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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023.ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For

2、 the Transition Period from to .Commission file number 001-36859 PayPal Holdings,Inc.(Exact Name of Registrant as Specified in Its Charter)Delaware47-2989869(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)2211 North First StreetSan Jose,California95131(

3、Address of Principal Executive Offices)(Zip Code)(408)967-1000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock,$0.0001 par value per sharePYPLNASDAQ Gl

4、obal Select MarketIndicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been su

5、bject to such filing requirements forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorte

6、r period that the registrant was required to submit suchfiles).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or anemerging growth company.See the definitions of“large accelerated filer,”“acce

7、lerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not

8、 to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of May 2,2023,the

9、re were 1,115,713,968 shares of the registrants common stock,$0.0001 par value,outstanding,which is the only class of common orvoting stock of the registrant issued.PayPal Holdings,Inc.TABLE OF CONTENTSPageNumberPart I.Financial Information4Item 1.Condensed Consolidated Balance Sheets4Condensed Cons

10、olidated Statements of Income(Loss)5Condensed Consolidated Statements of Comprehensive Income(Loss)6Condensed Consolidated Statements of Stockholders Equity7Condensed Consolidated Statements of Cash Flows8Notes to Condensed Consolidated Financial Statements10Item 2.Managements Discussion and Analysi

11、s of Financial Condition and Results of Operations43Item 3.Quantitative and Qualitative Disclosures About Market Risk58Item 4.Controls and Procedures60Part II.Other Information61Item 1.Legal Proceedings61Item 1A.Risk Factors61Item 2.Unregistered Sales of Equity Securities and Use of Proceeds64Item 3

12、.Defaults Upon Senior Securities64Item 4.Mine Safety Disclosures64Item 5.Other Information64Item 6.Exhibits65Signatures66Table of ContentsPART I:FINANCIAL INFORMATIONITEM 1:FINANCIAL STATEMENTSPayPal Holdings,Inc.CONDENSED CONSOLIDATED BALANCE SHEETS March 31,2023December 31,2022(In millions,except

13、par value)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents$7,101$7,776 Short-term investments3,559 3,092 Accounts receivable,net967 963 Loans and interest receivable,net of allowances of$638 and$598 as of March 31,2023 and December 31,2022,respectively7,495 7,431 Funds receivable and custom

14、er accounts35,276 36,357 Prepaid expenses and other current assets2,162 1,898 Total current assets56,560 57,517 Long-term investments4,632 5,018 Property and equipment,net1,633 1,730 Goodwill11,195 11,209 Intangible assets,net730 788 Other assets2,436 2,455 Total assets$77,186$78,717 LIABILITIES AND

15、 EQUITYCurrent liabilities:Accounts payable$142$126 Funds payable and amounts due to customers39,026 40,107 Accrued expenses and other current liabilities4,164 4,055 Income taxes payable577 813 Total current liabilities43,909 45,101 Deferred tax liability and other long-term liabilities2,938 2,925 L

16、ong-term debt10,481 10,417 Total liabilities57,328 58,443 Commitments and contingencies(Note 13)Equity:Common stock,$0.0001 par value;4,000 shares authorized;1,122 and 1,136 shares outstanding as of March 31,2023 and December 31,2022,respectively Preferred stock,$0.0001 par value;100 shares authoriz

17、ed,unissued Treasury stock at cost,192 and 173 shares as of March 31,2023 and December 31,2022,respectively(17,522)(16,079)Additional paid-in-capital18,529 18,327 Retained earnings19,749 18,954 Accumulated other comprehensive income(loss)(898)(928)Total equity19,858 20,274 Total liabilities and equi

18、ty$77,186$78,717 The accompanying notes are an integral part of these condensed consolidated financial statements.4Table of ContentsPayPal Holdings,Inc.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(LOSS)Three Months Ended March 31,20232022(In millions,except per share data)(Unaudited)Net revenues$7,04

19、0$6,483 Operating expenses:Transaction expense3,283 2,817 Transaction and credit losses442 369 Customer support and operations488 534 Sales and marketing436 594 Technology and development721 815 General and administrative507 607 Restructuring and other charges164 36 Total operating expenses6,041 5,7

20、72 Operating income999 711 Other income(expense),net75(82)Income before income taxes1,074 629 Income tax expense279 120 Net income(loss)$795$509 Net income(loss)per share:Basic$0.70$0.44 Diluted$0.70$0.43 Weighted average shares:Basic1,129 1,163 Diluted1,134 1,172 The accompanying notes are an integ

21、ral part of these condensed consolidated financial statements.5Table of ContentsPayPal Holdings,Inc.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS)Three Months Ended March 31,20232022(In millions)(Unaudited)Net income(loss)$795$509 Other comprehensive income(loss),net of reclassifica

22、tion adjustments:Foreign currency translation adjustments(“CTA”)(20)(95)Net investment hedges CTA gains,net27 21 Tax expense on net investment hedges CTA gains,net(6)(5)Unrealized losses on cash flow hedges,net(111)(3)Tax benefit on unrealized losses on cash flow hedges,net6 Unrealized gains(losses)

23、on investments,net175(293)Tax(expense)benefit on unrealized gains(losses)on investments,net(41)67 Other comprehensive income(loss),net of tax30(308)Comprehensive income(loss)$825$201 The accompanying notes are an integral part of these condensed consolidated financial statements.6Table of ContentsPa

24、yPal Holdings,Inc.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYCommon StockSharesTreasury StockAdditional Paid-In CapitalAccumulated OtherComprehensiveIncome(Loss)RetainedEarningsTotal Equity(In millions)(Unaudited)Balances at December 31,20221,136$(16,079)$18,327$(928)$18,954$20,274 Net

25、income 795 795 Foreign CTA (20)(20)Net investment hedges CTA gains,net 27 27 Tax expense on net investment hedges CTA gains,net (6)(6)Unrealized losses on cash flow hedges,net (111)(111)Tax benefit on unrealized losses on cash flow hedges,net 6 6 Unrealized gains on investments,net 175 175 Tax expen

26、se on unrealized gains on investments,net (41)(41)Common stock and stock-based awards issued and assumed,net of shares withheld for employee taxes5 (157)(157)Common stock repurchased(19)(1,432)(1,432)Excise tax on common stock repurchased(11)(11)Stock-based compensation 359 359 Balances at March 31,

27、20231,122$(17,522)$18,529$(898)$19,749$19,858 Common StockSharesTreasury StockAdditional Paid-In CapitalAccumulated OtherComprehensiveIncome(Loss)RetainedEarningsTotal Equity(In millions)(Unaudited)Balances at December 31,20211,168$(11,880)$17,208$(136)$16,535$21,727 Net income 509 509 Foreign CTA (

28、95)(95)Net investment hedges CTA gains,net 21 21 Tax expense on net investment hedges CTA gains,net (5)(5)Unrealized losses on cash flow hedges,net (3)(3)Unrealized losses on investments,net (293)(293)Tax benefit on unrealized losses on investments,net 67 67 Common stock and stock-based awards issue

29、d and assumed,net of shares withheld for employee taxes4 (273)(273)Common stock repurchased(11)(1,500)(1,500)Stock-based compensation 447 447 Other 1 1 Balances at March 31,20221,161$(13,380)$17,383$(444)$17,044$20,603 The accompanying notes are an integral part of these condensed consolidated finan

30、cial statements.7Table of ContentsPayPal Holdings,Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31,20232022(In millions)(Unaudited)Cash flows from operating activities:Net income(loss)$795$509 Adjustments to reconcile net income(loss)to net cash provided by operating a

31、ctivities:Transaction and credit losses442 369 Depreciation and amortization270 328 Stock-based compensation345 429 Deferred income taxes(67)(16)Net(gains)losses on strategic investments(48)(14)Other(92)65 Changes in assets and liabilities:Accounts receivable(3)(50)Accounts payable3(29)Income taxes

32、payable(235)17 Other assets and liabilities(240)(391)Net cash provided by operating activities1,170 1,217 Cash flows from investing activities:Purchases of property and equipment(170)(191)Proceeds from sales of property and equipment1 3 Purchases and originations of loans receivable(8,267)(5,525)Pri

33、ncipal repayment of loans receivable8,063 5,054 Purchases of investments(6,100)(8,604)Maturities and sales of investments5,445 8,751 Funds receivable1,076(239)Collateral posted related to derivative instruments,net(22)(1)Other investing activities8 Net cash provided by(used in)investing activities34

34、(752)Cash flows from financing activities:Proceeds from issuance of common stock1 3 Purchases of treasury stock(1,432)(1,500)Tax withholdings related to net share settlements of equity awards(149)(244)Borrowings under financing arrangements72 286 Repayments under financing arrangements(5)(104)Funds

35、payable and amounts due to customers(1,020)863 Collateral received related to derivative instruments,net(129)26 Other financing activities 1 Net cash used in financing activities(2,662)(669)Effect of exchange rate changes on cash,cash equivalents,and restricted cash(4)18 Net change in cash,cash equi

36、valents,and restricted cash(1,462)(186)Cash,cash equivalents,and restricted cash at beginning of period19,156 18,029 Cash,cash equivalents,and restricted cash at end of period$17,694$17,843 8Table of ContentsPayPal Holdings,Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(continued)Three Months E

37、nded March 31,20232022(In millions)(Unaudited)Supplemental cash flow disclosures:Cash paid for interest$2$12 Cash paid for income taxes,net$495$47 The table below reconciles cash,cash equivalents,and restricted cash as reported in the condensed consolidatedbalance sheets to the total of the same amo

38、unts shown in the condensed consolidated statements of cash flows:Cash and cash equivalents$7,101$4,861 Short-term investments13 27 Funds receivable and customer accounts10,580 12,955 Total cash,cash equivalents,and restricted cash shown in the condensed consolidated statements of cashflows$17,694$1

39、7,843 The accompanying notes are an integral part of these condensed consolidated financial statements.9Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)NOTE 1OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESOVERVIEW AND ORGANIZATIONPayPal Hol

40、dings,Inc.(“PayPal,”the“Company,”“we,”“us,”or“our”)was incorporated in Delaware in January 2015 and is a leading technology platformthat enables digital payments and simplifies commerce experiences on behalf of merchants and consumers worldwide.PayPal is committed to democratizingfinancial services

