SEC Filing - ViacomCBS Inc.

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viac-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 001-09553

ViacomCBS Inc.

(Exact name of registrant as specified in its charter)

Delaware

04-2949533

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

1515 Broadway

New York,

New York

10036

(Address of principal executive offices)

(Zip Code)

(212) 258-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Class A Common Stock, $0.001 par value

VIACA

The Nasdaq Stock Market LLC

Class B Common Stock, $0.001 par value

VIAC

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding at November 3, 2020:

Class A Common Stock, par value $.001 per share— 52,266,444

Class B Common Stock, par value $.001 per share— 564,979,589

VIACOMCBS INC.

INDEX TO FORM 10-Q


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Statements of Operations (Unaudited) for the Three and N ine Months Ended September 30, 2020 and September 30, 2019	3

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2020 and September 30, 2019	4

	Consolidated Balance Sheets (Unaudited) at September 30, 2020 and December 31, 2019	5

	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2020 and September 30, 2019	6

	Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2020 and September 30, 2019	7

	Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition.	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	66

Item 4.	Controls and Procedures.	66

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	67

Item 1A.	Risk Factors.	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	68

Item 6.	Exhibits.	69

-2-

PART I – FINANCIAL INFORMATION


Item 1.			Financial Statements.

VIACOMCBS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues	$	6,116	$	6,698	$	19,060	$	20,941
Costs and expenses:
Operating	3,634		3,959		11,184		12,417
Selling, general and administrative	1,373		1,473		3,936		4,157
Depreciation and amortization	98		108		335		323
Restructuring and other corporate matters	52		122		443		307
Total costs and expenses	5,157		5,662		15,898		17,204
Gain on sale of assets	—		—		—		549
Operating income	959		1,036		3,162		4,286
Interest expense	(259)		(246)		(763)		(723)
Interest income	14		19		39		53
Loss on extinguishment of debt	(23)		—		(126)		—
Other items, net	(20)		(27)		(47)		(2)
Earnings from continuing operations before income taxes and equity in loss of investee companies	671		782		2,265		3,614
(Provision) benefit for income taxes	(38)		(126)		(377)		9
Equity in loss of investee companies, net of tax	(9)		(14)		(30)		(53)
Net earnings from continuing operations	624		642		1,858		3,570
Net earnings from discontinued operations, net of tax	3		4		14		23
Net earnings (ViacomCBS and noncontrolling interests)	627		646		1,872		3,593
Net earnings attributable to noncontrolling interests	(12)		(16)		(260)		(27)
Net earnings attributable to ViacomCBS	$	615	$	630	$	1,612	$	3,566

Amounts attributable to ViacomCBS:
Net earnings from continuing operations	$	612	$	626	$	1,598	$	3,543
Net earnings from discontinued operations, net of tax	3		4		14		23
Net earnings attributable to ViacomCBS	$	615	$	630	$	1,612	$	3,566

Basic net earnings per common share attributable to ViacomCBS:
Net earnings from continuing operations	$	.99	$	1.02	$	2.60	$	5.76
Net earnings from discontinued operations	$	—	$	.01	$	.02	$	.04
Net earnings	$	1.00	$	1.02	$	2.62	$	5.80

Diluted net earnings per common share attributable to ViacomCBS:
Net earnings from continuing operations	$	.99	$	1.01	$	2.59	$	5.74
Net earnings from discontinued operations	$	—	$	.01	$	.02	$	.04
Net earnings	$	1.00	$	1.02	$	2.61	$	5.78

Weighted average number of common shares outstanding:
Basic	616		615		615		615
Diluted	618		617		617		617

See notes to consolidated financial statements.

-3-

VIACOMCBS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net earnings (ViacomCBS and noncontrolling interests)	$	627	$	646	$	1,872	$	3,593
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments	72		(68)		5		(60)
Net actuarial loss and prior service costs	17		17		52		46
Other comprehensive income (loss), net of tax (ViacomCBS and noncontrolling interests)	89		(51)		57		(14)
Comprehensive income	716		595		1,929		3,579
Less: Comprehensive income attributable to noncontrolling interests	12		16		257		29
Comprehensive income attributable to ViacomCBS	$	704	$	579	$	1,672	$	3,550

See notes to consolidated financial statements.

-4-

VIACOMCBS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)


	At			At
	September 30, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents		$	3,086		$	632
Receivables, net		6,946			7,206
Programming and other inventory		1,869			2,876
Prepaid and other current assets		1,256			1,188

Total current assets		13,157			11,902
Property and equipment, net		1,994			2,085
Programming and other inventory		9,365			8,652
Goodwill		16,995			16,980
Intangible assets, net		2,832			2,993
Operating lease assets		1,795			1,939
Deferred income tax assets, net		1,007			939
Other assets		4,020			4,006
Assets held for sale		260			23

Total Assets		$	51,425		$	49,519

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	436		$	667
Accrued expenses		1,765			1,760
Participants’ share and royalties payable		2,100			1,977
Accrued programming and production costs		1,125			1,500
Deferred revenues		710			739
Debt		18			717
Other current liabilities		1,609			1,688

Total current liabilities		7,763			9,048
Long-term debt		19,703			18,002
Participants’ share and royalties payable		1,396			1,546
Pension and postretirement benefit obligations		2,045			2,121
Deferred income tax liabilities, net		816			500
Operating lease liabilities		1,769			1,909
Program rights obligations		266			356
Other liabilities		2,226			2,494
Redeemable noncontrolling interest		196			254

Commitments and contingencies (Note 15)

ViacomCBS stockholders’ equity:
Class A Common Stock, par value $.001 per share; 55 shares authorized; 52 (2020 and 2019) shares issued		—			—
Class B Common Stock, par value $.001 per share; 5,000 shares authorized; 1,067 (2020) and 1,064 (2019) shares issued		1			1
Additional paid-in capital		29,719			29,590
Treasury stock, at cost; 503 (2020) and 501 (2019) Class B shares		(22,958)			(22,908)
Retained earnings		9,704			8,494
Accumulated other comprehensive loss		(1,910)			(1,970)
Total ViacomCBS stockholders’ equity		14,556			13,207
Noncontrolling interests		689			82
Total Equity		15,245			13,289
Total Liabilities and Equity		$	51,425		$	49,519

See notes to consolidated financial statements.

-5-

VIACOMCBS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	Nine Months Ended
	September 30,
	2020		2019
Operating Activities:
Net earnings (ViacomCBS and noncontrolling interests)	$	1,872	$	3,593
Less: Net earnings from discontinued operations, net of tax	14		23
Net earnings from continuing operations	1,858		3,570
Adjustments to reconcile net earnings from continuing operations to net cash flow provided by operating activities:
Depreciation and amortization	335		323
Deferred tax provision (benefit)	176		(506)
Stock-based compensation	191		171
Gain on sale of assets	—		(549)
Gains from investments	(32)		(89)
Loss on extinguishment of debt	126		—
Equity in loss of investee companies, net of tax and distributions	34		58
Change in assets and liabilities	(123)		(1,289)



Net cash flow provided by operating activities	2,565		1,689
Investing Activities:
Investments	(60)		(137)
Capital expenditures	(213)		(251)
Acquisitions, net of cash acquired	(142)		(384)
Proceeds from dispositions	146		755
Other investing activities	—		6


Net cash flow used for investing activities	(269)		(11)
Financing Activities:
Repayments of short-term debt borrowings, net	(706)		(624)
Proceeds from issuance of senior notes	4,365		492
Repayment of notes and debentures	(2,896)		(820)


Dividends	(450)		(446)
Purchase of Company common stock	(58)		(14)
Payment of payroll taxes in lieu of issuing shares for stock-based compensation	(62)		(52)
Other financing activities	(87)		(96)
Net cash flow provided by (used for) financing activities	106		(1,560)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(6)		(16)
Net increase in cash, cash equivalents and restricted cash	2,396		102
Cash, cash equivalents and restricted cash at beginning of period (includes $202 (2020) and $120 (2019) of restricted cash)	834		976
Cash, cash equivalents and restricted cash at end of period (includes $138 (2020) and $122 (2019) of restricted cash, and $6 (2020) of assets held for sale)	$	3,230	$	1,078

See notes to consolidated financial statements.

