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As of December 31, 2022 and 2021, approximately 57% and 40%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents.
−Removed: The assets underlying the customer balances that we hold on our consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities.
+Added: The remaining portfolio and assets underlying the customer balances that we hold on our consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities.
We seek to preserve principal while holding eligible liquid assets, as defined by applicable regulatory requirements and commercial law in certain jurisdictions where we operate, equal to at least 100% of the aggregate amount of all customer balances.
We do not pay interest on amounts due to customers.
−Removed: If interest rates increased by 100 basis points, the fair value of our available-for-sale debt securities investment portfolio would have decreased by approximately $272 million and $173 million at December 31, 2021 and 2020, respectively.
−Removed: As of December 31, 2021, we had $9.0 billion in fixed rate debt with varying maturity dates.
+Added: Interest rate movements affect the interest income we earn on cash and cash equivalents, time deposits, and available-for-sale debt securities and the fair value of those securities.
+Added: A hypothetical 100 basis points increase in interest rates would have resulted in a decrease in the fair value of our cash equivalents and available-for-sale debt securities investment by approximately $161 million and $272 million at December 31, 2022 and 2021, respectively.
+Added: Changes in the fair value of our available-for-sale debt securities resulting from such interest rate changes are reported as a component of accumulated other comprehensive income (“AOCI”) and are realized only if we sell the securities prior to their scheduled maturities or the declines in fair values are due to expected credit losses.
+Added: As of December 31, 2022 and 2021, we had $10.4 billion and $9.0 billion, respectively, in fixed rate debt with varying maturity dates.
Since these notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates.
−Removed: However, the fair value of these notes fluctuates when interest rates change.
−Removed: As of December 31, 2021, we also had revolving credit facilities of approximately $5.2 billion available to us.
+Added: However, the fair value of these notes fluctuates when interest rates change, increasing in periods of declining interest rates and declining in periods of increasing interest rates.
+Added: As of December 31, 2022 and 2021, we also had revolving credit facilities of approximately $5.7 billion and $5.2 billion, respectively, available to us.
We are obligated to pay interest on borrowings under these facilities as well as other customary fees, including an upfront fee and an unused commitment fee based on our debt rating.
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As a result, we are exposed to the risk related to fluctuations in interest rate to the extent of our borrowings.
−Removed: As of December 31, 2021, we had approximately $98 million outstanding under these credit facilities.
−Removed: No amounts were outstanding as of December 31, 2020.
+Added: As of December 31, 2022 and 2021, we had ¥64.3 billion (approximately $491 million) and ¥11.3 billion (approximately $98 million), respectively, outstanding under these credit facilities.
+Added: A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the period.
For additional information, see “Note 12—Debt” in the notes to the consolidated financial statements included in this Form 10-K.
Interest rates may also adversely impact our customers’ spending levels and ability and willingness to pay outstanding amounts owed to us.
−Removed: Higher interest rates often lead to larger payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net income.
+Added: Higher interest rates often lead to larger payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net income (loss).
FOREIGN CURRENCY EXCHANGE RATE RISK
−Removed: We have significant operations internationally that are denominated in foreign currencies, primarily the British Pound, Euro, Australian Dollar, and Canadian Dollar, subjecting us to foreign currency exchange rate risk, which may adversely impact our financial results.
−Removed: We transact business in various foreign currencies and have significant international revenues and costs.
+Added: We have significant operations internationally that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, and Canadian dollar, which subject us to foreign currency exchange rate risk and may adversely impact our financial results.
+Added: We transact in various foreign currencies and have significant international revenues and costs.
In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services.
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dollar, relative to foreign currencies.
+Added: We considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that changes in exchange rates of 10% for all currencies could be experienced in the near term.
We have a foreign currency exchange exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our consolidated cash flows and results of operations through the execution of foreign currency exchange contracts.
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We use foreign currency exchange forward contracts to protect our forecasted U.S.
−Removed: dollar-equivalent earnings and our investment in a foreign subsidiary from adverse changes in foreign currency exchange rates.
+Added: dollar-equivalent earnings and our investment in foreign subsidiaries from adverse changes in foreign currency exchange rates.
These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign currency exchange rate movements.
−Removed: We designate these contracts as cash flow and net investment hedges for accounting purposes.
−Removed: The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”).
−Removed: Cash flow hedges are subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.
−Removed: The accumulated gains and losses associated with the net investment hedge will remain in AOCI until the foreign subsidiary is sold or substantially liquidated, at which point they will be reclassified into earnings.
−Removed: We considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that changes in exchange rates of 20% for all currencies could be experienced in the near term.
−Removed: dollar weakened by 20% at December 31, 2021 and 2020, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately $1.0 billion and $1.1 billion lower, respectively.
−Removed: dollar strengthened by 20% at December 31, 2021 and 2020, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately $1.0 billion and $1.1 billion higher, respectively.
+Added: We designate these contracts as cash flow hedges of forecasted revenues denominated in foreign currencies and net investment hedges for accounting purposes.
+Added: The derivative’s gain or loss is initially reported as a component of AOCI.
+Added: Cash flow hedges are subsequently reclassified into revenue in the same period the forecasted transaction affects earnings.
+Added: The accumulated gains and losses associated with net investment hedges will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated, at which point they will be reclassified into earnings.
+Added: dollar weakened by a hypothetical 10% at December 31, 2022 and 2021, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately $710 million and $512 million lower, respectively, before considering the offsetting impact of the underlying hedged item.
We have an additional foreign currency exchange management program in which we use foreign currency exchange contracts to offset the foreign currency exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.
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The foreign currency exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign currency exchange contracts.
−Removed: Adverse changes in exchange rates of 20% for all currencies would have resulted in an adverse impact on income before income taxes of approximately $386 million and $353 million at December 31, 2021 and 2020, respectively, without considering the offsetting effect of foreign currency exchange contracts.
−Removed: Foreign currency exchange contracts in place as of December 31, 2021 would have positively impacted income before income taxes by approximately $400 million, resulting in a net positive impact of approximately $14 million.
+Added: Adverse changes in exchange rates of a hypothetical 10% for all foreign currencies would have resulted in a negative impact on income before income taxes of approximately $173 million and $196 million at December 31, 2022 and 2021, respectively, without considering the offsetting effect of foreign currency exchange contracts.
+Added: Foreign currency exchange contracts in place as of December 31, 2022 would have positively impacted income before income taxes by approximately $144 million, resulting in a net negative impact of approximately $29 million.
Foreign currency exchange contracts in place as of December 31, 2021 would have positively impacted income before income taxes by approximately $203 million, resulting in a net positive impact of approximately $7 million.
−Removed: These reasonably possible adverse changes in exchange rates of 20% were applied to total monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.
+Added: These reasonably possible adverse changes in exchange rates of 10% were applied to monetary assets, monetary liabilities, and available-for-sale debt securities denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.
EQUITY INVESTMENT RISK
Our strategic investments are subject to a variety of market-related risks that could substantially reduce or increase the carrying value of the portfolio.
−Removed: As of both December 31, 2021 and 2020, our strategic investments totaled $3.2 billion which represented approximately 20% and 17% of our total cash, cash equivalents, and short-term and long-term investment portfolio at each of those respective dates.
+Added: As of December 31, 2022 and 2021, our strategic investments totaled $2.1 billion and $3.2 billion which represented approximately 14% and 20% of our total cash, cash equivalents, and short-term and long-term investment portfolio at each of those respective dates.
Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies.
−Removed: We are required to record all adjustments to the value of these strategic investments through our consolidated statements of income.
−Removed: As such, we anticipate volatility to our net income in future periods due to changes in fair value related to our investments in marketable equity securities and changes in observable prices related to our non-marketable equity securities accounted for under the Measurement Alternative.
+Added: We are required to record all adjustments to the value of these strategic investments through our consolidated statements of income (loss).
+Added: As such, we expect volatility to our net income (loss) in future periods due to changes in fair value related to our investments in marketable equity securities and changes in observable prices related to our non-marketable equity securities accounted for under the Measurement Alternative.
These changes could be material based on market conditions.
−Removed: A hypothetical adverse change of 10% in the carrying value of our strategic investments, which could be experienced in the near term, would have resulted in a decrease of approximately $321 million to the carrying value of the portfolio as of December 31, 2021.
−Removed: We review our non-marketable equity investments accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value.
−Removed: Our analysis includes a review of recent operating results and trends, recent purchases and sales of securities, and other publicly available data.
+Added: Additionally, the financial success of our investments in privately held companies is typically dependent on a liquidity event, such as a public offering, acquisition, private sale, or other favorable market event providing the ability to realize appreciation in the value of the investment.
+Added: A hypothetical adverse change of 10% in the carrying value of our strategic investments as of December 31, 2022, which could be experienced in the near term, would have resulted in an incremental decrease of approximately $215 million to the carrying value of the portfolio.
+Added: We review our non-marketable equity securities accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value.
+Added: Our analysis includes a review of recent operating results and trends, recent purchases and sales of securities, and other publicly available data, for which we assess factors such as the investees’ financial condition and business outlook, industry performance, regulatory, economic, or technological environment, and other relevant events and factors affecting the investee.
+Added: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
+Added: The audited consolidated financial statements covering the years ended December 31, 2022, 2021, and 2020 and accompanying notes listed in Part IV, Item 15(a)(1) of this Form 10‑K are included in this report.
+Added: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.