41、to help improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes aroundthe world.Our goal is to enable our merchants and consumers to manage and move their money anywhere in the world in the markets we serve,anytime,onany platform

42、,and using any device when sending payments or getting paid,including person-to-person payments.We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the paymentsindustry,including countering terrorist financ

43、ing,anti-money laundering,privacy,cybersecurity,and consumer protection.The laws and regulations applicableto us,including those enacted prior to the advent of digital payments,continue to evolve through legislative and regulatory action and judicial interpretation.New or changing laws and regulatio

44、ns,including changes to their interpretation and implementation,as well as increased penalties and enforcement actionsrelated to non-compliance,could have a material adverse impact on our business,results of operations,and financial condition.We monitor these areas closelyand are focused on designin

45、g compliant solutions for our customers.SIGNIFICANT ACCOUNTING POLICIESBasis of presentation and principles of consolidationThe accompanying condensed consolidated financial statements include the financial statements of PayPal and our wholly-and majority-owned subsidiaries.All intercompany balances

46、 and transactions have been eliminated in consolidation.Investments in entities where we have the ability to exercise significant influence,but not control,over the investee are accounted for using the equity methodof accounting.For such investments,our share of the investees results of operations i

47、s included in other income(expense),net on our condensed consolidatedstatements of income(loss).Investments in entities where we do not have the ability to exercise significant influence over the investee are accounted for at fairvalue or cost minus impairment,if any,adjusted for changes resulting f

48、rom observable price changes,which are included in other income(expense),net on ourcondensed consolidated statements of income(loss).Our investment balance is included in long-term investments on our condensed consolidated balancesheets.We determine at the inception of each investment,and re-evaluat

49、e if certain events occur,whether an entity in which we have made an investment is considereda variable interest entity(“VIE”).If we determine an investment is in a VIE,we then assess if we are the primary beneficiary,which would requireconsolidation.As of March 31,2023 and December 31,2022,no VIEs

50、qualified for consolidation as the structures of these entities do not provide us with theability to direct activities that would significantly impact their economic performance.As of March 31,2023 and December 31,2022,the carrying value of ourinvestments in nonconsolidated VIEs was$135 million and$

51、128 million,respectively,and is included as non-marketable equity securities applying the equitymethod of accounting in long-term investments on our condensed consolidated balance sheets.Our maximum exposure to loss related to our nonconsolidatedVIEs,which represents funded commitments and any futur

52、e funding commitments,was$233 million and$232 million as of March 31,2023 and December 31,2022,respectively.These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statementsand accompanying notes included in our

53、Annual Report on Form 10-K for the year ended December 31,2022(the“2022 Form 10-K”)filed with the UnitedStates(“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

54、 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 periodshave been reclassified to conform to the financial statement presentation as of and for the three months ended

55、March 31,2023.10Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)ReclassificationsBeginning with the fourth quarter of 2022,we reclassified certain cash flows related to our collateral security arrangements for derivative instruments from

56、cash flows from operating activities to cash flows from investing activities and cash flows from financing activities within the condensed consolidatedstatements of cash flows.Prior period amounts have been reclassified to conform to the current period presentation.The current period presentation cl

57、assifies all changes in collateral posted and collateral received related to derivative instruments on our condensedconsolidated statements of cash flows as cash flows from investing activities and cash flows from financing activities,respectively.We believe that the currentperiod presentation provi

58、des a more meaningful representation of the nature of the cash flows and allows for greater transparency as the cash flows related tothe derivatives impact operating cash flows upon settlement exclusive of the offsetting cash flows from collateral.The following table presents the effects of the chan

59、ges on the presentation of these cash flows to the previously reported condensed consolidated statements ofcash flows:Three Months Ended March 31,2022(In millions)As Previously Reported AdjustmentsReclassifiedNet cash provided by(used in):Operating activities$1,242$(25)$1,217 Investing activities(75

60、1)(1)(752)Financing activities(695)26(669)Effect of exchange rates on cash,cash equivalents,and restricted cash18 18 Net decrease in cash,cash equivalents,and restricted cash$(186)$(186)As reported in our Form 10-Q for the quarter ended March 31,2022 filed with the SEC on April 28,2022.Financial sta

61、tement line impacted in operating activities was“Other assets and liabilities.”Financial statement line impacted in investing activities was“Collateral posted related to derivative instruments,net.”Financial statement line impacted in financing activities was“Collateral received related to derivativ

62、e instruments,net.”Use of estimatesThe preparation of condensed consolidated financial statements in conformity with U.S.generally accepted accounting principles(“GAAP”)requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of c

63、ontingent assets and liabilities at thedate of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.On an ongoing basis,we evaluate our estimates,including those related to provisions for transaction and credit losses,income ta

64、xes,loss contingencies,revenue recognition,thevaluation of goodwill and intangible assets,and the valuation of strategic investments.We base our estimates on historical experience and various otherassumptions which we believe to be reasonable under the circumstances.Actual results could materially d

65、iffer from these estimates.Recently adopted accounting guidanceIn March 2022,the Financial Accounting Standards Board(“FASB”)issued Accounting Standards Update(“ASU”)2022-02,Troubled Debt Restructurings(“TDRs”)and Vintage Disclosures(Topic 326):Financial Instruments Credit Losses.This amended guidan

66、ce eliminated the accounting designation of a loanmodification as a TDR and the measurement guidance for TDRs.The amendments also enhanced existing disclosure requirements and introduced newrequirements related to modifications of receivables due from borrowers experiencing financial difficulty.Addi

67、tionally,this guidance required entities todisclose gross charge-offs by year of origination for financing receivables,such as loans and interest receivable.The amended guidance was effective for fiscalyears beginning after December 15,2022 and was required to be applied prospectively,except for the

68、 recognition and measurement of TDRs,which could beapplied on a modified retrospective basis.We adopted this guidance effective January 1,2023 on a prospective basis.Our financial statements were notmaterially impacted upon adoption.For additional information,see“Note 11Loans and Interest Receivable

69、.”(1)(2)(3)(4)(1)(2)(3)(4)11Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt,as applicable.We do not believe any of theseaccounting pronou

70、ncements have had,or will have,a material impact on our condensed consolidated financial statements or disclosures.NOTE 2REVENUEWe enable our customers to send and receive payments.We earn revenue primarily by completing payment transactions for our customers on our paymentsplatform and from other v

71、alue added services.Our revenues are classified into two categories:transaction revenues and revenues from other value addedservices.DISAGGREGATION OF REVENUEWe determine operating segments based on how our chief operating decision maker(“CODM”)manages the business,makes operating decisions around t

72、heallocation of resources,and evaluates operating performance.Our CODM is our Chief Executive Officer,who regularly reviews our operating results on aconsolidated basis.We operate as one segment and have one reportable segment.Based on the information provided to and reviewed by our CODM,webelieve t

73、hat the nature,amount,timing,and uncertainty of our revenue and cash flows and how they are affected by economic factors are most appropriatelydepicted through our primary geographical markets and types of revenue categories(transaction revenues and revenues from other value added services).Revenues

74、 recorded within these categories are earned from similar products and services for which the nature of associated fees and the related revenuerecognition models are substantially the same.The following table presents our revenue disaggregated by primary geographical market and category:Three Months

75、 Ended March 31,20232022(In millions)Primary geographical marketsU.S.$4,147$3,671 Other countries2,893 2,812 Total net revenues$7,040$6,483 Revenue categoryTransaction revenues$6,364$5,998 Revenues from other value added services676 485 Total net revenues$7,040$6,483 No single country included in th

76、e other countries category generated more than 10%of total net revenues.Total net revenues include$451 million and$187 million for the three months ended March 31,2023 and 2022,respectively,which do not represent revenues recognized in the scope of AccountingStandards Codification Topic 606,Revenue

77、from contracts with customers.Such revenues relate to interest and fees earned on loans and interest receivable,as well as hedging gains or losses,andinterest earned on certain assets underlying customer balances.Net revenues are attributed to the country in which the party paying our fee is located

78、.NOTE 3NET INCOME(LOSS)PER SHAREBasic net income(loss)per share is computed by dividing net income(loss)for the period by the weighted average number of common shares outstandingduring the period.Diluted net income(loss)per share is computed by dividing net income(loss)for the period by the weighted

79、 average number of shares ofcommon stock and potentially dilutive common stock outstanding for the period.The dilutive effect of outstanding equity incentive awards is reflected indiluted net income(loss)per share by application of the treasury stock method.The calculation of diluted net income(loss

80、)per share excludes all anti-dilutivecommon shares.During periods when we report net loss,diluted net loss per share is the same as basic net loss per share because the effects of potentiallydilutive items would decrease the net loss per share.(1)(2)(2)(1)(2)12Table of ContentsPayPal Holdings,Inc.NO

81、TES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)The following table sets forth the computation of basic and diluted net income(loss)per share for the periods indicated:Three Months Ended March 31,20232022(In millions,except per share amounts)Numerator:Net income(loss)$795$509

82、 Denominator:Weighted average shares of common stock-basic1,129 1,163 Dilutive effect of equity incentive awards5 9 Weighted average shares of common stock-diluted1,134 1,172 Net income(loss)per share:Basic$0.70$0.44 Diluted$0.70$0.43 Common stock equivalents excluded from income(loss)per diluted sh

83、are because their effect would have been anti-dilutive orpotentially dilutive14 6 NOTE 4BUSINESS COMBINATIONSThere were no acquisitions accounted for as business combinations or divestitures completed in the three months ended March 31,2023 and 2022.NOTE 5GOODWILL AND INTANGIBLE ASSETSGOODWILLThe fo

84、llowing table presents goodwill balances and adjustments to those balances during the three months ended March 31,2023:December 31,2022Goodwill Acquired Adjustments March 31,2023(In millions)Total goodwill$11,209$(14)$11,195 The adjustments to goodwill during the three months ended March 31,2023 per

85、tained to foreign currency translation adjustments.INTANGIBLE ASSETSThe components of identifiable intangible assets were as follows:March 31,2023December 31,2022 GrossCarryingAmountAccumulatedAmortization Net CarryingAmountWeightedAverage UsefulLife(Years)GrossCarryingAmountAccumulatedAmortization