-6-

VIACOMCBS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; in millions)


	Three Months Ended September 30, 2020
	Class A and B Common Stock			Additional Paid-In Capital			Treasury Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total ViacomCBS Stockholders’ Equity			Non-Controlling Interests			Total Equity
	(Shares)
June 30, 2020	616	$	1		$	29,680	$	(22,958)		$	9,150		$	(1,999)		$	13,874		$	676	$	14,550
Stock-based compensation activity	—	—			39		—			—			—			39			—		39

Dividends	—	—			—		—			(150)			—			(150)			—		(150)
Noncontrolling interests	—	—			—		—			89			—			89			1		90
Net earnings	—	—			—		—			615			—			615			12		627
Other comprehensive income	—	—			—		—			—			89			89			—		89
September 30, 2020	616	$	1		$	29,719	$	(22,958)		$	9,704		$	(1,910)		$	14,556		$	689	$	15,245


	Nine Months Ended September 30, 2020
	Class A and B Common Stock			Additional Paid-In Capital			Treasury Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total ViacomCBS Stockholders’ Equity			Non-Controlling Interests				Total Equity
	(Shares)
December 31, 2019	615	$	1		$	29,590	$	(22,908)		$	8,494		$	(1,970)		$	13,207		$	82		$	13,289
Stock-based compensation activity	2	—			129		—			—			—			129			—			129
Class B Common Stock purchased	(1)	—			—		(50)			—			—			(50)			—			(50)
Dividends	—	—			—		—			(450)			—			(450)			—			(450)
Noncontrolling interests	—	—			—		—			48			—			48			350		(a)	398
Net earnings	—	—			—		—			1,612			—			1,612			260			1,872
Other comprehensive income (loss)	—	—			—		—			—			60			60			(3)			57
September 30, 2020	616	$	1		$	29,719	$	(22,958)		$	9,704		$	(1,910)		$	14,556		$	689		$	15,245

(a) Primarily reflects the acquisition of Miramax (see Note 2).

See notes to consolidated financial statements.

-7-

VIACOMCBS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited; in millions)


	Three Months Ended September 30, 2019
	Class A and B Common Stock			Additional Paid-In Capital			Treasury Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total ViacomCBS Stockholders’ Equity			Non-Controlling Interests			Total Equity
	(Shares)
June 30, 2019	615	$	1		$	49,944	$	(43,399)		$	8,418		$	(1,803)		$	13,161		$	43	$	13,204
Stock-based compensation activity	—	—			68		—			—			—			68			—		68
Dividends	—	—			—		—			(151)			—			(151)			—		(151)
Noncontrolling interests	—	—			—		—			6			—			6			7		13
Net earnings	—	—			—		—			630			—			630			16		646
Other comprehensive loss	—	—			—		—			—			(51)			(51)			—		(51)
September 30, 2019	615	$	1		$	50,012	$	(43,399)		$	8,903		$	(1,854)		$	13,663		$	66	$	13,729


	Nine Months Ended September 30, 2019
	Class A and B Common Stock			Additional Paid-In Capital			Treasury Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total ViacomCBS Stockholders’ Equity			Non-Controlling Interests			Total Equity
	(Shares)
December 31, 2018	613	$	1		$	49,907	$	(43,420)		$	5,569		$	(1,608)		$	10,449		$	54	$	10,503
Stock-based compensation activity and other	2	—			115		21			(4)			—			132			—		132
Dividends	—	—			—		—			(450)			—			(450)			—		(450)
Noncontrolling interests	—	—			(10)		—			(8)			—			(18)			(17)		(35)
Net earnings	—	—			—		—			3,566			—			3,566			27		3,593
Reclassification of income tax effect of the Tax Reform Act	—	—			—		—			230			(230)			—			—		—
Other comprehensive income (loss)	—	—			—		—			—			(16)			(16)			2		(14)
September 30, 2019	615	$	1		$	50,012	$	(43,399)		$	8,903		$	(1,854)		$	13,663		$	66	$	13,729

See notes to consolidated financial statements.

