Company: RSKD
Filing Date: 2025-03-06
Form Type: 20-F
Source: 0001851112-25-000006
Chunk: 99

Company: RISKIFIED LTD.
Filing Date: 2025-03-06
Form: 20-F
Item: Item 5
Chunk 99
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 situations is a percentage of the GMV of our merchants’ orders that we approve, prior to taxes or other charges. These arrangements do not provide merchants with the right to take possession of our software platform. Rather, merchants are granted continuous access to our software platform under a hosting arrangement over the contractual period.

Contracts with our merchants for our Chargeback Guarantee product obligate us to stand ready to review and guarantee eCommerce transactions for legitimacy. In the event of a chargeback due to fraud, we indemnify merchants based on the GMV of the approved transaction. Our fee is allocated between the consideration for our stand ready review service performance obligation accounted for under ASC 606 and the consideration for issuing indemnification guarantees that are accounted for under ASC 460 and are recorded at fair value. Consideration allocated to our review service is recognized as revenue over the contract period in the month that the transactions are approved while consideration allocated to the indemnification guarantee is recognized as we are released from risk under the guarantee, generally over a six-month period from the date of the transaction. Certain other contracts obligate us to stand ready to review eCommerce transactions for legitimacy without providing a guarantee. We have determined that these contracts meet the variable consideration allocation exception and revenue is recognized over the contract period in the month that the transactions are approved.

We present revenue net of cancellations and adjustments for minimum service level agreements.

Cost of Revenue

Cost of revenue primarily consist of chargeback expenses, net of chargebacks won, and other expenses related to providing our services to our merchants. These other expenses include compensation and benefits related costs, including share-based compensation expense associated with teams integral in providing our service, hosting fees and software costs, data enrichment costs, payment processing fees, amortization of capitalized software development costs and deferred contract fulfillment costs, depreciation expense, and allocated overhead. For products that offer guarantees of past performance, such as our Chargeback Guarantee, we provide contractual guarantees around the accuracy of our approvals so that our merchants can confidently automate a transaction’s execution. If an approved transaction that we have guaranteed results in an eligible chargeback, we will reimburse the merchant for the amount of the lost sale. In this situation, we record a chargeback expense in cost of revenue and typically reimburse the merchant in the form of credits on future invoices. Chargeback claims

can be disputed and if the decision of the dispute concludes that the order was legitimate and not fraudulent, the chargeback is classified as chargeback won. We present chargeback expenses net of chargebacks won, since such amounts are refunded to us.