GLOBAL PAYMENTS INC 10-K

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 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, 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting 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 and our report dated February 19, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting. Change in Accounting Principle 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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. Revenue Recognition - Issuer Solutions - Refer to Notes 1 and 3 to the financial statements . Critical Audit Matter Description The Company enters into long-term revenue contracts with its Issuer Solutions customers. Issuer Solutions customer contracts may include multiple promises, including processing services, loyalty redemption services and professional services to financial institutions and other financial services providers. 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. Professional services representing performance obligations are satisfied over time. 47 Table of Contents We identified the determination of performance obligations for Issuer Solutions revenue contracts as a critical audit matter, given the judgment required to determine whether promised services are capable of being distinct and are distinct within the context of the contract. A high degree of auditor judgment was required to evaluate the Company's identification of the performance obligations in the contract. 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, 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 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 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 payment services revenues included the following, among others: • With the assistance of our IT specialists, we: ◦ Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls. ◦ Tested system interface controls and automated controls within the relevant revenue streams, as well as the controls designed to ensure the accuracy and completeness of revenue. • 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 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. /s/ DELOITTE & TOUCHE LLP Atlanta, Georgia February 19, 2021 We have served as the Company's auditors since 2002. 48 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. 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 19, 2021 49 GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) 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 Interest and other income 43,551 31,413 20,719 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 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 ) Net income attributable to Global Payments $ 584,520 $ 430,613 $ 452,053 Earnings per share attributable to Global Payments: Basic earnings per share $ 1.95 $ 2.17 $ 2.85 Diluted earnings per share $ 1.95 $ 2.16 $ 2.84 See Notes to Consolidated Financial Statements. 50 GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2020 2019 2018 Net income $ 605,100 $ 469,276 $ 484,667 Other comprehensive income (loss): Foreign currency translation adjustments 153,210 58,369 ( 118,439 ) Income tax benefit (expense) related to foreign currency translation adjustments 1,160 1,281 ( 832 ) Net unrealized losses on hedging activities ( 52,742 ) ( 90,238 ) ( 7,553 ) Reclassification of net unrealized losses (gains) on hedging activities to interest expense 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 Other comprehensive income (loss) 134,996 ( 3,121 ) ( 127,884 ) Comprehensive income 740,096 466,155 356,783 Comprehensive income attributable to noncontrolling interests ( 35,223 ) ( 35,938 ) ( 29,918 ) Comprehensive income attributable to Global Payments $ 704,873 $ 430,217 $ 326,865 See Notes to Consolidated Financial Statements. 51 GLOBAL PAYMENTS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2020 December 31, 2019 ASSETS Current assets: Cash and cash equivalents $ 1,945,868 $ 1,678,273 Accounts receivable, net 794,172 895,232 Settlement processing assets 1,230,853 1,353,778 Prepaid expenses and other current assets 621,467 439,165 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 Property and equipment, net 1,578,532 1,382,802 Deferred income taxes 7,627 6,292 Other noncurrent assets 2,135,692 1,810,225 Total assets $ 44,201,545 $ 44,480,162 LIABILITIES AND EQUITY Current liabilities: Settlement lines of credit $ 358,698 $ 463,237 Current portion of long-term debt 827,357 35,137 Accounts payable and accrued liabilities 2,061,384 1,822,166 Settlement processing obligations 1,301,652 1,258,806 Total current liabilities 4,549,091 3,579,346 Long-term debt 8,466,407 9,090,364 Deferred income taxes 2,948,390 3,145,641 Other noncurrent liabilities 750,613 609,822 Total liabilities 16,714,501 16,425,173 Commitments and contingencies Equity: Preferred stock, no par value; 5,000,000 shares authorized and none issued — — Common stock, no par value; 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 — — Paid-in capital 24,963,769 25,833,307 Retained earnings 2,570,874 2,333,011 Accumulated other comprehensive loss ( 202,273 ) ( 310,571 ) Total Global Payments shareholders’ equity 27,332,370 27,855,747 Noncontrolling interests 154,674 199,242 Total equity 27,487,044 28,054,989 Total liabilities and equity $ 44,201,545 $ 44,480,162 See Notes to Consolidated Financial Statements. 52 GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) 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: Depreciation and amortization of property and equipment 357,529 211,200 145,128 Amortization of acquired intangibles 1,256,911 667,135 377,685 Amortization of capitalized contract costs 78,147 66,086 51,541 Share-based compensation expense 148,792 89,634 57,826 Provision for operating losses and bad debts 126,712 100,188 43,237 Noncash lease expense 98,592 52,612 — 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: Accounts receivable 55,986 ( 115,528 ) ( 33,386 ) Settlement processing assets and obligations, net 125,852 213,701 83,478 Prepaid expenses and other assets ( 270,965 ) ( 159,056 ) ( 160,800 ) Accounts payable and other liabilities ( 320 ) ( 95,091 ) 66,182 Net cash provided by operating activities 2,314,150 1,391,278 1,106,082 Cash flows from investing activities: 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 ) Other, net 39,323 35,404 ( 3,305 ) Net cash used in investing activities ( 438,342 ) ( 917,086 ) ( 1,476,287 ) Cash flows from financing activities: Net (repayments of) borrowings from settlement lines of credit ( 133,282 ) ( 236,473 ) 70,783 Proceeds from long-term debt 2,401,147 7,203,903 2,774,214 Repayments of long-term debt ( 2,342,072 ) ( 6,484,689 ) ( 2,304,314 ) Payments of debt issuance costs ( 8,075 ) ( 43,599 ) ( 16,345 ) Repurchases of common stock ( 631,148 ) ( 311,383 ) ( 208,198 ) Proceeds from stock issued under share-based compensation plans 66,142 24,514 14,318 Common stock repurchased - share-based compensation plans ( 61,243 ) ( 62,577 ) ( 31,510 ) Distributions to noncontrolling interests ( 26,199 ) ( 31,632 ) ( 5,686 ) Preacquisition dividends paid to former TSYS shareholders — ( 23,240 ) — 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, 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. 53 GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (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 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 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 Common stock repurchased - share-based compensation plans ( 316 ) ( 60,849 ) ( 60,849 ) ( 60,849 ) Share-based compensation expense 148,792 148,792 148,792 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 ) Repurchases of common stock ( 3,304 ) ( 525,886 ) ( 108,062 ) ( 633,948 ) ( 633,948 ) 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 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 Net income 430,613 430,613 38,663 469,276 Other comprehensive loss ( 396 ) ( 396 ) ( 2,725 ) ( 3,121 ) Stock issued under share-based compensation plans 991 24,514 24,514 24,514 Common stock repurchased - share-based compensation plans ( 308 ) ( 63,333 ) ( 63,333 ) ( 63,333 ) Share-based compensation expense 89,634 89,634 89,634 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 See Notes to Consolidated Financial Statements. 