Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements


			Page
Consolidated Statements of Income			48
Consolidated Statements of Comprehensive Income			49
Consolidated Balance Sheets			50
Consolidated Statements of Equity			51
Consolidated Statements of Cash Flows			52
Notes to Consolidated Financial Statements			53
Schedule II - Valuation and Qualifying Accounts			99
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			100

Fiserv, Inc.

Consolidated Statements of Income


In millions, except per share data
Year Ended December 31,	2021		2020		2019

Revenue:
Processing and services (1)	$	13,307	$	12,215	$	8,573
Product	2,919		2,637		1,614
Total revenue	16,226		14,852		10,187
Expenses:
Cost of processing and services	6,084		5,841		4,016
Cost of product	2,044		1,971		1,293
Selling, general and administrative	5,810		5,652		3,284
Gain on sale of businesses	—		(464)		(15)
Total expenses	13,938		13,000		8,578
Operating income	2,288		1,852		1,609
Interest expense, net	(693)		(709)		(473)
Debt financing activities	—		—		(47)
Other income (expense)	71		28		(6)
Income before income taxes and income from investments in unconsolidated affiliates	1,666		1,171		1,083
Income tax provision	(363)		(196)		(198)
Income from investments in unconsolidated affiliates	100		—		29


Net income	1,403		975		914
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	69		17		21
Net income attributable to Fiserv, Inc.	$	1,334	$	958	$	893


Net income attributable to Fiserv, Inc. per share – basic	$	2.01	$	1.42	$	1.74



Net income attributable to Fiserv, Inc. per share – diluted	$	1.99	$	1.40	$	1.71



Shares used in computing net income attributable to Fiserv, Inc. per share:
Basic	662.6		672.1		512.3
Diluted	671.6		683.4		522.6

(1)Includes processing and other fees charged to related party investments accounted for under the equity method of $203 million, $236 million and $112 million for the years ended December 31, 2021, 2020 and 2019, respectively (see Note 20).

Fiserv, Inc.

Consolidated Statements of Comprehensive Income


In millions
Year Ended December 31,	2021		2020		2019

Net income	$	1,403	$	975	$	914
Other comprehensive income (loss):
Fair market value adjustment on cash flow hedges, net of income tax (provision) benefit of ($2 million), ($2 million) and $46 million	6		5		(134)
Reclassification adjustment for net realized gains on cash flow hedges included in cost of processing and services, net of income tax provision of $2 million, $0 million and $0 million	(8)		(1)		(1)
Reclassification adjustment for net realized losses on cash flow hedges included in net interest expense, net of income tax benefit of $5 million, $5 million and $3 million	16		16		10
Unrealized gains (losses) on defined benefit pension plans, net of income tax (provision) benefit of ($17 million), $2 million and $1 million	50		(6)		(4)
Foreign currency translation, net of income tax (see Note 14)	(461)		(186)		8
Total other comprehensive loss	(397)		(172)		(121)
Comprehensive income	$	1,006	$	803	$	793
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	69		17		21
Less: other comprehensive (loss) income attributable to noncontrolling interests	(39)		35		(8)
Comprehensive income attributable to Fiserv, Inc.	$	976	$	751	$	780

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Consolidated Balance Sheets


In millions
December 31,	2021		2020

Assets
Cash and cash equivalents	$	835	$	906
Trade accounts receivable, less allowance for doubtful accounts	2,860		2,482
Prepaid expenses and other current assets	1,523		1,310
Settlement assets	13,652		11,521
Total current assets	18,870		16,219
Property and equipment, net	1,742		1,628
Customer relationships, net	9,991		11,603
Other intangible assets, net	4,018		3,755
Goodwill	36,433		36,322
Contract costs, net	811		692
Investments in unconsolidated affiliates	2,561		2,756
Other long-term assets	1,823		1,644
Total assets	$	76,249	$	74,619
Liabilities and Equity
Accounts payable and accrued expenses	$	3,550	$	3,186
Short-term and current maturities of long-term debt	508		384
Contract liabilities	585		546
Settlement obligations	13,652		11,521
Total current liabilities	18,295		15,637
Long-term debt	20,729		20,300
Deferred income taxes	4,172		4,389
Long-term contract liabilities	225		187
Other long-term liabilities	878		777
Total liabilities	44,299		41,290
Commitments and Contingencies (see Note 19)
Redeemable Noncontrolling Interests	278		259
Fiserv, Inc. Shareholders’ Equity:
Preferred stock, no par value: 25 million shares authorized; none issued	—		—
Common stock, $0.01 par value: 1,800 million shares authorized; 784 million and 789 million shares issued, respectively	8		8
Additional paid-in capital	22,983		23,643
Accumulated other comprehensive loss	(745)		(387)
Retained earnings	14,846		13,441
Treasury stock, at cost, 134 million and 121 million shares	(6,140)		(4,375)
Total Fiserv, Inc. shareholders’ equity	30,952		32,330
Noncontrolling interests	720		740
Total equity	31,672		33,070
Total liabilities and equity	$	76,249	$	74,619

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Consolidated Statements of Equity


	Fiserv, Inc. Shareholders’ Equity

	Number of Shares		Amount
In millions	Common Shares	Treasury Shares	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Noncontrolling Interests		Total Equity

Balance at January 1, 2019	791	399	$	8	$	1,057	$	(67)	$	11,635	$	(10,340)	$	—	$	2,293
Net income (1)									893				4		897
Shares issued to acquire First Data (see Note 4)		(286)			22,582						7,478		1,731		31,791
Distributions paid to noncontrolling interests (2)													(111)		(111)
Other comprehensive loss							(113)						(8)		(121)
Share-based compensation					229										229
Shares issued under stock plans		(5)			(127)						137				10
Purchases of treasury stock		4									(393)				(393)
Balance at December 31, 2019	791	112	8		23,741		(180)		12,528		(3,118)		1,616		34,595
Net income (loss) (1)									958				(22)		936
Measurement period adjustments related to First Data acquisition (see Note 4)													(126)		(126)
Distributions paid to noncontrolling interests (2)													(37)		(37)
Net adjustment to noncontrolling interests from dissolution (see Note 4)					(36)								(726)		(762)
Other comprehensive (loss) income							(207)						35		(172)
Share-based compensation					369										369
Shares issued under stock plans		(5)			(231)						178				(53)
Purchases of treasury stock		16									(1,635)				(1,635)



Retirement of treasury stock (see Note 20)	(2)	(2)			(200)						200				—
Cumulative-effect adjustment of ASU 2016-13 adoption									(45)						(45)
Balance at December 31, 2020	789	121	8		23,643		(387)		13,441		(4,375)		740		33,070
Net income (1)									1,334				25		1,359

Distributions paid to noncontrolling interests (2)													(6)		(6)

Change in redemption value of redeemable noncontrolling interest (see Note 13)					(18)										(18)
Other comprehensive loss							(287)						(39)		(326)
Prior period adjustment (see Note 14)							(71)		71						—
Share-based compensation					239										239
Shares issued under stock plans		(5)			(293)						212				(81)
Purchases of treasury stock		23									(2,565)				(2,565)
Retirement of treasury stock (see Note 20)	(5)	(5)			(588)						588				—

Balance at December 31, 2021	784	134	$	8	$	22,983	$	(745)	$	14,846	$	(6,140)	$	720	$	31,672

(1)The total net income presented in the consolidated statements of equity for the years ended December 31, 2021, 2020 and 2019 is different than the amount presented in the consolidated statements of income due to the net income attributable to redeemable noncontrolling interests of $44 million, $39 million and $17 million, respectively, not included in equity.

(2)The total distributions presented in the consolidated statements of equity for the years ended December 31, 2021, 2020 and 2019 exclude $43 million, $42 million and $7 million, respectively, in distributions paid to redeemable noncontrolling interests not included in equity. In addition, the total distributions presented in the consolidated statements of equity for the years ended December 31, 2021 and 2020 exclude $13 million and $25 million, respectively, in distributions related to the Banc of America Merchant Services Joint Venture (see Note 4) not included in equity.

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Consolidated Statements of Cash Flows (1)


In millions
Year Ended December 31,	2021		2020		2019

Cash flows from operating activities:
Net income	$	1,403	$	975	$	914

Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Depreciation and other amortization	1,158		1,077		615
Amortization of acquisition-related intangible assets	2,038		2,133		1,036
Amortization of financing costs, debt discounts and other	52		47		127
Net foreign currency gain on financing activities	—		—		(50)
Share-based compensation	239		369		229

Deferred income taxes	(262)		71		47
Gain on sale of businesses	—		(464)		(15)
Income from investments in unconsolidated affiliates	(100)		—		(29)
Distributions from unconsolidated affiliates	34		42		23
Settlement of interest rate hedge contracts	—		—		(183)
Non-cash impairment charges	15		124		48

Other operating activities	(48)		(16)		(3)
Changes in assets and liabilities, net of effects from acquisitions and dispositions:
Trade accounts receivable	(358)		320		(7)
Prepaid expenses and other assets	(248)		(167)		(82)
Contract costs	(269)		(289)		(212)
Accounts payable and other liabilities	303		(146)		238
Contract liabilities	77		71		99
Net cash provided by operating activities from continuing operations	4,034		4,147		2,795
Cash flows from investing activities:
Capital expenditures, including capitalized software and other intangibles	(1,160)		(900)		(721)
Proceeds from sale of businesses	—		579		51
Payments for acquisitions of businesses, net of cash acquired and including working capital adjustments	(848)		(139)		(15,083)
Distributions from unconsolidated affiliates	115		109		113
Purchases of investments	(256)		(1)		(45)
Proceeds from sale of investments	519		11		—
Other investing activities	—		—		5
Net cash used in investing activities from continuing operations	(1,630)		(341)		(15,680)
Cash flows from financing activities:
Debt proceeds	6,435		8,897		20,030
Debt repayments	(7,881)		(10,918)		(5,043)
Net proceeds from (repayments of) commercial paper and short-term borrowings	1,741		(6)		—
Payments of debt financing, redemption and other costs	—		(16)		(247)
Proceeds from issuance of treasury stock	140		133		156
Purchases of treasury stock, including employee shares withheld for tax obligations	(2,786)		(1,826)		(561)

Settlement activity, net	711		405		182
Distributions paid to noncontrolling interests and redeemable noncontrolling interests	(62)		(104)		(118)
Payments of acquisition-related contingent consideration	(37)		(18)		(13)
Other financing activities	(2)		22		(13)
Net cash (used in) provided by financing activities from continuing operations	(1,741)		(3,431)		14,373
Effect of exchange rate changes on cash and cash equivalents	(27)		16		1
Net change in cash and cash equivalents	636		391		1,489
Net cash flows from discontinued operations	—		—		133
Cash and cash equivalents, beginning balance	2,569		2,178		556
Cash and cash equivalents, ending balance	$	3,205	$	2,569	$	2,178
Discontinued operations cash flow information:

Net cash provided by investing activities	—		—		133
Net change in cash and cash equivalents from discontinued operations	$	—	$	—	$	133

(1) The company revised the consolidated statements of cash flows presentation to include cash and cash equivalents within settlement assets as a component of total cash and cash equivalents. The company revised the 2020 and 2019 presentation for comparable purposes. Additional information is included in Note 1.

See accompanying notes to consolidated financial statements.

Fiserv, Inc.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Description of the Business

Fiserv, Inc. and its subsidiaries (collectively, the “Company”) provide payments and financial services technology solutions to clients worldwide. The Company provides account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover® cloud-based point-of-sale and business management platform. The Company serves clients around the globe, including merchants, banks, credit unions, other financial institutions and corporate clients. The Company’s reportable segments are Merchant Acceptance (“Acceptance”), Financial Technology (“Fintech”) and Payments and Network (“Payments”).

On July 29, 2019, the Company acquired First Data Corporation (“First Data”), a global leader in commerce-enabling technology and solutions for merchants, financial institutions and card issuers, by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition for a total purchase price of $46.5 billion (see Note 4). The consolidated financial statements include the financial results of First Data from the date of acquisition.

Principles of Consolidation

The consolidated financial statements include the accounts of Fiserv, Inc. and its subsidiaries in which the Company holds a controlling financial interest. All intercompany transactions and balances between the Company and its subsidiaries have been eliminated in consolidation. Control is typically established when ownership and voting interests in an entity are greater than 50%. Investments in which the Company has significant influence but not control are accounted for using the equity method of accounting, for which the Company’s share of net income or loss is reported within income from investments in unconsolidated affiliates and the related tax expense or benefit is reported within the income tax provision in the consolidated statements of income. Significant influence over an affiliate’s operations generally coincides with an ownership interest of between 20% and 50%; however, for partnerships and limited liability companies, an ownership interest of between 3% and 50% or board of director representation may also constitute significance influence.

The Company maintains a majority controlling financial interest in certain entities, mostly related to consolidated merchant alliances (see Note 20). Noncontrolling interests represent the minority shareholders’ share of the net income or loss and equity in consolidated subsidiaries. The Company’s noncontrolling interests presented in the consolidated statements of income include net income attributable to noncontrolling interests and redeemable noncontrolling interests. Noncontrolling interests are presented as a component of equity in the consolidated balance sheets. Noncontrolling interests that are redeemable upon the occurrence of an event that is not solely within the Company’s control are presented outside of equity and are carried at their estimated redemption value if it exceeds the initial carrying value of the redeemable interest (see Note 13).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Risks and Uncertainties

Since early 2020, the world has been, and continues to be, impacted by the coronavirus (“COVID-19”) pandemic. The COVID-19 pandemic, and various measures imposed by the governments of many countries, states, cities and other geographic regions to prevent its spread, have negatively impacted global economic and market conditions, including levels of consumer and business spending. Consequently, the Company’s operating performance, primarily within its merchant acquiring and payment-related businesses, which earn transaction-based fees, has been adversely affected, and may continue to be adversely affected, by the economic impact of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s future operational and financial performance will depend on, among other matters, the duration and intensity of the pandemic; the level of success of global vaccination efforts; governmental and private sector responses to the pandemic and the impact of such responses on the Company; and the impact of the pandemic on the Company’s employees, clients, vendors, supply chain, operations and sales, all of which are uncertain and difficult to predict. These changing conditions may also affect the estimates and assumptions made by management. Such estimates and assumptions affect, among other things, the valuations of the Company’s long-lived assets, definite-lived intangible assets and equity method investments; the impairment assessment

See accompanying notes to consolidated financial statements.

of goodwill; the Company’s deferred tax assets and related valuation allowances; the estimate of current expected credit losses; and certain pension plan assumptions. It is reasonably possible that changes in any assumptions used may result in an impairment or other charge that, if incurred, could have a material adverse impact on the Company’s results of operations, total assets and total equity in the period recognized. Events and changes in circumstances arising subsequent to December 31, 2021, including those resulting from the impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods.

Revenue Recognition

The Company generates revenue from the delivery of processing, service and product solutions. Revenue is measured based on consideration specified in a contract with a customer, and excludes any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer which may be at a point in time or over time. Additional information regarding the Company’s revenue recognition policies is included in Note 3 to the consolidated financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and investments with original maturities of 90 days or less. Cash and cash equivalents are stated at cost in the consolidated balance sheets, which approximates market value. Cash and cash equivalents that were restricted from use due to regulatory or other requirements are included in other long-term assets in the consolidated balance sheets. Cash and cash equivalents held on behalf of merchants and other payees are included in settlement assets in the consolidated balance sheets. The following table provides a reconciliation between cash and cash equivalents on the consolidated balance sheets and the consolidated statements of cash flows at December 31:



(In millions)	2021		2020		2019
Cash and cash equivalents on the consolidated balance sheets	$	835	$	906	$	893
Cash and cash equivalents included in settlement assets (see Note 6)	2,361		1,650		1,245
Other restricted cash	9		13		40
Total cash and cash equivalents on the consolidated statements of cash flows	$	3,205	$	2,569	$	2,178

The Company revised the consolidated statements of cash flows for the years ended December 31, 2020 and 2019, respectively, to reflect settlement cash and cash equivalents within settlement assets as a component of total cash and cash equivalents on the consolidated statements of cash flows. The components of settlement assets were revised to reflect the settlement cash and cash equivalents held by partner banks of $175 million and $411 million as settlement receivables as of December 31, 2020 and 2019, respectively. The changes in settlement cash and cash equivalents for the years ended December 31, 2020 and 2019, of $405 million and $182 million, respectively, have been included in settlement activity, net within cash flows from financing activities. The consolidated statement of cash flows for the year ended December 31, 2019 reflects the impact of $922 million of acquired settlement cash and cash equivalents relating to the First Data acquisition with the offsetting change included in cash flows from investing activities.

Allowance for Doubtful Accounts

The Company analyzes the collectability of trade accounts receivable by considering historical bad debts, client creditworthiness, current economic trends, changes in client payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs. The allowance for doubtful accounts was $55 million and $48 million at December 31, 2021 and 2020, respectively.

Leases

The Company maintains certain leasing receivables associated with its point-of-sale terminal leasing businesses. Leasing receivables are included in prepaid expenses and other current assets and other long-term assets in the consolidated balance sheets. Interest income on the Company’s leasing receivables is recognized using the effective interest method, and is included within product revenue in the consolidated statements of income. Initial direct costs incurred to obtain operating leases and other sales-type leases, in which the fair value of the underlying asset is equal to its carrying amount at the lease commencement date, are deferred and recognized over the lease term. Initial direct costs to obtain a sales-type lease are expensed as incurred if the fair value of the underlying asset is different from its carrying amount at the lease commencement date. Additional information regarding the Company’s lease policies is included in Note 11 to the consolidated financial statements.

Prepaid Expenses

Prepaid expenses represent advance payments for goods and services to be consumed in the future, such as maintenance, postage and insurance, and totaled $410 million and $348 million at December 31, 2021 and 2020, respectively.

Settlement Assets and Obligations

Settlement assets and obligations result from timing differences between collection and fulfillment of payment transactions and collateral amounts held to manage merchant credit risk, primarily associated with the Company’s merchant acquiring services. Settlement assets represent cash received or amounts receivable from agents, payment networks, bank partners, merchants or directly from consumers. Settlement obligations represent amounts payable to merchants and payees. Certain merchant settlement assets (included in settlement receivables in Note 6) that relate to settlement obligations are held by partner banks to which the Company does not have legal ownership but has the right to use the assets to satisfy the related settlement obligations. The Company records settlement obligations for amounts payable to merchants and for outstanding payment instruments issued to payees that have not yet been presented for settlement. Additional information regarding the Company’s settlement assets and obligations is included in Note 6 to the consolidated financial statements.

Allowance for Merchant Credit Losses

With respect to the Company’s merchant acquiring business, the Company’s merchant customers have the legal obligation to refund any charges properly reversed by the cardholder. However, in the event the Company is not able to collect the refunded amounts from the merchants, the Company may be liable for the reversed charges. The Company’s risk in this area primarily relates to situations where the cardholder has purchased goods or services to be delivered in the future. The Company requires cash deposits, guarantees, letters of credit or other types of collateral from certain merchants to minimize this obligation. Collateral held by the Company, or held by partner banks for the Company’s benefit, is classified within settlement assets and the obligation to repay the collateral is classified within settlement obligations in the consolidated balance sheets. The Company also utilizes a number of systems and procedures to manage merchant credit risk. Despite these efforts, the Company experiences some level of losses due to merchant defaults.

The aggregate merchant credit loss expense, recognized by the Company within cost of processing and services in the consolidated statements of income, was $41 million, $113 million and $40 million for the years ended December 31, 2021, 2020 and 2019, respectively. The amount of collateral available to the Company was $2.2 billion and $1.2 billion at December 31, 2021 and 2020, respectively. The Company maintains an allowance for merchant credit losses that are expected to exceed the amount of merchant collateral. The allowance includes estimated losses from anticipated chargebacks and fraud events that have been incurred on merchants’ payment transactions that have been processed but not yet reported to the Company, which is recorded within accounts payable and accrued expenses in the consolidated balance sheets, as well as estimated losses on refunded amounts to cardholders that have not yet been collected from the merchants, which is recorded within prepaid expenses and other current assets in the consolidated balance sheets. The allowance is based primarily on the Company’s historical experience of credit losses and other relevant factors such as changes in economic conditions or increases in merchant fraud. The aggregate merchant credit loss allowance was $42 million and $59 million at December 31, 2021 and 2020, respectively.

Property and Equipment

Property and equipment is reported at cost. Depreciation of property and equipment is computed primarily using the straight-line method over the shorter of the estimated useful life of the asset or the leasehold period, if applicable. Property and equipment consisted of the following at December 31:



(In millions)	Estimated Useful Lives	2021		2020
Land	—	$	48	$	54
Data processing equipment	3 to 5 years	2,302		1,666
Buildings and leasehold improvements	5 to 40 years	512		555
Furniture and equipment	5 to 8 years	372		636
		3,234		2,911
Less: Accumulated depreciation		(1,492)		(1,283)
Total		$	1,742	$	1,628

Depreciation expense for all property and equipment totaled $498 million, $523 million and $247 million in 2021, 2020 and 2019, respectively (see Note 17 for a description of accelerated depreciation under certain finance lease agreements).

Intangible Assets

Customer related intangible assets represent customer contracts and relationships obtained as part of acquired businesses and are amortized using an accelerated amortization method which corresponds with the customer attrition rates used in the initial valuation of the intangibles over their estimated useful lives, generally ten to twenty years. Acquired software and technology represents software and technology intangible assets obtained as part of acquired businesses and is amortized using the straight-line method over their estimated useful lives, generally four to ten years. Trade names are amortized using the straight-line method over their estimated useful lives, generally eight to twenty years. Non-compete agreements are amortized using the straight-line method over their estimated useful lives, generally four to five years.

Purchased software represents software licenses purchased from third parties and is amortized using the straight-line method over their estimated useful lives, generally three to five years.

The Company continually develops, maintains and enhances its products and systems. Product development expenditures represented approximately 7%, 6% and 8% of the Company’s total revenue in 2021, 2020 and 2019, respectively. Research and development costs incurred prior to the establishment of technological feasibility are expensed as incurred. Routine maintenance of software products, design costs and other development costs incurred prior to the establishment of a product’s technological feasibility are also expensed as incurred. Costs are capitalized commencing when the technological feasibility of the software has been established.

Capitalized software development costs represent the capitalization of certain costs incurred to develop new software or to enhance existing software which is marketed externally or utilized by the Company to process client transactions. Capitalized software development costs are amortized using the straight-line method over their estimated useful lives, generally five years.

The Company may, at its discretion, negotiate to pay an independent sales organization (“ISO”) an agreed-upon up-front amount in exchange for the ISO’s surrender of its right to receive commission payments from the Company related to future transactions of the ISO’s referred merchants (“residual buyout”). The amount that the Company pays for these residual buyouts is capitalized and subsequently amortized using the straight-line method over the expected life of the merchant portfolios, generally five to nine years. The Company also obtains residual buyouts as part of acquired businesses. Additional information regarding the Company’s identifiable intangible assets is included in Note 7 to the consolidated financial statements.

Goodwill

Goodwill represents the excess of purchase price over the fair value of identifiable assets acquired and liabilities assumed in a business combination. The Company evaluates goodwill for impairment on an annual basis, or more frequently if circumstances indicate possible impairment. Goodwill is tested for impairment at a reporting unit level, which is one level below the Company’s reportable segments. When assessing goodwill for impairment, the Company considers (i) the prior year’s amount of excess fair value over the carrying value of each reporting unit, (ii) the period of time since a reporting unit’s last quantitative test, (iii) the extent a reorganization or disposition changes the composition of one or more of the reporting units and (iv) other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, the Company assesses numerous factors to determine whether it is more likely than not that the fair value of its reporting units are less than their

respective carrying values. Examples of qualitative factors that the Company assesses include its share price, its financial performance, market and competitive factors in its industry and other events specific to its reporting units. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative impairment test by comparing reporting unit carrying values to estimated fair values.

The Company elected to perform a quantitative test for certain reporting units obtained through the acquisition of First Data and for those that changed in composition, and tested the remainder of its reporting units using a qualitative approach. The Company’s most recent annual impairment assessment of its reporting units in the fourth quarter of 2021 determined that its goodwill was not impaired as the estimated fair values exceeded the carrying values. However, it is reasonably possible that future developments related to the interest rate environment or the economic impact of the COVID-19 pandemic (such as an increased duration and intensity of the pandemic and/or government-imposed restrictions) or changes in significant assumptions used in the quantitative test on certain of the Company’s businesses acquired and recorded at fair value through the July 2019 acquisition of First Data (such as an increase in risk-adjusted discount rates) could have a future material impact on one or more of the estimates and assumptions used to evaluate goodwill impairment. There is no accumulated goodwill impairment for the Company through December 31, 2021. Additional information regarding the Company’s goodwill is included in Note 8 to the consolidated financial statements.

Asset Impairment

The Company reviews property and equipment, lease right-of-use (“ROU”) assets, intangible assets and its investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company reviews capitalized software development costs for impairment at each reporting date. Recoverability of property and equipment, lease ROU assets, capitalized software development costs and other intangible assets is assessed by comparing the carrying amount of the asset to either the undiscounted future cash flows expected to be generated by the asset or the net realizable value of the asset, depending on the type of asset. The Company assesses lease ROU assets that are exited in advance of the non-cancellable lease terms by comparing the carrying values of the ROU assets to the discounted cash flows from estimated sublease payments. The Company’s investments in unconsolidated affiliates are assessed by comparing the carrying amount of the investments to their estimated fair values and are impaired if any decline in fair value is determined to be other than temporary. Measurement of any impairment loss is based on estimated fair value.

Fair Value Measurements

The Company applies fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in its consolidated financial statements on a recurring basis. Fair value represents the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company uses the hierarchy prescribed in Accounting Standards Codification (“ASC”) 820, Fair Value Measurements, and considers the principal or most advantageous market and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability. The three levels in the hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the

measurement date.

Level 2 – Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including but

not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or

liabilities and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 – Unobservable inputs reflecting management’s judgments about the assumptions that market

participants would use in pricing the asset or liability, including assumptions about risk.

Additional information regarding the Company’s fair value measurements is included in Note 10 to the consolidated financial statements.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following at December 31:



(In millions)	2021		2020
Trade accounts payable	$	593	$	437
Client deposits	783		702
Accrued compensation and benefits	392		419
Accrued taxes	154		130
Accrued interest	216		220
Other accrued expenses	1,412		1,278
Total	$	3,550	$	3,186

Foreign Currency

The U.S. dollar is the functional currency of the Company’s U.S.-based businesses and certain foreign-based businesses. Where the functional currency differs from the U.S. dollar, assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenue and expenses are translated at the average exchange rates during the reporting period. Gains and losses from foreign currency translation are recorded as a separate component of accumulated other comprehensive loss. Gains and losses from foreign currency transactions are included in determining net income for the reporting period.

The Company has designated its Euro- and British Pound- denominated senior notes and Euro-denominated commercial paper notes as net investment hedges to hedge a portion of its net investment in certain subsidiaries whose functional currencies are the Euro and the British Pound (see Note 14). Accordingly, foreign currency transaction gains or losses on the qualifying net investment hedge instruments are recorded as foreign currency translation, net of tax, within other comprehensive income (loss) in the consolidated statements of comprehensive income and will remain in accumulated other comprehensive loss within the consolidated balance sheets until the sale or complete liquidation of the underlying foreign subsidiaries.

Derivatives

Derivatives are entered into for periods consistent with related underlying exposures and are recorded in the consolidated balance sheets as either an asset or liability measured at fair value. Changes in the fair value of derivatives designated as a cash flow hedge are recorded as a component of accumulated other comprehensive loss and recognized in the consolidated statements of income when the hedged item affects earnings. The Company’s policy is to enter into derivatives with creditworthy institutions and not to enter into such derivatives for speculative purposes.

Employee Benefit Plans

The Company maintains frozen defined benefit pension plans covering certain employees in Europe and the U.S. The Company recognizes actuarial gains/losses and prior service cost in the consolidated balance sheets and recognizes changes in these amounts during the year in which changes occur through other comprehensive income (loss). The Company uses various assumptions when computing amounts relating to its defined benefit pension plan obligations and their associated expenses (including the discount rate and the expected rate of return on plan assets). Additional information regarding the Company’s employee benefit plans is included in Note 15 to the consolidated financial statements.

Cost of Processing, Services and Product

Cost of processing and services consists of costs directly associated with providing services to clients and includes the following: personnel; equipment and data communication; infrastructure costs, including costs to maintain software applications; client support; certain depreciation and amortization; and other operating expenses.

Cost of product consists of costs directly associated with the products sold and includes the following: costs of materials, postage and software development; hardware costs (primarily point-of-sale devices); personnel; infrastructure costs; certain depreciation and amortization; and other costs directly associated with product revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of: salaries, wages, commissions and related expenses paid to sales personnel, administrative employees and management; third-party commissions; advertising and promotional costs; certain depreciation and amortization; and other selling and administrative expenses.

Interest Expense, Net

Interest expense, net consists of interest expense primarily associated with the Company’s outstanding borrowings and finance lease obligations, as well as interest income primarily associated with the Company’s investment securities. Interest expense, net consisted of the following for the years ended December 31:



(In millions)	2021		2020		2019
Interest expense	$	696	$	716	$	507
Interest income	3		7		34
Interest expense, net	$	693	$	709	$	473

Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Liabilities are established for unrecognized tax benefits, attributable to differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements. In establishing a liability for an unrecognized tax benefit, assumptions are made in determining whether, and the extent to which, a tax position will be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized reflects the largest benefit the Company believes is more likely than not to be realized upon ultimate settlement. As additional information becomes available, the liability for unrecognized tax benefits is reevaluated and adjusted, as appropriate. Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax.

Net Income Per Share

Net income per share attributable to Fiserv, Inc. in each period is calculated using actual, unrounded amounts. Basic net income per share is computed by dividing net income attributable to Fiserv, Inc. by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income attributable to Fiserv, Inc. by the weighted-average number of common shares and common stock equivalents outstanding during the period. Common stock equivalents consist of outstanding stock options, unvested restricted stock units and unvested restricted stock awards, and are computed using the treasury stock method. The Company excluded 1.5 million, 1.3 million and 1.1 million weighted-average shares from the calculations of common stock equivalents for anti-dilutive stock options in 2021, 2020 and 2019, respectively. The computation of shares used in calculating basic and diluted net income per share is as follows at December 31:




(In millions)	2021	2020	2019
Weighted-average common shares outstanding used for the calculation of net income attributable to Fiserv, Inc. per share – basic	662.6	672.1	512.3
Common stock equivalents	9.0	11.3	10.3
Weighted-average common shares outstanding used for the calculation of net income attributable to Fiserv, Inc. per share – diluted	671.6	683.4	522.6

Supplemental Cash Flow Information



(In millions)
Year Ended December 31,	2021		2020		2019
Interest paid	$	648	$	673	$	291
Income taxes paid	666		156		197
Treasury stock purchases settled after the balance sheet date	—		—		6
Distribution of nonmonetary assets (see Note 4)	—		726		—
Software obtained under financing arrangements	143		308		—

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”), which clarifies certain interactions between the guidance to account for certain equity securities, investments under the equity method of accounting, and forward contracts or purchased options to purchase securities under Topic 321, Topic 323 and Topic 815. For public entities, ASU 2020-01 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2020-01 effective January 1, 2021, and the adoption did not have a material impact on its consolidated financial statements.

In 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which introduces a number of amendments that are designed to simplify the application of accounting for income taxes. Such amendments include removing certain exceptions for intraperiod tax allocation, interim reporting when a year-to-date loss exceeds the anticipated loss, reflecting the effect of an enacted change in tax laws or rates in the annual effective tax rate and recognition of deferred taxes related to outside basis differences for ownership changes in investments. ASU 2019-12 also provides clarification related to when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. In addition, ASU 2019-12 provides guidance on the recognition of a franchise tax (or similar tax) that is partially based on income as an income-based tax and accounting for any incremental amount incurred as a non-income-based tax. For public entities, ASU 2019-12 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 effective January 1, 2021, and the adoption did not have a material impact on its consolidated financial statements.

In 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13” or “CECL”), which prescribes an impairment model for most financial instruments based on expected losses rather than incurred losses. Under this model, an estimate of expected credit losses over the contractual life of the instrument is to be recorded as of the end of a reporting period as an allowance to offset the amortized cost basis, resulting in a net presentation of the amount expected to be collected on the financial instrument. For public entities, ASU 2016-13 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019. For most instruments, entities must apply the standard using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption. The Company adopted ASU 2016-13 effective January 1, 2020 using the required modified retrospective approach, which resulted in a cumulative-effect decrease to beginning retained earnings of $45 million. Financial assets and liabilities held by the Company subject to the “expected credit loss” model prescribed by CECL include trade and other receivables, net investments in leases, settlement asset receivables and other credit exposures such as financial guarantees not accounted for as insurance.

Recently Issued Accounting Pronouncements

In 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832) (“ASU 2021-10”), which requires that an entity provide certain disclosures in its annual financial statements about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. ASU 2021-10 is effective for all business entities for fiscal years beginning after December 15, 2021 and may be applied either prospectively or retrospectively to the transactions reflected in the financial statements at the date of initial application. The Company is currently assessing the impact that the adoption of ASU 2021-10 will have on its disclosures.

In 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Generally, this should result in recognition and measurement of contract assets and contract liabilities at carryover value consistent with how they were recognized and measured in the acquiree’s financial statements, providing consistent recognition and enhanced comparability with revenue contracts with customers not acquired in a business combination. Prior to adoption of ASU 2021-08, an acquirer generally recognized contract assets and contract liabilities acquired in a business combination at fair value on the acquisition date. For public entities, ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Entities are required to apply a prospective transition approach upon adoption, unless early adoption occurs in an interim period. The Company adopted ASU 2021-08 effective January 1, 2022, with prospective application to business combinations occurring after adoption.

In 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments (“ASU 2021-05”), which amends the lease classification requirements for lessors with certain leases containing variable payments. A lessor is to classify and account for a lease with variable lease payments that do not depend on an index or a rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would have otherwise recognized a day-one loss. For public entities, ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted. Entities that have adopted ASC Topic 842 prior to the issuance of ASU 2021-05 may apply this update either retrospectively to leases that commenced or were modified on or after the adoption of ASC Topic 842 or prospectively to leases that commence or are modified on or after the date the entity first applies ASU 2021-05. The Company adopted ASU 2021-05 effective January 1, 2022, with prospective application to leases commencing or modified thereafter.

3. Revenue Recognition

Significant Accounting Policy

ASC 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The core principle, involving a five-step process, of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Revenue is measured based on consideration specified in a contract with a customer, and excludes any amounts collected on behalf of third parties. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

Nature of Goods and Services

The Company’s operations are comprised of the Acceptance segment, the Fintech segment and the Payments segment (see Note 21). The following is a description of principal activities from which the Company generates its revenue. Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of goods and services as described below.

Processing and Services

Processing and services revenue is generated from account- and transaction-based fees for data processing, merchant transaction processing and acquiring, electronic billing and payment services, electronic funds transfer and debit/credit processing services; consulting and professional services; and software maintenance for ongoing client support.

The Company recognizes processing and services revenue in the period in which the specific service is performed unless they are not deemed distinct from other goods or services in which revenue would then be recognized as control is transferred of the combined goods and services. The Company’s arrangements for processing and services typically consist of an obligation to provide specific services to its customers on a when and if needed basis (a stand-ready obligation) and revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer. These services are typically provided under a fixed or declining (tier-based) price per unit based on volume of service; however, pricing for services may

also be based on minimum monthly usage fees. Fees for the Company’s processing and services arrangements are typically billed and paid on a monthly basis.

Product

Product revenue is generated from print and card production sales, as well as software license sales and hardware (primarily point-of-sale devices) sales.

For software license agreements that are distinct, the Company recognizes software license revenue upon delivery, assuming a contract is deemed to exist. Revenue for arrangements with customers that include significant customization, modification or production of software such that the software is not distinct is typically recognized over time based upon efforts expended, such as labor hours, to measure progress towards completion. For arrangements involving hosted licensed software for the customer, a software element is considered present to the extent the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and it is feasible for the customer to either operate the software on their own hardware or contract with another vendor to host the software. In certain instances, the Company may offer extended payment terms beyond one year. To the extent a significant financing component exists, it is calculated as the difference between the promised consideration and the present value of the software license fees utilizing a discount rate reflective of a separate financing transaction, and is recognized as interest income over the extended payment period. The cash selling price of the software license fee is recognized as revenue at the point in time when the software is transferred to the customer.

The Company sells or leases hardware (point-of-sale devices) and other peripherals as part of its contracts with customers. Hardware typically consists of terminals or Clover® devices. The Company does not manufacture hardware, rather it purchases hardware from third-party vendors and holds such hardware in inventory until purchased by a customer. The Company accounts for sales of hardware as a separate performance obligation and recognizes the revenue at its standalone selling price when the customer obtains control of the hardware.

Significant Judgments in Application of the Guidance

The Company uses the following methods, inputs and assumptions in determining amounts of revenue to recognize:

Identification of Performance Obligations

To identify its performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. For multi-element arrangements, the Company accounts for individual goods or services as a separate performance obligation if they are distinct, the good or service is separately identifiable from other items in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. Determining whether goods or services are distinct performance obligations that should be accounted for separately may require significant judgment.

Technology or service components from third parties are frequently embedded in or combined with the Company’s applications or service offerings. Whether the Company recognizes revenue based on the gross amount billed to a customer or the net amount retained involves judgment that depends on the relevant facts and circumstances, including the level of contractual responsibilities and obligations for delivering solutions to end customers, to determine whether control of goods and services is obtained prior to their transfer to a customer.

Determination of Transaction Price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. The Company includes any fixed charges within its contracts as part of the total transaction price. To the extent that variable consideration is not constrained, the Company includes an estimate of the variable amount, as appropriate, within the total transaction price and updates its assumptions over the duration of the contract.

Assessment of Estimates of Variable Consideration

Many of the Company’s contracts with customers contain some component of variable consideration; however, the constraint will generally not result in a reduction in the estimated transaction price for most forms of variable consideration. The Company may constrain the estimated transaction price in the event of a high degree of uncertainty as to the final consideration amount owed because of an extended length of time over which the fees may be adjusted.

Allocation of Transaction Price

The transaction price (including any discounts or rebates) is allocated between distinct goods and services in a multi-element arrangement based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells each good or service. For items that are not sold separately, the Company estimates the standalone selling prices using available information such as market conditions and internally approved pricing guidelines. Significant judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount the Company expects to receive in exchange for the related good or service.

Contract Modifications

Contract modifications occur when the Company and its customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by the Company. When a contract modification occurs, it requires the Company to exercise judgment to determine if the modification should be accounted for as (i) a separate contract, (ii) the termination of the original contract and creation of a new contract, or (iii) a cumulative catch up adjustment to the original contract. Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract, including the allocation of revenue to the remaining performance obligations and the period of recognition for each identified performance obligation.

Disaggregation of Revenue

The tables below present the Company’s revenue disaggregated by type of revenue, including a reconciliation with its reportable segments. The majority of the Company’s revenue is earned domestically, with revenue generated outside the U.S. comprising approximately 14%, 13% and 12% of total revenue in 2021, 2020 and 2019, respectively.



(In millions)	Reportable Segments
Year Ended December 31, 2021	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	5,511	$	1,544	$	4,497	$	32	$	11,584
Hardware, print and card production	830		44		913		—		1,787
Professional services	43		471		265		—		779
Software maintenance	—		557		11		—		568
License and termination fees	47		186		65		—		298
Output solutions postage	—		—		—		860		860
Other	48		220		82		—		350
Total Revenue	$	6,479	$	3,022	$	5,833	$	892	$	16,226



(In millions)	Reportable Segments
Year Ended December 31, 2020	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue




Processing	$	4,696	$	1,426	$	4,348	$	58	$	10,528
Hardware, print and card production	714		51		771		—		1,536
Professional services	29		465		233		1		728
Software maintenance	—		563		3		2		568
License and termination fees	28		189		68		—		285
Output solutions postage	—		—		—		864		864
Other	55		207		81		—		343
Total Revenue	$	5,522	$	2,901	$	5,504	$	925	$	14,852



(In millions)	Reportable Segments
Year Ended December 31, 2019	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue




Processing	$	2,205	$	1,382	$	3,110	$	166	$	6,863
Hardware, print and card production	323		51		458		—		832
Professional services	4		483		172		10		669
Software maintenance	—		570		3		15		588
License and termination fees	9		255		59		2		325
Output solutions postage	—		—		—		572		572
Other	30		201		107		—		338
Total Revenue	$	2,571	$	2,942	$	3,909	$	765	$	10,187

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers at December 31:



(In millions)	2021		2020		2019
Contract assets	$	541	$	433	$	382
Contract liabilities	810		733		647

Contract assets, reported within other long-term assets in the consolidated balance sheets, primarily result from revenue being recognized where payment is contingent upon the transfer of services to a customer over the contractual period. Contract liabilities primarily relate to advance consideration received from customers (deferred revenue) for which transfer of control occurs, and therefore revenue is recognized, as services are provided. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

During the years ended December 31, 2021 and December 31, 2020, contract assets and contract liabilities increased primarily due to customer discounts, prepaid maintenance and deferred conversion revenue associated with long-term contracts obtained during the respective year. The Company recognized $546 million and $492 million of revenue during the years ended December 31, 2021 and December 31, 2020, respectively, that was included in the contract liabilities balance at the beginning of the year.

Transaction Price Allocated to Remaining Performance Obligations

The following table includes estimated processing, services and product revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) at December 31, 2021:



(In millions)
Year Ending December 31,
2022	$	2,174
2023	1,790
2024	1,416
2025	955
Thereafter	1,418

The Company applies the optional exemption under ASC 606 and does not disclose information about remaining performance obligations for account- and transaction-based processing fees that qualify for recognition under the as-invoiced practical expedient. These multi-year contracts contain variable consideration for stand-ready performance obligations for which the exact quantity and mix of transactions to be processed are contingent upon the customer’s request. The Company also applies the optional exemptions under ASC 606 and does not disclose information for variable consideration that is a sales-based or usage-based royalty promised in exchange for a license of intellectual property or that is allocated entirely to a wholly

unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service in a series. The amounts disclosed above as remaining performance obligations consist primarily of fixed or monthly minimum processing fees and maintenance fees under contracts with an original expected duration of greater than one year.

Contract Costs

The Company incurs incremental costs to obtain a contract as well as costs to fulfill contracts with customers that are expected to be recovered. These costs consist of sales commissions incurred only if a contract is obtained, and customer conversion or implementation related costs. Capitalized sales commissions and conversion or implementation costs were as follows at December 31:



(In millions)	2021		2020
Capitalized sales commissions	$	437	$	402
Capitalized conversion or implementation costs	374		290

Capitalized contract costs are amortized based on the transfer of goods or services to which the asset relates. The amortization period also considers expected customer lives and whether the asset relates to goods or services transferred under a specific anticipated contract. The amortization of capitalized sales commissions is included in selling, general and administrative expenses and amortization of capitalized conversion or implementation costs within cost of processing and services. These costs totaled $148 million, $124 million and $105 million during the years ended December 31, 2021, 2020 and 2019, respectively. Impairment losses recognized during the years ended December 31, 2021, 2020 and 2019 related to capitalized contract costs were not significant.

4. Acquisitions and Dispositions

Acquisitions were accounted for as business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). Purchase price was allocated to the respective assets acquired and liabilities assumed based on the estimated fair values at the date of acquisitions.

Acquisition of BentoBox

On November 22, 2021, the Company acquired BentoBox CMS, Inc (“BentoBox”), a digital marketing and commerce platform that helps restaurants connect with their guests, for approximately $317 million, net of $24 million of acquired cash. BentoBox is included within the Acceptance segment, and further expands the Company’s Clover® dining solutions and commerce and business management capabilities. The preliminary allocation of purchase price resulted in the recognition of identifiable intangible assets, consisting primarily of acquired software and technology, of approximately $136 million with useful lives anticipated to be in the range of five to ten years, and goodwill of approximately $204 million. The allocation of the purchase price is preliminary and is subject to further adjustment, pending additional analysis and final completion of valuations. Goodwill, not expected to be deductible for tax purposes, is primarily attributed to the anticipated value created by the enhanced strength of the Company’s omnichannel platform to drive increased operational efficiencies for restaurants, enabling operators to deliver seamless and distinct hospitality experiences for their diners. The results of operations for BentoBox are included in the consolidated results of the Company from the date of acquisition. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

Acquisition of Pineapple Payments

On May 4, 2021, the Company acquired Pineapple Payments Holdings, LLC (“Pineapple Payments”), an independent sales organization that provides payment processing, proprietary technology, and payment acceptance solutions for merchants, for $207 million, net of $6 million of acquired cash, and including earn-out provisions estimated at a fair value of $30 million (see Note 10). Pineapple Payments is included within the Acceptance segment, and expands the reach of the Company’s payment solutions through its technology- and relationship-led distribution channels.

The allocation of purchase price was finalized in the fourth quarter of 2021 and resulted in the recognition of identifiable intangible assets of $127 million, goodwill of $79 million and other net assets of $7 million. Goodwill, of which $59 million is deductible for tax purposes, is primarily attributed to the anticipated value created by the accelerated delivery of new and innovative capabilities to merchant clients.

The amounts allocated to identifiable intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	90	17 years
Residual buyouts	20		8 years
Acquired software and technology	6		7 years
Non-compete agreements and other	11		5 years

Total	$	127	14 years

The results of operations for Pineapple Payments are included in the consolidated results of the Company from the date of acquisition. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

Acquisition of Ondot

On January 22, 2021, the Company acquired a remaining ownership interest in Ondot, a digital experience platform provider for financial institutions, for $271 million, net of $13 million of acquired cash and cash equivalents. The Company previously held a noncontrolling equity interest in Ondot, which was accounted for at cost. The remeasurement of the Company’s previously held equity interest to its acquisition-date fair value resulted in the recognition of a pre-tax gain of $12 million included within other income in the consolidated statements of income during the year ended December 31, 2021. Ondot is included within the Payments segment and further expands the Company’s digital capabilities, enhancing its suite of integrated payments, banking and merchant solutions.

The allocation of purchase price recorded for Ondot was finalized in the third quarter of 2021 as follows:



(In millions)
Cash and cash equivalents	$	13
Receivables and other assets	9
Intangible assets	142
Goodwill	173
Payables and other liabilities	(31)
Total consideration	$	306
Less: Fair value of previously held equity interest	(22)
Total purchase price	$	284

Goodwill, not deductible for tax purposes, is primarily attributed to the anticipated value created by the combined scale of integrated digital solutions to consumers, merchants, acquirers, networks and card issuers. The amounts allocated to identifiable intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Acquired software and technology	$	90	6 years
Customer relationships	35		6 years
Non-compete agreements and other	17		4 years
Total	$	142	6 years

The results of operations for Ondot are included in the consolidated results of the Company from the date of acquisition. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

Acquisition of First Data

On July 29, 2019, the Company acquired First Data, a global leader in commerce-enabling technology and solutions for merchants, financial institutions and card issuers, by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. The acquisition, included within the Acceptance and Payments segments, increases the Company’s footprint as a global payments and financial technology provider by expanding the portfolio of services provided to financial institutions, corporate and merchant clients and consumers.

As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. The Company also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio as described in further detail within Note 16. In addition, concurrent with the closing of the acquisition, the Company made a cash payment of $16.4 billion to repay existing First Data debt. The Company funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand and proceeds from debt issuances.

The total purchase price paid for First Data was as follows:



(In millions)
Fair value of stock exchanged for shares of Fiserv, Inc. (1)	$	29,293
Repayment of First Data debt	16,414
Fair value of vested portion of First Data stock awards exchanged for Fiserv, Inc. awards (2)	768
Total purchase price	$	46,475

(1)The fair value of the 286 million shares of the Company’s common stock issued as of the acquisition date was determined based on a per share price of $102.30, which was the closing price of the Company’s common stock on July 26, 2019, the last trading day before the acquisition closed the morning of July 29, 2019. This includes a nominal amount of cash paid in lieu of fractional shares.

(2)Represents the portion of the fair value of the replacement awards related to services provided prior to the acquisition. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period. See Note 16 for additional information.

The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is deductible for tax purposes. Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency.

The assets acquired and liabilities assumed of First Data have been measured at estimated fair value as of the acquisition date. In 2020, through the measurement period ended July 29, 2020, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. These measurement period adjustments resulted in an increase to goodwill of $304 million. The offsetting amounts to the change in goodwill were primarily related to customer relationship intangible assets, noncontrolling interests, property and equipment, payables and accrued expenses including legal contingency reserves, and deferred income taxes. The Company recorded a measurement period adjustment of $155 million to reduce the fair value of customer relationship intangible assets as a result of refinements to attrition rates. A measurement period adjustment of $126 million was recorded to reduce the fair value of noncontrolling interests based on changes to the fair value of the underlying customer relationship intangible assets and the incorporation of additional facts and circumstances that existed as of the acquisition date. A measurement period adjustment of $25 million was recorded to reduce the fair value of property and equipment to the estimated fair value of certain real property acquired. Measurement period adjustments were recorded to increase payables and accrued expenses by $37 million, reduce investments in unconsolidated affiliates by $23 million, and increase other long-term liabilities by $21 million. The remaining $169 million of adjustments were primarily comprised of deferred tax adjustments related to the measurement period adjustments. Such measurement period adjustments did not have a material impact on the consolidated statements of income. The allocation of purchase price recorded for First Data was finalized in the third quarter of 2020 as follows:



(In millions)
Assets acquired (1)
Cash and cash equivalents	$	310
Trade accounts receivable	1,747
Prepaid expenses and other current assets	1,047
Settlement assets (2)	10,398
Property and equipment	1,156
Customer relationships	13,458
Other intangible assets	2,814
Goodwill	30,811
Investments in unconsolidated affiliates	2,676
Other long-term assets	1,191
Total assets acquired	$	65,608

Liabilities assumed (1)
Accounts payable and accrued expenses	$	1,613
Short-term and current maturities of long-term debt (3)	243
Contract liabilities	71
Settlement obligations	10,398
Deferred income taxes	3,671
Long-term contract liabilities	16
Long-term debt and other long-term liabilities (4)	1,261
Total liabilities assumed	$	17,273

Net assets acquired	$	48,335
Redeemable noncontrolling interests	252
Noncontrolling interests	1,608
Total purchase price	$	46,475

(1)In connection with the acquisition of First Data, the Company acquired two businesses which it intended to sell and subsequently sold in October 2019. Therefore, such businesses were classified as held for sale and were included within prepaid expenses and other current assets and accounts payable and accrued expenses in the above allocation of purchase price (see Note 5).

(2)Includes $922 million of settlement cash and cash equivalents (see Note 1).

(3)Includes foreign lines of credit, current portion of finance lease obligations and other financing obligations (see Note 12).

(4)Includes the receivable securitized loan and the long-term portion of finance lease obligations (see Note 12).

The fair values of the assets acquired and liabilities assumed were determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that are judgmental. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. Intangible assets consisting of customer relationships, technology and trade names were valued using the multi-period excess earnings method (“MEEM”), or the relief from royalty (“RFR”) method, both are forms of the income approach. A cost and market approach was applied, as appropriate, for property and equipment, including land.

Customer relationship intangible assets were valued using the MEEM method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors.
Technology and trade name intangible assets were valued using the RFR method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue attributable to the asset, applicable tax rate,

royalty rate, and other factors such as technology related obsolescence rates), the discount rate, reflecting the risks inherent in the future cash flow stream, and the tax amortization benefit, among other factors.

The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.
The market approach, which estimates value by leveraging comparable land sale data/listings and qualitatively comparing them to the in-scope properties, was used to value the land.
An income approach was applied to derive fair value for both consolidated investments with a noncontrolling interest and equity method investments accounted for under the equity method of accounting. The significant assumptions used include the estimated annual cash flows, the discount rate, the long-term growth rate, and operating margin, among other factors.

The Company believes that the information provided a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities.

The amounts allocated to intangible assets were as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	13,458	15 years
Acquired software and technology	2,324		7 years
Trade names	490		9 years
Total	$	16,272	14 years

The financial results of First Data are included in the consolidated results of the Company from July 29, 2019, the date of acquisition. For the year ended December 31, 2019, the results of operations for First Data, included within the accompanying consolidated statement of income, consisted of $4.1 billion of revenue and $1.0 billion of operating income.

The Company incurred transaction expenses of approximately $175 million for the year ended December 31, 2019. Approximately $77 million of these expenses were included in selling, general and administrative expenses and $98 million were included in debt financing activities within the Company’s consolidated statement of income for the year ended December 31, 2019.

The following unaudited supplemental pro forma combined financial information presents the Company’s results of operations for the year ended December 31, 2019 as if the acquisition of First Data had occurred on January 1, 2018. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the Company’s operating results that may have actually occurred had the acquisition of First Data been completed on January 1, 2018. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of First Data.



(In millions, except for per share data)	2019
Total revenue	$	15,775
Net income	1,520
Net income attributable to Fiserv, Inc.	1,457
Net income per share attributable to Fiserv, Inc.:
Basic	$	2.14
Diluted	$	2.10

The unaudited pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisition had occurred on January 1, 2018 to give effect to certain events the Company believes to be directly attributable to the acquisition. These pro forma adjustments primarily include:

a net increase in amortization expense that would have been recognized due to acquired intangible assets;
an adjustment to interest expense to reflect (i) the additional borrowings of the Company in conjunction with the acquisition and (ii) the repayment of First Data’s historical debt in conjunction with the acquisition;
a reduction in expenses for the year ended December 31, 2019 and a corresponding increase in the year ended December 31, 2018 for acquisition-related transaction costs and other one-time costs directly attributable to the acquisition;
a reduction in operating revenues due to the elimination of deferred revenues assigned no value at the acquisition date;
an adjustment to stock compensation expense to reflect the cost of the replacement awards as if they had been issued on January 1, 2018; and
the related income tax effects of the adjustments noted above.

Other Acquisitions

On November 15, 2021, the Company acquired a remaining ownership interest in NetPay Solutions Group (“NetPay”), a multi-channel payment service provider offering a range of capabilities around onboarding, customer lifecycle, risk management and settlement to businesses of all sizes. The Company previously held a 40% noncontrolling interest in NetPay, which was accounted for under the equity method and approximated acquisition date fair value. NetPay is included within the Acceptance segment and further expands the Company’s merchant services business. On October 1, 2021, the Company acquired Integrity Payments, LLC (“AIP”), an independent sales organization that promotes payment processing services for merchants, which is included within the Acceptance segment. On June 14, 2021, the Company acquired Spend Labs Inc. (“SpendLabs”), a mobile-native, cloud-based software provider of commercial card payment solutions. SpendLabs is included within the Payments segment and further expands the Company’s digital capabilities across mobile and desktop devices for small and mid-sized businesses. On March 1, 2021, the Company acquired Radius8, Inc. (“Radius8”), a provider of a platform that uses consumer location and other information to drive incremental merchant transactions. Radius8 is included within the Acceptance segment and enhances the Company’s ability to help merchants increase sales, expand mobile application registration and improve one-to-one target marketing. The Company acquired these businesses for an aggregate purchase price of approximately $87 million, net of the fair value of the Company’s previously held non-controlling interest in NetPay of $14 million and including earn-out provisions estimated at a fair value of $4 million (see Note 10). The allocation of purchase price for these acquisitions resulted in the recognition of identifiable intangible assets totaling $47 million, goodwill of $62 million and net assumed liabilities of $8 million. The purchase price allocation for the Radius8 acquisition was finalized in the third quarter of 2021 and for SpendLabs in the fourth quarter of 2021. The allocation of the purchase price for the NetPay and AIP acquisitions are preliminary and subject to further adjustment, pending additional refinement and final completion of valuations. Measurement period adjustments did not have a material impact on the consolidated statements of income. Goodwill, of which $14 million is expected to be deductible for tax purposes, is primarily attributed to synergies, the anticipated value created by advancing digital capabilities to the Company’s clients, and selling the Company’s products and services to the acquired businesses’ existing client base.

The amounts allocated to intangible assets were as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Acquired software and technology	$	31	6 years
Customer relationships	9		10 years
Residual buyouts	7		5 years
Total	$	47	7 years

On March 2, 2020, the Company acquired MerchantPro Express LLC (“MerchantPro”), an independent sales organization that provides processing services, point-of-sale equipment and merchant cash advances to businesses across the U.S. MerchantPro is included within the Acceptance segment and further expands the Company’s merchant services business. On March 18, 2020, the Company acquired Bypass Mobile, LLC (“Bypass”), an independent software vendor and innovator in enterprise point-of-sale systems for sports and entertainment venues, food service management providers and national restaurant chains. Bypass is included within the Acceptance segment and further enhances the Company’s ability to help businesses deliver seamless physical and digital customer experiences. On May 11, 2020, the Company acquired Inlet, LLC (“Inlet”), a provider of secure digital delivery solutions for enterprise and middle-market biller invoices and statements. Inlet is included within the Payments segment and further enhances the Company’s digital bill payment strategy. The Company acquired these businesses for an aggregate purchase price of $167 million, net of $2 million of acquired cash, and including earn-out provisions estimated at a fair value of $45 million (see Note 10). The purchase price allocations for these acquisitions resulted in the recognition of identifiable intangible assets totaling $81 million, goodwill of $90 million, and net assumed liabilities of $4 million. The purchase price allocation for the MerchantPro acquisition was finalized in the third quarter of 2020, and for the Bypass and Inlet acquisitions in the fourth quarter of 2020. The goodwill recognized from these transactions, of which $36 million is

deductible for tax purposes, is primarily attributed to synergies and the anticipated value created by selling the Company’s products and services to the acquired businesses’ existing client base.

The amounts allocated to intangible assets were as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	32	14 years
Residual buyouts	35		9 years
Acquired software and technology	14		8 years
Total	$	81	11 years

The results of operations for these acquired businesses have been included in the consolidated results of the Company from the respective dates of acquisition. Pro forma information for these acquisitions is not provided because they did not have a material effect on the Company’s consolidated results of operations.

In February 2022, the Company entered into a definitive agreement to acquire the remaining ownership interest in Finxact, Inc. (“Finxact”), a developer of cloud-native banking solutions powering digital transformation throughout the financial services sector, for approximately $650 million. The Company expects the acquisition to close in 2022, subject to customary approvals and closing conditions. Upon closing of the acquisition, Finxact will be included in the Fintech segment. The Company expects to recognize a gain on the remeasurement of its previously held equity interest to its fair value at the acquisition date.

Dispositions

Effective July 1, 2020, the Company and Bank of America (“BANA”) dissolved the Banc of America Merchant Services joint venture (“BAMS” or the “joint venture”), of which the Company maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The remaining activities of the joint venture consist primarily of an orderly wind down of remaining BAMS assets and liabilities. Pursuant to the separation agreement, the joint venture retains the responsibility for certain contingencies that may arise from pre-dissolution activities, including certain legal claims and contingencies. The Company may be obligated to fund a proportionate share of any such losses as incurred.

The transfer of value to BANA was accounted for at fair value as a non pro rata distribution of nonmonetary assets, resulting in the recognition of a pre-tax gain of $36 million, with a related tax expense of $13 million. The pre-tax gain included the revaluation of client contracts allocated to BANA to a fair value of $700 million, as well as an estimated $24 million for certain additional consideration due from the Company to BANA in connection with the dissolution. The pre-tax net gain was recorded within gain on sale of businesses and the tax expense was recorded within the income tax provision in the consolidated statement of income. Noncontrolling interests of the Company were reduced by $726 million and the Company’s additional paid-in capital was reduced by $36 million to account for the wind down of the joint venture and the transfer of a proportionate share of the joint venture’s fair value to BANA. The transfer of value to the Company was accounted for at carryover basis as the Company maintains control of such assets. The business transferred to the Company continues to be operated and managed within the Company’s Acceptance segment.

The fair value of the client contracts upon dissolution of the joint venture was determined using the MEEM method, a form of the income approach. The determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that were judgmental in nature. The fair value measurements were primarily based on significant inputs that were not observable in the market and thus represented a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. The significant assumptions used included the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors.

The Company continues to provide merchant processing and related services to former BAMS clients allocated to BANA, at BAMS pricing, through June 2023. The Company also provides processing and other support services to new BANA merchant clients pursuant to a five-year non-exclusive agreement which, after June 2023, will also apply to the former BAMS clients allocated to BANA. In addition, both the Company and BANA are entitled to certain transition services, at fair value, from each other through June 2023.

On February 18, 2020, the Company sold a 60% controlling interest of its Investment Services business, subsequently renamed as Tegra118, LLC (“Tegra118”). The Company received pre-tax proceeds of $578 million, net of related expenses, resulting in

a pre-tax gain on the sale of $428 million, with the related tax expense of $112 million recorded through the income tax provision, in the consolidated statement of income for the year ended December 31, 2020. The pre-tax gain included $176 million related to the remeasurement of the Company’s 40% retained interest based upon the enterprise value of the business. The revenues, expenses and cash flows of the Investment Services business were consolidated into the Company’s financial results through the date of the sale transaction, and are reported within Corporate and Other (see Note 21). In conjunction with the sale transaction, the Company also entered into transition services agreements to provide, at fair value, various administration, business process outsourcing, technical and data center related services for defined periods to Tegra118.

On February 2, 2021, Tegra118 completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined new entity, Wealthtech Holdings, LLC, which was subsequently renamed as InvestCloud Holdings, LLC (“InvestCloud”). In connection with the transaction, the Company made an additional capital contribution of $200 million into the combined entity and recognized a pre-tax gain of $28 million within income from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $6 million recorded through the income tax provision, during the year ended December 31, 2021. On June 30, 2021, the Company sold its entire ownership interest in InvestCloud for $466 million, resulting in a pre-tax gain of $33 million recorded within income from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $8 million recorded through the income tax provision, during the year ended December 31, 2021. The Company will continue to provide various technical and data center related services under the terms of a pre-existing transition services agreement with InvestCloud, as described above.

5. Discontinued Operations

In connection with the acquisition of First Data, the Company acquired two businesses, which it intended to sell. In October 2019, the Company completed the sales, at acquired fair value, of these two businesses for aggregate proceeds of $133 million. The sale proceeds are presented within discontinued operations in the consolidated statement of cash flows since the businesses were never considered part of the Company’s ongoing operations. The financial results of these businesses from the date of acquisition were not significant.

6. Settlement Assets and Obligations

Settlement assets and obligations represent intermediary balances arising from the settlement process which involves the transferring of funds between card issuers, payment networks, merchants and consumers, and collateral amounts held to manage merchant credit risk. The Company records settlement assets and obligations upon processing a payment transaction. Settlement assets represent amounts receivable from agents, bank partners, merchants and from payment networks for submitted merchant transactions, and funds received by the Company in advance of paying to merchants or payees. Settlement obligations represent the unpaid amounts that are due to merchants or payees for their payment transactions and collateral deposits.

The principal components of the Company’s settlement assets and obligations were as follows at December 31:



(In millions)	2021		2020
Settlement assets
Cash and cash equivalents	$	2,361	$	1,650
Receivables	11,291		9,871
Total settlement assets	$	13,652	$	11,521
Settlement obligations
Payment instruments outstanding	$	460	$	483
Card settlements and collateral deposits due to merchants	13,192		11,038
Total settlement obligations	$	13,652	$	11,521

The changes in settlement cash and cash equivalents are presented in settlement activity, net within financing activities in the consolidated statements of cash flows.

7. Intangible Assets

Identifiable intangible assets consisted of the following at December 31:



(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
2021
Customer relationships	$	15,103	$	5,112	$	9,991
Acquired software and technology	2,522		901		1,621
Trade names	612		228		384
Purchased software	1,133		479		654
Capitalized software and other intangibles	1,879		520		1,359
Total	$	21,249	$	7,240	$	14,009

(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
2020
Customer relationships	$	15,271	$	3,668	$	11,603
Acquired software and technology	2,562		879		1,683
Trade names	618		172		446
Purchased software	913		207		706
Capitalized software and other intangibles	1,332		412		920
Total	$	20,696	$	5,338	$	15,358

Gross software development costs capitalized for new products and enhancements to existing products totaled $613 million, $462 million and $339 million in 2021, 2020 and 2019, respectively.

Amortization expense associated with the above identifiable intangible assets was as follows for the years ended December 31:



(In millions)	2021		2020		2019
Amortization expense	$	2,548	$	2,563	$	1,299

Amortization expense during the year ended December 31, 2020 includes $56 million of accelerated amortization associated with the termination of certain vendor contracts (see Note 17).

The Company estimates that annual amortization expense with respect to intangible assets recorded at December 31, 2021 will be as follows:



(In millions)
Year Ending December 31,
2022	$	2,466
2023	2,216
2024	1,780
2025	1,531
2026	1,247
Thereafter	4,769
Total	$	14,009

8. Goodwill

The following table presents changes in goodwill during 2021 and 2020.



	Reportable Segments
(In millions)	Acceptance		Fintech		Payments		Total
Goodwill - December 31, 2019	$	21,189	$	2,104	$	12,745	$	36,038
Acquisitions and valuation adjustments	332		—		62		394


Foreign currency translation	(113)		4		(1)		(110)
Goodwill - December 31, 2020	21,408		2,108		12,806		36,322
Acquisitions and valuation adjustments	321		—		197		518

Transfers(1)	—		(67)		67		—
Foreign currency translation	(347)		(2)		(58)		(407)
Goodwill - December 31, 2021	$	21,382	$	2,039	$	13,012	$	36,433

(1)Relates to the migration of a line of business from the Fintech segment to the Payments segment. This migration did not have a material impact on the results of operations of the affected reportable segments.

9. Investments in Unconsolidated Affiliates

The Company maintains investments in various affiliates that are accounted for as equity method investments, the most significant of which are related to the Company’s merchant alliances. The Company’s share of net income or loss from these investments is reported within income from investments in unconsolidated affiliates and the related tax expense or benefit is reported within the income tax provision in the consolidated statements of income.

Merchant Alliances

The Company maintains ownership interests of significant influence in various merchant alliances. A merchant alliance is an agreement between the Company and a financial institution that combines the processing capabilities and management expertise of the Company with the visibility and distribution channel of the financial institution. A merchant alliance acquires credit and debit card transactions from merchants. The Company provides processing and other services to the alliance and charges fees to the alliance primarily based on contractual pricing (see Note 20). The Company’s investment in its merchant alliances was $2.3 billion and $2.4 billion at December 31, 2021 and 2020, respectively, and is reported within investments in unconsolidated affiliates in the consolidated balance sheets.

Other Equity Method Investments

Following the sale of a controlling financial interest of the Investment Services business during the first quarter of 2020 (see Note 4), the Company’s remaining ownership interest in the business, subsequently renamed as InvestCloud, was accounted for as an equity method investment prior to the sale of the Company’s entire remaining ownership interest during the second quarter of 2021. The Company also maintains a 45% ownership interest in Sagent M&C, LLC and a 31% ownership interest in defi SOLUTIONS Group, LLC (collectively, the “Lending Joint Ventures”), which are accounted for as equity method investments. The Company’s aggregate investment in these entities was $25 million and $212 million at December 31, 2021 and 2020, respectively, and is reported within investments in unconsolidated affiliates in the consolidated balance sheets. In addition, the Company maintains other strategic investments accounted for under the equity method of accounting. The Company's aggregate investment in such entities was $266 million and $192 million at December 31, 2021 and 2020, respectively, and is reported within investments in unconsolidated affiliates in the consolidated balance sheets.

The Lending Joint Ventures maintain variable-rate term loan facilities with aggregate outstanding borrowings of $365 million in senior unsecured debt and variable-rate revolving credit facilities with an aggregate borrowing capacity of $45 million with a syndicate of banks, which mature in March 2023. Outstanding borrowings on the revolving credit facilities at December 31, 2021 were $16 million. The Company has guaranteed this debt of the Lending Joint Ventures and does not anticipate that the Lending Joint Ventures will fail to fulfill their debt obligations. See Note 10 for additional information regarding the Company’s debt guarantee arrangements with the Lending Joint Ventures.

In August 2019, the Company’s Sagent Auto, LLC joint venture completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined entity, defi SOLUTIONS Group, LLC. The Company recognized a pre-tax gain of $14 million within income from investments in unconsolidated affiliates, with the related tax expense of $3 million recorded through the income tax provision, in the consolidated statement of income for the year ended December 31, 2019, reflecting the Company’s 31% ownership interest.

The Company classifies distributions from its investments accounted for using the equity method in the consolidated statements of cash flows using the cumulative earnings approach. Under this approach, distributions received from unconsolidated affiliates are classified as cash flows from operating activities to the extent that the cumulative distributions do not exceed the cumulative earnings on the investment. To the extent the current period distribution exceeds the cumulative earnings on the investment, the distribution is considered a return of investment and is classified as cash flows from investing activities. The Company received cash distributions from unconsolidated affiliates of $149 million, $151 million and $136 million, of which $115 million, $109 million and $113 million were recorded as cash flows from investing activities in the Company’s consolidated statements of cash flows during 2021, 2020 and 2019, respectively.

The Company also maintains investments, of which it does not have significant influence, in various equity securities without a readily determinable fair value. Such investments totaled $113 million and $160 million at December 31, 2021 and 2020, respectively, and are included within other long-term assets in the consolidated balance sheets. The Company reviews these investments each reporting period to determine whether an impairment or observable price change for the investment has occurred. To the extent such events or changes occur, the Company evaluates the fair value compared to its cost basis in the investment. Gains or losses from a sale of these investments or a change in fair value are included within other income (expense) in the consolidated statements of income for the period. During the year ended December 31, 2021, the Company remeasured its equity interest in Ondot to fair value upon the acquisition of the remaining ownership interest, resulting in the recognition of a pre-tax gain of $12 million (see Note 4). Other adjustments made to the values recorded for certain equity securities and gains and losses from sales of equity securities during 2021, 2020 and 2019 were not significant.

10. Fair Value Measurements

The fair values of cash equivalents, trade accounts receivable, settlement assets and obligations, accounts payable, and client deposits approximate their respective carrying values due to the short period of time to maturity. The Company’s derivative instruments are measured on a recurring basis based on foreign currency spot rates and forwards quoted by banks and foreign currency dealers and are marked-to-market each period (see Note 14). Contingent consideration related to certain of the Company’s acquisitions (see Note 4) is estimated based on the present value of a probability-weighted assessment approach derived from the likelihood of achieving the earn-out criteria. The fair value of the Company’s contingent liability for current expected credit losses associated with its debt guarantees, as further described below, is estimated based on assumptions of future risk of default and the corresponding level of credit losses at the time of default.

Assets and liabilities measured at fair value on a recurring basis consisted of the following at December 31:



			Fair Value
(In millions)	Classification	Fair Value Hierarchy	2021		2020
Assets
Cash flow hedges	Prepaid expenses and other current assets	Level 2	$	6	$	9

Liabilities
Contingent consideration	Accounts payable and accrued expenses	Level 3	$	2	$	46
Contingent consideration	Other long-term liabilities	Level 3	32		—
Contingent debt guarantee	Accounts payable and accrued expenses	Level 3	4		—
Contingent debt guarantee	Other long-term liabilities	Level 3	—		8

The Company’s senior notes are recorded at amortized cost, but measured at fair value for disclosure purposes. The estimated fair value of senior notes was based on matrix pricing which considers readily observable inputs of comparable securities (Level 2 of the fair value hierarchy). The carrying value of the Company’s foreign lines of credit, debt associated with the receivables securitization agreement, term loan credit agreement, commercial paper notes and revolving credit facility borrowings approximates fair value as these instruments have variable interest rates and the Company has not experienced any change to its credit ratings (Level 2 of the fair value hierarchy). The estimated fair value of total debt, excluding finance leases and other financing obligations, was $21.8 billion and $22.5 billion at December 31, 2021 and 2020, respectively, and the carrying value was $20.4 billion and $19.9 billion at December 31, 2021 and 2020, respectively.

The Company maintains a liability for its non-contingent obligations to perform over the term of its debt guarantee arrangements with the Lending Joint Ventures (see Note 9), which is reported within accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets at December 31, 2021 and 2020, respectively. The non-contingent component of the Company’s debt guarantee arrangements is recorded at amortized cost but measured at fair value for disclosure purposes. The carrying value of the Company’s non-contingent liability of $10 million and $18 million approximates the fair value at December 31, 2021 and 2020, respectively (Level 3 of the fair value hierarchy). Such guarantees will be amortized in future periods over the contractual term which ends in March 2023. In addition, the Company has recorded, in conjunction with the adoption of CECL, a contingent liability ($4 million and $8 million as reported within accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets at December 31, 2021 and 2020, respectively), representing the current expected credit losses to which the Company is exposed. This contingent liability is estimated based on certain financial metrics of the Lending Joint Ventures and historical industry data, which is used to develop assumptions of the likelihood the guaranteed parties will default and the level of credit losses in the event a default occurs (Level 3 of the fair value hierarchy). The Company recognized $12 million, $13 million and $7 million during the years ended December 31, 2021, 2020 and 2019, respectively, within other income (expense) in its consolidated statements of income related to its release from risk under the non-contingent guarantees as well as a change in the provision of estimated credit losses associated with the indebtedness of the Lending Joint Ventures. The Company has not made any payments under the guarantees, nor has it been called upon to do so.

In addition, certain of the Company’s non-financial assets are measured at fair value on a non-recurring basis, including property and equipment, lease ROU assets, equity securities without a readily determinable fair value, goodwill and other intangible assets, and are subject to fair value adjustment in certain circumstances. Additional information about fair value adjustments recorded on a non-recurring basis during the years ended December 31, 2021, 2020 and 2019 is included in Note 17 to the consolidated financial statements.

11. Leases

Company as Lessee

The Company primarily leases office space, data centers and equipment from third parties. The Company determines if a contract is a lease at inception. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term begins on the commencement date, which is the date the Company takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Many of the Company’s leases contain renewal options for varying periods, which can be exercised at the Company’s sole discretion. Leases are classified as operating or finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. Certain leases include options to purchase the leased asset at the end of the lease term, which is assessed as a part of the Company’s lease classification determination. The Company’s leases have remaining lease terms ranging from one month to 22 years.

The Company uses the right-of-use model to account for its leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. ROU assets are based on the lease liability and are increased by prepaid lease payments and decreased by lease incentives received. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the ROU assets and lease liabilities to the extent they are variable in nature. These variable lease costs are recognized as variable lease expenses when incurred. As a practical expedient, lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes. The Company estimates contingent lease incentives when it is probable that the Company is entitled to the incentive at lease commencement. The Company elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets; instead, lease payments are recognized as lease expense on a straight-line basis over the lease term. The depreciable life of the ROU assets and leasehold improvements are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option. The Company uses its incremental borrowing rate to discount future lease payments in the calculation of the lease liability and ROU asset based on the information available on the commencement date for each lease. The Company’s leases typically do not provide an implicit rate. The determination of the incremental borrowing rate requires judgment and is determined using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization, currency and term to align with the terms of the lease.

Lease Balances



(In millions)
December 31,	2021		2020
Assets
Operating lease assets (1)	$	575	$	504
Finance lease assets (2)	487		267
Total lease assets	$	1,062	$	771

Liabilities
Current:
Operating lease liabilities (1)	$	122	$	125
Finance lease liabilities (2)	130		104
Noncurrent:
Operating lease liabilities (1)	615		471
Finance lease liabilities (2)	313		271
Total lease liabilities	$	1,180	$	971

(1)Operating lease assets are included within other long-term assets, and operating lease liabilities are included within accounts payable and accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the consolidated balance sheets.

(2)Finance lease assets are included within property and equipment, net and finance lease liabilities are included within short-term and current maturities of long-term debt (current portion) and long-term debt (noncurrent portion) in the consolidated balance sheets.

Components of Lease Cost



(In millions)
Year Ended December 31,	2021		2020		2019
Operating lease cost (1)	$	162	$	198	$	207
Finance lease cost: (2)
Amortization of right-of-use assets	122		150		40
Interest on lease liabilities	23		21		8
Total lease cost	$	307	$	369	$	255

(1)Operating lease expense is included within cost of processing and services, cost of product and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, in the consolidated statements of income. Operating lease expense includes approximately $39 million, $50 million and $56 million of variable lease costs for the years ended December 31, 2021, 2020 and 2019, respectively.

(2)Finance lease expense is recorded as depreciation and amortization expense within cost of processing and services, cost of product and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, and interest expense, net in the consolidated statements of income. Finance lease expense includes $62 million of accelerated amortization associated with the termination of certain vendor contracts during the year ended December 31, 2020 (see Note 17).

Supplemental Cash Flow Information



(In millions)
Year Ended December 31,	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	153	$	155	$	139
Operating cash flows from finance leases	23		21		8
Financing cash flows from finance leases	161		187		37

Right-of-use assets obtained in exchange for lease liabilities: (1)
Operating leases	$	197	$	46	$	441
Finance leases	231		399		288

(1)Amounts in 2019 include the right-of-use assets and lease liabilities obtained through the acquisition of First Data.

Lease Term and Discount Rate



December 31,	2021		2020
Weighted-average remaining lease term:
Operating leases	10 years		6 years
Finance leases	3 years		4 years
Weighted-average discount rate:
Operating leases	2.7	%	2.9	%
Finance leases	2.7	%	3.5	%

Maturity of Lease Liabilities

Future minimum rental payments on leases with initial non-cancellable lease terms in excess of one year were due as follows at December 31, 2021:



(In millions)
Year Ending December 31,	Operating Leases (1)		Finance Leases
2022	$	125	$	138
2023	112		146
2024	101		127
2025	82		45
2026	74		14
Thereafter	351		—
Total lease payments	845		470
Less: Interest	(108)		(27)
Present value of lease liabilities	$	737	$	443

(1)Operating lease payments include $6 million related to options to extend lease terms that are reasonably certain of being exercised.

Company as Lessor

The Company owns certain point-of-sale (“POS”) terminal equipment which it leases to merchants. Leases are classified as operating or sales-type leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. The terms of the leases typically range from one month to five years. For operating leases, the minimum lease payments received are recognized as lease income on a straight-line basis over the lease term and the leased asset is included in property and equipment, net in the consolidated balance sheets and depreciated over its estimated useful life. For sales-type leases, selling profit is recognized at the commencement date of the lease to the extent the fair value of the underlying asset is different from its carrying amount. Selling profit is directly impacted by the Company’s estimate of the amount to be derived from the residual value of the asset at the end of the lease term. The residual value of the asset is computed using various assumptions, including the expected value of the underlying asset at the end of the lease term. Unearned income is recognized as interest income over the lease term. For sales-type leases, the Company derecognizes the carrying amount of the underlying leased asset and recognizes a net investment in the leased asset in the consolidated balance sheets. The net investment in a leased asset is computed based on the present value of the minimum lease payments not yet received and the present value of the residual value of the asset.

Components of Lease Income



(In millions)
Year Ended December 31,	2021		2020		2019
Sales-type leases:
Selling profit (1)	$	61	$	48	$	20
Interest income (1)	85		76		33
Operating lease income (2)	297		257		36

(1)Selling profit includes $141 million, $106 million and $48 million recorded within product revenue with a corresponding charge of $80 million, $58 million and $28 million recorded in cost of product in the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019, respectively. Interest income is included within product revenue in the consolidated statements of income.

(2)Operating lease income includes a nominal amount of variable lease income and is included within product revenue in the consolidated statements of income for each of the years ended December 31, 2021, 2020 and 2019.

Components of Net Investment in Sales-Type Leases



(In millions)
December 31,	2021		2020
Minimum lease payments	$	395	$	355
Residual values	23		23
Less: Unearned interest income	(157)		(141)
Net investment in leases (1)	$	261	$	237

(1)Net investments in leased assets are included within prepaid expenses and other current assets (current portion) and other long-term assets (noncurrent portion) in the consolidated balance sheets.

Maturities of Future Minimum Lease Payment Receivables

Future minimum lease payments receivable on sales-type leases were as follows at December 31, 2021:



(In millions)
Year Ending December 31,	Sales-Type Leases
2022	$	164
2023	120
2024	76
2025	32
2026	3
Thereafter	—
Total minimum lease payments	$	395

Lease Payment Receivables Portfolio

The Company accounts for lease payment receivables in connection with POS terminal equipment as a single portfolio. The Company recognizes an allowance for expected credit losses on lease payment receivables at the commencement date of the lease by considering the term, geography and internal credit risk ratings of such lease. The internal credit risk ratings are established based on lessee specific risk factors, such as FICO score, number of years the lessee has been in business and the nature of the lessee’s industry, which are considered indicators of the likelihood a lessee may default in the future. The allowance for estimated credit losses on lease payment receivables was $56 million and $64 million at December 31, 2021 and 2020, respectively.

The Company determines delinquency status on lease payment receivables based on the number of calendar days past due. The Company considers lease payments that are 90 days or less past due as performing. Lease payments that are greater than 90 days past due are placed on non-accrual status in which interest income is no longer recognized. Lease payment receivables are fully written off in the period they become delinquent greater than 180 days past due. The amortized cost balance of net investment in leases at December 31, 2021 and 2020, was $261 million and $237 million, respectively. Lease payment receivables that were determined to be on non-accrual status were nominal at each of December 31, 2021 and 2020.

12. Debt

The Company’s debt consisted of the following at December 31:



(In millions)	2021		2020
Short-term and current maturities of long-term debt:
Foreign lines of credit	$	240	$	144
Finance lease and other financing obligations	268		240
Total short-term and current maturities of long-term debt	$	508	$	384

Long-term debt:

4.750% senior notes due June 2021	$	—	$	400
3.500% senior notes due October 2022	700		700
0.375% senior notes due July 2023 (Euro-denominated)	566		612
3.800% senior notes due October 2023	1,000		1,000
2.750% senior notes due July 2024	2,000		2,000
3.850% senior notes due June 2025	900		900
2.250% senior notes due July 2025 (British Pound-denominated)	705		709
3.200% senior notes due July 2026	2,000		2,000
2.250% senior notes due June 2027	1,000		1,000
1.125% senior notes due July 2027 (Euro-denominated)	566		612
4.200% senior notes due October 2028	1,000		1,000
3.500% senior notes due July 2029	3,000		3,000
2.650% senior notes due June 2030	1,000		1,000
1.625% senior notes due July 2030 (Euro-denominated)	566		612
3.000% senior notes due July 2031 (British Pound-denominated)	705		709
4.400% senior notes due July 2049	2,000		2,000
U.S. commercial paper notes	916		—
Euro commercial paper notes	905		—
Revolving credit facility	97		22
Receivable securitized loan	500		425
Term loan facility	200		1,250
Unamortized discount and deferred financing costs	(125)		(155)
Finance lease and other financing obligations	528		504
Total long-term debt	$	20,729	$	20,300

Annual maturities of the Company’s total debt were as follows at December 31, 2021:



(In millions)
Year Ending December 31,
2022	$	508
2023	4,923
2024	2,391
2025	1,677
2026	2,027
Thereafter	9,836
Total principal payments	21,362
Unamortized discount and deferred financing costs	(125)
Total debt	$	21,237

Senior Notes

The Company has outstanding $17.7 billion of various fixed-rate senior notes, as described above. The indentures governing the Company’s senior notes contain covenants that, among other matters, limit (i) the Company’s ability to consolidate or merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to, another person, (ii) the Company’s and certain of its subsidiaries’ ability to create or assume liens, and (iii) the Company’s and certain of its subsidiaries’ ability to engage in sale and leaseback transactions. The Company may, at its option, redeem the senior notes, in whole or, from time to time, in part, at any time prior to the applicable maturity date. Interest on the Company’s U.S. dollar-denominated senior notes is paid semi-annually, while interest on its Euro- and British Pound-denominated senior notes is paid annually. The interest rate applicable to certain of the senior notes is subject to an increase of up to two percent in the event that the credit rating assigned to such notes is downgraded below investment grade.

During the year ended December 31, 2021, the Company used a portion of the net proceeds from the 2021 issuance of commercial paper notes, as described below, to repay the outstanding principal balance of $400 million under its 4.75% senior notes that matured in June 2021. At December 31, 2021, the 3.50% senior notes due in October 2022 were classified in the consolidated balance sheet as long-term and within the debt maturity schedule above as maturing in September 2023, the date that the Company’s revolving credit facility expires, as the Company has the intent to refinance this debt on a long-term basis and the ability to do so under its revolving credit facility.

Commercial Paper

The Company initiated an unsecured U.S. dollar commercial paper program (“USCP”) in May 2021 and an unsecured Euro commercial paper program (“ECP”) in November 2021. From time to time, the Company may issue under these programs U.S. dollar commercial paper with maturities of up to 397 days from the date of issuance and Euro commercial paper with maturities of up to 183 days from the date of issuance. Outstanding borrowings under the USCP were $916 million at December 31, 2021, with a weighted average interest rate of 0.295%. Outstanding borrowings under the ECP were $905 million at December 31, 2021, with a weighted average interest rate of (0.420)%. The Company intends to maintain available capacity under its revolving credit facility, as described below, in an amount at least equal to the aggregate outstanding borrowings under its commercial paper programs. Outstanding borrowings under the commercial paper programs are classified in the consolidated balance sheet as long-term and within the debt maturity schedule above as maturing in September 2023, the date that the Company’s revolving credit facility expires, as the Company has the intent to refinance this commercial paper on a long-term basis through the continued issuance of new commercial paper upon maturity, and the Company also has the ability to refinance such commercial paper under its revolving credit facility.

During the year ended December 31, 2021, the Company used the net proceeds from the issuance of commercial paper notes to repay outstanding borrowings under its amended and restated revolving credit facility, to repay its 4.75% senior notes that matured in June 2021, and to pay down outstanding borrowings on its term loan facility.

Revolving Credit Facility

The Company maintains an amended and restated revolving credit facility, which matures in September 2023, with aggregate commitments available for $3.5 billion of total capacity. U.S. dollar borrowings under the amended and restated revolving credit facility bear interest at a variable rate based on LIBOR, typically at the overnight or 1-month rates, or a base rate, plus, in each case, a specified margin based on the Company’s long-term debt rating in effect from time to time. Foreign currency borrowings under the amended and restated revolving credit facility bear interest at a variable rate based on a benchmark applicable to the relevant currency, plus, in each case, a specified margin based on our long-term debt rating in effect from time to time. The variable interest rate on the revolving credit facility borrowings was 1.16% at December 31, 2021. There are no significant commitment fees and no compensating balance requirements. The amended and restated revolving credit facility contains various restrictions and covenants that require the Company, among other things, to (i) limit its consolidated indebtedness as of the end of each fiscal quarter to no more than three and one-half times the Company’s consolidated net earnings before interest, taxes, depreciation, amortization, non-cash charges and expenses and certain other adjustments (“EBITDA”) during the period of four fiscal quarters then ended, subject to certain exceptions, and (ii) maintain EBITDA of at least three times its consolidated interest expense as of the end of each fiscal quarter for the period of four fiscal quarters then ended. The Company was in compliance with all financial debt covenants during 2021.

Foreign Lines of Credit and Other Arrangements

The Company maintains certain short-term lines of credit with foreign banks and alliance partners primarily to fund settlement activity. These arrangements are primarily associated with international operations and are in various functional currencies, the most significant of which is the Argentine peso. The Company had amounts outstanding on these lines of credit totaling $240

million and $144 million at a weighted-average interest rate of 21.01% and 21.98% at December 31, 2021 and 2020, respectively.

Receivable Securitized Loan

The Company maintains a consolidated wholly-owned subsidiary, First Data Receivables, LLC (“FDR”). FDR is a party to certain receivables financing arrangements, including an agreement (“Receivables Financing Agreement”) with certain financial institutions and other persons from time to time party thereto as lenders and group agents, pursuant to which certain wholly-owned subsidiaries of the Company have agreed to transfer and contribute receivables to FDR, and FDR in turn may obtain borrowings from the financial institutions and other lender parties to the Receivables Financing Agreement secured by liens on those receivables. FDR’s assets are not available to satisfy the obligations of any other entities or affiliates of the Company, and FDR’s creditors would be entitled, upon its liquidation, to be satisfied out of FDR’s assets prior to any assets or value in FDR becoming available to the Company. The receivables held by FDR are recorded within trade accounts receivable, net in the Company’s consolidated balance sheets. FDR held $1.0 billion and $811 million in receivables as part of the securitization program at December 31, 2021 and 2020, respectively. FDR utilized the receivables as collateral in borrowings of $500 million and $425 million as of December 31, 2021 and 2020, respectively, at an average interest rate of 0.95% and 1.00%, respectively. Outstanding borrowings bear interest at a variable rate based on one-month LIBOR plus a specified margin. At December 31, 2021, the collateral capacity under the Receivables Financing Agreement was $747 million, and the maximum borrowing capacity was $500 million. The term of the Receivables Financing Agreement is through July 2022. At December 31, 2021, outstanding borrowings under the receivable securitized loan facility were classified in the consolidated balance sheet as long-term and within the debt maturity schedule above as maturing in September 2023, the date that the Company’s revolving credit facility expires, as the Company has the intent to refinance this debt on a long-term basis and the ability to do so under its revolving credit facility.

Term Loan Facility

The Company maintains a term loan credit agreement with a syndicate of financial institutions that was funded in conjunction with the acquisition of First Data in an original principal amount of $5.0 billion. Following various amortization payments and prepayments, the aggregate principal amount outstanding under such agreement was $200 million at December 31, 2021. Borrowings under the term loan facility bear interest at variable rates based on one-month LIBOR or on a base rate, plus, in each case, a specified margin based on the Company’s long-term debt rating in effect from time to time, and will mature in July 2024. The variable interest rate on the term loan facility borrowings was 1.35% at December 31, 2021. A portion of the net proceeds from the Company’s 2021 issuances of commercial paper, as described above, was used to pay down outstanding borrowings under the term loan facility. The term loan credit facility contains affirmative, negative and financial covenants, and events of default, that are substantially the same as those set forth in the Company’s existing amended and restated revolving credit facility, as described above.

Deferred Financing Costs

Deferred financing costs are amortized as a component of interest expense, net over the term of the underlying debt using the effective interest method. Deferred financing costs primarily related to the Company’s senior notes totaled $92 million and $117 million at December 31, 2021 and 2020, respectively, and are reported as a direct reduction of the related debt instrument in the consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facility are reported in other long-term assets in the consolidated balance sheets and totaled $3 million and $5 million at December 31, 2021 and 2020, respectively.

Debt Financing Activities

On January 16, 2019, in connection with the definitive merger agreement to acquire First Data (see Note 4), the Company entered into a bridge facility commitment letter pursuant to which a group of financial institutions committed to provide a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of $17.0 billion for the purpose of funding the repayment of certain indebtedness of First Data and its subsidiaries on the closing date of the acquisition of First Data, making cash payments in lieu of fractional shares as part of the acquisition consideration and paying fees and expenses related to the acquisition, the refinancing and the related transactions. The Company recorded $98 million of expenses, reported within debt financing activities in the consolidated statements of income, related to the bridge term loan facility during the year ended December 31, 2019. The aggregate commitments of $17.0 billion under the bridge facility commitment letter were replaced with a corresponding amount of permanent financing through the term loan credit agreement and issuance of senior notes, as described above, resulting in the termination of the bridge term loan facility effective July 1, 2019.

In June 2019, the Company entered into foreign exchange forward contracts to minimize foreign currency exposure to the Euro and British Pound upon settlement of the proceeds from the foreign currency-denominated senior notes, as described above.

The foreign exchange forward contracts matured on July 1, 2019, concurrent with the closing of the offering of the foreign currency-denominated senior notes. The Company realized foreign currency transaction gains of $3 million, reported within debt financing activities in the consolidated statement of income during the year ended December 31, 2019, from these foreign exchange forward contracts. Further, upon completion of the acquisition of First Data, the Company designated its Euro- and British Pound-denominated senior notes as net investment hedges to hedge a portion of its net investment in certain Euro- and British Pound-denominated subsidiaries (see Note 14). Prior to designating the foreign currency-denominated senior notes as net investment hedges, the Company realized foreign currency transaction gains of $69 million, reported within debt financing activities in the consolidated statement of income during the year ended December 31, 2019, as a result of changes in the U.S. dollar equivalent of the Euro- and British Pound-denominated senior notes due to fluctuations in foreign currency exchange rates. In addition, the Company held a portion of the proceeds from the issuance of these foreign currency-denominated senior notes in Euro- and British Pound-denominated cash and cash equivalents. The Company realized foreign currency transaction losses of $19 million, reported within debt financing activities in the consolidated statement of income during the year ended December 31, 2019, as a result of changes in the U.S. dollar equivalent of the Euro- and British Pound-denominated cash due to fluctuations in foreign currency exchange rates.

13. Redeemable Noncontrolling Interests

The minority partners in two of the Company’s merchant alliance joint ventures maintain redeemable noncontrolling interests which are presented outside of equity and carried at their estimated redemption values. Each minority partner owns 1% of the equity in the respective joint venture; in addition, each minority partner is entitled to a contractually determined share of the respective entity’s income. The agreements contain redemption features whereby interests held by the minority partner are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within the Company’s control. The joint ventures may be terminated by either party for convenience any time after September 1, 2021 and December 31, 2024, respectively. In the event of termination for cause, as a result of a change in control, or for convenience after the predetermined date, the Company may be required to purchase the minority partner membership interests at a price equal to the fair market value of the minority interest through a distribution in the form of cash, certain merchant contracts of the joint venture, or a combination thereof to the minority partner. In conjunction with the termination of the joint venture, the minority partner may also exercise an option to purchase certain additional merchant contracts at fair market value. In September 2021, the Company and a joint venture minority partner mutually agreed to terminate one of the Company’s merchant alliance joint ventures effective March 2022. The redeemable noncontrolling interest was adjusted to reflect the estimated redemption value, with such adjustment recorded within additional paid-in capital in the consolidated statement of equity. The joint venture minority partner has notified the Company of its intent to exercise its option to purchase certain additional merchant contracts of the joint venture. The Company anticipates the recognition of a pre-tax gain of approximately $150 million in the first quarter of 2022 upon termination of the joint venture.

The following table presents a summary of the redeemable noncontrolling interests activity during the years ended December 31:



(In millions)	2021		2020
Balance at beginning of year	$	259	$	262

Distributions paid to redeemable noncontrolling interests	(43)		(42)
Share of income	44		39
Adjustment to estimated redemption value	18		—
Balance at end of year	$	278	$	259

14. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component, net of income taxes, consisted of the following:



	Year Ended December 31, 2021
(In millions)	Cash Flow Hedges		Foreign Currency Translation		Pension Plans		Total
Balance at December 31, 2020	$	(121)	$	(254)	$	(12)	$	(387)
Other comprehensive income (loss) before reclassifications	6		(422)		50		(366)
Amounts reclassified from accumulated other comprehensive loss	8		—		—		8
Net current-period other comprehensive income (loss)	14		(422)		50		(358)
Balance at December 31, 2021	$	(107)	$	(676)	$	38	$	(745)



	Year Ended December 31, 2020
(In millions)	Cash Flow Hedges		Foreign Currency Translation		Pension Plans		Total
Balance at December 31, 2019	$	(141)	$	(33)	$	(6)	$	(180)
Other comprehensive income (loss) before reclassifications	5		(221)		(6)		(222)
Amounts reclassified from accumulated other comprehensive loss	15		—		—		15
Net current-period other comprehensive income (loss)	20		(221)		(6)		(207)


Balance at December 31, 2020	$	(121)	$	(254)	$	(12)	$	(387)

The Company has entered into forward exchange contracts, which have been designated as cash flow hedges, to hedge foreign currency exposure to the Indian Rupee. The notional amount of these derivatives was $341 million and $259 million, and the fair value totaling $6 million and $9 million is reported primarily in prepaid expenses and other current assets in the consolidated balance sheets at December 31, 2021 and 2020, respectively. Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2021, the Company estimates that it will recognize gains of approximately $5 million in cost of processing and services during the next twelve months as foreign exchange forward contracts settle.

The Company previously entered into treasury lock agreements (“Treasury Locks”), designated as cash flow hedges, in the aggregate notional amount of $5.0 billion to manage exposure to fluctuations in benchmark interest rates in anticipation of the issuance of fixed rate debt in connection with the acquisition and refinancing of certain indebtedness of First Data and its subsidiaries. In June 2019, concurrent with the issuance of U.S dollar-denominated senior notes (see Note 12), the Treasury Locks were settled resulting in a payment, included in cash flows from operating activities, of $183 million recorded in accumulated other comprehensive loss, net of income taxes, that will be amortized to earnings over the terms of the originally forecasted interest payments. Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2021, the Company estimates that it will recognize approximately $19 million in interest expense, net during the next twelve months related to settled interest rate hedge contracts.

To reduce exposure to changes in the value of the Company’s net investments in certain of its foreign currency-denominated subsidiaries due to changes in foreign currency exchange rates, the Company uses its foreign currency-denominated debt as an economic hedge of its net investments in such foreign currency-denominated subsidiaries. The Company has designated its Euro- and British Pound-denominated senior notes and Euro commercial paper notes as net investment hedges to hedge a portion of its net investment in certain subsidiaries whose functional currencies are the Euro and the British Pound. Accordingly, foreign currency transaction gains or losses on the qualifying net investment hedge instruments are recorded as foreign currency translation within other comprehensive income (loss) in the consolidated statements of comprehensive income and will remain in accumulated other comprehensive loss in the consolidated balance sheets until the sale or complete liquidation of the underlying foreign subsidiaries. The Company recorded a foreign currency translation gain (loss) of $110

million (net of income tax provision of $36 million), $(151) million and $(62) million in other comprehensive income (loss) from the Euro- and British Pound-denominated senior notes and Euro commercial paper notes during the years ended December 31, 2021, 2020 and 2019, respectively. During the year ended December 31, 2021, the Company recorded a prior period adjustment which resulted in an increase to retained earnings of $71 million to reclassify prior year deferred tax benefits on such foreign currency translation losses from accumulated other comprehensive loss that were not previously recorded in other comprehensive income (loss). Management believes this prior period adjustment was not material to the consolidated financial statements.

15. Employee Benefit Plans

Defined Contribution Plans

The Company and its subsidiaries maintain defined contribution savings plans covering the majority of their employees. Under the plans, eligible participants may elect to contribute a specified percentage of their salaries and the Company makes matching contributions, each subject to certain limitations. The plans provide tax-deferred amounts for each participant, consisting of employee elective contributions, company matching and discretionary company contributions. In response to the COVID-19 pandemic, the Company has taken several actions since the onset of the pandemic to manage discretionary costs, including the reduction or temporary suspension of certain employee-related benefits such as company matching contributions to the plans during 2021 and most of 2020. The Company temporarily suspended company matching contributions during most of 2020 and re-established such contributions effective January 1, 2021, to equal 100% on the first 1% contributed and 25% on the next 4% contributed for eligible participants. Effective January 1, 2022, company matching contributions were increased to 100% on the first 1% contributed and 50% on the next 4% contributed for eligible participants. Expenses for company contributions under these plans totaled $58 million, $38 million, and $65 million and in 2021, 2020 and 2019, respectively.

In connection with the acquisition of First Data (see Note 4), the Company assumed defined contribution savings plans and defined contribution pension plans covering substantially all employees of the former First Data. Effective January 1, 2020, the 401(k) Savings Plan of Fiserv, Inc. (the “Plan”) was amended to freeze the Plan to new participants and contributions and to allow for the merger of the Plan into the surviving Fiserv 401(k) Savings Plan (f/k/a the First Data Corporation Incentive Savings Plan) (“New Fiserv Plan”) for the purpose of providing a single plan covering current and former employees of both companies and their affiliates. Participants in the Plan became eligible to make salary reduction contributions in the New Fiserv Plan effective January 1, 2020. The merger of the Plan into the New Fiserv Plan was completed in the third quarter of 2020.

Defined Benefit Plans

The Company maintains noncontributory defined benefit pension plans covering a portion of its employees in the United Kingdom (“U.K.”), the U.S., Germany and Austria. The majority of these plans are frozen, representing substantially all of the benefit obligations and plan assets, and provide benefits to eligible employees based on an employee’s average final compensation and years of service.

The following table provides a reconciliation of benefit obligations, plan assets and the funded status of these defined benefit plans as of and for the years ended December 31:



	U.K. plan				U.S. and other plans
(In millions)	2021		2020		2021		2020
Change in projected benefit obligations:
Balance at beginning of year	$	(777)	$	(672)	$	(238)	$	(225)


Interest cost	(11)		(14)		(5)		(6)
Settlements	16		—		—		—
Actuarial gain (loss)	15		(93)		9		(18)
Benefits paid	21		30		12		13
Foreign currency translation	—		(28)		1		(2)
Balance at end of year	$	(736)	$	(777)	$	(221)	$	(238)

Change in fair value of plan assets:
Balance at beginning of year	$	974	$	860	$	181	$	167

Actual return on plan assets	47		110		14		22
Company contribution	—		—		—		5
Settlements	(16)		—		—		—
Benefits paid	(21)		(30)		(12)		(13)
Foreign currency translation	(1)		34		—		—
Balance at end of year	$	983	$	974	$	183	$	181

Funded status of the plans	$	247	$	197	$	(38)	$	(57)

The funded status of the defined benefit plans is recognized as an asset or a liability within other long-term assets or within other long-term liabilities in the consolidated balance sheets.

Projected Benefit Obligations

The Company records amounts relating to its defined benefit pension plan obligations and their associated expenses based on calculations which include actuarial assumptions, including the discount rate and the expected rate of return on plan assets. Changes in any of the assumptions and the amortization of differences between the assumptions and actual experience will affect the amount of pension expense in future periods. The Company reviews its actuarial assumptions at least annually and modifies the assumptions based on current rates and trends, as appropriate. The effects of modifications are recognized immediately within the consolidated balance sheets, and are generally amortized to operating income over future periods, with the deferred amount recorded in accumulated other comprehensive loss within the consolidated balance sheets. The Company’s funding policy is to contribute quarterly an amount as recommended by the plans’ independent actuaries. Company contributions under these plans were nominal in 2021 and $5 million in 2020, with future contributions not expected to be significant. The Company employs a building block approach in determining the expected long-term rate of return for plan assets with proper consideration of diversification and re-balancing. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to check for reasonableness and appropriateness.

The weighted-average rate assumptions used in the measurement of the Company’s projected benefit obligations and net periodic benefit expense as of and for the years ended December 31 were as follows:



	Projected Benefit Obligations				Net Periodic Benefit Expense
	2021		2020		2021		2020
Discount rate	1.97	%	1.56	%	1.56	%	1.95	%
Expected long-term return on plan assets	n/a		n/a		2.25	%	2.84	%

The estimated future benefit payments are expected to be as follows:



(In millions)
Year Ending December 31,
2022	$	33
2023	35
2024	36
2025	37
2026	38
2027-2031	205

Plan Assets

The Company’s investment strategy for the U.K. plan is to allocate the assets into two pools: (i) liability-hedging assets whereby the focus is risk management, protection and insurance relative to the liability target invested in, but not limited to, money market funds, debt, U.K. government bonds and U.K. government index-linked bonds; and (ii) return-seeking assets whereby the focus is on return generation and taking risk in a controlled manner. Such assets could include equities, government bonds, high-yield bonds, property, commodities or hedge funds. The Company’s target allocation for the U.K. plan based on the investment policy at December 31, 2021 was 20% return-seeking assets and 80% liability-hedging assets. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies. The Company’s investment strategy for the U.S. plan employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio contains a diversified blend of equity and fixed-income investments. The Company sets an allocation mix necessary to support the underlying plan liabilities as influenced significantly by the demographics of the participants and the frozen nature of the plan. The Company’s target allocation for the U.S. plan based on the investment policy at December 31, 2021 was 39% return-seeking assets and 61% liability-hedging assets.

The following table sets forth the Company’s plan assets carried and measured at fair value on a recurring basis at December 31:



(In millions)
2021	Level 1		Level 2		Level 3
Cash and cash equivalents (1)	$	230	$	—	$	—
Equity securities (2)	10		93		—
Fixed income securities (3)	202		105		—
Other investments (4)	361		7		—
Total investments at fair value	$	803	$	205	$	—



(In millions)
2020	Level 1		Level 2		Level 3
Cash and cash equivalents (1)	$	24	$	—	$	—
Equity securities (2)	20		175		—
Fixed income securities (3)	213		165		—
Other investments (4)	326		(4)		9
Total investments at fair value	$	583	$	336	$	9

(1)Cash and cash equivalents include highly liquid investments in money market funds.

(2)Equity securities primarily consist of domestic, international and global equity pooled funds.

(3)Fixed income securities primarily consist of debt securities issued by U.S. and foreign government agencies and debt obligations issued by a variety of private and public corporations.

(4)Other investments primarily consist of index linked government bonds, derivatives and other investments.

In addition to the investments presented within the fair value hierarchy table above, the Company’s plan assets include investments in various collective trusts that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. Such investments totaled $158 million and $227 million at December 31, 2021 and 2020, respectively.

Net Periodic Benefit Cost

The components of net periodic benefit expense were as follows for the years ended December 31:



(In millions)	2021		2020		2019

Interest cost	$	16	$	20	$	9
Expected return on plan assets	(23)		(24)		(10)

Net periodic benefit income	$	(7)	$	(4)	$	(1)

16. Share-Based Compensation

The Company recognizes the fair value of share-based compensation awards granted to employees in cost of processing and services, cost of product, and selling, general and administrative expense in its consolidated statements of income.

The Company’s share-based compensation awards are typically granted in the first quarter of the year, and may also occur throughout the year in conjunction with acquisitions of businesses, and primarily consist of the following:

Stock Options – The Company grants stock options to employees and non-employee directors at exercise prices equal to the fair market value of the Company’s stock on the dates of grant. Stock option grants generally vest over a three- or four-year period. All stock options expire ten years from the date of the award. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period of the stock option award.

Restricted Stock Units and Awards – The Company grants restricted stock units and awards to employees and non-employee directors. Restricted stock unit and award grants generally vest over a three- or four-year period. The Company recognizes compensation expense for restricted stock units and awards based on the market price of its common stock on the grant date over the period during which the units and awards vest.

Performance Share Units – The Company grants performance share units to employees. The number of shares issued at the end of the performance period is determined by the level of achievement of pre-determined performance and market goals, including earnings, revenue growth, synergy and integration attainment, and shareholder return. The Company recognizes compensation expense on performance share units ratably over the requisite performance period of the award, generally two or three years, to the extent management views the performance goals as probable of attainment. The Company recognizes compensation expense for the fair value of the shareholder return component over the requisite service period of the award.

Employee Stock Purchase Plan – The Company maintains an employee stock purchase plan that allows eligible employees to purchase a limited number of shares of common stock each quarter through payroll deductions at a

discount of the closing price of the Company’s common stock on the last business day of each calendar quarter. Effective January 1, 2020, the employee discount under the employee stock purchase plan was modified from 15% to 10%. In addition, the Company temporarily suspended the employee discount, effective April 9, 2020, to help manage discretionary costs in response to the COVID-19 pandemic. Effective January 1, 2021, the discount under the employee stock purchase plan was re-established at 5%, which is considered noncompensatory and therefore does not give rise to recognizable compensation cost.

The Company recognized $239 million, $369 million and $229 million of share-based compensation expense during the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, the total remaining unrecognized compensation cost for unvested stock options, restricted stock units and awards and performance share units, net of estimated forfeitures, of $314 million is expected to be recognized over a weighted-average period of 2.1 years. During the years ended December 31, 2021, 2020 and 2019, stock options to purchase 4.4 million, 2.6 million and 4.7 million shares, respectively, were exercised.

Acquisition of First Data

Upon the completion of the First Data acquisition on July 29, 2019 (see Note 4), First Data’s equity awards, whether vested or unvested, were either settled in shares of the Company’s common stock or converted into equity awards denominated in shares of the Company’s common stock based on a defined exchange ratio of 0.303, as described below.

First Data time-vesting awards that were granted at or prior to the initial public offering of First Data (the “First Data IPO”) were accelerated in full in accordance with their terms, except for certain executive officer awards and certain awards held by retirement-eligible employees, which were not accelerated and instead converted into equity awards denominated in shares of the Company’s common stock. Each such time-vesting, pre-IPO restricted stock and restricted stock unit award was settled in shares of the Company’s common stock based on the exchange ratio. Each time-vesting, pre-IPO stock option award was converted into an option to purchase a number of shares of the Company’s common stock based on the exchange ratio with an exercise price per share equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio.

First Data equity awards granted at the time of the First Data IPO that were subject to vesting solely upon achievement of a $32 price per share of First Data common stock were converted into equity awards denominated in shares of the Company’s common stock and remained eligible to vest upon satisfaction of an adjusted target price per share of the Company’s common stock equal to the existing First Data target price divided by the exchange ratio. Such awards vested during the third quarter of 2019. Each restricted stock and restricted stock unit award that was a performance-vesting IPO award was converted into an award denominated in shares of the Company’s common stock based on the exchange ratio, and each stock option award that was a performance-vesting award was converted into an option to purchase a number of shares of the Company’s common stock based on the exchange ratio with an exercise price per share equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio. As converted, the performance-vesting awards continued to be governed by the same terms and conditions as were applicable prior to the acquisition and vested during the year ended December 31, 2019 upon satisfaction of the adjusted performance condition.

The remaining existing First Data equity awards, whether vested or unvested, were converted into equity awards denominated in shares of the Company’s common stock based on the exchange ratio, with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio, and will continue to be governed by generally the same terms and conditions as were applicable prior to the acquisition; provided that, subject to compliance with Section 409A of the Internal Revenue Code, such awards will accelerate upon a covered termination as defined in the merger agreement.

The portion of the fair value of the replacement awards related to services provided prior to the acquisition was $768 million and was accounted for as consideration transferred. The remaining portion of the fair value of $467 million was associated with future service and recognized as compensation expense, net of estimated forfeitures, over the weighted-average remaining vesting period of 1.2 years. The fair value of options that the Company assumed in connection with the acquisition of First Data were estimated using the Black-Scholes model with the following assumptions:



Expected life (in years)	2.5
Average risk-free interest rate	1.9	%
Expected volatility	27.4	%
Expected dividend yield	0	%

The Company determined the expected life of stock options using a midpoint approach considering the vesting schedule, contractual terms and current option life-to-date. The risk-free interest rate was based on the U.S. treasury yield curve in effect as of the acquisition date. Expected volatility was determined using a weighted-average of the implied volatility and the mean reversion volatility of the Company’s stock at the time of conversion.

Share-Based Compensation Activity

The weighted-average estimated fair value of stock options granted during 2021, 2020 and 2019 was $33.35, $35.02 and $28.52 per share, respectively. The fair values of stock options granted were estimated on the date of grant using a binomial option-pricing model with the following assumptions:



	2021		2020		2019
Expected life (in years)	6.5		6.4		6.4
Average risk-free interest rate	0.6	%	1.8	%	2.7	%
Expected volatility	29.3	%	28.3	%	28.5	%
Expected dividend yield	0	%	0	%	0	%

The Company determined the expected life of stock options using historical data. The risk-free interest rate was based on the U.S. treasury yield curve in effect as of the grant date. Expected volatility was determined using weighted-average implied market volatility combined with historical volatility. The Company believes that a blend of historical volatility and implied volatility better reflects future market conditions and better indicates expected volatility than purely historical volatility.

A summary of stock option activity is as follows:



	Shares (In thousands)	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (In millions)
Stock options outstanding - December 31, 2020	14,689	$	50.82

Granted	168	111.86
Forfeited	(214)	108.74
Exercised	(4,414)	37.51
Stock options outstanding - December 31, 2021	10,229	$	56.36	4.26	$	498
Stock options exercisable - December 31, 2021	8,822	$	48.38	3.65	$	492

A summary of restricted stock unit, restricted stock award and performance share unit activity is as follows:



	Restricted Stock Units and Awards			Performance Share Units
	Shares (In thousands)	Weighted- Average Grant Date Fair Value		Shares (In thousands)	Weighted- Average Grant Date Fair Value
Units and awards - December 31, 2020	4,797	$	98.29	1,821	$	95.20

Granted	3,152	104.38		255	108.68
Forfeited	(420)	103.99		(158)	103.12
Vested	(2,455)	99.09		(526)	92.72
Units and awards - December 31, 2021	5,074	$	101.09	1,392	$	96.32

The table below presents additional information related to stock option and restricted stock unit activity:



(In millions)	2021		2020		2019
Total intrinsic value of stock options exercised	$	339	$	194	$	331
Fair value of restricted stock units vested	332		454		198
Income tax benefit from stock options exercised and restricted stock units vested	142		156		126
Cash received from stock options exercised	91		83		104

At December 31, 2021, 27.5 million share-based awards were available for grant under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan. Under its employee stock purchase plan, the Company issued 0.5 million shares in 2021, 0.5 million shares in 2020 and 0.6 million shares in 2019. At December 31, 2021, there were 23.8 million shares available for issuance under the employee stock purchase plan.

17. Restructuring and Other Charges

In connection with the acquisition of First Data, the Company implemented integration plans focused on reducing the Company’s overall cost structure, including reducing vendor spend and eliminating duplicate costs. The Company recorded restructuring charges related to certain of these integration activities of $118 million, $303 million and $56 million, primarily reported in cost of processing and service and selling, general and administrative expenses within the consolidated statements of income, based upon committed actions during the years ended December 31, 2021, 2020 and 2019, respectively. The Company has completed the above integration activities as of December 31, 2021 and does not expect to incur additional restructuring or other charges associated with the First Data acquisition.

Employee Termination Costs

The Company recorded $95 million, $131 million and $32 million of employee termination costs related to severance and other separation costs for terminated employees, including those in connection with the acquisition of First Data, during the years ended December 31, 2021, 2020 and 2019, respectively. The following table summarizes the changes in the reserve related to the Company’s employee severance and other separation costs during the years ended December 31:



(In millions)	2021		2020
Balance at beginning of year	$	27	$	14
Severance and other separation costs	95		131

Cash payments	(86)		(118)
Balance at end of year	$	36	$	27

The employee severance and other separation costs accrual balance of $36 million at December 31, 2021 is expected to be paid within the next twelve months. In addition, the Company recorded $8 million, $48 million and $23 million of share-based compensation costs during the years ended December 31, 2021, 2020 and 2019, respectively, related to the accelerated vesting of equity awards for terminated employees.

Facility Exit Costs

During 2021 and 2020, the Company permanently vacated certain leased facilities in advance of the non-cancellable lease terms as part of the Company’s efforts to reduce facility costs. In conjunction with the exit of these leased facilities, the Company assessed the respective operating lease ROU assets for impairment by comparing the carrying values of the ROU assets to the discounted cash flows from estimated sublease payments (Level 3 of the fair value hierarchy). In addition, the Company assessed certain property and equipment associated with the leased facilities for impairment. As a result, the Company recorded non-cash impairment charges of $15 million and $124 million, reported in selling, general and administrative expense within the consolidated statements of income during the years ended December 31, 2021 and 2020, respectively, associated with the early exit of these leased facilities. In addition, the Company recorded facility exit and related costs during the year ended December 31, 2019, primarily related to relocation costs and lease exit or termination fees; however, such costs were not significant.

Other Costs

During 2020, in connection with initiatives to reduce the Company’s overall cost structure following the acquisition of First Data, the Company terminated certain of its existing lease agreements to upgrade and consolidate its computing infrastructure.

The Company upgraded or replaced certain leased hardware under separate, new lease agreements, resulting in the early termination and disposal of existing hardware under the current lease agreements. As such, the Company has adjusted the amortization period for these existing lease agreements to coincide with the modified remaining term. Finance lease expense during the year ended December 31, 2020 includes $62 million of accelerated amortization associated with the termination of these vendor contracts. In addition, the Company executed similar terminations to certain of its existing software financing agreements. Amortization expense during the year ended December 31, 2020 includes $56 million of accelerated amortization associated with the termination of these vendor contracts.

During 2019, the Company recorded a $48 million non-cash impairment charge, reported primarily in cost of processing and services within the consolidated statements of income, associated with an international core account processing platform. Such impairment charge primarily related to the write-off of certain of the Fintech segment’s purchased and capitalized software development costs; however, the charge is presented within Corporate and Other as such charge was excluded from the Company’s measure of the Fintech segment’s operating performance.

18. Income Taxes

Substantially all of the Company’s pre-tax earnings are derived from domestic operations in all periods presented. The income tax provision was as follows for the years ended December 31:



(In millions)	2021		2020		2019
Components of income tax provision (benefit):
Current:
Federal	$	378	$	(25)	$	25
State	138		71		69
Foreign	109		79		57
	625		125		151
Deferred:
Federal	(186)		189		118
State	(106)		(34)		(18)
Foreign	30		(84)		(53)
	(262)		71		47
Income tax provision	$	363	$	196	$	198

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31:



	2021		2020		2019
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal effect	1.6	%	2.0	%	3.7	%



Foreign tax law changes	8.0	%	2.8	%	—	%
Foreign derived intangibles income deduction	(3.1)	%	(3.2)	%	(0.2)	%
Excess tax benefit from share-based awards	(2.2)	%	(3.9)	%	(5.1)	%
Sale of businesses and subsidiary restructuring	(2.1)	%	0.7	%	(2.6)	%

Unrecognized tax benefits	(2.7)	%	(1.0)	%	(0.1)	%
Nondeductible executive compensation	0.7	%	2.0	%	1.0	%
Valuation allowance	(1.3)	%	(1.7)	%	0.3	%
Other, net	1.9	%	(2.0)	%	0.3	%
Effective income tax rate	21.8	%	16.7	%	18.3	%

Foreign tax law changes include $134 million and $32 million of income tax expense attributed to the revaluation of certain net deferred tax liabilities in connection with enacted corporate income tax rate changes in the United Kingdom (tax rate increased from 19% to 25% starting in 2023) and Argentina (tax rate increased from 25% to 35%) in 2021, and in the United Kingdom (tax rate increased from 17% to 19%) in 2020, respectively.

Significant components of deferred tax assets and liabilities consisted of the following at December 31:



(In millions)	2021		2020
Accrued expenses	$	171	$	189

Share-based compensation	134		185
Net operating loss and credit carry-forwards	804		1,158

Leasing liabilities	194		171
Other	194		76
Subtotal	1,497		1,779
Valuation allowance	(697)		(888)
Total deferred tax assets	800		891

Capitalized software development costs	(633)		(614)
Intangible assets	(2,676)		(2,993)
Property and equipment	(280)		(198)
Capitalized commissions	(95)		(87)
Investments in joint ventures	(630)		(908)
Leasing right-of-use assets	(142)		(141)

Other	(474)		(311)
Total deferred tax liabilities	(4,930)		(5,252)
Total	$	(4,130)	$	(4,361)

The Company maintained a valuation allowance of $697 million and $888 million at December 31, 2021 and 2020, respectively, against its deferred tax assets. The decrease in the valuation allowance in 2021 is primarily the result of subsidiary restructurings. Substantially all of the valuation allowance relates to certain foreign and state net operating loss carryforwards.

Deferred tax assets and liabilities are reported in the consolidated balance sheets as follows at December 31:



(In millions)	2021		2020
Noncurrent assets	$	42	$	28
Noncurrent liabilities	(4,172)		(4,389)
Total	$	(4,130)	$	(4,361)

Noncurrent deferred tax assets are included in other long-term assets in the consolidated balance sheets at December 31, 2021 and 2020.

The following table presents the amounts of federal, state and foreign net operating loss carryforwards and general business credit carryforwards at December 31:



(In millions)	2021		2020
Net operating loss carryforwards: (1)
Federal	$	178	$	443
State	3,763		3,944
Foreign	2,580		3,343
General business credit carryforwards (2)	12		41

(1)At December 31, 2021, the Company had federal net operating loss carryforwards of $178 million, most of which do not expire, state net operating loss carryforwards of $3.8 billion, most of which expire in 2022 through 2041, and foreign net operating loss carryforwards of $2.6 billion, of which $375 million expire in 2022 through 2041, and the remainder of which do not expire.

(2)At December 31, 2021, the Company had general business credit carryforwards of $12 million which expire in 2027.

The Company asserts that its investment in its foreign subsidiaries is intended to be indefinitely reinvested. Undistributed historical and future earnings of its foreign subsidiaries are not considered to be indefinitely reinvested. Should these earnings

be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign or U.S. taxes. The Company has the ability and intent to limit distributions so as to not make a distribution in excess of its investment in those subsidiaries. The Company will continue to monitor its global cash requirements and the need to recognize a deferred tax liability.

Unrecognized tax benefits were as follows at December 31:



(In millions)	2021		2020		2019
Unrecognized tax benefits - Beginning of year	$	171	$	145	$	49
Increases for assumed tax positions related to First Data	—		—		82
Increases for tax positions taken during the current year	16		9		8
Increases for tax positions taken in prior years	5		53		16
Decreases for tax positions taken in prior years	(41)		(23)		(2)
Decreases for settlements	(1)		(2)		(1)
Lapse of the statute of limitations	(26)		(11)		(7)
Unrecognized tax benefits - End of year	$	124	$	171	$	145

At December 31, 2021, unrecognized tax benefits of $86 million, net of federal and state benefits, would affect the effective income tax rate if recognized. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $24 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states and foreign countries, and the lapse of the statute of limitations in various state and foreign jurisdictions.

The Company classifies interest expense and penalties related to income taxes as components of its income tax provision. The income tax provision included interest expense (benefits) and penalties on unrecognized tax benefits of $(6) million in 2021, $3 million in 2020 and $2 million in 2019. Accrued interest expense and penalties related to unrecognized tax benefits totaled $15 million and $22 million at December 31, 2021 and 2020, respectively.

The Company’s U.S. federal income tax returns for 2020 and 2021, and tax returns in certain states and foreign jurisdictions for 2005 through 2021, remain subject to examination by taxing authorities.

19. Commitments and Contingencies

Litigation

In the normal course of business, the Company or its subsidiaries are named as defendants in lawsuits in which claims are asserted against the Company. In addition, the Company assumed certain legal proceedings in connection with the acquisition of First Data (see Note 4) primarily associated with its merchant acquiring business and certain tax matters. In the third quarter of 2021, the Company resolved a matter, for which the Company previously had accrued, with a class of merchants related to alleged violations by an independent sales organization resulting in a payment of $28 million. In the second quarter of 2020, the Company resolved a matter with the Federal Trade Commission related to a U.S.-based wholesale independent sales organization resulting in a payment of $40 million, for which the Company previously had accrued. The Company maintained accruals of $32 million at both December 31, 2021 and 2020, respectively, related to its various legal proceedings, primarily associated with the Company’s merchant acquiring business and certain tax matters as described above. The Company’s estimate of the possible range of exposure for various litigation matters in excess of amounts accrued is $0 million to approximately $50 million. In the opinion of management, the liabilities, if any, which may ultimately result from such lawsuits are not expected to have a material adverse effect on the Company’s consolidated financial statements.

Electronic Payments Transactions

In connection with the Company’s processing of electronic payments transactions, which are separate and distinct from the payment transactions described in Note 6, funds received from subscribers are invested from the time the Company collects the funds until payments are made to the applicable recipients. These subscriber funds are invested in short-term, highly liquid investments. Subscriber funds, which are not included in the Company’s consolidated balance sheets, can fluctuate significantly based on consumer bill payment and debit card activity and totaled approximately $1.6 billion and $1.7 billion at December 31, 2021 and 2020, respectively.

Indemnifications and Warranties

The Company may indemnify its clients from certain costs resulting from claims of patent, copyright or trademark infringement associated with its clients’ use of the Company’s products or services. The Company may also warrant to clients that its

products and services will operate substantially in accordance with identified specifications. From time to time, in connection with sales of businesses, the Company agrees to indemnify the buyers of such businesses for liabilities associated with the businesses that are sold. Payments, net of recoveries, under such indemnification or warranty provisions were not material to the Company’s consolidated financial statements.

20. Related Party Transactions

Merchant Alliances

A significant portion of the Company’s business is conducted through merchant alliances between the Company and financial institutions (see Note 9). To the extent the Company maintains a controlling financial interest in an alliance, the alliance’s financial statements are consolidated with those of the Company and the related processing fees are treated as an intercompany transaction and eliminated in consolidation. To the extent the Company has significant influence but not control in an alliance, the Company uses the equity method of accounting to account for its investment in the alliance. As a result, the processing and other service fees charged to merchant alliances accounted for under the equity method are recognized in the Company’s consolidated statements of income primarily as processing and services revenue. Such fees totaled $171 million, $183 million and $76 million for the years ended December 31, 2021, 2020 and 2019, respectively. No directors or officers of the Company have ownership interests in any of the alliances. The formation of each of these alliances generally involves the Company and the financial institution contributing contractual merchant relationships to the alliance and a cash payment from one owner to the other to achieve the desired ownership percentage for each. The Company and the financial institution enter into a long-term processing service agreement as part of the negotiation process. This agreement governs the Company’s provision of transaction processing services to the alliance. At December 31, 2021 and 2020, the Company had approximately $36 million and $37 million, respectively, of amounts due from unconsolidated merchant alliances included within trade accounts receivable, net in the Company’s consolidated balance sheets.

Effective July 1, 2020, the Company and Bank of America dissolved their BAMS joint venture, of which the Company maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The revenues and expenses of the BAMS joint venture were consolidated into the Company’s financial results through the date of dissolution. See Note 4 for additional information.

Joint Venture Transition Services Agreements

Pursuant to certain transition services agreements, the Company provides, at fair value, various administration, business process outsourcing, and technical and data center related services for defined periods to certain joint ventures accounted for under the equity method. Amounts transacted through these agreements, including with InvestCloud through June 30, 2021, totaled $37 million, $58 million and $36 million during the years ended December 31, 2021, 2020 and 2019, respectively, and were primarily recognized as processing and services revenue in the Company’s consolidated statements of income.

Share Repurchases

On May 3, 2021, New Omaha Holdings L.P. (“New Omaha”), a shareholder of the Company, completed an underwritten secondary public offering of 23.0 million shares of Fiserv, Inc. common stock (the “2021 offering”). The Company did not sell any shares in, nor did it receive any proceeds from, the 2021 offering. New Omaha received all of the net proceeds from the 2021 offering. In connection with the 2021 offering, the Company repurchased from the underwriters 5.0 million shares of its common stock that were subject to the 2021 offering, at a price equal to the price per share paid by the underwriters to New Omaha in the 2021 offering (the “2021 share repurchase”). The 2021 share repurchase totaled $588 million and was funded with cash on hand. The repurchased shares were cancelled and no longer outstanding following the completion of the 2021 share repurchase. Prior to the 2021 offering, New Omaha owned approximately 13% of the Company’s outstanding shares of common stock, and immediately following the 2021 offering, New Omaha owned approximately 9% of such outstanding shares.

On December 14, 2020, New Omaha completed an underwritten secondary public offering of 20.1 million shares of Fiserv, Inc. common stock (the “2020 offering”). The Company did not sell any shares in, nor did it receive any proceeds from, the 2020 offering. New Omaha received all of the net proceeds from the 2020 offering. In connection with the 2020 offering, the Company repurchased from the underwriters 1.8 million shares of its common stock that were subject to the 2020 offering, at a price equal to the price per share paid by the underwriters to New Omaha in the 2020 offering (the “2020 share repurchase”). The 2020 share repurchase totaled $200 million and was funded with cash on hand. The repurchased shares were cancelled and no longer outstanding following the completion of the 2020 share repurchase. Prior to the 2020 offering, New Omaha owned approximately 16% of the Company’s outstanding shares of common stock, and immediately following the 2020 offering, New Omaha owned approximately 13% of such outstanding shares.

21. Business Segment Information

The Company’s operations are comprised of the Acceptance segment, the Fintech segment and the Payments segment. The businesses in the Acceptance segment provide a wide range of commerce-enabling solutions and serve merchants of all sizes around the world. These solutions include point-of-sale merchant acquiring and digital commerce services; mobile payment services; security and fraud protection products; CaratSM, the Company’s omnichannel commerce ecosystem; Clover®, the Company’s cloud-based point-of-sale and business management platform; and Clover Connect, the Company’s independent software vendors platform. The Company distributes the products and services in the global Acceptance segment businesses through a variety of channels, including direct sales teams, strategic partnerships with agent sales forces, independent software vendors, financial institutions and other strategic partners in the form of joint venture alliances, revenue sharing alliances and referral agreements. Merchants, financial institutions and distribution partners in the Acceptance segment are frequently clients of the Company’s other segments.

The businesses in the Fintech segment provide financial institutions around the world with the technology solutions they need to run their operations, including products and services that enable financial institutions to process customer deposit and loan accounts and manage an institution’s general ledger and central information files. As a complement to the core account processing functionality, the global Fintech segment businesses also provide digital banking, financial and risk management, professional services and consulting, item processing and source capture, and other products and services that support numerous types of financial transactions. Certain of the businesses in the Fintech segment provide products or services to corporate clients to facilitate the management of financial processes and transactions. Many of the products and services offered in the Fintech segment are integrated with products and services provided by the Company’s other segments.

The businesses in the Payments segment provide financial institutions and corporate clients around the world with the products and services required to process digital payment transactions. This includes card transactions such as debit, credit and prepaid card processing and services; a range of network services, security and fraud protection products, card production and print services. In addition, the Payments segment businesses offer non-card digital payment software and services, including bill payment, account-to-account transfers, person-to-person payments, electronic billing, and security and fraud protection products. Clients of the global Payments segment businesses reflect a wide range of industries, including merchants, distribution partners and financial institution customers in the Company’s other segments.

Corporate and Other supports the reportable segments described above, and consists of amortization of acquisition-related intangible assets, unallocated corporate expenses and other activities that are not considered when management evaluates segment performance, such as gains or losses on sales of businesses or investments, costs associated with acquisition and divestiture activity, and the Company’s Output Solutions postage reimbursements. Corporate and Other also includes the historical results of the Company’s Investment Services business prior to the Company’s disposal of its controlling financial interest in February 2020 (see Note 4), as well as certain transition services revenue associated with various dispositions.

Operating results for each segment are presented below and include the results of First Data from July 29, 2019, the date of acquisition.



	Reportable Segments
(In millions)	Acceptance		Fintech		Payments		Corporate and Other		Total
2021
Processing and services revenue	$	5,560	$	2,832	$	4,883	$	32	$	13,307
Product revenue	919		190		950		860		2,919
Total revenue	6,479		3,022		5,833		892		16,226
Operating income (loss)	1,996		1,081		2,557		(3,346)		2,288
Capital expenditures, including capitalized software and other intangibles	314		222		272		352		1,160
Depreciation and amortization expense	245		226		254		2,523		3,248

2020
Processing and services revenue	$	4,736	$	2,714	$	4,702	$	63	$	12,215
Product revenue	786		187		802		862		2,637
Total revenue	5,522		2,901		5,504		925		14,852
Operating income (loss) (1)	1,427		992		2,361		(2,928)		1,852
Capital expenditures, including capitalized software and other intangibles	227		183		242		248		900
Depreciation and amortization expense	239		202		248		2,568		3,257

2019
Processing and services revenue	$	2,215	$	2,737	$	3,431	$	190	$	8,573
Product revenue	356		205		478		575		1,614
Total revenue	2,571		2,942		3,909		765		10,187
Operating income (loss)	764		885		1,658		(1,698)		1,609
Capital expenditures, including capitalized software and other intangibles	147		182		196		196		721
Depreciation and amortization expense	146		191		204		1,237		1,778

(1)Corporate and Other includes gains of $428 million from the sale of a 60% interest of the Company’s Investment Services business and $36 million on the dissolution of BAMS.

Fiserv, Inc.

Schedule II — Valuation and Qualifying Accounts

(In millions)



			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses	Charged to Other Accounts		Deductions		Balance at End of Period
Year ended December 31, 2021
Deferred tax asset valuation allowance	$	888	13	(127)	(2)	(77)	(2)	$	697
Year ended December 31, 2020
Deferred tax asset valuation allowance	$	1,145	6	64		(327)	(2)	$	888
Year ended December 31, 2019
Deferred tax asset valuation allowance (1)	$	101	8	1,036		—		$	1,145

(1)Includes the valuation allowance adjustment associated with the acquisition of First Data.

(2)The decrease in the deferred tax asset valuation allowance is primarily due to subsidiary restructurings.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Fiserv, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Fiserv, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in Item 8 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue – Refer to Note 1 and Note 3 to the consolidated financial statements

Critical Audit Matter Description

The Company generates revenue from the delivery of processing, service and product solutions. Revenue is measured based on consideration specified in a contract with a customer, and the Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, which may be at a point in time or over time. The Company’s revenue consists of a significant volume of transactions sourced from multiple systems and applications. The processing of such transactions and recording of the majority of revenue is system-driven and based on contractual terms with customers. In addition, contract modifications occur when the Company and its customers agree to modify existing customer contracts to change the scope or price (or both) of the contract. Contract modifications also occur when a customer terminates some, or all, of the existing services provided by the Company, which may result in the customer paying a termination fee to the Company based upon the terms in the initial contract. When a contract modification occurs, it requires the Company to exercise judgment to determine if the modification should be accounted for as: (i) a separate contract, (ii) the termination of the original contract and creation of a new contract, or (iii) a cumulative catch-up adjustment to the original contract. Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract,

including the allocation of consideration to the remaining performance obligations and the period of recognition for each identified performance obligation.

We identified the complexity of revenue processing and revenue recognition, including customer contract modifications, as a critical audit matter because of the increased extent of effort and involvement of professionals in our firm having expertise in information technology (IT) to identify, test, and evaluate the Company's systems and automated controls and the management judgments necessary to determine the appropriate accounting. This required an increased extent of effort and a high degree of auditor judgment when performing audit procedures to evaluate whether revenue transactions were recognized appropriately.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenue recognition included the following, among others:

We evaluated management’s significant accounting policies.
We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various reports extracted from the IT systems to the Company’s general ledger and those related to the Company’s accounting for contract modifications.
With the assistance of professionals in our firm having expertise in IT, we:

◦Identified the relevant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.

◦Tested system interface controls and automated controls within the relevant revenue streams, as well as the controls designed to assess the accuracy and completeness of revenue.

We developed expectations of revenue at a disaggregated level based on historical transaction prices and current year volumes. We compared those estimates to revenue recognized by the Company.
For a sample of revenue transactions, we tested selected transactions by agreeing the amounts of revenue recognized to source documents and testing the mathematical accuracy of the recorded revenue.
We selected a sample of significant customer contract modifications and performed the following procedures:

◦Obtained and read the customer contracts.

◦Evaluated whether the contract represented a new contract or a contract modification and, if applicable, assessed the treatment of any change in scope or price.

◦Tested management’s identification of remaining performance obligations.

◦Recalculated the transaction price and assessed the appropriateness of the allocation of transaction price to each performance obligation.

◦Assessed the pattern of delivery for each distinct performance obligation.

Goodwill — Certain Reporting Units — Refer to Note 1 and Note 8 to the consolidated financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using both a discounted cash flow model and a market approach. The determination of fair value using the discounted cash flow model requires management to make significant estimates and assumptions, which include assumptions related to revenue growth rates and discount rates. The goodwill balance was $36,433 million as of December 31, 2021. For all reporting units, the fair values exceeded the carrying values and therefore, no impairment was recognized.

The three reporting units we identified as a critical audit matter have goodwill balances of $1,844 million, $1,602 million, and $7,652 million, respectively, and their fair values exceeded their carrying values as of the annual assessment, ranging between 8% and 21%. Revenue growth rates and discounts rates for these three reporting units are sensitive to significant and long-term deterioration in the macroeconomic environment, industry or market conditions.

We identified goodwill for these three reporting units as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of these reporting units and the sensitivity of operations to changes in the macroeconomic environment, industry or market conditions. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having expertise in valuation, when

performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to revenue growth rates and selection of the discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the revenue growth rates and the selection of discount rates for the three reporting units included the following, among others:

We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of these reporting units, specifically controls related to management’s forecasts and selection of the discount rates.
We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.
We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) expected results at the time of the First Data acquisition, (3) industry reports containing analyses of the Company’s and its competitors’ products and (4) forecasted information included in Company press releases as well as in analyst and industry reports of the Company and companies in its peer group.
With the assistance of professionals in our firm having expertise in valuation, we evaluated the discount rates including testing the underlying source information and the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin

February 24, 2022

We have served as the Company’s auditor since 1985.

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