What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-19 compared with 2020-02-21 · 619 added, 551 removed, 944 unchanged (55% of the section changed)

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To the shareholders and the Board of Directors of Global Payments Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Global Payments Inc.

and subsidiaries (the "Company") as of December 31, 2019 , based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 , based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2019 , of the Company and our report dated February 21, 2020 , expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company's change in its method of accounting for revenue from contracts with customers in fiscal year 2018, due to the adoption of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers and an explanatory paragraph regarding the Company’s change in its method of accounting for leases in fiscal year 2019 due to the adoption of ASC Topic 842, Leases .

As described in Management's Report on Internal Control over Financial Reporting, the Company consummated its merger with Total System Services, Inc.

("TSYS") on September 18, 2019, and management excluded from its assessment of internal control over financial reporting the acquired operations of TSYS, which constituted approximately 32% of consolidated assets, excluding goodwill, approximately 25% of consolidated revenues, and approximately 10% of consolidated operating income, as of and for the year ended December 31, 2019 .

Accordingly, our audit did not include the internal control over financial reporting of the acquired operations of TSYS that is excluded from management’s assessment.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that

could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

February 21, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Global Payments Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Global Payments Inc.

and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with the applicable accounting principles generally accepted in the United States of America.

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Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue from contracts with customers in fiscal year 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers .

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in fiscal year 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in fiscal year 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Merger with Total System Services, Inc.

Merger - Refer to Note 2 to financial statements

Critical Audit Matter Description

The Company completed the merger with Total System Services, Inc.

for consideration of $24.5 billion on September 18, 2019.

The Company accounted for the transaction as a business combination by applying the acquisition method of accounting.

Accordingly, the assets acquired and liabilities assumed were recognized at their respective fair values.

Management estimated the fair value of the customer relationship intangible assets for the Issuer Solutions segment, the most significant intangible asset acquired, using the income approach, which is based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the future cash flows.

The fair value determination of the customer relationship intangible asset required management to make significant estimates and assumptions related to future cash flows, including the forecasted rate of revenue growth, rate of customer attrition and the selection of the discount rate.

Designing and performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenue growth, future customer attrition and discount rates (key assumptions) for the Issuer Solutions customer relationship intangible asset included the following, among others:

We tested the effectiveness of controls over the valuation of the customer relationship intangible asset, including management's controls over forecasts of future cash flows and the selection of the revenue growth rate, customer attrition rate and discount rate.

We assessed the reasonableness of management’s forecasts and assumptions related to the revenue growth rate by comparing projections to historical results and certain peer company data.

We tested the source information underlying the determination of the customer attrition rate and testing the mathematical accuracy of the calculation.

Our fair value specialists assisted us in considering the reasonableness of the (1) valuation methodology and (2) the discount rate by:

Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

Developing a range of independent estimates and comparing those to the discount rate selected by management.

We evaluated whether the projected revenue growth rates were consistent with evidence obtained in other areas of the audit.

Revenue Recognition - Issuer Solutions - Refer to Notes 1 and 3 to the financial statements .

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The Company has determined that the processing services and loyalty redemption services represent stand-ready performance obligations comprising a series of distinct days of services that are substantially the same and have the same pattern of transfer to the customer.

These performance obligations include variable consideration.

The Company determined that (a) the variable consideration relates specifically to its efforts to satisfy the performance obligation and (b) allocating the variable amount of consideration entirely to the performance obligation is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.

As a result, the Company recognizes variable consideration in the period in which it has the contractual right to invoice the customer.

Professional services representing performance obligations are satisfied over time.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company's Issuer Solutions revenue transactions, specifically its identification of the performance obligations in contracts with its customers:

Our audit procedures related to the Company's Issuer Solutions revenue transactions, specifically its identification of the performance obligations in contracts with its customers, included the following, among others:

• We evaluated the effectiveness of controls over Issuer Solutions contract revenue, including controls over the identification of performance obligations.

We selected a sample of Issuer Solutions contracts and performed the following:

Evaluated whether the performance obligations were appropriately identified in each of the selected contracts.

Evaluated whether the pattern of revenue recognition was correctly determined for each of the identified performance obligations.

Revenues -Merchant Solutions - Refer to Note 1 to the financial statements

• We selected a sample of Issuer Solutions contracts and evaluated whether the performance obligations were appropriately identified in each of the selected contracts including whether the promised services are capable of being distinct and are distinct in the context of the contract.

Revenues - Payment processing solutions and services - Refer to Note 1 to the financial statements .

Critical Audit Matter Description

The Company's Merchant Solutions revenue from payment services consists of transaction-based fees made up of a significant volume of low-dollar transactions, sourced from multiple systems and applications.

The processing of transactions and recording of revenue is highly automated and is based on contractual terms with merchants, financial institutions, payment networks, and other parties.

Accordingly, we identified Merchant Solutions revenue as a critical audit matter.

The Company's revenues from its payment processing solutions and services consist of activity-based fees made up of a significant volume of low-dollar transactions, sourced from multiple systems and applications.

The processing of transactions and recording of revenue is highly automated and is based on contractual terms with merchants, financial institutions, financial service providers, payment networks, and other parties.

Accordingly, we identified payment processing solutions and services revenues as a critical audit matter.

This required an increased extent of effort, including the need for us to involve professionals with expertise in information technology (IT), to identify, test, and evaluate the Company's systems, software applications, and automated controls.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company's systems to process Merchant Solutions payment services revenues included the following, among others:

Our audit procedures related to the Company's systems to process payment services revenues included the following, among others:

• With the assistance of our IT specialists, we:

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• We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various reports extracted from the IT systems to the Company’s general ledger.

We evaluated trends in recorded revenue, including interchange fees and payment network fees.

• We evaluated trends in recorded revenues, including interchange fees and payment network fees.

• For a sample of revenue transactions, we tested selected transactions by agreeing the amounts of revenue recognized to source documents and testing the mathematical accuracy of the recorded revenue.

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We have served as the Company's auditors since 2002.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Global Payments Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Global Payments Inc.

and subsidiaries (the "Company") as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2020, of the Company and our report dated February 19, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s change in its method of accounting for leases in fiscal year 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

February 19, 2021

GLOBAL PAYMENTS INC.

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Years Ended December 31,

2020 2019 2018

Revenues $ 7,423,558 $ 4,911,892 $ 3,366,366

Operating expenses:

Cost of service

3,650,727 2,073,803 1,095,014

Selling, general and administrative

2,878,878 2,046,672 1,534,297

6,529,605 4,120,475 2,629,311

Operating income 893,953 791,417 737,055

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Interest and other expense ( 343,548 ) ( 304,905 ) ( 195,619 )

( 299,997 ) ( 273,492 ) ( 174,900 )

Income before income taxes and equity in income of equity method investments 593,956 517,925 562,155

Income tax (expense) benefit

Income tax expense 77,153 62,190 77,488

Income before equity in income of equity method investments 516,803 455,735 484,667

Equity in income of equity method investments, net of tax 88,297 13,541 —

Net income 605,100 469,276 484,667

Net income attributable to noncontrolling interests ( 20,580 ) ( 38,663 ) ( 32,614 )

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Years Ended December 31,

2020 2019 2018

Net income $ 605,100 $ 469,276 $ 484,667

Other comprehensive income (loss):

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Income tax benefit (expense) related to foreign currency translation adjustments 1,160 1,281 ( 832 )

Net unrealized (losses) gains on hedging activities

Net unrealized losses on hedging activities ( 52,742 ) ( 90,238 ) ( 7,553 )

Reclassification of net unrealized losses (gains) on hedging activities to interest expense

Income tax benefit (expense) related to hedging activities

36,510 2,257 ( 4,792 )

Income tax benefit related to hedging activities 4,008 21,036 2,972

Other, net of tax ( 7,150 ) 4,174 760

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Comprehensive income

740,096 466,155 356,783

Comprehensive income attributable to noncontrolling interests ( 35,223 ) ( 35,938 ) ( 29,918 )

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(in thousands, except share data)

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current assets:

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Total current assets 4,592,360 4,366,448

Goodwill 23,871,451 23,759,740

Other intangible assets, net 12,015,883 13,154,655

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Other noncurrent assets 2,135,692 1,810,225

Total assets $ 44,201,545 $ 44,480,162

LIABILITIES AND EQUITY

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Common stock, no par value;

400,000,000 shares authorized at December 31, 2019 and 200,000,000 shares authorized at December 31, 2018;

400,000,000 shares authorized at December 31, 2020 and 2019;

298,332,459 shares issued and outstanding at December 31, 2020 and 300,225,590 shares issued and outstanding at December 31, 2019

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Noncontrolling interests 154,674 199,242

Total equity 27,487,044 28,054,989

Total liabilities and equity $ 44,201,545 $ 44,480,162

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Years Ended December 31,

2020 2019 2018

Cash flows from operating activities:

Net income $ 605,100 $ 469,276 $ 484,667

Adjustments to reconcile net income to net cash provided by operating activities:

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Deferred income taxes ( 166,224 ) ( 108,309 ) ( 1,451 )

Equity in income of equity investments, net of tax ( 88,297 ) ( 13,541 ) —

Other, net ( 13,665 ) 12,971 ( 8,025 )

Changes in operating assets and liabilities, net of the effects of business combinations:

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Cash flows from investing activities:

Acquisitions, net of cash acquired

Business combinations and other acquisitions, net of cash acquired ( 160,801 ) ( 644,622 ) ( 1,259,692 )

Restricted cash from business combinations 119,372 — —

Capital expenditures ( 436,236 ) ( 307,868 ) ( 213,290 )

Proceeds from sale-and-leaseback transaction

Other, net 39,323 35,404 ( 3,305 )

Net cash used in investing activities ( 438,342 ) ( 917,086 ) ( 1,476,287 )

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Dividends paid ( 233,216 ) ( 63,498 ) ( 6,332 )

Purchase of subsidiary shares from noncontrolling interest

( 578,196 ) — —

Net cash (used in) provided by financing activities ( 1,546,142 ) ( 28,674 ) 286,930

Effect of exchange rate changes on cash

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

Effect of exchange rate changes on cash, cash equivalents and restricted cash 81,832 21,877 ( 41,702 )

Increase (decrease) in cash, cash equivalents and restricted cash 411,498 467,395 ( 124,977 )

Cash, cash equivalents and restricted cash, beginning of the period 1,678,273 1,210,878 1,335,855

Cash, cash equivalents and restricted cash, end of the period $ 2,089,771 $ 1,678,273 $ 1,210,878

See Notes to Consolidated Financial Statements.

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(in thousands, except per share data)

Number of Shares

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Global Payments Shareholders’ Equity

Noncontrolling Interests

Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity

Balance at December 31, 2019 300,226 $ 25,833,307 $ 2,333,011 $ ( 310,571 ) $ 27,855,747 $ 199,242 $ 28,054,989

Other comprehensive loss

Cumulative effect of adoption of new accounting standards ( 5,379 ) ( 5,379 ) ( 5,379 )

Net income 584,520 584,520 20,580 605,100

Other comprehensive income 120,353 120,353 14,643 134,996

Stock issued under share-based compensation plans 1,726 66,142 66,142 66,142

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Share-based compensation expense 148,792 148,792 148,792

Issuance of common stock in connection with a business combination

Noncontrolling interest of acquired business 14,812 14,812

Purchase of subsidiary shares from noncontrolling interest

( 497,737 ) ( 12,055 ) ( 509,792 ) ( 68,404 ) ( 578,196 )

Distributions to noncontrolling interests ( 26,199 ) ( 26,199 )

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Cash dividends declared ($ 0.78 per common share)

( 233,216 ) ( 233,216 ) ( 233,216 )

Balance at December 31, 2020 298,332 $ 24,963,769 $ 2,570,874 $ ( 202,273 ) $ 27,332,370 $ 154,674 $ 27,487,044

Number of Shares

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Global Payments Shareholders’ Equity

Noncontrolling Interests

Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity

Balance at December 31, 2018 157,962 $ 2,235,167 $ 2,066,415 $ ( 310,175 ) $ 3,991,407 $ 194,936 $ 4,186,343

Cumulative effect of adoption of new accounting standards

Net income 430,613 430,613 38,663 469,276

Other comprehensive loss ( 396 ) ( 396 ) ( 2,725 ) ( 3,121 )

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Share-based compensation expense 89,634 89,634 89,634

Distributions to noncontrolling interests

Issuance of common stock in connection with a business combination 143,909 23,771,389 23,771,389 23,771,389

Distribution of noncontrolling interests ( 31,632 ) ( 31,632 )

Repurchases of common stock ( 2,328 ) ( 224,064 ) ( 100,519 ) ( 324,583 ) ( 324,583 )

Cash dividends declared ($ 0.225 per common share)

( 63,498 ) ( 63,498 ) ( 63,498 )

Balance at December 31, 2019 300,226 $ 25,833,307 $ 2,333,011 $ ( 310,571 ) $ 27,855,747 $ 199,242 $ 28,054,989

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(in thousands, except per share data)

Number of Shares

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Global Payments Shareholders’ Equity

Noncontrolling Interests

Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity

Balance at December 31, 2017 159,180 $ 2,379,774 $ 1,597,897 $ ( 183,144 ) $ 3,794,527 $ 170,704 $ 3,965,231

Cumulative effect of adoption of new accounting standards 50,969 ( 1,843 ) 49,126 49,126

Net income 452,053 452,053 32,614 484,667

Other comprehensive income ( 125,188 ) ( 125,188 ) ( 2,696 ) ( 127,884 )

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Share-based compensation expense 57,826 57,826 57,826

Issuance of common stock in connection with a business combination

Dissolution of a subsidiary

Distributions to noncontrolling interests ( 5,686 ) ( 5,686 )

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Cash dividends declared ($ 0.04 per common share)

( 6,332 ) ( 6,332 ) ( 6,332 )

Balance at December 31, 2018 157,962 $ 2,235,167 $ 2,066,415 $ ( 310,175 ) $ 3,991,407 $ 194,936 $ 4,186,343

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These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

COVID-19 Update — In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic.

The pandemic continues to cause major disruptions to businesses and markets worldwide as the virus spreads or has a resurgence in certain jurisdictions.

A number of countries as well as many states and cities within the United States have implemented measures in an effort to contain the virus, including physical distancing, travel restrictions, border closures, limitations on public gatherings, work from home and closure of or restrictions on nonessential businesses.

The effects of the outbreak are still evolving, and the ultimate severity and duration of the pandemic and the implications on global economic conditions remains uncertain.

Use of estimates — The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period.

Actual results could differ materially from those estimates.

Recently adopted accounting pronouncements — The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases", which requires recognition of assets and liabilities for the rights and obligations created by leases and new disclosures about leases.

In particular, the future magnitude, duration and effects of the COVID-19 pandemic are difficult to predict at this time, and the ultimate effect could result in additional charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses.

These consolidated financial statements reflect the financial statement effects of COVID-19 based upon management's estimates and assumptions utilizing the most currently available information.

Recently adopted accounting pronouncements

Accounting Standards Update ("ASU") 2018-15 — In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (A Consensus of the FASB Emerging Issues Task Force)." ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract.

The new guidance amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs following the internal-use software capitalization criteria within Accounting Standards Codification ("ASC") Subtopic 350-40.

We adopted ASU 2018-15 on January 1, 2020, applying the guidance prospectively to all implementation costs incurred on or after the date of adoption.

The adoption of this standard did not have a material effect on our consolidated financial statements.

We have historically capitalized implementation costs associated with cloud computing arrangements that are

service contracts following the guidance in Subtopic 350-40 and will continue to do so pursuant to the clarifications provided in the new guidance.

We amortize capitalized implementation costs to expense on a straight-line basis over the term of the applicable hosting arrangement.

Our cloud computing arrangements involve services we use to support certain internal corporate functions as well as technology associated with revenue-generating activities.

As of December 31, 2020, capitalized implementation costs, net of accumulated amortization, were $ 16.2 million and are presented within other noncurrent assets in the consolidated balance sheets.

Amortization expense for the year ended December 31, 2020 was $ 3.1 million, and is presented in the same line item in the consolidated statements of income as the expense for the associated cloud services arrangement.

ASU 2016-13 — We adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments " on January 1, 2020 using the modified retrospective transition method.

The adoption of this standard resulted in a cumulative-effect adjustment to decrease retained earnings by $ 5.4 million, net of tax.

The amendments in this update changed how we measure and recognize credit impairment for certain financial instruments measured at amortized cost.

Under the current expected credit losses model required by ASU 2016-13, we recognize at asset inception and each subsequent reporting date an estimate of credit losses expected to occur over the remaining life of each pool of financial assets with similar risk characteristics.

ASU 2016-02 — ASU 2016-02 “Leases” requires recognition of assets and liabilities for the rights and obligations created by leases and new disclosures about leases.

We adopted ASU 2016-02, as well as other related clarifications and interpretive guidance issued by the FASB, on January 1, 2019 using the modified retrospective transition method.

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To calculate the present value of remaining lease payments, we elected to use an incremental borrowing rate based on the remaining lease term at transition.

We adopted ASU 2014-09, "Revenues from Contracts with Customers (Topic 606)" as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard ("ASC 606") and ASC Subtopic 340-40:

Adoption did not have a material effect on any line items in our consolidated statement of income or on our cash flows from operating activities, investing activities or financing activities included in our consolidated statement of cash flows.

ASU 2014-09 — We adopted ASU 2014-09, "Revenues from Contracts with Customers (Topic 606)" as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard ("ASC 606") and ASC Subtopic 340-40:

"Other Assets and Deferred Costs - Contracts with Customers" ("ASC 340-40") on January 1, 2018.

We elected the modified retrospective transition method, which resulted in a net increase to retained earnings of $ 51.0 million for the cumulative effect of applying the standard.

The primary components of the cumulative-effect adjustment were changes in the accounting for certain costs to obtain customer contracts and the related income tax effects, which resulted in increases to other noncurrent assets and deferred income tax liabilities of $ 64.6 million and $ 15.6 million , respectively.

Previously, we amortized these assets to expense over the related contract term.

Under ASC 340-40, we now amortize these assets over the expected period of benefit, which is generally longer than the initial contract term.

Under the new standard, we also capitalized certain costs that were not previously capitalized,

including certain commissions and the related payroll taxes and certain costs incurred to fulfill a contract before the performance obligation has been satisfied, primarily compensation and related payroll taxes for employees engaged in customer implementation activities in our technology-enabled businesses.

Prior to the adoption of ASC 606, we presented payments made to certain third parties, including payment networks, as a component of operating expenses.

For periods beginning on and after January 1, 2018 , we present revenue net of these third-party payments.

This change in presentation had the effect of reducing our revenues and operating expenses by the same amounts.

As a result, revenues, cost of service and selling, general and administrative expenses were lower than the amounts that would have been presented if not for the effect of the new revenue accounting standard by $ 1,110.8 million , $ 1,042.9 million and $ 67.9 million , respectively, for the year ended December 31, 2018.

The primary components of the cumulative-effect adjustment were changes in the accounting for certain costs to obtain and fulfill customer contracts and the related income tax effects, which resulted in increases to other noncurrent assets and deferred income tax liabilities of $ 64.6 million and $ 15.6 million, respectively.

Upon the adoption of ASC 606, we present revenue net of payments made to certain third-parties, including payment networks.

The adoption of ASC 606 did not have a material effect on any other line items in our consolidated statement of income for year ended December 31, 2018 or on any other line items in our consolidated balance sheet as of December 31, 2018 and had no effect on our cash flows from operating activities, investing activities or financing activities included in our consolidated statement of cash flows for the year ended December 31, 2018.

Revenue recognition — Pursuant to ASC 606, at contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good or service that is distinct.

Revenue Recognition — At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good or service that is distinct.

In accordance with ASC 606, we recognize revenue when a customer obtains control of promised services.

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Our comprehensive offerings include, but are not limited to, authorization services, settlement and funding services, customer support and help-desk functions, chargeback resolution, payment security services, consolidated billing and statements and on-line reporting.

In addition, we may sell or rent point-of-sale terminals or other equipment to customers.

For our payment services obligation, the nature of our promise to the customer is that we stand ready to process transactions the customer requests on a daily basis over the contract term.

In addition, we may sell or lease point-of-sale terminals or other equipment to customers.

For our payment services, the nature of our promise to the customer is that we stand ready to process transactions the customer requests on a daily basis over the contract term.

Since the timing and quantity of transactions to be processed by us is not determinable, we view payment services to comprise an obligation to stand ready to process as many transactions as the customer requests.

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When third parties are involved in the transfer of goods or services to our customer, we consider the nature of each specific promised good or service and apply judgment to determine whether we control the good or service before it is transferred to the customer or whether we are acting as an agent of the third party.

To determine whether or not we control the good or service before it is transferred to the customer, we assess indicators including which party is primarily responsible for fulfillment and has discretion in determining pricing for the good or service, as well as other considerations.

To determine whether or not we control the good or service before it is transferred to the customer, we assess indicators including which party is primarily responsible for fulfillment and which party has discretion in determining pricing for the good or service, as well as other considerations.

Based on our assessment of these indicators, we have concluded that our promise to our customer to provide our payment services is distinct from the services provided by the card issuing financial institutions and payment networks in connection with payment transactions.

We do not have the ability to direct the use of and obtain substantially all of the benefits of the services provided by the card issuing financial institutions and payment networks before those services are transferred to our customer, and on that basis, we do not control those services prior to being transferred to our customer.

As a result, upon adoption of ASC 606, we present our revenues net of the interchange fees retained by the card issuing financial institutions and the fees charged by the payment networks.

As a result, we present our revenues net of the interchange fees retained by the card issuing financial institutions and the fees charged by the payment networks.

The majority of our payment services are priced as a percentage of transaction value or a specified fee per transaction, depending on the card type.

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Given the nature of the promise and the underlying fees based on unknown quantities or outcomes of services to be performed over the contract term, the total consideration is determined to be variable consideration.

The variable consideration for our payment service is usage-based and, therefore, it specifically relates to our efforts to satisfy our payment services obligation.

The variable consideration for our payment service is usage-based and, therefore, it specifically relates to our efforts to satisfy our payment services performance obligation.

The variability is satisfied each day the service is provided to the customer.

We directly ascribe variable fees to the distinct day of service to which it relates, and we consider the services performed each day in order to ascribe

the appropriate amount of total fees to that day.

We directly ascribe variable fees to the distinct day of service to which it relates, and we consider the services performed each day in order to ascribe the appropriate amount of total fees to that day.

Therefore, we measure revenues for our payment service on a daily basis based on the services that are performed on that day.

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We determine standalone selling price based on the price at which the good or service is sold separately.

If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by considering all reasonably available information, including market conditions, trends or other company- or customer-specific factors.

Substantially all of the performance obligations described above are satisfied over time.

The performance obligations associated with equipment sales, perpetual software licenses and certain professional services are generally satisfied at a point in time when they are transferred to the customer.

For certain other professional services that represent separate performance obligations, we generally use the input method and recognize revenue based on the number of hours incurred or services performed to date in relation to the total services expected to be required to satisfy the performance obligation.

the standalone selling price is not observable through past transactions, we estimate the standalone selling price by considering all reasonably available information, including market conditions, trends or other company- or customer-specific factors.

Substantially all of the performance obligations within our SaaS arrangements described above are satisfied over time.

We satisfy the combined SaaS performance obligation by standing ready to provide access to the SaaS.

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Revenue is recognized over the period for which the services are provided or by directly ascribing any variable fees to the distinct day of service based on the services that are performed on that day.

Issuer Solutions.

Issuer Solutions segment revenues are derived from long-term contracts with financial institutions and other financial service providers.

Issuer Solutions customer contracts may include multiple promises.

Payment processing services revenues are generated primarily from charges based on the number of accounts on file, transactions and authorizations processed, statements generated and/or mailed, managed services, cards embossed and mailed, and other processing services for cardholders accounts on file.

Most of these contracts have prescribed annual minimums, penalties for early termination, and service level agreements that may affect contractual fees if specific service levels are not achieved.

Issuer Solutions revenues also include loyalty redemption services and professional services.

To the extent a contract includes multiple promised services, we must apply judgment to determine whether promised services are capable of being distinct and are distinct in the context of the contract.

If these criteria are not met, the promised services are combined and accounted for as a single performance obligation.

Issuer Solutions customer contracts typically include an obligation to provide processing services to financial institutions and other financial services providers.

Most of these contracts have prescribed annual minimums, penalties for early termination, and service level agreements that may affect contractual fees if specific service levels are not achieved.

We have determined that these processing services represent a stand-ready obligation comprising a series of distinct days of services that are substantially the same and have the same pattern of transfer to the customer.

In many cases, Issuer Solutions arrangements may include additional performance obligations relating to loyalty redemption services and other professional services.

Issuer Solutions contracts may also include additional performance obligations relating to loyalty redemption services and other professional services.

Similar to processing services, we have determined that loyalty redemption services represent a stand-ready obligation comprising a series of distinct days of service that are substantially the same and have the same pattern of transfer to the customer.

If these criteria for being distinct are not met, the promised services are combined and accounted for as a single performance obligation.

The performance obligations to provide processing services and loyalty redemption services include variable consideration.

With respect to these performance obligations, we have determined that (a) the variable consideration relates specifically to our efforts to satisfy the performance obligation and (b) allocating the variable amount of consideration entirely to the performance obligation is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract.

As a result, we allocate and recognize variable consideration in the period in which we have the contractual right to invoice the customer.

Professional services representing performance obligations are satisfied over time.

The variable consideration for our services is usage-based and, therefore, it specifically relates to our efforts to satisfy our services performance obligation.

The variability is satisfied each day the service is provided to the customer.

Therefore, we measure revenues for our services on a daily basis based on the services that are performed on that day.

Professional services performance obligations are satisfied over time.

For professional services, we recognize revenue based on the labor hours incurred for time and materials projects or on a straight-line basis for fixed-fee projects.

In some cases, we pay certain of our customers a signing incentive at contract inception or renewal.

Consideration paid to customers is accounted for as a reduction of the transaction price and recognized as a reduction in revenues as the related services are transferred to the customer over the contract term.

Consideration paid to customers is accounted for as a reduction of the transaction price and recognized as a reduction in revenues as the related services are provided to the customer, typically over the contract term.

The deferred portion of consideration paid to customers is classified within other assets in our consolidated balance sheets.

Business and Consumer Solutions.

Business and Consumer Solutions segment revenues principally consist of fees collected from cardholders and fees generated by cardholder activity in connection with the programs that we manage.

Business and Consumer Solution arrangements include a stand-ready performance obligation to provide account access and facilitate purchase transactions.

Revenues principally consist of fees collected from cardholders and fees generated by cardholder activity in connection with the programs that we manage.

Customers are typically charged a fee for each purchase transaction made using their cards, unless the customer is on a monthly or annual service plan, in which case the customer is instead charged a monthly or annual subscription fee, as applicable.

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We also charge fees associated with additional services offered in connection with our accounts, including the use of overdraft features, a variety of bill payment options, card replacement, foreign exchange and card-to-card transfers of funds initiated through our call centers.

Business and Consumer Solutions revenues include a stand-ready performance obligation to provide account access and facilitate purchase transactions.

We have determined that we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date.

We have determined that we have a right to consideration from a customer in an amount that corresponds directly with our performance completed to date.

As a result, we recognize revenue in the amount to which we have a right to invoice.

Revenues are recognized net of fees charged by the payment networks for services they provide in processing transactions routed through them.

Revenue recognition prior to ASC 606.

For periods prior to our adoption of ASC 606, we recognized revenue when services were performed.

For arrangements with multiple elements, such as equipment, perpetual licenses, SaaS, maintenance, installation and training, we allocated consideration to each element based on the relative-selling-price method.

In multiple element arrangements where more-than-incidental software elements were included, the entire amount of revenue under the arrangement was deferred until all elements were delivered or objective evidence of the fair value of the undelivered items was established.

Cash and cash equivalents — Cash and cash equivalents include cash on hand and all liquid investments with a maturity of three months or less when purchased.

Cash, cash equivalents and restricted cash — Cash and cash equivalents include cash on hand and all liquid investments with a maturity of three months or less when purchased.

We consider certain portions of our cash and cash equivalents to be unrestricted but not available for general purposes.

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Settlement-related cash balances are not restricted;

however, these funds are generally paid out in satisfaction of settlement processing obligations the following day.

however, these funds are generally paid out in satisfaction of a processing obligation the following day.

Merchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement.

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While this cash is not restricted in its use, we believe that designating this cash as Merchant Reserves strengthens our fiduciary standing with financial institutions that sponsor us and is in accordance with guidelines set by the card networks.

Funds held for customers and the corresponding liability that we record in "customer deposits" include amounts collected prior to remittance on our customers' behalf.

Funds held for customers and the corresponding liability include amounts collected prior to remittance to or at the direction of our customers.

Restricted cash consists of amounts deposited by customers for prepaid card transactions that are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use.

These amounts cannot be withdrawn or used for general operating activities under legal or regulatory restrictions.

Restricted cash is included in prepaid expenses and other current assets in the consolidated balance sheet with a corresponding liability in accounts payable and accrued liabilities.

A reconciliation of cash, cash equivalents and restricted cash in the consolidated balance sheets to the beginning and ending balances shown in the consolidated statements of cash flows is as follows:

(in thousands)

Cash and cash equivalents $ 1,945,868 $ 1,678,273

Restricted cash included in prepaid expenses and other current assets 143,903 —

Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,089,771 $ 1,678,273

Accounts receivable, contract assets and contract liabilities — A contract with a customer creates legal rights and obligations.

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Contract assets and liabilities are presented net at the individual contract level in the consolidated balance sheet and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

Allowance for doubtful accounts — Accounts receivable balances are stated net of an allowance for doubtful accounts and billing adjustments.

We record an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected.

Increases in the allowance for doubtful accounts are recorded as charges to bad debt expense and are reflected in selling, general and administrative expenses in our consolidated statements of income.

Write-offs of uncollectible accounts are charged against the allowance for doubtful accounts.

We record an allowance for billing adjustments for actual and potential billing discrepancies.

Increases in the allowance for billing adjustments are recorded as a reduction of revenues in our consolidated statements of income and actual adjustments to invoices are charged against the allowance for billing adjustments.

Contract costs — Upon adoption of ASC 340-40, we capitalize costs to obtain contracts with customers, including employee sales commissions and fees to business partners.

Allowance for credit losses — We are exposed to credit losses on accounts receivable balances.

We utilize a combination of aging and loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool.

A broad range of information is considered in the estimation process, including historical loss information adjusted for current conditions, the effects of COVID-19 on our customers and expectations of future trends.

The estimation process also includes consideration of qualitative and quantitative risk factors associated with the age of asset balances, expected timing of payment, contract terms and conditions, changes in specific customer risk profiles or mix of customers, geographic risk, industry or economic trends and relevant environmental factors.

Accounts receivable is presented net of an allowance for credit losses of $ 20.6 million as of December 31, 2020.

The measurement of the allowance for credit losses is recognized through credit loss expense and is included as a component of selling, general and administrative expense in our consolidated statements of income.

We recognized credit loss expense of $ 23.0 million for the year ended December 31, 2020.

Write-offs are recorded in the period in which the asset is deemed to be uncollectible.

Recoveries are recognized when received as a direct credit to the credit loss expense in the consolidated statements of income.

Prior to the adoption of ASU 2016-13, credit losses on accounts receivable balances were recognized when an occurrence was deemed to be probable.

Revenues are recognized net of estimated billing adjustments.

Adjustments to customer invoices are charged against the allowance for billing adjustments.

Contract costs — We capitalize costs to obtain contracts with customers, including employee sales commissions and fees to business partners.

At contract inception, we capitalize such costs that we expect to recover and that would not have been incurred if the contract had not been obtained.

In certain cases where costs related to obtaining customers are incurred after the inception of the customer contract, such costs are capitalized as the corresponding liability is recognized.

In certain cases in which costs related to obtaining customers are incurred after the inception of the customer contract, such costs are capitalized as the corresponding liability is recognized.

We also capitalize certain costs incurred to fulfill our contracts with customers that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract and (iii) are expected to be recovered through revenues generated under the contract.

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Contract costs are amortized to operating expense in our consolidated statements of income on a systematic basis consistent with the transfer to the customer of the goods or services to which the asset relates.

Amortization of capitalized costs to obtain customer contracts is included in selling, general and administrative expenses, while amortization of capitalized costs to fulfill customer contracts is included in cost of services.

Amortization of capitalized costs to obtain customer contracts is included in selling, general and administrative expenses in the consolidated statements of income, while amortization of capitalized costs to fulfill customer contracts is included in cost of services.

We utilize a straight-line or proportional amortization method depending upon which method best depicts the pattern of transfer of the goods or services to the customer.

We amortize these assets over the expected period of benefit, which, based on the factors noted above, is typically three to seven years.

In order to determine the appropriate amortization period for capitalized contract costs, we consider a combination of factors, including customer attrition rates, estimated terms of customer relationships, the useful lives of technology we use to provide goods and services to our customers, whether future contract renewals are expected and if there is any incremental commission to be paid associated with a contract renewal.

Costs to obtain a contract with an expected period of benefit of one year or less are recognized as an expense when incurred.

We evaluate contract costs for impairment by comparing, on a pooled basis, the expected future net cash flows from underlying customer relationships to the carrying amount of the capitalized contract costs.

Prior to our adoption of ASC 606, we capitalized certain customer acquisition costs that represented incremental, direct costs that were recoverable through merchant profitability.

The capitalized customer acquisition costs were amortized using a proportional method over the initial term of the related merchant contract.

The deferred customer acquisition cost asset was accrued over the first year of merchant processing, consistent with the build-up in the accrued buyout liability, as described below.

Up-front distributor and partner payments — We make up-front contractual payments to third-party distributors and partners that do not meet the criteria of a contract cost.

If the payments meet the criteria to be recognized as an asset, we capitalize the up-front payment and recognize the capitalized amount as expense ratably over the period of benefit, which is generally the contract period.

Up-front distributor and partner payments — We capitalize certain up-front contractual payments to third-party distributors and partners and recognize the capitalized amount as expense ratably over the period of benefit, which is generally the contract period.

If the contract requires the distributor or partner to perform specific acts and no other conditions exist for the distributor or partner to earn or retain the up-front payment, then we recognize the capitalized amount as an expense when the performance conditions have been met.

Up-front distributor and partner payments are classified on our consolidated balance sheet within prepaid expenses and other current assets and other noncurrent assets and the related expense is recorded within selling, general and administrative expenses in our consolidated statements of income.

Settlement processing assets and obligations — Funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants and relates to certain transactions processed in our Merchant Solutions segment.

For transactions processed on our systems, we use our internal network to provide funding instructions to financial institutions that in turn fund the merchants.

Up-front distributor and partner payments are classified on our consolidated balance sheets within prepaid expenses and other current assets and other noncurrent assets and the related expense is reported within selling, general and administrative expenses in our consolidated statements of income.

Settlement processing assets and obligations — Funds settlement refers to the process in our Merchant Solutions segment of transferring funds between card issuers and merchants for merchant sales and credits processed on our systems.

We use our internal network to provide funding instructions to financial institutions that in turn fund the merchants.

We process funds settlement under two models, a sponsorship model and a direct membership model.

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• Receivable from Members.

Our receivable from the Members for transactions in which we have advanced funding to the Members to fund merchants in advance of receipt of funding from networks.

Our receivable from the Members for transactions in which we have advanced funding to the Members to fund merchants in advance of receipt of funding from payment networks.

• Receivable from networks .

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• Liability to Members .

Our liability to the Members for transactions for which funding from the payment network has been received by the Members but merchants have not yet been funded.

Our liability to the Members for transactions that have not yet been funded to the merchants.

• Liability to merchants .

Our liability to merchants for transactions that have been processed but not yet funded where we are a direct member of a particular payment network.

Reserve for merchant losses and sales allowances .

Our reserve for allowances, charges or losses that we do not expect to collect from the merchants due to concessions, merchant fraud, insolvency, bankruptcy or any other merchant-related reason.

• Allowance for credit and other merchant losses on settlement assets.

Allowances, charges or expected credit losses on chargebacks, merchant fraud or other merchant-related reason.

We apply offsetting to our settlement processing assets and obligations where a right of setoff exists.

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In the direct membership model, offsetting is not applied, and the individual components are presented as an asset or obligation based on the nature of that component.

Reserve for merchant losses and sales allowances — Our merchant customers are liable for any charges or losses that occur under the merchant agreement.

We experience losses in our card processing services when we are unable to collect amounts from merchant customers for any charges properly reversed by the card issuing financial institutions.

When we are not able to collect these amounts from the merchants due to merchant fraud, insolvency, bankruptcy or any other reason, we may be liable for the reversed charges.

We require cash deposits, guarantees, letters of credit and other types of collateral from certain merchants to minimize any such contingent liability, and we also utilize a number of systems and procedures to manage merchant risk.

We record an estimated liability for merchant losses comprised of estimated known losses and estimated incurred but not reported losses, which is included in settlement processing obligations in our consolidated balance sheet.

The provision for merchant losses is included as a component of cost of service and the sales allowance provision is included as a reduction of revenue in our consolidated statements of income..

Reserve for check guarantee operating losses — We experience check guarantee losses when we are unable to collect the full amount of a guaranteed check from the checkwriter.

Allowance for credit and other merchant losses on settlement assets — Our merchant customers are liable for any charges or losses that occur under the merchant agreement.

We have a risk of loss in our card processing services associated with the liability to collect amounts from merchant customers for any charges properly reversed by the card issuing financial institutions.

We are therefore exposed to credit losses on these settlement processing assets.

We utilize a combination of aging and loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool.

A broad range of information is considered in the estimation process, including historical loss information adjusted for current conditions, consideration of the effects of COVID-19 on our customers and expectations of future trends.

We require cash deposits, guarantees, letters of credit and other types of collateral from certain merchants to minimize the risk of loss, and we also utilize

a number of systems and procedures to manage merchant risk.

The allowance for credit losses on settlement processing assets was $ 6.2 million as of December 31, 2020.

The measurement of the allowance for credit losses is recognized through credit loss expense and is included as a component of cost of service in our consolidated statements of income.

We recognized credit loss expense of $ 16.8 million for the year ended December 31, 2020.

Write-offs are recognized in the period in which the asset is deemed to be uncollectible.

Recoveries are recognized when received as a direct credit to the credit loss expense in the consolidated statements of income.

Prior to the adoption of ASU 2016-13, credit losses were recognized when an occurrence was deemed to be probable.

Additionally, when we are not able to collect these amounts from merchants due to merchant fraud, insolvency, bankruptcy or any other reason, we may be liable for the reversed charges.

We record an estimated liability for merchant losses comprised of estimated incurred but not reported losses, which is included in accrued liabilities in our consolidated balance sheet.

The provision for merchant losses is included as a component of cost of service in our consolidated statements of income.

Allowance for credit and operating losses on check guarantee claims receivable assets — Our check guarantee business is exposed to credit losses when we are unable to collect the full amount of a guaranteed check from the checkwriter.

In our check guarantee service offering, we charge our merchants a percentage of the gross amount of the check and guarantee payment of the check to the merchant in the event the check is not honored by the checkwriter's bank.

We have the right to collect the full amount of the check from the checkwriter, but have not historically always recovered 100% of the guaranteed checks.

We record a reserve for estimated losses on returned checks and estimated incurred but not reported losses, which is presented as a valuation allowance against claims receivable included in prepaid expenses and other current assets in the consolidated balance sheets.

The provision for check guarantee losses is included as a component of cost of service in the consolidated statements of income.

Reserve for contract contingencies and processing errors — A significant number of our customer contracts in our Issuer Solutions segment contain service level agreements that can result in performance penalties payable by us if we do not meet

contractually required service levels.

We have the right to collect the full amount of the check from the checkwriter, but we have not always recovered 100% of the guaranteed checks.

We recognize an allowance for estimated losses on returned checks to reduce the claims receivable balance to the amount expected to be recovered, which is determined based on recent loss history and expected future collection trends.

Check guarantee claims receivable are included in prepaid expenses and other current assets in the consolidated balance sheets and are presented net of an allowance of $ 2.1 million as of December 31, 2020.

The provision for check guarantee losses, which is approximately $ 10.1 million for the year ended December 31, 2020, is included as a component of cost of service in the consolidated statements of income.

We record an accrual for estimated performance penalties and processing errors.

When providing for these accruals, we consider such factors as our history of incurring performance penalties and processing errors, actual contractual penalty charge rates in our contracts, progress towards milestones and known processing errors.

These accruals are included in accounts payable and accrued liabilities in our consolidated balance sheet.

Depending on the nature of item, transaction processing provisions are included as a reduction of the transaction price and recognized as a reduction in revenues as the related services are transferred to the customer, or as a component of cost of service, in our consolidated statements of income.

These accruals are included in accounts payable and accrued liabilities in our consolidated balance sheets.

Depending on the nature of item, transaction processing provisions are either included as a reduction of the transaction price and recognized as a reduction in revenues as the related services are provided to the customer, or recognized as a component of cost of service, in our consolidated statements of income.

Reserve for cardholder losses — Through services offered in our Business and Consumer Solutions segment, we are exposed to losses due to cardholder fraud, payment defaults and other forms of cardholder activity as well as losses due to nonperformance of third parties who receive cardholder funds for transmittal to the issuing financial institutions.

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These reserves are established based upon historical loss and recovery rates and cardholder activity for which specific losses can be identified.

These reserves are included in accounts payable and accrued liabilities in our consolidated balance sheet, and the provision for cardholder losses is included as a component of cost of service in our consolidated statements of income.

These reserves are included in accounts payable and accrued liabilities in our consolidated balance sheets, and the provision for cardholder losses is included as a component of cost of service in our consolidated statements of income.

Property and equipment — Property and equipment are stated at cost less accumulated depreciation and amortization.

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The preliminary project stage consists of the conceptual formulation of alternatives, the evaluation of alternatives, the determination of existence of needed technology and the final selection of alternatives.

Costs incurred during the preliminary project stage are expensed as incurred.

Capitalized internal-use software is amortized over its estimated useful life, which is typically two to ten years, in a manner that best reflects the pattern of economic use of the assets.

Costs incurred during the preliminary project stage are recognized as expense as incurred.

Capitalized internal-use software is

amortized over its estimated useful life, which is typically two to ten years, in a manner that best reflects the pattern of economic use of the assets.

Goodwill — We perform our annual goodwill impairment test as of October 1 each year.

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If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.

Prior to the Merger, our reporting units consisted of:

North America Payments, Integrated Solutions and Vertical Markets, United Kingdom, Asia-Pacific, Central and Eastern Europe, Russia and Spain.

As of October 1, 2019 , we elected to perform a quantitative assessment of impairment for each of these reporting units, and determined on the basis of those assessments that the fair value of each reporting unit is greater than its respective carrying amount.

As of October 1, 2019 , we had not allocated goodwill associated with the Merger to any of our reporting units;

however, no indicators of impairment existed that warranted further evaluation of the provisional goodwill.

After October 1, 2019 , as a result of the Merger, we realigned our reporting units based on new executive management and organizational structures consisting of:

The quantitative assessment compares the fair value of the reporting unit to its carrying amount, and recognizes an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit.

When applying the quantitative assessment, we determine the fair value of our reporting units based on a weighted average of multiple valuation techniques, principally a combination of an income approach and a market approach.

The income approach calculates a value based upon the present value of estimated future cash flows, while the market approach uses earnings multiples of similarly situated guideline public companies.

Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions.

Our reporting units consist of the following:

North America Payment Solutions, Integrated Solutions, Vertical Market Software Solutions, Europe Merchant Solutions, Spain Merchant Solutions, Asia-Pacific Merchant Solutions, Issuer Solutions and Business and Consumer Solutions.

After the reorganization of our reporting units, we performed a quantitative assessment of impairment for each of our new reporting units, and determined on the basis of those assessments that the fair value of each reporting unit is equal to or greater than its respective carrying amount.

We believe that the fair value of each of our reporting units is substantially in excess of its carrying amount, except for Issuer Solutions and Business and Consumer Solutions for which the respective carrying amounts approximate fair value since they were acquired in the Merger.

Other intangible assets — Other intangible assets include customer-related intangible assets (such as customer lists, merchant contracts and distributor agreements), contract-based intangible assets (such as noncompete agreements, referral agreements and processing rights), acquired technologies, trademarks and trade names associated with business combinations.

As of October 1, 2020, we performed a quantitative assessment of impairment for our Issuer Solutions and Business and Consumer Solutions reporting units and a qualitative assessment for all other reporting units.

We determined on the basis of the quantitative assessments of our Issuer Solutions and Business and Consumer Solutions reporting units that the fair value of each reporting unit is equal to or greater than its respective carrying amount.

Additionally, we determined on the basis of the qualitative factors that the fair value of other reporting units was not more likely than not less than the respective carrying amounts.

Our current year assessments also included consideration of the expected near term effects of the COVID-19 pandemic on revenues and our cost mitigation efforts, as well as longer term performance expectations.

Other intangible assets — Other intangible assets include customer-related intangible assets (such as customer lists, merchant contracts and referral agreements), contract-based intangible assets (such as noncompete agreements, distributor agreements and processing rights), acquired technologies, trademarks and trade names associated with business combinations.

These assets are amortized over their estimated useful lives.

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The useful lives of contract-based intangible assets are equal to the terms of the agreements.

The useful lives of amortizable trademarks and trade names are based on our plans to use the trademarks and trade names in the applicable markets.

The useful lives of amortizable trademarks and trade names are based on an estimate of the period over which we will earn revenues for the related brands, including contemplation of any future plans to use the trademarks and trade names in the applicable markets.

We use the straight-line method of amortization for our acquired technologies, trademarks and trade names and contract-based intangibles.

Amortization for most of our customer-related intangible assets is determined using an accelerated method.

The first step in determining the amortization expense for any period is that we calculate the expected cash flows for that period that were used in determining the acquisition-date fair value of the asset divided by the expected total cash flows over the estimated life of the asset.

We then multiply that percentage by the initial carrying amount of the asset to arrive at the amortization expense for that period.

If the cash flow patterns that we experience differ significantly from our initial estimates, we adjust the amortization schedule prospectively.

These cash flow patterns are derived using certain assumptions and cost allocations due to a significant number of asset interdependencies that exist in our business.

Under this accelerated method, the first step in determining the amortization expense for any period is that we divide the expected cash flows for that period that were used in determining the acquisition-date fair value of the asset by the expected total cash flows over the estimated life of the asset.

We then multiply that ratio by the initial carrying amount of the asset to arrive at the amortization expense for that period.

If the cash flow patterns that we experience differ significantly from our

initial estimates, we adjust the amortization schedule prospectively.

We believe that our accelerated method reflects the expected pattern of the benefit to be derived from the acquired customer relationships.

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The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date.

Accrued buyout liability — Certain of our Merchant Solutions salespersons in the United States are paid residual commissions based on the profitability generated by certain merchants.

Equity method investments — We have certain investments, including a 45 % investment in China UnionPay Data Co., Ltd., which we account for using the equity method of accounting.

Equity method investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments.

Accrued buyout liability — Certain of our Merchant Solutions salespersons in the United States are paid residual commissions based on the profitability generated by certain merchant customers.

We have the right, but not the obligation, to buy out some or all of these commissions and intend to do so periodically.

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Internal Revenue Service or other taxing authorities.

If we cannot reach a more-likely-than-not determination, no benefit is recorded.

If we determine that the tax position is more likely than not to be sustained, we record the largest amount of benefit that is more likely than not to be realized when the tax position is settled.

We record interest and penalties related to unrecognized income tax benefits in interest and selling, general and administrative expenses, respectively, in our consolidated statements of income.

If we do not reach a more-likely-than-not determination, no benefit is recognized.

If we determine that the tax position is more likely than not to be sustained, we recognize the largest amount of benefit that is more likely than not to be realized when the tax position is settled.

interest and penalties related to unrecognized income tax benefits in interest and selling, general and administrative expenses, respectively, in our consolidated statements of income.

Derivative instruments — We may use interest rate swaps or other derivative instruments to manage a portion of our exposure to the variability in interest rates.

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This offset is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument.

We designated each of our interest rate swap agreements as a cash flow hedge of interest payments on variable rate borrowings.

We designated each of our active interest rate swap agreements as a cash flow hedge of interest payments on variable rate borrowings.

See "Note 8 — Long-Term Debt and Lines of Credit" for more information about our interest rate swaps.

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Level 3 inputs are developed from unobservable data reflecting our assumptions and include situations where there is little or no market activity for the asset or liability.

Fair value of financial instruments — The carrying amounts of cash and cash equivalents, receivables, settlement lines of credit, accounts payable and accrued liabilities, approximate their fair value given the short-term nature of these items.

Fair value of financial instruments — The carrying amounts of cash and cash equivalents, restricted cash, receivables, settlement lines of credit, accounts payable and accrued liabilities, approximate their fair value given the short-term nature of these items.

The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy.

Certain of our long-term debt includes variable interest rates.

Certain of our long-term debt arrangements include variable interest rates.

The carrying amount of long-term debt with variable interest rates, exclusive of debt issuance costs, approximated fair value, which is calculated using Level 2 inputs.

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As permitted, we have elected a measurement alternative for equity instruments that do not have readily determinable fair values.

Under such alternative, these instruments are measured at cost plus or minus any changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Any resulting change in carrying amount would be reflected in net income.

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Income statement items are translated at the weighted-average rates prevailing during the period.

The resulting translation adjustment is recorded as a component of other comprehensive income and is included in accumulated comprehensive income within equity in our consolidated balance sheets.

The resulting translation adjustment is presented as a component of other comprehensive income and is included in accumulated comprehensive income within equity in our consolidated balance sheets.

Gains and losses on transactions denominated in currencies other than the functional currency are generally included in determining net income for the period.

For the years ended December 31, 2020, 2019 and 2018, our transaction gains and losses were insignificant.

Transaction gains and losses on intercompany balances of a long-term investment nature are recorded as a component of other comprehensive income and included in accumulated comprehensive income within equity in our consolidated balance sheets.

Transaction gains and losses on intercompany balances of a long-term investment nature are presented as a component of other comprehensive income and included in accumulated comprehensive income within equity in our consolidated balance sheets.

Earnings per share — Basic earnings per share ("EPS") is computed by dividing reported net income attributable to Global Payments by the weighted-average number of shares outstanding during the period.

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All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS.

During the year ended December 31, 2020 there were 124,888 stock options that had an antidilutive effect on the computation of diluted EPS.

During the years ended December 31, 2019 and 2018, there were no stock options that would have an antidilutive effect on the computation of diluted EPS.

1 unchanged sentence

Years Ended December 31,

2020 2019 2018

(in thousands)

1 unchanged sentence

Dilutive effect of stock options and other share-based awards

1,294 836 599

Diluted weighted-average number of shares outstanding 300,516 199,134 159,271

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We use a last-in, first-out cost flow assumption to identify the original issue proceeds of the shares repurchased.

Recently issued pronouncements not yet adopted — In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

The new guidance amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project.

The amendments in this update also provide additional presentation and disclosure requirements, including requirements to disclose the nature of an entity’s hosting arrangements that are service contracts, as well as quantitative information about capitalized implementation costs and related amortization expense.

The guidance will become effective for us on January 1, 2020.

We expect to apply the guidance prospectively to all implementation costs incurred after the date of adoption.

We have completed our evaluation of the effect of ASU 2018-15 on our consolidated financial statements and internal controls.

We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.

We have historically capitalized implementation costs associated with cloud computing arrangements that are service contracts following the guidance in Subtopic 350-40 and expect to continue to do so pursuant to the clarifications provided in the new guidance.

We expect to amortize deferred implementation costs to expense on a straight-line basis over the term of the applicable hosting arrangement, and we will enhance our accounting processes and internal controls to meet the new disclosure requirements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ." The amendments in this update change how companies measure and recognize credit impairment for many financial instruments measured at amortized cost.

The new model for current expected credit losses ("CECL") will require us to recognize an estimate of credit losses expected to occur over the remaining life of the financial instruments that are within the scope of the update, including accounts receivable and certain settlement processing assets, each of which are short-term in nature.

Under current GAAP, credit losses on these financial instruments are not recognized until their occurrence is deemed to be probable.

The guidance will become effective for us on January 1, 2020.

In general, the new guidance will require modified retrospective application to all outstanding financial assets that are within the scope of the update, with a cumulative-effect adjustment, if any, recorded to retained earnings as of the date of adoption.

We are substantially complete with our evaluation of the effect of ASU 2016-13 on our consolidated financial statements.

We do not expect adoption of this standard will have a material effect on our consolidated financial statements;

however, it may require expanded qualitative disclosures about our financial assets and related allowance for credit losses, as well as new or modified internal controls.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

Recently issued pronouncements not yet adopted —

ASU 2019-12 — In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ," which is intended to enhance and simplify various aspects of the accounting for income taxes.

The amendments in this update remove certain exceptions to the general principles in Topic 740 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.

ASU 2019-12 also clarifies and amends existing guidance to improve consistent application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted.

The amendments in this update remove certain exceptions to the general principles in ASC Topic 740 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.

ASU 2019-12 also clarifies and amends existing guidance to improve consistency in application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill.

We will adopt ASU 2019-12 when it becomes effective for us on January 1, 2021.

We have completed our evaluation of the effect of ASU 2019-12 on our consolidated financial statements and internal controls.

We do not expect the adoption of this standard will have a material effect on our consolidated financial statements.

ASU 2020-04 — In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and which are retained through the end of the hedging relationship.

The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date

or reassessment of a previous accounting determination.

If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied.

The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

A portion of our current indebtedness bears interest at a variable rate based on LIBOR.

Furthermore, we have entered into hedging instruments to manage our exposure to fluctuations in the LIBOR benchmark interest rate.

We are evaluating the effect of ASU 2020-04 on our consolidated financial statements.

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(1) Fair value of common stock issued to TSYS shareholders does not equal the product of shares of Global Payments common stock issued to TSYS shareholders and price per share of Global Payments common stock as presented in the table above due to the rounding of the number of shares in thousands.

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of December 31, 2019 , including a reconciliation to the total purchase consideration, were as follows (in thousands):

Provisional Amounts at Acquisition Date

Measurement- Period Adjustments

Provisional Amounts at December 31, 2019

The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of December 31, 2020, including a reconciliation to the total purchase consideration, were as follows (in thousands):

Provisional Amounts at December 31, 2019 Measurement- Period Adjustments Final

(in thousands)

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Property and equipment 644,084 ( 978 ) 643,106

Other assets 1,474,825 ( 2,969 ) 1,471,856

Accounts payable and accrued liabilities ( 614,060 ) ( 11,899 ) ( 625,959 )

Debt ( 3,295,342 ) 4,787 ( 3,290,555 )

Deferred income tax liabilities ( 2,687,849 ) 52,598 ( 2,635,251 )

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Total identifiable net assets 7,076,100 39,684 7,115,784

Goodwill 17,398,853 ( 39,684 ) 17,359,169

Total purchase consideration $ 24,474,953 $ — $ 24,474,953

As of December 31, 2019 , we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuations of the assets acquired and liabilities assumed.

We made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $ 41.7 million .

The effects of the measurement-period adjustments on our consolidated statement of income for the fourth quarter of 2019 were not material.

As of December 31, 2019 , provisional goodwill arising from the acquisition of $ 17.4 billion was included in our reportable segments as follows:

During the year ended December 31, 2020, we made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $ 39.7 million.

The decrease in deferred income tax liabilities for the year ended December 31, 2020 primarily relates to a refined analysis of the outside bases of partnerships.

The effects of the measurement-period adjustments on our consolidated statement of income for the year ended December 31, 2020 were not material.

As of December 31, 2020, goodwill arising from the acquisition of $ 17.4 billion was included in our reportable segments as follows:

$ 7.1 billion in the Merchant Solutions segment, $ 7.9 billion in the Issuer Solutions segment and $ 2.4 billion in the Business and Consumer Solutions segment.

Goodwill was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business.

We expect that substantially all of the goodwill from this acquisition will not be deductible for income tax purposes.

The following table reflects the provisional estimated fair values of the identified intangible assets of TSYS and the respective weighted-average estimated amortization periods:

Estimated Fair Values

Weighted-Average Estimated Amortization Periods

(in thousands)

Substantially all of the goodwill from this acquisition is not deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets of TSYS and the respective weighted-average estimated amortization periods:

Estimated Fair Values Weighted-Average Estimated Amortization Periods

(in thousands) (years)

Customer-related intangible assets $ 6,420,000 15

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Total estimated identified intangible assets $ 10,980,000 13

For the year ended December 31, 2020, the acquired operations of TSYS contributed $ 4,205.2 million to our consolidated revenues and $ 538.0 million to our consolidated operating income.

From the acquisition date through December 31, 2019, the acquired operations of TSYS contributed $ 1,215.0 million to our consolidated revenues and $ 78.7 million to operating income.

Transaction costs directly related to the Merger were $ 68.9 million for the year ended December 31, 2019 , respectively.

Transaction costs directly related to the Merger were $ 68.9 million for the year ended December 31, 2019.

The following unaudited pro forma information shows the results of our operations for the years ended December 31, 2019 and 2018 as if the Merger had occurred on January 1, 2018.

The unaudited pro forma information is presented for informational

purposes only and is not necessarily indicative of what would have occurred if the Merger had occurred as of that date.

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of what would have occurred if the Merger had occurred as of that date.

The unaudited pro forma information is also not intended to be a projection of future results due to the integration of the acquired operations of TSYS.

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• the income tax effects of the pro forma adjustments.

In addition, the pro forma net income attributable to Global Payments includes recognition of transaction costs related to the Merger in earnings as of the beginning of the earliest period presented.

Accordingly, pro forma net income attributable to Global Payments for the year ended December 31, 2018 includes approximately $ 150 million of transaction costs.

December 31, 2019

In addition, the pro forma net income attributable to Global Payments includes presentation of transaction costs of $ 150 million related to the Merger in earnings in the earliest period presented, the year ended December 31, 2018.

December 31, 2019 Year Ended

December 31, 2018

Actual Pro Forma Actual Pro Forma

(in thousands)

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The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows:

Provisional Amounts at December 31, 2018

Measurement- Period Adjustments

Provisional Amounts at December 31, 2018 Measurement- Period Adjustments Final

(in thousands)

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Identified intangible assets 188,294 — 188,294

Other assets 22,278 ( 3 ) 22,275

Deferred income tax liabilities ( 48,448 ) 838 ( 47,610 )

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Total identifiable net assets 144,357 630 144,987

Goodwill 264,844 370 265,214

Total purchase consideration $ 409,201 $ 1,000 $ 410,201

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The following table reflects the estimated fair values of the identified intangible assets of SICOM and the respective weighted-average estimated amortization periods:

Estimated Fair Values

Weighted-Average Estimated Amortization Periods

(in thousands)

Estimated Fair Values Weighted-Average Estimated Amortization Periods

(in thousands) (years)

Customer-related intangible assets $ 104,900 14

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The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows:

Provisional Amounts at December 31, 2018

Measurement- Period Adjustments

Provisional Amounts at December 31, 2018 Measurement- Period Adjustments Final

(in thousands)

2 unchanged sentences

Identified intangible assets 419,500 — 419,500

Other assets 11,958 ( 173 ) 11,785

Deferred income tax liabilities ( 98,979 ) 4,935 ( 94,044 )

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Total identifiable net assets 330,184 4,739 334,923

Goodwill 376,701 ( 4,739 ) 371,962

Total purchase consideration $ 706,885 $ — $ 706,885

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The following table reflects the estimated fair values of the identified intangible assets of AdvancedMD and the respective weighted-average estimated amortization periods:

Estimated Fair Values

Weighted-Average Estimated Amortization Periods

(in thousands)

Estimated Fair Values Weighted-Average Estimated Amortization Periods

(in thousands) (years)

Customer-related intangible assets $ 303,100 11

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Total estimated identified intangible assets $ 419,500 10

ACTIVE Network

We acquired the communities and sports divisions of Athlaction Topco, LLC ("ACTIVE Network") on September 1, 2017 , for total purchase consideration of $ 1.2 billion .

ACTIVE Network delivers cloud-based enterprise software, including payment technology solutions, to event organizers in the communities and health and fitness markets.

The following table summarizes the cash and noncash components of the consideration transferred on September 1, 2017 (in thousands):

Cash consideration paid to ACTIVE Network stockholders

Fair value of Global Payments common stock issued to ACTIVE Network stockholders

Total purchase consideration

We funded the cash consideration with cash on hand and incremental debt.

The acquisition-date fair value of 6,357,509 shares of our common stock issued to the sellers was determined based on the share price of our common stock as of the acquisition date and the effect of certain transfer restrictions.

The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows (in thousands):

Cash and cash equivalents

Property and equipment

Identified intangible assets

Deferred income taxes

Other liabilities

Total identifiable net assets

Total purchase consideration

Goodwill of $ 784.2 million arising from the acquisition, included in the Merchant Solutions segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining our existing businesses.

We expect that approximately 80 % of the goodwill will be deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets and the respective weighted-average estimated amortization periods:

Estimated Fair Values

Weighted-Average Estimated Amortization Periods

(in thousands)

Customer-related intangible assets

Acquired technologies

Trademarks and trade names

Contract-based intangible assets

Total estimated acquired intangible assets

Valuation of Identified Intangible Assets

For the acquisitions discussed above, the estimated fair values of customer-related and contract-based intangible assets were generally determined using the income approach, which was based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows.

The discount rates used represented the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics.

The discount rates used represented a risk adjusted market participant weighted-average cost of capital, derived using customary market metrics.

Acquired technologies were valued using the replacement cost method, which required us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence.

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NOTE 3— REVENUES

The disclosures in this note arose from our adoption of ASC 606 on January 1, 2018 and are applicable for the years ended December 31, 2019 and 2018 .

The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments:

The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the years ended December 31, 2020, 2019 and 2018:

Year Ended December 31, 2020

Merchant Solutions

Issuer Solutions

Business and Consumer Solutions

Intersegment Revenues

Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Revenues Total

(in thousands)

Americas $ 3,948,642 $ 1,525,122 $ 825,564 $ ( 65,991 ) $ 6,233,337

Europe 539,839 446,587 3,941 — 990,367

Asia Pacific 199,854 9,726 — ( 9,726 ) 199,854

$ 4,688,335 $ 1,981,435 $ 829,505 $ ( 75,717 ) $ 7,423,558

Year Ended December 31, 2019

Merchant Solutions

Issuer Solutions

Business and Consumer Solutions

Intersegment Revenues

Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Revenues Total

(in thousands)

Americas $ 3,240,233 $ 458,289 $ 227,440 $ ( 18,782 ) $ 3,907,180

Europe 614,747 146,365 — — 761,112

Asia Pacific 243,600 — — — 243,600

$ 4,098,580 $ 604,654 $ 227,440 $ ( 18,782 ) $ 4,911,892

Year Ended December 31, 2018

Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Revenues Total

(in thousands)

Americas $ 2,522,285 $ — $ — $ — $ 2,522,285

Europe 589,744 21,185 — — 610,929

Asia Pacific 233,152 — — — 233,152

$ 3,345,181 $ 21,185 $ — $ — $ 3,366,366

The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the years ended December 31, 2020, 2019 and 2018:

2020 2019 2018

(in thousands)

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Technology-enabled 2,087,895 1,880,021 1,523,552

$ 4,688,335 $ 4,098,580 $ 3,345,181

ASC 606 requires that we determine for each customer arrangement whether revenues should be recognized at a point in time or over time.

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Supplemental balance sheet information related to contracts from customers as of December 31, 2020 and 2019 was as follows:

Balance Sheet Location

December 31, 2019

December 31, 2018

Balance Sheet Location December 31, 2020 December 31, 2019

(in thousands)

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Other noncurrent assets 81,371 38,150

Contract liabilities, net (current)

Accounts payable and accrued liabilities

Contract liabilities, net (noncurrent)

Other noncurrent liabilities

The increase in contract liabilities during the year ended December 31, 2019 was primarily attributable to contract liabilities assumed in the Merger.

Contract liabilities, net (current) Accounts payable and accrued liabilities

217,938 193,405

Contract liabilities, net (noncurrent) Other noncurrent liabilities 52,944 35,272

Net contract assets were not material at December 31, 2020 or December 31, 2019.

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The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts.

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

However, as permitted by ASC 606, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria.

Accordingly, the total unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in table below.

Estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at December 31, 2019 were as follows (in thousands):

Years ending December 31,

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at December 31, 2020.

However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria.

Accordingly, the total unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in table below (in thousands):

Year ending December 31,

2021 $ 926,809

2026 and thereafter 523,056

Total $ 3,372,355

NOTE 4— PROPERTY AND EQUIPMENT

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Range of Depreciable Lives 2020 2019

(in thousands)

(Years) (in thousands)

Software 1 - 10

$ 1,144,230 $ 828,249

Equipment 1 - 20

679,686 522,921

Buildings 2 - 43

208,264 196,430

Leasehold improvements 2 - 15

131,790 117,593

Furniture and fixtures 1 - 10

63,542 82,941

Land 13,751 14,037

2,241,263 1,762,171

Less accumulated depreciation and amortization ( 900,438 ) ( 615,104 )

Work-in-progress 237,707 235,735

$ 1,578,532 $ 1,382,802

During the fourth quarter of 2019, we wrote-off capitalized software assets of $ 31.1 million related to legacy Global Payments technology that will no longer be utilized for the combined company.

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(in thousands)

Goodwill $ 23,871,451 $ 23,759,740

Other intangible assets:

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Trademarks and trade names 1,239,925 1,239,471

15,292,269 15,184,846

Less accumulated amortization:

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Trademarks and trade names 281,260 145,253

On December 31, 2019, we acquired a merchant portfolio from Desjardins Group, the leading cooperative financial group in Canada.

We accounted for the acquisition as an asset purchase and recorded customer-related intangible assets of $ 307.9 million .

3,276,386 2,030,191

$ 12,015,883 $ 13,154,655

On December 31, 2019, we acquired a merchant portfolio from Desjardins Group, a cooperative financial group in Canada.

We accounted for the acquisition as an asset purchase and recognized customer-related intangible assets of $ 307.9 million in the consolidated balance sheet at the acquisition date.

The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the years ended December 31, 2020, 2019 and 2018:

Merchant Solutions

Issuer Solutions

Business and Consumer Solutions

Merchant Solutions Issuer Solutions Business and Consumer Solutions Total

(in thousands)

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There were no accumulated impairment losses for goodwill at any balance sheet date reflected in the table above.

Customer-related intangible assets, acquired technologies, contract-based intangible assets and trademarks and trade names acquired during the year ended December 31, 2019 had weighted-average amortization periods of 15.1 years, 6.9 years, 17.7 years and 10.7 years, respectively.

Customer-related intangible assets, acquired technologies and contract-based intangible assets acquired during the year ended December 31, 2020 had weighted-average amortization periods of 8.9 years, 5.0 years, and 9.8 years, respectively.

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The estimated amortization expense of acquired intangibles as of December 31, 2020 for the next five years, calculated using the currency exchange rate at the date of acquisition, if applicable, is as follows (in thousands):

2021 $ 1,240,341

2022 1,220,091

2023 1,176,692

2024 1,120,117

2025 1,051,578

NOTE 6— LEASES

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Unless otherwise indicated, the following information in this footnote applies only to periods after December 31, 2018.

The effects of adopting ASU 2016-02 on our balance sheet as of January 1, 2019 are set forth in the table below.

As of December 31, 2019 and January 1, 2019, right-of-use assets and lease liabilities consisted of the following:

Balance Sheet Location

December 31, 2019

January 1, 2019

As of December 31, 2020 and 2019, right-of-use assets and lease liabilities consisted of the following:

Balance Sheet Location December 31, 2020 December 31, 2019

(in thousands)

Operating lease right-of-use assets:

Other noncurrent assets

Computer equipment

Other noncurrent assets

Real estate Other noncurrent assets $ 425,376 $ 355,063

Computer equipment Other noncurrent assets 54,959 80,427

Other Other noncurrent assets 862 1,310

Total operating lease right-of-use-assets $ 481,197 $ 436,800

Finance lease right-of-use assets:

Computer equipment

Property and equipment, net

Computer equipment Property and equipment, net $ 26,737 $ 21,901

Other equipment Property and equipment, net 45,560 —

Other Property and equipment, net 4,260 4,808

76,557 26,709

Less accumulated depreciation:

Computer equipment

Property and equipment, net

Computer equipment Property and equipment, net ( 6,602 ) ( 2,190 )

Other equipment Property and equipment, net ( 8,628 ) —

Other Property and equipment, net ( 869 ) ( 234 )

Total accumulated depreciation ( 16,099 ) ( 2,424 )

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Total right-of-use assets (1)

Operating lease liabilities (current)

Accounts payable and accrued liabilities

Operating lease liabilities (noncurrent)

Other noncurrent liabilities

Finance lease liabilities (current)

Current portion of long-term debt

Finance lease liabilities (noncurrent)

Long-term debt

$ 541,655 $ 461,085

Operating lease liabilities (current) Accounts payable and accrued liabilities $ 103,706 $ 88,812

Operating lease liabilities (noncurrent) Other noncurrent liabilities 448,016 397,488

Finance lease liabilities (current) Current portion of long-term debt 18,217 6,570

Finance lease liabilities (noncurrent) Long-term debt 57,772 26,426

Total lease liabilities $ 627,711 $ 519,296

(1) Approximately 82 % of our right-of-use assets are located in the United States.

(1) As of December 31, 2020 and 2019, approximately 72 % and 82 % of our right-of-use assets were located in the United States.

The weighted-average remaining lease term for operating and finance leases at December 31, 2020 was 7.4 years and 4.3 years, respectively.

The weighted-average remaining lease term for operating and finance leases at December 31, 2019 was 7.4 years and 5.1 years, respectively.

As of December 31, 2020, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 3.5 % and 3.3 %, respectively.

As of December 31, 2019, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 4.1 % and 2.8 %, respectively.

As of December 31, 2020, maturities of lease liabilities were as follows:

Operating Leases

Finance Leases

Operating Leases Finance Leases

(in thousands)

Years ending December 31,

Year ending December 31,

2021 $ 122,002 $ 25,841

2022 107,349 18,950

2023 76,127 17,346

2024 66,309 15,682

2025 56,508 2,834

2026 and thereafter 204,895 —

Total lease payments (1)

633,190 80,653

Imputed interest ( 81,468 ) ( 4,664 )

Total lease liabilities $ 551,722 $ 75,989

(1) Total operating lease payments did not include approximately $ 64 million for operating leases that had not yet commenced at December 31, 2019 .

(1) Total operating lease payments do not include approximately $ 147.5 million for operating leases that had not yet commenced at December 31, 2020.

Total finance lease payments do not include approximately $ 18.1 million for finance leases that had not yet commenced at December 31, 2020.

We expect the lease commencement dates for these leases to occur in 2021.

Operating lease costs in our consolidated statement of income for the year ended December 31, 2020 we re $ 147.0 million, including $ 108.4 million in selling, general and administrative expenses and $ 38.6 million in cost of services.

Total lease costs for the year ended December 31, 2020 include variable lease costs of approximatel y $ 17.9 million, w hich are primarily comprised of the cost of property taxes, insurance and maintenance.

Finance lease costs for the year ended December 31, 2020 wer e $ 16.3 million, including $ 14.6 million of amortization on right-of use assets and $ 1.6 million of interest on lease liabilities.

Lease costs for leases with a term of less than 12 months were not material for the year ended December 31, 2020 .

Operating lease costs in our consolidated statement of income for the year ended December 31, 2019 were $ 85.9 million, including $ 71.0 million in selling, general and administrative expenses and $ 14.9 million in cost of services.

1 unchanged sentence

Finance lease costs and lease costs for leases with a term of less than 12 months were not material for the year ended December 31, 2019.

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2019 was $ 70.4 million , which is included as a component of cash provided by operating activities in the consolidated statement of cash flows.

Operating lease liabilities arising from obtaining new or modified right-of-use assets, net of reductions resulting from certain lease modifications, were approximately $ 28.4 million for the year ended December 31, 2019 .

Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2020 and 2019 w as $ 117.7 million a nd $ 70.4 million, respectively, which are included as a component of cash provided by operating activities in the consolidated statement of cash flows.

Operating lease liabilities arising from obtaining new or modified right-of-use assets, net of reductions resulting from certain lease modifications, were approximat ely $ 158.6 million an d $ 28.4 million for the years ended December 31, 2020 and 2019, respectively.

Cash paid for amounts included in the measurement of finance lease liabilities that is included as a component of cash used in financing activities in the consolidated statement of cash flows was $ 11.2 million for the year ended December 31, 2020.

Finance lease liabilities arising from obtaining new or modified right-of-use assets, net of reductions resulting from certain lease modifications, were approximately $ 51.3 million for the year ended December 31, 2020.

Cash paid for finance lease liabilities and finance lease liabilities arising from obtaining new or modified right-of-use assets were not material for the year ended December 31, 2019.

In connection with the Merger, we acquired right-of-use assets and assumed lease liabilities of $ 256.2 million and $ 272.0 million, respectively.

Future minimum payments at December 31, 2018 for noncancelable operating leases were as follows (in thousands):

Years ending December 31:

2024 and thereafter

Total future minimum payments (1)

(1) Future minimum lease payments included approximately $ 70 million for operating leases that had not commenced at December 31, 2018.

Rent expense on all operating leases for the years ended December 31, 2018 and 2017 was $ 47.1 million and $ 44.7 million , respectively.

During the year ended December 31, 2017, we sold our operating facility in Jeffersonville, Indiana for $ 37.5 million and simultaneously leased the property back for an initial term of 20 years , followed by four optional renewal terms of five years .

The arrangement met the criteria to be treated as a sale for accounting purposes, and as a result, we derecognized the associated property.

There was no resulting gain or loss on the sale because the proceeds received were equal to the carrying amount of the property.

Rent expense on all operating leases for the year ended December 31, 2018 was $ 47.1 million.

NOTE 7 - OTHER ASSETS

Through certain of our subsidiaries in Europe, we were a member and shareholder of Visa Europe Limited ("Visa Europe").

On June 21, 2016, Visa Inc.

("Visa") acquired all of the membership interests in Visa Europe, and we received consideration in the form of cash and Series B and C convertible preferred shares of Visa.

We assigned the preferred shares received a value of zero based on transfer restrictions, Visa's ability to adjust the conversion rate and the estimation uncertainty associated with those factors.

Based on the outcome of any current or potential litigation involving Visa Europe in the United Kingdom and elsewhere in Europe, the conversion rate of the preferred shares could be adjusted down such that the number of Visa common shares we receive could be as low as zero .

The Series B and C convertible preferred shares become convertible in stages based on developments in the litigation and become fully convertible no later than 2028 (subject to a holdback to cover any then pending claims).

On September 24, 2020, in connection with the first mandatory release assessment, a portion of the Series B and C convertible preferred shares were converted by Visa representing approximately half of the original potential conversion rate.

We recognized a gain of $ 27.7 million reported in interest and other income in our consolidated statement of income for the year ended December 31, 2020 based on the fair value of the shares received.

The shares were subsequently sold in October.

As of December 31, 2020, the remaining Series B and C convertible preferred shares continue to be carried at an assigned value of zero based on the aforementioned factors.

NOTE 8— LONG-TERM DEBT AND LINES OF CREDIT

As of December 31, 2020 and 2019, long-term debt consisted of the following:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

(in thousands)

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3.800 % senior notes due April 1, 2021

$ 752,199 $ 760,996

3.750 % senior notes due June 1, 2023

562,258 567,330

4.000 % senior notes due June 1, 2023

565,930 572,522

2.650 % senior notes due February 15, 2025

993,110 991,423

4.800 % senior notes due April 1, 2026

809,324 820,623

4.450 % senior notes due June 1, 2028

482,588 486,982

3.200 % senior notes due August 15, 2029

1,236,424 1,234,843

2.900 % senior notes due May 15, 2030

4.150 % senior notes due August 15, 2049

739,789 739,431

Unsecured term loan facility 1,985,776 1,981,758

Unsecured revolving credit facility 36,000 903,000

Secured term loans

Secured revolving credit facility

Finance lease liabilities 75,989 32,996

5 unchanged sentences

At December 31, 2020, unamortized discount on senior notes was $ 8.5 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 47.4 million.

Unamortized debt issuance costs on our secured term loans at December 31, 2018 were $ 37.4 million .

At December 31, 2019, unamortized discount on senior notes was $ 5.9 million, and unamortized debt issuance costs on our senior notes and unsecured term loans were $ 46.6 million.

The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets.

At December 31, 2020, unamortized debt issuance costs on the unsecured revolving credit facility were $ 13.8 million, and, at December 31, 2019, unamortized debt issuance costs on the secured revolving credit facility were $ 17.6 million.

The debt discounts and debt issuance costs are recognized as an increase to interest expense over the terms of the respective debt instruments.

The amortization of debt discounts and debt issuance costs is recognized as an increase to interest expense over the terms of the respective debt instruments.

Amortization of discounts and debt issuance costs was $ 12.0 million, $ 11.9 million and $ 11.7 million, respectively, for years ended December 31, 2020, 2019 and 2018.

At December 31, 2020, maturities of long-term debt (excluding finance lease liabilities) were as follows by year (in thousands):

Years ending December 31,

Year ending December 31,

2021 $ 806,834

2023 1,300,000

2024 1,786,000

2025 1,000,000

2026 and thereafter 4,200,000

Total $ 9,151,237

See "Note 6—Leases" for more information about our finance lease liabilities, including maturities.

Bridge Facility

On May 27, 2019 , in connection with our entry into the Merger Agreement described in "Note 2 —Acquisitions," we obtained commitments for a $ 2.75 billion , 364 -day senior unsecured bridge facility (the "Bridge Facility").

On July 9, 2019 , upon our entry into the senior unsecured term loan and revolving credit facilities described below, the aggregate commitments under the Bridge Facility were reduced to approximately $ 2.1 billion .

Concurrently with the issuance of our senior unsecured notes, the remaining aggregate commitments under the Bridge Facility were reduced to zero and terminated.

During the year ended December 31, 2019 , we recognized $ 11.7 million of fees associated with the Bridge Facility in interest expense.

Senior Unsecured Credit Facilities

On July 9, 2019 , we entered into a term loan credit agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

The Term Loan Credit Agreement provides for a senior unsecured $ 2.0 billion term loan facility, and the Unsecured Revolving Credit Agreement provides for a senior unsecured $ 3.0 billion revolving credit facility.

We capitalized debt issuance costs of $ 12.8 million in connection with the issuances of these term loan and revolving credit facilities.

Borrowings under the term loan facility were made in U.S.

dollars and borrowings under the revolving credit facility are available to be made in U.S.

dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option.

Borrowings in U.S.

dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5 % , (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0 % , in each case, plus an applicable margin.

As of December 31, 2019 , the interest rates on the term loan facility and the revolving credit facility were 3.2 % and 3.0 % , respectively.

In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the revolving credit facility at an applicable rate per annum ranging from 0.125 % to 0.300 % depending on our credit rating.

Beginning on December 31, 2022 , and at the end of each quarter thereafter, the term loan facility must be repaid in quarterly installments in the amount of 2.50 % of original principal through the maturity date with the remaining principal balance due upon maturity in September 2024 .

The revolving credit facility also matures in September 2024 .

We may issue standby letters of credit of up to $ 250 million in the aggregate under the revolving credit facility.

Outstanding letters of credit under the revolving credit facility reduce the amount of borrowings available to us.

The total available commitments under the revolving credit facility at December 31, 2019 were $ 2,077.5 million .

Senior Unsecured Notes

On August 14, 2019 , we completed the public offering and issuance of $ 3.0 billion aggregate principal amount of senior unsecured notes, consisting of the following:

We have $ 7.1 billion in aggregate principal amount of senior unsecured notes, as presented in the table above, which are comprised of senior notes issued in 2020, senior notes assumed in the Merger and senior notes issued in 2019.

Interest on the senior notes is payable semi-annually at various dates.

Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture.

On May 15, 2020, we issued $ 1.0 billion in aggregate principal amount of 2.900 % senior unsecured notes due May 2030 and received proceeds of $ 996.7 million.

We incurred debt issuance costs of approximately $ 8.4 million, including underwriting fees, fees for professional services and registration fees, which were capitalized and reflected as a reduction of the related carrying amount of the notes in our consolidated balance sheet at December 31, 2020.

Interest on the notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2020.

The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our other outstanding unsecured and unsubordinated indebtedness.

We used the net proceeds from the offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes.

In August 14, 2019, we completed the public offering and issuance of $ 3.0 billion aggregate principal amount of senior unsecured notes, consisting of the following:

(i) $ 1.0 billion aggregate principal amount of 2.650 % senior notes due 2025;

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From August 14, 2019 until the closing of the Merger on September 18, 2019, the proceeds from the issuance of the senior notes were held in escrow.

Upon closing, the funds were released and used together with borrowings under the term loan facility and the revolving credit facility, as well as cash on hand, to repay TSYS' unsecured revolving credit facility, refinance certain of our existing indebtedness, fund cash payments made in lieu of fractional shares and pay transaction fees and costs related to the Merger.

certain of our existing indebtedness, fund cash payments made in lieu of fractional shares and pay transaction fees and costs related to the Merger.

In addition, in connection with the Merger, we assumed $ 3.0 billion aggregate principal amount of senior unsecured notes of TSYS, consisting of the following:

6 unchanged sentences

For the 3.750 % senior notes due 2023, the 4.000 % senior notes due 2023 and the 4.450 % senior notes due 2028, interest is payable semi-annually each June 1 and December 1.

The senior notes assumed in the Merger were measured at fair value of $ 3.2 billion at the acquisition date, which exceeded their aggregate face value by $ 169.0 million .

The difference between the fair value and face value of the assumed senior notes is recognized over the terms of the respective notes as a reduction of interest expense.

The amortization of this fair value adjustment was $ 10.5 million for the year ended December 31, 2019 .

As of December 31, 2019 , our senior notes had an estimated fair value of $ 6.3 billion .

The difference between the acquisition-date fair value and face value of senior notes assumed in the Merger is recognized over the terms of the respective notes as a reduction of interest expense.

The amortization of this fair value adjustment was $ 36.2 million and $ 10.5 million for the year ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, our senior notes had a total carrying amount of $ 7.1 billion and an estimated fair value of $ 7.8 billion.

The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy.

The fair value of other long-term debt approximated its carrying amount at December 31, 2020.

Senior Unsecured Credit Facilities

We have a term loan credit agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

We capitalized debt issuance costs of $ 12.8 million in connection with the issuances of these term loan and revolving credit facilities.

As of December 31, 2020, borrowings outstanding under the term loan facility and the revolving credit facility were $ 2.0 billion and $ 36.0 million, respectively.

Borrowings under the term loan facility were made in U.S.

dollars and borrowings under the revolving credit facility are available to be made in U.S.

dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option.

Borrowings in U.S.

dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5 %, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0 %, in each case, plus an applicable margin.

As of December 31, 2020, the interest rates on the term loan facility and the revolving credit facility were 1.52 % and 1.48 %, respectively.

Beginning on December 31, 2022, and at the end of each quarter thereafter, the term loan facility must be repaid in quarterly installments in the amount of 2.50 % of original principal through the maturity date with the remaining principal balance due upon maturity in September 2024.

The revolving credit facility also matures in September 2024.

We may issue standby letters of credit of up to $ 250 million in the aggregate under the revolving credit facility.

Outstanding letters of credit under the revolving credit facility reduce the amount of borrowings available to us.

The amounts available to borrow under the revolving credit facility are also determined by a financial leverage covenant.

As of December 31, 2020, the total available commitments under the revolving credit facility wer e $ 2.1 billion.

Prior Credit Facility

Prior to completion of the Merger, we were party to a credit facility agreement with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

The credit facility provided for secured financing comprised of (i) a $ 1.5 billion revolving credit facility;

The credit facility provided for

secured financing comprised of (i) a $ 1.5 billion revolving credit facility;

(ii) a $ 1.5 billion term loan;

4 unchanged sentences

In connection with the extinguishment of this credit facility, we wrote off related unamortized debt issuance costs of $ 16.7 million to interest expense during the year ended December 31, 2019.

Bridge Facility

On May 27, 2019, in connection with our entry into the Merger Agreement described in "Note 2—Acquisitions," we obtained commitments for a $ 2.75 billion, 364 -day senior unsecured bridge facility (the "Bridge Facility").

On July 9, 2019, upon our entry into the senior unsecured term loan and revolving credit facilities described below, the aggregate commitments under the Bridge Facility were reduced to approximately $ 2.1 billion.

Concurrently with the issuance of our senior unsecured notes, the remaining aggregate commitments under the Bridge Facility were reduced to zero and terminated.

During the year ended December 31, 2019, we recognized $ 11.7 million of fees associated with the Bridge Facility in interest expense.

Compliance with Covenants

The senior unsecured term loan and revolving credit facilities contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default.

As of December 31, 2019 , financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00 .

As of December 31, 2020, financial covenants under the term loan facility required a leverage ratio o f 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00.

We were in compliance with all applicable covenants as of December 31, 2020.

Settlement Lines of Credit

In various markets where we do business, we have specialized lines of credit, which are restricted for use in funding settlement.

In various markets where our Merchant Solutions segment does business, we have specialized lines of credit, which are restricted for use in funding settlement.

The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies.

1 unchanged sentence

Accordingly, the amount of the outstanding line of credit may exceed the stated credit limit.

As of December 31, 2019 and 2018 , a total of $ 74.5 million and $ 70.6 million , respectively, of cash on deposit was used to determine the available credit.

As of December 31, 2019 , we had $ 463.2 million outstanding under these lines of credit with additional capacity to fund settlement of $ 981.8 million .

As of December 31, 2020 and 2019, a total of $ 64.5 million an d $ 74.5 million, respectively, of cash on deposit was used to determine the available credit.

As of December 31, 2020, we h ad $ 358.7 million outst anding under these lines of credit with additional capacity to fund settlement o f $ 1,507.6 million.

During the year ended December 31, 2020, the maximum and average outstanding balances under these lines of credit were $ 752.5 million and $ 341.4 million, respectively.

The weighted-average interest rate on these borrowings was 3.16 % at December 31, 2019 .

The weighted-average interest rate on these borrowings wa s 2.35 % at December 31, 2020.

Derivative Agreements

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Upon issuance of our senior unsecured notes, we terminated the forward-starting swap agreements and made settlement payments of $ 48.3 million, which are included in cash flows from operating activities in our consolidated statement of cash flows for the year ended December 31, 2019 within the caption labeled "Other, net." We have and will continue to reclassify the effective portion of the realized loss from accumulated other comprehensive loss into interest expense over the terms of the related senior notes.

The fair values of our interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of December 31, 2019 , and classified within Level 2 of the valuation hierarchy.

The fair values of our interest rate

swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of December 31, 2020, and classified within Level 2 of the valuation hierarchy.

The table below presents information about our derivative financial instruments as of December 31, 2020 and 2019:

Weighted-Average Fixed Rate of Interest at

Range of Maturity Dates at

Fair Values at December 31,

Derivative Financial Instruments

Balance Sheet Location

December 31, 2019

Weighted-Average Fixed Rate of Interest at Range of Maturity Dates at Fair Value

Derivative Financial Instruments Balance Sheet Location December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2019

(in thousands)

Interest rate swaps (Notional of $250 million at December 31, 2019 and $750 million at December 31, 2018)

Prepaid expenses and other current assets

July 31, 2020

Interest rate swaps (Notional of $ 250 million a t December 31, 2019)

Prepaid expenses and other current assets N/A N/A $ — $ 472

Interest rate swaps (Notional of $ 300 million at December 31, 2020)

Other noncurrent assets

AP & accrued liabilities 1.91 % March 31, 2021 $ 1,330 $ —

Interest rate swaps (Notional of $ 1,250 million at December 31, 2020 and $ 1,550 million at December 31, 2019)

Other noncurrent liabilities

March 31, 2021 - December 31, 2022

Other noncurrent liabilities 2.73 % December 31, 2022 $ 65,490 $ 45,604

N/A - not applicable.

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Years Ended December 31,

2020 2019 2018

(in thousands)

Net unrealized gains (losses) recognized in other comprehensive loss

Net unrealized losses recognized in other comprehensive loss $ ( 52,742 ) $ ( 90,238 ) $ ( 7,553 )

Net unrealized losses (gains) reclassified out of other comprehensive loss to interest expense $ 36,510 $ 2,257 $ ( 4,792 )

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Funds held for customers $ 645,863 $ 392,375

Compensation and benefits

Contract liabilities 217,938 193,405

Compensation and benefits 194,090 212,016

Payment network fees 166,880 154,789

1 unchanged sentence

Operating lease liabilities 103,706 88,812

Income taxes payable

Third-party commissions 74,391 68,592

Miscellaneous taxes and withholdings 68,048 48,738

Third-party processing fees

Interest 62,865 61,296

Audit and legal 44,146 26,080

Unclaimed property 32,497 26,331

Audit and legal fees

Third-party processing fees 24,619 28,041

Settlement of common share repurchases 20,000 17,200

Current portion of accrued buyout liability (1)

Third-party commissions

16,180 14,817

Income taxes payable 13,517 56,426

Other 247,923 285,164

$ 2,061,384 $ 1,822,166

(1) The noncurrent portion of accrued buyout liability of $ 30.7 million and $ 34.2 million is included in other noncurrent liabilities on the consolidated balance sheets as of December 31, 2020 and 2019, respectively.

At December 31, 2019 , accrued liabilities (compensation and benefits) included obligations totally $ 37.3 million for one-time employee termination benefits resulting from Merger-related integration activities.

During the year ended December 31, 2019 , we recognized charges of $ 57.1 million for actions taken to date, which included $ 17.3 million of share-based compensation expense based on accelerated vesting periods for equity awards held by terminated employees.

At December 31, 2020 and 2019, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 48.4 million and $ 37.3 million, respectively, for employee termination benefits resulting from Merger-related integration activities.

During the year ended December 31, 2020, we recognized charges for employee termination benefits of $ 83.3 million, which included $ 6.7 million of share-based compensation expense.

During the year ended December 31, 2019, we recognized charges for employee termination benefits of $ 57.1 million, which included $ 17.3 million of share-based compensation expense.

As of December 31, 2020, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $ 140.4 million, which included $ 24.0 million of share-based compensation expense.

These charges are recorded within selling, general and administrative expenses in our consolidated statements of income and included within Corporate expenses for segment reporting purposes.

New obligations may arise as Merger-related integration activities continue in 2020.

New obligations may arise and related expenses may be incurred as Merger-related integration activities continue in 2021.

NOTE 10— INCOME TAX

The income tax expense (benefit) for the years ended December 31, 2019 , 2018 and 2017 consisted of the following:

The income tax expense for the years ended December 31, 2020, 2019 and 2018 consisted of the following:

Years Ended December 31,

2020 2019 2018

(in thousands)

Current income tax expense (benefit):

Federal $ 124,176 $ 50,048 $ ( 20,984 )

State 35,840 29,788 21,122

Foreign 82,456 90,895 79,320

242,472 170,731 79,458

Deferred income tax expense (benefit):

Federal ( 151,824 ) ( 79,813 ) ( 8,760 )

State ( 20,607 ) ( 29,326 ) ( 1,684 )

Foreign 7,112 598 8,474

( 165,319 ) ( 108,541 ) ( 1,970 )

$ 77,153 $ 62,190 $ 77,488

Income tax expense allocated to noncontrolling interests was $ 8.5 million, $ 12.3 million and $ 10.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

1 unchanged sentence

Years Ended December 31,

2020 2019 2018

(in thousands)

United States $ 194,190 $ 60,000 $ 131,067

On December 22, 2017 , the United States enacted the U.S.

Tax Cuts and Jobs Act of 2017 (the "2017 U.S.

Tax Act"), which resulted in numerous changes, including a reduction in the U.S.

federal tax rate from 35% to 21% effective January 1, 2018 and the transition of the U.S.

federal tax system to a territorial regime.

As part of this transition, the 2017 U.S.

Tax Act imposed a one-time mandatory "transition" tax on foreign earnings not previously subjected to U.S.

Following the guidance in SAB 118, w e made reasonable estimates of the effects of the 2017 U.S.

Tax Act on our existing deferred tax balances and the one-time transition tax.

For these items, which are further described below, we recognized a provisional net income tax benefit of $ 158.7 million , which was included as a component of income tax benefit in our consolidated statement of income for the year ended December 31, 2017.

We remeasured our U.S.

deferred tax assets and liabilities based on the rates at which they are expected to reverse, which is now 21% instead of 35% and recorded a provisional income tax benefit of $ 222.4 million for the year ended December 31, 2017.

The one-time transition tax established by the 2017 U.S.

Tax Act is based on our total post-1986 foreign earnings and profits, offset by allowable foreign tax credits.

The transition tax rate applied to our foreign earnings is based on the amount of those earnings held in cash and cash equivalents, as well as other assets.

For the year ended December 31, 2017, we recorded a provisional income tax expense of $ 63.7 million for the transition tax on our previously deferred foreign earnings.

During 2018, we continued to analyze other provisions of the 2017 U.S.

Tax Act, including the effects on our foreign tax pools and resulting foreign tax credits, and reduced our estimated transition tax liability to $ 40.4 million , which resulted in an income tax benefit of $ 23.3 million .

As of December 31, 2018, we had completed our accounting for the transition effects of the 2017 U.S.

Foreign 399,766 457,925 431,088

$ 593,956 $ 517,925 $ 562,155

Approximately $ 32.3 million of our undistributed foreign earnings are considered to be indefinitely reinvested outside the United States as of December 31, 2020.

4 unchanged sentences

Years Ended December 31,

2020 2019 2018

statutory rate 21.0 % 21.0 % 21.0 %

Valuation allowance

Tax credits ( 5.3 ) ( 3.9 ) ( 0.5 )

Foreign interest income not subject to tax ( 4.2 ) ( 4.5 ) ( 1.7 )

Foreign-derived intangible income deduction ( 2.8 ) ( 2.7 ) ( 1.6 )

Uncertain tax positions

Share-based compensation expense ( 2.7 ) ( 2.5 ) ( 2.1 )

Nondeductible executive compensation 1.7 1.0 0.3

Equity method investment partnership income 1.1 — —

Uncertain tax positions 1.1 ( 2.6 ) ( 0.9 )

State income taxes, net of federal income tax benefit 0.7 1.0 2.7

Foreign income taxes 0.6 ( 0.7 ) ( 0.5 )

Valuation allowance ( 0.1 ) 4.6 1.4

transition tax — — ( 4.1 )

rate reduction

Other SAB 118 adjustments

Other 1.9 1.3 ( 0.2 )

Effective tax rate 13.0 % 12.0 % 13.8 %

5 unchanged sentences

Lease liabilities $ 105,959 $ 94,965

Foreign net operating loss carryforwards 107,931 37,818

Financial instruments 60,340 65,848

Credit carryforwards 42,637 37,057

Share-based compensation expense 41,558 48,204

Accrued expenses 38,521 40,035

Foreign net operating loss carryforwards

Income tax credit carryforwards

Domestic net operating loss carryforwards 18,952 22,254

Basis difference - U.K.

Other 58,107 30,490

474,005 376,671

Valuation allowance ( 132,531 ) ( 72,042 )

341,474 304,629

Deferred tax liabilities:

3 unchanged sentences

Right-of-use assets 89,734 83,023

Other 106,877 95,988

3,282,237 3,443,978

Net deferred income tax liability $ 2,940,763 $ 3,139,349

10 unchanged sentences

Allowance for state credit carryforwards ( 6 )

Rate change on domestic net operating loss and capital loss carryforwards

Utilization of foreign income tax credit carryforward

Balance at December 31, 2018 ( 23,390 )

Allowance for foreign net operating loss carryforwards ( 26,439 )

Allowance for domestic net operating loss carryforwards

Allowance for foreign credit carryforwards ( 15,226 )

Allowance for state credit carryforwards ( 6,680 )

Allowance for domestic net operating loss carryforwards ( 307 )

Balance at December 31, 2019 ( 72,042 )

4 unchanged sentences

Balance at December 31, 2020 $ ( 132,531 )

The increase in the valuation allowance related to the foreign net operating loss carryforwards for the year ended December 31, 2020 is due to the addition of a foreign affiliate net operating loss with a related full valuation allowance.

The increases in the valuation allowance related to both the state and foreign credit carryforwards for the year ended December 31, 2019 relate primarily to carryforward assets recognized in connection with the Merger.

Foreign net operating loss carryforwards of $ 176.9 million , domestic net operating loss carryforwards of $ 41.6 million and tax credit carryforwards of $ 36.1 million at December 31, 2019 will expire between December 31, 2024 and December 31, 2039 , if not utilized.

Foreign net operating loss carryforwards of $ 99.3 million will expire between December 31, 2024 and December 31, 2040, if not utilized.

Foreign net operating loss carryforwards of $ 2.3 million have indefinite carryforward periods.

Domestic net operating loss carryforwards of $ 24.3 million and tax credit carryforwards of $ 43.6 million will expire between December 31, 2024 and December 31, 2040, if not utilized.

We conduct business globally and file income tax returns in the U.S.

federal jurisdiction and various state and foreign jurisdictions.

In the normal course of business, we are subject to examination by taxing authorities around the world, including, without limitation, the United States and the United Kingdom.

In the normal course of business, we are subject to examination by taxing authorities around the world.

We are no longer subject to state income tax examinations for years ended on or before May 31, 2007, U.S.

federal income tax examinations for years ended on or before May 31, 2016 and U.K.

federal income tax examinations for years ended on or before May 31, 2015.

federal income tax examinations for years ended on or before December 31, 2016 and U.K.

corporation tax examinations for years ended on or before December 31, 2016.

A reconciliation of the beginning and ending amounts of unrecognized income tax benefits, excluding penalties and interest, for the years ended December 31, 2020, 2019 and 2018 as follows:

Years Ended December 31,

2020 2019 2018

(in thousands)

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Additions based on income tax positions related to the current year 4,900 1,206 —

Effect of foreign currency fluctuations on income tax positions

Balance at the end of the year $ 39,408 $ 29,671 $ 21,197

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NOTE 11— SHAREHOLDERS’ EQUITY

We make repurchases of our common stock mainly through the use of open market purchases.

As of December 31, 2019 , we were authorized to repurchase up to $ 473.4 million of our common stock.

We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs.

Information about shares repurchased and retired was as follows for the years ended December 31, 2020, 2019 and 2018:

Years Ended December 31,

2020 2019 2018

(in thousands, except per share amounts)

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In connection with the completion of the Merger, our Articles of Incorporation were amended to increase the number of authorized shares of Global Payments common stock from 200 million to 400 million.

On February 5, 2019 , the board of directors increased its authorization to repurchase shares of our common stock to $ 750 million , inclusive of prior share repurchase programs authorized by the board and repurchases made thereunder.

On February 19, 2020 , the board of directors declared a cash dividend of $ 0.195 per share payable on March 27, 2020 to common shareholders of record on March 13, 2020 .

As of December 31, 2020, the amount that may yet be purchased under our share repurchase program was $ 1,020.0 million.

On January 28, 2021, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $ 1.5 billion.

On February 10, 2021, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $ 500 million of our common stock.

In exchange for an up-front payment of $ 500 million, the financial institution committed to deliver a number of shares during the ASR program purchase period, which will end on March 31, 2021.

On February 12, 2021, 2,090,713 shares were initially delivered to us.

On January 28, 2021, the board of directors declared a cash dividend of $ 0.195 per share payable on March 26, 2021 to common shareholders of record on March 12, 2021.

NOTE 12— SHARE-BASED AWARDS AND OPTIONS

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Years Ended December 31,

2020 2019 2018

(in thousands)

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Restricted Stock

Restricted stock awards vest in equal annual installments over a three -year period and in some cases vest at the end of a three -year service period.

Restricted stock awards vest in equal annual installments over a three -year period or in some cases vest at the end of a three -year service period.

Restricted shares cannot be sold or transferred until they have vested.

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Performance Units

Certain of our executives have been granted performance units under our long-term incentive plan.

Performance units are performance-based restricted stock units that, after a performance period, may convert into common shares, which may be restricted.

The number of shares is dependent upon the achievement of certain performance measures during the performance period.

The target number of performance units and any market-based performance measures are set by the compensation committee of our board of directors ("Compensation Committee").

Performance units are converted only after the compensation committee certifies performance based on pre-established goals.

The Compensation Committee may set a range of possible performance-based outcomes for performance units.

For awards with only performance conditions, we recognize compensation expense on a straight-line basis over the performance period using the grant date fair value of the award, which is based on the number of shares expected to be earned according to the level of achievement of performance goals.

If the number of shares expected to be earned were to change at any time during the performance period, we would make a cumulative adjustment to share-based compensation expense based on the revised number of shares expected to be earned.

Certain of our executives have been granted performance-based restricted stock units that, after a performance period, may convert into common shares ("performance units").

The number of common shares is dependent upon the level of achievement of certain performance measures during the performance period.

The Compensation Committee of our board of directors ("Compensation Committee") establishes performance measures and may set a range of possible performance-based outcomes for performance units.

Performance units are converted only after the Compensation Committee certifies performance based on pre-established measures.

For these awards, we recognize compensation expense on a straight-line basis over the applicable performance or service period using the grant date fair value of the award and the number of shares expected to be earned according to the level of achievement of performance measures.

When the estimated number of common shares expected to be earned is changed during the performance period, we make a cumulative adjustment to share-based compensation expense based on the revised estimate.

The performance periods for awards granted generally range from one to three years .

To the extent earned, these performance units convert into unrestricted shares after performance results are certified by the Compensation Committee.

We recognize share-based compensation expense based on the grant-date fair value of the performance-based restricted stock units, as determined by use of a Monte Carlo model, on a straight-line basis over the performance period.

The following table summarizes the changes in unvested restricted stock awards and performance units for the years ended December 31, 2020, 2019 and 2018:

Weighted-Average

Shares Weighted-Average

(in thousands)

Unvested at December 31, 2017 1,226 $ 78.29

Unvested at December 31, 2017

Granted 650 109.85

Vested ( 722 ) 60.08

Forfeited ( 70 ) 91.47

Unvested at December 31, 2018 1,084 108.51

Replacement Awards 894 163.74

Granted 784 142.26

Vested ( 781 ) 105.04

Forfeited ( 137 ) 124.30

Unvested at December 31, 2019 1,844 149.96

Granted 607 191.20

Vested ( 835 ) 128.91

Forfeited ( 70 ) 168.40

Unvested at December 31, 2020 1,546 $ 176.71

The total fair value of restricted stock and performance awards vested was $ 107.7 million , $ 82.1 million and $ 43.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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The following table summarizes changes in stock option activity for the years ended December 31, 2020, 2019 and 2018:

Weighted-Average Exercise Price

Weighted-Average Remaining Contractual Term

Aggregate Intrinsic Value

(in thousands)

(in millions)

Outstanding at December 31, 2016

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

(in thousands) (years) (in millions)

Outstanding at December 31, 2017 723 $ 47.79 6.4 $ 37.9

Granted 103 114.70

Forfeited ( 22 ) 100.38

Exercised ( 206 ) 42.65 16.5

Outstanding at December 31, 2018 598 59.16 6.2 27.3

Replacement Awards 1,336 68.96

Granted 109 128.22

Forfeited ( 23 ) 110.13

Exercised ( 265 ) 33.99 28.8

Outstanding at December 31, 2019 1,755 74.06 6.5 190.3

Granted 124 200.42

Forfeited ( 3 ) 112.85

Exercised ( 623 ) 59.78 85.8

Outstanding at December 31, 2020 1,253 $ 93.66 6.3 $ 152.6

Options vested and exercisable at December 31, 2020 859 $ 71.15 5.4 $ 123.9

We recognized compensation expense for stock options of $ 12.5 million , $ 2.7 million and $ 2.6 million during the years ended December 31, 2019 , 2018 and 2017 , respectively.

We recognized compensation expense for stock opti ons of $ 8.4 million, $ 12.5 million and $ 2.7 million during the years ended December 31, 2020, 2019 and 2018, respectively.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 85.8 million, $ 28.8 million and $ 16.5 million.

As of December 31, 2020, we had $ 8.4 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 1.7 years.

The weighted-average grant-date fair value of stock options granted, including Replacement Awards, during the years ended December 31, 2019 , 2018 and 2017 was $ 99.56 , $ 35.09 , and $ 23.68 , respectively.

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2020, 2019 and 2018, including the Replacement Awards granted during the year ended December 31, 2019, was $ 54.85 , $ 99.56 , and $ 35.09 , respectively.

Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

Years Ended December 31,

2020 2019 2018

Risk-free interest rate 1.24 % 1.72 % 2.60 %

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The risk-free interest rate was based on the yield of a zero coupon U.S.

Treasury security with a maturity equal to the expected life of the stock option from the date of the grant.

Treasury security with a maturity equal to the expected life of the option from the date of the grant.

Our assumption on expected volatility is based on our historical volatility.

The dividend yield assumption was determined using our average common stock price over the preceding year and the annualized amount of our most current quarterly dividend per share.

We based our assumption of the expected term of the stock options on the historical exercise patterns of our stock options and our expectations of future exercise patterns.

The dividend yield assumption was determined using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share.

We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.

NOTE 13— SUPPLEMENTAL CASH FLOW INFORMATION

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Years Ended December 31,

2020 2019 2018

(in thousands)

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Years Ended December 31,

2020 2019 2018

(in thousands)

1 unchanged sentence

Foreign currency translation attributable to noncontrolling interests

14,643 ( 2,725 ) ( 2,696 )

Comprehensive income attributable to noncontrolling interests

$ 35,223 $ 35,938 $ 29,918

On October 1, 2020, we paid € 493 million ($ 578.2 million equivalent as of October 1, 2020) to increase our controlling financial interest in Comercia Global Payments Entidad de Pago, S.L.

(“Comercia”) from 51 % to 80 %.

We funded the transaction with a combination of available cash and borrowings on our unsecured revolving credit facility.

The transaction resulted in a reduction in equity attributable to noncontrolling interests of approximately $ 68.4 million and a reduction in total equity attributable to Global Payments of approximately $ 509.8 million.

The net effects of the transaction include a reclassification of an accumulated other comprehensive loss related to foreign currency translation of $ 12.1 million from noncontrolling interests to equity attributable to Global Payments.

NOTE 15— ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in the accumulated balances for each component of other comprehensive income (loss), net of tax, were as follows for the years ended December 31, 2019 , 2018 and 2017 :

Foreign Currency Translation

Net Unrealized Gains (Losses) on Hedging Activities

Accumulated Other Comprehensive Loss

The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the years ended December 31, 2020, 2019 and 2018:

Foreign Currency Translation Net Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss

(in thousands)

Balance at December 31, 2017 $ ( 185,856 ) $ 6,999 $ ( 4,287 ) $ ( 183,144 )

Other comprehensive income (loss)

Balance at December 31, 2017

Cumulative effect of adoption of new accounting standards ( 1,843 ) — — ( 1,843 )

Other comprehensive (loss) income ( 116,575 ) ( 9,373 ) 760 ( 125,188 )

Balance at December 31, 2018 ( 304,274 ) ( 2,374 ) ( 3,527 ) ( 310,175 )

Other comprehensive income (loss) 62,375 ( 66,945 ) 4,174 ( 396 )

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Other comprehensive income (loss) 139,727 ( 12,224 ) ( 7,150 ) 120,353

Effect of purchase of subsidiary shares from noncontrolling interest ( 12,055 ) — — ( 12,055 )

Balance at December 31, 2020 $ ( 114,227 ) $ ( 81,543 ) $ ( 6,503 ) $ ( 202,273 )

Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 14.6 million, $( 2.7 ) million, and $( 2.7 ) million for the years ended December 31, 2020, 2019 and 2018, respectively.

NOTE 16— SEGMENT INFORMATION

Information About Profit and Assets

Prior to the completion of the Merger, we operated in three reportable segments:

North America, Europe and Asia-Pacific.

In the fourth quarter of 2019, as a result of the merger with TSYS, we realigned our executive management and organizational structures.

Based on an evaluation performed in accordance with the guidance provided in Accounting Standards Codification Topic 280, Segment Reporting , we determined that our new reportable segments as of December 31, 2019 were:

Merchant Solutions,

Issuer Solutions and Business and Consumer Solutions.

In connection with the organizational realignment, the legacy Global Payments businesses are included in the Merchant Solutions segment with the exception of a small portion of our European business that is included in the Issuer Solutions segment.

Certain operating expenses that prior to the Merger were considered "enterprise-wide" expenses and reported in Corporate are now reflected in the Merchant Solutions segment.

We operate in three reportable segments:

Merchant Solutions, Issuer Solutions and Business and Consumer Solutions.

Our payment technology solutions are similar around the world in that we enable our customers to accept card, electronic, check and digital-based payments.

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In addition, we offer a wide array of enterprise software solutions that streamline business operations to customers in numerous vertical markets.

We also provide a variety of value-added services, including analytic and engagement tools, payroll services and reporting that assist our customers with driving demand and operating their businesses more efficiently.

We also provide a variety of value-added services, including analytic and engagement tools, payroll and human capital management services and reporting that assist our customers with driving demand and operating their businesses more efficiently.

Through our Issuer Solutions segment, we provide solutions that enable financial institutions and retailers to manage their card portfolios, reduce technical complexity and overhead and offer a seamless experience for cardholders on a single platform.

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Operating overhead, shared costs and share-based compensation costs are included in Corporate.

Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments, net of tax, are not allocated to the individual segments.

Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments are not allocated to the segments.

We do not evaluate the performance of or allocate resources to our operating segments using asset data.

The accounting policies of the reportable operating segments are the same as those described in the Summary of Significant Accounting Policies in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies." The presentation of segment information for the years ended December 31, 2018 and 2017 has been recast to align with the segment presentation for the year ended December 31, 2019.

Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization are as follows:

Years Ended December 31,

2020 2019 2018

(in thousands)

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Business and Consumer Solutions 829,505 227,440 —

Segment revenues

intersegment revenues

Intersegment eliminations ( 75,717 ) ( 18,782 ) —

Consolidated revenues

$ 7,423,558 $ 4,911,892 $ 3,366,366

Operating income (loss) (1)(2) :

2 unchanged sentences

Business and Consumer Solutions 138,630 19,473 —

Corporate ( 685,069 ) ( 459,203 ) ( 217,186 )

Consolidated operating income

$ 893,953 $ 791,417 $ 737,055

Depreciation and amortization (1) :

2 unchanged sentences

Business and Consumer Solutions 95,720 34,914 —

Corporate 22,623 8,426 5,372

Consolidated depreciation and amortization

(1) As more fully described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" and "Note 3 —Revenues" we adopted a new revenue accounting standard on January 1, 2018 that resulted in revenue being presented net of certain fees that we pay to third parties, including payment networks.

This change in presentation affected our reported revenues and operating expenses for all periods after the year ended December 31, 2017 by the same amount and had no effect on operating income.

$ 1,614,440 $ 878,335 $ 522,813

(1) Revenues, operating income and depreciation and amortization reflect the effects of acquired businesses from the respective dates of acquisition.

For further discussion, see "Note 2—Acquisitions."

(3) During the year ended December 31, 2019 , operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $ 56.1 million .

(2) During the year ended December 31, 2020 and 2019, operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $ 7.0 million and $ 56.1 million, respectively.

Operating loss for Corporate included acquisition and integration expenses of $ 313.0 million, $ 199.5 million and $ 56.1 million, respectively, during the years ended December 31, 2020, 2019 and 2018.

Acquisition and integration expenses for 2019 were primarily related to the Merger.

Acquisition and integration expenses for 2020 and 2019 were primarily related to the Merger.

Entity-Wide Information

As a percentage of our total consolidated revenues, revenues from external customers in the United States and the United Kingdom were 78 % and 8 %, respectively, for the year ended December 31, 2020, 72 % and 8 %, respectively, for the year ended December 31, 2019, and 67 % and 9 %, respectively, for the year ended December 31, 2018.

Revenues from external customers

are attributed to individual countries based on the location of the customer arrangements.

Revenues from external customers are attributed to individual countries based on the location of the customer arrangements.

Our results of operations and our financial condition are not significantly reliant upon any single customer.

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Foreign countries 551,648 432,235

$ 1,578,532 $ 1,382,802

NOTE 17— COMMITMENTS AND CONTINGENCIES

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Future minimum payments at December 31, 2020 for purchase obligations were as follows (in thousands):

Years ending December 31:

Year ending December 31:

2021 $ 292,865

2026 and thereafter 527,500

Total future minimum payments $ 1,279,965

During the year ended December 31, 2020, we entered into a new agreement to acquire software and related services, of which $ 97.6 million was financed utilizing a two -year vendor financing arrangement.

Legal Matters

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In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.

Six putative class action lawsuits challenging the Merger were filed.

Two of these lawsuits, captioned Peters v.

Total System Services, Inc.

4:19-cv-00114) and Wolf v.

Total System Services, Inc., et al.

4:19-cv-00115), were filed in the United States District Court for the Middle District of Georgia on July 18, 2019.

The third lawsuit, captioned Drulias v.

Global Payments Inc., et.

60774/2019) was filed in the Supreme Court of the State of New York, County of Westchester on July 19, 2019.

The fourth lawsuit, captioned Hickey v.

Total System Services, Inc., et al.

(Civil Action No.

1:19-cv-03337-LMM) was filed in the United States District Court for the Northern District of Georgia, Atlanta Division, on July 23, 2019.

The fifth lawsuit, captioned, Cason v.

Total System Services, Inc., et al.

1:19-cv-07471) was filed in the United States District Court for the Southern District of New York on August 9, 2019.

The sixth lawsuit, captioned, Cheng v.

Total System Services, et al.

1:19-cv-01513-UNA) was filed in the United States District Court for the District of Delaware on August 13, 2019.

The complaints filed in the lawsuits assert, among other matters, claims for filing a materially incomplete registration statement with the SEC.

Global Payments and TSYS released supplemental disclosures relating to the Merger in late August 2019, and the Peters lawsuit, the Wolf lawsuit and the Cheng lawsuit have been voluntarily dismissed.

On September 23, 2019, a jury in the Superior Court of Dekalb County Georgia, awarded Frontline Processing Corp.

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The Superior Court entered a final judgment on the verdict in favor of Frontline on September 30, 2019.

We believe the jury verdict is in error and Frontline’s case is completely without merit, and we are appealing

the decision to the Georgia Court of Appeals.

While it is reasonably possible that we will incur some loss between zero and the judgment amount plus interest, we have determined that it is not probable that Global Payments has incurred a loss under the applicable accounting standard (ASC Topic 450, Loss Contingencies ) as of December 31, 2019 .

We believe the jury verdict is in error and Frontline’s case is completely without merit, and we have appealed the decision to the Georgia Court of Appeals.

Our appeal is pending.

As a result, we have not recorded a liability on the consolidated balance sheet with respect to this litigation.

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Quarters Ended

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

(in thousands, except per share data)

Revenues $ 1,903,598 $ 1,671,952 $ 1,917,815 $ 1,930,193

Operating income 243,979 107,574 290,419 251,981

Net income 150,608 39,444 230,230 184,818

Net income attributable to Global Payments 143,575 37,331 220,971 182,643

Basic earnings per share attributable to Global Payments

0.48 0.12 0.74 0.61

Diluted earnings per share attributable to Global Payments

0.48 0.12 0.74 0.61

Quarters Ended

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019

(in thousands, except per share data)

Revenues $ 883,039 $ 935,152 $ 1,105,941 $ 1,987,760

Operating income 199,492 221,726 174,037 196,162

Net income 119,205 130,039 105,731 114,301

Net income attributable to Global Payments 112,341 120,458 95,044 102,770

Basic earnings per share attributable to Global Payments

0.71 0.77 0.54 0.34

Diluted earnings per share attributable to Global Payments

0.71 0.77 0.54 0.34

The quarterly financial data in the table above reflect the effects of business combinations and borrowings to fund certain of those business combinations.

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Acquisition and integration expenses were $ 5.3 million, $ 14.2 million, $ 100.8 million and $ 135.3 million for the quarters ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019, respectively.

Results for the quarter ended September 30, 2018 reflect the effects of a net income tax benefit of $ 23.3 million in connection with adjustments made to accounting estimates associated with the 2017 U.S.

Tax Act as further discussed in "Note 9 —Income Tax."

GLOBAL PAYMENTS INC.

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(in thousands)

(a) (b) (c) (d) (e)

Description (3)

Balance at Beginning of Period

Charged to Costs and Expenses (2)

Uncollectible Accounts Write-Offs (Recoveries)

Balance at End of Period

Allowance for doubtful accounts

Uncollectible Accounts Write-Offs (Recoveries) Balance at End of Period

Allowance for credit losses - accounts receivable

December 31, 2018 $ 1,807 $ 10,430 $ 9,189 $ 3,048

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December 31, 2020 $ 9,380 $ 27,107 $ 15,879 $ 20,608

Reserve for merchant losses and sales allowances (1)

Allowance for credit losses - settlement assets (1)

December 31, 2018 $ 3,460 $ 16,068 $ 16,740 $ 2,788

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December 31, 2020 $ 3,427 $ 16,915 $ 14,171 $ 6,171

Reserve for check guarantee operating losses

Reserve for sales allowances

December 31, 2018 $ 601 $ 6,244 $ 5,304 $ 1,541

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December 31, 2020 $ 4,070 $ 14,511 $ 7,710 $ 10,871

Allowance for credit and operating losses - check guarantee

December 31, 2018 $ 5,738 $ 19,314 $ 19,987 $ 5,065

December 31, 2019 5,065 13,346 14,490 3,921

December 31, 2020 $ 3,921 $ 10,092 $ 11,911 $ 2,102

Reserve for contract contingencies and processing errors

December 31, 2019 $ — $ 5,669 $ 1,453 $ 4,216

December 31, 2020 $ 4,216 $ 515 $ 1,142 3,589

Reserve for cardholder losses

December 31, 2019 $ — $ 24,391 $ 15,159 $ 9,232

December 31, 2020 $ 9,232 $ 61,847 $ 61,004 $ 10,075

Deferred income tax asset valuation allowance

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(1) Included in settlement processing obligations.

(2) In addition to amounts charged to costs and expenses, amounts in this column include additions, as applicable, resulting from business combinations.

(2) In addition to amounts charged to costs and expenses, amounts in this column include additions, as applicable, resulting from business combinations and the adoption of the new credit loss standard as of January 1, 2020.

(3) Reflects certain changes in descriptions and grouping of accounts as a result of the adoption of the new credit loss standard as of January 1, 2020.

Reclassifications have been made to the prior year comparative periods to conform with the current period presentation, including the separate presentation of sales allowances.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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