XML 83 R15.htm IDEA: XBRL DOCUMENT v3.20.1
Goodwill And Intangible Assets, Net
 9 Months Ended
Mar. 31, 2020
Goodwill And Intangible Assets, Net [Abstract]  
Goodwill And Intangible Assets, Net

8. Goodwill and intangible assets, net

Goodwill

Impairment loss

Three and nine months ended March 31, 2020

During the three and nine months ended March 31, 2020, the Company performed an impairment analysis and recognized an impairment loss of approximately $5,6 million, related to goodwill allocated to its EasyPay business within its South African transaction processing operating segment. The impairment loss resulted from a reassessment of the business’s growth prospects given the challenging economic environment in South Africa. The impairment is included within the caption impairment loss in the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2020.

In order to determine the amount of the EasyPay goodwill impairment, the estimated fair value of EasyPay’s business assets and liabilities were compared to the carrying value of its assets and liabilities. The Company used a discounted cash flow model in order to determine the fair value of EasyPay. Based on this analysis, the Company determined that the carrying value of EasyPay’s assets and liabilities exceeded their fair value at the reporting date.

Three and nine months ended March 31, 2019

The Company assesses the carrying value of goodwill for impairment annually, or more frequently, whenever events occur and circumstances change indicating potential impairment. The Company performs its annual impairment test as of June 30 of each year. The Company did not recognize an impairment loss during the three months ended March 31, 2019. During the second quarter of fiscal 2019, the three and six months ended December 31, 2018, the Company recognized an impairment loss of approximately $8.2 million, of which approximately $7.0 million related to goodwill allocated to its International Payment Group (“IPG”) business within its international transaction processing operating segment and $1.2 million related to goodwill within its South African transaction processing operating segment.

Given the consolidation and restructuring of IPG over the period to December 31, 2018, several business lines were terminated or meaningfully reduced, resulting in lower than expected revenues, profits and cash flows. IPG’s new business initiatives are still in their infancy, and it is expected to generate lower cash flows than initially forecast. In order to determine the amount of goodwill impairment, the estimated fair value of the Company’s IPG business assets and liabilities were compared to the carrying value of IPG’s assets and liabilities. The Company used a discounted cash flow model in order to determine the fair value of IPG. The allocation of the fair value of IPG required the Company to make a number of assumptions and estimates about the fair value of assets and liabilities where the fair values were not readily available or observable. Based on this analysis, the Company determined that the carrying value of IPG’s assets and liabilities exceeded their fair value at the reporting date.

In the event that there is a further deterioration in the South African transaction processing and the international transaction processing operating segments, or in any other of the Company’s businesses, this may lead to additional impairments in future periods.

8. Goodwill and intangible assets, net (continued)

Goodwill (continued)

Impairment loss (continued)

Summarized below is the movement in the carrying value of goodwill for the nine months ended March 31, 2020:

Gross valueAccumulated impairmentCarrying value
Continuing$72 473$(35 157)$37 316
Discontinued (Note 2)112 071-112 071
Balance as of June 30, 2019184 544(35 157)149 387
Impairment loss-(5 589)(5 589)
Disposal of FIHRST (Note 2)(599)-(599)
Deconsolidation of Net1 Korea (Note 2) (107 964)-(107 964)
Foreign currency adjustment (1) (12 459)658(11 801)
Balance as of March 31, 2020$63 522$(40 088)-23 434

(1) – The foreign currency adjustment represents the effects of the fluctuations between the South African rand, the Euro and the Korean won, and the U.S. dollar on the carrying value.

Goodwill has been allocated to the Company’s reportable segments as follows:

South African transaction processingInternational transaction processingFinancial inclusion and applied technologiesCarrying value
Continuing$19 208$657$17 451$37 316
Discontinued (Note 2)-112 071-112 071
Balance as of June 30, 201919 208112 72817 451149 387
Impairment loss(5 589)--(5 589)
Disposal of FIHRST (Note 2)(599)--(599)
Deconsolidation of Net1 Korea (Note 2) -(107 964)-(107 964)
Foreign currency adjustment (1) (3 980)(4 107)(3 714)(11 801)
Balance as of March 31, 2020$9 040$657$13 737$23 434

(1) – The foreign currency adjustment represents the effects of the fluctuations between the South African rand, the Euro and the Korean won, and the U.S. dollar on the carrying value.

8. Goodwill and intangible assets, net (continued)

Intangible assets

Impairment loss

Three and nine months ended March 31, 2020

During the three and nine months ended March 31, 2020, the Company determined that its indefinite-lived intangible asset, a Maltese e-money license, of $0,7 million was impaired. The facts and circumstances leading up to the impairment include the losses incurred by the Company’s IPG business unit. In fiscal 2019, IPG formulated a plan to return to profitability, however, it has missed a number of key deliverables deadlines, and is currently reformulating its growth plans following the decision not to acquire a controlling stake in Bank Frick. The impairment is included within the caption impairment loss to the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2020. The intangible asset was not allocated to an operating segment and is included within corporate/ eliminations (refer to Note 19).

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of the intangible assets as of March 31, 2020, and June 30, 2019:

As of March 31, 2020As of June 30, 2019
Gross carrying valueAccumulated amortizationNet carrying valueGross carrying valueAccumulated amortizationNet carrying value
Finite-lived intangible assets:
Customer relationships$20 568$(20 256)$312$24 234$(23 527)$707
Software and unpatented
technology4 251(4 080)1718 423(8 181)242
FTS patent 2 141(2 141)-2 721(2 721)-
Trademarks 2 679(2 322)3573 114(2 607)507
Total finite-lived intangible assets $29 639$(28 799)840$38 492$(37 036)1 456
Infinite-lived intangible assets:
Financial institution licenses -772
Total infinite-lived intangible assets -772
Total intangible assets $840$2 228

Aggregate amortization expense on the finite-lived intangible assets for the three months ended March 31, 2020 and 2019, was approximately $1,3 million and $6,1 million, respectively. Aggregate amortization expense on the finite-lived intangible assets for the nine months ended March 31, 2020 and 2019, was approximately $4,9 million and $12,2 million, respectively.

8. Goodwill and intangible assets, net (continued)

Intangible assets (continued)

Carrying value and amortization of intangible assets (continued)

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on March 31, 2020, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors.

Fiscal 2020(1)$5 230
Fiscal 2021307
Fiscal 202257
Fiscal 202357
Fiscal 202456
Thereafter114
Total future estimated annual amortization expense$5 821

(1) Estimated annual amortization expense for fiscal 2020 includes amortization of Net1 Korea acquired intangible assets from July 1, 2019, until deconsolidation in March 2020.