86、Net CarryingAmountWeightedAverage UsefulLife(Years)(In millions,except years)Intangible assets:Customer lists and user base$1,596$(1,062)$534 7$1,664$(1,092)$572 7Marketing related394(343)51 5395(339)56 5Developed technology1,079(1,037)42 31,099(1,048)51 3All other439(336)103 7438(329)109 7Intangibl

87、e assets,net$3,508$(2,778)$730$3,596$(2,808)$788 13Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)In the three months ended March 31,2023,we retired approximately$84 million of fully amortized intangible assets,of which$65 million and$1

88、9 millionwere included in customer lists and user base and developed technology,respectively.Amortization expense for intangible assets was$57 million and$118million for the three months ended March 31,2023 and 2022,respectively.Expected future intangible asset amortization as of March 31,2023 was a

89、s follows(in millions):Fiscal years:Remaining 2023$160 2024195 2025159 2026102 202764 Thereafter50 Total$730 NOTE 6LEASESPayPal enters into various leases,which are primarily real estate operating leases.We use these properties for executive and administrative offices,data centers,product developmen

90、t offices,customer services and operations centers,and warehouses.While a majority of our lease agreements do not contain an explicit interest rate,certain of our lease agreements are subject to changes based on the ConsumerPrice Index or another referenced index.In the event of changes to the relev

91、ant index,lease liabilities are not remeasured and instead are treated as variablelease payments and recognized in the period in which the obligation for those payments is incurred.The short-term lease exemption has been adopted for all leases with a duration of less than 12 months.PayPals lease por

92、tfolio includes a small number of subleases.A sublease situation can arise when currently leased real estate space is available and is surplusto operational requirements.As of March 31,2023,we had no finance leases.The components of lease expense were as follows:Three Months Ended March 31,20232022(

93、In millions)Lease expenseOperating lease expense$41$42 Sublease income(2)(2)Lease expense,net$39$40 14Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)Supplemental cash flow information related to leases was as follows:Three Months Ended

94、March 31,20232022(In millions)Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$43$41 Right-of-use(“ROU”)lease assets obtained in exchange for new operating lease liabilities$(1)$83 Other non-cash ROU lease asset activity$(21)$(10)Suppl

95、emental balance sheet information related to leases was as follows:March 31,2023December 31,2022(In millions,except weighted-average figures)Operating ROU lease assets$512$574 Current operating lease liabilities151 151 Operating lease liabilities529 569 Total operating lease liabilities$680$720 Weig

96、hted-average remaining lease termoperating leases5.7 years5.7 yearsWeighted-average discount rateoperating leases4%3%Future minimum lease payments for our operating leases as of March 31,2023 were as follows:Operating LeasesFiscal years:(In millions)Remaining 2023$130 2024157 2025116 2026106 202793

97、Thereafter155 Total$757 Less:present value discount(77)Lease liability$680 Operating lease amounts include minimum lease payments under our non-cancelable operating leases primarily for office and data center facilities.Theamounts presented are consistent with contractual terms and are not expected

98、to differ significantly from actual results under our existing leases.In the three months ended March 31,2023 and 2022,we incurred asset impairment charges of$39 million and$16 million,respectively,within restructuringand other charges on our condensed consolidated statements of income(loss).The imp

99、airments included a reduction to our ROU lease assets in the amount of$21 million and$10 million,respectively,which was attributed to certain leased space we are no longer utilizing for our business operations,a portion of whichis being subleased.As of March 31,2023,we entered into additional operat

100、ing leases primarily for real estate,which will commence in the second quarter of 2023 or later,withminimum lease payments aggregating to$13 million and lease terms ranging from four to six years.15Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(U

101、naudited)NOTE 7OTHER FINANCIAL STATEMENT DETAILSCRYPTO ASSET SAFEGUARDING LIABILITY AND CORRESPONDING SAFEGUARDING ASSETWe allow our customers in certain markets to buy,hold,sell,receive,and send certain cryptocurrencies as well as use the proceeds from sales ofcryptocurrencies to pay for purchases

102、at checkout.These cryptocurrencies consist of Bitcoin,Ethereum,Bitcoin Cash,and Litecoin(collectively,“ourcustomers crypto assets”).We engage third parties,which are licensed trust companies,to provide certain custodial services,including holding our customerscryptographic key information,securing o

103、ur customers crypto assets,and protecting them from loss or theft,including indemnification against certain types oflosses such as theft.Our third-party custodian holds the crypto assets in a custodial account in PayPals name for the benefit of PayPals customers.Wemaintain the internal recordkeeping

104、 of our customers crypto assets,including the amount and type of crypto asset owned by each of our customers in thatcustodial account.As of March 31,2023,we utilize one third-party custodian;as such,there is concentration risk in the event the custodian is not able toperform in accordance with our a

105、greement.Due to the unique risks associated with cryptocurrencies,including technological,legal,and regulatory risks,we recognize a crypto asset safeguarding liabilityto reflect our obligation to safeguard the crypto assets held for the benefit of our customers,which is recorded in accrued expenses

106、and other current liabilitieson our condensed consolidated balance sheets.We also recognize a corresponding safeguarding asset which is recorded in prepaid expenses and other currentassets on our condensed consolidated balance sheets.The crypto asset safeguarding liability and corresponding safeguar

107、ding asset are measured and recorded atfair value on a recurring basis using prices available in the market we determine to be the principal market at the balance sheet date.The correspondingsafeguarding asset may be adjusted for loss events,as applicable.As of March 31,2023,the Company has not incu

108、rred any safeguarding loss events,andtherefore,the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.The following table summarizes thesignificant crypto assets we hold for the benefit of our customers and the crypto asset safeguarding liability

109、 and corresponding safeguarding asset as ofMarch 31,2023 and December 31,2022:March 31,2023December 31,2022(In millions)Bitcoin$499$291 Ethereum362 250 Other82 63 Crypto asset safeguarding liability$943$604 Crypto asset safeguarding asset$943$604 ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS)The follo

110、wing table summarizes the changes in accumulated balances of other comprehensive income(loss)for the three months ended March 31,2023:Unrealized Gains(Losses)on CashFlow HedgesUnrealized Gains(Losses)onInvestmentsForeignCurrencyTranslationAdjustment(“CTA”)Net InvestmentHedges CTAGains(Losses)Estimat

111、ed Tax(Expense)BenefitTotal(In millions)Beginning balance$111$(591)$(575)$(1)$128$(928)Other comprehensive income(loss)before reclassifications(35)150(20)27(41)81 Less:Amount of gain(loss)reclassified from accumulatedother comprehensive income(loss)(“AOCI”)76(25)51 Net current period other comprehen

112、sive income(loss)(111)175(20)27(41)30 Ending balance$(416)$(595)$26$87$(898)16Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)The following table summarizes the changes in accumulated balances of other comprehensive income(loss)for the t

113、hree months ended March 31,2022:Unrealized Gains(Losses)on CashFlow HedgesUnrealized Gains(Losses)onInvestmentsForeign CTANet InvestmentHedges CTAGains(Losses)Estimated Tax(Expense)BenefitTotal(In millions)Beginning balance$199$(87)$(270)$24$(2)$(136)Other comprehensive income(loss)before reclassifi

114、cations44(293)(95)21 62(261)Less:Amount of gain reclassified from AOCI47 47 Net current period other comprehensive income(loss)(3)(293)(95)21 62(308)Ending balance$196$(380)$(365)$45$60$(444)The following table provides details about reclassifications out of AOCI for the periods presented below:Deta

115、ils about AOCI Components Amount of Gains(Losses)Reclassified fromAOCIAffected Line Item in the Statements ofIncome(Loss)Three Months Ended March 31,20232022(In millions)Gains on cash flow hedgesforeign currency exchange contracts$76$47 Net revenuesLosses on investments(23)Net revenuesLosses on inve

116、stments(2)Other income(expense),net51 47 Income before income taxes Income tax expenseTotal reclassifications for the period$51$47 Net income(loss)OTHER INCOME(EXPENSE),NETThe following table reconciles the components of other income(expense),net for the periods presented below:Three Months Ended Ma

117、rch 31,20232022(In millions)Interest income$108$15 Interest expense(87)(59)Net gains(losses)on strategic investments48 14 Other6(52)Other income(expense),net$75$(82)17Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)NOTE 8FUNDS RECEIVABLE

118、 AND CUSTOMER ACCOUNTS AND INVESTMENTSThe following table summarizes the assets underlying our funds receivable and customer accounts,short-term investments,and long-term investments as ofMarch 31,2023 and December 31,2022:March 31,2023December 31,2022(In millions)Funds receivable and customer accou

119、nts:Cash and cash equivalents$10,580$11,363 Time deposits100 95 Available-for-sale debt securities18,181 17,349 Funds receivable6,415 7,550 Total funds receivable and customer accounts$35,276$36,357 Short-term investments:Time deposits$478$482 Available-for-sale debt securities3,068 2,593 Restricted

120、 cash13 17 Total short-term investments$3,559$3,092 Long-term investments:Time deposits$65$55 Available-for-sale debt securities2,347 2,817 Strategic investments2,220 2,146 Total long-term investments$4,632$5,018 As of March 31,2023 and December 31,2022,the estimated fair value of our available-for-

121、sale debt securities included within funds receivable and customeraccounts,short-term investments,and long-term investments was as follows:March 31,2023 GrossAmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesEstimatedFair Value(In millions)Funds receivable and customer accounts:U.S.government an

122、d agency securities$9,665$2$(175)$9,492 Foreign government and agency securities1,189 (26)1,163 Corporate debt securities1,556 (63)1,493 Asset-backed securities1,389 (16)1,373 Municipal securities486 1(2)485 Commercial paper3,679 1(6)3,674 Short-term investments:U.S.government and agency securities8

123、14 (2)812 Foreign government and agency securities817 (12)805 Corporate debt securities1,006 (23)983 Asset-backed securities406 (7)399 Commercial paper69 69 Long-term investments:U.S.government and agency securities493 (30)463 Foreign government and agency securities222 (11)211 Corporate debt securi

124、ties601 (33)568 Asset-backed securities1,119 (14)1,105 Total available-for-sale debt securities$23,511$4$(420)$23,095“”Denotes gross unrealized gain or unrealized loss of less than$1 million in a given position.Excludes foreign currency denominated available-for-sale debt securities accounted for un

125、der the fair value option.Refer to“Note 9Fair Value Measurement of Assets and Liabilities.”(1)(2)(1)(2)18Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)December 31,2022 GrossAmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesEstimate

126、dFair Value(In millions)Funds receivable and customer accounts:U.S.government and agency securities$8,736$(252)$8,484 Foreign government and agency securities1,479 (44)1,435 Corporate debt securities1,637 (82)1,555 Asset-backed securities1,324 (26)1,298 Municipal securities410 (3)407 Commercial pape

127、r3,702 1(14)3,689 Short-term investments:U.S.government and agency securities815 (3)812 Foreign government and agency securities435 (11)424 Corporate debt securities641 (14)627 Asset-backed securities415 (9)406 Commercial paper324 324 Long-term investments:U.S.government and agency securities493 (36

128、)457 Foreign government and agency securities386 (22)364 Corporate debt securities987 (58)929 Asset-backed securities1,085 (18)1,067 Total available-for-sale debt securities$22,869$1$(592)$22,278“”Denotes gross unrealized gain or unrealized loss of less than$1 million in a given position.Excludes fo

129、reign currency denominated available-for-sale debt securities accounted for under the fair value option.Refer to“Note 9Fair Value Measurement of Assets and Liabilities.”Gross amortized cost and estimated fair value balances exclude accrued interest receivable on available-for-sale debt securities,wh

130、ich totaled$80 million and$65 million at March 31,2023 and December 31,2022,respectively,and were included in other current assets on our condensed consolidated balance sheets.(1)(2)(1)(2)19Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited

131、)As of March 31,2023 and December 31,2022,the gross unrealized losses and estimated fair value of our available-for-sale debt securities included withinfunds receivable and customer accounts,short-term investments,and long-term investments for which an allowance for credit losses was not deemed nece

132、ssaryin the current period,aggregated by the length of time those individual securities have been in a continuous loss position,was as follows:March 31,2023Less than 12 months12 months or longerTotal Fair ValueGrossUnrealizedLossesFair ValueGrossUnrealizedLossesFair ValueGrossUnrealizedLosses(In mil

133、lions)Funds receivable and customer accounts:U.S.government and agency securities$3,471$(37)$3,972$(138)$7,443$(175)Foreign government and agency securities200(5)876(21)1,076(26)Corporate debt securities 1,442(63)1,442(63)Asset-backed securities751(7)486(9)1,237(16)Municipal securities332(2)332(2)Co

134、mmercial paper3,042(6)3,042(6)Short-term investments:U.S.government and agency securities143 74(2)217(2)Foreign government and agency securities50 514(12)564(12)Corporate debt securities29 779(23)808(23)Asset-backed securities139(2)178(5)317(7)Commercial paper69 69 Long-term investments:U.S.governme

135、nt and agency securities 463(30)463(30)Foreign government and agency securities32(1)179(10)211(11)Corporate debt securities 559(33)559(33)Asset-backed securities651(5)371(9)1,022(14)Total available-for-sale debt securities$8,909$(65)$9,893$(355)$18,802$(420)“”Denotes gross unrealized loss or fair va

136、lue of less than$1 million in a given position.(1)(1)20Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)December 31,2022Less than 12 months12 months or longerTotal Fair ValueGrossUnrealizedLossesFair ValueGrossUnrealizedLossesFair ValueGr

137、ossUnrealizedLosses(In millions)Funds receivable and customer accounts:U.S.government and agency securities$3,730$(89)$4,246$(163)$7,976$(252)Foreign government and agency securities410(11)997(34)1,407(45)Corporate debt securities9(1)1,545(81)1,554(82)Asset-backed securities773(11)508(14)1,281(25)Mu

138、nicipal securities264(3)50 314(3)Commercial paper3,079(14)3,079(14)Short-term investments:U.S.government and agency securities345 73(3)418(3)Foreign government and agency securities61 362(11)423(11)Corporate debt securities97(2)465(12)562(14)Asset-backed securities175(2)217(7)392(9)Commercial paper2

139、24 224 Long-term investments:U.S.government and agency securities 457(36)457(36)Foreign government and agency securities31(2)333(20)364(22)Corporate debt securities85(6)834(52)919(58)Asset-backed securities872(9)195(9)1,067(18)Total available-for-sale debt securities$10,155$(150)$10,282$(442)$20,437

140、$(592)“”Denotes gross unrealized loss or fair value of less than$1 million in a given position.Unrealized losses have not been recognized into income as we neither intend to sell,nor anticipate that it is more likely than not that we will be required to sell,the securities before recovery of their a

141、mortized cost basis.The decline in fair value is due primarily to changes in market interest rates,rather than creditlosses.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 M

142、arch 31,2023,we received$1.1 billion in proceeds from the sale of available-for-sale debt securities incurring gross realizedlosses of$25 million,which were determined using the specific identification method.(1)(1)21Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STAT

143、EMENTS(continued)(Unaudited)Our available-for-sale debt securities included within funds receivable and customer accounts,short-term investments,and long-term investments classified bydate of contractual maturity were as follows:March 31,2023Amortized CostFair Value(In millions)One year or less$13,1

144、17$12,977 After one year through five years8,115 7,862 After five years through ten years2,205 2,183 After ten years74 73 Total$23,511$23,095 STRATEGIC INVESTMENTSOur strategic investments include marketable equity securities,which are publicly traded,and non-marketable equity securities,which are p

145、rimarilyinvestments in privately held companies.Our marketable equity securities have readily determinable fair values and are recorded as long-term investments onour condensed consolidated balance sheets at fair value with changes in fair value recorded in other income(expense),net on our condensed

146、 consolidatedstatements of income(loss).Marketable equity securities totaled$398 million and$323 million as of March 31,2023 and December 31,2022,respectively.Our non-marketable equity securities are recorded in long-term investments on our condensed consolidated balance sheets.As of March 31,2023 a

147、ndDecember 31,2022,we had non-marketable equity securities of$142 million and$136 million,respectively,where we have the ability to exercise significantinfluence,but not control,over the investee.We account for these equity securities using the equity method of accounting.The remaining non-marketabl

148、eequity securities do not have a readily determinable fair value and we measure these equity investments at cost minus impairment,if any,and adjust forchanges resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer(the“MeasurementAlte

149、rnative”).All gains and losses on these investments,realized and unrealized,and our share of earnings or losses from investments accounted for using theequity method are recognized in other income(expense),net on our condensed consolidated statements of income(loss).The carrying value of our non-mar

150、ketable equity securities totaled$1.8 billion for both March 31,2023 and December 31,2022.Measurement Alternative adjustmentsThe adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the three months endedMarch 31,2023 and 2022 w

151、ere as follows:Three Months Ended March 31,20232022(In millions)Carrying amount,beginning of period$1,687$1,268 Adjustments related to non-marketable equity securities:Net additions16 4 Gross unrealized gains22 197 Gross unrealized losses and impairments(45)Carrying amount,end of period$1,680$1,469

152、Net additions include purchases,reductions due to sales of securities,and reclassifications when Measurement Alternative is subsequently elected or no longer applies.(1)(1)22Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)The following t

153、able summarizes the cumulative gross unrealized gains and cumulative gross unrealized losses and impairment related to non-marketable equitysecurities accounted for under the Measurement Alternative,held at March 31,2023 and December 31,2022,respectively:March 31,2023December 31,2022(In millions)Cum

154、ulative gross unrealized gains$1,159$1,137 Cumulative gross unrealized losses and impairments$(173)$(131)Unrealized gains(losses)on strategic investments,excluding those accounted for using the equity methodThe following table summarizes the net unrealized gains(losses)on marketable and non-marketab

155、le equity securities,excluding those accounted for using theequity method,held at March 31,2023 and 2022,respectively:Three Months Ended March 31,20232022(In millions)Net unrealized gains(losses)$52$(36)23Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(conti

156、nued)(Unaudited)NOTE 9FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIESFINANCIAL ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASISThe following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of March 31,2023 and Decem

157、ber 31,2022:March 31,2023Quoted Prices inActive Markets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)(In millions)Assets:Cash and cash equivalents$153$153 Short-term investments:U.S.government and agency securities812 812 Foreign government and agency securities805 805 Corp

158、orate debt securities983 983 Asset-backed securities399 399 Commercial paper69 69 Total short-term investments3,068 3,068 Funds receivable and customer accounts:U.S.government and agency securities9,493 9,493 Foreign government and agency securities1,532 1,532 Corporate debt securities1,624 1,624 As

159、set-backed securities1,373 1,373 Municipal securities485 485 Commercial paper3,674 3,674 Total funds receivable and customer accounts18,181 18,181 Derivatives156 156 Crypto asset safeguarding asset943 943 Long-term investments:U.S.government and agency securities463 463 Foreign government and agency

160、 securities211 211 Corporate debt securities568 568 Asset-backed securities1,105 1,105 Marketable equity securities398 398 Total long-term investments2,745 398 2,347 Total financial assets$25,246$398$24,848 Liabilities:Derivatives$267$267 Crypto asset safeguarding liability943 943 Total financial li

161、abilities$1,210$1,210 Excludes cash of$6.9 billion not measured and recorded at fair value.Excludes restricted cash of$13 million and time deposits of$543 million not measured and recorded at fair value.Excludes cash,time deposits,and funds receivable of$17.1 billion underlying funds receivable and

162、customer accounts not measured and recorded at fair value.Excludes non-marketable equity securities of$1.8 billion measured using the Measurement Alternative or equity method accounting.(1)(2)(3)(2),(4)(1)(2)(3)(4)24Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATE

163、MENTS(continued)(Unaudited)December 31,2022Quoted Prices inActive Markets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)(In millions)Assets:Cash and cash equivalents$932$932 Short-term investments:U.S.government and agency securities812 812 Foreign government and agency secu

164、rities424 424 Corporate debt securities627 627 Asset-backed securities406 406 Commercial paper324 324 Total short-term investments2,593 2,593 Funds receivable and customer accounts:Cash and cash equivalents192 192 U.S.government and agency securities8,484 8,484 Foreign government and agency securiti

165、es1,777 1,777 Corporate debt securities1,694 1,694 Asset-backed securities1,298 1,298 Municipal securities407 407 Commercial paper3,689 3,689 Total funds receivable and customer accounts17,541 17,541 Derivatives244 244 Crypto asset safeguarding asset604 604 Long-term investments:U.S.government and a

166、gency securities457 457 Foreign government and agency securities364 364 Corporate debt securities929 929 Asset-backed securities1,067 1,067 Marketable equity securities323 323 Total long-term investments3,140 323 2,817 Total financial assets$25,054$323$24,731 Liabilities:Derivatives$298$298 Crypto a

167、sset safeguarding liability604 604 Total financial liabilities$902$902 Excludes cash of$6.8 billion not measured and recorded at fair value.Excludes restricted cash of$17 million and time deposits of$537 million not measured and recorded at fair value.Excludes cash,time deposits,and funds receivable

168、 of$18.8 billion underlying funds receivable and customer accounts not measured and recorded at fair value.Excludes non-marketable equity securities of$1.8 billion measured using the Measurement Alternative or equity method accounting.Our marketable equity securities are valued using quoted prices f

169、or identical assets in active markets(Level 1).There are no active markets for our crypto assetsafeguarding liability or the corresponding safeguarding asset.Accordingly,we have valued the asset and liability using quoted prices on the active exchangethat has been identified as the principal market

170、for the underlying crypto assets(Level 2).All other financial assets and liabilities are valued using quoted pricesfor identical instruments in less active markets,readily available pricing sources for comparable instruments,or models using market observable inputs(Level2).(1)(2)(3)(2),(4)(1)(2)(3)(

171、4)25Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)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,int

172、erest rate yield curves,option volatility,and equity prices.Our derivative instruments are primarily short-term in nature,generallyone month to one year in duration.As of March 31,2023 and December 31,2022,we did not have any assets or liabilities requiring measurement at fair value on a recurring b

173、asis with significantunobservable 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 valueoption.Election of the

174、 fair value option allows us to recognize any gains and losses from fair value changes on such investments in other income(expense),neton the condensed consolidated statements of income(loss)to significantly reduce the accounting asymmetry that would otherwise arise when recognizing thecorresponding

175、 foreign exchange gains and losses relating to customer liabilities.The following table summarizes the estimated fair value of our available-for-sale debt securities under the fair value option as of March 31,2023 and December 31,2022:March 31,2023December 31,2022(In millions)Funds receivable and cu

176、stomer accounts$501$481 The following table summarizes the gains(losses)from fair value changes recognized in other income(expense),net related to the available-for-sale debtsecurities under the fair value option for the three months ended March 31,2023 and 2022:Three Months Ended March 31,20232022(

177、In millions)Funds receivable and customer accounts$7$(34)ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASISThe following tables summarize our assets held as of March 31,2023 and December 31,2022 for which a non-recurring fair value measurement was recordedduring the three months end

178、ed March 31,2023 and the year ended December 31,2022,respectively:March 31,2023Significant OtherObservable Inputs(Level 2)Significant OtherUnobservable Inputs(Level3)(In millions)Non-marketable equity securities measured using the Measurement Alternative$138$100$38 Other assets47 47 Total$185$147$38

179、 Excludes non-marketable equity securities of$1.5 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the three months ended March31,2023.Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during

180、the three months ended March 31,2023.See“Note 6Leases”for additional information.(1)(2)(1)(2)26Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)December 31,2022Significant OtherObservable Inputs(Level 2)Significant OtherUnobservable Input

181、s(Level3)(In millions)Non-marketable equity investments measured using the Measurement Alternative$1,122$724$398 Other assets165 165 Total$1,287$889$398 Excludes non-marketable equity securities of$565 million accounted for under the Measurement Alternative for which no observable price changes occu

182、rred during the year ended December 31,2022.Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during the year ended December 31,2022.See“Note 6Leases”for additional information.We measure the non-marketable equity securities accounted for under the Meas

183、urement Alternative at cost minus impairment,if any,adjusted for observableprice changes in orderly transactions for an identical or similar investment in the same issuer.Non-marketable equity securities that have been remeasuredduring the period based on observable price changes are classified with

184、in Level 2 in the fair value hierarchy because we estimate the fair value based onvaluation methods which only include significant inputs that are observable,such as the observable transaction price at the transaction date.The fair value ofnon-marketable equity securities are classified within Level

185、 3 when we estimate fair value using significant unobservable inputs such as when we remeasuredue to impairment and use discount rates,forecasted cash flows,and market data of comparable companies,among others.We evaluate ROU assets related to leases for indicators of impairment whenever events or c

186、hanges in circumstances indicate that the carrying amount of anROU asset may not be recoverable.Impairment losses on ROU lease assets related to office operating leases are calculated initially using estimated rentalincome per square foot derived from observable market data,and the impaired asset is

187、 classified within Level 2 in the fair value hierarchy.FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AND RECORDED AT FAIR VALUEOur financial instruments,including cash,restricted cash,time deposits,loans and interest receivable,net,certain customer accounts,and long-term debtrelated to borrowings on

188、 our credit facilities,are carried at amortized cost,which approximates their fair value.Our notes receivable had a carrying value ofapproximately$444 million and fair value of approximately$351 million as of March 31,2023.Our notes receivable had a carrying value of approximately$441 million and fa

189、ir value of approximately$396 million as of December 31,2022.Our term debt(including current portion)in the form of fixed rate noteshad a carrying value of approximately$10.3 billion and fair value of approximately$9.5 billion for both March 31,2023 and December 31,2022.If thesefinancial instruments

190、 were measured at fair value in the financial statements,cash would be classified as Level 1;restricted cash,time deposits,certaincustomer accounts,and term debt(including current portion)would be classified as Level 2;and the remaining financial instruments would be classified asLevel 3 in the fair

191、 value hierarchy.NOTE 10DERIVATIVE INSTRUMENTSSUMMARY OF DERIVATIVE INSTRUMENTSOur primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates.Our derivatives expose us to credit risk to the extent that ou

192、r counterparties may be unable to meet the terms of the arrangement.We seek to mitigate such riskby limiting our counterparties to,and by spreading the risk across,major financial institutions and by entering into collateral security arrangements.In addition,the potential risk of loss with any one c

193、ounterparty resulting from this type of credit risk is monitored on an ongoing basis.We do not use any derivativeinstruments for trading or speculative purposes.(1)(2)(1)(2)27Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)Cash flow hedg

194、esWe have significant international revenues and costs denominated in foreign currencies,which subjects us to foreign currency exchange risk.We have a foreigncurrency exposure management program in which we designate certain foreign currency exchange contracts,generally with maturities of 12 months

195、or less,toreduce the volatility of cash flows primarily related to forecasted revenues denominated in foreign currencies.The objective of these foreign currency exchangecontracts is to help mitigate the risk that the U.S.dollar-equivalent cash flows are adversely affected by changes in the applicabl

196、e U.S.dollar/foreign currencyexchange rate.These derivative instruments are designated as cash flow hedges and accordingly,the derivatives gain or loss is initially reported as acomponent of AOCI and subsequently reclassified into revenue in the same period the forecasted transaction affects earning

197、s.We evaluate the effectiveness ofour foreign currency exchange contracts on a quarterly basis by comparing the critical terms of the derivative instruments with the critical terms of theforecasted cash flows of the hedged item;if the critical terms are the same,we conclude the hedge will be perfect

198、ly effective.We do not exclude anycomponent of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.We report cash flows arising from derivativeinstruments consistent with the classification of cash flows from the underlying hedged items that these deriv

199、atives are hedging.Accordingly,the cash flowsassociated with derivatives designated as cash flow hedges are classified in cash flows from operating activities on our condensed consolidated statements ofcash flows.As of March 31,2023,we estimated that net derivative gains related to our cash flow hed

200、ges included in AOCI,which are expected to be reclassified intoearnings within the next 12 months,were de minimis.During the three months ended March 31,2023 and 2022,we did not discontinue any cash flow hedgesbecause it was probable that the original forecasted transaction would not occur and as su

201、ch,did not reclassify any gains or losses to earnings prior to theoccurrence of the hedged transaction.If we elect to discontinue our cash flow hedges and it is probable that the original forecasted transaction will occur,wecontinue to report the derivatives gain or loss in AOCI until the forecasted

202、 transaction affects earnings,at which point we also reclassify it into earnings.Gainsand losses on derivatives held after we discontinue our cash flow hedges and on derivative instruments that are not designated as cash flow hedges are recordedin the same financial statement line item to which the

203、derivative relates.Net investment hedgesWe use forward foreign currency exchange contracts to reduce the foreign currency exchange risk related to our investment in certain foreign subsidiaries.These derivatives are designated as net investment hedges and accordingly,the gains and losses on the port

204、ion of the derivatives included in the assessment ofhedge effectiveness is recorded in AOCI as part of foreign currency translation.We exclude forward points from the assessment of hedge effectiveness andrecognize them in other income(expense),net on a straight-line basis over the life of the hedge.

205、The accumulated gains and losses associated with theseinstruments will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated,at which point they will be reclassified into earnings.Thecash flows associated with derivatives designated as a net investment hedge are classifi

206、ed in cash flows from investing activities on our condensed consolidatedstatements of cash flows.We have not reclassified any gains or losses related to net investment hedges from AOCI into earnings during any of the periods presented.Foreign currency exchange contracts not designated as hedging ins

207、trumentsWe have a foreign currency exposure management program in which we use foreign currency exchange contracts to offset the foreign currency exchange riskof our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.These contracts are not design

208、ated as hedginginstruments and reduce,but do not entirely eliminate,the impact of foreign currency exchange rate movements on our assets and liabilities.The gains andlosses due to remeasurement of certain foreign currency denominated monetary assets and liabilities are recorded in other income(expen

209、se),net,which areoffset by the gains and losses on these foreign currency exchange contracts.The cash flows associated with our non-designated derivatives used to hedgeforeign currency denominated monetary assets and liabilities are classified in cash flows from operating activities on our condensed

210、 consolidated statements ofcash flows.28Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)FAIR VALUE OF DERIVATIVE CONTRACTSThe fair value of our outstanding derivative instruments as of March 31,2023 and December 31,2022 was as follows:Ba

211、lance Sheet LocationMarch 31,2023December 31,2022(In millions)Derivative Assets:Foreign currency exchange contracts designated as hedging instrumentsOther current assets$90$167 Foreign currency exchange contracts designated as hedging instrumentsOther assets(non-current)19 15 Foreign currency exchan

212、ge contracts not designated as hedging instrumentsOther current assets47 62 Total derivative assets$156$244 Derivative Liabilities:Foreign currency exchange contracts designated as hedging instrumentsOther current liabilities$78$68 Foreign currency exchange contracts designated as hedging instrument

213、sOther long-term liabilities111 133 Foreign currency exchange contracts not designated as hedging instrumentsOther current liabilities78 97 Total derivative liabilities$267$298 MASTER NETTING AGREEMENTS-RIGHTS OF SET-OFFUnder master netting agreements with certain counterparties to our foreign curre

214、ncy exchange contracts,subject to applicable requirements,we are allowed tonet settle transactions of the same type with a single net amount payable by one party to the other.However,we have elected to present the derivative assetsand derivative liabilities on a gross basis on our condensed consolid

215、ated balance sheets.Rights of set-off associated with our foreign currency exchangecontracts represented a potential offset to both assets and liabilities of$62 million as of March 31,2023 and$70 million as of December 31,2022.We have entered into collateral security arrangements that provide for co

216、llateral to be received or posted when the net fair value of certain financial instrumentsfluctuates from contractually established thresholds.The following table provides the collateral posted and received:March 31,2023December 31,2022(In millions)Cash collateral posted$46$24 Cash collateral receiv

217、ed$74$203 Right to reclaim cash collateral related to our derivative liabilities recognized in other current assets on our condensed consolidated balance sheets.Obligation to return counterparty cash collateral related to our derivative assets recognized in other current liabilities on our condensed

218、 consolidated balance sheets.(1)(2)(1)(2)29Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)EFFECT OF DERIVATIVE CONTRACTS ON CONDENSED CONSOLIDATED FINANCIAL STATEMENTSThe following table provides the location in the condensed consolidat

219、ed statements of income(loss)and amount of recognized gains or losses related to ourderivative instruments:Three Months Ended March 31,20232022(In millions)Net revenuesOther income(expense),netNet revenuesOther income(expense),netTotal amounts presented in the condensed consolidated statements of in

220、come(loss)in which the effects of cash flow hedges and net investment hedges arerecorded$7,040$75$6,483$(82)Gains on derivatives in cash flow hedging relationship:Amount of gains on foreign currency exchange contracts reclassified fromAOCI76 47 Gains on derivatives in net investment hedging relation

221、ship:Amount of gains on foreign currency exchange contracts excluded from theassessment of effectiveness 30 9 Losses on derivatives not designated as hedging instruments:Amount of losses on foreign currency exchange contracts(75)(39)Total gains(losses)$76$(45)$47$(30)The following table provides the

222、 amount of pre-tax unrealized gains or losses included in the assessment of hedge effectiveness related to our derivativeinstruments designated as hedging instruments that are recognized in other comprehensive income(loss):Three Months Ended March 31,20232022(In millions)Unrealized(losses)gains on f

223、oreign exchange contracts designated as cash flow hedges$(35)$44 Unrealized gains on foreign exchange contracts designated as net investment hedges27 21 Total unrealized(losses)gains recognized from derivative contracts designated as hedging instruments in the condensedconsolidated statements of com

224、prehensive income(loss)$(8)$65 NOTIONAL AMOUNTS OF DERIVATIVE CONTRACTSDerivative transactions are measured in terms of the notional amount;however,this amount is not recorded on the balance sheet and is not,when viewed inisolation,a meaningful measure of the risk profile of the derivative instrumen

225、ts.The notional amount is generally not exchanged,but is used only as theunderlying basis on which the value of foreign currency exchange payments under these contracts is determined.The following table provides the notionalamounts of our outstanding derivatives:March 31,2023December 31,2022(In mill

226、ions)Foreign exchange contracts designated as hedging instruments$7,118$7,149 Foreign exchange contracts not designated as hedging instruments10,496 11,840 Total$17,614$18,989 30Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)NOTE 11LOAN

227、S AND INTEREST RECEIVABLECONSUMER RECEIVABLESWe offer revolving and installment credit products as a funding option for consumers in certain checkout transactions on our payments platform.Our revolvingcredit product consists of PayPal Credit in the United Kingdom(“U.K.”),which is made available to c

228、onsumers as a funding source in their PayPal wallet oncethey are approved for credit.Additionally,we offer installment credit products at the time of checkout in various markets,including the U.S.,several marketsacross Europe,Australia,and Japan.We offer non interest-bearing installment credit produ

229、cts in these markets as well as interest-bearing installment creditproducts in the U.S.and Germany.The majority of the installment loans allow consumers to pay for purchases over periods of 12 months or less.Beginning inJune 2022,we have purchased receivables related to interest-bearing installment

230、loans extended to U.S.consumers by an independent chartered financialinstitution(“partner institution”)and are responsible for servicing functions related to that portfolio.During the three months ended March 31,2023,wepurchased approximately$268 million in consumer receivables.As of March 31,2023 a

231、nd December 31,2022,the outstanding balance of consumerreceivables,which consisted of revolving and installment loans and interest receivable,was$6.1 billion and$5.9 billion,respectively,net of the participationinterest sold to the partner institution of$23 million and$17 million,respectively.We clo

232、sely monitor the credit quality of our consumer receivables to evaluate and manage our related exposure to credit risk.Credit risk management beginswith initial underwriting and continues through the full repayment of a loan.To assess a consumer who requests a loan,we use,among other indicators,inte

233、rnally developed risk models using detailed information from external sources,such as credit bureaus where available,and internal data,including theconsumers prior repayment history with our credit products where available.We use delinquency status and trends to assist in making(or,for interest-bear

234、inginstallment loans in the U.S.,to assist the partner institution in making)new and ongoing credit decisions,to adjust our models,to plan our collection practicesand strategies,and in determining our allowance for consumer loans and interest receivable.The following tables present the delinquency s

235、tatus and gross charge-offs of consumer loans and interest receivable by year of origination.The amounts arebased on the number of days past the billing date for revolving loans or contractual repayment date for installment loans.The“current”category representsbalances that are within 29 days of the

236、 billing date or contractual repayment date,as applicable.March 31,2023(In millions,except percentages)RevolvingLoansAmortizedCost BasisInstallment Loans Amortized Cost Basis20232022202120202019TotalPercentConsumer loans and interest receivable:Current$1,892$2,948$947$82$5,869 96.7%30-59 Days26 18 1

237、9 1 64 1.1%60-89 Days16 2 30 1 49 0.8%90-179 Days33 49 3 85 1.4%Total$1,967$2,968$1,045$87$6,067 100%Gross charge-offs for the three months endedMarch 31,2023$31$45$2$78 Excludes receivables from other consumer credit products of$11 million at March 31,2023.(1)(1)31Table of ContentsPayPal Holdings,I

238、nc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)December 31,2022(In millions,except percentages)RevolvingLoansAmortizedCost BasisInstallment Loans Amortized Cost Basis20222021202020192018TotalPercentConsumer loans and interest receivable:Current$1,850$3,726$123$5,699 97.

239、1%30-59 Days23 26 2 51 0.9%60-89 Days15 20 2 37 0.6%90-179 Days34 47 4 85 1.4%Total$1,922$3,819$131$5,872 100%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 receiv

240、able for the three months ended March 31,2023 and 2022:March 31,2023March 31,2022Consumer LoansReceivableInterest ReceivableTotal AllowanceConsumer LoansReceivableInterest ReceivableTotal Allowance(In millions)Beginning balance$322$25$347$243$43$286 Provisions95 6 101 43 6 49 Charge-offs(71)(7)(78)(

241、42)(9)(51)Recoveries7 7 3 3 Other4 4(6)(1)(7)Ending balance$357$24$381$241$39$280 Excludes allowances from other consumer credit products of nil and$3 million at March 31,2023 and 2022,respectively.Includes amounts related to foreign currency remeasurement.The provision for the three months ended Ma

242、rch 31,2023 was primarily attributable to growth in the consumer receivable portfolio.Qualitative adjustmentswere made to account for limitations in our current expected credit loss models due to uncertainty with respect to macroeconomic conditions and the financialhealth of our borrowers.The increa

243、se in charge-offs for the three months ended March 31,2023 compared to the same period in the prior year was due to the expansion of ourinstallment credit products.The provision for current expected credit losses relating to our consumer receivable portfolio is recognized in transaction and credit l

244、osses on our condensedconsolidated statements of income(loss).The provision for interest receivable for interest earned on our consumer receivable portfolio is recognized inrevenues from other value added services as a reduction to revenue.Loans receivable continue to accrue interest until they are

245、charged off.We charge off consumer receivable balances in the month in which a customers balance becomes 180 days past the billing date or contractual repayment date,except for the U.S.consumer interest-bearing installment receivables,which are charged off 120 days past the contractual repayment dat

246、e.Bankrupt accountsare charged off within 60 days after receipt of notification of bankruptcy.Charge-offs are recorded as a reduction to our allowance for loans and interestreceivable and subsequent recoveries,if any,are recorded as an increase to the allowance for loans and interest receivable.(1)(

247、1)(1)(1)(2)(1)(2)32Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)MERCHANT RECEIVABLESWe offer access to merchant finance products for certain small and medium-sized businesses through our PayPal Working Capital(“PPWC”)and PayPalBusines

248、s Loan(“PPBL”)products,which we collectively refer to as our merchant finance offerings.We purchase receivables related to credit extended to U.S.merchants by a partner institution and are responsible for servicing functions related to that portfolio.During the three months ended March 31,2023 and 2

249、022,we purchased approximately$666 million and$605 million in merchant receivables,respectively.As of both March 31,2023 and December 31,2022,the totaloutstanding balance in our pool of merchant loans,advances,and interest and fees receivable was$2.1 billion,net of the participation interest sold to

250、 thepartner institution of$91 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 forthe loan or advance based on the overall credit assessment of the merchant.Loans and

251、advances are repaid through a fixed percentage of the merchants futurepayment volume that PayPal processes.Through our PPBL product,we provide merchants access to short-term business financing for a fixed fee based on anevaluation of the applying business as well as the business owner.PPBL repayment

252、s are collected through periodic payments until the balance has beensatisfied.The interest or fee is fixed at the time the loan or advance is extended and is recognized as deferred revenue in accrued expenses and other current liabilities onour condensed consolidated balance sheets.The fixed interes

253、t or fee is amortized into revenues from other value added services based on the amount repaidover the repayment period.We estimate the repayment period for PPWC based on the merchants payment processing history with PayPal.For PPWC,there isa general requirement that at least 10%of the original amou

254、nt of the loan or advance plus the fixed fee must be repaid every 90 days.We calculate therepayment rate of the merchants future payment volume so that repayment of the loan or advance and fixed fee is expected to generally occur within 9 to 12months from the date of the loan or advance.On a monthly

255、 basis,we recalculate the repayment period based on the repayment activity on the receivable.Assuch,actual repayment periods are dependent on actual merchant payment processing volumes.For PPBL,we receive fixed periodic payments over thecontractual term of the loan,which generally ranges from 3 to 1

256、2 months.We actively monitor receivables with repayment periods greater than the original expected or contractual repayment period,as well as the credit quality of ourmerchant loans and advances that we extend or purchase,so that we can evaluate,quantify,and manage our credit risk exposure.To assess

257、 a merchant seekinga loan or advance,we use,among other indicators,risk models developed internally which utilize information obtained from multiple internal and external datasources to predict the likelihood of timely and satisfactory repayment by the merchant of the loan or advance amount and the

258、related interest or fee.Primarydrivers of the models include the merchants annual payment volume,payment processing history with PayPal,prior repayment history with PayPals creditproducts where available,information sourced from consumer and business credit bureau reports,and other information obtai

259、ned during the applicationprocess.We use delinquency status and trends to assist in making(or,in the U.S.,to assist the partner institution in making)ongoing credit decisions,to adjustour internal models,to plan our collection strategies,and in determining our allowance for these loans,advances,and

260、interest and fees receivable.33Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)Merchant receivables delinquency and allowanceThe following tables present the delinquency status and gross charge-offs of merchant loans,advances,and interes

261、t and fees receivable by year of origination.The amounts are based on the number of days past the expected or contractual repayment date for amounts outstanding.The“current”category representsbalances that are within 29 days of the expected repayment date or contractual repayment date,as applicable.

262、March 31,2023(In millions,except percentages)20232022202120202019TotalPercentMerchant loans,advances,and interest and feesreceivable:Current$788$965$12$47$34$1,846 89.8%30-59 Days8 52 4 3 3 70 3.4%60-89 Days1 39 3 2 2 47 2.3%90-179 Days 74 5 3 3 85 4.1%180+Days 2 2 1 2 7 0.4%Total$797$1,132$26$56$44

263、$2,055 100%Gross charge-offs for the three months endedMarch 31,2023$43$6$6$2$57 December 31,2022(In millions,except percentages)20222021202020192018TotalPercentMerchant loans,advances,and interest and feesreceivable:Current$1,826$20$57$42$2$1,947 90.7%30-59 Days63 7 3 4 77 3.6%60-89 Days34 4 4 2 44

264、 2.0%90-179 Days55 9 3 3 70 3.3%180+Days1 2 2 3 8 0.4%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 three months endedMarch 31,2023 and 2022:March 31,2023March 31,2022Merchant Loansan

265、d AdvancesInterest and FeesReceivableTotal AllowanceMerchant Loansand AdvancesInterest and FeesReceivableTotal Allowance(In millions)Beginning balance$230$18$248$192$9$201 Provisions49 10 59 5 1 6 Charge-offs(51)(6)(57)(21)(2)(23)Recoveries7 7 9 9 Ending balance$235$22$257$185$8$193 The provision fo

266、r the three months ended March 31,2023 was primarily attributable to originations in the merchant portfolio and a deterioration in creditquality of loans outstanding.Qualitative adjustments were made to account for uncertainty around the financial health of our borrowers including theeffectiveness o

267、f loan modification programs made available to merchants in previous years.34Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)The increase in the charge-offs for the three months ended March 31,2023 compared to the same period in the prio

268、r year was due to the expansion ofacceptable 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 a

269、dvanceand fixed interest or fee payment as compared to the original expected or contractual repayment period.We charge off the receivables outstanding under ourPPBL product when the repayments are 180 days past the contractual repayment date.We charge off the receivables outstanding under our PPWC p

270、roductwhen the repayments are 180 days past our expectation of repayments and the merchant has not made a payment in the last 60 days,or when the repaymentsare 360 days past due regardless of whether the merchant has made a payment in the last 60 days.Bankrupt accounts are charged off within 60 days

271、 afterreceipt of notification of bankruptcy.The provision for credit losses on merchant loans and advances is recognized in transaction and credit losses on ourcondensed consolidated statements of income(loss),and the provision for interest and fees receivable is recognized as a reduction of deferre

272、d revenue inaccrued expenses and other current liabilities on our condensed consolidated balance sheets.Charge-offs are recorded as a reduction to our allowance for loansand interest receivable and subsequent recoveries,if any,are recorded as an increase to the allowance for loans and interest recei

273、vable.NOTE 12DEBTFIXED RATE NOTESIn May 2022,May 2020,and September 2019,we issued fixed rate notes with varying maturity dates for an aggregate principal amount of$3.0 billion,$4.0 billion and$5.0 billion,respectively.The notes issued from the May 2022,May 2020,and September 2019 debt issuances are

274、 senior unsecuredobligations and are collectively referred to as the“Notes.”As of both March 31,2023 and December 31,2022,we had an outstanding aggregate principal amount of$10.4 billion related to the Notes.The followingtable summarizes the Notes:MaturitiesEffective Interest RateMarch 31,2023Decemb

275、er 31,2022(in millions)September 2019 debt issuance:Fixed-rate 2.400%notes10/1/20242.52%1,250 1,250 Fixed-rate 2.650%notes10/1/20262.78%1,250 1,250 Fixed-rate 2.850%notes10/1/20292.96%1,500 1,500 May 2020 debt issuance:Fixed-rate 1.350%notes6/1/20231.55%418 418 Fixed-rate 1.650%notes6/1/20251.78%1,0

276、00 1,000 Fixed-rate 2.300%notes6/1/20302.39%1,000 1,000 Fixed-rate 3.250%notes6/1/20503.33%1,000 1,000 May 2022 debt issuance:Fixed-rate 3.900%notes6/1/20274.06%500 500 Fixed-rate 4.400%notes6/1/20324.53%1,000 1,000 Fixed-rate 5.050%notes6/1/20525.14%1,000 1,000 Fixed-rate 5.250%notes6/1/20625.34%50

277、0 500 Total term debt$10,418$10,418 Unamortized premium(discount)and issuance costs,net(72)(74)Less:current portion of term debt(418)(418)Total carrying amount of term debt$9,928$9,926 The current portion of term debt is included within accrued expenses and other current liabilities on our condensed

278、 consolidated balance sheets.(1)(1)35Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)The effective interest rates for the Notes include interest on the Notes,amortization of debt issuance costs,and amortization of the debt discount.The i

279、nterestexpense recorded for the Notes,including amortization of the debt discount,debt issuance costs,and debt extinguishment net gains,was$83 million and$56million for the three months ended March 31,2023 and 2022,respectively.CREDIT FACILITIESPaidy credit agreementIn February 2022,we entered into

280、a credit agreement(the“Paidy Credit Agreement”)with Paidy as co-borrower,which provided for an unsecured revolvingcredit 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 of90.0 billion(approximately$678 mi

281、llion as of March 31,2023).As of March 31,2023 and December 31,2022,73.3 billion(approximately$553 million)and 64.3 billion(approximately$491 million),respectively,were outstanding under the Paidy Credit Agreement,which was recorded in long-term debt on ourcondensed consolidated balance sheet.At Mar

282、ch 31,2023,16.7 billion(approximately$125 million)of borrowing capacity was available for the purposespermitted by the Paidy Credit Agreement,subject to customary conditions to borrowing.During the three months ended March 31,2023 and 2022,the totalinterest expense and fees we recorded related to th

283、e Paidy Credit Agreement were de minimis.FUTURE PRINCIPAL PAYMENTSAs of March 31,2023,the future principal payments associated with our term debt were as follows(in millions):Remaining 2023$418 20241,250 20251,000 20261,250 2027500 Thereafter6,000 Total$10,418 Other than as provided above,there were

284、 no significant changes to the information disclosed in our 2022 Form 10-K.NOTE 13COMMITMENTS AND CONTINGENCIESCOMMITMENTSAs of March 31,2023 and December 31,2022,approximately$5.3 billion and$4.9 billion,respectively,of unused credit was available to PayPal Creditaccount holders in the U.K.While th

285、is amount represents the total unused credit available,we have not experienced,and do not anticipate,that all our PayPalCredit account holders will access their entire available credit at any given point in time.In addition,the individual lines of credit that make up this unusedcredit are subject to

286、 periodic review and termination based on,among other things,account usage and customer creditworthiness.36Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)LITIGATION AND REGULATORY MATTERSOverviewWe are involved in legal and regulatory p

287、roceedings on an ongoing basis.Many of these proceedings are in early stages and may seek an indeterminate amountof damages or penalties or may require us to change or adopt certain business practices.If we believe that a loss arising from such matters is probable and canbe reasonably estimated,we a

288、ccrue the estimated liability in our financial statements at that time.If only a range of estimated losses can be determined,weaccrue an amount within the range that,in our judgment,reflects the most likely outcome;if none of the estimates within that range is a better estimate thanany other amount,

289、we accrue the low end of the range.For those proceedings in which an unfavorable outcome is reasonably possible but not probable,wehave disclosed an estimate of the reasonably possible loss or range of losses or we have concluded that an estimate of the reasonably possible loss or range oflosses ari

290、sing directly from the proceeding(i.e.,monetary damages or amounts paid in judgment or settlement)are not material.If we cannot estimate theprobable or reasonably possible loss or range of losses arising from a legal proceeding,we have disclosed that fact.In assessing the materiality of a legalproce

291、eding,we evaluate,among other factors,the amount of monetary damages claimed,as well as the potential impact of non-monetary remedies sought byplaintiffs(e.g.,injunctive relief)that may require us to change our business practices in a manner that could have a material adverse impact on our business.

