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, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with 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, 2022, 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 17, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. 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 4 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. We identified the determination of performance obligations for Issuer Solutions revenue contracts as a critical audit matter, given the judgment required to determine whether any unusual and/or complex terms within the contract are identified and 51 Table of Contents evaluated appropriately. 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 revenues, 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 revenues is highly automated and is based on contractual terms with merchants, financial institutions, financial service providers, payment networks, and other parties. We identified payment processing solutions and services revenues as a critical audit matter given the 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 revenues. • We tested 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 tested the mathematical accuracy of the recorded revenues. Issuer Solutions Goodwill and Business and Consumer Solutions Goodwill - Refer to Notes 1 and 6 to the financial statements Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair values of its reporting units, including the Issuer Solutions reporting unit (as of June 30, 2022 and October 1, 2022) and the former Business and Consumer reporting unit (as of June 30, 2022), to their respective carrying values. The Company determined the fair values of these reporting units based on a weighted average of multiple valuation techniques, principally a combination of an income approach and a market approach. The Company utilizes discounted cash flow models to perform its income approach which requires management to make significant assumptions related to discount rates and forecasts of future revenues and cash flows, among others. Changes in these assumptions could have a significant impact on either the fair values of the reporting units, the amount of any goodwill impairment charge, or both. The Company recorded a goodwill impairment charge during 2022 of $833.1 million related to its former Business and Consumer reporting unit. The goodwill balance was $23.3 billion as of December 31, 2022, of which $9.5 billion was allocated to the Issuer Solutions reporting unit. 52 Table of Contents We identified valuation of goodwill for the Issuer Solutions and the former Business and Consumer Solutions reporting units as a critical audit matter because of the significant judgments made by management to estimate the fair values of these reporting units. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to discount rates and forecasts of future revenues and cash flows. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s estimates and assumptions used in its discounted cash flow models included the following, among others: • We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those controls related to management’s selection of the discount rates and forecasts of future revenues and cash flows. • With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the key assumptions used, including discount rates for which we tested the mathematical accuracy of the calculation, and developed a range of independent estimates and compared those to the discount rate selected by management. • We evaluated management’s ability to accurately forecast future revenues and cash flows by comparing the forecasts to (1) historical results, (2) projections utilized in the prior year goodwill impairment analysis, and (3) forecasted information included in analyst and industry reports of the Company and companies in its peer group. /s/ Deloitte & Touche LLP Atlanta, Georgia February 17, 2023 We have served as the Company's auditor since 2002. 53 Table of Contents 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, 2022, 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, 2022, 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 as of and for the year ended December 31, 2022, of the Company and our report dated February 17, 2023, expressed an unqualified opinion on those financial statements. 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 17, 2023 54 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Years Ended December 31, 2022 2021 2020 Revenues $ 8,975,515 $ 8,523,762 $ 7,423,558 Operating expenses: Cost of service 3,778,617 3,773,725 3,650,727 Selling, general and administrative 3,524,578 3,391,161 2,878,878 Impairment of goodwill 833,075 — — Loss on business dispositions 199,094 — — 8,335,364 7,164,886 6,529,605 Operating income 640,151 1,358,876 893,953 Interest and other income 33,604 19,320 43,551 Interest and other expense ( 449,433 ) ( 333,651 ) ( 343,548 ) ( 415,829 ) ( 314,331 ) ( 299,997 ) Income before income taxes and equity in income of equity method investments 224,322 1,044,545 593,956 Income tax expense 166,694 169,034 77,153 Income before equity in income of equity method investments 57,628 875,511 516,803 Equity in income of equity method investments, net of tax 85,685 112,353 88,297 Net income 143,313 987,864 605,100 Net income attributable to noncontrolling interests ( 31,820 ) ( 22,404 ) ( 20,580 ) Net income attributable to Global Payments $ 111,493 $ 965,460 $ 584,520 Earnings per share attributable to Global Payments: Basic earnings per share $ 0.41 $ 3.30 $ 1.95 Diluted earnings per share $ 0.40 $ 3.29 $ 1.95 See Notes to Consolidated Financial Statements. 55 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2022 2021 2020 Net income $ 143,313 $ 987,864 $ 605,100 Other comprehensive income (loss): Foreign currency translation adjustments ( 276,559 ) ( 79,550 ) 153,210 Reclassification of accumulated foreign currency translation losses to net loss as a result of the sale of a foreign entity 62,925 — — Income tax benefit related to foreign currency translation adjustments 2,698 455 1,160 Net unrealized gains (losses) on hedging activities 12,915 3,425 ( 52,742 ) Reclassification of net unrealized losses on hedging activities to interest expense 21,327 40,094 36,510 Income tax (expense) benefit related to hedging activities ( 8,172 ) ( 10,466 ) 4,008 Other, net of tax ( 222 ) 3,760 ( 7,150 ) Other comprehensive (loss) income ( 185,088 ) ( 42,282 ) 134,996 Comprehensive (loss) income ( 41,775 ) 945,582 740,096 Comprehensive income attributable to noncontrolling interests ( 18,519 ) ( 12,123 ) ( 35,223 ) Comprehensive (loss) income attributable to Global Payments $ ( 60,294 ) $ 933,459 $ 704,873 See Notes to Consolidated Financial Statements. 56 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 1,997,566 $ 1,979,308 Accounts receivable, net 998,332 946,247 Settlement processing assets 2,519,114 1,143,539 Current assets held for sale 138,815 4,779 Prepaid expenses and other current assets 660,321 637,112 Total current assets 6,314,148 4,710,985 Goodwill 23,320,736 24,813,274 Other intangible assets, net 9,658,374 11,633,709 Property and equipment, net 1,838,809 1,687,586 Deferred income taxes 37,907 12,117 Noncurrent assets held for sale 1,295,799 — Other noncurrent assets 2,343,241 2,422,042 Total assets $ 44,809,014 $ 45,279,713 LIABILITIES AND EQUITY Current liabilities: Settlement lines of credit $ 747,111 $ 484,202 Current portion of long-term debt 1,169,330 78,505 Accounts payable and accrued liabilities 2,442,560 2,542,256 Settlement processing obligations 2,413,799 1,358,051 Current liabilities held for sale 125,891 — Total current liabilities 6,898,691 4,463,014 Long-term debt 12,289,248 11,414,809 Deferred income taxes 2,428,412 2,793,427 Noncurrent liabilities held for sale 4,478 — Other noncurrent liabilities 647,975 739,046 Total liabilities 22,268,804 19,410,296 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, 2022 and 2021; 263,081,872 shares issued and outstanding at December 31, 2022 and 284,750,452 shares issued and outstanding at December 31, 2021 — — Paid-in capital 19,978,095 22,880,261 Retained earnings 2,731,380 2,982,122 Accumulated other comprehensive loss ( 405,969 ) ( 234,182 ) Total Global Payments shareholders’ equity 22,303,506 25,628,201 Noncontrolling interests 236,704 241,216 Total equity 22,540,210 25,869,417 Total liabilities and equity $ 44,809,014 $ 45,279,713 See Notes to Consolidated Financial Statements. 57 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2022 2021 2020 Cash flows from operating activities: Net income $ 143,313 $ 987,864 $ 605,100 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 399,486 396,342 357,529 Amortization of acquired intangibles 1,262,969 1,295,042 1,256,911 Amortization of capitalized contract costs 109,701 93,328 78,147 Share-based compensation expense 163,261 180,779 148,792 Provision for operating losses and bad debts 116,879 90,208 126,712 Noncash lease expense 78,935 107,775 98,592 Deferred income taxes ( 315,495 ) ( 189,050 ) ( 166,224 ) Equity in income of equity method investments, net of tax ( 85,685 ) ( 112,353 ) ( 88,297 ) Facilities exit charges 30,437 51,349 — Distributions received on investments 45,521 36,914 7,738 Impairment of goodwill 833,075 — — Loss on business dispositions 199,094 — — Other, net 993 10,810 ( 21,403 ) Changes in operating assets and liabilities, net of the effects of business combinations: Accounts receivable ( 111,974 ) ( 165,543 ) 55,986 Settlement processing assets and obligations, net ( 313,333 ) 128,584 125,852 Prepaid expenses and other assets ( 295,980 ) ( 264,009 ) ( 270,965 ) Accounts payable and other liabilities ( 17,157 ) 132,785 ( 320 ) Net cash provided by operating activities 2,244,040 2,780,825 2,314,150 Cash flows from investing activities: Business combinations and other acquisitions, net of cash acquired ( 65,672 ) ( 1,811,432 ) ( 160,801 ) Restricted cash from business combinations — — 119,372 Capital expenditures ( 615,652 ) ( 493,216 ) ( 436,236 ) Effect on cash from sale of business ( 29,755 ) — — Proceeds from sale of investments 33,046 — — Other, net 2,496 10,822 39,323 Net cash used in investing activities ( 675,537 ) ( 2,293,826 ) ( 438,342 ) Cash flows from financing activities: Net borrowings from (repayments of) settlement lines of credit 285,644 149,528 ( 133,282 ) Proceeds from long-term debt 9,812,289 7,057,668 2,401,147 Repayments of long-term debt ( 7,895,131 ) ( 4,826,769 ) ( 2,342,072 ) Payments of debt issuance costs ( 48,635 ) ( 21,320 ) ( 8,075 ) Repurchases of common stock ( 2,921,307 ) ( 2,533,629 ) ( 631,148 ) Proceeds from stock issued under share-based compensation plans 44,127 49,545 66,142 Common stock repurchased - share-based compensation plans ( 38,601 ) ( 90,649 ) ( 61,243 ) Distributions to noncontrolling interests ( 23,031 ) — ( 26,199 ) Contributions from noncontrolling interests — 69,987 — Payment of contingent consideration in business combination ( 15,726 ) — — Purchase of capped calls related to issuance of convertible notes ( 302,375 ) — — Dividends paid ( 273,955 ) ( 259,726 ) ( 233,216 ) Purchase of subsidiary shares from noncontrolling interest — — ( 578,196 ) Net cash used in financing activities ( 1,376,701 ) ( 405,365 ) ( 1,546,142 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 99,219 ) ( 48,382 ) 81,832 Increase in cash, cash equivalents and restricted cash 92,583 33,252 411,498 Cash, cash equivalents and restricted cash, beginning of the period 2,123,023 2,089,771 1,678,273 Cash, cash equivalents and restricted cash, end of the period $ 2,215,606 $ 2,123,023 $ 2,089,771 See Notes to Consolidated Financial Statements. 