What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-08-03 compared with 2022-08-03 · 90 added, 115 removed, 1081 unchanged (16% of the section changed)

11 unchanged sentences

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

154 unchanged sentences

Total liabilities and stockholders’ equity $ 50,971.0 $ 63,068.2

(A) As of June 30, 2022, $ 14.3 million of short-term marketable securities and $ 122.1 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements.

As of June 30, 2021, $ 23.5 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements (see Note 8).

(A) As of June 30, 2023, $ 104.6 million of long-term marketable securities and $ 0.8 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements.

As of June 30, 2022, $ 14.3 million of short-term marketable securities and $ 122.1 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements (see Note 8).

See notes to the Consolidated Financial Statements.

14 unchanged sentences

— — — ( 1,583.7 ) — —

Other — — — ( 6.9 ) — —

Balance at June 30, 2021 638.7 $ 63.9 $ 1,531.3 $ 19,451.1 $ ( 15,386.8 ) $ 10.6

30 unchanged sentences

Stock-based compensation expense 220.4 201.7 175.3

Net pension (income)/expense ( 53.4 ) ( 52.8 ) ( 11.6 )

Net pension income ( 42.6 ) ( 53.4 ) ( 52.8 )

Net amortization of premiums and accretion of discounts on available-for-sale securities 23.0 101.0 69.5

1 unchanged sentence

Changes in operating assets and liabilities:

Increase in accounts receivable ( 486.5 ) ( 339.8 ) ( 113.8 )

Decrease/(Increase) in accounts receivable 129.2 ( 486.5 ) ( 339.8 )

Increase in other assets ( 1,357.4 ) ( 1,258.4 ) ( 1,029.4 )

(Decrease)/Increase in accounts payable ( 11.8 ) ( 16.4 ) 36.9

Increase/(Decrease) in accrued expenses and other liabilities 123.0 394.9 ( 77.5 )

Increase in accrued expenses and other liabilities 301.3 123.0 394.9

Net cash flows provided by operating activities 4,207.6 3,099.5 3,093.3

6 unchanged sentences

Proceeds from the sale of property, plant, and equipment and other assets — 34.2 18.8

Net cash flows (used in)/provided by investing activities ( 7,014.4 ) ( 3,515.0 ) 3,156.3

Net cash flows used in investing activities ( 2,517.3 ) ( 7,014.4 ) ( 3,515.0 )

Cash Flows from Financing Activities:

Net increase /(decrease) in client funds obligations 17,057.9 8,336.2 ( 3,213.2 )

Net (decrease)/increase in client funds obligations ( 12,701.6 ) 17,057.9 8,336.2

Payments of debt ( 1.0 ) ( 0.9 ) ( 1,001.8 )

4 unchanged sentences

Dividends paid ( 1,903.6 ) ( 1,659.0 ) ( 1,575.5 )

Net proceeds/(payments) related to reverse repurchase agreements 128.3 9.9 ( 248.4 )

Net cash flows provided by/(used in) financing activities 13,653.4 6,437.5 ( 5,890.6 )

Net (payments)/proceeds related to reverse repurchase agreements ( 44.7 ) 128.3 9.9

Net cash flows (used in)/provided by financing activities ( 15,680.7 ) 13,653.4 6,437.5

Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents ( 21.1 ) ( 98.7 ) 73.8

27 unchanged sentences

Actual results may differ from those estimates.

Certain amounts from the prior year's financial statements have been reclassified in order to conform to the current year's presentation.

Description of Business.

12 unchanged sentences

The fees are typically billed in the period in which services are performed.

PEO, a component of the HR Outsourcing (“HRO”) strategic pillar, provides a comprehensive human resources outsourcing solution, including offering benefits, providing workers’ compensation insurance, and administering state unemployment insurance, among other human resources functions.

PEO, a component of the HR Outsourcing (“HRO”) business pillar, provides a comprehensive human resources outsourcing solution, including offering benefits, providing workers’ compensation insurance, and administering state unemployment insurance, among other human resources functions.

Amounts collected from PEO worksite employers include payroll, fees for benefits, and an administrative fee that also includes payroll taxes, fees for workers’ compensation and state unemployment taxes.

