IMPACT OF THE INVASION OF UKRAINE

12 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

IMPACT OF THE INVASION OF UKRAINE

IMPACT OF THE INVASION OF UKRAINE

On February 24, 2022, Russian forces attacked Ukraine and its people and EPAM has repeatedly called for an immediate end to this unlawful and unconscionable attack. As of December 31, 2023, the Company had $62.7 million of Property and equipment, net in Ukraine consisting of a building classified as construction-in-progress located in Kyiv with a net book value of $51.5 million, laptops with a net book value of $5.9 million, most of which are in the possession of employees, various office furniture, equipment and supplies with a net book value of $4.2 million, and leasehold improvements located throughout Ukraine with a net book value of $1.1 million. Additionally, as of December 31, 2023, the Company had Operating lease right-of-use assets located throughout Ukraine with a net book value of $6.6 million. Through the issuance date of these financial statements, the Company is not aware of any damage to its long-lived assets in Ukraine and the Company expects to continue to use these assets as part of its global delivery model.

On March 4, 2022, the Company announced a $100 million humanitarian commitment to support its employees and their families in and displaced from Ukraine. This humanitarian commitment is in addition to donations from EPAM's customers and employees and the work of EPAM volunteers on the ground.

During the years ended December 31, 2023 and 2022, the Company expensed $17.4 million and $44.8 million, respectively, related to this commitment which included special cash payments to support impacted employees, financial and medical support for impacted families, travel, meals and lodging expenses, and donations to third-party humanitarian organizations. Of the expensed amount for the year ended December 31, 2023 and 2022, $11.3 million and $29.0 million, respectively, is classified in Cost of revenues (exclusive of depreciation and amortization) and $6.1 million and $15.8 million, respectively, is classified in Selling, general and administrative expense on the consolidated financial statements. As of December 31, 2023, the Company has $37.8 million remaining to be expensed related to this humanitarian commitment.

The Company executed its business continuity plans following the invasion to assist relocating employees residing in Ukraine and the surrounding region impacted by the war and geopolitical uncertainty to other countries and to assign delivery personnel in locations outside of the region to serve in unbilled standby or backup capacities to ensure the continuity of delivery for its customers who have substantial delivery exposure to Ukraine or other delivery concerns resulting from the invasion and ongoing war. In addition to costs incurred as part of EPAM’s humanitarian commitment to Ukraine, during the year ended December 31, 2023 and 2022, the Company incurred expenses of $1.8 million and $38.7 million, respectively, related to its geographic repositioning efforts, classified as Selling, general and administrative expenses and $9.4 million and $14.7 million, respectively, related to the standby resources, classified as Cost of revenues (exclusive of depreciation and amortization). During the year ended December 31, 2022, the Company also recorded an impairment charge of $1.3 million, classified as Interest and other income/(loss), net related to a financial asset in Ukraine which the Company believed to be unrealizable due to the events in Ukraine.

In response to the attacks on Ukraine, EPAM announced on March 4, 2022, it would discontinue services to customers located in Russia. Based on this change in facts and circumstances, the long-term cash flow forecast for the Company’s operations in Russia and its Russia reporting unit were significantly reduced. The reduction in the long-term cash flow forecasts indicated that the carrying amounts of goodwill and long-lived assets associated with the Company’s Russia reporting unit and operations in Russia may not be recoverable, and the carrying value of these assets was tested for impairment. The Company relied on the income approach to estimate the fair values of the Russia reporting unit and long-lived assets and considered multiple scenarios including the continuing operation and exit of operations in Russia. Reflecting the negative long-term cash flow forecasts that each of these scenarios produced for these assets, during the three months ended March 31, 2022, the Company recorded impairments of Property and equipment, net of $15.1 million, Operating lease right-of-use assets, net of $3.8 million, and Goodwill of $0.7 million. These asset impairment charges are included in Selling, general and administrative expenses in the consolidated financial statements for the year ended December 31, 2022.

Additionally, the Company evaluated trade receivables and contract assets for estimated future credit losses from customers located in Russia and recorded bad debt expense of $5.1 million reflecting the deterioration of creditworthiness of its customers in Russia during the year ended December 31, 2022. Bad debt expense is included in Selling, general and administrative expenses in the consolidated statements of income. Amounts recorded to bad debt expense during the year ended December 31, 2023 related to customers located in Russia were not material.

Also, during the year ended December 31, 2022, the Company incurred employee separation costs of $17.1 million in connection with the decision to exit its operations in Russia, with no such costs incurred during the year ended December 31, 2023.

On July 26, 2023, the Company completed the sale of its remaining holdings in Russia to a third-party. The Company recorded a loss on sale of $25.9 million during the year ended December 31, 2023, including the recognition of the accumulated currency translation loss related to this foreign entity that was previously included in Accumulated other comprehensive loss in the consolidated financial statements.