-8-

VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in millions, except per share amounts)

1) BASIS OF PRESENTATION

Description of Business-ViacomCBS Inc. is comprised of the following segments: TV Entertainment (CBS Television Network, CBS Studios, CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations and CBS-branded streaming services), Cable Networks (Showtime Networks, Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TV, Smithsonian Networks, ViacomCBS Networks International, Network 10, Channel 5, Telefe and Pluto TV), Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation, Paramount Television Studios and Miramax) and Publishing (Simon & Schuster). References to “ViacomCBS”, the “Company”, “we”, “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires.

Basis of Presentation-On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. (“ViacomCBS”). The Merger has been accounted for as a transaction between entities under common control as National Amusements, Inc. (“NAI”) was the controlling stockholder of each of CBS and Viacom (and remains the controlling stockholder of ViacomCBS). Upon the closing of the Merger, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.

The accompanying unaudited consolidated financial statements have been prepared on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the more detailed financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented.

Use of Estimates-The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may vary from these estimates under different assumptions or conditions.

The coronavirus disease (“COVID-19”) pandemic has negatively impacted, and is expected to continue to impact, the macroeconomic environment in the United States and globally, as well as our business, financial condition and results of operations. Due to the evolving and uncertain nature of COVID-19, it is reasonably possible that it could materially impact our estimates, particularly those that require consideration of forecasted financial information, in the near to medium term. These estimates relate to certain accounts including, but not limited to, receivables, programming and other inventory, deferred income tax assets, finite and indefinite lived intangible assets, including goodwill and FCC licenses, and other long-lived assets. The magnitude of the impact will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer behavior in response to the pandemic and such governmental actions, and the economic and operating conditions that we may face in the aftermath of COVID-19.

-9-

VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Net Earnings per Common Share-Basic net earnings per share (“EPS”) is based upon net earnings divided by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted stock units (“RSUs”) or performance stock units (“PSUs”) only in the periods in which such effect would have been dilutive. Excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, were stock options and RSUs of 21 million and 24 million for the three and nine months ended September 30, 2020, respectively, and 16 million and 18 million for the three and nine months ended September 30, 2019, respectively.

The table below presents a reconciliation of weighted average shares used in the calculation of basic and diluted EPS.


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in millions)	2020	2019	2020	2019
Weighted average shares for basic EPS	616	615	615	615
Dilutive effect of shares issuable under stock-based compensation plans	2	2	2	2
Weighted average shares for diluted EPS	618	617	617	617

Recently Adopted Accounting Pronouncements

Improvements to Accounting for Costs of Films and License Agreements for Program Materials

On January 1, 2020, we adopted Financial Accounting Standards Board (“FASB”) guidance on the accounting for costs of films and episodic television series, which aligns the accounting for capitalizing production costs of episodic television series with the guidance for films. As a result of the adoption of this guidance, the capitalization of costs incurred to produce episodic television series is no longer limited to the amount of revenue contracted in the initial market until persuasive evidence of a secondary market exists. In addition, under this guidance our film and television programming is tested for impairment individually on a title-by-title basis, or together with other films and television programming as part of a group, based on the predominant monetization strategy of the film or television programming. Further, for programming monetized in a film group, this guidance requires any changes to the estimated use of the film or television series to be accounted for prospectively. This guidance also eliminates existing balance sheet classification guidance and adds new disclosure requirements relating to costs for acquired and internally-produced programming. As a result of this guidance, beginning in the first quarter of 2020, all of our programming inventory, other than prepayments for the rights to air sporting and other live events, is now classified as noncurrent on the Consolidated Balance Sheet. Therefore, $1.17 billion of programming inventory that was classified in current assets at December 31, 2019 was reclassified to noncurrent assets on January 1, 2020. This guidance did not have a material impact on the Consolidated Statement of Operations. See Note 3 for additional disclosures relating to the adoption of this guidance.

Collaborative Arrangements: Clarifying the Interaction with the New Revenue Standard

On January 1, 2020, we adopted FASB guidance on the accounting for collaborative arrangements, which clarifies that certain transactions between parties to collaborative arrangements should be accounted for in accordance with FASB revenue guidance when the counterparty is a customer. The adoption of this guidance did not have a material impact on our consolidated financial statements.

-10-

VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

On January 1, 2020, we adopted FASB guidance on the accounting for implementation costs of a cloud computing arrangement that is considered to be a service contract. This guidance requires companies to follow the guidance for capitalizing costs associated with internal-use software to determine which costs to capitalize in a cloud computing arrangement that is a service contract. Under this guidance, such implementation costs will be capitalized in “Other assets” on the Consolidated Balance Sheet, with the related amortization presented in “Selling, general and administrative expenses” on the Consolidated Statement of Operations. This guidance was applied prospectively to implementation costs incurred after January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Financial Instruments

On January 1, 2020, we adopted FASB guidance on the accounting for credit losses on financial instruments. Among other provisions, this guidance introduces a new impairment model for most financial assets and certain other instruments. The guidance applies primarily to our trade and other receivables, and requires the use of a forward-looking “expected loss” model instead of the “incurred loss” model that was used under previous FASB guidance for determining an allowance for credit losses. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022 and may not be applied to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, with a few exceptions for certain hedging relationships existing as of December 31, 2022. We are currently evaluating the impact of the changes in reference rates and the exemptions and exceptions in this guidance on our consolidated financial statements.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued guidance on the accounting for income taxes that, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. This guidance is effective for interim and annual periods beginning after December 15, 2020 with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

-11-

VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued amended guidance that eliminates, adds and clarifies certain disclosure requirements for defined benefit pension or other postretirement plans. The amendments affect annual disclosures only and are effective for our fiscal year ending on December 31, 2020. The amendments are required to be applied retrospectively. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

2) ACQUISITIONS AND DISPOSITIONS

Acquisition

On April 3, 2020, we acquired a 49% interest in Miramax, a global film and television studio, for $375 million, which included a cash payment at closing of approximately $150 million along with a commitment to invest $45 million annually over the next five years, or $225 million, to be used for new film and television productions and working capital. In conjunction with this acquisition, we entered into commercial agreements with Miramax under which we have exclusive, long-term distribution rights to Miramax’s catalog, adding more than 700 titles to our existing library. We also have certain rights to co-produce, co-finance and/or distribute new film and television projects. The investment is accounted for as a consolidated variable interest entity (“VIE”). We are the primary beneficiary of the VIE due to our power to direct the distribution of Miramax’s films and television series, which is considered the most significant activity of the VIE.

The following table summarizes our estimated allocation of the purchase price as of the acquisition date.


Assets
Cash	$	32
Accounts receivable and other current assets	19
Programming inventory	536
Goodwill	99
Intangible assets	12
Other assets (noncurrent)	7
Assets acquired	$	705

Liabilities
Accounts payable and accrued expenses	$	13
Participants’ share and royalties payable (current)	16
Deferred revenues	10
Participants’ share and royalties payable (noncurrent)	20
Debt	105
Other liabilities (noncurrent)	28
Liabilities assumed	192
Noncontrolling interests	363
Total purchase price	$	150

The goodwill, which is not deductible for tax purposes, reflects the expected Company-specific synergies arising from the acquisition and is included in the Filmed Entertainment segment. Intangible assets consist of a trade name with a useful life of 10 years.

The operating results of Miramax from the date of acquisition through September 30, 2020 were not material.

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VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

Dispositions

CNET Media Group

On October 30, 2020, we completed the sale of CNET Media Group (“CMG”) to Red Ventures for $484 million, including an estimated working capital adjustment. The purchase price consists of a cash payment at closing of $459 million and a credit of $25 million to be used over five years for the purchase of advertising and licensing of data from Red Ventures. As a result, we will recognize a pre-tax gain of approximately $245 million in the fourth quarter of 2020. CMG has been classified as held for sale on the Consolidated Balance Sheet at September 30, 2020. The following table presents assets and liabilities classified as held for sale at September 30, 2020.


Assets
Current assets (a)	$	39
Property and equipment	6
Goodwill (b)	114
Intangible assets, net	108
Other assets (noncurrent)	4
Total assets	$	271

Liabilities

Other current liabilities	$	32
Other liabilities (noncurrent)	4
Total liabilities	$	36

(a) Included in “Prepaid and other current assets” on the Consolidated Balance Sheet.

(b) Goodwill was allocated to CMG from the CBS Interactive reporting unit based on its relative fair value.

CBS Television City

During the first quarter of 2019, we completed the sale of CBS Television City for $750 million. We guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. This transaction resulted in a gain of $549 million ($386 million, net of tax), which included a reduction for the estimated amount payable under the guarantee obligation.

3) PROGRAMMING AND OTHER INVENTORY

We acquire rights to programming and produce programming to exhibit on our broadcast and cable networks, on our broadcast television stations, direct to consumers through our digital streaming services, and in theaters. We also produce programming for third parties. Programming inventory costs for both acquired and internally-produced content are recorded within the noncurrent portion of “Programming and other inventory” on the Consolidated Balance Sheet. Prepayments for the rights to air sporting and other live events that are expected to be expensed over the next 12 months are classified within the current portion of “Programming and other inventory” on the Consolidated Balance Sheet.

Internally-Produced Programming

Costs incurred to produce television programs and feature films (which include direct production costs, production overhead, acquisition costs and development costs) are capitalized when incurred. For television programs that are predominantly monetized as part of a film group, capitalized production costs are amortized based on an estimate of the timing of our usage of and benefit from such programming. For television programs and feature films that

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VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)

are predominantly monetized on an individual basis, we use an individual-film-forecast computation method to amortize capitalized production costs and to accrue estimated liabilities for participations and residuals over the applicable title’s life cycle based upon the ratio of current period revenues to estimated remaining total gross revenues to be earned (“Ultimate Revenues”) for each title.

Acquired Programming Rights

Our acquired programming rights are predominantly monetized in film groups together with certain internally-produced programming and other acquired programming rights. Costs incurred in acquiring program rights, including advances, are capitalized when the license period has begun and the program is accepted and available for airing. These costs are amortized over the shorter of the license period or the period in which an economic benefit is expected to be derived based on the timing of our usage of and benefit from such programming.

We test a film group or individual television program or feature film for impairment when events or circumstances indicate that its fair value may be less than its unamortized cost. An impairment charge will then be recorded for any difference between the carrying value and estimated fair value of the film group or individual television program or feature film. In addition, unamortized costs for internally-produced or acquired programming that have been substantively abandoned are written off.

The following tables present our programming and other inventory by type at September 30, 2020 and December 31, 2019. Programming inventory at September 30, 2020 has been grouped according to the predominant monetization strategy in accordance with new FASB guidance adopted in the first quarter of 2020 (see Note 1).


	At
	September 30, 2020
Film Group Monetization:
Acquired television program rights, including prepaid sports rights		$	3,408
Internally produced television programming:
Released		2,912
In process and other		898

Individual Monetization:
Acquired libraries		496
Film inventory:
Released		400
Completed, not yet released		311
In process and other		1,042
Internally produced television programming:
Released		937
In process and other		740

Home entertainment and Publishing, primarily finished goods		90
Total programming and other inventory		11,234
Less current portion		1,869
Total noncurrent programming and other inventory		$	9,365

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VIACOMCBS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Tabular dollars in millions, except per share amounts)


	At
	December 31, 2019
Acquired television program rights, including prepaid sports rights		$	3,477
Acquired libraries		99
Internally produced television programming:
Released		3,627
In process and other		2,626
Film inventory: