Company: RSKD
Filing Date: 2025-03-06
Form Type: 20-F
Source: 0001851112-25-000006
Chunk: 111

Company: RISKIFIED LTD.
Filing Date: 2025-03-06
Form: 20-F
Item: Item 5
Chunk 111
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 make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. As events continue to evolve and additional information becomes available, our estimates and assumptions may change materially in future periods. Actual results could differ materially from these estimates.

The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Indemnification Guarantees

We provide contractual guarantees around the accuracy of our approvals so that our merchants can confidently automate a transaction’s execution. Our Chargeback Guarantee contracts obligate us to indemnify our merchants for any costs incurred from a chargeback due to fraud (i. e., the “guarantee obligation”). Accordingly, we account for the guarantee obligation as an indemnification under the general provisions of ASC 460, Guarantees, or ASC 460, and recognize a liability at fair value upon approving a transaction at an amount that represents what we would need to pay a third party to relieve ourselves from this obligation.

We are relieved from our guarantee obligation at the earlier of (a) paying a chargeback or (b) expiration of the guarantee which is generally six months from the date of the transaction. We recognize the guarantee obligation as revenue through a systematic and rational amortization method over a six-month period that is representative of our historical pattern of being released from risk under the guarantee obligation. Indemnification guarantees are recorded at fair value upon approving a transaction and are not remeasured to fair value each period. The determination of the fair value of our indemnification guarantees requires the use of various inputs and assumptions which include the following:

•Historical chargebacks as a percentage of Billings: Calculated as historical chargebacks paid divided by the associated Billings. Chargebacks paid are not transactions that are readily observable in a marketplace, however they represent actual transactions between us and the merchant. We utilize historical chargebacks as a proxy to project future chargeback claims. This input has the greatest impact on the overall fair value of the guarantee.

•Risk premium fee: Represents the fee that we would have incurred from a third-party in order to relieve ourselves from our legal obligation under the guarantee. We primarily use observable inputs and methodologies with a limited amount of judgment and assumptions. For example, we consider the adjusted EBITDA margin of unrelated public companies in the property casualty