Mastercard Inc 10-K

Item 7A. 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 foreign currency exchange rates and interest rates. Our exposure to market risk from changes in foreign currency exchange rates and interest 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 exchange 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 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 $475 million and $414 million on our foreign exchange derivative contracts outstanding at December 31, 2024 and 2023, 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 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. 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, 2024 and 2023, 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. dollar reporting currency. 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 $279 million on our foreign exchange derivative contracts designated as a net investment hedge at December 31, 2024, 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. Interest Rate Risk Our available-for-sale debt investments include fixed and variable rate securities that are sensitive to interest rate fluctuations. Our policy is to invest in high quality securities, while providing adequate liquidity and maintaining diversification to avoid significant exposure. A hypothetical 100 basis point adverse change in interest rates would not have a material impact to the fair value of our investments at December 31, 2024 and 2023. We are also exposed to interest rate risk related to our fixed-rate debt. 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 $20 million and $29 million on the fair value of our interest rate derivative contracts designated as a fair value hedge of our fixed-rate debt at December 31, 2024 and 2023, respectively, before considering the offsetting effect of the underlying hedged activity. MASTERCARD 2024 FORM 10-K 60 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Item 8. Financial statements and supplementary data Mastercard Incorporated Index to consolidated financial statements Page As of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 Management’s report on internal control over financial reporting 62 Report of independent registered public accounting firm (PCAOB ID 238 ) 63 Consolidated Statement s of Operations 65 Consolidated Statement s of Comprehensive Income 66 Consolidated Balance Sheet s 67 Consolidated Statement s of Changes in Equity 68 Consolidated Statement s of Cash Flows 70 Notes to consolidated financial statements 71 61 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Management’s report on internal control over financial reporting The management of Mastercard Incorporated (“Mastercard”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has assessed the effectiveness of Mastercard’s internal control over financial reporting as of December 31, 2024. In making its assessment, management has utilized the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has concluded that, based on its assessment, Mastercard’s internal control over financial reporting was effective as of December 31, 2024. The effectiveness of Mastercard’s internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on the next page. Management’s assessment of, and conclusion on, the effectiveness of internal controls over financial reporting did not include the internal controls of RF Ultimate Parent, Inc. (“Recorded Future”), which was acquired in December 2024. Recorded Future is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment of internal controls represented approximately 1% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024. MASTERCARD 2024 FORM 10-K 62 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Mastercard Incorporated Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Mastercard Incorporated and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s report on internal control over financial reporting, management has excluded RF Ultimate Parent, Inc. from its assessment of internal control over financial reporting as of December 31, 2024, because it was acquired by the Company in a purchase business combination during 2024. We have also excluded RF Ultimate Parent, Inc. from our audit of internal control over financial reporting. RF Ultimate Parent, Inc. is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 1% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable 63 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition - Rebates and Incentives As described in Notes 1 and 3 to the consolidated financial statements, the Company provides certain customers with rebates and incentives which are a portion of total net revenue of $28.2 billion for the year ended December 31, 2024. The Company has business agreements with certain customers that provide for rebates and incentives within net revenue that could be either fixed or variable. Variable rebates and incentives are recorded primarily when volume- and transaction-based revenues are recognized over the contractual term. Variable rebates and incentives are calculated based upon estimated customer performance, such as volume thresholds, and the terms of the related business agreements. As disclosed by management, various factors are considered in estimating customer performance, including forecasted transactions, card issuance and card conversion volumes, expected payments and historical experience with that customer. The principal considerations for our determination that performing procedures relating to rebates and incentives is a critical audit matter are (i) the significant judgment by management when developing estimates related to rebates and incentives based on customer performance; and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s estimates related to customer performance, including the reasonableness of the various applicable factors considered by management in the estimate. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to rebates and incentives, including controls over evaluating estimated customer performance. These procedures also included, among others, evaluating the reasonableness of estimated customer performance for a sample of customer agreements, including (i) evaluating the agreements to identify whether all rebates and incentives are identified and recorded accurately; (ii) testing management’s process for developing estimated customer performance, including evaluating the reasonableness of the various applicable factors considered by management; and (iii) evaluating estimated customer performance as compared to actual results in the period the customer reports actual performance. /s/ PricewaterhouseCoopers LLP New York, New York February 12, 2025 We have served as the Company’s auditor since 1989. MASTERCARD 2024 FORM 10-K 64 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Operations For the Years Ended December 31, 2024 2023 2022 (in millions, except per share data) Net Revenue $ 28,167 $ 25,098 $ 22,237 Operating Expenses: General and administrative 10,193 8,927 8,078 Advertising and marketing 815 825 789 Depreciation and amortization 897 799 750 Provision for litigation 680 539 356 Total operating expenses 12,585 11,090 9,973 Operating income 15,582 14,008 12,264 Other Income (Expense): Investment income 327 274 61 Gains (losses) on equity investments, net ( 29 ) ( 61 ) ( 145 ) Interest expense ( 646 ) ( 575 ) ( 471 ) Other income (expense), net 20 ( 7 ) 23 Total other income (expense) ( 328 ) ( 369 ) ( 532 ) Income before income taxes 15,254 13,639 11,732 Income tax expense 2,380 2,444 1,802 Net Income $ 12,874 $ 11,195 $ 9,930 Basic Earnings per Share $ 13.91 $ 11.86 $ 10.26 Basic weighted-average shares outstanding 925 944 968 Diluted Earnings per Share $ 13.89 $ 11.83 $ 10.22 Diluted weighted-average shares outstanding 927 946 971 The accompanying notes are an integral part of these consolidated financial statements. 65 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Comprehensive Income For the Years Ended December 31, 2024 2023 2022 (in millions) Net Income $ 12,874 $ 11,195 $ 9,930 Other comprehensive income (loss): Foreign currency translation adjustments ( 456 ) 328 ( 712 ) Income tax effect 17 ( 33 ) 37 Foreign currency translation adjustments, net of income tax effect ( 439 ) 295 ( 675 ) Translation adjustments on net investment hedges 147 ( 165 ) 353 Income tax effect ( 33 ) 37 ( 78 ) Translation adjustments on net investment hedges, net of income tax effect 114 ( 128 ) 275 Cash flow hedges 161 ( 41 ) 1 Income tax effect ( 12 ) 10 — Reclassification adjustments for cash flow hedges ( 178 ) 35 ( 10 ) Income tax effect — ( 8 ) 2 Cash flow hedges, net of income tax effect ( 29 ) ( 4 ) ( 7 ) Defined benefit pension and other postretirement plans 23 ( 18 ) ( 45 ) Income tax effect ( 4 ) 5 14 Reclassification adjustments for defined benefit pension and other postretirement plans — ( 1 ) ( 1 ) Income tax effect — — — Defined benefit pension and other postretirement plans, net of income tax effect 19 ( 14 ) ( 32 ) Investment securities available-for-sale 1 6 ( 6 ) Income tax effect — ( 1 ) 1 Investment securities available-for-sale, net of income tax effect 1 5 ( 5 ) Other comprehensive income (loss), net of income tax effect ( 334 ) 154 ( 444 ) Comprehensive Income $ 12,540 $ 11,349 $ 9,486 The accompanying notes are an integral part of these consolidated financial statements. MASTERCARD 2024 FORM 10-K 66 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Balance Sheets December 31, 2024 2023 (in millions, except per share data) Assets Current assets: Cash and cash equivalents $ 8,442 $ 8,588 Restricted cash and restricted cash equivalents 492 32 Restricted security deposits held for customers 1,874 1,845 Investments 330 592 Accounts receivable 3,773 4,060 Settlement assets 1,821 1,233 Prepaid expenses and other current assets 2,992 2,611 Total current assets 19,724 18,961 Property, equipment and right-of-use assets, net 2,138 2,061 Deferred income taxes 1,614 1,355 Goodwill 9,193 7,660 Other intangible assets, net 5,453 4,086 Other assets 9,959 8,325 Total Assets $ 48,081 $ 42,448 Liabilities, Redeemable Non-controlling Interests and Equity Current liabilities: Accounts payable $ 929 $ 834 Settlement obligations 2,316 1,399 Restricted security deposits held for customers 1,874 1,845 Accrued litigation 930 723 Accrued expenses 10,393 8,517 Short-term debt 750 1,337 Other current liabilities 2,028 1,609 Total current liabilities 19,220 16,264 Long-term debt 17,476 14,344 Deferred income taxes 317 369 Other liabilities 4,553 4,474 Total Liabilities 41,566 35,451 Commitments and Contingencies Redeemable Non-controlling Interests — 22 Stockholders’ Equity Class A common stock, $ 0.0001 par value; authorized 3,000 shares, 1,404 and 1,402 shares issued and 907 and 927 shares outstanding, respectively — — Class B common stock, $ 0.0001 par value; authorized 1,200 shares, 7 shares issued and outstanding, respectively — — Additional paid-in-capital 6,442 5,893 Class A treasury stock, at cost, 497 and 475 shares, respectively ( 71,431 ) ( 60,429 ) Retained earnings 72,907 62,564 Accumulated other comprehensive income (loss) ( 1,433 ) ( 1,099 ) Mastercard Incorporated Stockholders' Equity 6,485 6,929 Non-controlling interests 30 46 Total Equity 6,515 6,975 Total Liabilities, Redeemable Non-controlling Interests and Equity $ 48,081 $ 42,448 The accompanying notes are an integral part of these consolidated financial statements. 67 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Changes in Equity Stockholders’ Equity Common Stock Additional Paid-In Capital Class A Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Mastercard Incorporated Stockholders' Equity Non- Controlling Interests Total Equity Class A Class B (in millions) Balance at December 31, 2021 $ — $ — $ 5,061 $ ( 42,588 ) $ 45,648 $ ( 809 ) $ 7,312 $ 71 $ 7,383 Net income — — — — 9,930 — 9,930 — 9,930 Activity related to non-controlling interests — — — — — — — ( 13 ) ( 13 ) Redeemable non-controlling interest adjustments — — — — ( 3 ) — ( 3 ) — ( 3 ) Other comprehensive income (loss) — — — — — ( 444 ) ( 444 ) — ( 444 ) Dividends — — — — ( 1,968 ) — ( 1,968 ) — ( 1,968 ) Purchases of treasury stock — — — ( 8,773 ) — — ( 8,773 ) — ( 8,773 ) Share-based payments — — 237 7 — — 244 — 244 Balance at December 31, 2022 — — 5,298 ( 51,354 ) 53,607 ( 1,253 ) 6,298 58 6,356 Net income — — — — 11,195 — 11,195 — 11,195 Activity related to non-controlling interests — — — — — — — ( 12 ) ( 12 ) Redeemable non-controlling interest adjustments — — — — ( 7 ) — ( 7 ) — ( 7 ) Other comprehensive income (loss) — — — — — 154 154 — 154 Dividends — — — — ( 2,231 ) — ( 2,231 ) — ( 2,231 ) Purchases of treasury stock — — — ( 9,088 ) — — ( 9,088 ) — ( 9,088 ) Share-based payments — — 595 13 — — 608 — 608 Balance at December 31, 2023 — — 5,893 ( 60,429 ) 62,564 ( 1,099 ) 6,929 46 6,975 MASTERCARD 2024 FORM 10-K 68 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Changes in Equity (Continued) Stockholders’ Equity Common Stock Additional Paid-In Capital Class A Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Mastercard Incorporated Stockholders' Equity Non- Controlling Interests Total Equity Class A Class B (in millions) Balance at December 31, 2023 — — 5,893 ( 60,429 ) 62,564 ( 1,099 ) 6,929 46 6,975 Net income — — — — 12,874 — 12,874 12,874 Activity related to non-controlling interests — — — — — — — ( 16 ) ( 16 ) Redeemable non-controlling interest adjustments — — — — ( 5 ) — ( 5 ) ( 5 ) Other comprehensive income (loss) — — — — — ( 334 ) ( 334 ) — ( 334 ) Dividends — — — — ( 2,526 ) — ( 2,526 ) — ( 2,526 ) Purchases of treasury stock — — — ( 11,025 ) — — ( 11,025 ) — ( 11,025 ) Share-based payments — — 549 23 — — 572 — 572 Balance at December 31, 2024 $ — $ — $ 6,442 $ ( 71,431 ) $ 72,907 $ ( 1,433 ) $ 6,485 $ 30 $ 6,515 The accompanying notes are an integral part of these consolidated financial statements. 69 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Cash Flows For the Years Ended December 31, 2024 2023 2022 (in millions) Operating Activities Net income $ 12,874 $ 11,195 $ 9,930 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of customer incentives 1,830 1,622 1,586 Depreciation and amortization 897 799 750 (Gains) losses on equity investments, net 29 61 145 Share-based compensation 526 460 295 Deferred income taxes ( 527 ) ( 236 ) ( 651 ) Other 191 22 44 Changes in operating assets and liabilities: Accounts receivable 186 ( 546 ) ( 481 ) Income taxes receivable ( 165 ) ( 171 ) 12 Settlement assets ( 593 ) 40 48 Prepaid expenses ( 3,225 ) ( 2,438 ) ( 2,175 ) Accrued litigation and legal settlements 205 ( 375 ) 240 Restricted security deposits held for customers 29 277 ( 305 ) Accounts payable 75 ( 99 ) 190 Settlement obligations 922 282 201 Accrued expenses 1,587 571 1,188 Long-term taxes payable ( 163 ) ( 129 ) ( 121 ) Net change in other assets and liabilities 102 645 299 Net cash provided by operating activities 14,780 11,980 11,195 Investing Activities Purchases of investment securities available-for-sale ( 508 ) ( 300 ) ( 267 ) Purchases of investments held-to-maturity ( 108 ) ( 347 ) ( 239 ) Proceeds from sales of investment securities available-for-sale 199 87 54 Proceeds from maturities of investment securities available-for-sale 262 191 211 Proceeds from maturities of investments held-to-maturity 378 157 265 Purchases of property and equipment ( 474 ) ( 371 ) ( 442 ) Capitalized software ( 720 ) ( 717 ) ( 655 ) Purchases of equity investments ( 42 ) ( 89 ) ( 88 ) Proceeds from sales of equity investments 125 44 7 Acquisition of businesses, net of cash acquired ( 2,511 ) — ( 313 ) Other investing activities ( 3 ) ( 6 ) ( 3 ) Net cash used in investing activities ( 3,402 ) ( 1,351 ) ( 1,470 ) Financing Activities Purchases of treasury stock ( 11,035 ) ( 9,032 ) ( 8,753 ) Dividends paid ( 2,448 ) ( 2,158 ) ( 1,903 ) Proceeds from debt, net 3,960 1,554 1,123 Payment of debt ( 1,336 ) — ( 724 ) Tax withholdings related to share-based payments ( 178 ) ( 89 ) ( 141 ) Cash proceeds from employee stock plans 224 237 90 Other financing activities ( 23 ) — ( 20 ) Net cash used in financing activities ( 10,836 ) ( 9,488 ) ( 10,328 ) Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents ( 199 ) 128 ( 103 ) Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents 343 1,269 ( 706 ) Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period 10,465 9,196 9,902 Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period $ 10,808 $ 10,465 $ 9,196 The accompanying notes are an integral part of these consolidated financial statements. MASTERCARD 2024 FORM 10-K 70 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes to consolidated financial statements Note 1. Summary of Significant Accounting Policies Organization 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 payments and making those payment transactions secure, simple, smart and accessible. The Company makes payments easier and more efficient by providing a wide range of payment solutions and services using its family of well-known and trusted brands, including Mastercard®, Maestro® and Cirrus®. The Company operates a payments network that provides choice and flexibility for consumers, merchants and Mastercard customers. Through its unique and proprietary global payments network, the Company switches (authorizes, clears and settles) payment transactions. 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 consumer and commercial payment products, captures new payment flows and provides services and solutions. The Company’s services and solutions include, among others, security solutions, consumer acquisition and engagement services, and business and market insights, all of which draw on Mastercard’s principled and responsible use of secure data. The Company’s capabilities strengthen, reinforce and complement each other and are fundamentally interdependent. For the 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. The Company does not issue cards, extend credit, determine or receive revenue from interest rates or other fees charged to account holders by issuers, or establish the rates charged by acquirers in connection with merchants’ acceptance of the Company’s products. In most cases, account holder relationships belong to, and are managed by, the Company’s financial institution customers. Significant Accounting Policies Consolidation and basis of presentation - The consolidated financial statements include the accounts of Mastercard and its majority-owned and controlled entities, including any variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Investments in VIEs for which the Company is not considered the primary beneficiary are not consolidated and are accounted for as marketable, equity method or measurement alternative method investments and recorded in other assets on the consolidated balance sheets. At December 31, 2024 and 2023, there were no significant VIEs that required consolidation and the investments were not considered material to the consolidated financial statements. The Company consolidates acquisitions as of the date the Company has obtained a controlling financial interest. Intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the 2024 presentation. The reclassification had no impact on previously reported net revenue, operating income or net income. The Company follows accounting principles generally accepted in the United States of America (“GAAP”). Non-controlling interests represent the equity interest not owned by the Company and are recorded for consolidated entities in which the Company owns less than 100 % of the interests. 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 2024, 2023 and 2022, net income/(losses) attributable to non-controlling interests were not material and, as a result, amounts are included on the consolidated statements 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. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using information reasonably available as of December 31, 2024 and through the date of this Report. The accounting estimates used in the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results may differ from these estimates. Revenue recognition - Revenue is recognized to depict the transfer of promised services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services. 71 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Revenue is recognized in the period in which the related transactions and volume occur. Certain volume-based revenue is determined from information reported by customers. Revenue from the Company’s value-added services and solutions is generated 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. For those contracts that include multiple performance obligations, the Company allocates revenue to each performance obligation based on its relative standalone selling price (“SSP”). The SSP is the price at which the Company would sell a promised product or service separately in similar circumstances to similar customers. Revenue from the Company’s value-added services and solutions is recognized in the period in which the related services and solutions are performed or transactions occur. For services provided to customers where delivery involves the use of a third-party, the Company recognizes revenue on a gross basis if it acts as the principal, controlling the service to the customer, or on a net basis if it acts as the agent, arranging for the service to be provided. Mastercard has business agreements with certain customers that provide for rebates and incentives within net revenue that could be either fixed or variable. Fixed incentives typically represent payments to a customer directly related to entering into an agreement, which are generally capitalized and amortized over the life of the agreement on a straight-line basis. Capitalized customer incentives are included in prepaid expenses and other current assets and other assets on the consolidated balance sheets. Variable rebates and incentives are recorded primarily when volume- and transaction-based revenues are recognized over the contractual term. Variable rebates and incentives are calculated based upon estimated customer performance, such as volume thresholds, and the terms of the related business agreements. Customer incentives to be paid to customers under business agreements are included in accrued expenses and other liabilities on the consolidated balance sheets. 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 SSP basis. 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. Contract assets are included in prepaid expenses and other current assets and other assets on the consolidated balance sheets. The Company defers the recognition of revenue when consideration has been received prior to the satisfaction of performance obligations. As these performance obligations are satisfied, revenue is subsequently recognized. Deferred revenue primarily relates to certain value-added services and solutions. Deferred revenue is included in other current liabilities and other liabilities on the consolidated balance sheets. Business combinations - The Company accounts for business combinations under the acquisition method of accounting. The Company measures the tangible and intangible identifiable assets acquired, liabilities assumed, any non-controlling interest in the acquiree and contingent consideration at fair value as of the acquisition date. Acquisition-related costs are expensed as incurred and are included in general and administrative expenses on the consolidated statements of operations. Any excess purchase price over the fair value of net assets acquired, including identifiable intangible assets, is recorded as goodwill. Measurement period adjustments, if any, to the preliminary estimated fair value of the intangibles assets as of the acquisition date are recorded in goodwill. Goodwill and other intangible assets - Indefinite-lived intangible assets consist of goodwill and customer relationships. Goodwill represents the synergies expected to arise after the acquisition date and the assembled workforce. Finite-lived intangible assets consist of capitalized software costs, 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. 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 MASTERCARD 2024 FORM 10-K 72 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 exceeds the carrying value, goodwill is not impaired. If the fair value of the reporting unit is less than its carrying value, 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. If the fair value of the indefinite-lived intangible asset exceeds the carrying value, the asset is not impaired. If the fair value of the indefinite-lived intangible asset is less than its carrying value, the asset is impaired and the excess of the asset’s carrying value over the fair value is recognized as an impairment charge. 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 statements 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 statements 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 statements of operations. Settlement and other risk management - Mastercard’s rules guarantee the settlement of many of the payment network 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. The duration of the settlement exposure is short-term and generally limited to a few days. 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. 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. In some circumstances, however, funds may not settle until subsequent business days. In addition, the Company may receive or post funds in advance of transactions related to certain payments capabilities. The Company classifies the balances arising from these various activities as settlement assets and settlement obligations. 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 sheets. 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 sheets. The Company 73 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS records interest expense related to income tax matters as interest expense on the consolidated statements 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 and restricted cash equivalents - 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 (“restricted cash”) that are included in the reconciliation of beginning-of-period and end-of-period amounts shown on the consolidated statements of cash flows: • Restricted cash - Restricted cash includes cash segregated to meet regulatory commitments, cash within qualified legal settlement funds and cash restricted for other general business purposes, including contractually restricted deposits as well as cash balances that are restricted based on the Company’s intention with regard to usage. • Restricted security deposits held for customers - The Company requires certain customers to enter into risk mitigation arrangements, including cash collateral and/or 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 guarantees, are not recorded on the consolidated balance sheets. 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 sheets. These assets are fully offset by corresponding liabilities included on the consolidated balance sheets. 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. 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 measured at fair value on a nonrecurring basis include nonmarketable securities. 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. 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 sheets. 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 statements of changes in equity. Net realized gains and losses on debt securities are recognized in investment income on the consolidated statements 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 statements of MASTERCARD 2024 FORM 10-K 74 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS operations while the non-credit related loss remains in accumulated other comprehensive income (loss) until realized from a sale or subsequent impairment. • 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 sheets 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 sheets 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 statements 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 sheets. • Nonmarketable equity investments - The Company’s nonmarketable equity investments, which are reported in other assets on the consolidated balance sheets, include strategic 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 statements 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 statements 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 statements 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 that 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. 75 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 statements of comprehensive income. Any gains and losses deferred in accumulated other comprehensive income (loss) are subsequently reclassified to the corresponding line item on the consolidated statements 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. Any amounts excluded from effectiveness testing of cash flow hedges are recognized in earnings over the life of the hedging instrument. 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 statements 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 statements of operations as the earnings effect of the hedged item. Hedged items are measured on the consolidated balance sheets 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 sheets 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. 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 statements of operations. Operating lease amortization expense is included in general and administrative expenses on the consolidated statements of operations. 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 sheets. 