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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-13 compared with 2023-02-14 · 31 added, 1191 removed, 358 unchanged (77% of the section changed)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in factors such as interest rates and foreign currency exchange rates.

Our exposure to market risk from changes in interest rates and foreign exchange rates is limited.

Management monitors risk exposures on an ongoing basis and establishes and oversees the implementation of policies governing our funding, investments and use of derivative financial instruments to manage these risks.

Foreign currency and interest rate exposures are managed through our risk management activities, which are discussed further in Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.

Foreign Exchange Risk

We enter into foreign exchange derivative contracts to manage currency exposure associated with anticipated receipts and disbursements occurring in a currency other than the functional currency of the entity.

We may also enter into foreign currency derivative contracts to offset possible changes in value of assets and liabilities due to foreign exchange fluctuations.

The objective of these activities is to reduce our exposure to transaction gains and losses resulting from fluctuations of foreign currencies against our functional currencies, principally the U.S.

dollar and euro.

The effect of a hypothetical 10% adverse change in the value of the functional currencies could result in a fair value loss of approximately $94 million and $70 million on our foreign exchange derivative contracts outstanding at December 31, 2022 and 2021, respectively, before considering the offsetting effect of the underlying hedged activity.

We are also subject to foreign exchange risk as part of our daily settlement activities.

To manage this risk, we enter into short duration foreign exchange contracts based upon anticipated receipts and disbursements for the respective currency position.

To manage this risk, we enter into short duration foreign exchange derivative contracts based upon anticipated receipts and disbursements for the respective currency position.

This risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with our customers.

The effect of a hypothetical 10% adverse change in the value of the functional currencies would not have a material impact to the fair value of our short duration foreign exchange derivative contracts outstanding at December 31, 2022 and 2021, respectively.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A hypothetical 10% adverse change in the value of the functional currencies would not have a material impact to the fair value of our short duration foreign exchange derivative contracts outstanding at December 31, 2023 and 2022, respectively.

We are further exposed to foreign exchange rate risk related to translation of our net investment in foreign subsidiaries where the functional currency is different than our U.S.

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To manage this risk, we may enter into foreign exchange derivative contracts to hedge a portion of our net investment in foreign subsidiaries.

The effect of a hypothetical 10% adverse change in the value of the U.S.

dollar could result in a fair value loss of approximately $203 million and $165 million on our foreign exchange derivative contracts designated as a net investment hedge at December 31, 2022 and 2021, respectively, before considering the offsetting effect of the underlying hedged activity.

As of December 31, 2023, we did not have any foreign exchange derivative contracts designated as a net investment hedge.

As of December 31, 2022, the effect of a hypothetical 10% adverse change in the value of the U.S.

dollar could result in a fair value loss of approximately $203 million on our foreign exchange derivative contracts designated as a net investment hedge before considering the offsetting effect of the underlying hedged activity.

Interest Rate Risk

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To manage this risk, we may enter into interest rate derivative contracts to hedge a portion of our fixed-rate debt that is exposed to changes in fair value attributable to changes in a benchmark interest rate.

The effect of a hypothetical 100 basis point adverse change in interest rates could result in a fair value loss of approximately $36 million and $49 million on our interest rate derivative contracts designated as a fair value hedge of our fixed-rate debt at December 31, 2022 and 2021, respectively, before considering the offsetting effect of the underlying hedged activity.

The effect of a hypothetical 100 basis point adverse change in interest rates would not have a material impact to the fair value of our interest rate derivative contracts designated as a fair value hedge of our fixed-rate debt at December 31, 2023 and 2022, respectively, before considering the offsetting effect of the underlying hedged activity.

63 MASTERCARD 2023 FORM 10-K

139 unchanged sentences

Restricted cash for litigation settlement — 589

Restricted security deposits held for customers 1,845 1,568

Investments 592 400

1 unchanged sentence

Settlement assets 1,233 1,270

Restricted security deposits held for customers 1,568 1,873

Prepaid expenses and other current assets 2,643 2,346

26 unchanged sentences

Class B common stock, $ 0.0001 par value;

authorized 1,200 shares, 8 shares issued and outstanding

authorized 1,200 shares, 7 and 8 shares issued and outstanding, respectively

Additional paid-in-capital 5,893 5,298

23 unchanged sentences

Activity related to non-controlling interests — — — — — — — ( 9 ) ( 9 )

Acquisition of non-controlling interest — — ( 122 ) — — — ( 122 ) ( 17 ) ( 139 )

Redeemable non-controlling interest adjustments — — — — ( 5 ) — ( 5 ) — ( 5 )

6 unchanged sentences

Activity related to non-controlling interests — — — — — — — ( 13 ) ( 13 )

Acquisition of non-controlling interest — — ( 122 ) — — — ( 122 ) ( 17 ) ( 139 )

Redeemable non-controlling interest adjustments — — — — ( 3 ) — ( 3 ) — ( 3 )

34 unchanged sentences

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

Amortization of customer and merchant incentives 1,586 1,371 1,072

Amortization of customer incentives 1,622 1,586 1,371

Depreciation and amortization 799 750 726

27 unchanged sentences

Acquisition of businesses, net of cash acquired — ( 313 ) ( 4,436 )

Settlement of interest rate derivative contracts — — ( 175 )

Other investing activities ( 6 ) ( 3 ) 33

13 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 128 ( 103 ) ( 153 )

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents ( 706 ) ( 2,517 ) 3,450

Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents 1,269 ( 706 ) ( 2,517 )

Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period 9,196 9,902 12,419

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Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (“Mastercard International” and together with Mastercard Incorporated, “Mastercard” or the “Company”), is a technology company in the global payments industry.

Mastercard connects consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide by enabling electronic forms of payment instead of cash and checks and making those payment transactions safe, simple, smart and accessible.

Mastercard connects consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide by enabling electronic forms of payment and making those payment transactions safe, simple, smart and accessible.

The Company makes payments easier and more efficient by providing a wide range of payment solutions and services through its family of well-known and trusted brands, including Mastercard®, Maestro® and Cirrus®.

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Through its unique and proprietary core global payments network, the Company switches (authorizes, clears and settles) payment transactions.

The Company has additional payment capabilities that include automated clearing house (“ACH”) transactions (both batch and real-time account-based payments).

Using these capabilities, the Company offers integrated payment products and services and captures new payment flows.

The Company’s value-added services include, among others, cyber and intelligence solutions to allow all parties to transact easily and with confidence, as well as other services that provide proprietary insights, drawing on Mastercard’s principled use of secure consumer and merchant data.

The Company’s investments in new networks, such as open banking solutions and digital identity capabilities, support and strengthen our payments and services solutions.

The Company’s franchise model sets the standards and ground-rules for our core global payments network that balance value and risk across all stakeholders and allows for interoperability among them.

The Company’s payment solutions are designed to ensure safety and security for the global payments ecosystem.

The Company has additional payments capabilities that include automated clearing house (“ACH”) transactions (both batch and real-time account-based payments).

Using these capabilities, the Company offers payment products and services and captures new payment flows.

The Company’s value-added services include, among others, cyber and intelligence solutions designed to allow all parties to transact securely, easily and with confidence, as well as other services that provide proprietary insights, drawing on Mastercard’s principled and responsible use of secure consumer and merchant data.

The Company’s investments in new networks, such as open banking solutions and digital identity capabilities, support and strengthen payments and services solutions.

Each of the Company’s capabilities support and build upon each other and are fundamentally interdependent.

For the core global payments network, Mastercard’s franchise model sets the standards and ground-rules that balance value and risk across all stakeholders and allows for interoperability among them.

The Company employs a multi-layered approach to help protect the global payments ecosystem in which it operates.

Mastercard is not a financial institution.

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Intercompany transactions and balances have been eliminated in consolidation.

During 2022, the Company updated its disaggregated net revenue presentation by category and geography to reflect the nature of its payment services and to align such information with the way in which management will prospectively view its categories of net revenue.

Prior period amounts have been reclassified to conform to the 2023 presentation.

The reclassification had no impact on previously reported total net revenue, operating income or net income.

The reclassifications had no impact on previously reported total net revenue, operating income or net income.

The Company follows accounting principles generally accepted in the United States of America (“GAAP”).

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Changes in a parent’s ownership interest while the parent retains its controlling interest are accounted for as equity transactions, and upon loss of control, retained ownership interests are remeasured at fair value, with any gain or loss recognized in earnings.

For 2022, 2021 and 2020, net losses attributable to non-controlling interests were not material and, as a result, amounts are included on the consolidated statement of operations within other income (expense).

For 2023, 2022 and 2021, net income/(losses) attributable to non-controlling interests were not material and, as a result, amounts are included on the consolidated statement of operations within other income (expense).

Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

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Variable rebates and incentives are calculated based upon estimated customer performance, such as volume thresholds, and the terms of the related business agreements.

Contract assets include unbilled consideration typically resulting from executed data analytic and consulting services performed for customers in connection with Mastercard’s payments network service arrangements.

Certain of the Company’s contracts may include options to receive additional value-added services and solutions.

The Company accounts for the option as a distinct performance obligation if the option provides a material right to the customer.

Material rights are incremental to the standard offerings, which a customer would not have received without entering into the contract.

If a material right exists in a contract, revenue allocated to the option is deferred and recognized as revenue when those future products or services are transferred or when the option expires.

The value of the option is based on observable prices in the contract or on a relative standalone selling price (“SSP”) basis.

The SSP is the price at which the Company would sell a promised product or service separately in similar circumstances to similar customers.

Contract assets include unbilled consideration typically resulting from executed value-added services and solutions performed for customers in connection with Mastercard’s payments network service arrangements.

Collection for these services typically occurs over the contractual term.

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Goodwill represents the synergies expected to arise after the acquisition date and the assembled workforce.

Finite-lived intangible assets consist of capitalized software costs, customer relationships and other intangible assets.

Finite-lived intangible assets consist of capitalized software costs, other intangible assets acquired in business combinations (including customer relationships and acquired technology) and other intangible assets.

Intangible assets with finite useful lives are amortized over their estimated useful lives, on a straight-line basis, which range from one to twenty years .

Capitalized software includes internal and external costs incurred directly related to the design, development and testing phases of each capitalized software project, as well as technology acquired in business combinations.

Capitalized software includes internal and external costs incurred directly related to the design, development and testing phases of each capitalized software project.

The valuation methods for goodwill and other intangible assets acquired in business combinations involve assumptions concerning comparable company multiples, discount rates, growth projections and other assumptions of future business conditions.

The Company uses various valuation techniques to determine the fair value of its intangible assets, primarily discounted cash flows analysis, relief-from-royalty and multi-period excess earnings.

As the assumptions employed to measure these assets are based on management’s judgment using internal and external data, these fair value determinations are classified in Level 3 of the Valuation Hierarchy (as defined in Fair value subsection below).

Impairment of assets - Goodwill and indefinite-lived intangible assets are not amortized but tested annually for impairment at the reporting unit level in the fourth quarter, or sooner when circumstances indicate an impairment may exist.

The impairment evaluation for goodwill utilizes a qualitative assessment to determine whether it is more likely than not that goodwill is impaired.

The qualitative factors may include, but are not limited to, macroeconomic conditions, industry and market conditions, operating environment, financial performance and other relevant events.

If it is determined that it is more likely than not that goodwill is impaired, then the Company is required to perform a quantitative goodwill impairment test.

If the fair value of the reporting unit

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exceeds the carrying value, goodwill is not impaired.

If the fair value of the reporting unit is less than its carrying value, then goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment charge.