292、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 theapplication of such non-monetary remedies.Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reason

293、ably estimable were not material as of March 31,2023.Except as otherwise noted for the proceedings described in this Note 13,we have concluded,based on currently available information,that reasonablypossible losses arising directly from the proceedings(i.e.,monetary damages or amounts paid in judgme

294、nt or settlement)in excess of our recorded accruals arealso not material.Determining legal reserves or possible losses from such matters involves judgment and may not reflect the full range of uncertainties andunpredictable outcomes.We may be exposed to losses in excess of the amount recorded,and su

295、ch amounts could be material.If any of our estimates andassumptions change or prove to have been incorrect,it could have a material adverse effect on our business,financial position,results of operations,or cashflows.Regulatory proceedingsPayPal Australia Pty Limited(“PPAU”)self-reported a potential

296、 violation to the Australian Transaction Reports and Analysis Centre(“AUSTRAC”)on May22,2019.This self-reported matter relates to PPAU incorrectly filing required international funds transfer instructions over a period of time under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006(

297、“AML/CTF Act”).On September 23,2019,PPAU received a notice from AUSTRAC requiringthat PPAU appoint an external auditor(a partner of a firm which is not our independent auditor)to review certain aspects of PPAUs compliance with itsobligations under the AML/CTF Act.The external auditor was appointed o

298、n November 1,2019.AUSTRAC had notified PPAU that its enforcement team was investigating the matters reported upon by the external auditor in its August 31,2020 final report.As a resolution of this investigation,on March 17,2023,AUSTRACs Chief Executive Officer accepted an enforceable undertaking fro

299、m PPAU in relation tothe self-reported issues.The enforceable undertaking does not include a monetary penalty.The entry into and compliance with the enforceable undertaking will not require a change toour business practices in a manner that could result in a material loss,require significant managem

300、ent time,result in the diversion of significant operationalresources,or otherwise adversely affect our business.PPAU is required to deliver an Assurance Action Plan(“AAP”)under the enforceable undertaking to demonstrate that the governance and oversightarrangements following the remedial work comple

301、ted by PPAU are sustainable and appropriate.The enforceable undertaking requires PPAU to appoint anexternal auditor by June 30,2023 to assess the appropriateness,sustainability and efficacy of the actions to be taken under the AAP.The external auditors finalreport to PPAU and AUSTRAC is due on or be

302、fore April 16,2024.The successful completion of the enforceable undertaking is subject to AUSTRACsultimate review and decision based on the external auditors final report.We cannot predict the outcome of the external auditors final report or AUSTRACsdecision.Any failure to comply with the enforceabl

303、e undertaking could result in penalties or require us to change our business practices.37Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)We have received Civil Investigative Demands(“CIDs”)from the Consumer Financial Protection Bureau(“C

304、FPB”)related to Venmos unauthorized fundstransfers and collections processes,and related matters,including treatment of consumers who request payments but accidentally designate an unintendedrecipient.The CIDs request the production of documents and answers to written questions.We are cooperating wi

305、th the CFPB in connection with these CIDs.We are responding to subpoenas and requests for information received from the U.S.Securities and Exchange Commission(“SEC”)Enforcement Divisionrelating to whether the interchange rates paid to the bank that issues debit cards bearing our licensed brands were

306、 consistent with Regulation II of the Board ofGovernors of the Federal Reserve System,and to the reporting of marketing fees earned from the PayPal-branded card programs(the“SEC Debit CardProgram Matter”).We are cooperating with the SEC Enforcement Division in connection with this investigation.In F

307、ebruary 2022,we received a CID from the Federal Trade Commission(“FTC”)related to PayPals practices relating to commercial customers that submitcharges on behalf of other merchants or sellers,and related activities.The CID requests the production of documents and answers to written questions.We arec

308、ooperating with the FTC in connection with this CID.In January 2023,we received notice of an administrative proceeding and a related request for information from the German Federal Cartel Office(“FCO”)related to terms in PayPal(Europe)S.r.l.et Cie,S.C.A.s contractual terms with merchants in Germany

309、prohibiting surcharging and requiring paritypresentation of PayPal relative to other payment methods.We are cooperating with the FCO in connection with this proceeding.Legal proceedingsOn August 20,2021,a putative securities class action captioned Kang v.PayPal Holdings,Inc.,et al.,Case No.21-cv-064

310、68,was filed in the U.S.DistrictCourt for the Northern District of California(the“Kang Securities Action”).The Kang Securities Action asserts claims relating to our disclosure of a CID fromthe CFPB related to the marketing and use of PayPal Credit in connection with certain merchants that provide ed

311、ucational services and the SEC Debit CardProgram 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 onbehalf of purchasers of the Companys stock between February 9,2017 and July 28,2021(the“Class Period”),and asse

312、rts claims for violations of Sections10(b)and 20(a)of the Securities Exchange Act of 1934 against the Company,its Chief Executive Officer,and former Chief Financial Officer.The complaintalleges that certain public statements made by the Company during the Class Period were rendered materially false

313、and misleading(which,allegedly,causedthe Companys stock to trade at artificially inflated prices)by the defendants failure to disclose that,among other things,PayPals business practices withrespect to PayPal Credit and regarding interchange rates paid to its bank partner related to its bank-issued c

314、o-branded debit cards were non-compliant withapplicable laws and/or regulations.The Kang Securities Action seeks unspecified compensatory damages on behalf of the putative class members.OnNovember 2,2021,the court appointed a Lead Plaintiff,and on January 25,2022,the Lead Plaintiff filed an amended

315、complaint.The amended complaintalleges 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 v

316、arious statements made by thedefendants during the Amended Class Period were rendered materially false and misleading,in violation of Sections 10(b)and 20(a)of the Securities ExchangeAct of 1934,by PayPals alleged violations of the 2015 consent order with the CFPB,federal consumer financial laws,and

317、 Regulation II.On August 8,2022,the court granted Defendants motion to dismiss the amended complaint in its entirety,and granted Lead Plaintiffs request for leave to file a further amendedcomplaint.On September 16,2022,Lead Plaintiff filed a Second Amended Complaint(the“SAC”),which asserts the same

318、claims against the same Defendantsbased 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 grantedDefendants motion and dismissed the SAC in its entirety with prejudice.Plaintiffs deadline to file a notice of appeal is

319、 May 30,2023.38Table of ContentsPayPal Holdings,Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)(Unaudited)On December 16,2021 and January 19,2022,two related putative shareholder derivative actions captioned Pang v.Daniel Schulman,et al.,Case No.21-cv-09720,and Lalor v.Daniel Sch

320、ulman,et al.,Case No.22-cv-00370,respectively,were filed in the U.S.District Court for the Northern District of California(the“California Derivative Actions”),purportedly on behalf of the Company.On August 2,2022,a related putative shareholder derivative action captionedJefferson v.Daniel Schulman,e

321、t al.,No.2022-0684,was filed in the Court of Chancery for the State of Delaware(the“Delaware Derivative Action,”andcollectively with the California Derivative Actions,the“Derivative Actions”),purportedly on behalf of the Company.The Derivative Actions are based on thesame alleged facts and circumsta

322、nces as the Kang Securities Action,and name certain of our officers,including our Chief Executive Officer and former ChiefFinancial 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 m

323、ismanagement,waste of corporate assets,and violations of the Securities Exchange Act of 1934,and seek to recover damages onbehalf of the Company.On February 1,2022,the court entered an order consolidating the two California Derivative Actions and staying them until all motionsto dismiss in the Kang

324、Securities Action are resolved.On October 4,2022,a putative securities class action captioned Defined Benefit Plan of the Mid-Jersey Trucking Industry and Teamsters Local 701 Pensionand Annuity Fund v.PayPal Holdings,Inc.,et al.,Case No.22-cv-5864,was filed in the U.S.District Court for the District

325、 of New Jersey.On January 11,2023,the Court appointed Caisse de dpt et placement du Qubec as lead plaintiff and renamed the action In re PayPal Holdings,Inc.Securities Litigation(“PPH Securities Action”).On March 13,2023,the lead plaintiff filed an amended and consolidated complaint.The PPH Securiti

326、es Action asserts claimsrelating 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 Companys stock between February 3,2021 and

327、 February 1,2022(the“ClassPeriod”),and asserts claims for alleged violations of Sections 10(b)of the Securities Exchange Act of 1934(“Exchange Act”)against the Company,as well asits Chief Executive Officer,Chief Strategy,Growth and Data Officer,and former Chief Financial Officer(collectively,the“Ind

328、ividual Defendants,”andtogether with the Company,“Defendants”),and for alleged violations of Sections 20(a)and 20A of the Exchange Act against the Individual Defendants.Thecomplaint alleges that certain public statements made by Defendants during the Class Period were rendered materially false and m

329、isleading(which,allegedly,caused the Companys stock to trade at artificially inflated prices)by the Defendants failure to disclose that,among other things,the Companys incentivecampaigns were susceptible to fraud and led to the creation of illegitimate accounts,which allegedly affected the Companys

330、NNA results and guidance.ThePPH Securities Action seeks unspecified compensatory damages on behalf of the putative class members.On November 2,2022,a putative shareholder derivative action captioned Shah v.Daniel Schulman,et al.,Case No.22-cv-1445,was filed in the U.S.DistrictCourt for the District

331、of Delaware(the“Shah Action”),purportedly on behalf of the Company.On April 4,2023,a putative shareholder derivative actioncaptioned Nelson v.Daniel Schulman,et.al.,Case No.23-cv-01913,was filed in the U.S.District Court for the District of New Jersey(the“Nelson Action”)purportedly on behalf of the

332、Company.The Shah and Nelson Actions are based on the same alleged facts and circumstances as the PPH Securities Action,andname 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 Acti

333、ons allege claims for breach of fiduciary duty,aiding and abetting breach of fiduciary duty,unjust enrichment,waste of corporateassets,gross mismanagement and violations of the Securities Exchange Act of 1934,and seek to recover damages on behalf of the Company.The Shah andNelson Actions have been stayed pending further developments in the PPH Securities Action.General mattersOther third parties h