What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 288 added, 210 removed, 1234 unchanged (29% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

2023 December 31,

5 unchanged sentences

Loans and interest receivable, held for sale 2,165 —

Loans and interest receivable, net of allowances of $ 617 and $ 598 as of June 30, 2023 and December 31, 2022, respectively

Loans and interest receivable, net of allowances of $ 555 and $ 598 as of September 30, 2023 and December 31, 2022, respectively

Funds receivable and customer accounts 34,641 36,264

20 unchanged sentences

4,000 shares authorized;

1,102 and 1,136 shares outstanding as of June 30, 2023 and December 31, 2022, respectively

1,080 and 1,136 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

Preferred stock, $ 0.0001 par value;

100 shares authorized, unissued

Treasury stock at cost, 214 and 173 shares as of June 30, 2023 and December 31, 2022, respectively

Treasury stock at cost, 237 and 173 shares as of September 30, 2023 and December 31, 2022, respectively

( 20,513 ) ( 16,079 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

24 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

5 unchanged sentences

Tax expense on net investment hedges CTA gains, net ( 8 ) ( 23 ) ( 53 ) ( 59 )

Unrealized (losses) gains on cash flow hedges, net ( 23 ) 213 ( 134 ) 210

Tax benefit (expense) on unrealized (losses) gains on cash flow hedges, net 1 ( 11 ) 7 ( 11 )

Unrealized gains (losses) on cash flow hedges, net

109 138 ( 25 ) 348

Tax (expense) benefit on unrealized gains (losses) on cash flow hedges, net

( 6 ) ( 7 ) 1 ( 18 )

Unrealized gains (losses) on investments, net 110 ( 157 ) 298 ( 614 )

33 unchanged sentences

Balances at June 30, 2023 1,102 $ ( 19,064 ) $ 18,943 $ ( 996 ) $ 20,778 $ 19,661

Net income — — — — 1,020 1,020

Foreign CTA — — — ( 70 ) — ( 70 )

Net investment hedge CTA gains, net — — — 35 — 35

Tax expense on net investment hedges CTA gains, net — — — ( 8 ) — ( 8 )

Unrealized gains on cash flow hedges, net — — — 109 — 109

Tax expense on unrealized gains on cash flow hedges, net — — — ( 6 ) — ( 6 )

Unrealized gains on investments, net

— — — 110 — 110

Tax expense on unrealized gains on investments, net

— — — ( 26 ) — ( 26 )

Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes 1 — ( 28 ) — — ( 28 )

Common stock repurchased ( 23 ) ( 1,449 ) — — — ( 1,449 )

Stock-based compensation — — 392 — — 392

Balances at September 30, 2023 1,080 $ ( 20,513 ) $ 19,307 $ ( 852 ) $ 21,798 $ 19,740

PayPal Holdings, Inc.

28 unchanged sentences

Balances at June 30, 2022 1,156 $ ( 14,130 ) $ 17,758 $ ( 564 ) $ 16,703 $ 19,767

Net income — — — — 1,330 1,330

Foreign CTA — — — ( 206 ) — ( 206 )

Net investment hedges CTA gains, net — — — 97 — 97

Tax expense on net investment hedges CTA gains, net — — — ( 23 ) — ( 23 )

Unrealized gains on cash flow hedges, net — — — 138 — 138

Tax expense on unrealized gains on cash flow hedges, net — — — ( 7 ) — ( 7 )

Unrealized losses on investments, net — — — ( 157 ) — ( 157 )

Tax benefit on unrealized losses on investments, net — — — 41 — 41

Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes 1 — ( 14 ) — — ( 14 )

Common stock repurchased ( 10 ) ( 939 ) — — — ( 939 )

Stock-based compensation — — 237 — — 237

Balances at September 30, 2022 1,147 $ ( 15,069 ) $ 17,981 $ ( 681 ) $ 18,033 $ 20,264

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

40 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(continued)

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

34 unchanged sentences

If we determine an investment is in a VIE, we then assess if we are the primary beneficiary, which would require consolidation.

As of June 30, 2023 and December 31, 2022, no VIEs qualified for consolidation as the structures of these entities do not provide us with the ability to direct activities that would significantly impact their economic performance.

As of June 30, 2023 and December 31, 2022, the carrying value of our investments in nonconsolidated VIEs was $ 146 million and $ 128 million, respectively, and is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our condensed consolidated balance sheets.

Our maximum exposure to loss related to our nonconsolidated VIEs, which represents funded commitments and any future funding commitments, was $ 233 million and $ 232 million as of June 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023 and December 31, 2022, no VIEs qualified for consolidation as the structures of these entities do not provide us with the ability to direct activities that would significantly impact their economic performance.

As of September 30, 2023 and December 31, 2022, the carrying value of our investments in nonconsolidated VIEs was $ 160 million and $ 128 million, respectively, and is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our condensed consolidated balance sheets.

Our maximum exposure to loss related to our nonconsolidated VIEs, which represents funded commitments and any future funding commitments, was $ 246 million and $ 232 million as of September 30, 2023 and December 31, 2022, respectively.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 10, 2023.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the condensed consolidated financial statements for all interim periods presented.

Certain amounts for prior periods have been reclassified to conform to the financial statement presentation as of and for the three and six months ended June 30, 2023.

Certain amounts for prior periods have been reclassified to conform to the financial statement presentation as of and for the three and nine months ended September 30, 2023.

PayPal Holdings, Inc.

6 unchanged sentences

The following table presents the effects of the changes on the presentation of these cash flows to the previously reported condensed consolidated statements of cash flows:

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In millions)

7 unchanged sentences

Financing activities (4)

( 2,422 ) 437 ( 1,985 )

Effect of exchange rates on cash, cash equivalents, and restricted cash ( 253 ) — ( 253 )

Net decrease in cash, cash equivalents, and restricted cash $ ( 1,305 ) $ — $ ( 1,305 )

(1) As reported in our Form 10-Q for the quarter ended June 30, 2022 filed with the SEC on August 3, 2022.

(1) As reported in our Form 10-Q for the quarter ended September 30, 2022 filed with the SEC on November 4, 2022.

(2) Financial statement line impacted in operating activities was “Other assets and liabilities.”

12 unchanged sentences

and other European buy now, pay later loan receivables, consisting of eligible loans and interest receivable, held for sale at the closing of the transaction and a forward-flow arrangement for the sale of future originations of eligible loans over a 24 -month commitment period (together, “eligible consumer installment receivables”).

Following the closing of this transaction, which is expected to occur in the second half of 2023, the global investment firm will become the owner of the eligible consumer installment receivables and we will no longer hold an ownership interest in these receivables.

Following the closing of this transaction, which is expected to occur in the fourth quarter of 2023, the global investment firm will become the owner of the eligible consumer installment receivables and we will no longer hold an ownership interest in these receivables.

We will maintain the servicing rights and receive a servicing fee for the entire pool of the eligible consumer installment receivables outstanding.

3 unchanged sentences

Prior to the decision to sell, this portfolio was reported at outstanding principal balances, net of allowances, including unamortized deferred origination costs and estimated collectible interest and fees.

At the time of reclassification, any previously recorded allowance for credit losses for loans and interest receivable outstanding was reversed, resulting in a decrease of approximately $ 33 million in transaction and credit losses in our condensed consolidated statements of income (loss) for the three and six months ended June 30, 2023.

Interest income on interest bearing held-for-sale loans is accrued and recognized based on the contractual rate of interest.

25 unchanged sentences

The following table presents our revenue disaggregated by primary geographical market and category:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

12 unchanged sentences

(1) No single country included in the other countries category generated more than 10% of total net revenues.

(2) Total net revenues include $ 452 million and $ 296 million for the three months ended June 30, 2023 and 2022, respectively, and $ 903 million and $ 483 million for the six months ended June 30, 2023 and 2022, respectively, which do not represent revenues recognized in the scope of Accounting Standards Codification Topic 606, Revenue from contracts with customers .

(2) Total net revenues include $ 433 million and $ 391 million for the three months ended September 30, 2023 and 2022, respectively, and $ 1.3 billion and $ 874 million for the nine months ended September 30, 2023 and 2022, respectively, which do not represent revenues recognized in the scope of Accounting Standards Codification Topic 606, Revenue from contracts with customers .

Such revenues relate to interest and fees earned on loans and interest receivable, including loans and interest receivable held for sale, hedging gains or losses, and interest earned on certain assets underlying customer balances.

7 unchanged sentences

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Common stock equivalents excluded from income (loss) per diluted share because their effect would have been anti-dilutive or potentially dilutive 22 14 20 13

NOTE 4— BUSINESS COMBINATIONS AND DIVESTITURES

There were no acquisitions accounted for as business combinations or divestitures completed in the three and nine months ended September 30, 2023 and 2022.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4— BUSINESS COMBINATIONS

There were no acquisitions accounted for as business combinations or divestitures completed in the three and six months ended June 30, 2023 and 2022.

In September 2023, we entered into a definitive agreement to sell Happy Returns to United Parcel Services, Inc.

for approximately $ 465 million in cash.

The sale of Happy Returns will enable us to focus on our core business and priorities.

The transaction closed in the fourth quarter of 2023, and we expect to record a pre-tax gain of approximately $ 329 million, net of expected transaction costs, in restructuring and other charges on the condensed consolidated statements of income (loss) in that period.

We concluded that Happy Returns meets the criteria to be classified as held for sale and measured at the lower of its carrying amount or fair value less cost to sell as of September 30, 2023.

The assets held for sale consist primarily of $ 81 million of goodwill and $ 13 million of net intangible assets, which are presented within prepaid expenses and other current assets on our condensed consolidated balance sheets as of September 30, 2023.

No impairment charges were required in the three months ended September 30, 2023.

The sale does not represent a strategic shift that would have a major effect on our operations and financial results, and therefore is not reported as a discontinued operation.

NOTE 5— GOODWILL AND INTANGIBLE ASSETS

The following table presents goodwill balances and adjustments to those balances during the six months ended June 30, 2023:

2022 Goodwill Acquired Adjustments June 30,

The following table presents goodwill balances and adjustments to those balances during the nine months ended September 30, 2023:

2022 Goodwill Acquired Adjustments September 30,

(In millions)

Total goodwill $ 11,209 $ — $ ( 274 ) $ 10,935

The adjustments to goodwill during the six months ended June 30, 2023 pertained to foreign currency translation adjustments.

The adjustments to goodwill during the nine months ended September 30, 2023 pertained to foreign currency translation adjustments and reclassification of $ 81 million of goodwill to assets held for sale described in “Note 4—Business Combinations and Divestitures.”

INTANGIBLE ASSETS

The components of identifiable intangible assets were as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Gross Carrying Amount Accumulated Amortization

9 unchanged sentences

Intangible assets, net $ 3,343 $ ( 2,779 ) $ 564 $ 3,596 $ ( 2,808 ) $ 788

In the three months ended June 30, 2023, we retired approximately $ 8 million of fully amortized intangible assets, all of which were included in developed technology.

In the six months ended June 30, 2023, we retired approximately $ 92 million of fully amortized intangible assets, of which $ 65 million and $ 27 million were included in customer lists and user base and developed technology, respectively.

Amortization expense for intangible assets was $ 58 million and $ 120 million for the three months ended June 30, 2023 and 2022, respectively.

Amortization expense for intangible assets was $ 115 million and $ 238 million for the six months ended June 30, 2023 and 2022, respectively.

Expected future intangible asset amortization as of June 30, 2023 was as follows (in millions):

In the three and nine months ended September 30, 2023, we reclassified approximately $ 36 million of gross intangible assets, with a net carrying amount of $ 13 million as assets held for sale as described in “Note 4—Business Combinations and Divestitures.” In the three months ended September 30, 2023, we retired approximately $ 49 million of fully amortized intangible assets, of which $ 35 million and $ 14 million were included in developed technology and customer lists and user base, respectively.

In the nine months ended September 30, 2023, we retired approximately $ 141 million of fully amortized intangible assets, of which $ 79 million and $ 62 million were included in customer lists and user base and developed technology, respectively.

Amortization expense for intangible assets was $ 57 million and $ 118 million for the three months ended September 30, 2023 and 2022, respectively.

Amortization expense for intangible assets was $ 172 million and $ 356 million for the nine months ended September 30, 2023 and 2022, respectively.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Expected future intangible asset amortization as of September 30, 2023 was as follows (in millions):

Fiscal years:

1 unchanged sentence

Thereafter 43

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6— LEASES

6 unchanged sentences

A sublease situation can arise when currently leased real estate space is available and is surplus to operational requirements.

As of June 30, 2023, we had no finance leases.

As of September 30, 2023, we had no finance leases.

The components of lease expense were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

5 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

4 unchanged sentences

Other non-cash ROU lease asset activity (1)

$ ( 15 ) $ ( 11 ) $ ( 40 ) $ ( 36 )

(1) ROU lease asset impairment.

Refer to “Note 17—Restructuring and Other Charges” for further details.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental balance sheet information related to leases was as follows:

September 30,

2023 December 31,

7 unchanged sentences

Weighted-average discount rate — operating leases

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Future minimum lease payments for our operating leases as of June 30, 2023 were as follows:

Future minimum lease payments for our operating leases as of September 30, 2023 were as follows:

Operating Leases

7 unchanged sentences

The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases.

In the three and six months ended June 30, 2023, we incurred asset impairment charges of $ 4 million and $ 43 million, respectively, within restructuring and other charges on our condensed consolidated statements of income (loss).

The impairments in the three and six months ended June 30, 2023 included a reduction to our ROU lease assets in the amount of $ 4 million and $ 25 million, respectively, which were attributed to certain leased space we are no longer utilizing for our business operations, a portion of which is being subleased.

In the three and six months ended June 30, 2022, we incurred asset impairment charges of $ 19 million and $ 35 million, respectively, within restructuring and other charges on our condensed consolidated statements of income (loss).

The impairments in the three and six months ended June 30, 2022 included a reduction to our ROU lease assets in the amount of $ 15 million and $ 25 million, respectively, which were attributed to certain leased space we are no longer utilizing for our business operations, a portion of which is being subleased.

As of September 30, 2023, we have additional operating leases, primarily for data centers, which will commence in the first quarter of 2024 or later with minimum lease payments aggregating to $ 244 million and lease terms ranging from five to eight years .

NOTE 7— OTHER FINANCIAL STATEMENT DETAILS

CRYPTO ASSET SAFEGUARDING LIABILITY AND CORRESPONDING SAFEGUARDING ASSET

We allow our customers in certain markets to buy, hold, sell, receive, and send certain cryptocurrencies as well as use the proceeds from sales of cryptocurrencies to pay for purchases at checkout.

These cryptocurrencies consist of Bitcoin, Ethereum, Bitcoin Cash, and Litecoin (collectively, “our customers’ crypto assets”).

We allow our customers in certain markets to buy, hold, sell, convert, receive, and send certain cryptocurrencies as well as use the proceeds from sales of cryptocurrencies to pay for purchases at checkout.

These cryptocurrencies consist of Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and PayPal USD stablecoin (collectively, “our customers’ crypto assets”).

We engage third parties, which are licensed trust companies, to provide certain custodial services, including holding our customers’ cryptographic key information, securing our customers’ crypto assets, and protecting them from loss or theft, including indemnification against certain types of losses such as theft.

1 unchanged sentence

We maintain the internal recordkeeping of our customers’ crypto assets, including the amount and type of crypto asset owned by each of our customers in that custodial account.

As of June 30, 2023, we utilize two third-party custodians;

As of September 30, 2023, we utilize two third-party custodians;

as such, there is concentration risk in the event these custodians are not able to perform in accordance with our agreement.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Due to the unique risks associated with cryptocurrencies, including technological, legal, and regulatory risks, we recognize a crypto asset safeguarding liability to reflect our obligation to safeguard the crypto assets held for the benefit of our customers, which is recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets.

We also recognize a corresponding safeguarding asset, which is recorded in prepaid expenses and other current assets on our condensed consolidated balance sheets.

The crypto asset safeguarding liability and corresponding safeguarding asset are measured and recorded at fair value on a recurring basis using prices available in the market we determine to be the principal market at the balance sheet date.

The crypto asset safeguarding liability and corresponding safeguarding asset are measured and recorded at fair value on a recurring basis using quoted prices for the underlying crypto assets on the active exchange that we have identified as the principal market at the balance sheet date.

The corresponding safeguarding asset may be adjusted for loss events, as applicable.

As of June 30, 2023, the Company has not incurred any safeguarding loss events, and therefore, the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the significant crypto assets we hold for the benefit of our customers and the crypto asset safeguarding liability and corresponding safeguarding asset as of June 30, 2023 and December 31, 2022:

As of September 30, 2023, the Company has not incurred any safeguarding loss events, and therefore, the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.

September 30,

2023 December 31, 2022

5 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended June 30, 2023:

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended September 30, 2023:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Investments

9 unchanged sentences

Ending balance $ 86 $ ( 293 ) $ ( 881 ) $ 230 $ 6 $ ( 852 )

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended June 30, 2022:

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended September 30, 2022:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Investments

7 unchanged sentences

Ending balance $ 547 $ ( 701 ) $ ( 871 ) $ 277 $ 67 $ ( 681 )

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2023:

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the nine months ended September 30, 2023:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Investments

7 unchanged sentences

Ending balance $ 86 $ ( 293 ) $ ( 881 ) $ 230 $ 6 $ ( 852 )

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2022:

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the nine months ended September 30, 2022:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Investments

7 unchanged sentences

Ending balance $ 547 $ ( 701 ) $ ( 871 ) $ 277 $ 67 $ ( 681 )

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table provides details about reclassifications out of AOCI for the periods presented below:

1 unchanged sentence

Affected Line Item in the Statements of Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

7 unchanged sentences

Total reclassifications for the period $ 7 $ 156 $ 92 $ 310 Net income (loss)

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

OTHER INCOME (EXPENSE), NET

The following table reconciles the components of other income (expense), net for the periods presented below:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

5 unchanged sentences

Other income (expense), net $ 73 $ 460 $ 318 $ ( 337 )

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8— FUNDS RECEIVABLE AND CUSTOMER ACCOUNTS AND INVESTMENTS

The following table summarizes the assets underlying our funds receivable and customer accounts, short-term investments, and long-term investments as of June 30, 2023 and December 31, 2022:

The following table summarizes the assets underlying our funds receivable and customer accounts, short-term investments, and long-term investments as of September 30, 2023 and December 31, 2022:

September 30,

2023 December 31,

16 unchanged sentences

Total long-term investments $ 3,855 $ 5,018

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of June 30, 2023 and December 31, 2022, the estimated fair value of our available-for-sale debt securities included within funds receivable and customer accounts, short-term investments, and long-term investments was as follows:

June 30, 2023 (1)

As of September 30, 2023 and December 31, 2022, the estimated fair value of our available-for-sale debt securities included within funds receivable and customer accounts, short-term investments, and long-term investments was as follows:

September 30, 2023 (1)

Losses Estimated

23 unchanged sentences

Refer to “Note 9 — Fair Value Measurement of Assets and Liabilities.”

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2022 (1)

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Refer to “Note 9 — Fair Value Measurement of Assets and Liabilities.”

Gross amortized cost and estimated fair value balances exclude accrued interest receivable on available-for-sale debt securities, which totaled $ 94 million and $ 65 million at September 30, 2023 and December 31, 2022, respectively, and were included in other current assets on our condensed consolidated balance sheets.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Gross amortized cost and estimated fair value balances exclude accrued interest receivable on available-for-sale debt securities, which totaled $ 88 million and $ 65 million at June 30, 2023 and December 31, 2022, respectively, and were included in other current assets on our condensed consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, the gross unrealized losses and estimated fair value of our available-for-sale debt securities included within funds receivable and customer accounts, short-term investments, and long-term investments for which an allowance for credit losses was not deemed necessary in the current period, aggregated by the length of time those individual securities have been in a continuous loss position, was as follows:

June 30, 2023 (1)

As of September 30, 2023 and December 31, 2022, the gross unrealized losses and estimated fair value of our available-for-sale debt securities included within funds receivable and customer accounts, short-term investments, and long-term investments for which an allowance for credit losses was not deemed necessary in the current period, aggregated by the length of time those individual securities have been in a continuous loss position, was as follows:

September 30, 2023 (1)

Less than 12 months 12 months or longer Total

54 unchanged sentences

We will continue to monitor the performance of the investment portfolio and assess whether impairment due to expected credit losses has occurred.

During the three months ended June 30, 2023, we received $ 749 million in proceeds from the sale of available-for-sale debt securities, incurring gross realized gains and losses which were de minimis and determined using the specific identification method.

During the six months ended June 30, 2023, we received $ 1.8 billion in proceeds from the sale of available-for-sale debt securities, incurring gross realized losses of $ 25 million, which were determined using the specific identification method.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the three months ended September 30, 2023, we received $ 772 million in proceeds from the sale of available-for-sale debt securities and incurred gross realized gains and losses which were de minimis and determined using the specific identification method.

During the nine months ended September 30, 2023, we received $ 2.7 billion in proceeds from the sale of available-for-sale debt securities and incurred gross realized losses of $ 25 million and de minimis gross realized gains, which were determined using the specific identification method.

Our available-for-sale debt securities included within funds receivable and customer accounts, short-term investments, and long-term investments classified by date of contractual maturity were as follows:

June 30, 2023

September 30, 2023

Amortized Cost Fair Value

5 unchanged sentences

Total $ 22,045 $ 21,752

Actual maturities may differ from contractual maturities as certain securities may be prepaid.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

STRATEGIC INVESTMENTS

1 unchanged sentence

Our marketable equity securities have readily determinable fair values and are recorded as long-term investments on our condensed consolidated balance sheets at fair value with changes in fair value recorded in other income (expense), net on our condensed consolidated statements of income (loss).

Marketable equity securities totaled $ 513 million and $ 323 million as of June 30, 2023 and December 31, 2022, respectively.

Marketable equity securities totaled $ 541 million and $ 323 million as of September 30, 2023 and December 31, 2022, respectively.

Our non-marketable equity securities are recorded in long-term investments on our condensed consolidated balance sheets.

The carrying value of our non-marketable equity securities totaled $ 1.8 billion as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022, we had non-marketable equity securities of $ 154 million and $ 136 million, respectively, where we have the ability to exercise significant influence, but not control, over the investee.

The carrying value of our non-marketable equity securities totaled $ 1.8 billion as of September 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022, we had non-marketable equity securities of $ 168 million and $ 136 million, respectively, where we have the ability to exercise significant influence, but not control, over the investee.

We account for these equity securities using the equity method of accounting.

2 unchanged sentences

Measurement Alternative adjustments

The adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the three and six months ended June 30, 2023 and 2022 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the three and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

7 unchanged sentences

(1) Net additions include purchases, reductions due to sales of securities, and reclassifications when the Measurement Alternative is subsequently elected or no longer applies.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the cumulative gross unrealized gains and cumulative gross unrealized losses and impairment related to non-marketable equity securities accounted for under the Measurement Alternative, held at June 30, 2023 and December 31, 2022, respectively:

September 30,

2023 December 31,

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Unrealized gains (losses) on strategic investments, excluding those accounted for using the equity method

The following table summarizes the net unrealized gains (losses) on marketable and non-marketable equity securities, excluding those accounted for using the equity method, held at June 30, 2023 and 2022, respectively:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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FINANCIAL ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:

June 30, 2023 Quoted Prices in

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

September 30, 2023 Quoted Prices in

Active Markets for

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There are no active markets for our crypto asset safeguarding liability or the corresponding safeguarding asset.

Accordingly, we have valued the asset and liability using quoted prices on the active exchange that has been identified as the principal market for the underlying crypto assets (Level 2).

Accordingly, we have valued the asset and liability using quoted prices on the active exchange that we have identified as the principal market for the underlying crypto assets (Level 2).

All other financial assets and liabilities are valued using quoted prices for identical instruments in less active markets, readily available pricing sources for comparable instruments, or models using market observable inputs (Level 2).

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A majority of our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as currency rates, interest rate yield curves, option volatility, and equity prices.

As of June 30, 2023 and December 31, 2022, we did not have any assets or liabilities requiring measurement at fair value on a recurring basis with significant unobservable inputs that would require a high level of judgment to determine fair value (Level 3).

As of September 30, 2023 and December 31, 2022, we did not have any assets or liabilities requiring measurement at fair value on a recurring basis with significant unobservable inputs that would require a high level of judgment to determine fair value (Level 3).

We elect to account for available-for-sale debt securities denominated in currencies other than the functional currency of our subsidiaries under the fair value option.

Election of the fair value option allows us to recognize any gains and losses from fair value changes on such investments in other income (expense), net on the condensed consolidated statements of income (loss) to significantly reduce the accounting asymmetry that would otherwise arise when recognizing the corresponding foreign exchange gains and losses relating to customer liabilities.

The following table summarizes the estimated fair value and amortized cost of our available-for-sale debt securities under the fair value option as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table summarizes the estimated fair value and amortized cost of our available-for-sale debt securities under the fair value option as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Amortized Cost Fair Value Amortized Cost Fair Value

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Funds receivable and customer accounts $ 255 $ 247 $ 441 $ 481

The following table summarizes the gains (losses) from fair value changes recognized in other income (expense), net related to the available-for-sale debt securities under the fair value option for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS

The following tables summarize our assets held as of June 30, 2023 and December 31, 2022 for which a non-recurring fair value measurement was recorded during the six months ended June 30, 2023 and the year ended December 31, 2022, respectively:

The following tables summarize our assets held as of September 30, 2023 and December 31, 2022 for which a non-recurring fair value measurement was recorded during the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively:

September 30,

2023 Significant Other

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Total $ 2,436 $ 223 $ 2,213

(1) Excludes non-marketable equity securities of $ 1.5 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the six months ended June 30, 2023.

(2) Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during the six months ended June 30, 2023.

(1) Excludes non-marketable equity securities of $ 1.5 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the nine months ended September 30, 2023.

(2) Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during the nine months ended September 30, 2023.

See “Note 6—Leases” for additional information.

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The fair value of loans and interest receivables held for sale is classified within Level 3 as we estimate fair value using significant unobservable inputs.

The significant unobservable input is the price at which the Company expects to sell the loans based upon our agreement with the global investment firm that will purchase these loans.

The significant unobservable input is the price at which the Company expects to sell the loans based upon our agreement with the global investment firm to purchase these loans.

The price is determined based upon certain loan and risk classifications of the portfolio.

The following table presents the valuation techniques covering the majority of Level 3 non-recurring fair value measurements and the most significant unobservable inputs used in those measurements as of June 30, 2023:

(In millions) Methodology Input Low (1)

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We evaluate ROU assets related to leases for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an ROU asset may not be recoverable.

Impairment losses on ROU lease assets related to office operating leases are calculated initially using estimated rental income per square foot derived from observable market data, and the impaired asset is classified within Level 2 in the fair value hierarchy.

Impairment losses on ROU lease assets related to office operating leases are calculated using estimated rental income per square foot derived from observable market data, and the impaired asset is classified within Level 2 in the fair value hierarchy.

FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AND RECORDED AT FAIR VALUE

Our financial instruments, including cash, restricted cash, time deposits, loans and interest receivable, net, certain customer accounts, and long-term debt related to borrowings on our credit facilities, are carried at amortized cost, which approximates their fair value.

Our notes receivable had a carrying value of approximately $ 461 million and fair value of approximately $ 389 million as of June 30, 2023.

Our notes receivable had a carrying value of approximately $ 479 million and fair value of approximately $ 406 million as of September 30, 2023.

Our notes receivable had a carrying value of approximately $ 441 million and fair value of approximately $ 396 million as of December 31, 2022.

Our term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $ 10.5 billion and fair value of approximately $ 9.7 billion as of June 30, 2023.

Our term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $ 10.5 billion and fair value of approximately $ 9.5 billion as of September 30, 2023.

Our term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $ 10.3 billion and fair value of approximately $ 9.5 billion as of December 31, 2022.

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Cash flow hedges

We have significant international revenues and costs denominated in foreign currencies, which subjects us to foreign currency exchange risk.

We have significant international revenues and expenses denominated in foreign currencies, which subjects us to foreign currency exchange risk.

We have a foreign currency exposure management program in which we designate certain foreign currency exchange contracts, generally with maturities of 12 months or less, to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in certain foreign currencies.

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Accordingly, the cash flows associated with derivatives designated as cash flow hedges are classified in cash flows from operating activities on our condensed consolidated statements of cash flows.

As of June 30, 2023, we estimated that $ 23 million of net derivative losses related to our cash flow hedges included in AOCI are expected to be reclassified into earnings within the next 12 months.

During the three and six months ended June 30, 2023 and 2022, we did not discontinue any cash flow hedges because it was probable that the original forecasted transaction would not occur and as such, did not reclassify any gains or losses to earnings prior to the occurrence of the hedged transaction.

As of September 30, 2023, we estimated that $ 86 million of net derivative gains related to our cash flow hedges included in AOCI are expected to be reclassified into earnings within the next 12 months.

During the three and nine months ended September 30, 2023 and 2022, we did not discontinue any cash flow hedges because it was probable that the original forecasted transaction would not occur and as such, did not reclassify any gains or losses to earnings prior to the occurrence of the hedged transaction.

If we elect to discontinue our cash flow hedges and it is probable that the original forecasted transaction will occur, we continue to report the derivative’s gain or loss in AOCI until the forecasted transaction affects earnings, at which point we also reclassify it into earnings.

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The cash flows associated with derivatives designated as a net investment hedge are classified in cash flows from investing activities on our condensed consolidated statements of cash flows.

We have no t reclassified any gains or losses related to net investment hedges from AOCI into earnings during any of the periods presented.

We have no t reclassified any gains or losses related to net investment hedges from AOCI into earnings for any of the periods presented.

PayPal Holdings, Inc.

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FAIR VALUE OF DERIVATIVE CONTRACTS

The fair value of our outstanding derivative instruments as of June 30, 2023 and December 31, 2022 was as follows:

Balance Sheet Location June 30,

The fair value of our outstanding derivative instruments as of September 30, 2023 and December 31, 2022 was as follows:

Balance Sheet Location September 30,

2023 December 31,

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However, we have elected to present the derivative assets and derivative liabilities on a gross basis on our condensed consolidated balance sheets.

Rights of set-off associated with our foreign currency exchange contracts represented a potential offset to both assets and liabilities of $ 52 million as of June 30, 2023 and $ 70 million as of December 31, 2022.

Rights of set-off associated with our foreign currency exchange contracts represented a potential offset to both assets and liabilities of $ 29 million as of September 30, 2023 and $ 70 million as of December 31, 2022.

We have entered into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds.

The following table provides the collateral posted and received:

September 30,

2023 December 31,

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The following tables provide the location in the condensed consolidated statements of income (loss) and amount of recognized gains or losses related to our derivative instruments:

Three Months Ended June 30,

Three Months Ended September 30,

(In millions)

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Gains (losses) on derivatives not designated as hedging instruments:

Amount of (losses) gains on foreign currency exchange contracts — ( 81 ) — 147

Amount of gains on foreign currency exchange contracts

Amount of losses on equity derivative contracts (1)

— — — ( 174 )

Total gains (losses) $ 7 $ 74 $ 156 $ ( 95 )

Six Months Ended June 30,

(1) During the three months ended September 30, 2022, equity derivative contracts were entered into and matured in association with the sale of marketable equity securities related to a strategic investment.

Nine Months Ended September 30,

(In millions)

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Amount of (losses) gains on foreign exchange contracts — ( 102 ) — 160

Amount of losses on equity derivative contracts (1)

— — — ( 174 )

Total gains (losses) $ 117 $ ( 23 ) $ 310 $ 39

(1) During the nine months ended September 30, 2022, equity derivative contracts were entered into and matured in association with the sale of marketable equity securities related to a strategic investment.

The cash flows associated with the equity derivative contracts were classified in cash flows from investing activities on our condensed consolidated statements of cash flows.

PayPal Holdings, Inc.

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The following table provides the amount of pre-tax unrealized gains or losses included in the assessment of hedge effectiveness related to our derivative instruments designated as hedging instruments that are recognized in other comprehensive income (loss):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(In millions)

Unrealized gains (losses) on foreign exchange contracts designated as cash flow hedges $ 11 $ 320 $ ( 24 ) $ 364

Unrealized gains on foreign exchange contracts designated as cash flow hedges

$ 116 $ 294 $ 92 $ 658

Unrealized gains on foreign exchange contracts designated as net investment hedges 35 97 231 253

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The following table provides the notional amounts of our outstanding derivatives:

September 30,

2023 December 31,

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See “Note 1—Overview and Summary of Significant Accounting Policies” for additional information.

During the six months ended June 30, 2023, we reclassified approximately $ 1.2 billion of eligible consumer installment receivables from loans and interest receivable, net to loans and interest receivable, held for sale.

As of June 30, 2023, the total outstanding balance in our held for sale portfolio was $ 1.9 billion, including loans reclassified as held for sale and loans originated as held for sale.

During the nine months ended September 30, 2023, we reclassified approximately $ 1.2 billion of eligible consumer installment receivables from loans and interest receivable, net to loans and interest receivable, held for sale.

As of September 30, 2023, the total outstanding balance in our held for sale portfolio was $ 2.2 billion, including loans reclassified as held for sale and loans originated as held for sale.

PayPal Holdings, Inc.

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consumers by an independent chartered financial institution (“partner institution”) and are responsible for the servicing functions related to that portfolio.

During the six months ended June 30, 2023 and 2022, we purchased approximately $ 514 million and nil in consumer receivables, respectively.

As of June 30, 2023 and December 31, 2022, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $ 4.5 billion and $ 5.9 billion, respectively, net of the participation interest sold to the partner institution of $ 26 million and $ 17 million, respectively.

During the nine months ended September 30, 2023 and 2022, we purchased approximately $ 643 million and $ 106 million in consumer receivables, respectively.

As of September 30, 2023 and December 31, 2022, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $ 4.2 billion and $ 5.9 billion, respectively, net of the participation interest sold to the partner institution of $ 22 million and $ 17 million, respectively.

We closely monitor the credit quality of our consumer receivables to evaluate and manage our related exposure to credit risk.

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The “current” category represents balances that are within 29 days of the billing date or contractual repayment date, as applicable.

June 30, 2023

September 30, 2023

(In millions, except percentages)

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$ 2,072 $ 1,698 $ 435 $ 13 $ — $ — $ 4,218 100 %

Gross charge-offs for the six months ended June 30, 2023

Gross charge-offs for the nine months ended September 30, 2023

$ 95 $ 43 $ 129 $ 5 $ — $ — $ 272

(1) Excludes receivables from other consumer credit products of $ 4 million at June 30, 2023.

PayPal Holdings, Inc.

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(1) Excludes receivables from other consumer credit products of $ 11 million at December 31, 2022.

The following table summarizes the activity in the allowance for consumer loans and interest receivable for the six months ended June 30, 2023 and 2022:

June 30, 2023 June 30, 2022

The following table summarizes the activity in the allowance for consumer loans and interest receivable for the nine months ended September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

Consumer Loans Receivable Interest Receivable Total Allowance (1)

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Ending balance $ 334 $ 23 $ 357 $ 265 $ 24 $ 289

(1) Excludes allowances from other consumer credit products of nil and $ 3 million at June 30, 2023 and 2022, respectively.

(1) Beginning balances, provisions and charge-offs include amounts related to loans and interest receivable prior to their reclassification to loan and interest receivable, held for sale.

(2) Excludes allowances from other consumer credit products of $ 2 million at September 30, 2022.

(3) Includes amounts related to foreign currency remeasurement.

The provision for the six months ended June 30, 2023 was primarily attributable to growth in the U.S.

installment loans and U.K.

revolving loans within our consumer receivable portfolio.

In the second quarter of 2023, we updated our expected credit loss models for the consumer receivables.

The expected credit loss models utilize certain macroeconomic factors such as forecasted trends in household disposable income and retail e-commerce sales, and no longer consider unemployment.

The provision for the nine months ended September 30, 2023 for our consumer receivable portfolio was primarily attributable to growth in installment loans in the U.S.

and Japan and U.K.

revolving loans as well as a deterioration in credit quality of installment loans in the U.S.

In the second quarter of 2023, we updated our expected credit loss models for the U.K.

revolving loan product.

The updated expected credit loss models utilize certain macroeconomic factors such as forecasted trends in household disposable income and retail e-commerce sales, and no longer consider unemployment.

These changes did not have a material impact on our provision recorded in the period.

Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty with respect to the financial health of our borrowers.

The increase in charge-offs for the six months ended June 30, 2023 compared to the same period in the prior year was due to the expansion of our installment products and growth of revolving credit products.

The increase in charge-offs for the nine months ended September 30, 2023 compared to the same period of the prior year was due to the expansion of our installment products and growth of revolving credit products.

The provision for current expected credit losses relating to our consumer receivable portfolio is recognized in transaction and credit losses on our condensed consolidated statements of income (loss).

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merchants by a partner institution and are responsible for the servicing functions related to that portfolio.

During the six months ended June 30, 2023 and 2022, we purchased approximately $ 975 million and $ 1.4 billion in merchant receivables, respectively.

As of June 30, 2023 and December 31, 2022, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $ 1.7 billion and $ 2.1 billion, respectively, net of the participation interest sold to the partner institution of $ 69 million and $ 97 million, respectively.

During the nine months ended September 30, 2023 and 2022, we purchased approximately $ 1.3 billion and $ 2.3 billion in merchant receivables, respectively.

As of September 30, 2023 and December 31, 2022, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $ 1.4 billion and $ 2.1 billion, respectively, net of the participation interest sold to the partner institution of $ 55 million and $ 97 million, respectively.

Through our PPWC product, merchants can borrow a certain percentage of their annual payment volume processed by PayPal and are charged a fixed fee for the loan or advance based on the overall credit assessment of the merchant.

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The “current” category represents balances that are within 29 days of the expected repayment date or contractual repayment date, as applicable.

June 30, 2023

September 30, 2023

(In millions, except percentages)

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Total $ 1,060 $ 271 $ 11 $ 35 $ 26 $ 1,403 100 %

Gross charge-offs for the six months ended June 30, 2023

Gross charge-offs for the nine months ended September 30, 2023

$ 12 $ 185 $ 13 $ 14 $ 4 $ 228

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Total $ 1,979 $ 42 $ 69 $ 54 $ 2 $ 2,146 100 %

The following table summarizes the activity in the allowance for merchant loans, advances, and interest and fees receivable for the six months ended June 30, 2023 and 2022:

June 30, 2023 June 30, 2022

The following table summarizes the activity in the allowance for merchant loans, advances, and interest and fees receivable for the nine months ended September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

Merchant Loans and Advances Interest and Fees Receivable Total Allowance Merchant Loans and Advances Interest and Fees Receivable Total Allowance

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Ending balance $ 180 $ 18 $ 198 $ 175 $ 12 $ 187

The provision for the six months ended June 30, 2023 was primarily attributable to a deterioration in credit quality of loans outstanding.

Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty around the financial health of our borrowers including the effectiveness of loan modification programs made available to merchants.

The provision for the nine months ended September 30, 2023 was primarily attributable to a deterioration in credit quality of loans outstanding.

Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty around the financial health of our borrowers, including the effectiveness of loan modification programs made available to merchants, as described further below.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The increase in the charge-offs for the six months ended June 30, 2023 compared to the same period in the prior year was due to the expansion of acceptable risk parameters in 2022, which resulted in a deterioration of the overall credit quality of loans outstanding.

The increase in the charge-offs for the nine months ended September 30, 2023 compared to the same period of the prior year was due to the expansion of acceptable risk parameters in 2022, which resulted in a deterioration of the overall credit quality of loans outstanding.

For merchant loans and advances, the determination of delinquency is based on the current expected or contractual repayment period of the loan or advance and fixed interest or fee payment as compared to the original expected or contractual repayment period.

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Charge-offs are recorded as a reduction to our allowance for loans and interest receivable and subsequent recoveries, if any, are recorded as an increase to the allowance for loans and interest receivable.

Loan modifications for merchants experiencing financial difficulty

In certain instances, we may modify the merchant loans, advances, and interest and fees receivable for which we determine it is probable that, without modification, we would be unable to collect all amounts due.

These modifications are intended to provide merchants with financial relief and enable us to potentially mitigate losses.

Modifications during the three and nine months ended September 30, 2023 were term extensions.

These modifications increased the term, while moving the delinquency status to current.

The following table details merchant loans, advances, and interest and fees receivable as of September 30, 2023 that were modified through a term extension to a merchant experiencing financial difficulty during the three and nine months ended September 30, 2023, and the financial effect of these modifications:

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Merchant loans, advances, and interest and fees receivables:

Amortized cost basis (in millions) $ 37 $ 107

Modifications as % of merchant loans, advances, and interest and fees receivables 3 % 8 %

Weighted average term extension (months) 25 24

We closely monitor the performance of the merchant loans, advances, and interest and fees receivable that were modified to extend the term to understand the effectiveness of these modification efforts.

The following table depicts the performance of merchant loans, advances, and interest and fees receivable as of September 30, 2023 that have been modified during the nine months ended September 30, 2023:

September 30, 2023

(In millions)

Merchant loans, advances, and interest and fees receivables:

30 - 59 days past due 7

60 - 89 days past due 4

90 - 179 days past due 10

A merchant is considered in payment default after a modification when the merchant’s payment is 60 days past their expected or contractual repayment date.

Merchant loans, advances, and interest and fees receivable modified to extend the term since January 1, 2023 that subsequently defaulted were not material during the three and nine months ended September 30, 2023.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Allowances for merchant loans, advances, and interest and fees receivable modified due to merchants experiencing financial difficulties are assessed separately from other loans and advances within our portfolio and are determined by estimating current expected credit losses utilizing the modified term.

Historical loss estimates are utilized in addition to macroeconomic assumptions to determine current expected credit losses.

Further, we may include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses.

NOTE 12— DEBT

FIXED RATE NOTES

In June 2023, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of ¥ 90 billion (approximately $ 622 million as of June 30, 2023).

In June 2023, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of ¥ 90 billion (approximately $ 603 million as of September 30, 2023).

Interest on these notes is payable on June 9 and December 9 of each year, beginning on December 9, 2023.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of June 30, 2023 and December 31, 2022, we had an outstanding aggregate principal amount of $ 10.6 billion and $ 10.4 billion, respectively, related to the Notes.

As of September 30, 2023 and December 31, 2022, we had an outstanding aggregate principal amount of $ 10.6 billion and $ 10.4 billion, respectively, related to the Notes.

The following table summarizes the Notes:

Maturities Effective Interest Rate June 30,

Maturities Effective Interest Rate September 30,

2023 December 31,

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(1) Principal amounts represent the U.S.

dollar equivalent as of June 30, 2023 and December 31, 2022, respectively.

dollar equivalent as of September 30, 2023 and December 31, 2022, respectively.

(2) The current portion of term debt is included within accrued expenses and other current liabilities on our condensed consolidated balance sheets.

The effective interest rates for the Notes include interest on the Notes, amortization of debt issuance costs, and amortization of the debt discount.

The interest expense recorded for the Notes, including amortization of the debt discount and debt issuance costs, was $ 83 million and $ 166 million for the three and six months ended June 30, 2023, respectively.

The interest expense recorded for the Notes, including amortization of the debt discount, debt issuance costs, and debt extinguishment net gains, was $ 67 million and $ 123 million for the three and six months ended June 30, 2022, respectively.

The interest expense recorded for the Notes, including amortization of the debt discount and debt issuance costs, was $ 84 million and $ 250 million for the three and nine months ended September 30, 2023, respectively.

The interest expense recorded for the Notes, including amortization of the debt discount, debt issuance costs, and debt extinguishment net gains, was $ 83 million and $ 206 million for the three and nine months ended September 30, 2022, respectively.

PayPal Holdings, Inc.

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guarantees the portion of borrowings made available and other obligations of any such subsidiaries under the Credit Agreement.

As of June 30, 2023, certain subsidiaries were designated as additional borrowers.

As of September 30, 2023, certain subsidiaries were designated as additional borrowers.

Funds borrowed under the Credit Agreement may be used for working capital, capital expenditures, acquisitions, and other purposes not in contravention of the Credit Agreement.

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The financial covenant requires the Company to meet a quarterly financial test with respect to a maximum consolidated leverage ratio.

As of June 30, 2023, no borrowings or letters of credit were outstanding under the Credit Agreement.

Accordingly, at June 30, 2023, $ 5.0 billion of borrowing capacity was available for the purposes permitted by the Credit Agreement, subject to customary conditions to borrowing.

As of September 30, 2023, no borrowings or letters of credit were outstanding under the Credit Agreement.

Accordingly, at September 30, 2023, $ 5.0 billion of borrowing capacity was available for the purposes permitted by the Credit Agreement, subject to customary conditions to borrowing.

Paidy credit agreement

In February 2022, we entered into a credit agreement (the “Paidy Credit Agreement”) with Paidy as co-borrower, which provided for an unsecured revolving credit facility of ¥ 60.0 billion, which was modified in September 2022 to increase the borrowing capacity by ¥ 30.0 billion for a total borrowing capacity of ¥ 90.0 billion (approximately $ 622 million as of June 30, 2023).

In June 2023, we repaid borrowings on the Paidy Credit Agreement using proceeds from the June 2023 debt issuance.

As of June 30, 2023, no borrowings were outstanding, and as of December 31, 2022, ¥ 64.3 billion (approximately $ 491 million) was outstanding under the Paidy Credit Agreement, which was recorded in long-term debt on our condensed consolidated balance sheets.

At June 30, 2023, ¥ 90.0 billion (approximately $ 622 million) of borrowing capacity was available for the purposes permitted by the Paidy Credit Agreement, subject to customary conditions to borrowing.

During the three and six months ended June 30, 2023 and 2022, the total interest expense and fees we recorded related to the Paidy Credit Agreement were de minimis.

As of September 30, 2023 and December 31, 2022, ¥ 16.0 billion (approximately $ 108 million) and ¥ 64.3 billion (approximately $ 491 million) was drawn down under the Paidy Credit Agreement, respectively, which was recorded in long-term debt on our condensed consolidated balance sheets.

At September 30, 2023, ¥ 74.0 billion (approximately $ 495 million) of borrowing capacity was available for the purposes permitted by the Paidy Credit Agreement, subject to customary conditions to borrowing.

During the three and nine months ended September 30, 2023 and 2022, the total interest expense and fees we recorded related to the Paidy Credit Agreement were de minimis.

PayPal Holdings, Inc.

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FUTURE PRINCIPAL PAYMENTS

As of June 30, 2023, the future principal payments associated with our term debt were as follows (in millions):

As of September 30, 2023, the future principal payments associated with our term debt were as follows (in millions):

Remaining 2023 $ —

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NOTE 13— COMMITMENTS AND CONTINGENCIES

As of June 30, 2023 and December 31, 2022, approximately $ 5.6 billion and $ 4.9 billion, respectively, of unused credit was available to PayPal Credit account holders in the U.K.

As of September 30, 2023 and December 31, 2022, approximately $ 5.7 billion and $ 4.9 billion, respectively, of unused credit was available to PayPal Credit account holders in the U.K.

While this amount represents the total unused credit available, we have not experienced, and do not anticipate, that all our PayPal Credit account holders will access their entire available credit at any given point in time.

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With respect to the matters disclosed in this Note 13, we are unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material as of June 30, 2023.

Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material as of September 30, 2023.

Except as otherwise noted for the proceedings described in this Note 13, we have concluded, based on currently available information, that reasonably possible losses arising directly from the proceedings (i.e., monetary damages or amounts paid in judgment or settlement) in excess of our recorded accruals are also not material.

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We are cooperating with the CFPB in connection with these CIDs.

We have responded to subpoenas and requests for information from the U.S.

Securities and Exchange Commission (“SEC”) Enforcement Division relating to whether the interchange rates paid to the bank that issues debit cards bearing our licensed brands were consistent with Regulation II of the Board of Governors of the Federal Reserve System, and to the reporting of marketing fees earned from the PayPal-branded card programs (the “SEC Debit Card Program Matter”).

We have been informed by the SEC that this matter has been formally closed without action.

In February 2022, we received a CID from the Federal Trade Commission (“FTC”) related to PayPal’s practices relating to commercial customers that submit charges on behalf of other merchants or sellers, and related activities.

4 unchanged sentences

We are cooperating with the FCO in connection with this proceeding.

In October 2023, we received a CID from the CFPB related to investigation and error-resolution obligations under Regulation E, the presentment of transactions to linked bank accounts, and related matters.

The CID requests the production of documents and answers to written questions.

We are cooperating with the CFPB in connection with this CID.

On November 1, 2023, we received a subpoena from the U.S.

SEC Division of Enforcement relating to PayPal USD stablecoin.

The subpoena requests the production of documents.

We are cooperating with the SEC in connection with this request.

PayPal Holdings, Inc.

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Legal proceedings

On August 20, 2021, a putative securities class action captioned Kang v.

PayPal Holdings, Inc., et al., Case No.

21-cv-06468, was filed in the U.S.

District Court for the Northern District of California (the “Kang Securities Action”).

The Kang Securities Action asserts claims relating to our disclosure of a CID from the CFPB related to the marketing and use of PayPal Credit in connection with certain merchants that provide educational services and the SEC Debit Card Program Matter in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021.

The Kang Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 9, 2017 and July 28, 2021 (the “Class Period”), and asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company, its Chief Executive Officer, and former Chief Financial Officer.

The complaint alleges that certain public statements made by the Company during the Class Period were rendered materially false and misleading (which, allegedly, caused the Company’s stock to trade at artificially inflated prices) by the defendants’ failure to disclose that, among other things, PayPal’s business practices with respect to PayPal Credit and regarding interchange rates paid to its bank partner related to its bank-issued co-branded debit cards were non-compliant with applicable laws and/or regulations.

The Kang Securities Action seeks unspecified compensatory damages on behalf of the putative class members.

On November 2, 2021, the court appointed a Lead Plaintiff, and on January 25, 2022, the Lead Plaintiff filed an amended complaint.

The amended complaint alleges a class period between April 27, 2016 and July 28, 2021 (the “Amended Class Period”), and in addition to the Company, its Chief Executive Officer, and former Chief Financial Officer, also names other Company executives as defendants.

The amended complaint alleges that various statements made by the defendants during the Amended Class Period were rendered materially false and misleading, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by PayPal’s alleged violations of the 2015 consent order with the CFPB, federal consumer financial laws, and Regulation II.

On August 8, 2022, the court granted Defendants’ motion to dismiss the amended complaint in its entirety, and granted Lead Plaintiff’s request for leave to file a further amended complaint.

On September 16, 2022, Lead Plaintiff filed a Second Amended Complaint (the “SAC”), which asserts the same claims against the same Defendants based on the same alleged conduct as the prior complaint.

Defendants moved to dismiss the SAC on November 3, 2022.

On April 27, 2023, the Court granted Defendants’ motion and dismissed the SAC in its entirety with prejudice.

Plaintiffs’ deadline to file an appeal has passed and the matter is now closed.

On December 16, 2021 and January 19, 2022, two related putative shareholder derivative actions captioned Pang v.

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2022-0684, was filed in the Court of Chancery for the State of Delaware (the “Delaware Derivative Action,” and collectively with the California Derivative Actions, the “Derivative Actions”), purportedly on behalf of the Company.

The Derivative Actions are based on the same alleged facts and circumstances as the Kang Securities Action, and name certain of our officers, including our Chief Executive Officer and former Chief Financial Officer, and members of our Board of Directors, as defendants.

The Derivative Actions are based on the same alleged facts and circumstances as the putative securities class action captioned Kang v.

PayPal Holdings, Inc., et al.

21-cv-06468, that was filed in the U.S.

District Court for the Northern District of California (the “Kang Securities Action”), and name certain of our officers, including our former Chief Executive Officer and former Chief Financial Officer, and members of our Board of Directors, as defendants.

The Derivative Actions allege claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of the Securities Exchange Act of 1934 (“Exchange Act”), and seek to recover damages on behalf of the Company.

On February 1, 2022, the court entered an order consolidating the two California Derivative Actions and staying them until all motions to dismiss in the Kang Securities Action are resolved.

On June 29, 2023, following the final dismissal of the Kang Securities Action, the Court so-ordered a stipulation dismissing the California Derivative Actions, without prejudice.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On June 29, 2023, following the final dismissal of the Kang Securities Action, the Court ordered a stipulation dismissing the California Derivative Actions, without prejudice, and on July 7, 2023, the Court ordered a stipulation dismissing the Delaware Derivative Action, without prejudice.

On October 4, 2022, a putative securities class action captioned Defined Benefit Plan of the Mid-Jersey Trucking Industry and Teamsters Local 701 Pension and Annuity Fund v.

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The PPH Securities Action asserts claims relating to our public statements with respect to net new active accounts (“NNA”) results and guidance, and the detection of illegitimately created accounts.

The PPH Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 3, 2021 and February 1, 2022 (the “Class Period”), and asserts claims for alleged violations of Sections 10(b) of the Exchange Act against the Company, as well as its Chief Executive Officer, Chief Strategy, Growth and Data Officer, and former Chief Financial Officer (collectively, the “Individual Defendants,” and together with the Company, “Defendants”), and for alleged violations of Sections 20(a) and 20A of the Exchange Act against the Individual Defendants.

The PPH Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 3, 2021 and February 1, 2022 (the “Class Period”), and asserts claims for alleged violations of Sections 10(b) of the Exchange Act against the Company, as well as its former Chief Executive Officer, Chief Strategy, Growth and Data Officer, and former Chief Financial Officer (collectively, the “Individual Defendants,” and together with the Company, “Defendants”), and for alleged violations of Sections 20(a) and 20A of the Exchange Act against the Individual Defendants.

The complaint alleges that certain public statements made by Defendants during the Class Period were rendered materially false and misleading (which, allegedly, caused the Company’s stock to trade at artificially inflated prices) by the Defendants’ failure to disclose that, among other things, the Company’s incentive campaigns were susceptible to fraud and led to the creation of illegitimate accounts, which allegedly affected the Company’s NNA results and guidance.

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District Court for the District of New Jersey (the “Nelson Action”) purportedly on behalf of the Company.

The Shah and Nelson Actions are based on the same alleged facts and circumstances as the PPH Securities Action, and name certain of our officers, including our Chief Executive Officer and former Chief Financial Officer, and members of our Board of Directors, as defendants.

The Shah and Nelson Actions are based on the same alleged facts and circumstances as the PPH Securities Action, and name certain of our officers, including our former Chief Executive Officer and former Chief Financial Officer, and members of our Board of Directors, as defendants.

The Shah and Nelson Actions allege claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement and violations of the Exchange Act, and seek to recover damages on behalf of the Company.

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On July 14, 2023, the court denied Defendants’ motion to dismiss the complaint.

Trial is scheduled to begin in August 2024.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

General matters

4 unchanged sentences

Intellectual property claims, whether meritorious or not, are time-consuming and costly to defend and resolve, could require expensive changes in our methods of doing business, or could require us to enter into costly royalty or licensing agreements on unfavorable terms or make substantial payments to settle claims or to satisfy damages awarded by courts.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business, including suits by our customers (individually or as class actions) or regulators alleging, among other things, improper disclosure of our prices, rules, or policies, that our practices, prices, rules, policies, or customer/user agreements violate applicable law, or that we have acted unfairly or not acted in conformity with such prices, rules, policies, or agreements.

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We have agreed, under certain circumstances, to indemnify the chartered financial institution and its assignee of a portion of these loans in connection with the services provided for loans made under this program.

To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2023 and December 31, 2022, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions.

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2023 and December 31, 2022, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

PROTECTION PROGRAMS

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These protection programs are considered assurance-type warranties under applicable accounting standards for which we estimate and record associated costs in transaction and credit losses during the period the payment transaction is completed.

At June 30, 2023 and December 31, 2022, the allowance for transaction losses was $ 58 million and $ 66 million, respectively.

The allowance for negative customer balances was $ 288 million and $ 212 million at June 30, 2023 and December 31, 2022, respectively.

The following table shows changes in the allowance for transaction losses and negative customer balances related to our protection programs for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

At September 30, 2023 and December 31, 2022, the allowance for transaction losses was $ 67 million and $ 66 million, respectively.

The allowance for negative customer balances was $ 230 million and $ 212 million at September 30, 2023 and December 31, 2022, respectively.

The following table shows changes in the allowance for transaction losses and negative customer balances related to our protection programs for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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NOTE 14— STOCK REPURCHASE PROGRAMS

During the six months ended June 30, 2023, we repurchased approximately 41 million shares of our common stock for approximately $ 3.0 billion at an average price of $ 72.42 , excluding excise tax.

During the nine months ended September 30, 2023, we repurchased approximately 64 million shares of our common stock for approximately $ 4.4 billion at an average price of $ 69.06 , excluding excise tax.

These shares were purchased in the open market under our stock repurchase programs authorized in July 2018 and June 2022.

As of June 30, 2023, a total of approximately $ 12.9 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program.

As of September 30, 2023, a total of approximately $ 11.5 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program.

The Inflation Reduction Act of 2022 imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

Beginning in the first quarter of 2023, we reflected the applicable excise tax in treasury stock on our condensed consolidated balance sheet.

During the six months ended June 30, 2023, we recorded $ 24 million in excise tax within treasury stock on our condensed consolidated balance sheet.

Beginning in the first quarter of 2023, we have reflected the applicable excise tax in treasury stock on our condensed consolidated balance sheet.

During the nine months ended September 30, 2023, we recorded $ 39 million in excise tax within treasury stock on our condensed consolidated balance sheet.

NOTE 15— STOCK-BASED PLANS

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2015 Equity Incentive Award Plan (the “Plan”).

In June 2023, the Company filed a post-effective amendment to the 2022 Inducement Plan registration statement that enabled 2.6 million shares previously issuable under the 2022 Inducement Plan to be included in the 34.6 million additional shares issuable under the Plan.

STOCK-BASED COMPENSATION EXPENSE

Stock-based compensation expense for our equity incentive plans are measured based on their estimated fair value at the time of grant and recognized over the award’s vesting period.

In June 2023, the Company filed a post-effective amendment to the registration statement for the PayPal Holdings, Inc.

2022 Inducement Plan (“Inducement Plan”), which enabled 2.6 million shares previously issuable under the Inducement Plan to be included in the 34.6 million additional shares issuable under the Plan.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The impact on our results of operations of recording stock-based compensation expense under our equity incentive plans for the three and six months ended June 30, 2023 and 2022 was as follows:

Three Months Ended June 30, Six Months Ended June 30,

STOCK-BASED COMPENSATION EXPENSE

Stock-based compensation expense for our equity incentive plans are measured based on their estimated fair value at the time of grant and recognized over the award’s vesting period.

The impact on our results of operations of recording stock-based compensation expense under our equity incentive plans for the three and nine months ended September 30, 2023 and 2022 was as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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NOTE 16— INCOME TAXES

Our effective tax rate for the three and six months ended June 30, 2023 was 21 % and 23 %, respectively.

Our effective tax rate for the three and six months ended June 30, 2022 was 796 % and 75 %, respectively.

Our effective tax rate for the three and nine months ended September 30, 2023 was 18 % and 21 %, respectively.

Our effective tax rate for the three and nine months ended September 30, 2022 was 16 % and 34 %, respectively.

The difference between our effective tax rate and the U.S.

federal statutory rate of 21% in the current periods was primarily the result of foreign income taxed at different rates and discrete tax adjustments, including tax expense related to stock-based compensation.

federal statutory rate of 21% in the three and nine months ended September 30, 2023 was primarily the result of foreign income taxed at different rates and discrete tax adjustments, including tax expense related to stock-based compensation.

The difference between our effective tax rate and the U.S.

federal statutory rate of 21% for the three and six months ended June 30, 2022 was primarily due to tax expense related to the intra-group transfer of intellectual property.

federal statutory rate of 21% for the three and nine months ended September 30, 2022 was primarily the result of foreign income taxed at different rates, and for the nine months ended September 30, 2022, tax expense related to the intra-group transfer of intellectual property.

NOTE 17— RESTRUCTURING AND OTHER CHARGES

During the first quarter of 2023, management initiated a global workforce reduction intended to focus resources on core strategic priorities, and improve our cost structure and operating efficiency.

The associated restructuring charges during the three and six months ended June 30, 2023 were nil and $ 117 million, respectively.

The associated restructuring charges during the three and nine months ended September 30, 2023 were $ 3 million and $ 120 million, respectively.

We primarily incurred employee severance and benefits costs, substantially all of which have been accrued for as of March 31, 2023.

The following table summarizes the restructuring reserve activity during the six months ended June 30, 2023:

The following table summarizes the restructuring reserve activity during the nine months ended September 30, 2023:

Employee Severance and Benefits and Other Associated Costs

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Payments ( 136 )

Accrued liability as of June 30, 2023

Accrued liability as of September 30, 2023

During the first quarter of 2022, management initiated a strategic reduction of the existing global workforce intended to streamline and optimize our global operations to enhance operating efficiency.

This effort focused on reducing redundant operations and simplifying our organizational structure.

The associated restructuring charges during the three and six months ended June 30, 2022 were $ 71 million and $ 91 million, respectively.

The associated restructuring charges during the three and nine months ended September 30, 2022 were $ 23 million and $ 114 million, respectively.

We primarily incurred employee severance and benefits costs, as well as associated consulting costs under this strategic reduction.

The strategic actions associated with this plan were substantially completed by the fourth quarter of 2022.

Additionally, we are continuing to review our real estate and facility capacity requirements due to our new and evolving work models.

We incurred asset impairment charges of $ 4 million and $ 43 million in the three and six months ended June 30, 2023, respectively, and $ 19 million and $ 35 million in the three and six months ended June 30, 2022, respectively, due to exiting of certain leased properties, which resulted in a reduction of ROU lease assets and related leasehold improvements.

See “Note 6—Leases” for additional information.

We recognized a gain of $ 14 million due to the sale of an owned property in the three and six months ended June 30, 2023.

We also incurred a loss of $ 8 million upon designation of another owned property as held for sale in the six months ended June 30, 2023.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the three and six months ended June 30, 2023, approximately $ 34 million of losses were recorded in restructuring and other charges in order to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

Additionally, we are continuing to review our real estate and facility capacity requirements due to our new and evolving work models.

We incurred asset impairment charges of $ 15 million and $ 58 million in the three and nine months ended September 30, 2023, respectively, and $ 29 million and $ 64 million in the three and nine months ended September 30, 2022, respectively, due to exiting of certain leased properties, which resulted in a reduction of ROU lease assets and related leasehold improvements.

See “Note 6—Leases” for additional information.

In the nine months ended September 30, 2023, we recognized a gain of $ 17 million due to the sale of an owned property.

We also incurred a loss of $ 12 million related to another owned property held for sale in the nine months ended September 30, 2023.

During the three and nine months ended September 30, 2023, approximately $ 15 million and $ 49 million, respectively, of losses were recorded in restructuring and other charges in order to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

NOTE 18— SUBSEQUENT EVENTS

As described in “Note 1—Overview and Summary of Significant Accounting Policies,” in June 2023 we entered into a multi-year agreement with a global investment firm to sell up to € 40 billion of eligible consumer installment receivables.

In October 2023, we began selling those receivables and as of October 31, 2023, $ 1.4 billion of such receivables, which were classified as held for sale, have been sold.

Following the sale, the global investment firm became the owner of the receivables sold and we no longer hold an ownership interest in these receivables.

This transaction was accounted for as a sale, based on our determination that it met the necessary criteria for such accounting including legal isolation of transferred assets, ability of the transferee to pledge or exchange the transferred assets without constraint, and the transfer of control.

Accordingly, we no longer record these loan and interest receivables on our consolidated financial statements.

We also concluded that our continuing involvement in the arrangement does not negate this determination.

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

What changed 10-Q

Item 1. Financial Statements