62 unchanged sentences

Property, plant and equipment is stated at cost less accumulated depreciation on the Consolidated Balance Sheets.

Depreciation is recognized over the estimated useful lives of the assets using the straight-line

Leasehold improvements are amortized over the shorter of the term of the lease or the estimated useful lives of the improvements.

Depreciation is recognized over the estimated useful lives of the assets using the straight-line method.

Leasehold improvements are amortized over the shorter of the term of the lease or the estimated useful lives of the

improvements.

The estimated useful lives of assets are primarily as follows:

44 unchanged sentences

The Company recognizes stock-based compensation expense in net earnings based on the fair value of the award on the date of the grant, and in the case of international units settled in cash, adjusts this fair value based on changes in the Company's stock price during the vesting peri od.

Restricted stock units and restricted stock awards are valued based on the closing price of the Company's common stock on the date of the grant and, in the case of performance based restricted stock units and restricted stock, are adjusted for changes to probabilities of achieving performance targets.

International restricted stock units are settled in cash and are marked-to-market based on changes in the Company's stock price.

Time-based restricted stock units are valued based on the closing price of the Company's common stock on the date of the grant and, in the case of performance based restricted stock units, are valued based on the grant date fair value of such awards and are adjusted for changes to probabilities of achieving performance targets.

S ee Note 10 for additional information on the Company's stock-based compensation programs.

26 unchanged sentences

Assumptions, judgment, and the use of estimates are required in determining if the “more likely than not” standard has been met when developing the provision for income taxes.

As of June 30, 2022 and 2021, the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $ 98.1 million a nd $ 99.9 million, respectively.

As of June 30, 2023 and 2022, the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $ 116.9 million and $ 98.1 million, respectively.

Workers' Compensation Costs.

17 unchanged sentences

The loss contingencies are included in Selling, general and administrative expenses.

If no accrual is made for a loss contingency because the amount of loss cannot be reasonably estimated, the Company will disclose contingent liabilities when there is at least a reasonable possibility that a loss or an additional loss may have been incurred.

If no accrual is made for a loss contingency because the amount of loss cannot be reasonably estimated, the Company will disclose material contingent liabilities when there is at least a reasonable possibility that a loss or an additional loss may have been incurred.

Legal fees and other costs related to litigation and other legal proceedings or services are expensed as incurred and are included in Selling, general and administrative expenses.

2 unchanged sentences

Recently Adopted Accounting Pronouncements

In fiscal 2022, the Company early adopted accounting standard update ("ASU") 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)".

The adoption of this guidance did not have a material impact on the Company's consolidated results of operations, financial condition, or cash flows.

Recently Issued Accounting Pronouncements

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated by its three strategic pillars:

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated by its three business pillars as follows:

Human Capital Management (“HCM”), HR Outsourcing (“HRO”), and Global (“Global”) Solutions, with separate disaggregation for PEO zero-margin benefits pass-through revenues and client fund interest revenues.

7 unchanged sentences

The Company recognizes client fund interest revenues on collected but not yet remitted funds held for clients in revenues as earned, as the collection, holding and remittance of these funds are critical components of providing these services.

The following tables provide details of revenue by our strategic pillars and includes a reconciliation to the Company’s reportable segments.

The Company made changes to certain allocation methodologies in both the current period and the prior period in the tables below which did not materially affect our reporting of revenues by strategic pillar:

The following tables provide details of revenue by our business pillars and includes a reconciliation to the Company’s reportable segments.

Types of Revenues 2023 2022 2021

36 unchanged sentences

Recognition of revenue included in beginning of year contract liability ( 30.3 )

Contract liability, net of revenue recognized on contracts during the period 133.0

Contract liability, net of revenue recognized on contracts during the year 31.7

Currency translation adjustments ( 4.8 )

18 unchanged sentences

Other (income)/expense, net $ ( 183.5 ) $ ( 82.8 ) $ ( 96.3 )

In fiscal 2022, the Company recorded impairment charges of $ 23.0 million which is comprised of a write down of $ 12.1 million related to software and customer lists which were determined to have no future use and impairment charges of $ 10.9 million related to operating right-of-use assets associated with exiting certain leases early.

In fiscal 2021, the Company recorded impairment charges of $ 19.9 million which is comprised of a write down of $ 10.5 million related to internally developed software which was determined to have no future use, impairment charges of $ 9.4 million related to operating right-of-use assets and certain related fixed assets associated with exiting certain leased locations early, and recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale.

In fiscal 2020, the Company recorded impairment charges of $ 25.3 million as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale.

In addition, the Company exited certain leased locations early and recorded total impairment charges of $ 4.6 million related to operating right-of-use assets and certain related fixed assets associated with the exited locations.

In fiscal 2023, interest income on corporate funds increased as compared to fiscal 2022, due to higher average interest rates of 2.4 % for the year ended June 30, 2023, as compared to 1.0 % for the year ended June 30, 2022, coupled with higher average investment balances for the year ended June 30, 2023 as compared to the year ended June 30, 2022.

In fiscal 2022, the Company recorded impairment charges of $ 23.0 million, which is comprised of $ 12.1 million related to software and customer lists which were determined to have no future use and impairment charges of $ 10.9 million related to operating right-of-use assets associated with exiting certain leases early.

In fiscal 2021, the Company recorded impairment charges of $ 19.9 million which is comprised of a write down o f $ 10.5 million related to internally developed software which was determined to have no future use, impairment charges of $ 9.4 million related to operating right-of-use assets and certain related fixed assets associated with exiting certain leased locations early, and recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale.

See Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

CORPORATE INVESTMENTS AND FUNDS HELD FOR CLIENTS

7 unchanged sentences

Treasury securities 8,054.7 0.7 ( 290.4 ) 7,765.0

Asset-backed securities 1,995.7 0.5 ( 58.8 ) 1,937.4

Canadian government obligations and

2 unchanged sentences

government agency securities 1,670.0 0.2 ( 179.8 ) 1,490.4

Asset-backed securities 1,234.7 — ( 69.7 ) 1,165.0

Canadian provincial bonds 1,000.5 0.2 ( 78.1 ) 922.6

37 unchanged sentences

Treasury securities ( 85.5 ) 4,629.4 ( 204.9 ) 2,876.3 ( 290.4 ) 7,505.7

Asset-backed securities ( 52.6 ) 1,444.9 ( 6.2 ) 59.9 ( 58.8 ) 1,504.8

Canadian government obligations and

3 unchanged sentences

( 0.6 ) 28.2 ( 179.2 ) 1,432.2 ( 179.8 ) 1,460.4

Asset-backed securities ( 2.0 ) 159.7 ( 67.7 ) 975.6 ( 69.7 ) 1,135.3

Canadian provincial bonds ( 2.7 ) 127.0 ( 75.4 ) 757.3 ( 78.1 ) 884.3

23 unchanged sentences

$ ( 1,305.8 ) $ 20,798.8 $ ( 425.3 ) $ 4,005.8 $ ( 1,731.1 ) $ 24,804.6

At June 30, 2022, Corporate bonds include investment-grade debt securities, with a wide variety of issuers, industries, and sectors, primarily carry credit ratings of A and above, and have maturities ranging from July 2022 through April 2032.

At June 30, 2022, asset-backed securities include AAA-rated senior tranches of securities with predominately prime collateral of fixed-rate auto loan, credit card, equipment lease and rate reduction receivables with fair values of $ 973.1 million, $ 685.9 million, $ 233.8 million, and $ 44.2 million, respectively.

These securities are collateralized by the cash flows of the underlying

pools of receivables.

The primary risk associated with these securities is the collection risk of the underlying receivables.

At June 30, 2023, Corporate bonds include investment-grade debt securities, with a wide variety of issuers, industries, and sectors, primarily carry credit ratings of A and above, and have maturities ranging from July 2023 through May 2033.

At June 30, 2023, asset-backed securities include AAA-rated senior tranches of securities with predominately prime collateral of fixed-rate auto loan, credit card, and equipment lease receivables with fair values of $ 569.5 million, $ 406.6 million, and $ 163.2 million, respectively.

These securities are collateralized by the cash flows of the underlying pools of receivables.

primary risk associated with these securities is the collection risk of the underlying receivables.

All collateral on such asset-backed securities has performed as expected through June 30, 2023.

1 unchanged sentence

government agency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $ 969.0 million and $ 443.6 million, respectively.

government agency securities represent senior, unsecured, non-callable debt that primarily carry ratings of Aaa by Moody's and AA+ by Standard & Poor's, with maturities ranging from September 2022 through March 2032.

At June 30, 2023, U.S.

government agency commercial mortgage-backed securities of $ 632.5 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At June 30, 2022, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above, with fair values of $ 536.5 million and AA-rated United Kingdom Gilt securities of $ 314.1 million.

At June 30, 2023, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above, with fair values of $ 535.8 million, AA-rated United Kingdom Gilt securities of $ 383.1 million and AAA-rated supranational bonds of $ 207.5 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:

44 unchanged sentences

The Company has certain assets classified as held for sale given intent to sell.

The fair value of these assets was approximately $ 5.0 million and $ 29.8 million as of June 30, 2022 and 2021, respectively, and it is not material for reclassification separately on the Consolidated Balance Sheets.

The fair value of these assets was approximately $ 17.3 million and $ 5.0 million as of June 30, 2023 and 2022, respectively, and is not material for reclassification separately on the Consolidated Balance Sheets.

The Company records leases on the Consolidated Balance Sheets as operating lease ROU assets, records the current portion of operating lease liabilities within accrued expenses and other current liabilities and, separately, records long-term operating lease liabilities.

1 unchanged sentence

The Company has entered into operating lease agreements for facilities and equipment.

The Company's leases have remaining lease terms of up to approximately ten years .

The Company's leases have remaining lease terms of up to approximately eleven years .

The components of operating lease expense were as follows:

27 unchanged sentences

Balance at June 30, 2021 $ 2,333.6 $ 4.8 $ 2,338.4

Additions and other adjustments 11.1 — 11.1

Currency translation adjustments ( 49.0 ) — ( 49.0 )

18 unchanged sentences

All intangible assets have finite lives and, as such, are subject to amortization.

The weighted average remaining useful life of the intangible assets is 5 years ( 6 years for software and software licenses, 4 years for customer contracts and lists, and 2 years for other intangibles).

The weighted average remaining useful life of the intangible assets is 5 years ( 6 years for software and software licenses, 3 years for customer contracts and lists, and 1 year for other intangibles).

Amortization of intangible assets was $ 372.8 million, $ 344.1 million, and $ 327.4 million for fiscal 2023, 2022, and 2021, respectively.

6 unchanged sentences

SHORT TERM FINANCING

The Company has a $ 3.75 billion, 364 -day credit agreement with a one-year term-out option that was scheduled to mature in June 2022 and was amended to mature in July 2022.

On July 1, 2022, the company entered into a new $ 3.75 billion 364 -day credit agreement that matures in June 2023 with a one year term-out option to replace the maturing facility.

The interest rate applicable to committed borrowings under each agreement is tied to SOFR, the effective funds rate, or the prime rate depending up on the notification provided by the Company to the syndicated financial institutions prior to borrowing.

Th e Company also has a $ 2.75 billion five year credit facility that matures in June 2024 that also contains an accordion feature under which the aggregate commitment can be increased by $ 500 million, subject to the availability of additional commitments.

In addition, the Company has a five year $ 3.2 billion credit facility maturing in June 2026 that contains an accordion feature under which the aggregate commitment can be increased by $ 500 million, subject to the availability of additional commitments.

The interest rate applicable to committed borrowings is tied to LIBOR, the effective federal funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing.

The Company has a $ 4.25 billion, 364 -day credit agreement that matures in June 2024 with a one-year term-out option.

T he Company also has a five year $ 3.2 billion credit facility maturing in June 2026 that contains an accordion feature under which the aggregate commitment can be increased by $ 500 million , subject to the availability of additional commitments.

In addition, t h e Company also has a $ 2.25 billion five year credit facility that matures in June 2028 that contains an accordion feature under which the aggregate commitment can be increased by $ 500 million , subject to the availability of additional commitments.

The interest rate applicable to committed borrowings is tied to SOFR, the effective federal funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing.

The Company is also required to pay facility fees on the credit agreements.

7 unchanged sentences

Maturities of commercial paper can range from overnight to up to 364 days.

At June 30, 2022 and June 30, 2021, the Company had no co mmercial paper borrowing outstanding.

At June 30, 2023 and 2022 the Company had no co mmercial paper borrowing outstanding.

Details of the borrowings under the commercial paper program are as follows:

2 unchanged sentences

Weighted average interest rates 3.7 % 0.4 %

Weighted average maturity (approximately in days) 1 day 1 day

Weighted average maturity (approximately in days) 2 days 1 day

The Company’s U.S., Canadian and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

27 unchanged sentences

Stock-based compensation consists of the following:

• Stock Options.

Stock options are granted to employees at exercise prices equal to the fair market value of the Company's common stock on the dates of grant.

Stock options generally vest ratably over 4 years and have a term of 10 years.

Compensation expense is measured based on the fair value of the stock option on the grant date and recognized on a straight-line basis over the vesting period.

Stock options are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

The Company determines the fair value of stock options issued using a binomial option-pricing model.

The binomial option-pricing model considers a range of assumptions

related to volatility, dividend yield, risk-free interest rate, and employee exercise behavior.

Expected volatilities utilized in the binomial option-pricing model are based on a combination of implied market volatilities, historical volatility of the Company's stock price, and other factors.

Similarly, the dividend yield is based on historical experience and expected future changes.

The risk-free rate is derived from the U.S.

Treasury yield curve in effect at the time of grant.

The binomial option-pricing model also incorporates exercise and forfeiture assumptions based on an analysis of historical data.

The expected life of a stock option grant is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding.

The Company's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, and performance-based restricted stock units.

The Company also offers an employee stock purchase plan for eligible employees .

Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock.

Any such future awards will be grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility.

Time-based restricted stock unit awards and performance-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock, and for awards granted to employees with a home country outside the United States are generally settled in cash.

• Restricted Stock.

• Time-Based Restricted Stock and Time-Based Restricted Stock Units.

Time-based restricted stock and time-based restricted stock units generally vest ratably over 3 years.

Awards are forfeited if the employee ceases to be employed by the Company prior to vesting.

Time-based restricted stock cannot be transferred during the vesting period.

Compensation expense relating to the issuance of time-based restricted stock is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period.

Dividends are paid on shares awarded under the time-based restricted stock program.

Time-based restricted stock units are settled in cash and cannot be transferred during the vesting period.

Compensation expense relating to the issuance of time-based restricted stock units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently remeasured at each reporting date during the vesting period based on the change in the ADP stock price.

No dividend equivalents are paid on units awarded under the time-based restricted stock unit program.

• Performance-Based Restricted Stock and Performance-Based Restricted Stock Units.

Performance-based restricted stock and performance-based restricted stock units generally vest over a one to three year performance period and a subsequent service period of up to 38 months.

• Time-Based Restricted Stock Units.

Time-based restricted stock units generally vest ratably over 3 years.

Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Time-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period.

Time-based restricted stock unit awards granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period.

Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period.

Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently remeasured at each reporting date during the vesting period based on the change in the ADP stock price.

Dividend cash equivalents are paid on share-settled units, and dividend cash equivalents are not paid on cash-settled units.

• Performance-Based Restricted Stock Units.

Performance-based restricted stock units generally vest over a one to three year performance period and a subsequent service period of up to 38 months.

Under these programs, the Company communicates “target awards” at the beginning of the performance period with possible payouts at the end of the performance period ranging from 0 % to 200 % of the “target awards.” Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Performance-based restricted stock cannot be transferred during the vesting period.

Compensation expense relating to the issuance of performance-based restricted stock is recognized over the vesting period based on the fair value of the award on the grant date with subsequent adjustments to the number of shares awarded during the performance period based on probable and actual performance against targets.

After the performance period, if the performance targets are achieved, employees are eligible to receive dividends during the remaining vesting period on shares awarded under the performance-based restricted stock program.

Performance-based restricted stock units cannot be transferred and are settled in either cash or stock, depending on the employee's home country.

9 unchanged sentences

The Company repurchased 4.9 million shares in fiscal 2023 as compared to 9.2 million shares repurchased in fiscal 2022.

The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to

employee benefit plan activity, and market conditions.

Cash payments related to the settlement of vested time-based restricted stock units and performance-based restricted stock units were approximately 23.5 million, 22.1 million, and 10.7 million during fiscal years 2023, 2022, and 2021, respectively.

6 unchanged sentences

Income tax benefit $ 54.5 $ 49.1 $ 43.0

As of June 30, 2022, the total remaining unrecognized compensation cost related to non-vested stock options, restricted stock units, and restricted stock awards amounted to $ 18.9 million, $ 53.9 million, and $ 116.2 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 2.2 years, 1.5 years, and 1.7 years, respectively.

As of June 30, 2023, the total remaining unrecognized compensation cost related to unvested stock options, restricted stock units, and restricted stock awards amounted to $ 8.3 million, $ 137.1 million, and $ 53.5 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 1.8 years, 1.9 years, and 1.3 years, respectively.

In fiscal 2023, the following activity occurred under the Company’s existing plans.

32 unchanged sentences

2023 2022 2021

Risk-free interest rate 0.0 % 0.1 % 1.4 %

Dividend yield 1.8 % 2.6 % 1.9 %

Weighted average volatility factor 22.7 % 25.8 % 19.3 %

Weighted average expected life (in years) 4.9 5.4 5.4

Weighted average fair value (in dollars) $ 33.03 $ 21.66 $ 24.40

Risk-free interest rate N/A 0 % 0.1 %

Dividend yield N/A 1.8 % 2.6 %

Weighted average volatility factor N/A 22.7 % 25.8 %

Weighted average expected life (in years) N/A 4.9 5.4

Weighted average fair value (in dollars) N/A $ 33.03 $ 21.66

The weighted average fair values of shares granted were as follows:

28 unchanged sentences

Interest cost 78.2 52.3

Actuarial loss (a) ( 319.2 ) ( 11.8 )

Actuarial gain (a) ( 48.2 ) ( 319.2 )

Currency translation adjustments ( 2.0 ) ( 22.5 )

Plan changes — 6.8

Acquisitions 0.7 —

Benefits paid ( 86.7 ) ( 93.4 )

1 unchanged sentence

Funded status - plan assets less benefit obligations $ 128.6 $ 21.5

(a) The actuarial loss for fiscal 2022 was primarily due to lower than expected return on assets.

(a) The actuarial gain for fiscal 2023 was primarily due to a higher discount rate used to value plan liabilities.

The amounts recognized on the Consolidated Balance Sheets as of June 30, 2023 and 2022 consisted of:

15 unchanged sentences

2023 2022 2021

Service cost – benefits earned during the period $ 5.7 $ 4.9 $ 59.7

Service cost – benefits earned during the year $ 4.8 $ 5.7 $ 4.9

Interest cost on projected benefits 78.2 52.3 51.4

3 unchanged sentences

Net pension (income)/expense $ ( 42.6 ) $ ( 53.4 ) $ ( 52.8 )

As a result of the freeze of the U.S.

pension plan, described above, the Company recognized $ 17.0 million of prior service credits during fiscal 2020 within Other (income)/expense, net, which were previously recognized within accumulated other comprehensive income (loss) (see Note 13).

The net actuarial loss and prior service cost for the defined benefit pension plans that are included in accumulated other comprehensive income (loss) that have not yet been recognized as components of net periodic benefit cost are $ 293.0 million and $ 5.5 million, respectively, at June 30, 2023.

10 unchanged sentences

Expected long-term rate of return on assets 6.75 % 6.75 % 6.75 %

Increase in compensation levels N/A 4.00 % 4.00 %

Increase in compensation levels N/A N/A 4.00 %

The discount rate is based upon published rates for high-quality fixed-income investments that produce cash flows that approximate the timing and amount of expected future benefit payments.

19 unchanged sentences

Global equity securities 20 % - 30 %

As of June 30, 2022 and June 30, 2021, the U.S.

