Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following financial statements are filed as part of this Report:

			Page
Reports of Independent Registered Public Accounting Firm			54
Consolidated Statements of Operations for each of the three years in the period ended July 31, 2021			57
Consolidated Statements of Comprehensive Income for each of the three years in the period ended July 31, 2021			58
Consolidated Balance Sheets as of July 31, 2021 and 2020			59
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended July 31, 2021			60
Consolidated Statements of Cash Flows for each of the three years in the period ended July 31, 2021			61
Notes to Consolidated Financial Statements			63

2.INDEX TO FINANCIAL STATEMENT SCHEDULES

The following financial statement schedule is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements:

Schedule									Page
II			Valuation and Qualifying Accounts						96

						All other schedules not listed above have been omitted because they are inapplicable or are not required.

			Intuit Fiscal 2021 Form 10-K			53

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Intuit Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Intuit Inc. (the Company) as of July 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended July 31, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have 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 July 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated September 8, 2021 expressed an unqualified opinion thereon.

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 consolidated 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.

						Determination of Distinct Performance Obligations in Revenue Contracts
Description of the Matter						As described in Note 1 to the consolidated financial statements, the Company enters into contracts with customers that often include promises to transfer multiple products and services. The Company has generally concluded that software licenses and services are separate performance obligations and revenues from software licenses and services are recognized as those products and services are provided. Given the nature of the Company’s product and service offerings, there is complexity in determining whether software licenses and services are considered performance obligations that should be accounted for separately or together. Auditing the Company’s determination of distinct performance obligations related to its various product and service offerings involved complex auditor judgment. In particular, significant judgment was required when assessing whether the promised products and services are separate performance obligations or inputs to a combined performance obligation due to the evaluation of the interdependency or interrelation of the promised products and services within each contract.

			Intuit Fiscal 2021 Form 10-K			54

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How we Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s processes, as they relate to the determination of distinct performance obligations. We also obtained an understanding of the Company’s product and service offerings and tested the application of the revenue recognition accounting model to determine distinct performance obligations. Among other audit procedures, we evaluated whether the performance obligations identified by the Company were capable of being distinct and distinct in the context of the contract through review of contracts, discussions with management, observing product demonstrations and review of the Company’s website and other marketing materials. More specifically, we evaluated the Company’s determination of whether the contract was to deliver (1) multiple promised products or services that constitute separate performance obligations or (2) a single performance obligation that is comprised of the combined products or services. That is, considering the utility, integration, interrelation or interdependence of the products and services, we evaluated whether the multiple promised products and services that were delivered to the customer were outputs or inputs to a combined item.

						Accounting for Acquisition of Credit Karma
Description of the Matter						As described in Note 6 to the consolidated financial statements, during the year ended July 31, 2021, the Company completed its acquisition of Credit Karma for a total purchase price of $7.2 billion. The transaction was accounted for as a business combination. Auditing the Company's accounting for its acquisition of Credit Karma was complex due to the significant estimation uncertainty in determining the fair value of identified intangible assets, which primarily consisted of user relationships of $2,781 million, trade names/trademarks of $375 million, and purchased technology of $216 million. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. The significant assumptions used to estimate the fair values of the intangible assets included certain assumptions that form the basis of the forecasted results including revenue growth rates and operating margins. Each of these assumptions was subjective and involved significant judgment as they are forward looking and could be affected by future economic and market conditions.

How we Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s process for accounting for the acquisition. For example, we tested the controls over the recognition and determination of the fair values of the acquired intangible assets, including the development and review of the valuation models and underlying assumptions used to develop such estimates. To test the estimated fair value of the user relationships, trade name/trademark and purchased technology intangible assets, we performed substantive audit procedures that included, among others, evaluating the Company’s selection of valuation methodologies with the assistance of our valuation specialists, and evaluating the significant assumptions used by the Company to develop the forecasted results of Credit Karma including projected revenue growth rates and projected operating margins. For example, we compared the significant assumptions to current industry, market and economic trends, and to the historical results of the acquired business. We tested the completeness and accuracy of the underlying data used in the valuation.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1990.

San Jose, California

September 8, 2021

			Intuit Fiscal 2021 Form 10-K			55

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Intuit Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Intuit Inc.’s internal control over financial reporting as of July 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Intuit Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of July 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Credit Karma, which is included in the July 31, 2021 consolidated financial statements of the Company and constituted nine percent of both total and net assets, respectively, as of July 31, 2021 and nine percent of both revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Credit Karma.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated September 8, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Jose, California

September 8, 2021

			Intuit Fiscal 2021 Form 10-K			56

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INTUIT INC. CONSOLIDATED STATEMENTS OF OPERATIONS
			Twelve Months Ended July 31,
(In millions, except per share amounts)			2021						2020						2019
Net revenue:
Product			$	1,698					$	1,635					$	1,623
Service and other			7,935						6,044						5,161
Total net revenue			9,633						7,679						6,784
Costs and expenses:
Cost of revenue:
Cost of product revenue			69						72						77
Cost of service and other revenue			1,564						1,284						1,070
Amortization of acquired technology			50						22						20
Selling and marketing			2,644						2,048						1,927
Research and development			1,678						1,392						1,233
General and administrative			982						679						597
Amortization of other acquired intangible assets			146						6						6
Total costs and expenses			7,133						5,503						4,930
Operating income			2,500						2,176						1,854
Interest expense			(29)						(14)						(15)
Interest and other income, net			85						36						42
Income before income taxes			2,556						2,198						1,881
Income tax provision			494						372						324
Net income			$	2,062					$	1,826					$	1,557
Basic net income per share			$	7.65					$	6.99					$	5.99
Shares used in basic per share calculations			270						261						260
Diluted net income per share			$	7.56					$	6.92					$	5.89
Shares used in diluted per share calculations			273						264						264
Cash dividends declared per common share			$	2.36					$	2.12					$	1.88

See accompanying notes.

			Intuit Fiscal 2021 Form 10-K			57

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INTUIT INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Net income			$	2,062					$	1,826					$	1,557
Other comprehensive income (loss), net of income taxes:
Unrealized gain (loss) on available-for-sale debt securities			(3)						5						3
Foreign currency translation gain (loss)			11						(1)						(3)
Total other comprehensive income, net			8						4						—
Comprehensive income			$	2,070					$	1,830					$	1,557

See accompanying notes.

			Intuit Fiscal 2021 Form 10-K			58

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INTUIT INC. CONSOLIDATED BALANCE SHEETS
			July 31,
(Dollars in millions, except par value; shares in thousands)			2021						2020
ASSETS
Current assets:
Cash and cash equivalents			$	2,562					$	6,442
Investments			1,308						608
Accounts receivable, net of allowance for doubtful accounts of $96 and $12			391						149
Income taxes receivable			123						12
Prepaid expenses and other current assets			316						314
Current assets before funds held for customers			4,700						7,525
Funds held for customers			457						455
Total current assets			5,157						7,980
Long-term investments			43						19
Property and equipment, net			780						734
Operating lease right-of-use assets			380						226
Goodwill			5,613						1,654
Acquired intangible assets, net			3,252						28
Long-term deferred income taxes			8						65
Other assets			283						225
Total assets			$	15,516					$	10,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt			$	—					$	1,338
Accounts payable			623						305
Accrued compensation and related liabilities			530						482
Deferred revenue			684						652
Other current liabilities			361						297
Current liabilities before customer fund deposits			2,198						3,074
Customer fund deposits			457						455
Total current liabilities			2,655						3,529
Long-term debt			2,034						2,031
Long-term deferred income tax liabilities			525						2
Operating lease liabilities			380						221
Other long-term obligations			53						42
Total liabilities			5,647						5,825
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value Authorized - 1,345 shares total; 145 shares designated Series A; 250 shares designated Series B Junior Participating Issued and outstanding - None			—						—
Common stock, $0.01 par value Authorized - 750,000 shares Outstanding - 273,235 shares at July 31, 2021 and 261,740 shares at July 31, 2020			3						3
Additional paid-in capital			10,545						6,179
Treasury stock, at cost			(12,951)						(11,929)
Accumulated other comprehensive loss			(24)						(32)
Retained earnings			12,296						10,885
Total stockholders’ equity			9,869						5,106
Total liabilities and stockholders’ equity			$	15,516					$	10,931

See accompanying notes.

			Intuit Fiscal 2021 Form 10-K			59

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INTUIT INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
			Common Stock						Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total Stockholders’ Equity
(Dollars in millions, shares in thousands)			Shares			Amount
Balance at July 31, 2018			258,616			$	3		$	5,335		$	(11,050)		$	(36)		$	8,564		$	2,816
Comprehensive income			—			—			—			—			—			1,557			1,557
Issuance of stock under employee stock plans, net of shares withheld for employee taxes			4,019			—			32			—			—			—			32
Stock repurchases under stock repurchase programs			(2,455)			—			—			(561)			—			—			(561)
Dividends and dividend rights declared ($1.88 per share)			—			—			—			—			—			(500)			(500)
Share-based compensation expense			—			—			405			—			—			—			405
Balance at July 31, 2019			260,180			3			5,772			(11,611)			(36)			9,621			3,749
Comprehensive income			—			—			—			—			4			1,826			1,830
Issuance of stock under employee stock plans, net of shares withheld for employee taxes			2,736			—			(31)			—			—			—			(31)
Stock repurchases under stock repurchase programs			(1,176)			—			—			(318)			—			—			(318)
Dividends and dividend rights declared ($2.12 per share)			—			—			—			—			—			(562)			(562)
Share-based compensation expense			—			—			438			—			—			—			438
Balance at July 31, 2020			261,740			3			6,179			(11,929)			(32)			10,885			5,106
Comprehensive income			—			—			—			—			8			2,062			2,070
Issuance of stock under employee stock plans, net of shares withheld for employee taxes			2,593			—			(187)			—			—			—			(187)
Stock repurchases under stock repurchase programs			(2,422)			—			—			(1,022)			—			—			(1,022)
Dividends and dividend rights declared ($2.36 per share)			—			—			—			—			—			(651)			(651)
Share-based compensation expense			—			—			755			—			—			—			755
Issuance of stock in business combination			11,324			—			3,798			—			—			—			3,798
Balance at July 31, 2021			273,235			$	3		$	10,545		$	(12,951)		$	(24)		$	12,296		$	9,869

See accompanying notes.

			Intuit Fiscal 2021 Form 10-K			60

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INTUIT INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Cash flows from operating activities:
Net income			$	2,062					$	1,826					$	1,557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			166						189						199
Amortization of acquired intangible assets			197						29						26
Non-cash operating lease cost			62						60						—
Share-based compensation expense			753						435						401
Deferred income taxes			(42)						(179)						(7)
Other			(39)						6						15
Total adjustments			1,097						540						634
Originations of loans held for sale			(41)						(566)						—
Sale and principal payments of loans held for sale			143						482						—
Changes in operating assets and liabilities:
Accounts receivable			(104)						(59)						11
Income taxes receivable			(51)						53						5
Prepaid expenses and other assets			30						(31)						(37)
Accounts payable			206						33						90
Accrued compensation and related liabilities			(70)						100						16
Deferred revenue			22						38						39
Operating lease liabilities			(66)						(61)						—
Other liabilities			22						59						9
Total changes in operating assets and liabilities			(11)						132						133
Net cash provided by operating activities			3,250						2,414						2,324
Cash flows from investing activities:
Purchases of corporate and customer fund investments			(1,489)						(701)						(752)
Sales of corporate and customer fund investments			229						130						84
Maturities of corporate and customer fund investments			550						596						303
Purchases of property and equipment			(53)						(59)						(76)
Capitalization of internal use software			(72)						(78)						(79)
Acquisitions of businesses, net of cash acquired			(3,064)						—						(64)
Originations of term loans to small businesses			(232)						(243)						(316)
Principal repayments of term loans from small businesses			136						287						267
Other			30						(29)						(2)
Net cash used in investing activities			(3,965)						(97)						(635)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of discount and issuance costs			—						1,983						—
Proceeds from borrowings under unsecured revolving credit facility			—						1,000						—
Repayments on borrowings under unsecured revolving credit facility			(1,000)						—						—
Proceeds from borrowings under secured revolving credit facility			—						—						48
Repayment of debt			(338)						(50)						(50)
Proceeds from issuance of stock under employee stock plans			196						211						284
Payments for employee taxes withheld upon vesting of restricted stock units			(383)						(244)						(251)
Cash paid for purchases of treasury stock			(1,005)						(323)						(556)
Dividends and dividend rights paid			(646)						(561)						(501)

			Intuit Fiscal 2021 Form 10-K			61

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INTUIT INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Net change in customer fund deposits			2						19						69
Other			(2)						(1)						(8)
Net cash provided by (used in) financing activities			(3,176)						2,034						(965)
Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents			13						(6)						(3)
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents			(3,878)						4,345						721
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period			6,697						2,352						1,631
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period			$	2,819					$	6,697					$	2,352
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within the consolidated balance sheets to the total amounts reported on the consolidated statements of cash flows
Cash and cash equivalents			$	2,562					$	6,442					$	2,116
Restricted cash and restricted cash equivalents included in funds held for customers			257						255						236
Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period			$	2,819					$	6,697					$	2,352
Supplemental disclosure of cash flow information:
Interest paid			$	30					$	14					$	17
Income taxes paid			$	578					$	493					$	325
Supplemental schedule of non-cash investing activities:
Issuance of common stock in a business combination			$	3,798					$	—					$	—

See accompanying notes.

			Intuit Fiscal 2021 Form 10-K			62

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INTUIT INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Intuit helps consumers, small businesses, and the self-employed prosper by delivering financial management and compliance products and services. We also provide specialized tax products to accounting professionals, who are key partners that help us serve small business customers.

Our flagship brands, QuickBooks, TurboTax and Mint, help customers run their small businesses, pay employees and send invoices, separate business and personal expenses, track their money, and file income taxes. ProSeries and Lacerte are our leading tax preparation offerings for professional accountants. On December 3, 2020 we acquired Credit Karma, Inc. (Credit Karma), a consumer technology platform that enables us to provide personalized financial offers to members including credit cards, loans, insurance, and savings and checking accounts through an FDIC member bank partner. Incorporated in 1984 and headquartered in Mountain View, California, we sell our products and services primarily in the United States.

Basis of Presentation

These consolidated financial statements include the financial statements of Intuit and its wholly owned subsidiaries. We have eliminated all significant intercompany balances and transactions in consolidation. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation, including amounts related to reportable segments. In August 2020, we reorganized certain technology and customer success functions that support and benefit our overall platform. Additionally, certain legal, facility and employee service costs are now managed at the corporate level. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the twelve months ended July 31, 2020 and 2019, we reclassified $180 million and $172 million from Small Business & Self-Employed, $121 million and $78 million from Consumer, and $13 million and $12 million from ProConnect to other corporate expenses. In August 2020, we also renamed our Strategic Partner segment as the ProConnect segment. This segment continues to serve professional accountants. See Note 14, "Segment Information," for more information.

On December 3, 2020 we acquired Credit Karma, a consumer technology platform. We have included the results of operations for Credit Karma in our consolidated statements of operations from the date of acquisition. Credit Karma operates as a separate reportable segment. See Note 14, "Segment Information," for more information.

Seasonality

Our Consumer and ProConnect offerings have a significant and distinct seasonal pattern as sales and revenue from our income tax preparation products and services are typically concentrated in the period from November through April. This seasonal pattern typically results in higher net revenues during our second and third quarters ending January 31 and April 30, respectively.

Due to the COVID-19 pandemic, the timing of tax filing seasons for fiscal 2021 and fiscal 2020 varied significantly. In fiscal 2019, the IRS began accepting returns on January 28, 2019 and the tax filing deadline was April 15, 2019. In fiscal 2020, the IRS began accepting returns on January 27, 2020 and the tax filing deadline was July 15, 2020. In fiscal 2021, the IRS began accepting returns on February 12, 2021 and the tax filing deadline was May 17, 2021. These changes to the tax filing seasons impacted our quarterly financial results during fiscal 2021 and fiscal 2020.

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Use of Estimates

In preparing our consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP), we make certain judgments, estimates, and assumptions that affect the amounts reported in our financial statements and the disclosures made in the accompanying notes. For example, we use judgments and estimates in determining how revenue should be recognized. These judgments and estimates include identifying performance obligations, determining if the performance obligations are distinct, determining the standalone sales price (SSP) and timing of revenue recognition for each distinct performance obligation, and estimating variable consideration to be included in the transaction price. We use estimates in determining the collectibility of accounts receivable and notes receivable, the appropriate levels of various accruals including accruals for litigation contingencies, the discount rate used to calculate lease liabilities, the amount of our worldwide tax provision, the realizability of deferred tax assets, the credit losses of available-for-sale debt securities, and the fair value of assets acquired and liabilities assumed for business combinations. We also use estimates in determining the remaining economic lives and fair values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates. Additionally, in the context of the ongoing global COVID-19 pandemic, while there has been no material impact on our estimates to date, in future periods, facts and circumstances could change and impact our estimates.

Revenue Recognition

We derive revenue from the sale of software subscriptions, hosted services, payroll services, merchant payment processing services, packaged software products, live expert advice, financing for small businesses, delivery of qualified links, financial supplies and hardware. We enter into contracts with customers that include promises to transfer various products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration allocated to the respective performance obligation.

