QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as interest rates, foreign currency exchange rates, and equity investment risk.
−Removed: Management establishes and oversees the implementation of policies governing our investing, funding, and foreign currency derivative activities intended to mitigate market risks.
+Added: Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as interest rates, foreign exchange rates, and equity investment risk.
+Added: Management establishes and oversees the implementation of policies governing our investing, funding, and foreign exchange derivative activities intended to mitigate market risks.
We monitor risk exposures on an ongoing basis.
INTEREST RATE RISK
−Removed: We are exposed to interest rate risk relating to our investment portfolio and from interest-rate sensitive assets underlying the customer balances we hold on our condensed consolidated balance sheets as customer accounts.
−Removed: As of September 30, 2024 and December 31, 2023, approximately 50% and 59%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents.
+Added: We are exposed to interest rate risk relating to our investment portfolio, from interest-rate sensitive assets underlying the customer balances we hold on our condensed consolidated balance sheets as customer accounts, and a portion of our debt.
+Added: As of March 31, 2025 and December 31, 2024, approximately 52% and 47%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents.
The remaining portfolio and assets underlying the customer balances that we hold on our condensed consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities.
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Interest rate movements affect the interest income we earn on cash and cash equivalents, time deposits, and available-for-sale debt securities and the fair value of those securities.
−Removed: A hypothetical 100 basis points increase in interest rates would have resulted in a decrease in the fair value of our cash equivalents and available-for-sale debt securities investment by approximately $76 million and $122 million at September 30, 2024 and December 31, 2023, respectively.
+Added: A hypothetical 100 basis points increase in interest rates would have resulted in a decrease in the fair value of our cash equivalents and available-for-sale debt securities investment by approximately $128 million and $101 million at March 31, 2025 and December 31, 2024, respectively.
Changes in the fair value of our available-for-sale debt securities resulting from such interest rate changes are reported as a component of accumulated other comprehensive income (“AOCI”) and are realized only if we sell the securities prior to their scheduled maturities or the declines in fair values are due to expected credit losses.
−Removed: As of September 30, 2024 and December 31, 2023, we had an aggregate principal amount of $11.9 billion and $10.6 billion, respectively, in fixed rate debt with varying maturity dates.
+Added: As of March 31, 2025 and December 31, 2024, we had an aggregate principal amount of $11.7 billion and $10.6 billion, respectively, in fixed rate debt with varying maturity dates.
Since these notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates.
However, the fair value of these notes fluctuates when interest rates change, increasing in periods of declining interest rates and declining in periods of increasing interest rates.
−Removed: As of September 30, 2024 and December 31, 2023, we also had revolving credit facilities of approximately $5.6 billion available to us.
+Added: As of March 31, 2025, we had an aggregate principal amount of $450 million in floating rate debt with a maturity date of March 6, 2028.
+Added: A hypothetical 100 basis points increase in market interest rates would not have resulted in a material impact to interest expense recorded in the three months ended March 31, 2025.
+Added: As of March 31, 2025 and December 31, 2024, we also had revolving credit facilities of approximately $5.6 billion available to us.
We are obligated to pay interest on borrowings under these facilities as well as other customary fees, including an upfront fee and an unused commitment fee based on our debt rating.
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As a result, we are exposed to the risk related to fluctuations in interest rates to the extent of our borrowings.
−Removed: As of September 30, 2024 and December 31, 2023, ¥90.0 billion (approximately $633 million) and ¥50.0 billion (approximately $355 million), respectively, was outstanding under these facilities.
−Removed: A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the period.
+Added: As of March 31, 2025 and December 31, 2024, ¥90.0 billion (approximately $601 million) and ¥90.0 billion (approximately $574 million), respectively, was outstanding under these facilities.
+Added: A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the three months ended March 31, 2025.
For additional information, see “Note 12—Debt” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
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Higher interest rates often lead to larger payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net income (loss).
−Removed: FOREIGN CURRENCY EXCHANGE RATE RISK
−Removed: We have significant operations internationally that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, and Canadian dollar, which subject us to foreign currency exchange rate risk and may adversely impact our financial results.
+Added: FOREIGN EXCHANGE RISK
+Added: We have significant operations internationally that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, and Canadian dollar, which subject us to foreign exchange risk and may adversely impact our financial results.
We transact in various foreign currencies and have significant international revenues and expenses.
In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services.
−Removed: Our cash flows, results of operations, and certain of our intercompany balances that are exposed to foreign currency exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.
+Added: Our cash flows, results of operations, and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.
We are generally a net receiver of foreign currencies and therefore benefit from a weakening of the United States (“U.S.”) dollar, and are adversely affected by a strengthening of the U.S.
dollar, relative to foreign currencies.
−Removed: We considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that changes in exchange rates of 10% for all currencies could be experienced in the near term.
−Removed: We have a foreign currency exchange exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our consolidated cash flows and results of operations through the execution of foreign currency exchange contracts.
−Removed: These foreign currency exchange contracts are accounted for as derivative instruments;
−Removed: for additional details related to our foreign currency exchange contracts, please see “Note 10—Derivative Instruments” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
−Removed: We use foreign currency exchange forward contracts to protect our forecasted U.S.
−Removed: dollar-equivalent earnings and our investment in foreign subsidiaries from adverse changes in foreign currency exchange rates.
−Removed: These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign currency exchange rate movements.
+Added: We considered the historical trends in foreign exchange rates and determined that it was reasonably possible that changes in exchange rates of 10% for all currencies could be experienced in the near term.
+Added: We have a foreign currency exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our consolidated cash flows and results of operations through the execution of foreign exchange contracts.
+Added: These foreign exchange contracts are accounted for as derivative instruments;
+Added: for additional details related to our foreign exchange contracts, please see “Note 10—Derivative Instruments” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
+Added: We use foreign exchange contracts to protect our forecasted U.S.
+Added: dollar-equivalent earnings and our investment in foreign subsidiaries from adverse changes in foreign exchange rates.
+Added: These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate movements.
We designate these contracts as cash flow hedges of forecasted revenues and expenses denominated in certain foreign currencies and net investment hedges for accounting purposes.
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The accumulated gains and losses associated with net investment hedges will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated, at which point they will be reclassified into earnings.
−Removed: dollar weakened by a hypothetical 10% at September 30, 2024 and December 31, 2023, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately $627 million and $622 million lower, respectively, before considering the offsetting impact of the underlying hedged item.
−Removed: We have an additional foreign currency exchange management program in which we use foreign currency exchange contracts to help offset the foreign currency exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.
+Added: dollar weakened by a hypothetical 10% at March 31, 2025 and December 31, 2024, the amount recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $443 million and $380 million lower, respectively, before considering the offsetting impact of the underlying hedged item.
+Added: We have an additional balance sheet foreign exchange management program in which we use foreign exchange contracts to help offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.
These contracts are not designated as hedging instruments and reduce, but do not entirely eliminate, the impact of currency exchange rate movements on our assets and liabilities.
−Removed: The foreign currency exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign currency exchange contracts.
−Removed: Adverse changes in exchange rates of a hypothetical 10% for all foreign currencies would have resulted in a negative impact on income before income taxes of approximately $464 million and $417 million at September 30, 2024 and December 31, 2023, respectively, without considering the offsetting effect of foreign currency exchange contracts.
−Removed: Foreign currency exchange contracts in place as of September 30, 2024 would have positively impacted income before income taxes by approximately $451 million, resulting in a net negative impact of approximately $13 million.
+Added: The foreign exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign exchange contracts.
+Added: Adverse changes in exchange rates of a hypothetical 10% for all foreign currencies would have resulted in a negative impact on income before income taxes of approximately $309 million and $470 million at March 31, 2025 and December 31, 2024, respectively, without considering the offsetting effect of foreign currency exchange contracts.
+Added: Foreign currency exchange contracts in place as of March 31, 2025 would have positively impacted income before income taxes by approximately $277 million, resulting in a net negative impact of approximately $32 million.
Foreign currency exchange contracts in place as of December 31, 2024 would have positively impacted income before income taxes by approximately $445 million, resulting in a net negative impact of approximately $25 million.
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Our strategic investments are subject to a variety of market-related risks that could substantially reduce or increase the carrying value of the portfolio.
−Removed: As of September 30, 2024 and December 31, 2023, our strategic investments totaled $1.7 billion and $1.8 billion, which represented approximately 11% of our total cash, cash equivalents, and short-term and long-term investment portfolio at those respective dates.
+Added: As of both March 31, 2025 and December 31, 2024, our strategic investments totaled $1.6 billion which represented approximately 10% of our total cash, cash equivalents, and short-term and long-term investment portfolio at those respective dates.
Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies.
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Additionally, the financial success of our investments in privately held companies is typically dependent on a liquidity event, such as a public offering, acquisition, private sale, or other favorable market event providing the ability to realize appreciation in the value of the investment.
−Removed: A hypothetical adverse change of 10% in the carrying value of our strategic investments as of September 30, 2024, which could be experienced in the near term, would have resulted in a decrease of approximately $171 million to the carrying value of the portfolio.
+Added: A hypothetical adverse change of 10% in the carrying value of our strategic investments as of March 31, 2025, which could be experienced in the near term, would have resulted in a decrease of approximately $163 million to the carrying value of the portfolio.
We review our non-marketable equity securities accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value.
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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.