54 GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (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 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 ) Stock issued under share-based compensation plans 988 14,318 14,318 14,318 Common stock repurchased - share-based compensation plans ( 279 ) ( 32,727 ) ( 32,727 ) ( 32,727 ) Share-based compensation expense 57,826 57,826 57,826 Distributions to noncontrolling interests ( 5,686 ) ( 5,686 ) Repurchases of common stock ( 1,927 ) ( 184,024 ) ( 28,172 ) ( 212,196 ) ( 212,196 ) 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 See Notes to Consolidated Financial Statements. 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, consolidation and presentation — We are a leading pure play payments technology company delivering innovative software and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to operate their businesses more efficiently across a variety of channels around the world. We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions, which are described in "Note 16—Segment Information." Global Payments Inc. and its consolidated subsidiaries are referred to collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise. On September 18, 2019, we consummated our merger with Total System Services, Inc. ("TSYS") (the "Merger") for total purchase consideration of $ 24.5 billion, primarily funded with shares of our common stock. Prior to the Merger, TSYS was a leading global payments provider, offering seamless, secure and innovative solutions to issuers, merchants and consumers. See "Note 2—Acquisitions" for further discussion of the Merger and other acquisitions. These consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. Investments in entities that we do not control are accounted for using the equity or cost method, depending upon our ability to exercise significant influence over operating and financial policies. 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. 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 56 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. Under this transition method, we did not recast the prior period financial statements presented. We elected the transition package of three practical expedients, which among other things, allowed for the carryforward of historical lease classifications. We made an accounting policy election to not recognize assets or liabilities for leases with a term of less than 12 months and to account for all components in a lease arrangement as a single combined lease component for all of our then existing asset classes. In connection with the Merger, we acquired right-of-use assets that represent an additional asset class for computer equipment, for which we account for lease and nonlease components separately. The adoption of ASU 2016-02 resulted in the measurement and recognition of lease liabilities in the amount of $ 274.0 million and right-of-use assets in the amount of $ 236.0 million as of January 1, 2019. Lease liabilities were measured as the present value of remaining lease payments, and the corresponding right-of-use assets were measured at an amount equal to the lease liabilities adjusted by the amounts of certain assets and liabilities, such as prepaid rent and deferred lease obligations, that we previously recognized on the balance sheet prior to the initial application of ASU 2016-02. 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. 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 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 — 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. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these services. 57 Merchant Solutions. Our customers in the Merchant Solutions segment contract with us for payment services, which we provide in exchange for consideration for completed transactions. Our payment solutions are similar around the world in that we enable our customers to accept card, electronic, check and digital-based payments. 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 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. Under a stand-ready obligation, the evaluation of the nature of our performance obligation is focused on each time increment rather than the underlying activities. Therefore, we view payment services to comprise a series of distinct days of service that are substantially the same and have the same pattern of transfer to the customer. Accordingly, the promise to stand ready is accounted for as a single series performance obligation. In order to provide our payment services, we route and clear each transaction through the applicable payment network. We obtain authorization for the transaction and request funds settlement from the card issuing financial institution through the payment network. 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 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, 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. We also charge other per occurrence fees based on specific services that may be unrelated to the number of transactions or transaction value. 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 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. Therefore, we measure revenues for our payment service on a daily basis based on the services that are performed on that day. Certain of our technology-enabled customer arrangements contain multiple promises, such as payment services, perpetual software licenses, software-as-a-service ("SaaS"), maintenance, installation services, training and equipment, each of which is evaluated to determine whether it represents a separate performance obligation. SaaS arrangements are generally offered on a subscription basis, providing the customers with access to the SaaS platform along with general support and maintenance services. Because these promised services within our SaaS arrangements are delivered concurrently over the contract term, we account for these promises as if they are a single performance obligation that includes a series of distinct services with the same pattern of transfer to the customer. In addition, certain installation services are not considered distinct from the SaaS and are recognized over the expected period of benefit. Once we determine the performance obligations and the transaction price, including an estimate of any variable consideration, we then allocate the transaction price to each performance obligation in the contract using a relative standalone selling price method. We determine standalone selling price based on the price at which the good or service is sold separately. If 58 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. Consideration for SaaS arrangements may consist of fixed or usage-based fees. 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. 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. Issuer Solutions. Issuer Solutions segment revenues are derived from long-term contracts with financial institutions and other financial service providers. Issuer Solutions customer contracts typically include an obligation to provide processing services to financial institutions and other financial services providers. 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 cardholder 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. 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. 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. 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 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. 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. 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 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 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 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. Customers are also charged a monthly maintenance fee after a specified period of inactivity. 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. 59 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. 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. The amount of cash that we consider to be available for general purposes does not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted; 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. We record a corresponding liability in settlement processing assets and settlement processing obligations in our consolidated balance sheet. 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 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: December 31, 2020 2019 (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. As we perform under customer contracts, our right to consideration that is unconditional is considered to be accounts receivable. If our right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues we have recognized in excess of the amount we have billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. 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 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. 60 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 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. Capitalized costs to obtain and to fulfill contracts are included in other noncurrent assets. 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 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 expected 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. 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 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. Under the sponsorship model, we are designated as an independent sales organization by Mastercard and Visa, which means that member clearing banks ("Member") sponsor us and require our adherence to the standards of the payment networks. In certain markets, we have sponsorship or depository and clearing agreements with financial institution sponsors. These agreements allow us to route transactions under the Members' control and identification numbers to clear credit card transactions through Mastercard and Visa. In this model, the standards of the payment networks restrict us from performing funds settlement or accessing merchant settlement funds, and, instead, require that these funds be in the possession of the Member until the merchant is funded. 61 Under the direct membership model, we are members in various payment networks, allowing us to process and fund transactions without third-party sponsorship. In this model, we route and clear transactions directly through the card brand’s network and are not restricted from performing funds settlement. Otherwise, we process these transactions similarly to how we process transactions in the sponsorship model. We are required to adhere to the standards of the payment networks in which we are direct members. We maintain relationships with financial institutions, which may also serve as our Member sponsors for other card brands or in other markets, to assist with funds settlement. Timing differences, interchange fees, merchant reserves and exception items cause differences between the amount received from the payment networks and the amount funded to the merchants. These intermediary balances arising in our settlement process are reflected as settlement processing assets and obligations on our consolidated balance sheets. Settlement processing assets and obligations include the following components: • Interchange reimbursement . Our receivable from merchants for the portion of the discount fee related to reimbursement of the interchange fee. • 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 payment networks. • Receivable from networks . Our receivable from a payment network for transactions processed on behalf of merchants where we are a direct member of that particular network. • Exception items . Items such as customer chargeback amounts received from merchants. • Merchant Reserves . Reserves held to minimize contingent liabilities associated with losses that may occur under the merchant agreement. • Liability to Members . 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. • 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. In the sponsorship model, we apply offsetting by Member agreement because the Member is ultimately responsible for funds settlement. With these Member transactions, we do not have access to the gross proceeds of the receivable from the payment networks and, thus, do not have a direct obligation or any ability to satisfy the payable to fund the merchant. In these situations, we apply offsetting to determine a net position for each Member agreement. If that net position is an asset, we reflect the net amount in settlement processing assets on our consolidated balance sheet. If that net position is a liability, we reflect the net amount in settlement processing obligations on our consolidated balance sheet. 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. 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. 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. 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 62 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 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. 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 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 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. We establish a reserve for losses we estimate will arise from processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to nondelivery of goods and services. 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 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. Depreciation and amortization are generally calculated using the straight-line method. Leasehold improvements are amortized over the lesser of the remaining term of the lease and the useful life of the asset. We develop software that is used to provide services to customers. Capitalization of internal-use software, primarily associated with operating platforms, occurs when we have completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended. 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 recognized as expense as incurred. Capitalized internal-use software is 63 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. We test goodwill for impairment at the reporting unit level annually and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. Factors we consider in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. 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. 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. 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. 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 recently acquired in the Merger. 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. The useful lives for customer-related intangible assets are determined based primarily on forecasted cash flows, which include estimates for the revenues, expenses, and customer attrition associated with the assets. 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 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. 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 64 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. Impairment of long-lived assets — We regularly evaluate whether events and circumstances have occurred that indicate the carrying amount of property and equipment and finite-life intangible assets may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, we assess the potential impairment by determining whether the carrying amount of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. The evaluation is performed at the asset group level, which is the lowest level of identifiable cash flows. If the carrying amount of the asset group is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market prices or discounted cash flow analysis as applicable. We regularly evaluate whether events and circumstances have occurred that indicate the useful lives of property and equipment and finite-life intangible assets may warrant revision. Leases — We evaluate each of our lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease. A lease exists if we obtain substantially all of the economic benefits of, and have the right to control the use of, an asset for a period of time. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease agreement. We recognize right-of-use assets and lease liabilities at the lease commencement date based on the present values of fixed lease payments over the term of the lease. Right-of-use assets may also be adjusted to reflect any prepayments made or any incentive payments received. Operating lease costs and depreciation expense for finance leases are recognized as expense on a straight-line basis over the lease term. We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option. Because our leases generally do not provide a readily determinable implicit interest rate, we use an incremental borrowing rate to measure the lease liability and associated right-of-use asset at the lease commencement date. 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. 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. Such purchases of the commissions are at a fixed multiple of the last 12 months of commissions. Because of our intent and ability to execute purchases of the residual commissions, and the mutual understanding between us and our salespersons, we have accounted for this deferred compensation arrangement pursuant to the substantive nature of the plan. Therefore, we recognize a liability for the amount that we would have to pay (the "settlement cost") to buy out related commissions in their entirety from vested salespersons, and an estimated amount for unvested salespersons based on their progress towards vesting and the expected percentage that will become vested. As noted above, as the liability increases over the first year of the related merchant contract, we record a related asset. Subsequent changes in the estimated accrued buyout liability due to merchant attrition, same-store sales growth or contraction and changes in profitability are included in the selling, general and administrative expense in the consolidated statements of income. The classification of the accrued buyout liability between current and noncurrent on the consolidated balance sheet is based upon our estimate of the amount of the accrued buyout liability that we reasonably expect to pay over the next 12 months. Income taxes — Deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We periodically assess our tax exposures related to periods that are open to examination. Based on the latest available information, we evaluate our tax positions to determine whether the position will more likely than not be sustained upon examination by the U.S. Internal Revenue Service or other taxing authorities. 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. We present 65 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. Our objective in managing our exposure to fluctuation in interest rates is to better control this element of cost and to mitigate the earnings and cash flow volatility associated with changes in applicable rates. We have established policies and procedures that encompass risk-management philosophy and objectives, guidelines for derivative instrument usage, counterparty credit approval, and the monitoring and reporting of derivative activity. We do not use derivative instruments for speculation. At inception, we formally designate and document instruments that qualify for hedge accounting of underlying exposures. When qualified for hedge accounting, these financial instruments are recognized at fair value in our consolidated balance sheets, and changes in fair value are recognized as a component of other comprehensive income (loss) and included in accumulated other comprehensive loss within equity in our consolidated balance sheets. Cash flows resulting from settlements are presented as a component of cash flows from operating activities within our consolidated statements of cash flows. We formally assess, both at inception and at least quarterly, whether the financial instruments used in hedging transactions are effective at offsetting changes in cash flows of the related underlying exposure. Fluctuations in the value of these instruments generally are offset by changes in the forecasted cash flows of the underlying exposures being hedged. This offset is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument. 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. Fair value measurements — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. GAAP establishes a fair value hierarchy that categorizes the inputs to valuation techniques into three broad levels. Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities. Level 2 inputs are based on other observable market data, such as quoted prices for similar assets and liabilities, and inputs other than quoted prices that are observable such as interest rates and yield curves. 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, 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 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. The fair values of our swap agreements were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date, and classified within Level 2 of the valuation hierarchy. See "Note 8 — Long-Term Debt and Lines of Credit" for further information. We also have investments in equity instruments without readily determinable fair value. 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 less any impairments. Any resulting change in carrying amount would be reflected in net income. Foreign currencies — We have significant operations in a number of foreign subsidiaries whose functional currency is the local currency. The assets and liabilities of subsidiaries whose functional currency is a foreign currency are translated into the reporting currency at the period-end rate of exchange. Income statement items are translated at the weighted-average rates prevailing during the period. 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. 66 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 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. Earnings available to common shareholders is the same as reported net income attributable to Global Payments for all periods presented. Diluted EPS is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards that would have a dilutive effect on earnings per share. 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. The following table sets forth the computation of the diluted weighted-average number of shares outstanding for all periods presented: Years Ended December 31, 2020 2019 2018 (in thousands) Basic weighted-average number of shares outstanding 299,222 198,298 158,672 Plus: 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 Repurchased shares — We account for the retirement of repurchased shares using the par value method under which the repurchase price is charged to paid-in capital up to the amount of the original issue proceeds of those shares. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. 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 — 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 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 67 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. NOTE 2— ACQUISITIONS The transactions described below were accounted for as business combinations, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. Total System Services, Inc. On September 18, 2019, we acquired all of the outstanding common stock of TSYS. Prior to the Merger, TSYS was a leading global payments provider, offering seamless, secure and innovative solutions to issuers, merchants and consumers. Holders of TSYS common stock received 0.8101 shares of Global Payments common stock for each share of TSYS common stock they owned at the effective time of the Merger (the "Exchange Ratio"). In addition, certain TSYS equity awards held by employees who were not executive officers, pursuant to their terms, vested automatically at closing ("Single-Trigger Awards") and were converted into the right to receive a number of shares of Global Payments common stock determined based on the Exchange Ratio. Also, pursuant to the Merger Agreement, we granted equity awards for approximately 2.2 million shares of Global Payments common stock to certain TSYS equity awards holders ("Replacement Awards"). Each such Replacement Award is subject to the same terms and conditions (including vesting and exercisability or payment terms) as applied to the corresponding TSYS equity award. We apportioned the fair value of the Replacement Awards between purchase consideration and amounts to be recognized in periods following the Merger as share-based compensation expense over the requisite service period of the Replacement Awards. The purchase consideration transferred to TSYS shareholders was valued at $ 23.8 billion. Total purchase consideration also included the amount of borrowings outstanding under TSYS' unsecured revolving credit facility together with accrued interest and fees that we were required to repay upon consummation of the Merger. The fair value of total purchase consideration was determined as follows (in thousands, except per share data): Shares of TSYS common stock issued and outstanding (including Single-Trigger Awards) 177,643 Exchange Ratio 0.8101 Shares of Global Payments common stock issued to TSYS shareholders 143,909 Price per share of Global Payments common stock $ 163.74 Fair value of common stock issued to TSYS shareholders (1) 23,563,568 Value of Replacement Awards attributable to purchase consideration 207,821 Cash paid to TSYS shareholders in lieu of fractional shares 1,352 Total purchase consideration transferred to TSYS shareholders 23,772,741 Repayment of TSYS' unsecured revolving credit facility (including accrued interest and fees) 702,212 Total purchase consideration $ 24,474,953 (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. 68 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) Cash and cash equivalents $ 446,009 $ — $ 446,009 Accounts receivable 442,848 ( 2,660 ) 440,188 Identified intangible assets 10,980,000 978 10,980,978 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 ) Other liabilities ( 314,415 ) ( 173 ) ( 314,588 ) 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 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. 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 Contract-based intangible assets 1,800,000 18 Acquired technologies 1,810,000 7 Trademarks and trade names 950,000 11 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. 69 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 also not intended to be a projection of future results due to the integration of the acquired operations of TSYS. The unaudited pro forma information reflects the effects of applying our accounting policies and certain pro forma adjustments to the combined historical financial information of Global Payments and TSYS. The pro forma adjustments include: • incremental amortization expense associated with identified intangible assets; • a reduction of revenues and operating expenses associated with fair value adjustments made to acquired assets and assumed liabilities, such as contract cost assets and contract liabilities; • a reduction of interest expense resulting from financing of the Merger, the repayment of TSYS' secured revolving credit facility and fair value adjustments applied to TSYS debt that we assumed; and • the income tax effects of the pro forma adjustments. 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. Year Ended December 31, 2019 Year Ended December 31, 2018 Actual Pro Forma Actual Pro Forma (in thousands) Total revenues $ 4,911,892 $ 7,854,282 $ 3,366,366 $ 7,359,631 Net income attributable to Global Payments $ 430,613 $ 711,658 $ 452,053 $ 510,795 SICOM Systems, Inc. On October 17, 2018, we acquired SICOM Systems, Inc. ("SICOM") for total purchase consideration of $ 410.2 million, which we funded with cash on hand and incremental debt. SICOM is a provider of end-to-end enterprise, cloud-based software solutions and other technologies to quick service restaurants and food service management companies. Prior to the acquisition, SICOM was indirectly owned by a private equity investment firm where one of our board members was a partner and investor. His direct interest in the transaction was approximately $ 1.1 million, the amount distributed to him based on his investment interest in the fund of the private equity firm that sold SICOM to us. Based on consideration of all relevant information, the audit committee of our board of directors recommended that the board approve the acquisition of SICOM, which it did. 70 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 Final (in thousands) Cash and cash equivalents $ 7,540 $ — $ 7,540 Property and equipment 5,943 ( 105 ) 5,838 Identified intangible assets 188,294 — 188,294 Other assets 22,278 ( 3 ) 22,275 Deferred income tax liabilities ( 48,448 ) 838 ( 47,610 ) Other liabilities ( 31,250 ) ( 100 ) ( 31,350 ) Total identifiable net assets 144,357 630 144,987 Goodwill 264,844 370 265,214 Total purchase consideration $ 409,201 $ 1,000 $ 410,201 Goodwill arising from the acquisition of $ 265.2 million, included in the Merchant Solutions segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business. We expect that approximately $ 40.0 million of the goodwill from this acquisition will be deductible for income tax purposes. 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) (years) Customer-related intangible assets $ 104,900 14 Acquired technologies 65,312 6 Trademarks and trade names 11,202 5 Contract-based intangible assets 6,880 5 Total estimated acquired intangible assets $ 188,294 10 AdvancedMD On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD") for total purchase consideration of $ 706.9 million, which we funded with cash on hand and incremental debt. AdvancedMD is a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory-care physician practices. 71 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 Final (in thousands) Cash and cash equivalents $ 7,657 $ — $ 7,657 Property and equipment 5,672 — 5,672 Identified intangible assets 419,500 — 419,500 Other assets 11,958 ( 173 ) 11,785 Deferred income tax liabilities ( 98,979 ) 4,935 ( 94,044 ) Other liabilities ( 15,624 ) ( 23 ) ( 15,647 ) Total identifiable net assets 330,184 4,739 334,923 Goodwill 376,701 ( 4,739 ) 371,962 Total purchase consideration $ 706,885 $ — $ 706,885 Goodwill arising from the acquisition of $ 372.0 million, included in the Merchant Solutions segment, 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 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) (years) Customer-related intangible assets $ 303,100 11 Acquired technologies 83,700 5 Trademarks and trade names 32,700 15 Total estimated identified intangible assets $ 419,500 10 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 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. Trademarks and trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital. 72 NOTE 3— REVENUES 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 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 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) Relationship-led $ 2,600,440 $ 2,218,559 $ 1,821,629 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. For the years ended December 31, 2020, 2019, and 2018, substantially all of our revenues were recognized over time. 73 Supplemental balance sheet information related to contracts from customers as of December 31, 2020 and 2019 was as follows: Balance Sheet Location December 31, 2020 December 31, 2019 (in thousands) Assets: Capitalized costs to obtain customer contracts, net Other noncurrent assets $ 253,780 $ 226,945 Capitalized costs to fulfill customer contracts, net Other noncurrent assets 81,371 38,150 Liabilities: 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. Revenue recognized for the year ended December 31, 2020 and 2019 from contract liability balances at the beginning of each period was $ 182.3 million and $ 137.2 million, respectively. ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. 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 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 2022 753,523 2023 537,829 2024 360,762 2025 270,376 2026 and thereafter 523,056 Total $ 3,372,355 74 NOTE 4— PROPERTY AND EQUIPMENT As of December 31, 2020 and 2019, property and equipment consisted of the following: Range of Depreciable Lives 2020 2019 (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. NOTE 5— GOODWILL AND OTHER INTANGIBLE ASSETS As of December 31, 2020 and 2019, goodwill and other intangible assets consisted of the following: 2020 2019 (in thousands) Goodwill $ 23,871,451 $ 23,759,740 Other intangible assets: Customer-related intangible assets $ 9,275,093 $ 9,238,728 Acquired technologies 2,795,991 2,732,218 Contract-based intangible assets 1,981,260 1,974,429 Trademarks and trade names 1,239,925 1,239,471 15,292,269 15,184,846 Less accumulated amortization: Customer-related intangible assets 1,914,214 1,225,785 Acquired technologies 960,281 576,928 Contract-based intangible assets 120,631 82,225 Trademarks and trade names 281,260 145,253 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. 75 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 Total (in thousands) Balance at December 31, 2017 $ 5,670,454 $ 33,538 $ — $ 5,703,992 Goodwill acquired 698,870 — — 698,870 Effect of foreign currency translation ( 59,374 ) ( 1,709 ) — ( 61,083 ) Measurement-period adjustments ( 424 ) — — ( 424 ) Balance at December 31, 2018 6,309,526 31,829 — 6,341,355 Goodwill acquired 7,095,167 7,945,029 2,358,657 17,398,853 Effect of foreign currency translation 10,030 8,873 — 18,903 Measurement-period adjustments 629 — — 629 Balance at December 31, 2019 13,415,352 7,985,731 2,358,657 23,759,740 Goodwill acquired 80,152 — — 80,152 Effect of foreign currency translation 54,548 14,182 — 68,730 Measurement-period adjustments ( 1,362 ) ( 42,297 ) 6,488 ( 37,171 ) Balance at December 31, 2020 $ 13,548,690 $ 7,957,616 $ 2,365,145 $ 23,871,451 There were no accumulated impairment losses for goodwill at any balance sheet date reflected in the table above. 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. 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, contract-based intangible assets and trademarks and trade names acquired during the year ended December 31, 2018 had weighted-average amortization periods of 11.5 years, 6.2 years, 19.3 years and 12.5 years, respectively. Amortization expense of acquired intangibles was $ 1,256.9 million for the year ended December 31, 2020, $ 667.1 million for the year ended December 31, 2019 and $ 377.7 million for the year ended December 31, 2018. 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 Our leases consist primarily of operating real estate leases for office space and data centers in the markets in which we conduct business. We also have operating and finance leases for computer and other equipment. Many of our leases include escalating rental payments and incentives, as well as termination and renewal options. Certain of our lease agreements provide that we pay the cost of property taxes, insurance and maintenance. As described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies," we adopted ASU 2016-02 on January 1, 2019. Unless otherwise indicated, the following information in this footnote applies only to periods after December 31, 2018. 76 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) Assets: Operating lease right-of-use 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 $ 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 ( 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 ) Total finance lease right-of-use assets 60,458 24,285 Total right-of-use assets (1) $ 541,655 $ 461,085 Liabilities: 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) 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. 77 As of December 31, 2020, maturities of lease liabilities were as follows: Operating Leases Finance Leases (in thousands) 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 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. Total lease costs for the year ended December 31, 2019 include variable lease costs of approximately $ 19.1 million, which are primarily comprised of the cost of property taxes, insurance and maintenance. 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 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. Rent expense on all operating leases for the year ended December 31, 2018 was $ 47.1 million. 78 Table of Contents 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, 2020 December 31, 2019 (in thousands) Long-term Debt 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 989,025 — 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 Finance lease liabilities 75,989 32,996 Other borrowings 65,352 33,597 Total long-term debt 9,293,764 9,125,501 Less current portion 827,357 35,137 Long-term debt, excluding current portion $ 8,466,407 $ 9,090,364 79 Table of Contents The carrying amounts of our senior notes and term loans are presented net of unamortized discount and unamortized debt issuance costs, as applicable. 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. 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 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): Year ending December 31, 2021 $ 806,834 2022 58,403 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. Senior Unsecured Notes 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; (ii) $ 1.25 billion aggregate principal amount of 3.200 % senior notes due 2029; and (iii) $ 750.0 million aggregate principal amount of 4.150 % senior notes due 2049. Interest on the senior notes is payable semi-annually in arrears on each February 15 and August 15, beginning on February 15, 2020. 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. We issued the senior notes at a total discount of $ 6.1 million and capitalized related debt issuance costs of $ 29.6 million. 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 80 Table of Contents 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: (i) $ 750.0 million aggregate principal amount of 3.800 % senior notes due 2021; (ii) $ 550.0 million aggregate principal amount of 3.750 % senior notes due 2023; (iii) $ 550.0 million aggregate principal amount of 4.000 % senior notes due 2023; (iv) $ 750 million aggregate principal amount of 4.800 % senior notes due 2026; and (v) $ 450 million aggregate principal amount of 4.450 % senior notes due 2028. For the 3.800 % senior notes due 2021 and the 4.800 % senior notes due 2026, interest is payable semi-annually each April 1 and October 1. 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 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. 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. 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. 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 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 81 Table of Contents secured financing comprised of (i) a $ 1.5 billion revolving credit facility; (ii) a $ 1.5 billion term loan; (iii) a $ 1.37 billion term loan; (iv) a $ 1.14 billion term loan; and (v) a $ 500.0 million term loan. Upon the consummation of the Merger, all borrowings outstanding and other amounts due under the credit facility were repaid and this credit facility was terminated. 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, 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 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. For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding line of credit may exceed the stated credit limit. 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 wa s 2.35 % at December 31, 2020. Derivative Agreements We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive income (loss). In addition, in June 2019, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of $ 1.0 billion. The forward-starting interest rate swaps, designated as cash flow hedges, were designed to manage the exposure to interest rate volatility in anticipation of the issuance of our senior unsecured notes. During the period from the commencement of the swaps through the date upon which our senior unsecured notes were issued, the effective portion of the unrealized losses on the swaps was included in other comprehensive loss. 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 82 Table of Contents 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 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 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) 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 2.73 % December 31, 2022 $ 65,490 $ 45,604 N/A - not applicable. The table below presents the effects of our interest rate swaps on the consolidated statements of income and comprehensive income for the years ended December 31, 2020, 2019 and 2018: Years Ended December 31, 2020 2019 2018 (in thousands) 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 ) At December 31, 2020, the amount of net unrealized losses in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was approximately $ 39.8 million. Interest Expense Interest expense was $ 326.8 million, $ 301.2 million and $ 195.5 million, respectively, for the years ended December 31, 2020, 2019 and 2018. 83 Table of Contents NOTE 9— ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As of December 31, 2020 and 2019, accounts payable and accrued liabilities consisted of the following: 2020 2019 (in thousands) Funds held for customers $ 645,863 $ 392,375 Contract liabilities 217,938 193,405 Compensation and benefits 194,090 212,016 Payment network fees 166,880 154,789 Trade accounts payable 128,721 148,084 Operating lease liabilities 103,706 88,812 Third-party commissions 74,391 68,592 Miscellaneous taxes and withholdings 68,048 48,738 Interest 62,865 61,296 Audit and legal 44,146 26,080 Unclaimed property 32,497 26,331 Third-party processing fees 24,619 28,041 Settlement of common share repurchases 20,000 17,200 Current portion of accrued buyout liability (1) 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, 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 and related expenses may be incurred as Merger-related integration activities continue in 2021. 84 Table of Contents NOTE 10— INCOME TAX 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. The following table presents income before income taxes for the years ended December 31, 2020, 2019 and 2018: Years Ended December 31, 2020 2019 2018 (in thousands) United States $ 194,190 $ 60,000 $ 131,067 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. Because those earnings are considered to be indefinitely reinvested, no deferred income taxes have been provided thereon. If we were to make a distribution of any portion of those earnings in the form of dividends or otherwise, any such amounts would be subject to withholding taxes payable to various foreign jurisdictions; however, the amounts would not be subject to any additional U.S. income tax. 85 Table of Contents Our effective tax rates for the years ended December 31, 2020, 2019 and 2018 differ from the federal statutory rate for those periods as follows: Years Ended December 31, 2020 2019 2018 Federal U.S. statutory rate 21.0 % 21.0 % 21.0 % 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 ) 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 Federal U.S. transition tax — — ( 4.1 ) Other 1.9 1.3 ( 0.2 ) Effective tax rate 13.0 % 12.0 % 13.8 % 86 Table of Contents Deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates. Deferred income taxes as of December 31, 2020 and 2019 reflect the effect of temporary differences between the amounts of assets and liabilities for financial accounting and income tax purposes. As of December 31, 2020 and 2019, principal components of deferred tax items were as follows: 2020 2019 (in thousands) Deferred income tax assets: 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 Domestic net operating loss carryforwards 18,952 22,254 Other 58,107 30,490 474,005 376,671 Valuation allowance ( 132,531 ) ( 72,042 ) 341,474 304,629 Deferred tax liabilities: Acquired intangibles 2,736,300 2,963,695 Property and equipment 248,375 193,052 Partnership interests 100,951 108,220 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 The net deferred income taxes reflected on our consolidated balance sheets as of December 31, 2020 and 2019 are as follows: 2020 2019 (in thousands) Noncurrent deferred income tax asset $ ( 7,627 ) $ ( 6,292 ) Noncurrent deferred income tax liability 2,948,390 3,145,641 Net deferred income tax liability $ 2,940,763 $ 3,139,349 87 Table of Contents A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Changes to our valuation allowance during the years ended December 31, 2020, 2019 and 2018 are summarized below (in thousands): Balance at December 31, 2017 $ ( 16,550 ) Allowance for foreign net operating loss carryforwards ( 7,979 ) Allowance for domestic net operating loss carryforwards 1,145 Allowance for state credit carryforwards ( 6 ) Balance at December 31, 2018 ( 23,390 ) Allowance for foreign net operating loss carryforwards ( 26,439 ) 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 ) Allowance for foreign net operating loss carryforwards ( 63,113 ) Allowance for foreign credit carryforwards ( 2,486 ) Allowance for state credit carryforwards 2,932 Allowance for domestic net operating loss carryforwards 2,178 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 $ 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. 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 December 31, 2016 and U.K. corporation tax examinations for years ended on or before December 31, 2016. 88 Table of Contents 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) Balance at the beginning of the year $ 29,671 $ 21,197 $ 31,218 Additions related to acquisitions 3,186 22,283 — Reductions for income tax positions of prior years ( 5,408 ) ( 14,235 ) ( 10,021 ) Settlements with income tax authorities ( 909 ) ( 2,583 ) — Additions for income tax positions of prior years 7,968 1,803 — Additions based on income tax positions related to the current year 4,900 1,206 — Balance at the end of the year $ 39,408 $ 29,671 $ 21,197 As of December 31, 2020, the total amount of gross unrecognized income tax benefits that, if recognized, would affect the provision for income taxes is $ 35.1 million. NOTE 11— SHAREHOLDERS’ EQUITY 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) Number of shares repurchased and retired 3,304 2,328 1,927 Cost of shares repurchased, including commissions $ 633,948 $ 324,583 $ 212,196 Average cost per share $ 191.87 $ 139.42 $ 110.11 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. 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 We have granted nonqualified stock options and restricted stock awards to key employees, officers and directors under a long-term incentive plan, which permits grants of equity to employees, officers, directors and consultants. A total of 14.0 million shares of our common stock has been reserved and made available for issuance pursuant to awards granted under the plan. The awards are held in escrow and released upon the grantee's satisfaction of conditions of the award certificate. 89 Table of Contents The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options: Years Ended December 31, 2020 2019 2018 (in thousands) Share-based compensation expense $ 148,792 $ 89,634 $ 57,826 Income tax benefit $ 33,530 $ 20,519 $ 13,038 Restricted Stock 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. The grant date fair value of restricted stock awards, which is based on the quoted market value of our common stock on the grant date, is recognized as share-based compensation expense on a straight-line basis over the vesting period. Performance Units 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 . 90 Table of Contents The following table summarizes the changes in unvested restricted stock awards and performance units for the years ended December 31, 2020, 2019 and 2018: Shares Weighted-Average Grant-Date Fair Value (in thousands) Unvested at December 31, 2017 1,226 $ 78.29 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. For restricted stock awards and performance units, we recognized compensation expense of $ 135.4 million , $ 74.3 million and $ 53.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, there was $ 179.5 million of unrecognized compensation expense related to unvested restricted stock awards and performance units that we expect to recognize over a weighted-average period of 2.0 years. Our restricted stock and performance unit plans provide for accelerated vesting under certain conditions. Stock Options Stock options are granted with an exercise price equal to 100 % of fair market value of our common stock on the date of grant and have a term of ten years . Stock options vest in equal installments on each of the first three anniversaries of the grant date. Our stock option plans provide for accelerated vesting under certain conditions. 91 Table of Contents The following table summarizes changes in stock option activity for the years ended December 31, 2020, 2019 and 2018: 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 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 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 % Expected volatility 30 % 31 % 29 % Dividend yield 0.39 % 0.04 % 0.04 % Expected term (years) 5 5 5 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 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 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. 92 Table of Contents NOTE 13— SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow disclosures for the years ended December 31, 2020, 2019 and 2018 are as follows: Years Ended December 31, 2020 2019 2018 (in thousands) Income taxes paid, net of refunds $ 308,620 $ 146,739 $ 101,302 Interest paid $ 343,213 $ 206,562 $ 177,525 NOTE 14— NONCONTROLLING INTERESTS The following table presents the reconciliation of net income attributable to noncontrolling interests to comprehensive income attributable to noncontrolling interests for the years ended December 31, 2020, 2019 and 2018: Years Ended December 31, 2020 2019 2018 (in thousands) Net income attributable to noncontrolling interests $ 20,580 $ 38,663 $ 32,614 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. 93 NOTE 15— 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 ) 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 ) Balance at December 31, 2019 ( 241,899 ) ( 69,319 ) 647 ( 310,571 ) 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 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. Through our Merchant Solutions segment, our offerings include, but are not limited to, authorization services, settlement and funding services, customer support and help-desk functions, chargeback resolution, terminal rental, sales and deployment, payment security services, consolidated billing and statements and on-line reporting. 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 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. In addition, we provide flexible commercial payments and ePayables solutions that support business-to-business payment processes for businesses and governments. We also offer complementary services including account management and servicing, fraud solution services, analytics and business intelligence, cards, statements and correspondence, customer contact solutions and risk management solutions. Through our Business and Consumer Solutions segment, we provide general purpose reloadable prepaid debit and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses in the United States. 94 Table of Contents We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. 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 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." 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) Revenues (1) : Merchant Solutions $ 4,688,335 $ 4,098,580 $ 3,345,181 Issuer Solutions 1,981,435 604,654 21,185 Business and Consumer Solutions 829,505 227,440 — Intersegment eliminations ( 75,717 ) ( 18,782 ) — Consolidated revenues $ 7,423,558 $ 4,911,892 $ 3,366,366 Operating income (loss) (1)(2) : Merchant Solutions $ 1,162,741 $ 1,148,975 $ 940,157 Issuer Solutions 277,651 82,172 14,084 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) : Merchant Solutions $ 948,798 $ 677,196 $ 516,731 Issuer Solutions 547,299 157,799 710 Business and Consumer Solutions 95,720 34,914 — Corporate 22,623 8,426 5,372 Consolidated depreciation and amortization $ 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." (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 2020 and 2019 were primarily related to the Merger. 95 Table of Contents 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. Our results of operations and our financial condition are not significantly reliant upon any single customer. Long-lived assets, excluding goodwill and other intangible assets, by location as of December 31, 2020 and 2019 were as follows: 2020 2019 (in thousands) United States $ 1,026,884 $ 950,567 Foreign countries 551,648 432,235 $ 1,578,532 $ 1,382,802 NOTE 17— COMMITMENTS AND CONTINGENCIES Purchase Obligations We have contractual obligations related to service arrangements with suppliers for fixed or minimum amounts. Future minimum payments at December 31, 2020 for purchase obligations were as follows (in thousands): Year ending December 31: 2021 $ 292,865 2022 181,486 2023 108,610 2024 75,981 2025 93,523 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 We are party to a number of claims and lawsuits incidental to our business. 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. On September 23, 2019, a jury in the Superior Court of Dekalb County Georgia, awarded Frontline Processing Corp. ("Frontline") $ 135.2 million in damages, costs and attorney's fees (plus interest) following a trial of a breach of contract dispute between Frontline and Global Payments, wherein Frontline alleged that Global Payments violated provisions of the parties' Referral Agreement and Master Services Agreement. 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 have appealed the decision to the Georgia Court of Appeals. Our appeal is pending. 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, Contingencies) as of December 31, 2020. As a result, we have not recorded a liability on the consolidated balance sheet with respect to this litigation. 96 Table of Contents Operating Taxes We are subject to certain taxes that are not derived based on earnings (e.g., sales, gross receipts, property, value-added and other business taxes). During the course of operations, we must interpret the meaning of various operating tax regulations in the United States and in the foreign jurisdictions in which we do business. Taxing authorities in those various jurisdictions may arrive at different interpretations of applicable tax laws and regulations which could result in the payment of additional taxes in those jurisdictions. BIN/ICA Agreements We have entered into sponsorship or depository and processing agreements with certain banks. These agreements allow us to use the banks' identification numbers, referred to as Bank Identification Number ("BIN") for Visa transactions and an Interbank Card Association ("ICA") number for Mastercard transactions, to clear credit card transactions through Visa and Mastercard. Certain of these agreements contain financial covenants, and we were in compliance with all such covenants as of December 31, 2020. NOTE 18— QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly results for the years ended December 31, 2020 and 2019 were as follows: Quarters Ended 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, 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. Notably, we completed our merger with TSYS during the quarter ended September 30, 2019. Additionally, our consolidated results reflected incremental expenses associated with the acquisition and integration of acquired businesses. See "Note 2—Acquisitions" for further discussion of our acquisitions. 97 Acquisition and integration expenses were $ 71.9 million, $ 85.1 million, $ 56.7 million and $ 106.3 million for the quarters ended March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020, respectively. 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. 98 Table of Contents GLOBAL PAYMENTS INC. SCHEDULE II Valuation & Qualifying Accounts (in thousands) (a) (b) (c) (d) (e) Description (3) Balance at Beginning of Period Additions: Charged to Costs and Expenses (2) Deductions: 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 December 31, 2019 3,048 18,097 11,765 9,380 December 31, 2020 $ 9,380 $ 27,107 $ 15,879 $ 20,608 Allowance for credit losses - settlement assets (1) December 31, 2018 $ 3,460 $ 16,068 $ 16,740 $ 2,788 December 31, 2019 2,788 20,433 19,794 3,427 December 31, 2020 $ 3,427 $ 16,915 $ 14,171 $ 6,171 Reserve for sales allowances December 31, 2018 $ 601 $ 6,244 $ 5,304 $ 1,541 December 31, 2019 1,541 6,370 3,841 4,070 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 December 31, 2018 $ 16,550 $ 6,840 $ — $ 23,390 December 31, 2019 23,390 48,652 — 72,042 December 31, 2020 $ 72,042 $ 60,489 $ — $ 132,531 (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 and the adoption of the new credit loss standard as of January 1, 2020. 99 Table of Contents (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. 100 Table of Contents ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.