58 Table of Contents 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, 2021 284,750 $ 22,880,261 $ 2,982,122 $ ( 234,182 ) $ 25,628,201 $ 241,216 $ 25,869,417 Net income 111,493 111,493 31,820 143,313 Other comprehensive loss ( 171,787 ) ( 171,787 ) ( 13,301 ) ( 185,088 ) Stock issued under share-based compensation plans 1,883 44,127 44,127 44,127 Common stock repurchased - share-based compensation plans ( 285 ) ( 38,423 ) ( 38,423 ) ( 38,423 ) Share-based compensation expense 163,261 163,261 163,261 Repurchases of common stock ( 23,266 ) ( 2,841,534 ) ( 88,280 ) ( 2,929,814 ) ( 2,929,814 ) Distributions to noncontrolling interests — ( 23,031 ) ( 23,031 ) Purchase of capped calls related to issuance of convertible notes, net of taxes of $ 72,778 ( 229,597 ) ( 229,597 ) ( 229,597 ) Cash dividends declared ($ 1.00 per common share) ( 273,955 ) ( 273,955 ) ( 273,955 ) Balance at December 31, 2022 263,082 $ 19,978,095 $ 2,731,380 $ ( 405,969 ) $ 22,303,506 $ 236,704 $ 22,540,210 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, 2020 298,332 $ 24,963,769 $ 2,570,874 $ ( 202,273 ) $ 27,332,370 $ 154,674 $ 27,487,044 Net income 965,460 965,460 22,404 987,864 Other comprehensive loss ( 32,001 ) ( 32,001 ) ( 10,281 ) ( 42,282 ) Stock issued under share-based compensation plans 2,085 49,545 49,545 49,545 Common stock repurchased - share-based compensation plans ( 498 ) ( 90,165 ) ( 90,165 ) ( 90,165 ) Share-based compensation expense 180,779 180,779 180,779 Contributions from noncontrolling interests — 69,987 69,987 Change in ownership attributable to a noncontrolling interest ( 4,524 ) 92 ( 4,432 ) 4,432 — Repurchases of common stock ( 15,169 ) ( 2,219,143 ) ( 294,486 ) ( 2,513,629 ) ( 2,513,629 ) Cash dividends declared ($ 0.89 per common share) ( 259,726 ) ( 259,726 ) ( 259,726 ) Balance at December 31, 2021 284,750 $ 22,880,261 $ 2,982,122 $ ( 234,182 ) $ 25,628,201 $ 241,216 $ 25,869,417 See Notes to Consolidated Financial Statements. 59 Table of Contents 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 See Notes to Consolidated Financial Statements. 60 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, consolidation and presentation — We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world. Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise. During 2022, as a result of the pending divestiture of our consumer business and changes in how our business is managed, we realigned the businesses previously comprising our Business and Consumer Solutions segment to include the business-to-business ("B2B") portion within our Issuer Solutions segment and the consumer portion forming our new Consumer Solutions segment. Our three reportable segments now are: Merchant Solutions, Issuer Solutions and Consumer Solutions. See "Note 17—Segment Information" in the notes to the accompanying consolidated financial statements for additional information about our segments. 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, based on whether or not we have the 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"). 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, uncertainty resulting from the COVID-19 pandemic, global events and other macroeconomic conditions 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 based upon management’s estimates and assumptions utilizing the most currently available information. Recently adopted accounting pronouncements Accounting Standards Update ("ASU") 2021-08— In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ." We elected to early adopt ASU 2021-08 during the year ended December 31, 2022, with application to any business combinations for which the acquisition date occurred after January 1, 2022. Prior to the adoption of this update, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606" or "ASC 606"), at fair value on the acquisition date. ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts, which should generally result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. This update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. ASU 2020-04— In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ," 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 amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to 61 Table of Contents be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied. The amendments in this update were effective upon issuance and, as further updated by ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 ,” may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. We elected to apply the expedients under ASU 2020-04 to a debt facility amendment completed in December 2021, the application of which did not result in any effect on our consolidated financial statements. As a result of changes in our debt structure during 2022, which did not qualify for the optional expedients under ASU 2020-04, we no longer have any significant indebtedness or borrowings that bear interest at a variable rate based on LIBOR. Therefore, we do not expect the discontinuance of LIBOR or the related effects of ASU 2020-04 will have a material effect on our consolidated financial statements. See "Note 9—Long-Term Debt and Lines of Credit" in the notes to the accompanying consolidated financial statements for further information about our borrowing agreements. 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. The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our consolidated financial statements. ASU 2018-15— In August 2018, the 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 amended 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 ASC Subtopic 350-40. We adopted ASU 2018-15 on January 1, 2020, applying the guidance prospectively to all implementation costs incurred on or after the date of adoption. The adoption of this standard did not have a material effect on our consolidated financial statements. We have historically capitalized implementation costs associated with cloud computing arrangements that are service contracts following the guidance in Subtopic 350-40 and 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, 2022 and 2021, capitalized implementation costs, net of accumulated amortization, were $ 142.9 million and $ 72.4 million, respectively, and are presented within other noncurrent assets in the consolidated balance sheets. Amortization expense for the years ended December 31, 2022, 2021 and 2020 was $ 3.1 million, $ 3.0 million and $ 3.1 million, respectively, 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. 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 62 Table of Contents 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. 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, check and digital-based payments. Our comprehensive offerings include, but are not limited to, authorization, settlement and funding services, customer support, chargeback resolution, payment security services, consolidated billing and 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 for 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 implementation 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 63 Table of Contents selling price method. We determine standalone selling price based on the price at which the good or service is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by considering all reasonably available information, including market conditions, trends or other company- or customer-specific factors. Substantially all of the performance obligations 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 primarily 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 the customer 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. Other Issuer Solutions customer arrangements provide B2B payment services, consisting of a stand-ready obligation to process financial transactions for which revenue is recognized on a daily basis based on the services that are performed on that day. Customer contracts may also include subscription based SaaS arrangements that automate key procurement processes and enable virtual cards and integrated payments options, for which revenue is recognized over time on a ratable basis over the contract term beginning on the date that the services are first made available to the customer. 64 Table of Contents Consumer Solutions. Consumer Solutions 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. 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, $ 713.0 million and $ 894.6 million as of December 31, 2022 and 2021, respectively, 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 in their use; 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. Funds held for customers, which are not restricted in their use, include amounts collected before the corresponding obligation is due to be settled to or at the direction of our customers. Restricted cash includes amounts that cannot be withdrawn or used for general operating activities under legal or regulatory restrictions. 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. 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 the amounts of cash and cash equivalents and restricted cash in the consolidated balance sheets to the amount in the consolidated statements of cash flows is as follows: December 31, 2022 2021 (in thousands) Cash and cash equivalents $ 1,997,566 $ 1,979,308 Restricted cash 147,422 143,715 Cash included in assets held for sale 70,618 — Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,215,606 $ 2,123,023 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 65 Table of Contents 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 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 $ 21.0 million and $ 17.4 million as of December 31, 2022 and 2021, respectively, including $ 3.3 million presented within assets held for sale in the consolidated balance sheet as of December 31, 2022 as further discussed in "Note 3—Business Dispositions." 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 $ 15.0 million, $ 12.8 million and $ 23.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. 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. Revenues are recognized net of estimated billing adjustments. Adjustments to customer invoices are charged against the allowance for billing adjustments. Contract costs — We capitalize certain costs to obtain contracts with customers, including employee sales commissions and fees to business partners. At contract inception, we capitalize costs incurred that we expect to recover and that would not have been incurred if the contract had not been obtained. In certain instances 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 in 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. 66 Table of Contents 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. 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 in 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 in our consolidated balance sheet. If that net position is a liability, we reflect the net amount in settlement 67 Table of Contents processing obligations in 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 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 a number of systems and procedures to manage merchant risk. The allowance for credit losses on settlement processing assets was $ 2.3 million and $ 3.0 million as of December 31, 2022 and 2021, respectively. 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 $ 13.0 million , $ 3.6 million and $ 16.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. 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. 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 — The check guarantee portion of our gaming 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. As of December 31, 2022, check guarantee claims receivable, net of an allowance of $ 3.4 million , are included within the gaming business disposal group presented as held for sale in the consolidated balance sheet, as further discussed in "Note 3—Business Dispositions." As of December 31, 2021, check guarantee claims receivable, net of an allowance of $ 2.5 million, are included in prepaid expenses and other current assets in the consolidated balance sheet. The provision for check guarantee losses, which was approximately $ 12.3 million , $ 10.2 million and $ 10.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, 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 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 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 68 Table of Contents 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. Prior to presentation of the consumer business as held for sale as of December 31, 2022, as further discussed in "Note 3—Business Dispositions," these reserves were included in accrued liabilities in our consolidated balance sheet. 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 costs, 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. Costs incurred during the preliminary project stage are recognized as expense as incurred. Capitalized internal-use software is amortized over its estimated useful life, which is typically five to ten years , in a manner that best reflects the pattern of economic use of the assets. Goodwill — We test goodwill for impairment at the reporting unit level annually (in the fourth quarter) 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 election 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 estimated 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 estimated fair value, without exceeding the total amount of goodwill allocated to that reporting unit. A sustained decline in our share price and increases in discount rates, primarily resulting from increased economic uncertainty, indicated a potential decline in fair value and triggered a requirement to evaluate our Issuer Solutions and our former Business and Consumer Solutions reporting units for potential impairment as of June 30, 2022. Furthermore, the estimated sales price for the consumer business, which is held for sale, also indicated a potential decline in fair value of our former Business and Consumer Solutions reporting unit as of June 30, 2022. We determined on the basis of the quantitative assessment that the fair value of our Issuer Solutions reporting unit was still greater than its carrying amount as of June 30, 2022, indicating no impairment. Based on the quantitative assessment of our former Business and Consumer Solutions reporting unit, including consideration of the consumer business disposal group and the remaining assets of the reporting unit, we recognized a goodwill impairment charge of $ 833.1 million in our consolidated statement of income during the three months ended June 30, 2022. During 2022, as a result of the pending divestiture of our consumer business and changes in how our business is managed, we realigned the businesses previously comprising our Business and Consumer Solutions segment to include the B2B portion within our Issuer Solutions segment and the consumer portion forming our new Consumer Solutions segment. In connection with the change in presentation of segment information, the B2B portion of our former Business and Consumer Solutions reporting unit was realigned into the Issuer Solutions reporting unit, including a reallocation of goodwill and accumulated impairment losses based on relative fair value . As of October 1, 2022, our reporting units consisted of the following: North America Payment Solutions, Integrated Solutions, Vertical Market Software Solutions, Europe Merchant Solutions, Spain Merchant Solutions, Asia-Pacific Merchant Solutions and Issuer Solutions. As of October 1, 2022, we performed a quantitative assessment of impairment for our North 69 Table of Contents America Payments Solutions, Integrated Solutions and Issuer Solutions reporting units and a qualitative assessment for all other reporting units. We determined on the basis of the quantitative assessments of our North America Payments Solutions, Integrated Solutions and Issuer Solutions reporting units that the fair value of each reporting unit was greater than its respective carrying amount, indicating no impairment. 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. 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 acquired technologies are based on an estimate of the period over which we expect to receive economic benefit. 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 amortizable acquired technologies, trademarks and trade names and certain contract-based intangible assets. Amortization for most of our customer-related intangible assets and certain contract-based 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 initial estimates, we adjust the amortization schedule prospectively. We believe that our accelerated method reflects the expected pattern of the benefit to be derived. 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. We have 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 asset classes with the exception of computer equipment, for which we account for lease and nonlease components separately. Impairment of long-lived assets — We regularly evaluate whether events and circumstances have occurred that indicate the carrying amount of property and equipment, lease right-of-use assets 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 to be not 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. Assets held for sale — We classify an asset or business as a held for sale disposal group if we have committed to a plan to sell the asset or business within one year and are actively marketing the asset or business in its current condition for a price that is reasonable in comparison to its estimated fair value. Disposal groups held for sale are reported at the lower of carrying 70 Table of Contents amount or fair value less costs to sell. Long-lived assets classified as held for sale are not subject to depreciation or amortization, and both the assets and any liabilities directly associated with the disposal group are presented net within separate current and noncurrent held for sale line items in our consolidated balance sheet. Subsequent changes to the estimated selling price of an asset or disposal group held for sale are recorded as gains or losses in our consolidated statement of income and any subsequent gains are limited to the cumulative losses previously recognized. Equity method investments — We have certain investments, including a 45 % interest in China UnionPay Data Co., Ltd. that 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. As of December 31, 2022 and 2021, we had total equity method investments of $ 957.2 million and $ 976.4 million, respectively, presented within other noncurrent assets in the consolidated balance sheets. 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 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 in 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 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 71 Table of Contents is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument. Prior to their settlement in 2022, we designated each of our active interest rate swap agreements as a cash flow hedge of interest payments on variable rate borrowings. See "Note 9 — 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. The estimated fair value of our convertible notes was based on a lattice pricing model and is considered to be a Level 3 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. Prior to their settlement, 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 9 — Long-Term Debt and Lines of Credit" for further information. We also have investments in equity instruments without readily determinable fair values. 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. 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, 2022, 2021 and 2020, 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 (loss) and included in accumulated comprehensive income (loss) within equity in our consolidated balance sheets. When a foreign subsidiary is divested in its entirety, the associated accumulated foreign currency translation gains or losses are reclassified from the separate component of equity into our consolidated statement of income. 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, convertible notes or other potential securities that would have a dilutive effect on EPS. 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. The dilutive share base for the years ended December 31, 2022, 2021 and 2020 excluded approximately 700,119 , 234,813 and 124,888 , respectively, shares related to stock options that would have an antidilutive effect on the computation of diluted EPS. 72 Table of Contents The effect of the potential shares needed to settle the conversion spread on our convertible notes is included in diluted EPS if the effect is dilutive. The effect depends on the market share price of our common stock at the time of conversion and would be dilutive if the average market share price of our common stock for the period exceeds the conversion price. For the year ended December 31, 2022, the convertible notes were not included in the computation of diluted EPS as the effect would have been anti-dilutive. Furthermore, the effect of the related capped call transactions is not included in the computation of diluted EPS as it is always anti-dilutive. The following table sets forth the computation of the diluted weighted-average number of shares outstanding for all periods presented: Years Ended December 31, 2022 2021 2020 (in thousands) Basic weighted-average number of shares outstanding 275,191 292,655 299,222 Plus: Dilutive effect of stock options and other share-based awards 385 1,014 1,294 Diluted weighted-average number of shares outstanding 275,576 293,669 300,516 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. NOTE 2— ACQUISITIONS Pending Acquisition of EVO Payments, Inc. On August 1, 2022, we entered into a merger agreement to acquire all outstanding equity of EVO Payments, Inc. (“EVO”) for $ 34 per share, or approximately $ 3.4 billion in preliminary estimated cash consideration to be paid to EVO shareholders, which equates to an enterprise value of approximately $ 4 billion. EVO is a leading payment technology and services provider, offering an array of payment solutions to merchants ranging from small and middle market enterprises to multinational companies and organizations across the Americas and Europe. The acquisition aligns with our technology-enabled payments strategy, expands our geographic presence and augments our business-to-business software and payment solutions business. The acquisition is expected to close in the first quarter of 2023, subject to customary closing conditions. Zego On June 10, 2021, we acquired Zego, a real estate technology company that provides comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States, for cash consideration of approximately $ 933 million, which we funded with cash on hand and by drawing on our revolving credit facility. We accounted for this transaction as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. The final 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: 73 Table of Contents Final Amounts (in thousands) Cash and cash equivalents $ 67,374 Accounts receivable 1,017 Identifiable intangible assets 473,000 Property and equipment 575 Other assets 9,051 Accounts payable and accrued liabilities ( 71,006 ) Deferred income tax liabilities ( 10,749 ) Other liabilities ( 8,010 ) Total identifiable net assets 461,252 Goodwill 471,994 Total purchase consideration $ 933,246 During the year ended December 31, 2022, we made measurement-period adjustments that decreased the amount of deferred income tax liabilities and provisional goodwill by $ 3.2 million. The decrease in deferred income tax liabilities for the year ended December 31, 2022 primarily related to finalizing the evaluation of the differences in the bases of assets and liabilities for financial reporting and tax purposes. The effects of the measurement-period adjustments on our consolidated statements of income for the year ended December 31, 2022 were not material. Goodwill of $ 472.0 million arising from the acquisition, included in the Merchant Solutions segment, is attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce. Substantially all of the goodwill is deductible for income tax purposes. The following table reflects the estimated fair values of the identified intangible assets of Zego and their respective weighted-average estimated amortization periods: Estimated Fair Value Weighted-Average Estimated Amortization Periods (in thousands) (years) Customer-related intangible assets $ 208,000 13 Contract-based intangible assets 119,000 20 Acquired technologies 124,000 6 Trademarks and trade names 22,000 15 Total estimated identifiable intangible assets $ 473,000 14 Other Business Acquisitions During the year ended December 31, 2021, we completed other business acquisitions that were insignificant, individually and in the aggregate, to the consolidated financial statements for an aggregate purchase price of $ 963 million. The assets acquired and liabilities assumed were recorded based on the provisional estimated fair values, including intangible assets of $ 438 million and goodwill of $ 514 million. See "Note 6 — Goodwill and Other Intangible Assets" for the aggregate allocation of goodwill to the respective segments. The operating results of each acquisition have been included in the consolidated financial statements since the respective acquisition dates. 74 Table of Contents 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. NOTE 3— BUSINESS DISPOSITIONS Sale of Merchant Solutions Business in Russia We sold our Merchant Solutions business in Russia effective April 29, 2022 for cash proceeds of $ 9 million. During the year ended December 31, 2022, we recognized a loss of $ 127.2 million associated with the sale, comprised of the difference between the consideration received and the net carrying amount of the business and the reclassification of $ 62.9 million of associated accumulated foreign currency translation losses from the separate component of equity. The loss was presented within loss on business dispositions in our consolidated statement of income. Businesses Held for Sale Consumer Business. On July 31, 2022, we entered into a definitive agreement to sell the consumer portion of our Netspend business, which comprises the Consumer Solutions segment, for $ 1 billion, subject to certain closing adjustments. In connection with the sale, we will provide seller financing, consisting of a first lien seven-year secured term loan facility in an aggregate principal amount of $ 350 million bearing interest at a fixed annual rate of 9 % and a second lien twenty-five year secured term loan facility in an aggregate principal amount of $ 325 million bearing interest at a fixed annual rate of 13 %. In addition, we will provide the purchasers a first lien five-year $ 50 million secured revolving facility that will be available from the date of closing of the sale. The transaction is expected to close in the first quarter of 2023 subject to required regulatory approvals and other customary closing conditions. The assets and liabilities of our consumer business are classified as held for sale and the disposal group is reported at fair value less costs to sell in our consolidated balance sheet as of December 31, 2022. As further discussed in "Note 1— Summary of Significant Accounting Policies," we recognized a goodwill impairment charge of $ 833.1 million during the year ended December 31, 2022 related to our former Business and Consumer Solutions reporting unit, which included the consumer business. We also recognized charges within loss on business dispositions in our consolidated statement of income of $ 71.9 million during the year ended December 31, 2022, respectively, to reduce the carrying amount of the disposal group to estimated fair value less costs to sell. The charges relate primarily to estimated costs to sell and changes in the estimated fair value of the fixed rate seller financing commitment through December 31, 2022. Gaming Business. On December 6, 2022, we entered into a definitive agreement to sell our gaming business for approximately $ 400 million, which includes $ 32 million of seller financing and is subject to certain closing adjustments. The transaction is expected to close in the first quarter of 2023 and is subject to customary terms and conditions, including any required regulatory approvals. The assets and liabilities of our gaming business met the criteria for classification as held for sale in our consolidated balance sheet as of December 31, 2022, and we performed an impairment assessment of the respective assets and determined that no impairment was indicated. 75 Table of Contents Assets and Liabilities Held for Sale. The major classes of assets presented as held for sale in the consolidated balance sheet as of December 31, 2022, include cash of $ 70.6 million, accounts receivable of $ 18.4 million, other current assets of $ 42.3 million, goodwill of $ 529.5 million, other intangible assets of $ 717.9 million, property and equipment of $ 82.9 million, other noncurrent assets of $ 44.9 million and an asset group valuation allowance of $ 71.9 million. The major classes of liabilities presented as held for sale in the consolidated balance sheet as of December 31, 2022 include accounts payable and accrued liabilities of $ 125.9 million and other noncurrent liabilities of $ 4.5 million. NOTE 4— 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, 2022, 2021 and 2020 and has been recast to align with the change in the presentation of segment information as further described in “Note 17—Segment Information:” Year Ended December 31, 2022 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 5,236,728 $ 1,739,620 $ 620,482 $ ( 58,916 ) $ 7,537,914 Europe 720,660 469,412 — — 1,190,072 Asia Pacific 247,529 36,591 — ( 36,591 ) 247,529 $ 6,204,917 $ 2,245,623 $ 620,482 $ ( 95,507 ) $ 8,975,515 Year Ended December 31, 2021 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 4,735,505 $ 1,644,765 $ 783,625 $ ( 65,781 ) $ 7,098,114 Europe 684,760 495,597 — — 1,180,357 Asia Pacific 245,292 25,385 — ( 25,386 ) 245,291 $ 5,665,557 $ 2,165,747 $ 783,625 $ ( 91,167 ) $ 8,523,762 Year Ended December 31, 2020 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 3,948,643 $ 1,601,118 $ 747,886 $ ( 64,308 ) $ 6,233,339 Europe 539,838 450,529 — — 990,367 Asia Pacific 199,854 9,725 — ( 9,727 ) 199,852 $ 4,688,335 $ 2,061,372 $ 747,886 $ ( 74,035 ) $ 7,423,558 The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the years ended December 31, 2022, 2021 and 2020: 2022 2021 2020 (in thousands) Relationship-led $ 3,189,046 $ 3,031,873 $ 2,600,440 Technology-enabled 3,015,871 2,633,684 2,087,895 $ 6,204,917 $ 5,665,557 $ 4,688,335 76 Table of Contents ASC 606 requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the years ended December 31, 2022, 2021, and 2020, substantially all of our revenues were recognized over time. Supplemental balance sheet information related to contracts from customers as of December 31, 2022 and 2021 was as follows: Balance Sheet Location December 31, 2022 December 31, 2021 (in thousands) Assets: Capitalized costs to obtain customer contracts, net Other noncurrent assets $ 329,785 $ 291,914 Capitalized costs to fulfill customer contracts, net Other noncurrent assets 152,520 113,366 Liabilities: Contract liabilities, net (current) Accounts payable and accrued liabilities 226,254 227,783 Contract liabilities, net (noncurrent) Other noncurrent liabilities 45,613 44,502 Net contract assets were not material at December 31, 2022 or December 31, 2021. Revenue recognized for the years ended December 31, 2022 and 2021 from contract liability balances at the beginning of each period was $ 209.4 million and $ 207.1 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 revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at December 31, 2022. 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 amount of unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in the table below (in thousands): Year ending December 31, 2023 $ 1,052,178 2024 791,163 2025 564,134 2026 443,049 2027 295,266 2028 and thereafter 454,383 Total $ 3,600,173 77 Table of Contents NOTE 5— PROPERTY AND EQUIPMENT As of December 31, 2022 and 2021, property and equipment consisted of the following: Range of Depreciable Lives 2022 2021 (Years) (in thousands) Software 5 - 10 $ 1,523,220 $ 1,309,160 Equipment 3 - 20 776,203 778,533 Buildings 40 189,586 195,088 Leasehold improvements 5 - 15 117,275 132,529 Furniture and fixtures 5 - 10 88,548 78,364 Land 9,834 12,126 2,704,666 2,505,800 Less accumulated depreciation and amortization ( 1,367,860 ) ( 1,196,623 ) Work-in-progress 502,003 378,409 $ 1,838,809 $ 1,687,586 As of December 31, 2022, approximately $ 75.4 million of property and equipment assets have been classified as assets held for sale in connection with the presentation of the consumer and gaming businesses as held for sale. See “Note 3—Business Dispositions” for further discussion. As a result of actions taken during the years ended December 31, 2022 and 2021 to reduce our facility footprint in certain markets around the world, we recognized charges of $ 7.5 million and $ 9.2 million in selling, general and administrative expenses in our consolidated statement of income, primarily related to certain leasehold improvements, furniture and fixtures and equipment to reduce the carrying amount of each asset group to the estimated fair value. NOTE 6— GOODWILL AND OTHER INTANGIBLE ASSETS As of December 31, 2022 and 2021, goodwill and other intangible assets consisted of the following: 2022 2021 (in thousands) Goodwill $ 23,320,736 $ 24,813,274 Other intangible assets: Customer-related intangible assets $ 9,524,922 $ 9,694,083 Acquired technologies 2,863,731 2,962,154 Contract-based intangible assets 1,741,321 2,258,676 Trademarks and trade names 1,067,745 1,271,302 15,197,719 16,186,215 Less accumulated amortization: Customer-related intangible assets 3,155,838 2,587,586 Acquired technologies 1,692,762 1,367,513 Contract-based intangible assets 197,478 180,975 Trademarks and trade names 493,267 416,432 5,539,345 4,552,506 $ 9,658,374 $ 11,633,709 78 Table of Contents As of December 31, 2022, approximately $ 717.9 million of intangible assets have been classified as assets held for sale in connection with the presentation of the consumer and gaming businesses as held for sale. See “Note 3—Business Dispositions” for further discussion. The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the years ended December 31, 2022, 2021 and 2020 and has been recast to align with the change in the presentation of segment information as further described in “Note 17—Segment Information:” Merchant Solutions Issuer Solutions Consumer Solutions Total (in thousands) Balance at December 31, 2019 $ 13,415,352 $ 9,506,319 $ 838,069 $ 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 ) ( 39,318 ) 3,509 ( 37,171 ) Balance at December 31, 2020 13,548,690 9,481,183 841,578 23,871,451 Goodwill acquired 557,044 431,797 — 988,841 Effect of foreign currency translation ( 36,192 ) ( 4,826 ) — ( 41,018 ) Measurement-period adjustments ( 5,860 ) ( 140 ) — ( 6,000 ) Balance at December 31, 2021 14,063,682 9,908,014 841,578 24,813,274 Goodwill acquired 3,296 — — 3,296 Effect of foreign currency translation ( 66,251 ) ( 29,009 ) — ( 95,260 ) Goodwill derecognized in connection with the sale of a business (1) ( 17,719 ) — — ( 17,719 ) Impairment of goodwill (2) — — ( 833,075 ) ( 833,075 ) Reallocation of accumulated impairment losses due to change in reporting units (2) — ( 357,933 ) 357,933 — Reclassification of goodwill to assets held for sale (3) ( 163,105 ) — ( 366,436 ) ( 529,541 ) Measurement-period adjustments ( 2,958 ) ( 17,281 ) — ( 20,239 ) Balance at December 31, 2022 $ 13,816,945 $ 9,503,791 $ — $ 23,320,736 (1) Reflects goodwill derecognized in connection with the sale of our Merchant Solutions business in Russia. See “Note 3—Business Dispositions” for further discussion. (2) Reflects a goodwill impairment charge related to our former Business and Consumer Solutions reporting unit. In connection with the change in presentation of segment information, accumulated impairment losses associated with our former Business and Consumer Solutions reporting unit were reallocated to our new reporting units based on relative fair value. See "Note 1— Summary of Significant Accounting Policies" for further discussion. (3) Reflects the reclassification of goodwill in connection with the presentation of the consumer and gaming businesses as held for sale. See “Note 3—Business Dispositions” for further discussion. Accumulated impairment losses for goodwill as of December 31, 2022 were $ 833.1 million. There were no accumulated impairment losses for goodwill as of December 31, 2021. Customer-related intangible assets, acquired technologies, contract-based intangible assets, and trademarks and trade names acquired during the year ended December 31, 2021 had weighted-average amortization periods of 11.9 years, 6.0 years, 18.5 years, and 15.0 years, respectively. Customer-related intangible assets, acquired technologies and contract-based intangible assets acquired during the year ended December 31, 2020 had weighted-average amortization periods of 8.9 years, 5.0 years, and 9.8 years, respectively. Amortization expense of acquired intangibles was $ 1,263.0 million for the year ended 79 Table of Contents December 31, 2022, $ 1,295.0 million for the year ended December 31, 2021 and $ 1,256.9 million for the year ended December 31, 2020. The estimated amortization expense of acquired intangibles as of December 31, 2022 for the next five years, calculated using the currency exchange rate at the date of acquisition, if applicable, is as follows (in thousands): 2023 $ 1,210,371 2024 1,157,755 2025 1,092,260 2026 960,261 2027 744,011 NOTE 7— 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. 