounts for each participant, consisting of employee elective contributions, company matching and discretionary company contributions. In response to the COVID-19 pandemic, the Company has taken several actions since the onset of the pandemic to manage discretionary costs, including the temporary suspension of certain employee-related benefits such as company matching contributions to the plans during most of 2020. Expenses for company contributions under these plans totaled $38 million, $65 million and $44 million in 2020, 2019 and 2018, respectively. Effective January 1, 2021, company matching contributions were re-established to equal 100% on the first 1% contributed and 25% on the next 4% contributed for eligible participants.

In connection with the acquisition of First Data (see Note 4), the Company assumed defined contribution savings plans and defined contribution pension plans covering substantially all employees of the former First Data. Effective January 1, 2020, the 401(k) Savings Plan of Fiserv, Inc. (the “Plan”) was amended to freeze the Plan to new participants and contributions and to allow for the merger of the Plan into the surviving Fiserv 401(k) Savings Plan (f/k/a the First Data Corporation Incentive Savings Plan) (“New Fiserv Plan”) for the purpose of providing a single plan covering current and former employees of both companies and their affiliates. Participants in the Plan became eligible to make salary reduction contributions in the New Fiserv Plan effective January 1, 2020. The merger of the Plan into the New Fiserv Plan was completed in the third quarter of 2020.

Defined Benefit Plans

The Company maintains noncontributory defined benefit pension plans covering a portion of the employees in the United Kingdom (“U.K.”), the U.S., Germany and Austria. The majority of these plans are frozen and provide benefits to eligible employees based on an employee’s average final compensation and years of service.

The following table provides a reconciliation of benefit obligations, plan assets and the funded status of these defined benefit plans as of and for the years ended December 31:



	U.K. plan				U.S. and other plans
(In millions)	2020		2019		2020		2019
Change in projected benefit obligations:
Balance at beginning of year	$	(672)	$	—	$	(225)	$	—
Acquired First Data plans (see Note 4)	—		(687)		—		(219)

Interest cost	(14)		(6)		(6)		(3)
Actuarial gain (loss)	(93)		28		(18)		(15)
Benefits paid	30		12		13		12
Foreign currency translation	(28)		(19)		(2)		—
Balance at end of year	$	(777)	$	(672)	$	(238)	$	(225)

Change in fair value of plan assets:
Balance at beginning of year	$	860	$	—	$	167	$	—
Acquired First Data plans (see Note 4)	—		866		—		160
Actual return on plan assets	110		(19)		22		19
Company contribution	—		—		5		—
Benefits paid	(30)		(12)		(13)		(12)
Foreign currency translation	34		25		—		—
Balance at end of year	$	974	$	860	$	181	$	167

Funded status of the plans	$	197	$	188	$	(57)	$	(58)

The funded status of the defined benefit plans is recognized as an asset or a liability within other long-term assets or within other long-term liabilities in the consolidated balance sheets.

Projected Benefit Obligations

The Company records amounts relating to its defined benefit pension plan obligations and their associated expenses based on calculations which include actuarial assumptions, including the discount rate and the expected rate of return on plan assets. Changes in any of the assumptions and the amortization of differences between the assumptions and actual experience will affect the amount of pension expense in future periods. The Company reviews its actuarial assumptions at least annually and modifies the assumptions based on current rates and trends, as appropriate. The effects of modifications are recognized immediately within the consolidated balance sheets, and are generally amortized to operating income over future periods, with the deferred amount recorded in accumulated other comprehensive loss within the consolidated balance sheets. The Company’s funding policy is to contribute quarterly an amount as recommended by the plans’ independent actuaries. Company contributions under these plans totaled $5 million in 2020 and are expected to be nominal in 2021. The Company employs a building block approach in determining the expected long-term rate of return for plan assets with proper consideration of diversification and re-balancing. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to check for reasonableness and appropriateness.

The weighted-average rate assumptions used in the measurement of the Company’s projected benefit obligations and net periodic benefit expense as of and for the years ended December 31 were as follows:



	Projected Benefit Obligations				Net Periodic Benefit Expense
	2020		2019		2020		2019
Discount rate	1.56	%	2.28	%	1.95	%	2.16	%
Expected long-term return on plan assets	n/a		n/a		2.84	%	2.83	%

The estimated future benefit payments are expected to be as follows:



(In millions)
Year Ending December 31,
2021	$	32
2022	33
2023	36
2024	36
2025	37
2026-2030	200

Plan Assets

The Company’s investment strategy for the U.K. plan is to allocate the assets into two pools: (i) off-risk assets whereby the focus is risk management, protection and insurance relative to the liability target invested in, but not limited to, debt, U.K. government bonds and U.K. government index-linked bonds; and (ii) on-risk assets whereby the focus is on return generation and taking risk in a controlled manner. Such assets could include equities, government bonds, high-yield bonds, property, commodities or hedge funds. The Company’s target allocation for the U.K. plan is 50% on-risk assets and 50% off-risk assets. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies. The Company’s investment strategy for the U.S. plan employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio contains a diversified blend of equity and fixed-income investments. The Company sets an allocation mix necessary to support the underlying plan liabilities as influenced significantly by the demographics of the participants and the frozen nature of the plan. The Company’s target allocation for the U.S. plan based on the investment policy at December 31, 2020 was 50% on-risk assets and 50% off-risk assets.

The following table sets forth the Company’s plan assets carried and measured at fair value on a recurring basis at December 31:



(In millions)
2020	Level 1		Level 2		Level 3
Cash and cash equivalents	$	24	$	—	$	—
Equity securities (1)	20		175		—
Fixed income securities (2)	213		165		—
Other investments (3)	326		(4)		9
Total investments at fair value	$	583	$	336	$	9



(In millions)
2019	Level 1		Level 2		Level 3
Cash and cash equivalents	$	17	$	—	$	—
Equity securities (1)	134		123		—
Fixed income securities (2)	188		214		—
Other investments (3)	315		(22)		10
Total investments at fair value	$	654	$	315	$	10

(1)Equity securities primarily consist of domestic, international and global equity pooled funds.

(2)Fixed income securities primarily consist of debt securities issued by U.S. and foreign government agencies and debt obligations issued by a variety of private and public corporations.

(3)Other investments primarily consist of index linked government bonds, derivatives and other investments.

In addition to the investments presented within the fair value hierarchy table above, the Company’s plan assets include investments in various hedge funds that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. Such investments totaled $227 million and $48 million at December 31, 2020 and 2019, respectively.

Net Periodic Benefit Cost

The components of net periodic benefit expense were as follows for the years ended December 31:



(In millions)	2020		2019

Interest cost	$	20	$	9
Expected return on plan assets	(24)		(10)

Net periodic benefit income	$	(4)	$	(1)

16. Share-Based Compensation

The Company recognizes the fair value of share-based compensation awards granted to employees in cost of processing and services, cost of product, and selling, general and administrative expense in its consolidated statements of income.

The Company’s share-based compensation awards are typically granted in the first quarter of the year and primarily consist of the following:

Stock Options – The Company grants stock options to employees and non-employee directors at exercise prices equal to the fair market value of the Company’s stock on the dates of grant. Stock option grants generally vest over a three- or four-year period. All stock options expire ten years from the date of the award. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period of the stock option award.

Restricted Stock Units and Awards – The Company grants restricted stock units and awards to employees and non-employee directors. Restricted stock unit and award grants generally vest over a three- or four-year period. The Company recognizes compensation expense for restricted stock units and awards based on the market price of the common stock on the grant date over the period during which the units and awards vest.

Performance Share Units and Awards – The Company grants performance share units and awards to employees. The number of shares issued at the end of the performance period is determined by the level of achievement of pre-determined performance and market goals, including earnings, revenue growth, synergy attainment and shareholder return. The Company recognizes compensation expense on performance share units and awards ratably over the requisite three-year performance period of the award to the extent management views the performance goals as probable of attainment. The Company recognizes compensation expense for the fair value of the shareholder return component over the requisite service period of the award.

Employee Stock Purchase Plan – The Company maintains an employee stock purchase plan that allows eligible employees to purchase a limited number of shares of common stock each quarter through payroll deductions at a discount of the closing price of the Company’s common stock on the last business day of each calendar quarter. Effective January 1, 2020, the employee discount under the employee stock purchase plan was modified from 15% to 10%. In addition, the Company temporarily suspended the employee discount, effective April 9, 2020, to help manage discretionary costs in response to the COVID-19 pandemic. Effective January 1, 2021, the discount under the employee stock purchase plan was re-established at 5%, which is considered noncompensatory and therefore does not give rise to recognizable compensation cost.

The Company recognized $369 million, $229 million and $73 million of share-based compensation expense during the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020, the total remaining unrecognized compensation cost for unvested stock options, restricted stock units and awards and performance share units and awards, net of estimated forfeitures, of $276 million is expected to be recognized over a weighted-average period of 2.1 years. During the years ended December 31, 2020, 2019 and 2018, stock options to purchase 2.6 million, 4.7 million and 2.7 million shares, respectively, were exercised.

Acquisition of First Data

Upon the completion of the First Data acquisition on July 29, 2019 (see Note 4), First Data’s equity awards, whether vested or unvested, were either settled in shares of the Company’s common stock or converted into equity awards denominated in shares of the Company’s common stock based on a defined exchange ratio of 0.303, as described below.

First Data time-vesting awards that were granted at or prior to the initial public offering of First Data (the “First Data IPO”) were accelerated in full in accordance with their terms, except for certain executive officer awards and certain awards held by retirement-eligible employees, which were not accelerated and instead converted into equity awards denominated in shares of the Company’s common stock. Each such time-vesting, pre-IPO restricted stock and restricted stock unit award was settled in shares of the Company’s common stock based on the exchange ratio. Each time-vesting, pre-IPO stock option award was converted into an option to purchase a number of shares of the Company’s common stock based on the exchange ratio with an exercise price per share equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio.

First Data equity awards granted at the time of the First Data IPO that were subject to vesting solely upon achievement of a $32 price per share of First Data common stock were converted into equity awards denominated in shares of the Company’s common stock and remained eligible to vest upon satisfaction of an adjusted target price per share of the Company’s common stock equal to the existing First Data target price divided by the exchange ratio. Such awards vested during the third quarter of 2019. Each restricted stock and restricted stock unit award that was a performance-vesting IPO award was converted into an award denominated in shares of the Company’s common stock based on the exchange ratio, and each stock option award that was a performance-vesting award was converted into an option to purchase a number of shares of the Company’s common stock based on the exchange ratio with an exercise price per share equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio. As converted, the performance-vesting awards continued to be governed by the same terms and conditions as were applicable prior to the acquisition and vested during the year ended December 31, 2019 upon satisfaction of the adjusted performance condition.