Nature of Products and Services

Desktop Offerings

Our desktop offerings consist of our QuickBooks Desktop products, which include both packaged software products and software subscriptions, our consumer and professional tax desktop products, which include TurboTax, Lacerte and ProSeries, our desktop payroll products, and merchant payment processing services for small businesses who use our desktop offerings.

Our QuickBooks Desktop packaged software products include a perpetual software license as well as enhancements and connected services. We recognize revenue for our QuickBooks Desktop packaged software products at the time the software license is delivered. We have determined that the enhancements and connected services included in our QuickBooks Desktop packaged software products are immaterial within the context of the contract.

Our QuickBooks Desktop software subscriptions include a term software license, version protection, enhancements, support and various connected services. We recognize revenue for the software license and version protection at the time they are delivered and recognize revenue for support and connected services over the subscription term as the services are provided. We have determined that the enhancements included in our QuickBooks Desktop software subscriptions are immaterial within the context of the contract.

Our consumer and professional tax packaged desktop software products include an on-premise tax software license, related tax form updates, electronic filing service and connected services. We recognize revenue for the software license and related tax form updates, as one performance obligation, over the period the forms and updates are delivered. We recognize revenue for our electronic filings service and connected services as those services are provided.

We also sell some of our QuickBooks Desktop packaged software products and consumer tax packaged desktop software products in non-consignment and consignment arrangements to certain retailers. For non-consignment retailers, we begin recognizing revenue when control has transferred to the retailer. For consignment retailers, we begin recognizing revenue when control has transferred to the customer, at the time the end-user sale has occurred.

Our desktop payroll products are sold as software subscriptions and include a term software license with a stand-ready obligation to maintain compliance with current payroll tax laws, support and connected services. The term software license and stand-ready obligation to maintain compliance with current payroll tax laws is considered one performance obligation. Each of the performance obligations is considered distinct and control is transferred to the customer over the subscription term. As a result, revenue is recognized ratably over the subscription term as services are provided.

We offer merchant payment processing services as a separately paid connected service for our QuickBooks Desktop packaged software products and software subscriptions, and revenue is recognized as the services are provided to the customers.

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Online Offerings

Our online offerings include TurboTax Online and TurboTax Live, ProConnect Tax Online, QuickBooks Online, online payroll, and merchant payment processing services for small businesses who use our online offerings.

These online offerings provide customers with the right to use the hosted software over the contract period without taking possession of the software and are billed on either a subscription or consumption basis. Revenue related to our online offerings that are billed on a subscription basis is recognized ratably over the contract period. Revenue related to online offerings that are billed on a consumption basis, is recognized when the customer consumes the related service.

Other Solutions

Revenue from our Credit Karma segment is primarily comprised of revenue from the delivery of qualified links that result in completed actions, or cost-per-action transactions. Credit Karma also generates revenue from cost-per-click and cost-per-lead transactions. All revenue from our Credit Karma segment is included in service and other revenue on our consolidated statement of operations.

Cost-per-action revenue is earned based on a pre-determined fee for approved actions such as when credit cards are issued or when personal loans and other loans to businesses are funded and is recognized as the actions are completed.

Cost-per-click and cost-per-lead revenue is primarily related to mortgage and insurance businesses. Cost-per-click revenue is earned as users click on our customers' advertisements and is recognized based on the number of clicks recorded each month. Cost-per-lead revenue is earned via customer advertisements that allow the generation of leads from consumers interested in the advertised products and is recognized at the time a consumer request or lead is delivered to the customer.

Revenue from the sale of our financial supplies, such as printed check stock and hardware, such as retail point-of-sale equipment and credit card readers for mobile phones, is recognized when control is transferred to the customer which is generally when the products are shipped.

We also have revenue-sharing and royalty arrangements with third-party partners and recognize this revenue as earned based upon reporting provided to us by our partners. In instances where we do not have reporting from our partners, we estimate revenue based on information available to us at the time.

Product Revenue and Service and Other Revenue

Product revenue includes revenue from: QuickBooks Desktop software licenses and version protection; consumer and professional tax desktop licenses and the related form updates; desktop payroll licenses and related updates; and financial supplies.

Service and other revenue includes revenue from: our online offerings discussed above; support, electronic filing services and connected services included with our desktop offerings; merchant payment processing services for our desktop offerings; and revenue-sharing and royalty arrangements.

We record revenue net of sales tax obligations. For payroll services, we generally require customers to remit payroll tax funds to us in advance of the payroll date via electronic funds transfer. We include in total net revenue the interest earned on these funds between the time that we collect them from customers and the time that we remit them to outside parties. Revenue for electronic payment processing services that we provide to merchants is recorded net of interchange fees charged by credit card associations.

Judgments and Estimates

Our contracts with customers often include promises to transfer multiple products and services to a customer. In determining how revenue should be recognized, a five-step process is used, which requires judgment and estimates. These judgments and estimates include identifying performance obligations in the contract, determining whether the performance obligations are distinct, determining the SSP for each distinct performance obligation, determining the timing of revenue recognition for distinct performance obligations and estimating the amount of variable consideration to include in the transaction price.

The functionality of the software licenses included in our consumer and professional tax and payroll desktop offerings is dependent on the related enhancements and updates included in these offerings. Judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the related updates and recognized over time.

Our contracts with customers include promises to transfer various products and services, which are generally capable of being distinct performance obligations. In many cases SSPs for distinct performance obligations are based on directly observable pricing. In instances where the SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs.

Our consumer and professional tax desktop products include an on-premise tax software license and related tax form updates that are recognized as the forms and updates are delivered. We measure progress towards complete satisfaction of the software license and related tax form updates using an output method based on the timing of when the tax forms are delivered.

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We generally provide refunds to customers for product returns and subscription cancellations. We also provide promotional discounts and incentive rebates on retail and distribution sales. These refunds, discounts and incentive rebates are accounted for as variable consideration when estimating the amount of revenue to recognize. Refunds are estimated based on historical experience and current business and economic indicators and updated at the end of each reporting period as additional information becomes available to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Discounts and incentive rebates are estimated based on distributors' and retailers' performance against the terms and conditions of the rebate programs.

Deferred Revenue

We record deferred revenue when we have entered into a contract with a customer and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation. During the twelve months ended July 31, 2021, we recognized revenue of $652 million, that was included in deferred revenue at July 31, 2020. During the twelve months ended July 31, 2020, we recognized revenue of $619 million, that was included in deferred revenue at July 31, 2019.

Our performance obligations are generally satisfied within 12 months of the initial contract date. As of July 31, 2021 and 2020, the deferred revenue balance related to performance obligations that will be satisfied after 12 months was $8 million and $13 million, respectively, and is included in other long-term obligations on our consolidated balance sheets.

Assets Recognized from the Costs to Obtain a Contract with a Customer

Our internal sales commissions are considered incremental costs of obtaining the contract with a customer. Internal sales commissions for subscription offerings where we expect the benefit of those costs to continue longer than one year are capitalized and amortized ratably over the period of benefit, which ranges from three to four years. Total capitalized costs to obtain a contract are not significant and are included in prepaid expenses and other current assets and other assets on our consolidated balance sheets.

We apply a practical expedient to expense costs incurred to obtain a contract with a customer when the period of benefit is less than one year. These costs primarily include internal and external sales commissions for our consumer and professional tax offerings.

Shipping and Handling

We record the amounts we charge our customers for the shipping and handling of our software products as product revenue and we record the related costs as cost of product revenue in our consolidated statements of operations.

Customer Service and Technical Support

We include the costs of customer service and technical support associated with our online or hosted offerings in cost of service and other revenue line in our consolidated statements of operations. We also include the costs of providing technical support for our desktop offerings in cost of service and other revenue. We include the costs of customer service related to desktop offerings in selling and marketing expense in our consolidated statements of operations. Customer service and technical support costs include costs associated with performing order processing, answering customer inquiries by telephone and through websites, e-mail and other electronic means, and providing technical support assistance to customers. We expense the cost of providing this support as incurred.

Software Development Costs

We expense software development costs as we incur them until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. To date, our software has been available for general release concurrent with the establishment of technological feasibility and, accordingly, we have not capitalized any development costs. Costs we incur to enhance our existing products or after the general release of the service using the product are expensed in the period they are incurred and included in research and development expense in our consolidated statements of operations.

Internal Use Software

We capitalize costs related to development of hosted services that we provide to our customers and internal use of enterprise-level business and finance software in support of our operational needs. Costs incurred in the application development phase are capitalized and amortized on a straight-line basis over their useful lives, which are generally three to six years. