Exit and Other Related Liabilities

6 Months Ended

Jun. 30, 2021

Restructuring and Related Activities [Abstract]

As a result of the significant growth seen in recent quarters across key client volume metrics, including the number of active brokerage accounts, DATs, and peak daily trades, the Company has increased the scope of technology work related to the integration of TD Ameritrade. We have commenced greater technology build-out to support the expanded volumes of our combined client base. Based on our current integration plans and expanded scope of technology work, the Company expects to complete client conversion within 30 to 36 months from the October 6, 2020 date of acquisition.

To achieve our integration objectives, the Company expects to recognize significant additional acquisition and integration-related costs and capital expenditures throughout the integration process. Such acquisition and integration-related costs have included and are expected to continue to include professional fees, such as legal, advisory, and accounting fees, costs for technology enhancements, and compensation and benefits expenses for employees and contractors involved in the integration work.

The Company’s acquisition and integration-related spending also includes exit and other related costs, such as severance and other employee termination benefits, retention costs, as well as costs related to facility closures, including accelerated amortization and depreciation or impairments of assets in those locations. Exit and other related costs are a component of the Company’s overall acquisition and integration-related spending, and support the Company’s ability to achieve integration objectives including expected synergies.

Our estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs are subject to change based on a number of factors, including the expected duration and complexity of the integration process and the heightened uncertainty of the current economic environment. More specifically, factors that could cause variability in our expected acquisition and integration-related costs include the level of employee attrition, workforce redeployment from eliminated positions into open roles, changes in the levels of client activity, and increased real estate-related exit cost variability due to the effects of the COVID-19 pandemic.

Inclusive of costs recognized through June 30, 2021, Schwab currently expects to incur total exit and other related costs for the integration of TD Ameritrade ranging from $650 million to $1 billion, consisting of employee compensation and benefits, facility exit costs, and certain other costs. During the three and six months ended June 30, 2021, the Company incurred pre-tax charges of $47 million and $90 million for acquisition-related exit costs, respectively. The Company expects the remaining exit and other related costs will be incurred and charged to expense over the next 27 to 39 months; some costs are expected to be incurred after client conversion. In addition to ASC 420 Exit or Disposal Cost Obligations, certain of the costs associated with these activities are accounted for in accordance with ASC 360 Property, Plant and Equipment, ASC 712 Compensation – Nonretirement Post Employment Benefits, ASC 718 Compensation – Stock Compensation, and ASC 842 Leases.

The following is a summary of the activity in the Company’s exit and other related liabilities for the three and six months ended June 30, 2021:



	Investor Services Employee Compensation and Benefits		Advisor Services Employee Compensation and Benefits		Total
Balance at March 31, 2021	$	56	$	15	$	71

Costs incurred and charged to expense (1)	35		9		44
Costs paid or otherwise settled	(35)		(9)		(44)
Balance at June 30, 2021 (2)	$	56	$	15	$	71

Balance at December 31, 2020	$	86	$	24	$	110

Costs incurred and charged to expense (1)	57		15		72
Costs paid or otherwise settled	(87)		(24)		(111)
Balance at June 30, 2021 (2)	$	56	$	15	$	71

(1) Costs incurred for severance pay and other termination benefits, as well as retention costs, are included in employee compensation and benefits on the condensed consolidated statements of income.

(2) Included in accrued expenses and other liabilities on the condensed consolidated balance sheets.

The following table summarizes the exit and other related costs incurred for the three and six months ended June 30, 2021:


	Investor Services						Advisor Services
Three Months Ended June 30,	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total

Compensation and benefits	$	35	$	—	$	35	$	9	$	—	$	9	$	44

Occupancy and equipment	—		3		3		—		—		—		3



Total	$	35	$	3	$	38	$	9	$	—	$	9	$	47


	Investor Services						Advisor Services
Six Months Ended June 30,	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total

Compensation and benefits	$	57	$	—	$	57	$	15	$	—	$	15	$	72

Occupancy and equipment	—		13		13		—		3		3		16

Professional services	—		1		1		—		—		—		1
Other	—		1		1		—		—		—		1
Total	$	57	$	15	$	72	$	15	$	3	$	18	$	90

(1) Costs related to facility closures. These costs, which are primarily comprised of accelerated amortization of right-of-use (ROU) assets, relate to the impact of abandoning leased and other properties.

The following table summarizes the cumulative exit and other related costs incurred from October 6, 2020 through June 30, 2021:


	Investor Services						Advisor Services
	Employee Compensation and Benefits		Facility Exit Costs (1)		Investor Services Total		Employee Compensation and Benefits		Facility Exit Costs (1)		Advisor Services Total		Total
Compensation and benefits	$	195	$	—	$	195	$	53	$	—	$	53	$	248

Occupancy and equipment	—		19		19		—		4		4		23
Depreciation and amortization	—		2		2		—		1		1		3
Professional services	—		1		1		—		—		—		1
Other	—		1		1		—		—		—		1
Total	$	195	$	23	$	218	$	53	$	5	$	58	$	276

(1) Costs related to facility closures. These costs, which are primarily comprised of accelerated amortization of ROU assets and accelerated depreciation of fixed assets, relate to the impact of abandoning leased and other properties.