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 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 sheets 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. MASTERCARD 2024 FORM 10-K 76 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 sheets. Net periodic pension and postretirement benefit cost/(income), excluding the service cost component, is recognized in other income (expense), net on the consolidated statements 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 statements 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 statements of operations. Advertising and marketing - Expenses incurred to promote Mastercard’s brand, products and services are recognized in advertising and marketing on the consolidated statements of operations. The timing of recognition is dependent on the type of advertising or marketing expense. Foreign currency remeasurement and translation - Revenue and expense transactions in currencies other than applicable functional currency of an entity are converted to the functional currency at the exchange rate on the transaction date. 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. Resulting exchange gains and losses related to remeasurement are included in general and administrative expenses on the consolidated statements 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. The Company also records an excise tax of 1% on the fair market value of net repurchases of shares of its common stock within treasury stock. 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 statements 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 sheets. The redeemable non-controlling interests are considered temporary and reported outside of permanent equity on the consolidated balance sheets 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 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. 77 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting Pronouncements Not Yet Adopted Improvements to Income Tax Disclosures - In December 2023, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to enhance the transparency and decision usefulness of income tax disclosures. The guidance includes improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company will adopt this guidance in its Form 10-K for the year ended December 31, 2025. Disaggregation of Income Statement Expenses - In November 2024, the FASB issued accounting guidance to improve the disclosures of a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods after December 15, 2027. The Company is in the process of evaluating when it will adopt this guidance. Note 2. Acquisitions In 2024, the Company acquired businesses for total cash consideration of $ 2.8 billion. In December 2024, Mastercard acquired a 100 % equity interest in RF Ultimate Parent, Inc. (“Recorded Future”), a global threat intelligence company, for cash consideration of $ 2.7 billion. This acquisition is expected to add threat intelligence capabilities to Mastercard’s identity, fraud prevention, real-time decisioning and cybersecurity services. The net assets acquired primarily relate to intangible assets, including goodwill of $ 1.7 billion 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. In 2023, the Company did not complete any material business acquisitions. In 2022, Mastercard acquired a 100 % equity interest in Dynamic Yield LTD (“Dynamic Yield”) for cash consideration of $ 325 million. The net assets acquired primarily relate to 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. 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. The Company is evaluating and finalizing the purchase accounting for the businesses acquired during 2024. In 2023, the Company finalized the purchase accounting for the business acquired during 2022. The fair values of the purchase price allocations in aggregate, as of the acquisition dates, are noted below for the years ended December 31. 2024 2023 2022 (in millions) Assets: Cash and cash equivalents $ 270 ** $ 11 Prepaid expenses and other current assets 79 ** 7 Goodwill 1,736 ** 200 Other intangible assets, net 1,361 ** 125 Other assets 20 ** 9 Total assets 3,466 ** 352 Liabilities: Other current liabilities 413 ** 15 Deferred income taxes 207 ** 3 Other liabilities 65 ** 9 Total liabilities 685 ** 27 Net assets acquired $ 2,781 ** $ 325 ** No material business acquisitions completed in 2023. MASTERCARD 2024 FORM 10-K 78 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the identified intangible assets acquired during the years ended December 31: 2024 2023 2022 2024 2023 2022 Acquisition Date Fair Value Weighted-Average Useful Life (in millions) (in years) Developed technologies $ 530 ** $ 100 8.9 ** 7.8 Customer relationships 781 ** 25 15.0 ** 17.0 Other 50 ** — 9.0 ** — Other intangible assets, net $ 1,361 ** $ 125 12.4 ** 9.6 ** No material business acquisitions completed in 2023. 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. Note 3. Revenue Mastercard is a payments network service provider that generates revenue from a wide range of payments 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 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 security solutions, consumer acquisition and engagement services, business and market insights, digital and authentication solutions, processing and gateway, ACH batch and real-time account-based payments and solutions, and open banking. Revenue from these services and solutions is recognized in the period in which the related services and solutions are performed or transactions occur. 79 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s disaggregated net revenue by category and geographic region were as follows for the years ended December 31: 2024 2023 2022 (in millions) Net revenue by category: Payment network $ 17,335 $ 15,824 $ 14,358 Value-added services and solutions 10,832 9,274 7,879 Net revenue $ 28,167 $ 25,098 $ 22,237 Net revenue by geographic region: Americas 1 $ 12,375 $ 11,135 $ 10,156 Asia Pacific, Europe, Middle East and Africa 15,792 13,963 12,081 Net revenue $ 28,167 $ 25,098 $ 22,237 1 Americas includes the United States, Canada and Latin America. Prior period amounts have been reclassified to conform to the new presentation. The Company’s customers are generally billed weekly, with certain billings occurring on a monthly and quarterly basis. The frequency of billing 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 sheets from contracts with customers at December 31: 2024 2023 (in millions) Receivables from contracts with customers Accounts receivable $ 3,491 $ 3,851 Contract assets Prepaid expenses and other current assets 210 133 Other assets 460 387 Deferred revenue 1, 2 Other current liabilities 890 459 Other liabilities 449 318 1 Revenue recognized from performance obligations satisfied in 2024 was $ 2.8 billion. 2 During 2024, the increase in deferred revenue is primarily driven by the acquisition of Recorded Future. 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, 2024, the estimated aggregate consideration allocated to unsatisfied performance obligations for these services and solutions is $ 1.4 billion, which is expected to be recognized through 2029. 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. MASTERCARD 2024 FORM 10-K 80 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4. Earnings Per Share The components of basic and diluted EPS for common shares for each of the years ended December 31 were as follows: 2024 2023 2022 (in millions, except per share data) Numerator Net income $ 12,874 $ 11,195 $ 9,930 Denominator Basic weighted-average shares outstanding 925 944 968 Dilutive stock options and stock units 2 2 3 Diluted weighted-average shares outstanding 1 927 946 971 Earnings per Share Basic $ 13.91 $ 11.86 $ 10.26 Diluted $ 13.89 $ 11.83 $ 10.22 Note: 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. Note 5. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents The following table provides the components of cash, cash equivalents, restricted cash and restricted cash equivalents reported on the consolidated balance sheets that total to the amounts shown on the consolidated statements of cash flows for the years ended December 31: 2024 2023 (in millions) Cash and cash equivalents $ 8,442 $ 8,588 Restricted cash and restricted cash equivalents Restricted cash and restricted cash equivalents 1 492 32 Restricted security deposits held for customers 1,874 1,845 Cash, cash equivalents, restricted cash and restricted cash equivalents $ 10,808 $ 10,465 1 During 2024, the Company increased its Restricted cash and restricted cash equivalents balance primarily as a result of cash segregated to meet regulatory commitments, as the Company is subject to systemic importance regulation in the European Union. The increase was also attributable to restricted cash for litigation within a qualified settlement fund related to the settlement agreement for the ATM non-discrimination rule surcharge complaints. See Note 21 (Legal and Regulatory Proceedings) for additional information. Note 6. Supplemental Cash Flows The following table includes supplemental cash flow disclosures for each of the years ended December 31: 2024 2023 2022 (in millions) Cash paid for income taxes, net of refunds $ 3,252 $ 2,746 $ 2,506 Cash paid for interest 571 477 414 Cash paid for legal settlements 496 929 114 81 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7. Investments The Company’s investments on the consolidated balance sheets include both available-for-sale and held-to-maturity debt securities (see Investments section below). The Company’s strategic investments in equity securities of publicly traded and privately held companies are classified within other assets on the consolidated balance sheets (see Equity Investments section below). Investments Investments on the consolidated balance sheets consisted of the following at December 31: 2024 2023 (in millions) Available-for-sale securities $ 292 $ 286 Held-to-maturity securities 1 38 306 Total investments $ 330 $ 592 1 Held-to-maturity securities represent investments in time deposits that mature within one year. The cost of these securities approximates fair value. Investment income on the consolidated statements of operations primarily consists of interest income generated from cash, cash equivalents, held-to-maturity 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 2024, 2023 and 2022 were not material. 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: 2024 2023 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value (in millions) Government and agency securities $ 80 $ — $ — $ 80 $ 86 $ — $ — $ 86 Corporate securities 187 1 — 188 200 1 ( 1 ) 200 Asset-backed securities 24 — — 24 — — — — Total $ 291 $ 1 $ — $ 292 $ 286 $ 1 $ ( 1 ) $ 286 The Company’s government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds and foreign government bonds that are denominated in the national currency of the issuing country. Corporate securities held at December 31, 2024 and 2023, and asset-backed securities held at December 31, 2024, primarily carried a credit rating of A- or better. Corporate securities are comprised of commercial paper and corporate bonds. The gross unrealized gains and losses on the available-for-sale securities are primarily driven by changes in interest rates. For the available-for-sale securities in gross unrealized loss positions, the Company (1) does not intend to sell the securities, (2) more likely than not, will not be required to sell the securities before recovery of the unrealized losses and (3) expects that the contractual principal and interest will be received. Unrealized gains and losses are recorded as a separate component of accumulated other comprehensive income (loss) on the consolidated statements of changes in equity. The maturity distribution based on the contractual terms of the Company’s available-for-sale investment securities at December 31, 2024 was as follows: Amortized Cost Fair Value (in millions) Due within 1 year $ 134 $ 134 Due after 1 year through 5 years 157 158 Total $ 291 $ 292 MASTERCARD 2024 FORM 10-K 82 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Equity Investments Included in other assets on the consolidated balance sheets 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, 2023 Purchases Sales Changes in Fair Value 1 Other 2 Balance at December 31, 2024 (in millions) Marketable securities $ 506 $ — $ ( 104 ) $ ( 28 ) $ ( 137 ) $ 237 Nonmarketable securities 1,223 42 ( 21 ) ( 1 ) 127 1,370 Total equity investments $ 1,729 $ 42 $ ( 125 ) $ ( 29 ) $ ( 10 ) $ 1,607 1 Recorded in gains (losses) on equity investments, net on the consolidated statements of operations. 2 Includes reclasses between Marketable and Nonmarketable securities as well as translational impact of currency. The following table sets forth the components of the Company’s Nonmarketable securities at December 31: 2024 2023 (in millions) Measurement alternative $ 1,140 $ 1,008 Equity method 230 215 Total Nonmarketable securities $ 1,370 $ 1,223 The following table summarizes the total carrying value of the Company’s Measurement alternative investments, including cumulative unrealized gains and losses through December 31: 2024 (in millions) Initial cost basis $ 693 Cumulative adjustments 1 : Upward adjustments 645 Downward adjustments (including impairment) ( 198 ) Carrying amount, end of period $ 1,140 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: 2024 2023 2022 (in millions) Measurement alternative investments: Upward adjustments $ 11 $ 7 $ 114 Downward adjustments (including impairment) $ ( 9 ) $ ( 145 ) $ ( 23 ) Marketable securities: Unrealized gains (losses), net $ ( 34 ) $ 97 $ ( 213 ) 83 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8. Fair Value Measurements The Company’s financial instruments are carried at fair value, cost or amortized cost on the consolidated balance sheets. The Company classifies its fair value measurements of financial instruments into a three-level hierarchy (the “Valuation Hierarchy”). Financial Instruments - Carried at Fair Value Financial instruments carried at fair value are categorized for fair value measurement purposes as recurring or non-recurring in nature. Recurring Measurements The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy was as follows: December 31, 2024 December 31, 2023 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (in millions) Assets Investment securities available-for-sale 1 : Government and agency securities $ 36 $ 44 $ — $ 80 $ 33 $ 53 $ — $ 86 Corporate securities — 188 — 188 — 200 — 200 Asset-backed securities — 24 — 24 — — — — Derivative instruments 2 : Foreign exchange contracts — 206 — 206 — 36 — 36 Marketable securities 3 : Equity securities 237 — — 237 506 — — 506 Deferred compensation plan 4 : Deferred compensation assets 107 — — 107 93 — — 93 Liabilities Derivative instruments 2 : Foreign exchange contracts $ — $ 36 $ — $ 36 $ — $ 104 $ — $ 104 Interest rate contracts — 63 — 63 — 79 — 79 Deferred compensation plan 5 : Deferred compensation liabilities 105 — — 105 91 — — 91 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 non-U.S. government and agency securities, corporate and asset-backed 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 measured at fair value are 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 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 sheets. 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 sheets. MASTERCARD 2024 FORM 10-K 84 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Financial Instruments - Not Carried at Fair Value Debt Debt instruments are carried on the consolidated balance sheets at amortized cost. 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, 2024, the carrying value and fair value of debt was $ 18.2 billion and $ 16.8 billion, respectively. At December 31, 2023, the carrying value and fair value of debt was $ 15.7 billion and $ 14.7 billion, respectively. See Note 15 (Debt) for further details. Other Financial Instruments Certain other financial instruments are carried on the consolidated balance sheets 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, time deposits, accounts receivable, settlement assets, restricted cash and restricted cash equivalents, accounts payable, settlement obligations and other accrued liabilities. Note 9. Prepaid Expenses and Other Assets Prepaid expenses and other current assets consisted of the following at December 31: 2024 2023 (in millions) Customer incentives $ 1,854 $ 1,570 Other 1,138 1,041 Total prepaid expenses and other current assets $ 2,992 $ 2,611 Other assets consisted of the following at December 31: 2024 2023 (in millions) Customer incentives $ 6,550 $ 5,170 Equity investments 1,607 1,729 Income taxes receivable 1,002 783 Other 800 643 Total other assets $ 9,959 $ 8,325 85 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10. Property, Equipment and Right-of-Use Assets Property, equipment and right-of-use assets consisted of the following at December 31: 2024 2023 (in millions) Buildings, building equipment and land $ 709 $ 678 Equipment 2,118 1,940 Furniture and fixtures 101 90 Leasehold improvements 436 398 Operating lease right-of-use assets 1,167 1,192 Property, equipment and right-of-use assets 4,531 4,298 Less: Accumulated depreciation and amortization ( 2,393 ) ( 2,237 ) Property, equipment and right-of-use assets, net $ 2,138 $ 2,061 Depreciation and amortization expense for the above property, equipment and right-of-use assets was $ 519 million, $ 482 million and $ 473 million for 2024, 2023 and 2022, respectively. Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheets as follows at December 31: 2024 2023 (in millions) Balance sheet location Property, equipment and right-of-use assets, net $ 681 $ 686 Other current liabilities 133 142 Other liabilities 627 633 Operating lease amortization expense was $ 145 million, $ 141 million and $ 137 million for 2024, 2023 and 2022, respectively. As of December 31, 2024 and 2023, the weighted-average remaining lease term of operating leases was 8.0 years and 8.2 years and the weighted-average discount rate for operating leases was 3.5 % and 3.3 %, respectively. The useful lives of the Company’s assets are as follows: Asset Category Estimated Useful Life Buildings 30 years Building equipment 10 - 15 years Equipment and furniture and fixtures 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 following table summarizes the maturity of the Company’s operating lease liabilities at December 31, 2024 based on lease term: (in millions) 2025 $ 161 2026 139 2027 105 2028 87 2029 69 Thereafter 328 Total operating lease payments 889 Less: Interest ( 129 ) Present value of operating lease liabilities $ 760 MASTERCARD 2024 FORM 10-K 86 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11. Goodwill The changes in the carrying amount of goodwill for the years ended December 31 were as follows: 2024 2023 (in millions) Beginning balance $ 7,660 $ 7,522 Additions 1,736 46 Foreign currency translation ( 203 ) 92 Ending balance $ 9,193 $ 7,660 The increase in the carrying amount of goodwill in 2024 was primarily related to the acquisition of Recorded Future in 2024. The Company performed its annual qualitative assessment of goodwill during the fourth quarter of 2024 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, 2024. Note 12. Other Intangible Assets The following table sets forth net intangible assets, other than goodwill, at December 31: 2024 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in millions) Finite-lived intangible assets Capitalized software 1 $ 4,797 $ ( 1,640 ) $ 3,157 $ 3,917 $ ( 1,530 ) $ 2,387 Customer relationships 2,804 ( 720 ) 2,084 2,165 ( 641 ) 1,524 Other 99 ( 40 ) 59 51 ( 38 ) 13 Total 7,700 ( 2,400 ) 5,300 6,133 ( 2,209 ) 3,924 Indefinite-lived intangible assets Customer relationships 153 — 153 162 — 162 Total $ 7,853 $ ( 2,400 ) $ 5,453 $ 6,295 $ ( 2,209 ) $ 4,086 1 Includes technology acquired in business combinations. The increase in the gross carrying amount of finite-lived intangible assets in 2024 was primarily related to the acquisition of Recorded Future in 2024 as well as software additions to support the continued growth of the Company. 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 2024, it was determined that the Company’s indefinite-lived intangible assets were not impaired. Amortization on the finite-lived intangible assets above amounted to $ 523 million, $ 457 million and $ 414 million in 2024, 2023 and 2022, respectively. The following table sets forth the estimated future amortization expense on finite-lived intangible assets on the consolidated balance sheets at December 31, 2024: (in millions) 2025 $ 698 2026 706 2027 641 2028 580 2029 542 Thereafter 2,133 Total $ 5,300 87 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13. Accrued Expenses and Accrued Litigation Accrued expenses consisted of the following at December 31: 2024 2023 (in millions) Customer incentives $ 7,627 $ 6,219 Personnel costs 1,681 1,258 Income and other taxes 454 486 Other 631 554 Total accrued expenses $ 10,393 $ 8,517 As of December 31, 2024 and 2023, long-term customer incentives included in other liabilities were $ 2,820 million and $ 2,777 million, respectively. As of December 31, 2024 and 2023, the Company’s provision for litigation was $ 930 million and $ 723 million, respectively. These amounts are separately reported as accrued litigation on the consolidated balance sheets. See Note 21 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation. Note 14. 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 $ 287 million, $ 253 million and $ 204 million in 2024, 2023 and 2022, 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, the Company sponsors a defined benefit pension plan in the United Kingdom (the “U.K. 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 U.K. 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”). The Company uses a December 31 measurement date for the Pension Plans and its Postretirement Plan. The benefit obligation associated with the Postretirement Plan is immaterial. The following table sets forth the components of the Pension Plans recognized on the Company’s consolidated balance sheets at December 31: 2024 2023 (in millions) Fair value of plan assets $ 454 $ 449 Projected benefit obligation 410 420 Accumulated benefit obligation 408 419 Funded Status 44 29 As of December 31, 2024 and 2023, the amount recognized in accumulated other comprehensive income (loss), before tax, for the Postretirement Plan was $ 10 million and $ 8 million, respectively. As of December 31, 2024 and 2023, the amount recognized in accumulated other comprehensive income (loss), before tax, for the Pension Plans was $( 14 ) million, and $( 35 ) million, respectively. MASTERCARD 2024 FORM 10-K 88 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15. Debt Debt consisted of the following at December 31: 2024 2023 Effective Interest Rate (in millions) Senior Notes 2024 USD Notes 4.100 % Senior Notes due January 2028 $ 750 $ — 4.262 % 4.350 % Senior Notes due January 2032 1,150 — 4.446 % 4.550 % Senior Notes due January 2035 1,100 — 4.633 % 4.875 % Senior Notes due May 2034 1,000 — 5.047 % 2023 USD Notes 4.875 % Senior Notes due March 2028 750 750 5.003 % 4.850 % Senior Notes due March 2033 750 750 4.923 % 2022 EUR Notes 1 1.000 % Senior Notes due February 2029 781 830 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 2.100 % Senior Notes due December 2027 833 885 2.189 % 2.500 % Senior Notes due December 2030 156 166 2.562 % 2014 USD Notes 3.375 % Senior Notes due April 2024 — 1,000 3.484 % Other Debt 2023 INR Term Loan 3 9.430 % Term Loan due July 2024 — 338 9.780 % 18,420 15,869 Less: Unamortized discount and debt issuance costs ( 131 ) ( 109 ) Less: Cumulative hedge accounting fair value adjustments 4 ( 63 ) ( 79 ) Total debt outstanding 18,226 15,681 Less: Short-term debt 5 ( 750 ) ( 1,337 ) Long-term debt $ 17,476 $ 14,344 1 € 750 million euro-denominated debt issued in February 2022. 2 € 950 million euro-denominated debt remaining of the € 1.650 billion issued in December 2015. 3 INR 28.1 billion Indian rupee-denominated loan issued in July 2023. 4 The Company has an interest rate swap that is accounted for as a fair value hedge. See Note 23 (Derivative and Hedging Instruments) for additional information. 5 The 2019 USD Notes due March 2025 are classified as short-term debt, net of unamortized discount and debt issuance costs, on the consolidated balance sheets as of December 31, 2024. As of December 31, 2023, the 2014 USD Notes due April 2024 and the INR Term Loan due July 2024 were classified as short-term debt, net of unamortized discount and debt issuance costs, on the consolidated balance sheets. 89 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Scheduled annual maturities of the principal portion of debt outstanding at December 31, 2024 are summarized below. (in millions) 2025 $ 750 2026 750 2027 1,833 2028 2,000 2029 1,781 Thereafter 11,306 Total $ 18,420 Senior Notes During 2024, the Company issued a total of $ 4 billion of debt, as follows: • In May 2024, the Company issued $ 1 billion principal amount of notes due May 2034 • In September 2024, the Company issued $ 750 million principal amount of notes due January 2028, $ 1,150 million principal amount of notes due January 2032 and $ 1,100 million principal amount of notes due January 2035 The issuances in 2024 are collectively referred to as the “2024 USD Notes”. The net proceeds from the issuance of the 2024 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $ 3.96 billion. In March 2023, the Company issued $ 750 million principal amount of notes due March 2028 and $ 750 million principal amount of notes due March 2033 (collectively the “2023 USD Notes”). The net proceeds from the issuance of the 2023 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $ 1.489 billion. In February 2022, the Company issued € 750 million ($ 781 million and $ 830 million as of December 31, 2024 and 2023, respectively) 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). 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 term loan originally due July 2023 (the “2022 INR Term Loan”). The net proceeds of the 2022 INR Term Loan, after deducting issuance costs, were INR 22.6 billion ($ 284 million as of the date of settlement). In April 2023, the Company entered into an additional unsecured INR 4.97 billion term loan, also originally due July 2023 (the “April 2023 INR Term Loan”). The net proceeds of the April 2023 INR Term Loan, after deducting issuance costs, were INR 4.96 billion ($ 61 million as of the date of settlement). In July 2023, the Company modified and combined the 2022 INR Term Loan and April 2023 INR Term Loan (the “2023 INR Term Loan”), increasing the total unsecured loans to INR 28.1 billion ($ 342 million as of the date of settlement). The 2023 INR Term Loan matured in July 2024. The Company obtained the INR Term Loans to serve as economic hedges to offset possible changes in the value of INR-denominated monetary assets due to foreign exchange fluctuations. Commercial Paper Program and Credit Facility As of December 31, 2024, the Company has a commercial paper program (the “Commercial Paper Program”) under which the Company is authorized to issue up to $ 8 billion in unsecured commercial paper notes with maturities of up to 397 days from the date of issuance. The Commercial Paper Program is available in U.S. dollars. In conjunction with the Commercial Paper Program, the Company has a committed five-year unsecured $ 8 billion revolving credit facility (the “Credit Facility”). The Credit Facility, which previously was set to expire on November 8, 2028, was extended and now expires on November 7, 2029. Borrowings under the Credit Facility are available in U.S. dollars and/or euros. The facility fee under MASTERCARD 2024 FORM 10-K 90 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2024 and 2023. 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 for business continuity purposes. The Company had no borrowings under the Credit Facility or the Commercial Paper Program at December 31, 2024 and 2023. Note 16. 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, 2024 and 2023. Dividend and voting rights are to be determined by the Board of Directors of the Company upon issuance. Dividends The Company declared a quarterly cash dividend on its Class A and Class B Common Stock during each of the four quarters of 2024, 2023 and 2022. The total per share dividends declared during the years ended December 31 are summarized below: 2024 2023 2022 (in millions, except per share data) Dividends declared per share $ 2.74 $ 2.37 $ 2.04 Total dividends declared $ 2,526 $ 2,231 $ 1,968 Ownership and Governance Structure Equity ownership and voting power of the Company’s shares were allocated as follows as of December 31: 2024 2023 Equity Ownership General Voting Power Equity Ownership General Voting Power Public Investors (Class A stockholders) 89.9 % 90.6 % 88.8 % 89.5 % Mastercard Foundation (Class A stockholders) 9.3 % 9.4 % 10.4 % 10.5 % Principal or Affiliate Customers (Class B stockholders) 0.7 % — % 0.8 % — % Note: Table may not sum due to rounding. 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. 91 MASTERCARD 2024 FORM 10-K PART II ITEM 8. 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. Historically, Mastercard Foundation had been restricted from selling or otherwise transferring its shares of Class A common stock prior to May 1, 2027, except to the extent necessary to satisfy its charitable disbursement requirements. In July 2023, pursuant to an application in consultation with the Company, Mastercard Foundation received court approval to advance that date to January 1, 2024. As a result, Mastercard Foundation is now permitted to sell all or part of its remaining shares, subject to certain conditions. In March 2024, Mastercard Foundation began selling shares pursuant to an orderly and structured plan to diversify its Mastercard shares over a seven-year period, while committing to remain a long-term Mastercard stockholder and retaining a significant holding of Mastercard shares in its portfolio. Common Stock Activity The following table presents the changes in the Company’s outstanding Class A and Class B common stock: Outstanding Shares Class A Class B (in millions) 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 Purchases of treasury stock ( 23.8 ) — Share-based payments 2.3 — Conversion of Class B to Class A common stock 0.4 ( 0.4 ) Balance at December 31, 2023 927.3 7.2 Purchases of treasury stock ( 23.0 ) — Share-based payments 1.9 — Conversion of Class B to Class A common stock 0.4 ( 0.4 ) Balance at December 31, 2024 906.6 6.8 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: 2024 2023 2022 (In millions, except per share data) Board authorization $ 12,000 $ 11,000 $ 9,000 Dollar-value of shares repurchased $ 10,954 $ 9,032 $ 8,753 Shares repurchased 23.0 23.8 25.7 Average price paid per share $ 475.35 $ 379.49 $ 340.60 As of December 31, 2024, the remaining authorization under the share repurchase programs approved by the Company’s Board of Directors was $ 15.2 billion. The Company repurchased an additional $ 959 million dollar-value of shares in 2025, through February 7, 2025. As of February 7, 2025, the remaining authorization under the share repurchase programs approved by the Company’s Board of Directors was $ 14.2 billion. MASTERCARD 2024 FORM 10-K 92 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 17. 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, 2024 and 2023 were as follows: December 31, 2023 Increase / (Decrease) Reclassifications December 31, 2024 (in millions) Foreign currency translation adjustments 1 $ ( 1,119 ) $ ( 439 ) $ — $ ( 1,558 ) Translation adjustments on net investment hedges 2 181 114 — 295 Cash flow hedges Foreign exchange contracts 3 ( 17 ) 149 ( 183 ) ( 51 ) Interest rate contracts ( 118 ) — 5 ( 113 ) Defined benefit pension and other postretirement plans ( 25 ) 19 — ( 6 ) Investment securities available-for-sale ( 1 ) 1 — — Accumulated other comprehensive income (loss) $ ( 1,099 ) $ ( 156 ) $ ( 178 ) $ ( 1,433 ) December 31, 2022 Increase / (Decrease) Reclassifications December 31, 2023 (in millions) Foreign currency translation adjustments 1 $ ( 1,414 ) $ 295 $ — $ ( 1,119 ) Translation adjustments on net investment hedges 2 309 ( 128 ) — 181 Cash flow hedges Foreign exchange contracts 3 ( 8 ) ( 31 ) 22 ( 17 ) Interest rate contracts ( 123 ) — 5 ( 118 ) Defined benefit pension and other postretirement plans ( 11 ) ( 13 ) ( 1 ) ( 25 ) Investment securities available-for-sale ( 6 ) 5 — ( 1 ) Accumulated other comprehensive income (loss) $ ( 1,253 ) $ 128 $ 26 $ ( 1,099 ) 1 During 2024, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro, Brazilian real, and British pound against the U.S. dollar. During 2023, the decrease in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the appreciation of the euro and British pound against the U.S. dollar. 2 During 2024, the increase in the accumulated other comprehensive income related to the net investment hedges was driven by the depreciation of the euro and British pound against the U.S. dollar. During 2023, the decrease in the accumulated other comprehensive income related to the net investment hedges was driven by the appreciation of the euro against the U.S. dollar. 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 statements of operations when the underlying hedged transactions impact earnings. See Note 23 (Derivative and Hedging Instruments) for additional information. Note 18. 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. 93 MASTERCARD 2024 FORM 10-K PART II ITEM 8. 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; however, 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. 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: 2024 2023 2022 Risk-free rate of return 4.2 % 4.2 % 1.6 % Expected term (in years) 6.00 6.00 6.00 Expected volatility 28.7 % 29.5 % 24.6 % Expected dividend yield 0.6 % 0.6 % 0.6 % Weighted-average fair value per Option granted $ 164.66 $ 123.22 $ 86.92 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, 2024: Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in millions) (in years) (in millions) Outstanding at January 1, 2024 3.0 $ 217 Granted 0.2 $ 476 Exercised ( 1.1 ) $ 163 Forfeited — $ 418 Outstanding at December 31, 2024 2.1 $ 273 5.2 $ 524 Exercisable at December 31, 2024 1.6 $ 230 4.2 $ 461 Options vested and expected to vest at December 31, 2024 2.1 $ 273 5.2 $ 524 As of December 31, 2024, there was $ 16 million o f total unrecognized compensation cost related to non-vested Options. The cost is expected to be recognized over a weighted-average period o f 1.6 years. 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; however, in the event of termination due to job elimination (as defined by the Company), 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 . MASTERCARD 2024 FORM 10-K 94 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the Company’s RSU activity for the year ended December 31, 2024: Units Weighted-Average Grant-Date Fair Value Aggregate Intrinsic Value (in millions) (in millions) Outstanding at January 1, 2024 2.2 $ 344 Granted 1.0 $ 472 Converted ( 1.0 ) $ 338 Forfeited ( 0.1 ) $ 391 Outstanding at December 31, 2024 2.1 $ 403 $ 1,081 RSUs expected to vest at December 31, 2024 2.0 $ 403 $ 1,034 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, 2024, there was $ 378 million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 1.8 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; however, in the event of termination due to job elimination (as defined by the Company), 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. The following table summarizes the Company’s PSU activity for the year ended December 31, 2024: Units Weighted-Average Grant-Date Fair Value Aggregate Intrinsic Value (in millions) (in millions) Outstanding at January 1, 2024 0.6 $ 365 Granted 0.2 $ 512 Converted ( 0.3 ) $ 385 Other 0.1 $ 335 Outstanding at December 31, 2024 0.6 $ 396 $ 325 PSUs expected to vest at December 31, 2024 0.6 $ 396 $ 321 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. As of December 31, 2024, there was $ 37 million of total unrecognized compensation cost related to non-vested PSUs. The cost is expected to be recognized over a weighted-average period of 1.6 years. 95 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Additional Information The following table includes additional share-based payment information for each of the years ended December 31: 2024 2023 2022 (in millions, except weighted-average fair value) Share-based compensation expense $ 526 $ 460 $ 295 Income tax benefit recognized for equity awards 111 99 61 Income tax benefit realized related to Options exercised 77 95 49 Options Total intrinsic value of Options exercised 354 487 231 RSUs Weighted-average grant-date fair value of awards granted 472 350 340 Total grant-date fair value of awards vested 340 235 305 Total intrinsic value of RSUs converted into shares of Class A common stock 477 253 420 PSUs Weighted-average grant-date fair value of awards granted 512 365 335 Total grant-date fair value of awards vested 99 12 — Total intrinsic value of PSUs converted into shares of Class A common stock 122 14 — Note 19. Commitments At December 31, 2024, the Company had the following future minimum payments due under noncancelable agreements, primarily related to sponsorships to promote the Mast ercard brand and licensing arrangements. The amount accrued related to these future payments as of December 31, 2024 was not material. (in millions) 2025 $ 735 2026 595 2027 406 2028 248 2029 62 Thereafter 27 Total $ 2,073 Note 20. Income Taxes Components of Income and Income Tax Expense The domestic and foreign components of income before income taxes for the years ended December 31 were as follows: 2024 2023 2022 (in millions) United States $ 6,168 $ 4,506 $ 4,228 Foreign 9,086 9,133 7,504 Income before income taxes $ 15,254 $ 13,639 $ 11,732 MASTERCARD 2024 FORM 10-K 96 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The total income tax provision for the years ended December 31 was comprised of the following components: 2024 2023 2022 (in millions) Current Federal $ 1,093 $ 991 $ 1,024 State and local 144 127 133 Foreign 1,670 1,563 1,296 Total current 2,907 2,681 2,453 Deferred Federal ( 197 ) ( 180 ) ( 661 ) State and local ( 14 ) ( 18 ) ( 40 ) Foreign ( 316 ) ( 39 ) 50 Total deferred ( 527 ) ( 237 ) ( 651 ) Income tax expense $ 2,380 $ 2,444 $ 1,802 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, was as follows: 2024 2023 2022 Amount Percent Amount Percent Amount Percent ($ in millions) Income before income taxes $ 15,254 $ 13,639 $ 11,732 Federal statutory tax 3,203 21.0 % 2,864 21.0 % 2,464 21.0 % State tax effect, net of federal benefit 90 0.6 % 82 0.6 % 72 0.6 % Foreign tax effect ( 649 ) ( 4.3 ) % ( 393 ) ( 2.9 ) % ( 347 ) ( 3.0 ) % Valuation allowance - U.S. foreign tax credit — — % 327 2.4 % ( 333 ) ( 2.8 ) % U.S. tax expense on foreign operations 82 0.5 % 39 0.3 % 111 0.9 % Foreign-derived intangible income deduction ( 195 ) ( 1.3 ) % ( 144 ) ( 1.1 ) % ( 129 ) ( 1.1 ) % Windfall benefit ( 93 ) ( 0.6 ) % ( 88 ) ( 0.6 ) % ( 68 ) ( 0.6 ) % Other, net ( 58 ) ( 0.4 ) % ( 243 ) ( 1.8 ) % 32 0.3 % Income tax expense $ 2,380 15.6 % $ 2,444 17.9 % $ 1,802 15.4 % Note: Table may not sum due to rounding. The effective income tax rates for the years ended December 31, 2024, 2023 and 2022 were 15.6 %, 17.9 % and 15.4 %, respectively. The effective income tax rate for 2024 was lower than the effective income tax rate for 2023, primarily due to a discrete tax expense in 2023 related to changes in the valuation allowance associated with the U.S. foreign tax credits deferred tax asset. In 2023, the treatment of foreign taxes paid under the U.S. tax regulations published in 2022 changed due to the foreign tax legislation enacted in Brazil and Notice 2023-55 (the “Notice”), released by the U.S. Department of Treasury (“Treasury”). Therefore, the Company recognized a total $ 327 million discrete tax expense in 2023 to establish the valuation allowance. This discrete tax expense was partially offset by the Company’s ability to claim more U.S. foreign tax credits generated in 2022 and 2023 due to the Notice. Additionally, a change in the Company’s geographic mix of earnings in 2024 contributed to the lower effective income tax rate compared to the prior year. The effective income tax rate for 2023 was higher than the effective income tax rate for 2022, primarily due to changes in the valuation allowance associated with the deferred tax asset related to U.S. foreign tax credits. In 2022, the Company recognized a discrete tax benefit of $ 333 million to release the valuation allowance resulting from U.S. tax regulations published in the first quarter of 2022 (the “2022 Regulations”). In 2023, the treatment of foreign taxes paid under the 2022 Regulations changed due to foreign tax legislation enacted in Brazil and the Notice released by Treasury. Therefore, the Company recognized a total $ 327 million discrete tax expense in 2023 to establish the valuation allowance. The discrete tax expense recognized in 2023 was partially offset by the Company’s ability to claim more U.S. foreign tax credits generated in 2022 and 2023 due to the Notice. 97 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Ltd. (“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 2024, 2023 and 2022, the impact of the incentive grant received from the Ministry of Finance resulted in a reduction of MAPPL’s income tax liability of $ 644 million, or $ 0.69 per diluted share, $ 571 million, or $ 0.60 per diluted share, and $ 454 million, or $ 0.47 per diluted share, respectively. Indefinite Reinvestment As of December 31, 2024 the Company does not accrue taxes on $ 3.8 billion of foreign earnings that remain permanently reinvested outside the U.S. The Company expects that taxes associated with any future repatriation of these earnings are immaterial. Deferred Income 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 were as follows: 2024 2023 (in millions) Deferred tax assets Accrued liabilities $ 939 $ 863 Compensation and benefits 371 335 Net operating losses 468 149 U.S. foreign tax credits 736 635 Property and equipment 432 277 Intangible assets 160 182 Lease liabilities 134 158 Other items 236 203 Less: Valuation allowance ( 871 ) ( 758 ) Total deferred tax assets 2,605 2,044 Deferred tax liabilities Prepaid expenses and other accruals 195 211 Gains on equity investments 112 112 Goodwill and intangible assets 760 518 Right-of-use lease assets 116 138 Other items 125 79 Total deferred tax liabilities 1,308 1,058 Net deferred tax assets $ 1,297 $ 986 MASTERCARD 2024 FORM 10-K 98 PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The changes in the Company’s valuation allowance on deferred tax assets were as follows: Balance at December 31, 2021 Changes to Related Gross Deferred Tax Assets Change/(Release) Balance at December 31, 2022 Changes to Related Gross Deferred Tax Assets Change/(Release) Balance at December 31, 2023 Changes to Related Gross Deferred Tax Assets Change/(Release) Balance at December 31, 2024 (in millions) U.S. foreign tax credit carryforward 1 $ 333 $ — $ ( 333 ) $ — $ 308 $ 327 $ 635 $ 101 $ — $ 736 Net operating and capital losses 2 82 23 9 114 12 ( 3 ) 123 11 1 135 Total $ 415 $ 23 $ ( 324 ) $ 114 $ 320 $ 324 $ 758 $ 112 $ 1 $ 871 1 The 2022 activity resulted in a full release of the valuation allowance associated with the U.S. foreign tax credit carryforward due to final U.S. tax regulations published in 2022. The 2023 activity resulted in the establishment of the valuation allowance associated with the U.S. foreign tax credit carryforward due to foreign tax legislation enacted in Brazil and the Notice released by Treasury. 2 Capital losses are included within other items in the deferred tax assets section of the components of the Deferred Income Taxes table above. The recognition of foreign tax credits is dependent upon the realization of future foreign source income in the appropriate foreign tax credit basket in accordance with U.S. federal income tax law. The recognition of the net operating and capital losses is dependent on the timing and character of future taxable income in the applicable jurisdictions. As of December 31, 2024, the Company had a foreign tax credit carryforward and tax effected net operating loss carryforwards of $ 736 million and $ 468 million, respectively. The foreign tax credits begin to expire in 2029 and the majority of the net operating losses can be carried forward indefinitely. A reconciliation of the beginning and ending balance for the Company’s unrecognized tax benefits for the years ended December 31, is as follows: 2024 2023 2022 (in millions) Beginning balance $ 431 $ 414 $ 360 Additions: Current year tax positions 37 23 22 Prior year tax positions 1 34 16 65 Reductions: Prior year tax positions 1 ( 189 ) ( 7 ) ( 14 ) Settlements with tax authorities — — ( 13 ) Expired statute of limitations ( 9 ) ( 15 ) ( 6 ) Ending balance $ 304 $ 431 $ 414 1 Includes immaterial translational impact of currency. As of December 31, 2024, the amount of unrecognized tax benefit was $ 304 million. This amount, if recognized, would reduce income tax expense by $ 246 million. In 2024, the decrease in the Company’s unrecognized tax benefits was primarily due to the withdrawal of a prior year refund claim, which had no impact on the consolidated results of operations or financial condition. The Company is subject to tax in the United States, 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 2014. 99 MASTERCARD 2024 FORM 10-K PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 21. 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, it is not possible to determine the probability of loss or estimate damages, and therefore, Mastercard has not established liabilities for any of these proceedings, except as discussed below. 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 proceedings involve 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 and financial condition. United States. In 2005, the first of a series of complaints were filed on behalf of merchants (the majority of the complaints were styled as class actions, although a few complaints were filed on behalf of individual merchant plaintiffs) against Mastercard International, Visa U.S.A., Inc., Visa International Service Association and a number of financial institutions. Taken together, the claims in the complaints were generally brought under both Sections 1 and 2 of the Sherman Act, which prohibit monopolization and attempts or conspiracies to monopolize a particular industry, and some of these complaints contain unfair competition law claims under state law. The complaints allege, among other things, that Mastercard, Visa, and certain financial institutions conspired to set the price of interchange fees, enacted point-of-sale acceptance rules (including the “no surcharge” rule) in violation of antitrust laws and engaged in unlawful tying and bundling of certain products and services, resulting in merchants paying excessive costs for the acceptance of Mastercard and Visa credit and debit cards. The cases were consolidated for pre-trial proceedings in the U.S. District Court for the Eastern District of New York in MDL No. 1720 (the “U.S. MDL Litigation Cases”). The plaintiffs filed a consolidated class action complaint seeking treble damages. In 2006, the group of purported merchant class plaintiffs filed a supplemental complaint alleging that Mastercard’s initial public offering of its Class A Common Stock in May 2006 (the “IPO”) and certain purported agreements entered into between Mastercard and financial institutions in connection with the IPO: (1) violate U.S. antitrust laws and (2) constituted a fraudulent conveyance because the financial institutions allegedly attempted to release, without adequate consideration, Mastercard’s right to assess them for Mastercard’s litigation liabilities. The class plaintiffs sought treble damages and injunctive relief including, but not limited to, an order reversing and unwinding the IPO. In 2011, Mastercard and Mastercard International entered into each of: (1) an omnibus judgment sharing and settlement sharing agreement with Visa Inc., Visa U.S.A. Inc. and Visa International Service Association and a number of financial institutions; and (2) a Mastercard settlement and judgment sharing agreement with a number of financial institutions. The agreements provide for the apportionment of certain costs and liabilities which Mastercard, the Visa parties and the financial institutions may incur, jointly and/or severally, in the event of an adverse judgment or settlement of one or all of the U.S. MDL Litigation Cases. Among a number of scenarios addressed by the agreements, in the event of a global settlement involving the Visa parties, the financial institutions and Mastercard, Mastercard would pay 12 % of the monetary portion of the settlement. In the event of a settlement involving only Mastercard and the financial institutions with respect to their issuance of Mastercard cards, Mastercard would pay 36 % of the monetary portion of such settlement. In 2012, the parties entered into a definitive settlement agreement with respect to the U.S. MDL Litigation Cases (including with respect to the claims related to the IPO) and the defendants separately entered into a settlement agreement with the individual MASTERCARD 2024 FORM 10-K 100 PART II