The impairment test for indefinite-lived intangible assets consists of a qualitative assessment to evaluate relevant events and circumstances that could affect the significant inputs used to determine the fair value of indefinite-lived intangible assets.

If the qualitative assessment indicates that it is more likely than not that indefinite-lived intangible assets are impaired, then a quantitative assessment is required.

Long-lived assets, other than goodwill and indefinite-lived intangible assets, are tested for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable.

If the carrying value of the asset cannot be recovered from estimated future cash flows, undiscounted and without interest, the fair value of the asset is calculated using the present value of estimated net future cash flows.

If the carrying amount of the asset exceeds its fair value, an impairment is recorded.

Impairment charges, if any, are recorded in general and administrative expenses on the consolidated statement of operations.

Litigation - The Company is a party to certain legal and regulatory proceedings with respect to a variety of matters.

The Company evaluates the likelihood of an unfavorable outcome of all legal or regulatory proceedings to which it is a party and accrues a loss contingency when the loss is probable and reasonably estimable.

Loss contingencies are recorded in provision for litigation on the consolidated statement of operations.

These judgments are subjective based on the status of the legal or regulatory proceedings, the merits of its defenses and consultation with in-house and external legal counsel.

Legal costs are expensed as incurred and recorded in general and administrative expenses on the consolidated statement of operations.

Settlement and other risk management - Mastercard’s rules guarantee the settlement of many of the transactions between its customers.

Settlement exposure is the outstanding settlement risk to customers under Mastercard’s rules due to the difference in timing between the payment transaction date and subsequent settlement.

For those transactions the Company guarantees, the guarantee will cover the full amount of the settlement obligation to the extent the settlement obligation is not otherwise satisfied.

Settlement is generally completed on a same-day basis, however, in some circumstances, funds may not settle until subsequent business days creating a short-term settlement exposure.

The Company also enters into agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company.

As the extent of the Company’s obligations under these agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable.

The Company accounts for each of its guarantees by recording the guarantee at its fair value at the inception or modification date through earnings.

Income taxes - The Company follows an asset and liability based approach in accounting for income taxes as required under GAAP.

Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences between the financial statement carrying amounts and income tax bases of assets and liabilities.

Deferred income taxes are displayed separately as noncurrent assets and liabilities on the consolidated balance sheet.

Valuation allowances are provided against assets which are not more likely than not to be realized.

The Company recognizes all material tax positions, including uncertain tax positions in which it is more likely than not that the position will be sustained based on its technical merits and if challenged by the relevant taxing authorities.

At each balance sheet date, unresolved uncertain tax positions are reassessed to determine whether subsequent developments require a change in the amount of recognized tax benefit.

The allowance for uncertain tax positions is recorded in other current and noncurrent liabilities on the consolidated balance sheet.

The Company records interest expense related to income tax matters as interest expense on the consolidated statement of operations.

The Company includes penalties related to income tax matters in the income tax provision.

Cash and cash equivalents - Cash and cash equivalents include certain investments with daily liquidity and with an original maturity of three months or less from the date of purchase.

Cash equivalents are recorded at cost, which approximates fair value.

Restricted cash - The Company classifies cash and cash equivalents as restricted when it is unavailable for withdrawal or use in its general operations.

The Company has the following types of restricted cash and restricted cash equivalents which are included in the reconciliation of beginning-of-period and end-of-period amounts shown on the consolidated statement of cash flows:

• Restricted cash for litigation settlement - The Company has restricted cash for litigation within a qualified settlement fund related to the settlement agreement for the U.S.

merchant class litigation.

The funds continue to be restricted for payments until the litigation matter is resolved.

• Restricted security deposits held for customers - The Company requires certain customers to enter into risk mitigation arrangements, including cash collateral and/or other forms of credit enhancement such as letters of credit and guarantees, for settlement of their transactions.

Certain risk mitigation arrangements for settlement, such as standby letters of credit and bank

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guarantees, are not recorded on the consolidated balance sheet.

The Company also holds cash deposits and certificates of deposit from certain customers as collateral for settlement of their transactions, which are recorded as assets on the consolidated balance sheet.

These assets are fully offset by corresponding liabilities included on the consolidated balance sheet.

The amount of these security deposits and the duration held are determined by the risk profile of the individual customer and the Company’s risk management practices.

• Other restricted cash balances - The Company has other restricted cash balances which include contractually restricted deposits, as well as cash balances that are restricted based on the Company’s intention with regard to usage.

These funds are classified on the consolidated balance sheet within prepaid expenses and other current assets and other assets.

Fair value - The Company measures certain financial assets and liabilities at fair value on a recurring basis by estimating the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.

The Company also measures certain financial and non-financial assets and liabilities at fair value on a nonrecurring basis, when a change in fair value or impairment is evidenced.

The Company classifies these recurring and nonrecurring fair value measurements into a three-level hierarchy (“Valuation Hierarchy”).

The Valuation Hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

A financial instrument’s categorization within the Valuation Hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of the Valuation Hierarchy are as follows:

• Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets and inputs that are observable for the asset or liability.

• Level 3 - inputs to the valuation methodology are unobservable and cannot be directly corroborated by observable market data.

The Company’s financial assets and liabilities measured at fair value on a recurring basis include investment securities available for sale, marketable securities, derivative instruments and deferred compensation.

The Company’s financial assets and liabilities measured at fair value on a nonrecurring basis include nonmarketable securities, debt and other financial instruments.

The Company’s non-financial assets measured at fair value on a nonrecurring basis include property, equipment and right-of-use assets, goodwill and other intangible assets and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Contingent consideration - Certain business combinations involve the potential for future payment of consideration that is contingent upon the achievement of performance milestones.

These liabilities are classified within Level 3 of the Valuation Hierarchy as the inputs used to measure fair value are unobservable and require management’s judgment.

The fair value of the contingent consideration at the acquisition date and subsequent periods is determined utilizing an income approach based on a Monte Carlo technique and is recorded in other current liabilities and other liabilities on the consolidated balance sheet.

Changes to projected performance milestones of the acquired businesses could result in a higher or lower contingent consideration liability.

The changes in fair value as a result of updated assumptions are recorded in general and administrative expenses on the consolidated statement of operations.

Investment securities - The Company classifies investments as available-for-sale or held-to-maturity at the date of acquisition.

• Available-for-sale debt securities:

◦ Investments in debt securities that are available to meet the Company’s current operational needs are classified as current assets and the securities that are not available for current operational needs are classified as noncurrent assets on the consolidated balance sheet.

The debt securities are carried at fair value, with unrealized gains and losses, net of tax, recorded as a separate component of accumulated other comprehensive income (loss) on the consolidated statement of comprehensive income.

Net realized gains and losses on debt securities are recognized in investment income on the consolidated statement of operations.

The specific identification method is used to determine realized gains and losses.

The Company evaluates its debt securities for impairment on an ongoing basis.

When there has been a decline in fair value of a debt security below the amortized cost basis, the Company recognizes an impairment if:

(1) it has the intent to sell the security;

(2) it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis;

or (3) it does not expect to recover the entire amortized cost basis of the security.

The credit loss component of the impairment is recognized as an allowance and recorded in other income (expense), net on the consolidated statement of operations while the non-credit related loss remains in accumulated other comprehensive income (loss) until realized from a sale or subsequent impairment.

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• Held-to-maturity securities:

◦ Time deposits - The Company classifies time deposits with original maturities greater than three months as held-to-maturity.

Held-to-maturity securities that mature within one year are classified as current assets within investments on the consolidated balance sheet while held-to-maturity securities with maturities of greater than one year are classified as other assets.

Time deposits are carried at amortized cost on the consolidated balance sheet and are intended to be held until maturity.

Equity investments - The Company holds equity securities of publicly traded and privately held companies.

• Marketable equity securities - Marketable equity securities are strategic investments in publicly traded companies and are measured at fair value using quoted prices in their respective active markets with changes recorded through gains (losses) on equity investments, net on the consolidated statement of operations.

Marketable equity securities that are expected to be held as part of the Company’s long-term investment strategy are classified in other assets on the consolidated balance sheet.

• Nonmarketable equity investments - The Company’s nonmarketable equity investments, which are reported in other assets on the consolidated balance sheet, include investments in privately held companies without readily determinable market values.

The Company uses discounted cash flows and market assumptions to estimate the fair value of its nonmarketable equity investments when certain events or circumstances indicate that impairment may exist.

The Company’s nonmarketable equity investments are accounted for under the measurement alternative method or equity method.

◦ Measurement alternative method - The Company accounts for investments in common stock or in-substance common stock under the measurement alternative method of accounting when it does not exercise significant influence, generally when it holds less than 20 % ownership in the entity or when the interest in a limited partnership or limited liability company is less than 5 % and the Company has no significant influence over the operations of the investee.

Investments in companies that Mastercard does not control, but that are not in the form of common stock or in-substance common stock, are also accounted for under the measurement alternative method of accounting.

Measurement alternative investments are measured at cost, less any impairment and adjusted for changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Fair value adjustments, as well as impairments, are included in gains (losses) on equity investments, net on the consolidated statement of operations.

◦ Equity method - The Company accounts for investments in common stock or in-substance common stock under the equity method of accounting when it has the ability to exercise significant influence over the operations of the investee, generally when it holds between 20% and 50% ownership in the entity.

The excess of the cost over the underlying net equity of investments accounted for under the equity method is allocated to identifiable tangible and intangible assets and liabilities based on fair values at the date of acquisition.

The amortization of the excess of the cost over the underlying net equity of investments and Mastercard’s share of net earnings or losses of entities accounted for under the equity method of accounting is included in other income (expense), net on the consolidated statement of operations.

In addition, investments in flow-through entities such as limited partnerships and limited liability companies are also accounted for under the equity method when the Company has the ability to exercise significant influence over the operations of the investee, generally when the investment ownership percentage is equal to or greater than 5% of the outstanding ownership interest.

The Company’s share of net earnings or losses for these investments are included in gains (losses) on equity investments, net on the consolidated statement of operations.

Derivative and hedging instruments - The Company’s derivative financial instruments are recorded as either assets or liabilities on the balance sheet and measured at fair value.

The Company’s foreign exchange and interest rate derivative contracts are included in Level 2 of the Valuation Hierarchy as the fair value of the contracts are based on inputs, which are observable based on broker quotes for the same or similar instruments.

The Company does not enter into derivative instruments for trading or speculative purposes.

For derivatives that are not designated as hedging instruments, realized and unrealized gains and losses from the change in fair value of the derivatives are recognized in current earnings.

The Company’s derivatives that are designated as hedging instruments are required to meet established accounting criteria.

In addition, an effectiveness assessment is required to demonstrate that the derivative is expected to be highly effective at offsetting changes in fair value or cash flows of the underlying exposure both at inception of the hedging relationship and on an ongoing basis.

The method of assessing hedge effectiveness and measuring hedge results is formally documented at hedge inception and assessed at least quarterly throughout the designated hedge period.

The Company may designate derivative instruments as cash flow, fair value and net investment hedges, as follows:

• Cash flow hedges - Fair value adjustments to derivative instruments are recorded, net of tax, in other comprehensive income (loss) on the consolidated statement of comprehensive income.

Any gains and losses deferred in accumulated other

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comprehensive income (loss) are subsequently reclassified to the corresponding line item on the consolidated statement of operations when the underlying hedged transactions impact earnings.

For hedges that are no longer deemed highly effective, hedge accounting is discontinued prospectively, and any gains and losses remaining in accumulated other comprehensive income (loss) are reclassified to earnings when the underlying forecasted transaction occurs.