The remaining existing First Data equity awards, whether vested or unvested, were converted into equity awards denominated in shares of the Company’s common stock based on the exchange ratio, with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio, and will continue to be governed by generally the same terms and conditions as were applicable prior to the acquisition; provided that, subject to compliance with Section 409A of the Internal Revenue Code, such awards will accelerate upon a covered termination as defined in the merger agreement.

The portion of the fair value of the replacement awards related to services provided prior to the acquisition was $768 million and was accounted for as consideration transferred. The remaining portion of the fair value of $467 million is associated with future service and was recognized as compensation expense, net of estimated forfeitures, over the weighted-average remaining vesting period of 1.2 years. The fair value of options that the Company assumed in connection with the acquisition of First Data were estimated using the Black-Scholes model with the following assumptions:



Expected life (in years)	2.5
Average risk-free interest rate	1.9	%
Expected volatility	27.4	%
Expected dividend yield	0	%

The Company determined the expected life of stock options using a midpoint approach considering the vesting schedule, contractual terms and current option life-to-date. The risk-free interest rate was based on the U.S. treasury yield curve in effect as of the acquisition date. Expected volatility was determined using a weighted-average of the implied volatility and the mean reversion volatility of the Company’s stock at the time of conversion.

Share-Based Compensation Activity

The weighted-average estimated fair value of stock options granted during 2020, 2019 and 2018 was $35.02, $28.52 and $22.48 per share, respectively. The fair values of stock options granted were estimated on the date of grant using a binomial option-pricing model with the following assumptions:



	2020		2019		2018
Expected life (in years)	6.4		6.4		6.3
Average risk-free interest rate	1.8	%	2.7	%	2.2	%
Expected volatility	28.3	%	28.5	%	28.3	%
Expected dividend yield	0	%	0	%	0	%

The Company determined the expected life of stock options using historical data. The risk-free interest rate was based on the U.S. treasury yield curve in effect as of the grant date. Expected volatility was determined using weighted-average implied market volatility combined with historical volatility. The Company believes that a blend of historical volatility and implied volatility better reflects future market conditions and better indicates expected volatility than purely historical volatility.

A summary of stock option activity is as follows:



	Shares (In thousands)	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (In millions)
Stock options outstanding - December 31, 2019	15,989	$	42.83

Granted	1,522	112.65
Forfeited	(186)	93.66
Exercised	(2,636)	35.07
Stock options outstanding - December 31, 2020	14,689	$	50.82	4.60	$	926
Stock options exercisable - December 31, 2020	12,222	$	41.14	3.79	$	889

A summary of restricted stock unit and performance share unit activity is as follows:



	Restricted Stock Units			Performance Share Units
	Shares (In thousands)	Weighted- Average Grant Date Fair Value		Shares (In thousands)	Weighted- Average Grant Date Fair Value
Units - December 31, 2019	6,869	$	93.80	2,328	$	94.61

Granted	1,671	111.27		—	—
Forfeited	(293)	94.33		(28)	90.41
Vested	(3,450)	95.86		(479)	92.62
Units - December 31, 2020	4,797	$	98.29	1,821	$	95.20

A summary of restricted stock award activity is as follows:



	Restricted Stock Awards
	Shares (In thousands)	Weighted-Average Grant Date Fair Value
Awards - December 31, 2019	48	$	102.30

Granted	—	—
Forfeited	—	—
Vested	(48)	102.30
Awards - December 31, 2020	—	$	—

The table below presents additional information related to stock option and restricted stock unit activity:



(In millions)	2020		2019		2018
Total intrinsic value of stock options exercised	$	194	$	331	$	147
Fair value of restricted stock units vested	454		198		37
Income tax benefit from stock options exercised and restricted stock units vested	156		126		43
Cash received from stock options exercised	83		104		29

At December 31, 2020, 30.5 million share-based awards were available for grant under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan. Under its employee stock purchase plan, the Company issued 0.5 million shares in 2020, 0.6 million shares in 2019 and 0.7 million shares in 2018. At December 31, 2020, there were 24.2 million shares available for issuance under the employee stock purchase plan.

17. Restructuring and Other Charges

In connection with the acquisition of First Data, the Company continues to implement integration plans focused on reducing the Company’s overall cost structure, including reducing vendor spend and eliminating duplicate costs. The Company recorded restructuring charges related to certain of these integration activities of $303 million and $56 million, primarily reported in cost of processing and service and selling, general and administrative expenses within the consolidated statements of income, based upon committed actions during the years ended December 31, 2020 and 2019, respectively. The Company continues to evaluate operating efficiencies and anticipates incurring additional costs in connection with these activities, but is unable to estimate those amounts at this time as such plans are not yet finalized.

Employee Termination Costs

The Company recorded $131 million and $32 million of employee termination costs related to severance and other separation costs for terminated employees in connection with the acquisition of First Data during the years ended December 31, 2020 and 2019, respectively. The following table summarizes the changes in the reserve related to the Company’s employee severance and other separation costs during the years ended December 31:



(In millions)	2020		2019
Balance at beginning of year	$	14	$	—
Severance and other separation costs	131		32

Cash payments	(118)		(18)
Balance at end of year	$	27	$	14

The employee severance and other separation costs accrual balance of $27 million at December 31, 2020 is expected to be paid within the next twelve months. In addition, the Company recorded $48 million and $23 million of share-based compensation costs during the years ended December 31, 2020 and 2019, respectively, related to the accelerated vesting of equity awards for terminated employees.

Facility Exit Costs

The Company has identified certain leased facilities that have been or will be exited in the future as part of the Company’s efforts to reduce facility costs. During 2020, the Company permanently vacated certain of these leased facilities in advance of the non-cancellable lease terms. In conjunction with the exit of these leased facilities, the Company assessed the respective operating lease ROU assets for impairment by comparing the carrying values of the ROU assets to the discounted cash flows from estimated sublease payments (Level 3 of the fair value hierarchy). In addition, the Company assessed certain property and equipment associated with the leased facilities for impairment. As a result, the Company recorded non-cash impairment charges of $124 million, reported in selling, general and administrative expense within the consolidated statement of income during the year ended December 31, 2020, associated with the early exit of these leased facilities. In addition, the Company recorded facility exit and related costs during the year ended December 31, 2019, primarily related to relocation costs and lease exit or termination fees, as well as ongoing operating expenses of certain vacated facilities; however, such costs were not significant.

Other Costs

During 2020, in connection with initiatives to reduce the Company’s overall cost structure following the acquisition of First Data, the Company terminated certain of its existing lease agreements to upgrade and consolidate its computing infrastructure.

The Company upgraded or replaced certain leased hardware under separate, new lease agreements, resulting in the early termination and disposal of existing hardware under the current lease agreements. As such, the Company has adjusted the amortization period for these existing lease agreements to coincide with the modified remaining term. Finance lease expense during the year ended December 31, 2020 includes $62 million of accelerated amortization associated with the termination of these vendor contracts. In addition, the Company executed similar terminations to certain of its existing software financing agreements. Amortization expense during the year ended December 31, 2020 includes $56 million of accelerated amortization associated with the termination of these vendor contracts.

During 2019, the Company recorded a $48 million non-cash impairment charge, reported primarily in cost of processing and services within the consolidated statements of income, associated with an international core account processing platform. Such impairment charge primarily related to the write-off of certain of the Fintech segment’s purchased and capitalized software development costs; however, are presented within Corporate and Other as such charge was excluded from the Company’s measure of the Fintech segment’s operating performance.

18. Income Taxes

Substantially all of the Company’s pre-tax earnings are derived from domestic operations in all periods presented. The income tax provision was as follows for the years ended December 31:



(In millions)	2020		2019		2018
Components of income tax provision (benefit):
Current:
Federal	$	(25)	$	25	$	189
State	71		69		39
Foreign	79		57		17
	125		151		245
Deferred:
Federal	189		118		110
State	(34)		(18)		24
Foreign	(84)		(53)		(1)
	71		47		133
Income tax provision	$	196	$	198	$	378

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31:



	2020		2019		2018
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal effect	2.0	%	3.7	%	3.2	%

Tax expense due to federal tax reform	—	%	—	%	1.2	%

Enacted United Kingdom tax rate change	2.8	%	—	%	—	%
Foreign derived intangibles income deduction	(3.2)	%	(0.2)	%	(0.2)	%
Excess tax benefit from share-based awards	(3.9)	%	(5.1)	%	(2.2)	%
Sale of businesses and subsidiary restructuring	0.7	%	(2.6)	%	1.3	%

Unrecognized tax benefits	(1.0)	%	(0.1)	%	—	%
Nondeductible executive compensation	2.0	%	1.0	%	0.2	%
Valuation Allowance	(1.7)	%	0.3	%	—	%
Other, net	(2.0)	%	0.3	%	(0.2)	%
Effective income tax rate	16.7	%	18.3	%	24.3	%

Significant components of deferred tax assets and liabilities consisted of the following at December 31:



(In millions)	2020		2019
Accrued expenses	$	189	$	303

Share-based compensation	185		216
Net operating loss and credit carry-forwards	1,158		1,444
Foreign tax credits on undistributed earnings	—		289
Leasing liabilities	171		219
Other	76		65
Subtotal	1,779		2,536
Valuation allowance	(888)		(1,145)
Total deferred tax assets	891		1,391

Capitalized software development costs	(614)		(622)
Intangible assets	(2,993)		(3,297)
Property and equipment	(198)		(143)
Capitalized commissions	(87)		(86)
Investments in joint ventures	(908)		(841)
Leasing right-of-use assets	(141)		(205)

Other	(311)		(332)
Total deferred tax liabilities	(5,252)		(5,526)
Total	$	(4,361)	$	(4,135)

In connection with the acquisition of First Data (see Note 4), the Company recorded $3.7 billion of deferred tax liabilities for the deferred tax effects associated with the fair value of assets acquired and liabilities assumed using the applicable tax rates, with a corresponding adjustment to goodwill. During the current year through the measurement period ended July 29, 2020, the Company recognized an incremental increase of $136 million to deferred tax liabilities related to measurement period adjustments, with a corresponding adjustment to goodwill. The measurement period adjustments to the preliminary First Data purchase price allocation were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date.

The Company recorded a valuation allowance of $888 million and $1.1 billion at December 31, 2020 and 2019, respectively, against its deferred tax assets. The decrease in the valuation allowance in 2020 is primarily the result of a subsidiary restructuring. Substantially all of the acquired First Data valuation allowance relates to certain foreign and state net operating loss carryforwards.

Deferred tax assets and liabilities are reported in the consolidated balance sheets as follows at December 31:



(In millions)	2020		2019
Noncurrent assets	$	28	$	112
Noncurrent liabilities	(4,389)		(4,247)
Total	$	(4,361)	$	(4,135)

Noncurrent deferred tax assets are included in other long-term assets in the consolidated balance sheets at December 31, 2020 and 2019.

The following table presents the amounts of federal, state and foreign net operating loss carryforwards and general business credit carryforwards at December 31:



(In millions)	2020		2019
Net operating loss carryforwards: (1)
Federal	$	443	$	1,674
State	3,944		4,636
Foreign	3,343		3,201
General business credit carryforwards (2)	41		57

(1)At December 31, 2020, the Company had federal net operating loss carryforwards of $443 million, most of which expire in 2021 through 2037, state net operating loss carryforwards of $3.9 billion, most of which expire in 2021 through 2040, and foreign net operating loss carryforwards of $3.3 billion, of which $263 million expire in 2021 through 2040, and the remainder of which do not expire.

(2)At December 31, 2020, the Company had general business credit carryforwards of $41 million which expire in 2025 through 2038.

The Company asserts that its investment in its foreign subsidiaries is intended to be indefinitely reinvested with limited exceptions for select foreign subsidiaries. Undistributed historical and future earnings of its foreign subsidiaries are not considered to be indefinitely reinvested. Should these earnings be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign taxes. The Company has the ability and intent to limit distributions so as to not make a distribution in excess of its investment in those subsidiaries. The Company will continue to monitor its global cash requirements and the need to recognize a deferred tax liability.

Unrecognized tax benefits were as follows at December 31:



(In millions)	2020		2019		2018
Unrecognized tax benefits - Beginning of year	$	145	$	49	$	42
Increases for assumed tax positions related to First Data	—		82		—
Increases for tax positions taken during the current year	9		8		3
Increases for tax positions taken in prior years	53		16		20
Decreases for tax positions taken in prior years	(23)		(2)		(8)
Decreases for settlements	(2)		(1)		—
Lapse of the statute of limitations	(11)		(7)		(8)
Unrecognized tax benefits - End of year	$	171	$	145	$	49

At December 31, 2020, unrecognized tax benefits of $116 million, net of federal and state benefits, would affect the effective income tax rate if recognized. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $61 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states and foreign countries, and the lapse of the statute of limitations in various state and foreign jurisdictions.

The Company classifies interest expense and penalties related to income taxes as components of its income tax provision. The income tax provision included interest expense and penalties on unrecognized tax benefits of $3 million in 2020, $2 million in 2019 and $1 million in 2018. Accrued interest expense and penalties related to unrecognized tax benefits totaled $22 million and $19 million at December 31, 2020 and 2019, respectively.

The Company’s U.S. federal income tax returns for 2016 through 2020, and tax returns in certain states and foreign jurisdictions for 2005 through 2020, remain subject to examination by taxing authorities. In connection with the acquisition of First Data, the Company is subject to income tax examination from 2009 forward in relation to First Data’s U.S. federal income tax return. State and local examinations are substantially complete through 2010 in relation to First Data’s state and local tax filings. Foreign jurisdictions generally remain subject to examination by their respective authorities from 2010 forward in relation to First Data’s foreign tax filings, none of which are considered significant jurisdictions.

During the third quarter of 2020, the U.S. Department of Treasury released certain proposed and final regulations relating to provisions that were enacted under the Tax Cuts and Jobs Act of 2017. The new regulations did not have a material impact on the Company’s consolidated financial statements.

The Company accounts for research and development costs in accordance with ASC subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs are charged to expense as incurred. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. In September 2017, the Internal Revenue Service issued Directive LB&I-04-0917-005 pertaining to the allowance of the credit for increasing research activities under Internal Revenue Code section 41 allowing a safe harbor for LB&I taxpayers reporting research and development costs under ASC 730-10. During the year ended December 31, 2020, the Company incurred $150 million of research and development costs related to First Data.

19. Commitments and Contingencies

Litigation

In the normal course of business, the Company or its subsidiaries are named as defendants in lawsuits in which claims are asserted against the Company. In addition, the Company assumed certain legal proceedings in connection with the acquisition of First Data (see Note 4) primarily associated with its merchant business including claims associated with alleged processing errors and a tax matter. In 2020, the Company resolved a matter with the Federal Trade Commission related to a U.S.-based wholesale independent sales organization resulting in a payment of $40 million, for which the Company previously had accrued. The Company maintained reserves of $32 million and $43 million at December 31, 2020 and 2019, respectively, related to its various legal proceedings, primarily associated with the Company’s merchant business as described above. The Company’s estimate of the possible range of exposure for various litigation matters in excess of amounts accrued is $0 million to approximately $60 million. In the opinion of management, the liabilities, if any, which may ultimately result from such lawsuits are not expected to have a material adverse effect on the Company’s consolidated financial statements.

Electronic Payments Transactions

In connection with the Company’s processing of electronic payments transactions, funds received from subscribers are invested from the time the Company collects the funds until payments are made to the applicable recipients. These subscriber funds are invested in short-term, highly liquid investments. Subscriber funds, which are not included in the Company’s consolidated balance sheets, can fluctuate significantly based on consumer bill payment and debit card activity and totaled approximately $1.7 billion and $2.0 billion at December 31, 2020 and 2019, respectively.

Indemnifications and Warranties

The Company may indemnify its clients from certain costs resulting from claims of patent, copyright or trademark infringement associated with its clients’ use of the Company’s products or services. The Company may also warrant to clients that its products and services will operate substantially in accordance with identified specifications. From time to time, in connection with sales of businesses, the Company agrees to indemnify the buyers of such businesses for liabilities associated with the businesses that are sold. Payments, net of recoveries, under such indemnification or warranty provisions were not material to the Company’s consolidated results of operations or financial position.

20. Related Party Transactions

Merchant Alliances

A significant portion of the Company’s business is conducted through merchant alliances between the Company and financial institutions (see Note 9). To the extent the Company maintains a controlling financial interest in an alliance, the alliance’s financial statements are consolidated with those of the Company and the related processing fees are treated as an intercompany transaction and eliminated in consolidation. To the extent the Company has significant influence but not control in an alliance, the Company uses the equity method of accounting to account for its investment in the alliance. As a result, the Company’s consolidated revenues include processing fees, administrative service fees, and other fees charged to alliances accounted for under the equity method. Such fees totaled $183 million and $76 million for the years ended December 31, 2020 and 2019, respectively. No directors or officers of the Company have ownership interests in any of the alliances. The formation of each of these alliances generally involves the Company and the bank contributing contractual merchant relationships to the alliance and a cash payment from one owner to the other to achieve the desired ownership percentage for each. The Company and the bank enter into a long-term processing service agreement as part of the negotiation process. This agreement governs the Company’s provision of transaction processing services to the alliance. At December 31, 2020 and 2019, the Company had approximately $37 million and $35 million, respectively, of amounts due from unconsolidated merchant alliances included within trade accounts receivable, net in the Company’s consolidated balance sheets.

Effective July 1, 2020, the Company and Bank of America dissolved their BAMS joint venture, of which the Company maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation.

The revenues and expenses of the BAMS joint venture were consolidated into the Company’s financial results through the date of dissolution. See Note 4 for additional information.

Joint Venture Transition Services Agreements

Pursuant to certain transition services agreements, the Company provides, at fair value, various administration, business process outsourcing, and technical and data center related services for defined periods to the Lending Joint Ventures and Tegra 118 (see Note 4). Amounts transacted through these agreements totaled $58 million, $36 million and $30 million during the years ended December 31, 2020, 2019 and 2018, respectively, and were primarily recognized as processing and services revenue in the Company’s consolidated statements of income.

Share Repurchase

On December 14, 2020, New Omaha Holdings L.P. (“New Omaha”), a shareholder of the Company, completed an underwritten secondary public offering of 20.1 million shares of Fiserv, Inc. common stock (the “offering”). The Company did not sell any shares in, nor did it receive any proceeds from, the offering. New Omaha received all of the net proceeds from the offering. In connection with the offering, the Company repurchased from the underwriters 1.8 million shares of its common stock that were subject to the offering, at a price equal to the price per share paid by the underwriters to New Omaha in the offering (the “share repurchase”). The share repurchase totaled $200 million and was funded with cash on hand. The repurchased shares were cancelled and no longer outstanding following the completion of the share repurchase. Prior to the offering, New Omaha owned approximately 16% of the Company’s outstanding shares of common stock, and following the offering, New Omaha owned approximately 13% as of December 31, 2020.

21. Business Segment Information

Following the Segment Realignment (see Note 1), the Company’s operations are comprised of the Acceptance segment, the Fintech segment and the Payments segment.

The businesses in the Acceptance segment provide a wide range of commerce-enabling solutions to merchants of all sizes around the world. These solutions include point-of-sale merchant acquiring and digital commerce services; mobile payment services; security and fraud protection products; CaratSM, the Company’s omnichannel commerce ecosystem; and the Company’s cloud-based Clover point-of-sale platform, which includes a marketplace for proprietary and third-party business applications. The products and services in the global Acceptance businesses are distributed through a variety of channels, including through direct sales teams, strategic partnerships with agent sales forces, independent software vendors, financial institutions and other strategic partners in the form of joint venture alliances, revenue sharing alliances and referral agreements. Many merchants, financial institutions and distribution partners within the Acceptance segment are also clients of the Company’s other segments.

The businesses in the Fintech segment provide financial institutions around the world with the technology solutions they need to run their operations, including products and services that enable financial institutions to process customer deposit and loan accounts, as well as management of an institution’s general ledger and central information files. As a complement to the core account processing functionality, the businesses in the global Fintech segment also provide digital banking, financial and risk management, cash management, professional services and consulting, item processing and source capture, and other products and services that support numerous types of financial transactions. In addition, some of the businesses in the Fintech segment provide products or services to corporate clients to facilitate the management of financial processes and transactions. Many of the products and services offered in the Fintech segment are integrated with solutions from the Company’s other segments.

The businesses in the Payments segment provide financial institutions and corporate clients around the world with the products and services required to process digital payment transactions. This includes card transactions such as debit, credit and prepaid card processing and services, a range of network services, security and fraud protection products, card production and print services. In addition, the Payments segment businesses offer non-card digital payment software and services, including bill payment, account-to-account transfers, person-to-person payments, electronic billing, and security and fraud protection products. Clients of the global Payments segment businesses reflect a wide range of industries, including merchants, distribution partners and financial institution customers in the Company’s other segments.

Corporate and Other supports the reportable segments described above, and consists of amortization of acquisition-related intangible assets, unallocated corporate expenses and other activities that are not considered when management evaluates segment performance, such as gains or losses on sales of businesses, costs associated with acquisition and divestiture activity, and the Company’s Output Solutions postage reimbursements. Corporate and Other also includes the historical results of the Company’s Investment Services business, of which the Company sold a 60% controlling interest in February 2020 (see Note 4), as well as certain transition services revenue associated with various dispositions.

Operating results for each segment are presented below and include the results of First Data from July 29, 2019, the date of acquisition. Segment results for the years ended December 31, 2019 and 2018 have been restated to reflect the Segment Realignment.



(In millions)	Acceptance		Fintech		Payments		Corporate and Other		Total
2020
Processing and services revenue	$	4,736	$	2,714	$	4,702	$	63	$	12,215
Product revenue	786		187		802		862		2,637
Total revenue	5,522		2,901		5,504		925		14,852
Operating income (loss) (1)	1,427		992		2,361		(2,928)		1,852
Capital expenditures, including capitalized software and other intangibles	227		183		242		248		900
Depreciation and amortization expense	239		202		248		2,568		3,257

2019
Processing and services revenue	$	2,215	$	2,737	$	3,431	$	190	$	8,573
Product revenue	356		205		478		575		1,614
Total revenue	2,571		2,942		3,909		765		10,187
Operating income (loss)	764		885		1,658		(1,698)		1,609
Capital expenditures, including capitalized software and other intangibles	147		182		196		196		721
Depreciation and amortization expense	146		191		204		1,237		1,778

2018
Processing and services revenue	$	—	$	2,692	$	2,101	$	182	$	4,975
Product revenue	—		225		307		316		848
Total revenue	—		2,917		2,408		498		5,823
Operating income (loss) (1)	—		851		1,081		(179)		1,753
Capital expenditures, including capitalized software and other intangibles	—		153		67		140		360
Depreciation and amortization expense	—		185		81		290		556

(1)Corporate and Other includes gains of $428 million from the sale of a 60% interest of the Company’s Investment Services business and $36 million on the dissolution of BAMS in 2020, as well as a gain of $227 million from the sale of a 55% interest of the Company’s Lending Solutions business in 2018.

22. Quarterly Financial Data (unaudited)

Quarterly financial data for 2020 and 2019 was as follows:



(In millions, except per share data)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
2020
Total revenue	$	3,769	$	3,465	$	3,786	$	3,832	$	14,852
Cost of processing and services	1,635		1,466		1,387		1,353		5,841
Cost of product	532		454		481		504		1,971
Selling, general and administrative expenses	1,404		1,377		1,412		1,459		5,652
(Gain) loss on sale of businesses	(431)		3		(36)		—		(464)
Total expenses	3,140		3,300		3,244		3,316		13,000
Operating income	629		165		542		516		1,852
Net income	377		9		276		313		975
Net income attributable to Fiserv, Inc.	392		2		264		300		958
Comprehensive (loss) income attributable to Fiserv, Inc.	(239)		169		77		744		751
Net income attributable to Fiserv, Inc. per share: (1)
Basic	$	0.58	$	—	$	0.39	$	0.45	$	1.42
Diluted	$	0.57	$	—	$	0.39	$	0.44	$	1.40

2019 (2)
Total revenue	$	1,502	$	1,512	$	3,128	$	4,045	$	10,187
Cost of processing and services	624		617		1,204		1,571		4,016
Cost of product	174		168		413		538		1,293
Selling, general and administrative expenses	341		343		1,137		1,463		3,284
Gain on sale of businesses	(10)		—		—		(5)		(15)
Total expenses	1,129		1,128		2,754		3,567		8,578
Operating income	373		384		374		478		1,609
Net income	225		223		225		241		914
Net income attributable to Fiserv, Inc.	225		223		198		247		893
Comprehensive income attributable to Fiserv, Inc.	207		115		12		446		780
Net income attributable to Fiserv, Inc. per share: (1)
Basic	$	0.58	$	0.57	$	0.34	$	0.36	$	1.74
Diluted	$	0.56	$	0.56	$	0.33	$	0.36	$	1.71

(1)Net income attributable to Fiserv, Inc. per share in each period is calculated using actual, unrounded amounts.

(2)Includes the results of First Data from July 29, 2019, the date of acquisition.

Fiserv, Inc.

Schedule II — Valuation and Qualifying Accounts

(In millions)



			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses	Charged to Other Accounts	Deductions		Balance at End of Period
Year ended December 31, 2020
Deferred tax asset valuation allowance	$	1,145	6	64	(327)	(2)	$	888
Year ended December 31, 2019
Deferred tax asset valuation allowance (1)	$	101	8	1,036	—		$	1,145
Year ended December 31, 2018
Deferred tax asset valuation allowance	$	103	1	(3)	—		$	101

(1)Includes the valuation allowance adjustment associated with the acquisition of First Data.

(2)The decrease in the deferred tax asset valuation allowance is primarily due to a subsidiary restructuring.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Fiserv, Inc:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Fiserv, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842) using the modified retrospective method.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue – Refer to Note 3 to the consolidated financial statements

Critical Audit Matter Description

The Company generates revenue from the delivery of processing, service and product solutions. Revenue is measured based on consideration specified in a contract with a customer, and the Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, which may be at a point in time or over time. The Company’s revenue consists of a significant volume of transactions sourced from multiple systems and applications. The processing of such transactions and recording of revenue is system-driven and based on contractual terms with customers. In addition, contract modifications occur when the Company and its customers agree to modify existing customer contracts to

change the scope or price (or both) of the contract. Contract modifications also occur when a customer terminates some, or all, of the existing services provided by the Company, which may result in the customer paying a termination fee to the Company based upon the terms in the initial contract. When a contract modification occurs, it requires the Company to exercise judgment to determine if the modification should be accounted for as: (i) a separate contract, (ii) the termination of the original contract and creation of a new contract, or (iii) a cumulative catch up adjustment to the original contract. Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract, including the allocation of consideration to the remaining performance obligations and the period of recognition for each identified performance obligation.

