SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2023

SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation, basis of presentation and accounting principles:

a.    Principles of consolidation, basis of presentation and accounting principles:

The accompanying condensed consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America (hereafter – U.S. GAAP) and include the accounts of Payoneer Global Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Investments in an entity where the Company has the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, the Company’s share of the investee’s results of operations is shown within Share in gains and losses of associated company on the condensed consolidated statements of comprehensive income (loss) and its investment balance as an investment in associated company on the condensed consolidated balance sheets.

The consolidated interim financial information herein is unaudited; however, such information reflects all adjustments (consisting of normal, recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. The year-end condensed balance sheet data was derived from audited financial statements for the year ended December 31, 2022 but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto of Payoneer Global Inc. and its subsidiaries.

Use of estimates in the preparation of financial statements:

b.    Use of estimates in the preparation of financial statements:

The preparation of financial statements in conformity with U.S. GAAP 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, allowance for capital advance receivables, income taxes, goodwill, revenue recognition, stock-based compensation, and loss contingencies.

Investment in associated company:

c.    Investment in associated company:

In July 2019, the Company, through its wholly-owned subsidiary Payoneer Research and Development Ltd., entered into an agreement for the establishment of a joint venture company in the People’s Republic of China (“PRC”). The objective of the joint venture was to apply for a local payment service provider license in accordance with PRC laws. The Company’s share in the Joint Venture was 46%, with the remaining ownership interest held by a local partner. Initial funds in the amount of $6,501 were contributed. The investment in the joint venture was presented as an investment in associated company in the Company’s consolidated balance sheets as the Company did not have control over the joint venture.

In January 2023, the Company, through Payoneer Research and Development Ltd., acquired all remaining interests from other partners in the joint venture. As part of the agreement, the acquiring company assumed responsibility for all expenses and income incurred or earned through the date of acquisition related to the joint venture.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):

As substantially all of the fair value of the gross assets of the joint venture are concentrated in a group of similar assets (cash and cash equivalents and restricted deposits), the Company accounted for the transaction as an asset acquisition. As such, the Company’s basis in the acquired assets is valued at the amount of consideration transferred, as shown below.

Consideration paid
Cash1	$7,961
Foreign exchange loss on payment1	(100)
Investment in associated company	6,429
Total	$14,290
Assets acquired
Cash and cash equivalents	$6,957
Short-term restricted deposits	6,957
Prepaid assets	24
Tax receivable	59
Intangible assets	293
Total	$14,290
Net cash inflow related to acquisition
Cash and cash equivalents and restricted deposits acquired	$13,914
Cash paid	(7,961)
Net cash inflow	$5,953

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(1) The underlying assets of the joint venture were previously valued in CNY. Due to a timing difference of payment date and acquisition agreement settlement date, $100 of foreign exchange loss was recognized at the time of payment through other financial income (expense), net on the condensed consolidated statements of comprehensive income (loss).

The Company acquired $59 in tax receivables which it does not expect to utilize. As such, these receivables were written-off subsequent to acquisition through general and administrative expenses in the condensed consolidated statements of comprehensive income (loss).

The Company also acquired $293 in intangible assets which were determined to have no use to the Company post-acquisition. As such, these assets were completely impaired through depreciation and amortization expenses in the condensed consolidated statements of comprehensive income (loss).

Functional currency and translation:

d.    Functional currency and translation:

Prior to January 1, 2023, the Company had a foreign subsidiary that used the local currency of the respective country as its functional currency. As of January 1, 2023, this subsidiary has changed its functional currency to be that of the Company, the U.S. dollar, due to a shift in the subsidiary’s primary revenue streams, which are now substantially all from services provided to the Company.

Treasury stock:

e.    Treasury stock:

The Company accounts for repurchases of shares of its common stock as of the trade date, and includes in treasury stock the repurchase price plus any costs associated with the transaction.

When and if treasury stock is reissued, the Company applies the average cost method to determine the value of the reissued shares, and to the extent that it remains in an accumulated deficit position, recognizes any related gain or loss in additional paid-in capital. When and if the Company’s accumulated deficit becomes a retained earnings balance, it will credit gains on reissuances to additional paid-in capital and offset losses against historical gains. Losses in excess of historical gains will be recognized against retained earnings.  

Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Recently issued accounting pronouncements:

f.    Recently issued accounting pronouncements:

Financial Accounting Standards Board (“FASB”) standards adopted during 2023

In 2020, the FASB issued amended guidance that provides transitional relief for the accounting impact of reference rate reform. For a limited duration, this guidance provides optional expedients and exceptions for applying GAAP to certain contract modifications, hedging relationships, and other transactions that will be impacted by a reference rate expected to be discontinued due to reference rate reform. As of July 1, 2023, the Warehouse Facility (as defined in Note 8 below) replaced LIBOR with the Secured Overnight Financing Rate ("SOFR") plus .26161% as its benchmark rate (see Note 8 for further discussion). Adoption of this new guidance did not have a material impact on the Company’s condensed consolidated financial statements.