80 Table of Contents As of December 31, 2022 and 2021, right-of-use assets and lease liabilities consisted of the following: Balance Sheet Location (2) December 31, 2022 December 31, 2021 (in thousands) Assets: Operating lease right-of-use assets: Real estate Other noncurrent assets $ 336,993 $ 404,453 Computer equipment Other noncurrent assets 22,763 88,431 Other Other noncurrent assets 727 1,198 Total operating lease right-of-use-assets $ 360,483 $ 494,082 Finance lease right-of-use assets: Computer equipment Property and equipment, net $ 7,280 $ 24,720 Other equipment Property and equipment, net 53,410 55,953 Other Property and equipment, net 6,090 4,608 66,780 85,281 Less accumulated depreciation: Computer equipment Property and equipment, net ( 3,331 ) ( 11,107 ) Other equipment Property and equipment, net ( 29,052 ) ( 19,914 ) Other Property and equipment, net ( 2,884 ) ( 344 ) Total accumulated depreciation ( 35,267 ) ( 31,365 ) Total finance lease right-of-use assets 31,513 53,916 Total right-of-use assets (1) $ 391,996 $ 547,998 Liabilities: Operating lease liabilities (current) Accounts payable and accrued liabilities $ 80,208 $ 103,554 Operating lease liabilities (noncurrent) Other noncurrent liabilities 439,580 550,726 Finance lease liabilities (current) Current portion of long-term debt 12,883 19,905 Finance lease liabilities (noncurrent) Long-term debt 19,552 44,516 Total lease liabilities $ 552,223 $ 718,701 (1) As of December 31, 2022 and 2021, approximately 73 % and 75 % of our right-of-use assets were located in the United States. (2) As of December 31, 2022, operating lease assets and liabilities of approximately $ 4.9 million and $ 5.0 million have been classified as assets held for sale in connection with the presentation of the consumer and gaming businesses as held for sale. See “Note 3—Business Dispositions” for further discussion. The weighted-average remaining lease term for operating and finance leases at December 31, 2022 was 8.8 years and 2.7 years, respectively. The weighted-average remaining lease term for operating and finance leases at December 31, 2021 was 8.4 years and 3.2 years, respectively. As of December 31, 2022, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 3.3 % and 3.4 %, respectively. As of December 31, 2021, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 3.2 % and 3.2 %, respectively. 81 Table of Contents As of December 31, 2022, maturities of lease liabilities were as follows: Operating Leases Finance Leases (in thousands) Year ending December 31, 2023 $ 95,127 $ 13,729 2024 88,931 11,522 2025 73,424 6,269 2026 63,463 1,820 2027 47,605 473 2028 and thereafter 243,059 — Total lease payments (1) 611,609 33,813 Imputed interest ( 91,821 ) ( 1,378 ) Total lease liabilities $ 519,788 $ 32,435 (1) Total operating lease payments do not include approximately $ 4.3 million for operating leases that had not yet commenced at December 31, 2022. Operating lease costs in our consolidated statement of income for the year ended December 31, 2022 were $ 137.8 million, including $ 105.7 million in selling, general and administrative expenses and $ 32.1 million in cost of services. Total lease costs for the year ended December 31, 2022 include variable lease costs of $ 21.0 million, which are primarily comprised of the cost of property taxes, insurance and maintenance. Finance lease costs for the year ended December 31, 2022 were $ 18.1 million, including $ 16.7 million of amortization on right-of use assets and $ 1.4 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, 2022 . Operating lease costs in our consolidated statement of income for the year ended December 31, 2021 were $ 195.6 million, including $ 157.4 million in selling, general and administrative expenses and $ 38.2 million in cost of services. Total lease costs for the year ended December 31, 2021 include variable lease costs of $ 18.1 million, which are primarily comprised of the cost of property taxes, insurance and maintenance. Finance lease costs for the year ended December 31, 2021 wer e $ 20.5 million, including $ 18.4 million of amortization on right-of use assets and $ 2.2 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, 2021. Operating lease costs in our consolidated statement of income for the year ended December 31, 2020 were $ 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 $ 17.9 million, which are primarily comprised of the cost of property taxes, insurance and maintenance. F inance lease costs for the year ended December 31, 2020 were $ 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. 82 Table of Contents Opportunities were identified during the years ended December 31, 2022 and 2021 to reduce our facility footprint in certain markets around the world. In conjunction with the actions taken to exit certain leased facilities, we assessed the respective asset groups for impairment by comparing the carrying amount of the assets associated with the leased facilities to the discounted cash flows from estimated sublease payments. As a result, we recognized charges of $ 22.9 million and $ 42.1 million in selling, general and administrative expenses in our consolidated statement of income for the years ended December 31, 2022 and 2021, respectively. Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2022, 2021 and 2020 w as $ 120.7 million , $ 123.6 million and $ 117.7 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 $ 25.8 million, $ 200.1 million and $ 158.6 million for the years ended December 31, 2022, 2021 and 2020, 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 $ 21.2 million, $ 22.6 million and $ 11.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Finance lease liabilities arising from obtaining new or modified right-of-use assets, net of reductions resulting from certain lease modifications, were $ 8.2 million, $ 7.9 million and $ 51.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. In connection with acquisitions completed during the year ended December 31, 2021, we acquired right-of-use assets and assumed lease liabilities for operating and finance leases of $ 8.8 million and $ 5.8 million, respectively. During the year ended December 31, 2022, we entered into a new agreement to acquire hardware, software and related services, including the purchase of certain assets previously leased. The reduction in operating and finance lease liabilities arising from the termination of the related right-of-use assets was $ 44.2 million and $ 9.7 million, respectively. NOTE 8 - OTHER ASSETS Visa Preferred Shares 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). In connection with the first and second mandatory release assessment, a portion of the Series B and C convertible preferred shares was converted by Visa in September 2020 and July 2022 representing approximately one half and one quarter, respectively, of the original potential conversion rate. We recognized gains of $ 27.7 million and $ 13.2 million during the years ended December 31, 2020 and 2022, respectively, reported in interest and other income in our consolidated statement of income based on the fair value of the shares received. The shares received were subsequently sold, and the remaining Series B and C convertible preferred shares continue to be carried at an assigned value of zero based on the aforementioned factors. 83 Table of Contents NOTE 9— LONG-TERM DEBT AND LINES OF CREDIT As of December 31, 2022 and 2021, long-term debt consisted of the following: December 31, 2022 December 31, 2021 (in thousands) Long-term Debt 3.750 % senior notes due June 1, 2023 $ 552,113 $ 557,186 4.000 % senior notes due June 1, 2023 552,747 559,338 1.500 % senior notes due November 15, 2024 498,164 497,185 2.650 % senior notes due February 15, 2025 996,485 994,797 1.200 % senior notes due March 1, 2026 1,093,932 1,092,016 4.800 % senior notes due April 1, 2026 786,724 798,024 2.150 % senior notes due January 15, 2027 744,945 743,695 4.950 % senior notes due August 15, 2027 495,463 — 4.450 % senior notes due June 1, 2028 473,800 478,194 3.200 % senior notes due August 15, 2029 1,239,588 1,238,006 5.300 % senior notes due August 15, 2029 495,362 — 2.900 % senior notes due May 15, 2030 991,367 990,196 2.900 % senior notes due November 15, 2031 742,555 741,716 5.400 % senior notes due August 15, 2032 742,085 — 4.150 % senior notes due August 15, 2049 740,503 740,146 5.950 % senior notes due August 15, 2052 738,177 — 1.000 % convertible notes due August 15, 2029 1,445,225 — Unsecured term loan facility (outstanding under our Prior Credit Facility) — 1,989,793 Unsecured revolving credit facility — — Finance lease liabilities 32,435 64,421 Other borrowings 96,908 8,601 Total long-term debt 13,458,578 11,493,314 Less current portion 1,169,330 78,505 Long-term debt, excluding current portion $ 12,289,248 $ 11,414,809 The carrying amounts of our senior notes, convertible notes and unsecured term loan facility in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At December 31, 2022, the unamortized discount on senior notes and convertible notes was $ 50.8 million, and unamortized debt issuance costs on senior notes and convertible notes was $ 85.4 million. At December 31, 2021, the unamortized discount on senior notes was $ 11.7 million, and unamortized debt issuance costs on our senior notes and the unsecured term loan facility were $ 60.7 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At December 31, 2022, unamortized debt issuance costs on the unsecured revolving credit facility were $ 23.5 million, and, at December 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 9.9 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 $ 20.5 million, $ 14.4 million and $ 12.0 million, respectively, for years ended December 31, 2022, 2021 and 2020. 84 Table of Contents At December 31, 2022, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands): Year ending December 31, 2023 $ 1,151,564 2024 545,321 2025 1,000,000 2026 1,850,000 2027 1,250,000 2028 and thereafter 7,700,000 Total $ 13,496,885 See "Note 7—Leases" for more information about our finance lease liabilities, including maturities. Senior Notes We have $ 11.9 billion in aggregate principal amount of senior unsecured notes outstanding, as presented in the table above, which are comprised of senior notes issued in 2022, 2021, 2020 and 2019, and senior notes assumed in our merger with Total System Services, Inc. ("TSYS") in September 2019 (the "TSYS Merger"). 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 August 22, 2022, we issued $ 2.5 billion aggregate principal amount of senior unsecured notes consisting of the following: (i) $ 500.0 million aggregate principal amount of 4.950 % senior notes due August 2027; (ii) $ 500.0 million aggregate principal amount of 5.300 % senior notes due August 2029; (iii) $ 750.0 million aggregate principal amount of 5.400 % senior notes due August 2032; and (iv) $ 750.0 million aggregate principal amount of 5.950 % senior notes due August 2052. We issued the senior notes at a total discount of $ 5.2 million, and we incurred debt issuance costs of $ 24.8 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, 2022. Interest on the senior unsecured notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing February 15, 2023. The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our other outstanding unsecured and unsubordinated indebtedness. The net proceeds from the offering have been or will used to refinance the outstanding indebtedness under our credit facility, to make cash payments and pay transaction fees and expenses in connection with the pending acquisition of EVO, to refinance certain outstanding indebtedness of EVO in connection with the acquisition and for general corporate purposes. In the event that the EVO acquisition is not consummated, we will be required to redeem the notes due 2027 and 2029 at a redemption price equal to 101 % of the principal amount of the notes due 2027 and 2029 then outstanding plus accrued and unpaid interest, if any. On November 22, 2021, we issued $ 2.0 billion aggregate principal amount of senior unsecured notes consisting of the following: (i) $ 500.0 million aggregate principal amount of 1.500 % senior notes due November 2024; (ii) $ 750.0 million aggregate principal amount of 2.150 % senior notes due January 2027; and (iii) $ 750.0 million aggregate principal amount of 2.900 % senior notes due November 2031. We incurred debt issuance costs of approximately $ 14.4 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, 2022. Interest on the senior unsecured notes is payable semi-annually in arrears on May 15 and November 15 for the 2024 and 2031 notes and January 15 and July 15 on the 2027 note, commencing May 15, 2022 for the 2024 note and the 2031 note and July 15, 2022 for the 2027 note. 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 the outstanding indebtedness under our prior credit facility and for general corporate purposes. On February 26, 2021, we issued $ 1.1 billion aggregate principal amount of 1.200 % senior unsecured notes due March 2026. We incurred debt issuance costs of approximately $ 8.6 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, 2022. Interest on the notes is payable semi-annually in arrears on March 1 and 85 Table of Contents September 1 of each year, commencing September 1, 2021. 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 this offering to fund the redemption in full of the 3.800 % senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our prior credit facility and for general corporate purposes. On May 15, 2020, we issued $ 1.0 billion 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, 2022. 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 prior credit facility and for general corporate purposes. On August 14, 2019, we issued $ 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. In addition, in connection with the TSYS 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, which were redeemed in February 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 TSYS Merger is recognized over the terms of the respective notes as a reduction of interest expense. The amortization of this fair value adjustment was $ 27.4 million, $ 29.6 million and 36.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Convertible Notes On August 8, 2022, we issued $ 1.5 billion in aggregate principal amount of 1.000 % convertible unsecured senior notes (the "Convertible Notes”) due August 2029 in a private placement pursuant to an investment agreement with Silver Lake Partners. The net proceeds from this offering were approximately $ 1.44 billion, reflecting an issuance discount of $ 37.5 million and $ 20.4 million of debt issuance costs, which were capitalized and reflected as a reduction of the related carrying amount of the Convertible Notes in our consolidated balance sheet at December 31, 2022. Interest on the Convertible Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023, to the holders of record on the preceding February 1 and August 1, respectively. The Convertible Notes are convertible at the option of the holder at any time after the date that is 18 months after issuance (or earlier, upon the occurrence of certain corporate events) until the scheduled trading day prior to the maturity date. The Convertible Notes are convertible into cash and shares of our common stock based on an initial conversion rate of 7.1089 shares of common stock per $1,000 principal amount of the Convertible Notes (which is equal to an initial conversion price of approximately $ 140.67 per share), subject to customary anti-dilution and other adjustments upon the occurrence of certain events. Upon conversion, the principal amount of, and interest due on, the Convertible Notes are required to be settled in cash and any other amounts may be settled in shares, cash or a combination of shares and cash at our election. The Convertible Notes are not redeemable by us. If certain corporate events that constitute a fundamental change (as defined in the indenture governing the Convertible Notes) occur, any holder of the Convertible Notes may require that we 86 Table of Contents repurchase all or any portion of their notes for cash at a purchase price of par plus accrued and unpaid interest to, but excluding, the repurchase date. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture governing the Convertible Notes) occur, then the conversion rate will in certain circumstances be increased for a specified period of time. The Convertible Notes include customary covenants for convertible notes of this type, as well as customary events of default, which may result in the acceleration of the maturity of the Convertible Notes. On August 8, 2022, in connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call transactions with certain financial institutions to cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Notes. The economic effect of the capped call transactions is to hedge the potential dilutive effect upon conversion of the Convertible Notes, or offset our cash obligation if the cash settlement option is elected, up to a cap price determined based on a hedging period that commenced on August 9, 2022 and concluded on August 25, 2022. The capped call has an initial strike price of $ 140.67 per share and a cap price of $ 229.26 per share. The capped call transactions meet the accounting criteria to be reflected in stockholders’ equity and not accounted for as derivatives. The cost of $ 302.4 million incurred in connection with the capped call transactions was recorded as a reduction to paid-in-capital in our consolidated balance sheet at December 31, 2022, net of applicable income taxes. New Credit Facility On August 19, 2022, we entered into a credit agreement (the “Revolving Credit Agreement”) with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents. The Revolving Credit Agreement provides for an unsubordinated unsecured $ 5.75 billion revolving credit facility (the “Revolving Credit Facility”). We capitalized debt issuance costs of $ 12.3 million in connection with the issuances under the Revolving Credit Facility. The Revolving Credit Facility matures in August 2027. Borrowings under the Revolving Credit Facility may be repaid prior to maturity without premium or penalty, subject to payment of certain customary expenses of lenders and customary notice provisions. Borrowings under the Revolving Credit Facility will be available to be made in US dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option. Borrowings under the Revolving Credit Facility will bear interest, at our option, at a rate equal to (i) for Secured Overnight Financing Rate ("SOFR") based currencies or certain alternative currencies, a secured overnight financing rate (subject to a 0.00 % floor) plus a 0.10 % credit spread adjustment or an alternative currency term rate (subject to a 0.00 % floor), as applicable, (ii) for US dollar borrowings, a base rate, (iii) for US dollar borrowings, a daily floating secured overnight financing rate (subject to a 0.00 % floor on or after January 1, 2023) plus a 0.10 % credit spread adjustment or (iv) for certain alternative currencies, a daily alternative currency rate (subject to a 0.00 % floor), in each case, plus an applicable margin. The applicable margin for borrowings under the Revolving Credit Facility will range from 1.125 % to 1.875 % depending on our credit rating and is initially 1.375 %. 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. 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, 2022, there were no borrowing outstanding under the Revolving Credit Facility, and the total available commitments under the Revolving Credit Facility were $ 2.4 billion. Prior Credit Facility Prior to the Revolving Credit Facility, 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 (as amended from time to time, the “Prior Credit Facility”). The Prior Credit Facility provided for a senior unsecured $ 2.0 billion term loan facility and a senior unsecured $ 3.0 billion revolving credit facility. In August 2022, all borrowings outstanding and other amounts due under the Prior Credit Facility were repaid and the Prior Credit Facility was terminated. 87 Table of Contents Bridge Facility On August 1, 2022, in connection with our entry into the EVO merger agreement, we obtained commitments for a $ 4.3 billion, 364-day senior unsecured bridge facility (the "Bridge Facility"). Upon the execution of permanent financing, including the issuance of our senior unsecured notes and entry into the Revolving Credit Facility described above, the aggregate commitments under the Bridge Facility were reduced to zero and terminated. For the year ended December 31, 2022, we recognized expense of $ 17.3 million related to commitment fees associated with the Bridge Facility, which was presented within interest expense in our consolidated statement of income. Fair Value of Long-Term Debt As of December 31, 2022, our senior notes had a total carrying amount of $ 11.9 billion and an estimated fair value of $ 10.7 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. As of December 31, 2022, our Convertible Notes had a total carrying amount of $ 1.4 billion and an estimated fair value of $ 1.4 billion. The estimated fair value of our Convertible Notes was based on a lattice pricing model and is considered to be a Level 3 measurement of the valuation hierarchy. The fair value of other long-term debt approximated its carrying amount at December 31, 2022. Compliance with Covenants The Convertible Notes include customary covenants and events of default for convertible notes of this type. The Revolving Credit Agreement contains customary affirmative covenants and restrictive covenants, including, among others, financial covenants based on net leverage and interest coverage ratios, and customary events of default. As of December 31, 2022, financial covenants under the Revolving Credit Agreement required a leverage ratio of 3.75 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, 2022. 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, 2022 and 2021, a total of $ 81.9 million and $ 76.3 million, respectively, of cash on deposit was used to determine the available credit. As of December 31, 2022, we had $ 747.1 million outstanding under these lines of credit with additional capacity to fund settlement of $ 1,654.5 million. During the year ended December 31, 2022, the maximum and average outstanding balances under these lines of credit were $ 1,084.6 million and $ 477.5 million, respectively. The weighted-average interest rate on these borrowings was 4.97 % at December 31, 2022. Commercial Paper In January 2023, we established a $ 2.0 billion commercial paper program pursuant to which we may issue senior unsecured commercial paper ("Commercial Paper") with maturities of up to 397 days from the date of issue. The program is backstopped by our Revolving Credit Agreement, in that the amount of commercial paper outstanding cannot exceed the undrawn portion on the Revolving Credit Facility. Commercial Paper is expected to be issued at a discount from par, but may also bear interest, each at commercial paper market rates. The proceeds from issuances of Commercial Paper are expected to be used for general corporate purposes but may also be used for acquisitions, to pay dividends or for debt refinancing or other purposes. 88 Table of Contents Derivative Instruments We had previously entered into 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 were reflected as adjustments to interest expense. Since we had designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value were recorded as components of other comprehensive income (loss). The fair values of our interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy. In August 2022, in connection with entry into the Revolving Credit Agreement and repayment of amounts outstanding under the Prior Credit Facility, we terminated and settled our existing interest rate swap agreements. The termination resulted in the recognition of a net gain of $ 1.2 million, including the reclassification of $ 0.5 million of accumulated losses from the separate component of equity. The net gain was presented in interest expense in our consolidated statement of income for the year ended December 31, 2022. As of December 31, 2021, accounts payable and accrued liabilities included $ 28.8 million related to the interest rate swaps. 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. 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 table below presents the effects of our interest rate swaps on the consolidated statements of income and statements of comprehensive income for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, 2022 2021 2020 (in thousands) Net unrealized gains (losses) recognized in other comprehensive loss $ 12,915 $ 3,425 $ ( 52,742 ) Net unrealized losses reclassified out of other comprehensive loss to interest expense $ 21,327 $ 40,094 $ 36,510 As of December 31, 2022, the amount of net unrealized losses in accumulated other comprehensive loss related to our forward-starting interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was approximately $ 5.5 million. Interest Expense Interest expense was $ 437.0 million, $ 328.0 million and $ 326.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. 89 Table of Contents NOTE 10— ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As of December 31, 2022 and 2021, accounts payable and accrued liabilities consisted of the following: 2022 2021 (in thousands) Funds held for customers $ 768,227 $ 775,852 Trade accounts payable 229,436 262,014 Contract liabilities 226,254 227,783 Payment network fees 210,347 187,665 Compensation and benefits 209,630 184,580 Interest 128,308 64,591 Third-party commissions 95,192 88,109 Operating lease liabilities 80,208 103,554 Income taxes payable 61,949 51,818 Miscellaneous taxes and withholdings 42,198 68,323 Unclaimed property 31,734 34,744 Audit and legal 28,548 82,108 Third-party processing fees 25,509 27,345 Current portion of accrued buyout liability (1) 16,116 22,204 Interest rate swap liabilities — 28,777 Other 288,904 332,789 $ 2,442,560 $ 2,542,256 (1) The noncurrent portion of accrued buyout liability of $ 45.4 million and $ 44.6 million is included in other noncurrent liabilities in the consolidated balance sheets as of December 31, 2022 and 2021, respectively. At December 31, 2021, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 14.5 million for employee termination benefits resulting from integration activities related to the TSYS Merger. During the years ended December 31, 2021 and 2020, we recognized charges for employee termination benefits of $ 43.4 million and $ 83.3 million, respectively, which included $ 1.2 million and $ 6.7 million, respectively, 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. Employee termination benefits from TSYS Merger-related integration activities were substantially complete as of December 31, 2021. There were no significant charges recognized during the year ended December 31, 2022 and no significant remaining obligations to be paid as of December 31, 2022. 90 Table of Contents NOTE 11— INCOME TAX The income tax expense for the years ended December 31, 2022, 2021 and 2020 consisted of the following: Years Ended December 31, 2022 2021 2020 (in thousands) Current income tax expense (benefit): Federal $ 277,120 $ 195,804 $ 124,176 State 68,120 58,772 35,840 Foreign 125,580 103,781 82,456 470,820 358,357 242,472 Deferred income tax expense (benefit): Federal ( 235,727 ) ( 178,666 ) ( 151,824 ) State ( 41,770 ) ( 18,500 ) ( 20,607 ) Foreign ( 26,629 ) 7,843 7,112 ( 304,126 ) ( 189,323 ) ( 165,319 ) $ 166,694 $ 169,034 $ 77,153 Income tax expense allocated to noncontrolling interests was $ 9.8 million, $ 6.8 million and $ 8.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. The following table presents income (loss) before income taxes for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, 2022 2021 2020 (in thousands) United States $ ( 189,030 ) $ 537,586 $ 194,190 Foreign 413,352 506,959 399,766 $ 224,322 $ 1,044,545 $ 593,956 Approximately $ 30.5 million of our undistributed foreign earnings are considered to be indefinitely reinvested outside the United States as of December 31, 2022. 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. 91 Table of Contents Our effective tax rates for the years ended December 31, 2022, 2021 and 2020 differ from the federal statutory rate for those periods as follows: Years Ended December 31, 2022 2021 2020 Federal U.S. statutory rate 21.0 % 21.0 % 21.0 % Goodwill impairment 78.0 — — Sale of Russian business 12.1 — — State income taxes, net of federal income tax benefit 9.0 3.4 0.7 Foreign inclusion, net of foreign tax credits 8.2 1.0 0.9 Nondeductible executive compensation 4.7 1.0 1.7 Share-based compensation expense 2.0 ( 0.2 ) ( 2.7 ) Foreign income taxes 1.4 0.3 0.6 Deemed royalty 1.2 — — Equity method investment partnership income 0.1 0.9 1.1 Valuation allowance ( 0.2 ) ( 1.7 ) ( 0.1 ) Uncertain tax positions ( 0.7 ) ( 0.3 ) 1.1 Foreign-derived intangible income deduction ( 12.4 ) ( 1.9 ) ( 2.8 ) Tax credits ( 19.5 ) ( 3.3 ) ( 5.2 ) Foreign interest income not subject to tax ( 29.9 ) ( 4.2 ) ( 4.2 ) Other ( 0.7 ) 0.2 0.9 Effective tax rate 74.3 % 16.2 % 13.0 % 92 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, 2022 and 2021 reflect the effect of temporary differences between the amounts of assets and liabilities for financial accounting and income tax purposes. As of December 31, 2022 and 2021, principal components of deferred tax items were as follows: 2022 2021 (in thousands) Deferred income tax assets: Research and development costs $ 148,023 $ — Foreign net operating loss carryforwards 129,882 104,499 Lease liabilities 106,884 130,328 Financial instruments 92,477 37,928 Credit carryforwards 48,930 49,875 Accrued expenses 44,819 42,839 Share-based compensation expense 41,344 36,086 Domestic net operating loss carryforwards 31,160 29,806 Other 68,258 42,945 711,777 474,306 Valuation allowance ( 110,043 ) ( 112,259 ) 601,734 362,047 Deferred tax liabilities: Acquired intangibles 2,376,564 2,580,489 Property and equipment 363,457 261,764 Partnership interests 145,776 136,022 Right-of-use assets 69,773 94,739 Other 36,669 70,343 2,992,239 3,143,357 Net deferred income tax liability $ 2,390,505 $ 2,781,310 The net deferred income taxes reflected in our consolidated balance sheets as of December 31, 2022 and 2021 are as follows: 2022 2021 (in thousands) Noncurrent deferred income tax asset $ ( 37,907 ) $ ( 12,117 ) Noncurrent deferred income tax liability 2,428,412 2,793,427 Net deferred income tax liability $ 2,390,505 $ 2,781,310 93 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, 2022, 2021 and 2020 are summarized below (in thousands): 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 ) Allowance for foreign net operating loss carryforwards 5,804 Allowance for foreign credit carryforwards 12,656 Allowance for state credit carryforwards ( 1,995 ) Allowance for domestic net operating loss carryforwards 3,807 Balance at December 31, 2021 ( 112,259 ) Allowance for foreign net operating loss carryforwards ( 122 ) Allowance for foreign credit carryforwards 60 Allowance for state credit carryforwards 2,282 Allowance for domestic net operating loss carryforwards ( 4 ) Balance at December 31, 2022 $ ( 110,043 ) The decrease in the valuation allowance for the year ended December 31, 2022 is primarily related to the utilization of state tax credit carryforwards. The decrease in the valuation allowance for the year ended December 31, 2021 is primarily related to the foreign net operating loss carryforwards and the foreign tax credit carryforwards which the Company determined are more likely than not to be realized. 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. Foreign net operating loss carryforwards of $ 129.2 million will expire between December 31, 2024 and December 31, 2040, if not utilized. Foreign net operating loss carryforwards of $ 0.7 million have indefinite carryforward periods. Domestic net operating loss carryforwards of $ 22.4 million and tax credit carryforwards of $ 48.2 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 December 31, 2013, 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, 2018. 94 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, 2022, 2021 and 2020 is as follows: Years Ended December 31, 2022 2021 2020 (in thousands) Balance at the beginning of the year $ 34,905 $ 39,408 $ 29,671 Additions related to acquisitions — 387 3,186 Reductions for income tax positions of prior years ( 8,301 ) ( 10,875 ) ( 5,408 ) Settlements with income tax authorities ( 3,245 ) ( 2,137 ) ( 909 ) Additions for income tax positions of prior years 911 2,289 7,968 Additions based on income tax positions related to the current year 7,045 5,833 4,900 Balance at the end of the year $ 31,315 $ 34,905 $ 39,408 As of December 31, 2022, the total amount of gross unrecognized income tax benefits that, if recognized, would affect the provision for income taxes is $ 29.8 million. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (the "IRA") into law. The IRA, among other things, implements a 15% corporate alternative minimum tax based on global adjusted financial statement income and a 1% excise tax on share repurchases, which shall take effect in tax years beginning after December 31, 2022. We are continuing to evaluate the provisions of the IRA, but we do not currently believe the IRA will have a material effect on our reported results, cash flows or financial position when it becomes effective. We expect to reflect the excise tax within equity as part of the repurchase price of common stock. NOTE 12— 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, 2022, 2021 and 2020: Years Ended December 31, 2022 2021 2020 (in thousands, except per share amounts) Number of shares repurchased and retired 23,266 15,169 3,304 Cost of shares repurchased, including commissions $ 2,929,814 $ 2,513,629 $ 633,948 Average cost per share $ 125.93 $ 165.72 $ 191.87 The share repurchase activity for the year ended December 31, 2021 included the repurchase of 2,491,161 shares at an average price of $ 200.71 per share under an ASR agreement we entered into on February 10, 2021 with a financial institution to repurchase an aggregate of $ 500 million of our common stock during the A SR program purchase period, which ended on March 31, 2021. As of December 31, 2022, the amount available under our share repurchase program was $ 1,089.9 million. On January 26, 2023, 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 January 26, 2023, our board of directors declared a cash dividend of $ 0.25 per share payable on March 31, 2023 to common shareholders of record on March 17, 2023. 95 Table of Contents NOTE 13— SHARE-BASED AWARDS AND OPTIONS We have granted nonqualified stock options, restricted stock and performance unit 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 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, 2022 2021 2020 (in thousands) Share-based compensation expense $ 163,261 $ 180,779 $ 148,792 Income tax benefit $ 38,059 $ 42,870 $ 33,530 Restricted Stock Restricted stock awards vest in approximately equal annual installments on each of the first three anniversaries of the grant date or, in some cases, in one installment on the third anniversary of the grant date, in either case subject to the holder's continued service on each applicable vesting date. 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. Our restricted stock agreements provide for accelerated vesting under certain conditions. Performance Units Certain of our executives have been granted performance-based restricted stock units ("performance units") that, after a performance period, may convert on a 1 -for-1 basis into shares of our common stock based upon the level of achievement of certain pre-established performance measures during the performance period and subject to the holders' continued service on the vesting date. 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. The performance periods generally range from one to three years . Performance units are converted into shares of common stock only after the Compensation Committee certifies the level of achievement against the performance measures. Our performance unit agreements provide for accelerated vesting under certain conditions. 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 . 96 Table of Contents The following table summarizes the changes in unvested restricted stock awards and performance units for the years ended December 31, 2022, 2021 and 2020: Shares Weighted-Average Grant-Date Fair Value (in thousands) 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 Granted 1,465 192.19 Vested ( 1,263 ) 154.06 Forfeited ( 108 ) 181.61 Unvested at December 31, 2021 1,640 184.90 Granted 1,496 137.51 Vested ( 756 ) 170.79 Forfeited ( 235 ) 164.06 Unvested at December 31, 2022 2,145 $ 159.04 The total fair value of restricted stock and performance units vested was $ 129.2 million, $ 194.6 million, and $ 107.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. For restricted stock and performance units, we recognized compensation expense of $ 151.5 million, $ 167.3 million, and $ 135.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. Compensation expense for the year ended December 31, 2021 included approximately $ 32.2 million related to the vesting of certain performance-based restricted stock units upon achievement of performance measures during the period. As of December 31, 2022, there was $ 196.3 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 1.9 years. 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, subject to the holder's continued service on each applicable vesting date. Our stock option agreements provide for accelerated vesting under certain conditions. 97 Table of Contents The following table summarizes changes in stock option activity for the years ended December 31, 2022, 2021 and 2020: Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) (years) (in millions) 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 Granted 112 196.06 Forfeited ( 1 ) 113.48 Exercised ( 192 ) 68.42 24.1 Outstanding at December 31, 2021 1,172 107.44 5.8 47.4 Granted 154 $ 136.02 Forfeited ( 89 ) $ 147.65 Exercised ( 98 ) $ 65.69 5.5 Outstanding at December 31, 2022 1,139 $ 111.75 5.4 $ 17.3 Options vested and exercisable at December 31, 2022 907 $ 98.76 4.5 $ 17.3 We recognized compensation expense for stock options of $ 6.4 million, $ 7.9 million and $ 8.4 million during the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, we had $ 7.4 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 1.8 years. The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2022, 2021 and 2020 was $ 48.88 , $ 65.99 and $ 54.85 , 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, 2022 2021 2020 Risk-free interest rate 1.87 % 0.59 % 1.24 % Expected volatility 40 % 40 % 30 % Dividend yield 0.56 % 0.44 % 0.39 % 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 was 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. 98 Table of Contents NOTE 14— SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow disclosures for the years ended December 31, 2022, 2021 and 2020 are as follows: Years Ended December 31, 2022 2021 2020 (in thousands) Income taxes paid, net of refunds $ 431,148 $ 295,534 $ 308,620 Interest paid $ 350,075 $ 335,481 $ 343,213 NOTE 15— 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, 2022, 2021 and 2020: Years Ended December 31, 2022 2021 2020 (in thousands) Net income attributable to noncontrolling interests $ 31,820 $ 22,404 $ 20,580 Foreign currency translation attributable to noncontrolling interests ( 13,301 ) ( 10,281 ) 14,643 Comprehensive income attributable to noncontrolling interests $ 18,519 $ 12,123 $ 35,223 During the year ended December 31, 2021, Global Payments and noncontrolling shareholders made contributions of $ 209.6 million and $ 70.0 million, respectively, to certain of our majority-owned subsidiaries based on each shareholder's proportionate ownership, primarily to fund acquisitions that closed in the fourth quarter of 2021. The contributions from the noncontrolling shareholders were recorded as an increase to noncontrolling interests in the consolidated balance sheet. In addition, we increased our controlling financial interest in one of our majority-owned subsidiaries from 51 % to 55 %, which resulted in a reallocation between equity attributable to noncontrolling interests and total equity attributable to Global Payments. During the year ended December 31, 2020, we paid € 493 million ($ 578.2 million equivalent) 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. 99 Table of Contents NOTE 16— 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, 2022, 2021 and 2020: Foreign Currency Translation Net Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss (in thousands) 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 (loss) income ( 68,814 ) 33,053 3,760 ( 32,001 ) Effect of change in ownership attributable to a noncontrolling interest 92 — — 92 Balance at December 31, 2021 ( 182,949 ) ( 48,490 ) ( 2,743 ) ( 234,182 ) Other comprehensive (loss) income ( 197,635 ) 26,070 ( 222 ) ( 171,787 ) Balance at December 31, 2022 $ ( 380,584 ) $ ( 22,420 ) $ ( 2,965 ) $ ( 405,969 ) Other comprehensive (loss) income attributable to noncontrolling interests, which relates only to foreign currency translation, was $( 13.3 ) million, $( 10.3 ) million and $ 14.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. NOTE 17— SEGMENT INFORMATION Information About Profit and Assets During 2022, as a result of the pending divestiture of our consumer business and changes in how our business is managed, we have realigned the businesses previously comprising our Business and Consumer Solutions segment to include the B2B portion within our Issuer Solutions segment and the consumer portion forming our new Consumer Solutions segment. Our three reportable segments now are: Merchant Solutions, Issuer Solutions and Consumer Solutions. The presentation of segment information for the years ended December 31, 2021 and 2020 has been recast to align with the segment presentation for the year ended December 31, 2022. Our payment technology solutions are similar around the world in that we enable our customers to accept card, check and digital-based payments. Through our Merchant Solutions segment, our offerings include, but are not limited to, authorization, settlement and funding services, customer support, chargeback resolution, terminal rental, sales and deployment, payment security services, consolidated billing 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 solutions and services, including specialty point-of-sale software, analytics and customer engagement, human capital management and payroll 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, accounts payable and electronic payment alternative solutions that support B2B 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. Additionally, our Issuer Solutions segment provides B2B payment 100 Table of Contents services and other financial service solutions marketed to corporations, including SaaS offerings that enable accounts payables automation, integrated payments, employer disbursement solutions, and virtual card capabilities. Through our 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. 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. Impairment of goodwill and gains or losses on business dispositions are not included in determining segment operating income. Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments are not allocated to the individual 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 was as follows: Years Ended December 31, 2022 2021 2020 (in thousands) Revenues (1) : Merchant Solutions $ 6,204,917 $ 5,665,557 $ 4,688,335 Issuer Solutions 2,245,623 2,165,747 2,061,372 Consumer Solutions 620,482 783,625 747,886 Intersegment eliminations ( 95,507 ) ( 91,167 ) ( 74,035 ) Consolidated revenues $ 8,975,515 $ 8,523,762 $ 7,423,558 Operating income (loss) (1) : Merchant Solutions $ 2,040,255 $ 1,725,990 $ 1,162,741 Issuer Solutions 356,215 333,355 298,389 Consumer Solutions 53,594 135,541 117,892 Corporate (2) ( 777,744 ) ( 836,010 ) ( 685,069 ) Impairment of goodwill (3) ( 833,075 ) — — Loss on business dispositions (4) ( 199,094 ) — — Consolidated operating income $ 640,151 $ 1,358,876 $ 893,953 Depreciation and amortization (1) : Merchant Solutions $ 981,297 $ 993,228 $ 948,798 Issuer Solutions 623,755 589,394 555,850 Consumer Solutions 35,773 76,018 87,169 Corporate 21,630 32,744 22,623 Consolidated depreciation and amortization $ 1,662,455 $ 1,691,384 $ 1,614,440 (1) Revenues, operating income (loss) and depreciation and amortization reflect the effects of acquired businesses from the respective acquisition dates and the effects of divested businesses through the respective disposal dates. See “Note 2—Acquisitions” and “Note 3—Business Dispositions” for further discussion. 101 Table of Contents (2) During the years ended December 31, 2022, 2021 and 2020, operating loss for Corporate included acquisition and integration expenses of $ 254.2 million, $ 335.5 million, and $ 313.0 million, respectively. During the years ended December 31, 2022 and 2021, operating loss for Corporate also included $ 47.1 million and $ 56.8 million, respectively, of other charges related to facilities exit activities. (3) During the year ended December 31, 2022, consolidated operating income included a $ 833.1 million goodwill impairment charge related to our former Business and Consumer Solutions reporting unit. See “Note 6—Goodwill and Other Intangible Assets” for further discussion. (4) During the year ended December 31, 2022, consolidated operating income included a $ 127.2 million loss on the sale of our Merchant Solutions business in Russia and a charge of $ 71.9 million to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell. Entity-Wide Information As a percentage of our total consolidated revenues, revenues from external customers in the United States were 80 % for the year ended December 31, 2022, 79 % for the year ended December 31, 2021, and 78 % for the year ended December 31, 2020. 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, 2022 and 2021 were as follows: 2022 2021 (in thousands) United States $ 1,313,290 $ 1,092,899 Foreign countries 525,519 594,687 $ 1,838,809 $ 1,687,586 NOTE 18— 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, 2022 for purchase obligations were as follows (in thousands): Year ending December 31: 2023 $ 507,321 2024 319,162 2025 261,541 2026 233,121 2027 210,648 2028 and thereafter 577,428 Total future minimum payments $ 2,109,221 During the year ended December 31, 2022, we entered into new agreements to acquire hardware, software and related services, of which $ 112.0 million was financed utilizing two-year supplier financing arrangements. One of the agreements included the purchase of certain assets previously leased. The reduction in operating and finance lease liabilities arising from the termination of the related right-of-use assets was $ 44.2 million and $ 9.7 million, respectively. 102 Table of Contents 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 supplier 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. 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. We are subject to ongoing audits in certain jurisdictions, and 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 In certain markets, we enter into sponsorship or depository and processing agreements with 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, 2022. 103 Table of Contents GLOBAL PAYMENTS INC. SCHEDULE II Valuation & Qualifying Accounts (in thousands) (a) (b) (c) (d) (e) Description 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, 2020 $ 9,380 $ 27,107 $ 15,879 $ 20,608 December 31, 2021 $ 20,608 $ 12,835 $ 16,054 $ 17,389 December 31, 2022 (3) $ 17,389 $ 14,951 $ 11,320 $ 21,020 Allowance for credit losses - settlement assets (1) December 31, 2020 $ 3,427 $ 16,915 $ 14,171 $ 6,171 December 31, 2021 $ 6,171 $ 3,553 $ 6,750 $ 2,974 December 31, 2022 $ 2,974 $ 12,984 $ 13,671 $ 2,287 Reserve for sales allowances December 31, 2020 $ 4,070 $ 14,511 $ 7,710 $ 10,871 December 31, 2021 $ 10,871 $ 16,881 $ 19,236 $ 8,516 December 31, 2022 $ 8,516 $ 24,517 $ 25,073 $ 7,960 Allowance for credit and operating losses - check guarantee December 31, 2020 $ 3,921 $ 10,092 $ 11,911 $ 2,102 December 31, 2021 $ 2,102 $ 10,160 $ 9,725 $ 2,536 December 31, 2022 (3) $ 2,536 $ 12,291 $ 11,383 $ 3,444 Reserve for contract contingencies and processing errors December 31, 2020 $ 4,216 $ 515 $ 1,142 $ 3,589 December 31, 2021 $ 3,589 $ 734 $ 2,986 $ 1,337 December 31, 2022 $ 1,337 $ 1,212 $ 972 $ 1,577 Reserve for cardholder losses December 31, 2020 $ 9,232 $ 61,847 $ 61,004 $ 10,075 December 31, 2021 $ 10,075 $ 62,751 $ 62,769 $ 10,058 December 31, 2022 (3) $ 10,058 $ 58,673 $ 58,541 $ 10,190 Deferred income tax asset valuation allowance December 31, 2020 $ 72,042 $ 60,489 $ — $ 132,531 December 31, 2021 $ 132,531 $ ( 20,272 ) $ — $ 112,259 December 31, 2022 $ 112,259 $ ( 2,216 ) $ — $ 110,043 (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. 104 Table of Contents (3) Includes certain amounts within our consumer and gaming business disposal groups that are presented as held for sale in the consolidated balance sheet as of December 31, 2022. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.