As of June 30, 2023 and 2022, the U.S.

pension plan asset allocation is within the target ranges.

60 unchanged sentences

State taxes, net of federal tax benefit 111.2 2.5 91.8 2.4 67.2 2.0

Valuation allowance release on foreign tax credits — — — — ( 20.3 ) ( 0.6 )

Foreign rate differential 33.1 0.7 41.3 1.1 34.0 1.0

3 unchanged sentences

The effective tax rate in fiscal 2023 and 2022 was 23.1 % and 22.5 %, respectively.

The decrease in the effective tax rate is primarily due to a favorable earnings mix, lower reserves for uncertain tax positions, and an intercompany transfer of certain assets in fiscal 2022, partially offset by favorable adjustments to prior year tax liabilities and a foreign tax election in fiscal 2021.

The increase in the effective tax rate is primarily due to an intercompany transfer of certain assets that resulted in a lower effective tax rate in fiscal 2022 and higher reserves for uncertain tax positions in fiscal 2023.

The effective tax rate for fiscal 2022 and 2021 was 22.5 % and 22.7 %, respectively.

The increase in the effective tax rate is primarily due to combined benefits from a valuation allowance release related to foreign tax credit carryforwards and a foreign tax law change during fiscal 2020 as well as a decrease in the excess tax benefit on stock-based compensation, partially offset by favorable adjustments to prior year tax liabilities during fiscal 2021.

The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:

4 unchanged sentences

Foreign tax credits 13.3 5.9

Fixed and intangible assets 108.2 —

Net operating losses 37.5 34.1

9 unchanged sentences

Prepaid retirement benefits 30.8 4.6

Unrealized investment gains, net — 101.7

Tax on unrepatriated earnings 10.1 11.5

3 unchanged sentences

There are $ 331.1 million and $ 157.4 million of long-term deferred tax assets included in other assets on the Consolidated Balance Sheets at June 30, 2023 and 2022, respectively.

Income taxes have not been provided on undistributed earnings of certain foreign subsidiaries in an aggregate amount of approximately $ 53.0 million as the Company considers such earnings to be permanently reinvested outside of the United States.

Income taxes have not been provided on undistributed earnings of certain foreign subsidiaries in an aggregate amount of approximately $ 53.1 million a s the Company considers such earnings to be permanently reinvested outside of the United States.

As of June 30, 2023, it is not practicable to estimate the unrecognized tax liability that would occur upon distribution.

The Company has estimated foreign net operating loss carry-forwards of approximately $ 55.1 million as of June 30, 2022, of which $ 1.5 million expire throu gh June 2032 and $ 53.6 million h ave an indefinite utilization period.

The Company has estimated foreign net operating loss carry-forwards of approximately $ 78.1 million as of June 30, 2023, of which $ 1.3 million expire through June 2033 and $ 76.8 million have an indefinite utilization period.

As of June 30, 2023, the Company has approximately $ 19.0 million of federal net operating loss carry-forwards from acquired companies.

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The Company has recorded valuation allowances of $ 18.6 million and $ 18.9 million at June 30, 2023 and 2022, respectively, to reflect the estimated amount of domestic and foreign deferred tax assets that may not be realized.

Income tax payments were approximately $ 856.8 million , $ 973.7 million, and $ 677.1 million for fiscal 2022, 2021, and 2020, respectively.

As of June 30, 2022, 2021, and 2020 the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $ 98.1 million , $ 99.9 million, and $ 62.3 million respectively.

Income tax payments were appr oximately $ 1,080.7 million, $ 856.8 million, and $ 973.7 million for fiscal 2023, 2022, and 2021, respectively.

As of June 30, 2023, 2022, and 2021 the Company's liabilities for unrecognized tax benefits, which include interest and penalties, we re $ 116.9 million, $ 98.1 million, and $ 99.9 million respectively.

The amount that, if recognized, would impact the effective tax rate is $ 83.6 million, $ 68.1 million, and $ 68.5 million, respectively.

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During fiscal year 2022, the Company recorded penalties of $ 0.3 million.

At June 30, 2022, the Company had accrued interest of $ 21.9 million recorded on the Consolidated Balance Sheets, of which $ 4.5 million was recorded within income taxes payable, and the remainder was recorded within other liabilities.

At June 30, 2023, the Company had accrued interest of $ 30.0 million recorded on the Consolidated Balance Sheets within other liabilities.

At June 30, 2022 and June 30, 2021, the Company’s accrued penalties of $ 0.3 million and $ 0.3 million, respectively, were recorded on the Consolidated Balance Sheets within income taxes payable.

At June 30, 2023 and June 30, 2022, the Company’s accrued penalties recorded on the Consolidated Balance Sheets within other liabilities were not material.

At June 30, 2022, the Company's accrued penalties of $ 0.3 million, were recorded on the Consolidated Balance Sheets within income taxes payable.

The Company is routinely examined by the IRS and tax authorities in foreign countries in which it conducts business, as well as tax authorities in states in which it has significant business operations.

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Taxing Jurisdiction Fiscal Years under Examination

Illinois 2019 - 2020

Arizona 2016 - 2020

Illinois 2019 - 2020

Massachusetts 2016 - 2020

New York State 2016 - 2018

New York City 2016 - 2021

New York State 2016 - 2019

India 2014 - 2018 , 2020 - 2021

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If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions.

Based on current estimates, settlements related to various jurisdictions and tax periods could increase earnings up to $ 2 million and expected cash payments could be up to $ 15 million in the next twelve months.

The liability related to cash payments expected to be paid within the next 12 months has been reclassified from other liabilities to current liabilities on the Consolidated Balance Sheets.

Based on current estimates, the Company is not projecting any settlements.

Audit outcomes and the timing of audit settlements are subject to significant uncertainty.

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As of June 30, 2023 , the Company has purchase commitm ents of approximately $ 1,067.9 million, including a reinsurance premium with Chubb for the fiscal 2024 policy year, as well as obligations related to software license agreements, and purchase and maintenance agreements on our software, equipment, and other assets, of which $ 297.5 million relates to fiscal 2024, $ 406.8 million relates to the fiscal years ending June 30, 2025 through fiscal 2026 and the remaining relates to fiscal years ending June 30, 2027 through fiscal 2028.

In May 2020, two potential class action complaints were filed against ADP, TotalSource and related defendants in the U.S.

In May 2020, a putative class action complaint was filed against ADP, TotalSource and related defendants in the U.S.

District Court, District of New Jersey.

The complaints assert violations of the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with the ADP TotalSource Retirement Savings Plan’s fiduciary administrative and investment decision-making.

The complaints seek statutory and other unspecified monetary damages, injunctive relief and attorney’s fees.

These claims are still in their early stages and the Company is unable to estimate any reasonably possible loss, or range of loss, with respect to these matters.

The Company intends to vigorously defend against these lawsuits.

The complaint asserts violations of the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with the ADP TotalSource Retirement Savings Plan’s fiduciary administrative and investment decision-making.

The complaint seeks statutory and other unspecified monetary damages, injunctive relief and attorney’s fees.

These claims are still in their early stages and the Company is unable to estimate any reasonably possible loss, or range of loss, with respect to this matter.

The Company intends to vigorously defend against this lawsuit.

A second putative class action complaint, also filed in May 2020 against TotalSource and covering similar claims, has been dismissed.

The Company is subject to various claims, litigation, and regulatory compliance matters in the normal course of business.

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Tax effect — 82.6 0.8 ( 69.0 ) 14.4

Reclassification adjustments to net earnings — ( 12.9 ) (A) — ( 11.8 ) (B) ( 24.7 )

Reclassification adjustments to net earnings — ( 11.3 ) (A) 3.8 (C) 9.3 (B) 1.8

Tax effect — 2.5 ( 0.9 ) ( 2.7 ) ( 1.1 )

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(B) Reclassification adjustments out of AOCI are included in net pension (income)/expense (see Note 10).

In fiscal 2020, reclassification includes $ 17.0 million of prior service credits which were recognized as a component of net pension (income)/expense as a result of the U.S.

pension plan freeze.

(C) Reclassification adjustments out of AOCI are included in Interest expense on the Statements of Consolidated Earnings (see Note 9).

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data