We identified the complexity of revenue processing and revenue recognition, including customer contract modifications, as a critical audit matter because of the increased extent of effort and involvement of professionals in our firm having expertise in information technology (IT) to identify, test, and evaluate the Company’s systems and automated controls and the management judgments necessary to determine the appropriate accounting. This required an increased extent of effort and a high degree of auditor judgment when performing audit procedures to evaluate whether revenue transactions were recognized appropriately.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenue recognition included the following, among others:

We evaluated management’s significant accounting policies.
We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various reports extracted from the IT systems to the Company’s general ledger and those related to the Company’s accounting for contract modifications.
With the assistance of professionals in our firm having expertise in IT, we:

◦Identified the relevant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.

◦Tested system interface controls and automated controls within the relevant revenue streams, as well as the controls designed to assess the accuracy and completeness of revenue.

We developed expectations of revenue at a disaggregated level based on historical transaction prices and current year volumes. We compared those estimates to revenue recognized by the Company.
For a sample of revenue transactions, we tested selected transactions by agreeing the amounts of revenue recognized to source documents and testing the mathematical accuracy of the recorded revenue.
We selected a sample of significant customer contract modifications and performed the following procedures:

◦Obtained and read the customer contracts.

◦Evaluated whether the contract represented a new contract or a contract modification and, if applicable, assessed the treatment of any change in scope or price.

◦Tested management’s identification of remaining performance obligations.

◦Recalculated the transaction price and assessed the appropriateness of the allocation of transaction price to each performance obligation.

◦Assessed the pattern of delivery for each distinct performance obligation.

Banc of America Merchant Services – Joint Venture Dissolution – Refer to Note 4 to the consolidated financial statements

Critical Audit Matter Description

The Company and Bank of America previously announced the planned dissolution of the Banc of America Merchant Services (“BAMS”) joint venture. Effective July 1, 2020, the Company and Bank of America dissolved the BAMS joint venture, of which the Company maintained a 51% controlling ownership interest. Due to the nature of the transaction, the dissolution was accounted for as a non-pro-rata distribution of value to Bank of America, which was accounted for at fair value resulting in the recognition of a pre-tax gain of $36 million for the Company. In determining the fair value, the Company obtained assistance from a third-party valuation specialist to measure the fair value of the client contracts intangible assets. The determination of fair value of the client contracts intangible assets required the Company to make significant judgments and assumptions related to expected future cash flows, revenue growth, retention rates and discount rate.

We identified the dissolution of the BAMS joint venture as a critical audit matter because of the significant estimates and assumptions made by the Company and the complexities of the technical accounting for the dissolution. The transaction required a high degree of auditor judgment and an increased extent of effort, including the need to involve our specialists when performing audit procedures to evaluate the reasonableness of the Company’s client contracts intangible assets attrition valuation assumptions and discount rate, as well as to analyze the associated non-pro rata fair value accounting treatment relating to the transaction.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the technical accounting and valuation of the BAMS joint venture dissolution transaction included the following, among others:

We tested the overall accounting treatment of the transaction’s key provisions through review of the separation agreement to evaluate that the transaction was recorded appropriately under U.S. GAAP with the assistance of professionals in our firm having expertise in dissolution transactions.
We evaluated the reasonableness of management’s expected future cash flows utilized in determining the fair value of the client contracts intangible assets by comparing the projections to the Company’s historical results, industry data and other publicly available data.
With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies and (2) the retention rates and discount rate associated with the client contracts intangible assets by:

◦Assessing the appropriateness of the valuation methodologies.

◦Developing independent estimates for the retention rates and discount rate, and comparing those to the estimates selected by management.

We tested the effectiveness of internal controls over the valuation and the technical accounting treatment of the transaction.

Goodwill - Certain Reporting Units – Refer to Notes 1 and 8 to the consolidated financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using both a discounted cash flow model and a market approach. The determination of fair value using the discounted cash flow model requires management to make significant estimates and assumptions, which include assumptions related to revenue growth rates and discount rates. The goodwill balance was $36,322 million as of December 31, 2020, of which $30,811 million was acquired as a result of the July 29, 2019 acquisition of First Data Corporation (“First Data”). For all reporting units, the fair values exceeded the carrying values and therefore, no impairment was recognized.

Four of the reporting units that were acquired as part of the First Data acquisition had goodwill balances of $813 million, $1,602 million, $1,904 million and $7,979 million, respectively, and their fair values exceeded their carrying values as of the annual assessment date by a range of 14% to 21%. Revenue growth rates and discounts rates for these four reporting units are sensitive to significant and long-term deterioration in the macroeconomic environment, industry or market conditions.

We identified goodwill for these four reporting units as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of these reporting units and the sensitivity of operations to changes in the macroeconomic environment, industry or market conditions. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having expertise in valuation, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to revenue growth rates and selection of the discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the revenue growth rates and the selection of discount rates for the four reporting units included the following, among others:

We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of these reporting units, specifically controls related to management’s forecasts and selection of the discount rates.
We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.
We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) expected results at the time of the First Data acquisition, (3) industry reports containing analyses of the Company’s and its competitors’ products and (4) forecasted information included in Company press releases as well as in analyst and industry reports of the Company and companies in its peer group.
With the assistance of professionals in our firm having expertise in valuation, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin

February 26, 2021

We have served as the Company’s auditor since 1985.

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