If it is probable that the forecasted transaction will no longer occur, the associated gains or losses in accumulated other comprehensive income (loss) are reclassified to the corresponding line item on the consolidated statement of operations in current earnings.

• Fair value hedges - Changes in the fair value of derivative instruments are recorded in current-period earnings, along with the gain or loss on the hedged asset or liability (“hedged item”) that is attributable to the hedged risk.

All amounts recognized in earnings are recorded to the corresponding line item on the consolidated statement of operations as the earnings effect of the hedged item.

Hedged items are measured on the consolidated balance sheet at their carrying amount adjusted for any changes in fair value attributable to the hedged risk (“basis adjustments”).

The Company defers the amortization of any basis adjustments until the end of the derivative instrument’s term.

If the hedge designation is discontinued for reasons other than derecognition of the hedged item, the remaining basis adjustments are amortized in accordance with applicable GAAP for the hedged item.

• Net investment hedges - The Company has numerous investments in foreign subsidiaries.

The net assets of these subsidiaries are exposed to volatility in foreign currency exchange rates.

The Company may use foreign currency denominated debt and/or derivative instruments to hedge a portion of its net investment in foreign operations against adverse movements in exchange rates.

The effective portion of the foreign currency gains and losses related to the hedging instruments are reported in accumulated other comprehensive income (loss) on the consolidated balance sheet as a cumulative translation adjustment component of equity.

Gains and losses in accumulated other comprehensive income (loss) are reclassified to earnings only if the Company sells or substantially liquidates its net investments in foreign subsidiaries.

Amounts excluded from effectiveness testing of net investment hedges are recognized in earnings over the life of the hedging instrument.

The Company evaluates the effectiveness of the net investment hedge each quarter.

Settlement assets/obligations - The Company operates systems for settling payment transactions among participants in the payments ecosystem in which the Company operates.

Settlement is generally completed on a same-day basis, however, in some circumstances, funds may not settle until subsequent business days.

In addition, the Company may receive or post funds in advance of transactions related to certain payment capabilities over its multi-rail payments network.

The Company classifies the balances arising from these various activities as settlement assets and settlement obligations.

Property, equipment and right-of-use assets - Property and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets.

Depreciation of leasehold improvements and amortization of finance leases is included in depreciation and amortization expense on the consolidated statement of operations.

Operating lease amortization expense is included in general and administrative expenses on the consolidated statement of operations.

The useful lives of the Company’s assets are as follows:

Asset Category Estimated Useful Life

Buildings 30 years

Building equipment 10 - 15 years

Furniture and fixtures and equipment 3 - 5 years

Leasehold improvements Shorter of life of improvement or lease term

Right-of-use assets Shorter of life of the asset or lease term

The Company determines if a contract is, or contains, a lease at contract inception.

The Company’s right-of-use (“ROU”) assets are primarily related to operating leases for office space, automobiles and other equipment.

Leases are included in property, equipment and right-of-use assets, other current liabilities and other liabilities on the consolidated balance sheet.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

In addition, ROU assets include initial direct costs incurred by the lessee as well as any lease payments made at or before the commencement date, and exclude lease incentives.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.

Lease terms include options to extend or terminate the lease when it is

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reasonably certain that the Company will exercise that option.

Leases with a term of one year or less are excluded from ROU assets and liabilities.

The Company excludes variable lease payments in measuring ROU assets and lease liabilities, other than those that depend on an index, a rate or are in-substance fixed payments.

Lease and nonlease components are generally accounted for separately.

When available, consideration is allocated to the separate lease and nonlease components in a lease contract on a relative standalone price basis using observable standalone prices.

Pension and other postretirement plans - The Company recognizes the funded status of its single-employer defined benefit pension plans and postretirement plans as assets or liabilities on its consolidated balance sheet and recognizes changes in the funded status in the year in which the changes occur through accumulated other comprehensive income (loss).

The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation at December 31, the measurement date.

Overfunded plans, if any, are aggregated and recorded in other assets, while underfunded plans are aggregated and recorded as accrued expenses and other liabilities on the consolidated balance sheet.

Net periodic pension and postretirement benefit cost/(income), excluding the service cost component, is recognized in other income (expense), net on the consolidated statement of operations.

These costs include interest cost, expected return on plan assets, amortization of prior service costs or credits and gains or losses previously recognized as a component of accumulated other comprehensive income (loss).

The service cost component is recognized in general and administrative expenses on the consolidated statement of operations.

Defined contribution plans - The Company’s contributions to defined contribution plans are recorded as employees render service to the Company.

The charge is recorded in general and administrative expenses on the consolidated statement of operations.

Advertising and marketing - Expenses incurred to promote Mastercard’s brand, products and services are recognized in advertising and marketing on the consolidated statement of operations.

The timing of recognition is dependent on the type of advertising or marketing expense.

Foreign currency remeasurement and translation - Monetary assets and liabilities in a currency other than the functional currency are remeasured using current exchange rates in effect at the balance sheet date.

Non-monetary assets and liabilities are recorded at historical exchange rates.

Revenue and expense accounts are remeasured at the weighted-average exchange rate for the period.

Resulting exchange gains and losses related to remeasurement are included in general and administrative expenses on the consolidated statement of operations.

Where a non-U.S.

currency is the functional currency, translation from that functional currency to U.S.

dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate for the period.

Resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss).

Treasury stock - The Company records the repurchase of shares of its common stock at cost on the trade date of the transaction.

These shares are considered treasury stock, which is a reduction to stockholders’ equity.

Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Share-based payments - The Company measures share-based compensation expense at the grant date, based on the estimated fair value of the award and uses the straight-line method of attribution, net of estimated forfeitures, for expensing awards over the requisite employee service period.

The Company estimates the fair value of its non-qualified stock option awards (“Options”) using a Black-Scholes valuation model.

The fair value of restricted stock units (“RSUs”) is determined and fixed on the grant date based on the Company’s stock price, adjusted for the exclusion of dividend equivalents.

The Monte Carlo simulation valuation model is used to determine the grant date fair value of performance stock units (“PSUs”) granted.

All share-based compensation expenses are recorded in general and administrative expenses on the consolidated statement of operations.

Redeemable non-controlling interests - The Company’s business combinations may include provisions allowing non-controlling equity owners the ability to require the Company to purchase additional interests in the subsidiary at their discretion.

The interests are initially recorded at fair value and in subsequent reporting periods are accreted or adjusted to the estimated redemption value.

The adjustments to the redemption value are recorded to retained earnings or additional paid-in capital on the consolidated balance sheet.

The redeemable non-controlling interests are considered temporary and reported outside of permanent equity on the consolidated balance sheet at the greater of the carrying amount adjusted for the non-controlling interest’s share of net income (loss) or its redemption value.

Earnings per share - The Company calculates basic earnings per share (“EPS”) by dividing net income by the weighted-average number of common shares outstanding during the year.

Diluted EPS is calculated by dividing net income by the weighted-average number of common shares outstanding during the year, adjusted for the potentially dilutive effect of stock options and unvested

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stock units using the treasury stock method.

The Company may be required to calculate EPS using the two-class method as a result of its redeemable non-controlling interests.

If redemption value exceeds the fair value of the redeemable non-controlling interests, the excess would be a reduction to net income for the EPS calculation.

In 2022, 2021 and 2020, the Company acquired several businesses for total consideration of $ 0.3 billion , $ 4.7 billion and $ 1.1 billion, respectively, representing both cash and contingent consideration.

These acquisitions align with the Company’s strategy to grow, diversify and build the Company’s business.

Refer to Note 1 (Summary of Significant Accounting Policies) for the valuation techniques Mastercard utilizes to fair value the respective components of business combinations and contingent consideration.

The residual value allocated to goodwill is primarily attributable to the synergies expected to arise after the acquisition date and a majority of the goodwill is not expected to be deductible for local tax purposes.

On April 1, 2022, Mastercard acquired a 100 % equity interest in Dynamic Yield LTD (“Dynamic Yield”) for cash consideration of $ 325 million.

The Company’s preliminary estimate of net assets acquired has been recorded primarily as intangible assets, including goodwill of $ 200 million that is primarily attributable to the synergies expected to arise after the acquisition date.

None of the goodwill is expected to be deductible for local tax purposes.

On March 5, 2021, Mastercard acquired a majority of the Corporate Services business of Nets Denmark A/S (“Nets”) for € 3.0 billion (approximately $ 3.6 billion as of the date of acquisition) in cash consideration based on a € 2.85 billion enterprise value, adjusted for cash and net working capital at closing.

The business acquired is primarily comprised of clearing and instant payment services and e-billing solutions.

In relation to this acquisition, the net assets acquired primarily relate to intangible assets, including goodwill of $ 2.1 billion, of which $ 0.8 billion is expected to be deductible for local tax purposes.

The goodwill arising from this acquisition is primarily attributable to the synergies expected to arise through geographic, product and customer expansion, the underlying technology and workforce acquired.

On June 9, 2021, Mastercard acquired a 100 % equity interest in Ekata, Inc.

(“Ekata”) for cash consideration of $ 861 million, based on an $ 850 million enterprise value, adjusted for cash and net working capital at closing.

The acquisition of Ekata is expected to broaden the Company’s digital identity verification capabilities.

The residual value allocated to goodwill is primarily attributable to the synergies expected to arise after the acquisition date and none of the goodwill is expected to be deductible for local tax purposes.

Mastercard acquired additional businesses in 2021 for consideration of $ 272 million.

These businesses were not considered individually material to Mastercard.

Among the businesses acquired in 2020, the largest acquisition relates to Finicity Corporation (“Finicity”), an open-banking provider, headquartered in Salt Lake City, Utah.

On November 18, 2020, Mastercard acquired 100 % equity interest in Finicity for cash consideration of $ 809 million.

In addition, the Finicity sellers earned additional contingent consideration of $ 64 million upon meeting 2021 revenue targets in accordance with terms of the purchase agreement.

The additional businesses acquired in 2020 were not considered individually material to Mastercard.

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The Company is evaluating and finalizing the purchase accounting for Dynamic Yield.

In 2022, the Company finalized the purchase accounting for businesses acquired during 2021.

The estimated and final fair values of the purchase price allocations in aggregate, as of the acquisition dates, are noted below for the years ended December 31.

2022 2021 2020

(in millions)

Cash and cash equivalents $ 11 $ 253 $ 6

Other current assets 7 41 14

Other intangible assets 125 2,071 237

Goodwill 200 2,842 844

Other assets 9 15 11

Total assets 352 5,222 1,112

Other current liabilities 15 112 15

Deferred income taxes 3 398 23

Other liabilities 9 12 8

Total liabilities 27 522 46

Net assets acquired $ 325 $ 4,700 $ 1,066

The following table summarizes the identified intangible assets acquired during the years ended December 31:

2022 2021 2020 2022 2021 2020

Acquisition Date Fair Value Weighted-Average Useful Life

(in millions) (in years)

Developed technologies $ 100 $ 433 $ 122 7.8 11.7 6.3

Customer relationships 25 1,614 114 17.0 19.2 12.0

Other — 24 1 — 7.1 1.0

Other intangible assets $ 125 $ 2,071 $ 237 9.6 17.5 9.0

Proforma information related to these acquisitions was not included because the impact on the Company's consolidated results of operations was not considered to be material.

Mastercard is a payments network service provider that generates revenue from a wide range of payment solutions provided to customers.

Revenue from contracts with customers is recognized when services are performed in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services (i.e., fees charged to customers).

The Company disaggregates its net revenue from contracts with customers into two categories:

(i) payment network and (ii) value-added services and solutions.

The Company’s net revenue categories, payment network and value-added services and solutions, are recognized net of rebates and incentives provided to customers.

Rebates and incentives can be either fixed or variable and are attributed to the category of revenue to which they pertain.

Payment network

Mastercard’s payment network involves four participants in addition to the Company:

account holders (a person or entity who holds a card or uses another device enabled for payment), issuers (the account holders’ financial institutions), merchants and acquirers (the merchants’ financial institutions).

Revenue from the Company’s payment network is primarily generated by charging fees to customers (issuers, acquirers and other market participants) for providing switching and other network-related services, as well as by charging fees to customers based primarily on the gross dollar volume of activity (GDV, which includes both domestic and cross-border volume) on the cards that carry the Company’s brands.

As a payments network service provider, the Company provides its

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customers with continuous access to its global payments network and stands ready to provide transaction processing over the contractual term.

Consideration is variable and is recognized as revenue in the period in which volumes and transactions occur.

Value-added services and solutions

The Company generates revenues from value-added services and solutions through either fixed or transaction-based fees.

These services and solutions can be integrated and sold with the Company’s payment network services or can be sold on a stand-alone basis.

These services and solutions primarily include cyber and intelligence, data and services, processing and gateway, ACH batch and real-time account-based payments and solutions, open banking and digital identity.

Revenue from these value-added services and solutions is recognized in the period in which the related services and solutions are performed or transactions occur.

The Company’s disaggregated net revenue by category and geographic region were as follows for the years ended December 31:

2022 2021 2020

(in millions)

Revenue by category:

Payment network $ 14,358 $ 11,943 $ 9,897

Value-added services and solutions 7,879 6,941 5,404

Net revenue $ 22,237 $ 18,884 $ 15,301

Net revenue by geographic region:

North American Markets $ 7,809 $ 6,667 $ 5,473

International Markets 14,428 12,217 9,828

Net revenue $ 22,237 $ 18,884 $ 15,301

The Company’s customers are generally billed weekly, however, the frequency is dependent upon the nature of the performance obligation and the underlying contractual terms.

The Company does not typically offer extended payment terms to customers.

The following table sets forth the location of the amounts recognized on the consolidated balance sheet from contracts with customers at December 31:

(in millions)

Receivables from contracts with customers

Accounts receivable

$ 3,213 $ 2,829

Contract assets

Prepaid expenses and other current assets 118 134

Other assets 442 487

Deferred revenue 1

Other current liabilities 434 482

Other liabilities 248 180

1 Revenue recognized from performance obligations satisfied in 2022 was $ 1.6 billion.

The Company’s remaining performance periods for its contracts with customers for its payments network services are typically long-term in nature (generally up to 10 years).

As a payments network service provider, the Company provides its customers with continuous access to its global payments network and stands ready to provide transaction processing and related services over the contractual term.

Consideration is variable as the Company generates volume- and transaction-based revenues from charging fees on its customers’ current period activity.

The Company has elected the optional exemption to not disclose the remaining performance obligations related to its payments network services.

The Company also earns revenue from value-added services and solutions.

At December 31, 2022, the estimated aggregate consideration allocated to unsatisfied performance obligations for these value-added services and solutions is $ 1.4 billion, which is expected to be recognized through 2027.

The estimated remaining performance obligations related to these revenues are subject to change and are affected by several factors, including modifications and terminations and are not expected to be material to any future annual period.

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Earnings Per Share

The components of basic and diluted EPS for common shares for each of the years ended December 31 were as follows:

2022 2021 2020

(in millions, except per share data)

Net income $ 9,930 $ 8,687 $ 6,411

Basic weighted-average shares outstanding 968 988 1,002

Dilutive stock options and stock units 3 4 4

Diluted weighted-average shares outstanding 1

971 992 1,006

Earnings per Share

Basic $ 10.26 $ 8.79 $ 6.40

Diluted $ 10.22 $ 8.76 $ 6.37

Table may not sum due to rounding.

1 For the years presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported on the consolidated balance sheet that total to the amounts shown on the consolidated statement of cash flows for the years ended December 31:

(in millions)

Cash and cash equivalents $ 7,008 $ 7,421

Restricted cash and restricted cash equivalents

Restricted cash for litigation settlement 589 586

Restricted security deposits held for customers 1,568 1,873

Prepaid expenses and other current assets 31 22

Cash, cash equivalents, restricted cash and restricted cash equivalents $ 9,196 $ 9,902

Supplemental Cash Flows

The following table includes supplemental cash flow disclosures for each of the years ended December 31:

2022 2021 2020

(in millions)

Cash paid for income taxes, net of refunds $ 2,506 $ 1,820 $ 1,349

Cash paid for interest 414 399 311

Cash paid for legal settlements 114 98 149

Non-cash investing and financing activities

Dividends declared but not yet paid 545 479 439

Accrued property, equipment and right-of-use assets 118 15 154

Fair value of assets acquired, net of cash acquired 341 4,969 1,106

Fair value of liabilities assumed related to acquisitions 27 522 46

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The Company’s investments on the consolidated balance sheet include both available-for-sale and held-to-maturity debt securities (see Investments section below).

The Company classifies its investments in equity securities of publicly traded and privately held companies within other assets on the consolidated balance sheet (see Equity Investments section below).

Investments on the consolidated balance sheet consisted of the following at December 31:

(in millions)

Available-for-sale securities 1

Held-to-maturity securities 2

Total investments $ 400 $ 473

1 See Available-for-Sale Securities section below for further detail.

2 The cost of these securities approximates fair value.

Available-for-Sale Securities

The major classes of the Company’s available-for-sale investment securities and their respective amortized cost basis and fair values at December 31 were as follows:

Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value

(in millions)

Municipal securities $ — $ — $ — $ — $ 2 $ — $ — $ 2

Government and agency securities 91 — ( 2 ) 89 98 — — 98

Corporate securities 187 — ( 4 ) 183 214 — — 214

Total $ 278 $ — $ ( 6 ) $ 272 $ 314 $ — $ — $ 314

The Company’s corporate and municipal available-for-sale investment securities held at December 31, 2022 and 2021, primarily carried a credit rating of A- or better.

Corporate securities are comprised of commercial paper and corporate bonds.

Municipal securities are comprised of state tax-exempt bonds and are diversified across states and sectors.

Government and agency securities include U.S.

government bonds, U.S.

government sponsored agency bonds and foreign government bonds which are denominated in the national currency of the issuing country.

Unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statement of comprehensive income.

The maturity distribution based on the contractual terms of the Company’s available-for-sale investment securities at December 31, 2022 was as follows:

Cost Fair Value

(in millions)

Due within 1 year $ 158 $ 157

Due after 1 year through 5 years 120 115

Total $ 278 $ 272

Investment income on the consolidated statement of operations primarily consists of interest income generated from cash, cash equivalents, time deposits and available-for-sale investment securities, as well as realized gains and losses on the Company’s investment securities.

The realized gains and losses from the sales of available-for-sale securities for 2022, 2021 and 2020 were not material.

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Equity Investments

Included in other assets on the consolidated balance sheet are equity investments with readily determinable fair values (“Marketable securities”) and equity investments without readily determinable fair values (“Nonmarketable securities”).

Marketable securities are equity interests in publicly traded companies and are measured using unadjusted quoted prices in their respective active markets.

Nonmarketable securities that do not qualify for equity method accounting are measured at cost, less any impairment and adjusted for changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer (“Measurement alternative”).

The following table is a summary of the activity related to the Company’s equity investments:

Balance at December 31, 2021 Purchases Sales Changes in Fair Value 1

Balance at December 31, 2022

(in millions)

Marketable securities $ 627 $ — $ — $ ( 213 ) $ ( 15 ) $ 399

Nonmarketable securities 1,207 88 ( 7 ) 68 ( 25 ) 1,331

Total equity investments $ 1,834 $ 88 $ ( 7 ) $ ( 145 ) $ ( 40 ) $ 1,730

1 Recorded in gains (losses) on equity investments, net on the consolidated statement of operations.

2 Includes translational impact of currency.

The following table sets forth the components of the Company’s Nonmarketable securities at December 31:

(in millions)

Measurement alternative

$ 1,087 $ 952

Equity method

Total Nonmarketable securities $ 1,331 $ 1,207

The following table summarizes the total carrying value of the Company’s Measurement alternative investments, including cumulative unrealized gains and losses through December 31:

(in millions)

Initial cost basis

Cumulative adjustments 1 :

Upward adjustments 620

Downward adjustments (including impairment) ( 36 )

Carrying amount, end of period $ 1,087

1 Includes immaterial translational impact of currency.

The following table summarizes the unrealized gains and losses included in the carrying value of the Company’s Measurement alternative investments and Marketable securities for the years ended December 31:

2022 2021 2020

(in millions)

Measurement alternative investments:

Upward adjustments $ 114 $ 468 $ 21

Downward adjustments (including impairment) $ ( 23 ) $ ( 2 ) $ ( 3 )

Marketable securities:

Unrealized gains (losses), net $ ( 213 ) $ 8 $ ( 5 )

Fair Value Measurements

The Company classifies its fair value measurements of financial instruments into a three-level hierarchy (the “Valuation Hierarchy”).

Financial instruments are categorized for fair value measurement purposes as recurring or nonrecurring in nature.

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Financial Instruments - Recurring Measurements

The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy were as follows:

December 31, 2022 December 31, 2021

Quoted Prices

(Level 1) Significant

(Level 2) Significant

(Level 3) Total Quoted Prices

(Level 1) Significant

(Level 2) Significant

(Level 3) Total

(in millions)

Investment securities available-for-sale 1 :

Municipal securities $ — $ — $ — $ — $ — $ 2 $ — $ 2

Government and agency securities 35 54 — 89 35 63 — 98

Corporate securities — 183 — 183 — 214 — 214

Derivative instruments 2 :

Foreign exchange contracts — 108 — 108 — 8 — 8

Interest rate contracts — — — — — 6 — 6

Marketable securities 3 :

Equity securities 399 — — 399 627 — — 627

Deferred compensation plan 4 :

Deferred compensation assets 74 — — 74 89 — — 89

Derivative instruments 2 :

Foreign exchange contracts $ — $ 21 $ — $ 21 $ — $ 15 $ — $ 15

Interest rate contracts — 105 — 105 — 8 — 8

Deferred compensation plan 5 :

Deferred compensation liabilities 73 — — 73 89 — — 89

1 The Company’s U.S.

government securities are classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices for identical assets in active markets.

The fair value of the Company’s available-for-sale municipal securities, non-U.S.

government and agency securities and corporate securities are based on observable inputs such as quoted prices, benchmark yields and issuer spreads for similar assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy.

2 The Company’s foreign exchange and interest rate derivative asset and liability contracts have been classified within Level 2 of the Valuation Hierarchy as the fair value is based on observable inputs such as broker quotes for similar derivative instruments.

See Note 23 (Derivative and Hedging Instruments) for further details.

3 The Company’s Marketable securities are publicly held and classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices in their respective active markets.

4 The Company has a nonqualified deferred compensation plan where assets are invested primarily in mutual funds held in a rabbi trust, which is restricted for payments to participants of the plan.

The Company has elected to use the fair value option for these mutual funds, which are measured using quoted prices of identical instruments in active markets and are included in prepaid expenses and other current assets on the consolidated balance sheet.

5 The deferred compensation liabilities are measured at fair value based on the quoted prices of identical instruments to the investment vehicles selected by the participants.

These are included in other liabilities on the consolidated balance sheet.

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Financial Instruments - Nonrecurring Measurements

Nonmarketable Securities

The Company’s Nonmarketable securities are recorded at fair value on a nonrecurring basis in periods after initial recognition under the equity method or measurement alternative method.

Nonmarketable securities are classified within Level 3 of the Valuation Hierarchy due to the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value that require management’s judgment.

The Company uses discounted cash flows and market assumptions to estimate the fair value of its Nonmarketable securities when certain events or circumstances indicate that impairment may exist.

See Note 7 (Investments) for further details.

The Company estimates the fair value of its debt based on either market quotes or observable market data.

Debt is classified as Level 2 of the Valuation Hierarchy as it is generally not traded in active markets.

At December 31, 2022, the carrying value and fair value of debt was $ 14.0 billion and $ 12.7 billion, respectively.

At December 31, 2021, the carrying value and fair value of debt was $ 13.9 billion and $ 15.3 billion, respectively.

See Note 15 (Debt) for further details.

Other Financial Instruments

Certain other financial instruments are carried on the consolidated balance sheet at cost or amortized cost basis, which approximates fair value due to their short-term, highly liquid nature.

These instruments include cash and cash equivalents, restricted cash, time deposits, accounts receivable, settlement assets, restricted security deposits held for customers, accounts payable, settlement obligations and other accrued liabilities.

Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consisted of the following at December 31:

(in millions)

Customer and merchant incentives $ 1,392 $ 1,326

Prepaid income taxes 34 92

Other 920 853

Total prepaid expenses and other current assets $ 2,346 $ 2,271

Other assets consisted of the following at December 31:

(in millions)

Customer and merchant incentives $ 4,578 $ 3,798

Equity investments 1,730 1,834

Income taxes receivable 633 645

Other 639 717

Total other assets $ 7,580 $ 6,994

Customer and merchant incentives represent payments made to customers and merchants under business agreements.

Payments made directly related to entering into such an agreement are generally capitalized and amortized over the life of the agreement.

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Property, Equipment and Right-of-Use Assets

Property, equipment and right-of-use assets consisted of the following at December 31:

(in millions)

Building, building equipment and land $ 652 $ 615

Equipment 1,711 1,456

Furniture and fixtures 96 96

Leasehold improvements 376 371

Operating lease right-of-use assets 1,075 983

Property, equipment and right-of-use assets 3,910 3,521

Accumulated depreciation and amortization ( 1,904 ) ( 1,614 )

Property, equipment and right-of-use assets, net $ 2,006 $ 1,907

Depreciation and amortization expense for the above property, equipment and right-of-use assets was $ 473 million, $ 424 million and $ 400 million for 2022, 2021 and 2020, respectively.

Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheet as follows at December 31:

(in millions)

Balance sheet location

Property, equipment and right-of-use assets, net $ 679 $ 671

Other current liabilities 140 127

Other liabilities 630 645

Operating lease amortization expense was $ 137 million, $ 122 million and $ 123 million for 2022, 2021 and 2020, respectively.

As of December 31, 2022 and 2021, the weighted-average remaining lease term of operating leases was 8.4 years and 8.8 years and the weighted-average discount rate for operating leases was 2.5 % and 2.6 %, respectively.

The following table summarizes the maturity of the Company’s operating lease liabilities at December 31, 2022 based on lease term:

Operating Leases

(in millions)

Thereafter 308

Total operating lease payments 849

Interest ( 79 )

Present value of operating lease liabilities $ 770

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The changes in the carrying amount of goodwill for the years ended December 31 were as follows:

(in millions)

Beginning balance $ 7,662 $ 4,960

Additions 200 2,842

Foreign currency translation ( 340 ) ( 140 )

Ending balance $ 7,522 $ 7,662

The Company performed its annual qualitative assessment of goodwill during the fourth quarter of 2022 and determined a quantitative assessment was not necessary.

The Company concluded that goodwill was not impaired and had no accumulated impairment losses at December 31, 2022.

Other Intangible Assets

The following table sets forth net intangible assets, other than goodwill, at December 31:

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(in millions)

Finite-lived intangible assets

Capitalized software $ 3,448 $ ( 1,402 ) $ 2,046 $ 2,929 $ ( 1,288 ) $ 1,641

Customer relationships 2,161 ( 521 ) 1,640 2,272 ( 429 ) 1,843

Other 54 ( 37 ) 17 59 ( 38 ) 21

Total 5,663 ( 1,960 ) 3,703 5,260 ( 1,755 ) 3,505

Indefinite-lived intangible assets

Customer relationships 156 — 156 166 — 166

Total $ 5,819 $ ( 1,960 ) $ 3,859 $ 5,426 $ ( 1,755 ) $ 3,671

The increase in the gross carrying amount of amortized intangible assets in 2022 was primarily related to software additions and the business acquired in 2022.

See Note 2 (Acquisitions) for further details.

Certain intangible assets are denominated in foreign currencies.

As such, the change in intangible assets includes a component attributable to foreign currency translation.

Based on the qualitative assessment performed in 2022, it was determined that the Company’s indefinite-lived intangible assets were not impaired.

Amortization on the assets above amounted to $ 414 million, $ 424 million and $ 303 million in 2022, 2021 and 2020, respectively.

The following table sets forth the estimated future amortization expense on finite-lived intangible assets on the consolidated balance sheet at December 31, 2022 for the years ending December 31:

(in millions)

2027 and thereafter 1,837

Total $ 3,703

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Accrued Expenses and Accrued Litigation

Accrued expenses consisted of the following at December 31:

(in millions)

Customer and merchant incentives $ 5,600 $ 4,730

Personnel costs 1,322 980

Income and other taxes 279 337

Other 600 595

Total accrued expenses $ 7,801 $ 6,642

Customer and merchant incentives represent amounts to be paid to customers under business agreements.

As of December 31, 2022 and 2021, long-term customer and merchant incentives included in other liabilities were $ 2,293 million and $ 1,835 million, respectively.

As of December 31, 2022 and 2021, the Company’s provision for litigation was $ 1,094 million and $ 840 million, respectively.

These amounts are not included in the accrued expenses table above and are separately reported as accrued litigation on the consolidated balance sheet.

See Note 21 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation.

Pension, Postretirement and Savings Plans

The Company and certain of its subsidiaries maintain various pension and other postretirement plans that cover substantially all employees worldwide.

Defined Contribution Plans

The Company sponsors defined contribution retirement plans.

The primary plan is the Mastercard Savings Plan, a 401(k) plan for substantially all of the Company’s U.S.

employees, which is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.

In addition, the Company has several defined contribution plans outside of the U.S.

The Company’s total expense for its defined contribution plans was $ 204 million, $ 175 million and $ 150 million in 2022, 2021 and 2020, respectively.

Defined Benefit and Other Postretirement Plans

The Company sponsors pension and postretirement plans for certain non-U.S.

employees (the “non-U.S.

Plans”) that cover various benefits specific to their country of employment.

Additionally, Vocalink has a defined benefit pension plan (the “Vocalink Plan”) which was permanently closed to new entrants and future accruals as of July 21, 2013, however, plan participants’ obligations are adjusted for future salary changes.

The term “Pension Plans” includes the non-U.S.

Plans and the Vocalink Plan.

The Company maintains a postretirement plan providing health coverage and life insurance benefits for substantially all of its U.S.

employees hired before July 1, 2007 (the “Postretirement Plan”).

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The Company uses a December 31 measurement date for the Pension Plans and its Postretirement Plan (collectively the “Plans”).

The Company recognizes the funded status of its Plans, measured as the difference between the fair value of the plan assets and the projected benefit obligation, on the consolidated balance sheet.

The following table sets forth the Plans’ funded status, key assumptions and amounts recognized on the Company’s consolidated balance sheet at December 31:

Pension Plans Postretirement Plan

2022 2021 2022 2021

($ in millions)

Change in benefit obligation

Benefit obligation at beginning of year $ 596 $ 604 $ 62 $ 70

Service cost 12 14 1 1

Interest cost 9 9 2 2

Actuarial (gain) loss ( 156 ) ( 6 ) ( 16 ) ( 7 )

Benefits paid ( 16 ) ( 17 ) ( 6 ) ( 4 )

Transfers in 5 4 — —

Foreign currency translation ( 58 ) ( 12 ) — —

Benefit obligation at end of year 392 596 43 62

Change in plan assets

Fair value of plan assets at beginning of year 688 617 — —

Actual gain/(loss) on plan assets ( 203 ) 63 — —

Employer contributions 25 32 6 4

Benefits paid ( 16 ) ( 17 ) ( 6 ) ( 4 )

Transfers in 5 4 — —

Foreign currency translation ( 69 ) ( 11 ) — —

Fair value of plan assets at end of year 430 688 — —

Funded status at end of year $ 38 $ 92 $ ( 43 ) $ ( 62 )

Amounts recognized on the consolidated balance sheet consist of:

Noncurrent assets $ 44 $ 105 $ — $ —

Other liabilities, short-term — — ( 3 ) ( 3 )

Other liabilities, long-term ( 6 ) ( 13 ) ( 40 ) ( 59 )

$ 38 $ 92 $ ( 43 ) $ ( 62 )

Accumulated other comprehensive income consists of:

Net actuarial (gain) loss $ 23 $ ( 38 ) $ ( 14 ) $ 2

Prior service credit 1 1 ( 1 ) ( 2 )

Balance at end of year $ 24 $ ( 37 ) $ ( 15 ) $ —

Weighted-average assumptions used to determine end of year benefit obligations

Discount rate

Plans 3.80 % 0.90 % * *

Vocalink Plan 4.80 % 1.75 % * *

Postretirement Plan * * 5.50 % 2.75 %

Rate of compensation increase

Plans 1.50 % 1.50 % * *

Vocalink Plan 2.70 % 3.20 % * *

Postretirement Plan * * 3.00 % 3.00 %

* Not applicable

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2022 and 2021, the Company’s aggregated Pension Plan assets exceeded the benefit obligations.

For plans where the benefit obligations exceeded plan assets, the projected benefit obligation was $ 8 million and $ 116 million, the accumulated benefit obligation was $ 6 million and $ 115 million and plan assets were $ 2 million and $ 104 million at December 31, 2022 and 2021, respectively.

Information on the Pension Plans were as follows as of December 31:

(in millions)

Projected benefit obligation $ 392 $ 596

Accumulated benefit obligation 388 592

Fair value of plan assets 430 688

For the year ended December 31, 2022, the Company’s projected benefit obligation related to its Pension Plans decreased $ 204 million, primarily attributable to actuarial gains related to higher discount rate assumptions.

For the year ended December 31, 2021, the Company’s projected benefit obligation related to its Pension Plans decreased $ 8 million, primarily attributable to actuarial gains related to higher discount rate assumptions.

Components of net periodic benefit cost recorded in earnings were as follows for the Plans for each of the years ended December 31:

Pension Plans Postretirement Plan

2022 2021 2020 2022 2021 2020

(in millions)

Service cost $ 12 $ 14 $ 13 $ 1 $ 1 $ 1

Interest cost 9 9 9 2 2 2

Expected return on plan assets ( 14 ) ( 19 ) ( 18 ) — — —

Amortization of actuarial loss — ( 1 ) — — — —

Amortization of prior service credit — — — ( 1 ) ( 1 ) ( 1 )

Net periodic benefit cost $ 7 $ 3 $ 4 $ 2 $ 2 $ 2

The service cost component is recognized in general and administrative expenses on the consolidated statement of operations.

Net periodic benefit cost, excluding the service cost component, is recognized in other income (expense) on the consolidated statement of operations.

Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31 were as follows:

Pension Plans Postretirement Plan

2022 2021 2020 2022 2021 2020

(in millions)

Current year actuarial loss (gain) $ 61 $ ( 50 ) $ 5 $ ( 16 ) $ ( 7 ) $ 7

Amortization of prior service credit $ — $ — $ — $ 1 $ 2 $ 1

Total other comprehensive loss (income) $ 61 $ ( 50 ) $ 5 $ ( 15 ) $ ( 5 ) $ 8

Total net periodic benefit cost and other comprehensive loss (income) $ 68 $ ( 47 ) $ 9 $ ( 13 ) $ ( 3 ) $ 10

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Weighted-average assumptions used to determine net periodic benefit cost were as follows for the years ended December 31:

Pension Plans Postretirement Plan

2022 2021 2020 2022 2021 2020

Discount rate

Plans 0.90 % 0.70 % 0.70 % * * *

Vocalink Plan 1.75 % 1.55 % 1.55 % * * *

Postretirement Plan * * * 2.75 % 2.50 % 3.25 %

Expected return on plan assets

Plans 1.60 % 1.60 % 1.60 % * * *

Vocalink Plan 2.30 % 3.20 % 3.20 % * * *

Rate of compensation increase

Plans 1.50 % 1.50 % 1.50 % * * *

Vocalink Plan 3.20 % 2.75 % 2.75 % * * *

Postretirement Plan * * * 3.00 % 3.00 % 3.00 %

* Not applicable

The Company’s discount rate assumptions are based on yield curves derived from high quality corporate bonds, which are matched to the expected cash flows of each respective plan.

The expected return on plan assets assumptions are derived using the current and expected asset allocations of the Pension Plans’ assets and considering historical as well as expected returns on various classes of plan assets.

The rates of compensation increases are determined by the Company, based upon its long-term plans for such increases.

The following additional assumptions were used at December 31 in accounting for the Postretirement Plan:

Healthcare cost trend rate assumed for next year 6.50 % 6.75 %

Ultimate trend rate 5.00 % 5.00 %

Year that the rate reaches the ultimate trend rate 6 7

Plan assets are managed taking into account the timing and amount of future benefit payments.

The Vocalink Plan assets are managed with the following target asset allocations:

cash and cash equivalents 14 %, U.K.

government securities 41 %, fixed income 18 %, equity 16 % and real estate 11 %.

For the non-U.S.

Plans, the assets are concentrated primarily in insurance contracts.

The Valuation Hierarchy of the Pension Plans’ assets is determined using a consistent application of the categorization measurements for the Company’s financial instruments.

See Note 1 (Summary of Significant Accounting Policies) for additional information.

MASTERCARD 2022 FORM 10-K 92

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth by level within the Valuation Hierarchy, the Pension Plans’ assets at fair value:

December 31, 2022 December 31, 2021

Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant

(Level 3) Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant

(Level 3) Fair Value

(in millions)

Cash and cash equivalents 1

$ 43 $ — $ — $ 43 $ 246 $ — $ — $ 246

Mutual funds 2

106 128 — 234 185 102 — 287

Insurance contracts 3

— 114 — 114 — 104 — 104

Total $ 149 $ 242 $ — $ 391 $ 431 $ 206 $ — $ 637

Investments at Net Asset Value (“NAV”) 4

Total Plan Assets $ 430 $ 688

1 Cash and cash equivalents are valued at quoted market prices, which represent the net asset value of the shares held by the Plans.

2 Certain mutual funds are valued at quoted market prices, which represent the value of the shares held by the Plans, and are therefore included in Level 1.

Certain other mutual funds are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors, and are therefore included in Level 2.

3 Insurance contracts are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors.

4 Investments at NAV include mutual funds (comprised primarily of credit investments) and other investments (comprised primarily of real estate investments) and are valued using the net asset value provided by the administrator as a practical expedient, and therefore these investments are not included in the valuation hierarchy.

These investments have quarterly redemption frequencies with redemption notice periods ranging from 60 to 90 days.

The following table summarizes expected benefit payments (as of December 31, 2022) through 2032 for the Pension Plans and the Postretirement Plan, including those payments expected to be paid from the Company’s general assets.

Actual benefit payments may differ from expected benefit payments.

Pension Plans Postretirement Plan

(in millions)

2023 $ 28 $ 3

2028 - 2032 114 18

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Debt consisted of the following at December 31:

2022 2021 Effective

Interest Rate

(in millions)

2022 EUR Notes 1

1.000 % Senior Notes due February 2029 $ 800 $ — 1.138 %

2021 USD Notes 2.000 % Senior Notes due November 2031 750 750 2.112 %

1.900 % Senior Notes due March 2031 600 600 1.981 %

2.950 % Senior Notes due March 2051 700 700 3.013 %

2020 USD Notes 3.300 % Senior Notes due March 2027 1,000 1,000 3.420 %

3.350 % Senior Notes due March 2030 1,500 1,500 3.430 %

3.850 % Senior Notes due March 2050 1,500 1,500 3.896 %

2019 USD Notes 2.950 % Senior Notes due June 2029 1,000 1,000 3.030 %

3.650 % Senior Notes due June 2049 1,000 1,000 3.689 %

2.000 % Senior Notes due March 2025 750 750 2.147 %

2018 USD Notes 3.500 % Senior Notes due February 2028 500 500 3.598 %

3.950 % Senior Notes due February 2048 500 500 3.990 %

2016 USD Notes 2.950 % Senior Notes due November 2026 750 750 3.044 %

3.800 % Senior Notes due November 2046 600 600 3.893 %

2015 EUR Notes 2

1.100 % Senior Notes due December 2022 — 793 1.265 %

2.100 % Senior Notes due December 2027 854 906 2.189 %

2.500 % Senior Notes due December 2030 160 170 2.562 %

2014 USD Notes 3.375 % Senior Notes due April 2024 1,000 1,000 3.484 %

INR Term Loan 3

8.640 % Term Loan due July 2023 275 — 9.090 %

14,239 14,019

Unamortized discount and debt issuance costs ( 111 ) ( 116 )

Cumulative hedge accounting fair value adjustments 4

( 105 ) ( 2 )

Total debt outstanding 14,023 13,901

Short-term debt 5

( 274 ) ( 792 )

Long-term debt $ 13,749 $ 13,109

1 € 750 million euro-denominated debt issued in February 2022.

2 € 1.650 billion euro-denominated debt issued in December 2015 of which € 700 million ($ 724 million) matured and was paid during 2022.

3 INR 22.7 billion Indian rupee-denominated loan issued in July 2022.

4 In 2021, the Company entered into an interest rate swap which is accounted for as a fair value hedge.

See Note 23 (Derivative and Hedging Instruments) for additional information.

5 The INR Term Loan due July 2023 is classified as short-term debt on the consolidated balance sheet as of December 31, 2022.

The 2015 EUR Notes due December 2022 are classified as short-term debt on the consolidated balance sheet as of December 31, 2021.

In February 2022, the Company issued € 750 million ($ 800 million as of December 31, 2022) principal amount of notes due February 2029 (the “2022 EUR Notes”).

The net proceeds from the issuance of the 2022 EUR Notes, after deducting the original issue discount, underwriting discount and offering expenses, were € 743 million ($ 843 million as of the date of settlement).

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2021, the Company issued $ 600 million principal amount of notes due March 2031 and $ 700 million principal amount of notes due March 2051.

In November 2021, the Company also issued $ 750 million principal amount of notes due November 2031.

The two issuances in 2021 are collectively referred to as the “2021 USD Notes”.

The net proceeds from the issuance of the 2021 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $ 2.024 billion.

In March 2020, the Company issued $ 1 billion principal amount of notes due March 2027, $ 1.5 billion principal amount of notes due March 2030 and $ 1.5 billion principal amount of notes due March 2050 (collectively the “2020 USD Notes”).

The net proceeds from the issuance of the 2020 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $ 3.959 billion.

The Senior Notes described above are not subject to any financial covenants and may be redeemed in whole, or in part, at the Company’s option at any time for a specified make-whole amount.

These notes are senior unsecured obligations and would rank equally with any future unsecured and unsubordinated indebtedness.

Indian Rupee (“INR”) Term Loan

In July 2022, the Company entered into an unsecured INR 22.7 billion ($ 275 million as of December 31, 2022) term loan due July 2023 (the “INR Term Loan”).

The net proceeds of the INR Term Loan, after deducting issuance costs, were INR 22.6 billion ($ 284 million as of the date of settlement).

The Company obtained the INR Term Loan to serve as an economic hedge to offset possible changes in the value of INR-denominated monetary assets due to foreign exchange fluctuations.

The INR Term Loan is not subject to any financial covenants and it may be repaid in whole at the Company’s option at any time for a specified make-whole amount.

Scheduled annual maturities of the principal portion of long-term debt outstanding at December 31, 2022 are summarized below.

(in millions)

Thereafter 9,610

Total $ 14,239

As of December 31, 2022, the Company has a commercial paper program (the “Commercial Paper Program”) under which the Company is authorized to issue up to $ 6 billion in unsecured commercial paper notes with maturities of up to 397 days from the date of issuance.

On January 27, 2023, the Company increased its Commercial Paper Program from $ 6 billion to $ 8 billion.

The Commercial Paper Program is available in U.S.

In conjunction with the Commercial Paper Program, the Company entered into a committed five-year unsecured $ 8 billion revolving credit facility (the “Credit Facility”) on November 10, 2022.

The Credit Facility, which expires on November 10, 2027, amended and restated the Company’s prior $ 6 billion credit facility which was set to expire on November 12, 2026.

Borrowings under the Credit Facility are available in U.S.

dollars and/or euros.

The facility fee under the Credit Facility is determined according to the Company’s credit rating and is payable on the average daily commitment, regardless of usage, per annum.

In addition to the facility fee, interest rates on borrowings under the Credit Facility would be based on prevailing market interest rates plus applicable margins that fluctuate based on the Company’s credit rating.

The Credit Facility contains customary representations, warranties, affirmative and negative covenants, events of default and indemnification provisions.

The Company was in compliance in all material respects with the covenants of the Credit Facility at December 31, 2022 and 2021.

Borrowings under the Commercial Paper Program and the Credit Facility are to be used to provide liquidity for general corporate purposes, including providing liquidity in the event of one or more settlement failures by the Company’s customers.

The Company may borrow and repay amounts under the Commercial Paper Program and Credit Facility from time to time.

The Company had no borrowings under the Credit Facility or the Commercial Paper Program at December 31, 2022 and 2021.

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stockholders' Equity

Classes of Capital Stock

Mastercard’s amended and restated certificate of incorporation authorizes the following classes of capital stock:

Class Par Value Per Share Authorized Shares

(in millions) Dividend and Voting Rights

A $ 0.0001 3,000 One vote per share

Dividend rights

B $ 0.0001 1,200 Non-voting

Dividend rights

Preferred $ 0.0001 300 No shares issued or outstanding at December 31, 2022 and 2021.

Dividend and voting rights are to be determined by the Board of Directors of the Company upon issuance.

The Company declared a quarterly cash dividend on its Class A and Class B Common Stock during each of the four quarters of 2022, 2021 and 2020.

The Company declared total per share dividends on its Class A and Class B Common Stock during the years ended December 31 as summarized below:

2022 2021 2020

(in millions, except per share data)

Dividends declared per share $ 2.04 $ 1.81 $ 1.64

Total dividends declared $ 1,968 $ 1,781 $ 1,641

Ownership and Governance Structure

Equity ownership and voting power of the Company’s shares were allocated as follows as of December 31:

Equity Ownership General Voting Power Equity Ownership General Voting Power

Public Investors (Class A stockholders) 88.5 % 89.3 % 88.4 % 89.2 %

Principal or Affiliate Customers (Class B stockholders) 0.8 % — % 0.8 % — %

Mastercard Foundation (Class A stockholders) 10.7 % 10.7 % 10.8 % 10.8 %

Class B Common Stock Conversions

Shares of Class B common stock are convertible on a one-for-one basis into shares of Class A common stock.

Entities eligible to hold Mastercard’s Class B common stock are defined in the Company’s amended and restated certificate of incorporation (generally the Company’s principal or affiliate customers), and they are restricted from retaining ownership of shares of Class A common stock.

Class B stockholders are required to subsequently sell or otherwise transfer any shares of Class A common stock received pursuant to such a conversion.

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mastercard Foundation

In connection and simultaneously with its 2006 initial public offering (the “IPO”), the Company issued and donated 135 million newly authorized shares of Class A common stock to Mastercard Foundation.

Mastercard Foundation is a private charitable foundation incorporated in Canada that is controlled by directors who are independent of the Company and its principal customers.

Under the terms of the donation, Mastercard Foundation became able to resell the donated shares in May 2010 to the extent necessary to meet charitable disbursement requirements pursuant to Canadian tax law.

Under such current law, Mastercard Foundation must annually disburse at least 3.5 % of its assets not used in its charitable activities and administration in the previous eight quarters (“Disbursement Quota”).

However, Mastercard Foundation obtained permission from the Canada Revenue Agency to, until December 31, 2021, meet its cumulative Disbursement Quota obligations over a period of time that, on average, demonstrated compliance with the requirement for such established time period.

Currently, Mastercard Foundation may not sell or otherwise transfer its donated shares prior to May 1, 2027, except to the extent necessary to satisfy the Disbursement Quota.

Based on that timing, Mastercard Foundation would be permitted to sell all of its remaining shares beginning May 1, 2027, subject to certain conditions.

Common Stock Activity

The following table presents the changes in the Company’s outstanding Class A and Class B common stock for the years ended December 31:

Outstanding Shares

Class A Class B

(in millions)

Balance at December 31, 2019 996.0 11.2

Purchases of treasury stock ( 14.3 ) —

Share-based payments 2.3 —

Conversion of Class B to Class A common stock 2.9 ( 2.9 )

Balance at December 31, 2020 986.9 8.3

Purchases of treasury stock ( 16.5 ) —

Share-based payments 1.2 —

Conversion of Class B to Class A common stock 0.5 ( 0.5 )

Balance at December 31, 2021 972.1 7.8

Purchases of treasury stock ( 25.7 ) —

Share-based payments 1.8 —

Conversion of Class B to Class A common stock 0.2 ( 0.2 )

Balance at December 31, 2022 948.4 7.6

The Company’s Board of Directors have approved share repurchase programs of its Class A Common Stock authorizing the Company to repurchase shares.

The following table summarizes the Company’s share repurchase authorizations of its Class A common stock for the years ended December 31:

2022 2021 2020

(In millions, except per share data)

Board authorization $ 9,000 $ 8,000 $ 6,000

Dollar-value of shares repurchased $ 8,753 $ 5,904 $ 4,473

Shares repurchased 25.7 16.5 14.3

Average price paid per share $ 340.60 $ 356.82 $ 312.68

As of December 31, 2022, the remaining authorization under the share repurchase programs approved by the Company’s Board of Directors was $ 12.2 billion.

97 MASTERCARD 2022 FORM 10-K

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income (Loss)

The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2022 and 2021 were as follows:

December 31, 2021 Increase / (Decrease) Reclassifications December 31, 2022

(in millions)

Foreign currency translation adjustments 1

$ ( 739 ) $ ( 675 ) $ — $ ( 1,414 )

Translation adjustments on net investment hedges 2

Cash flow hedges

Foreign exchange contracts 3

4 1 ( 13 ) ( 8 )

Interest rate contracts ( 128 ) — 5 ( 123 )

Defined benefit pension and other postretirement plans 4

21 ( 31 ) ( 1 ) ( 11 )

Investment securities available-for-sale ( 1 ) ( 5 ) — ( 6 )

Accumulated other comprehensive income (loss) $ ( 809 ) $ ( 435 ) $ ( 9 ) $ ( 1,253 )

December 31, 2020 Increase / (Decrease) Reclassifications December 31, 2021

(in millions)

Foreign currency translation adjustments 1

$ ( 352 ) $ ( 387 ) $ — $ ( 739 )

Translation adjustments on net investment hedges 2

( 175 ) 209 — 34

Cash flow hedges

Foreign exchange contracts 3

Interest rate contracts ( 133 ) — 5 ( 128 )

Defined benefit pension and other postretirement plans 4

( 20 ) 43 ( 2 ) 21

Investment securities available-for-sale — ( 1 ) — ( 1 )

Accumulated other comprehensive income (loss) $ ( 680 ) $ ( 131 ) $ 2 $ ( 809 )

1 During 2022, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro and British pound against the U.S.

During 2021, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro against the U.S.

2 During 2022 and 2021, the increase in the accumulated other comprehensive income related to the net investment hedges was driven by the depreciation of the euro against the U.S.

See Note 23 (Derivative and Hedging Instruments) for additional information.

3 Certain foreign exchange derivative contracts are designated as cash flow hedging instruments.

Gains and losses resulting from changes in the fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings.

See Note 23 (Derivative and Hedging Instruments) for additional information.

4 During 2022, the increase in the accumulated other comprehensive loss related to the Plans was driven primarily by a net actuarial loss within the Pension Plans.

During 2021, the increase in the accumulated other comprehensive income related to the Plans was driven primarily by a net actuarial gain within the Pension Plans.

See Note 14 (Pension, Postretirement and Savings Plans) for additional information.

Share-Based Payments

In May 2006, the Company granted the following awards under the Mastercard Incorporated 2006 Long Term Incentive Plan, which was amended and restated as of June 22, 2021 (the “LTIP”).

The LTIP is a stockholder-approved plan that permits the grant of various types of equity awards to employees.

The Company has granted Options, RSUs and PSUs under the LTIP.

The Company uses the straight-line method of attribution for expensing all equity awards.

Compensation expense is recorded net of estimated forfeitures, with estimates adjusted as appropriate.

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There are approximately 116 million shares of Class A common stock authorized for equity awards under the LTIP.

Although the LTIP permits the issuance of shares of Class B common stock, no such shares have been authorized for issuance.

Shares issued as a result of Option exercises and the conversions of RSUs and PSUs were funded primarily with the issuance of new shares of Class A common stock.

Stock Options

Options expire ten years from the date of grant and vest ratably over three years for awards granted on or after March 1, 2022.

For awards granted before March 1, 2022, they vest ratably over four years .

For Options granted, a participant’s unvested awards are forfeited upon termination.

In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, however, the participant retains all of their awards without providing additional service to the Company.

Retirement eligibility is dependent upon age and years of service.

Compensation expense is recognized over the vesting period as stated in the LTIP.

The fair value of each Option is estimated on the date of grant using a Black-Scholes option pricing model.

The following table presents the weighted-average assumptions used in the valuation and the resulting weighted-average fair value per Option granted for the years ended December 31:

2022 2021 2020

Risk-free rate of return 1.6 % 0.9 % 1.0 %

Expected term (in years) 6.00 6.00 6.00

Expected volatility 24.6 % 26.1 % 19.3 %

Expected dividend yield 0.6 % 0.5 % 0.6 %

Weighted-average fair value per Option granted $ 86.92 $ 91.70 $ 80.92

The risk-free rate of return was based on the U.S.

Treasury yield curve in effect on the date of grant.

The expected term and the expected volatility were based on historical Mastercard information.

The expected dividend yields were based on the Company’s expected annual dividend rate on the date of grant.

The following table summarizes the Company’s option activity for the year ended December 31, 2022:

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

(in millions) (in years) (in millions)

Outstanding at January 1, 2022 5.4 $ 152

Granted 0.3 $ 344

Exercised ( 0.9 ) $ 100

Forfeited ( 0.1 ) $ 308

Expired — $ 363

Outstanding at December 31, 2022 4.7 $ 173 4.9 $ 828

Exercisable at December 31, 2022 3.9 $ 143 4.3 $ 788

Options vested and expected to vest at December 31, 2022 4.7 $ 173 4.9 $ 827

As of December 31, 2022, there wa s $ 19 million of total unrecognized compensation cost related to non-vested Options.

The cost is expected to be recognized over a weighted-average period of 1.7 years.

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Restricted Stock Units

For RSUs granted on or after March 1, 2022, the awards generally vest ratably over three years .

For RSUs granted on or after March 1, 2020 but before March 1, 2022, the awards generally vest ratably over four years .

A participant’s unvested awards are forfeited upon termination of employment.

In the event of termination due to job elimination (as defined by the Company), however, a participant will retain a pro-rata portion of the unvested awards for services performed through the date of termination.

In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, the participant retains all of their awards without providing additional service to the Company.

Compensation expense is recognized over the shorter of the vesting periods stated in the LTIP or the date the individual becomes eligible to retire but not less than seven months .

The following table summarizes the Company’s RSU activity for the year ended December 31, 2022:

Units Weighted-Average Grant-Date Fair Value Aggregate Intrinsic Value

(in millions) (in millions)

Outstanding at January 1, 2022 2.2 $ 291

Granted 1.0 $ 340

Converted ( 1.2 ) $ 258

Forfeited ( 0.2 ) $ 332

Outstanding at December 31, 2022 1.8 $ 335 $ 641

RSUs expected to vest at December 31, 2022 1.8 $ 335 $ 615

The fair value of each RSU is the closing stock price on the New York Stock Exchange of the Company’s Class A common stock on the date of grant, adjusted for the exclusion of dividend equivalents.

Upon vesting, a portion of the RSU award may be withheld to satisfy the minimum statutory withholding taxes.

The remaining RSUs will be settled in shares of the Company’s Class A common stock after the vesting period.

As of December 31, 2022, there wa s $ 334 million of total unrecognized compensation cost related to non-vested RSUs.

The cost is expected to be recognized over a weighted-average period of 2.0 years.

Performance Stock Units

PSUs vest after three years and are subject to a mandatory one-year post-vest hold, during which they are eligible for dividend equivalents.

A participant’s unvested awards are forfeited upon termination of employment.

The following table summarizes the Company’s PSU activity for the year ended December 31, 2022:

Units Weighted-Average

Grant-Date Fair Value Aggregate Intrinsic Value

(in millions) (in millions)

Outstanding at January 1, 2022 0.4 $ 334

Granted 0.2 $ 335

Converted — $ —

Other ( 0.2 ) $ 291

Outstanding at December 31, 2022 0.4 $ 352 $ 128

PSUs expected to vest at December 31, 2022 0.4 $ 352 $ 128

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Since 2013, PSUs containing performance and market conditions have been issued.

Performance measures used to determine the actual number of shares that vest after three years include net revenue growth, EPS growth and relative total shareholder return (“TSR”).

Relative TSR is considered a market condition, while net revenue and EPS growth are considered performance conditions.

The Monte Carlo simulation valuation model is used to determine the grant-date fair value.

Compensation expense for PSUs is recognized over the requisite service period, or the date the individual becomes eligible to retire but not less than seven months , if it is probable that the performance target will be achieved and subsequently adjusted if the probability assessment changes.

During the year ended December 31, 2020, performance targets related to PSU awards granted in 2018 (“2018 PSU Awards”) were adjusted to exclude certain pandemic-related financial impacts deemed outside of the Company’s control.

The adjustment during the year ended December 31, 2020 required the Company to apply modification accounting to the 2018 PSU Awards which had an immaterial impact on compensation expense.

As of December 31, 2022, there was $ 29 million of total unrecognized compensation cost related to non-vested PSUs.

The cost is expected to be recognized over a weighted-average period of 1.7 years.

Additional Information

The following table includes additional share-based payment information for each of the years ended December 31:

2022 2021 2020

(in millions, except weighted-average fair value)

Share-based compensation expense:

Options, RSUs and PSUs $ 295 $ 273 $ 254

Income tax benefit recognized for equity awards 61 57 53

Income tax benefit realized related to Options exercised 49 36 68

Total intrinsic value of Options exercised 231 169 317

Weighted-average grant-date fair value of awards granted 340 358 288

Total intrinsic value of RSUs converted into shares of Class A common stock 420 360 330

Weighted-average grant-date fair value of awards granted 335 385 291

Total intrinsic value of PSUs converted into shares of Class A common stock — 32 92

At December 31, 2022, the Company had the following future minimum payments due under noncancelable agreements, primarily related to sponsorships to promote the Mastercard brand and licensing arrangements.

The Company has accrued $ 12 million of these future payments as of December 31, 2022.

(in millions)

Thereafter 47

Total $ 1,205

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Components of Income and Income Tax Expense

The domestic and foreign components of income before income taxes for the years ended December 31 are as follows:

2022 2021 2020

(in millions)

United States $ 4,228 $ 4,261 $ 3,304

Foreign 7,504 6,046 4,456

Income before income taxes $ 11,732 $ 10,307 $ 7,760

The total income tax provision for the years ended December 31 is comprised of the following components:

2022 2021 2020

(in millions)

Federal $ 1,024 $ 663 $ 439

State and local 133 51 56

Foreign 1,296 976 781

2,453 1,690 1,276

Federal ( 661 ) ( 31 ) 106

State and local ( 40 ) ( 4 ) 9

Foreign 50 ( 35 ) ( 42 )

( 651 ) ( 70 ) 73

Income tax expense $ 1,802 $ 1,620 $ 1,349

Effective Income Tax Rate

A reconciliation of the effective income tax rate to the U.S.

federal statutory income tax rate for the years ended December 31, is as follows:

2022 2021 2020

Amount Percent Amount Percent Amount Percent

($ in millions)

Income before income taxes $ 11,732 $ 10,307 $ 7,760

Federal statutory tax 2,464 21.0 % 2,164 21.0 % 1,630 21.0 %

State tax effect, net of federal benefit 72 0.6 % 60 0.6 % 57 0.7 %

Foreign tax effect ( 347 ) ( 3.0 ) % ( 283 ) ( 2.7 ) % ( 193 ) ( 2.5 ) %

Valuation allowance - U.S.

foreign tax credit ( 333 ) ( 2.8 ) % — — % — — %

tax expense on foreign operations 111 0.9 % 63 0.6 % 47 0.6 %

Foreign-derived intangible income deduction ( 129 ) ( 1.1 ) % ( 69 ) ( 0.7 ) % ( 46 ) ( 0.6 ) %

tax benefits 1

— — % ( 132 ) ( 1.3 ) % — — %

Windfall benefit ( 68 ) ( 0.6 ) % ( 67 ) ( 0.7 ) % ( 119 ) ( 1.5 ) %

Other, net 32 0.3 % ( 116 ) ( 1.1 ) % ( 27 ) ( 0.3 ) %

Income tax expense $ 1,802 15.4 % $ 1,620 15.7 % $ 1,349 17.4 %

Table may not sum due to rounding.

The effective income tax rates for the years ended December 31, 2022, 2021 and 2020 were 15.4 %, 15.7 % and 17.4 %, respectively.

The effective income tax rate for 2022 was lower than the effective income tax rate for 2021, primarily due to a discrete tax benefit in the first quarter of 2022 related to final U.S.

tax regulations published in the current year.

These regulations resulted in a valuation allowance release of $ 333 million associated with the U.S.

foreign tax credit carryforward deferred tax asset.

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regulations limit the Company’s ability to generate foreign tax credits starting in 2022 for certain foreign taxes paid, resulting in additional U.S.

Additionally, a more favorable geographic mix of earnings in 2022 contributed to the lower effective tax rate.

The lower effective income tax rate in 2022 was partially offset by:

• the recognition of U.S.

tax benefits in 2021 (the majority of which were discrete) resulting from a higher foreign derived intangible income deduction and greater utilization of foreign tax credits in the U.S.

• a discrete tax benefit in 2021 related to the remeasurement of the Company’s net deferred tax asset in the U.K.

due to an enacted tax rate change in 2021

• a discrete tax expense related to an unfavorable court ruling in 2022

The effective income tax rate for 2021 was lower than the effective income tax rate for 2020, primarily due to the recognition of U.S.

tax benefits (the majority of which were discrete) resulting from a higher foreign derived intangible income deduction and greater utilization of foreign tax credits in the U.S.

In addition, a more favorable geographic mix of earnings in 2021 contributed to the Company’s lower effective tax rate.

These benefits were partially offset by a lower discrete tax benefit related to share-based payments in 2021.

Singapore Income Tax Rate

In connection with the expansion of the Company’s operations in the Asia Pacific, Middle East and Africa region, the Company’s subsidiary in Singapore, Mastercard Asia Pacific Pte.

(“MAPPL”) received an incentive grant from the Singapore Ministry of Finance in 2010.

The incentive had provided MAPPL with, among other benefits, a reduced income tax rate for the 10 -year period commencing January 1, 2010 on taxable income in excess of a base amount.

The Company continued to explore business opportunities in this region, resulting in an expansion of the incentives being granted by the Ministry of Finance, including a further reduction to the income tax rate on taxable income in excess of a revised fixed base amount commencing July 1, 2011 and continuing through December 31, 2025.

Without the incentive grant, MAPPL would have been subject to the statutory income tax rate on its earnings.

For 2022, 2021 and 2020, the impact of the incentive grant received from the Ministry of Finance resulted in a reduction of MAPPL’s income tax liability of $ 454 million, or $ 0.47 per diluted share, $ 300 million, or $ 0.30 per diluted share, and $ 260 million, or $ 0.26 per diluted share, respectively.

Indefinite Reinvestment

As of December 31, 2022 the Company does not accrue taxes on $ 1.6 billion of foreign earnings which remain permanently reinvested outside the U.S.

The Company expects that taxes associated with any future repatriation of these earnings are immaterial.

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Deferred Taxes

Deferred tax assets and liabilities represent the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities.

The components of deferred tax assets and liabilities at December 31 are as follows:

(in millions)

Deferred Tax Assets

Accrued liabilities $ 697 $ 497

Compensation and benefits 316 260

State taxes and other credits 43 40

Net operating losses 156 136

foreign tax credits 274 333

Property, plant and equipment 52 —

Intangible assets 186 206

Other items 162 161

Valuation allowance ( 114 ) ( 415 )

Total Deferred Tax Assets 1,772 1,218

Deferred Tax Liabilities

Prepaid expenses and other accruals 186 114

Gains on equity investments 132 153

Goodwill and intangible assets 561 571

Property, plant and equipment — 174

Other items 135 115

Total Deferred Tax Liabilities 1,014 1,127

Net Deferred Tax Assets $ 758 $ 91

The valuation allowance balance at December 31, 2022 primarily related to the Company’s ability to recognize future tax benefits associated with certain foreign losses.

The recognition of the foreign losses is dependent on the timing and character of future taxable income in the applicable jurisdictions.

The valuation allowance balance at December 31, 2021 primarily related to the Company’s ability to recognize future tax benefits associated with the carry forward of U.S.

foreign tax credits and certain foreign losses.

The valuation allowance associated with the carryforward of U.S.

foreign tax credits was released in 2022 as a result of the publication of final U.S.

tax regulations.

The regulations limit the Company’s ability to generate foreign tax credits for certain taxes paid beginning in 2022, but have the effect of allowing the Company to utilize its foreign tax credit carryforwards.

As of December 31, 2022, the Company had foreign tax credit and tax effected net operating loss carryforwards of $ 274 million and $ 156 million, respectively.

The foreign tax credits begin to expire in 2029 and the majority of the net operating losses can be carried forward indefinitely.

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A reconciliation of the beginning and ending balance for the Company’s unrecognized tax benefits for the years ended December 31, is as follows:

2022 2021 2020

(in millions)

Beginning balance $ 360 $ 388 $ 203

Current year tax positions 22 17 19

Prior year tax positions 1

( 14 ) ( 31 ) ( 10 )

Settlements with tax authorities ( 13 ) ( 15 ) ( 12 )

Expired statute of limitations ( 6 ) ( 3 ) ( 4 )

Ending balance $ 414 $ 360 $ 388

1 Includes immaterial translational impact of currency.

As of December 31, 2022, the amount of unrecognized tax benefit was $ 414 million.

This amount, if recognized, would reduce the effective income tax rate by $ 362 million.

The Company’s unrecognized tax benefits increased in 2020 primarily due to a prior year tax issue resulting from a refund claim filed in 2020.

The Company is subject to tax in the U.S., Belgium, Singapore, the United Kingdom and various other foreign jurisdictions, as well as state and local jurisdictions.

Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation.

Within the next twelve months, the Company believes that the resolution of certain federal, foreign and state and local examinations is reasonably possible and that a change in estimate, reducing unrecognized tax benefits, may occur.

While such a change may be significant, it is not possible to provide a range of the potential change until the examinations progress further or the related statutes of limitation expire.

The Company has effectively settled its U.S.

federal income tax obligations through 2014.

With limited exception, the Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2011.

Legal and Regulatory Proceedings

Mastercard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business.

Some of these proceedings are based on complex claims involving substantial uncertainties and unascertainable damages.

Accordingly, except as discussed below, it is not possible to determine the probability of loss or estimate damages, and therefore, Mastercard has not established reserves for any of these proceedings.

When the Company determines that a loss is both probable and reasonably estimable, Mastercard records a liability and discloses the amount of the liability if it is material.

When a material loss contingency is only reasonably possible, Mastercard does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made.

Unless otherwise stated below with respect to these matters, Mastercard cannot provide an estimate of the possible loss or range of loss based on one or more of the following reasons:

(1) actual or potential plaintiffs have not claimed an amount of monetary damages or the amounts are unsupportable or exaggerated, (2) the matters are in early stages, (3) there is uncertainty as to the outcome of pending appeals or motions, (4) there are significant factual issues to be resolved, (5) the existence in many such proceedings of multiple defendants or potential defendants whose share of any potential financial responsibility has yet to be determined and/or (6) there are novel legal issues presented.

Furthermore, except as identified with respect to the matters below, Mastercard does not believe that the outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its results of operations, financial condition and overall business.

However, an adverse judgment or other outcome or settlement with respect to any proceedings discussed below could result in fines or payments by Mastercard and/or could require Mastercard to change its business practices.

In addition, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage claims and possibly result in significant damage awards.

Any of these events could have a material adverse effect on Mastercard’s results of operations, financial condition and overall business.

Interchange Litigation and Regulatory Proceedings

Mastercard’s interchange fees and other practices are subject to regulatory, legal review and/or challenges in a number of jurisdictions, including the proceedings described below.

When taken as a whole, the resulting decisions, regulations and legislation with respect to interchange fees and acceptance practices may have a material adverse effect on the Company’s prospects for future growth and its overall results of operations, financial position and cash flows.

As the assumptions employed to measure these assets are based on

75 MASTERCARD 2023 FORM 10-K

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk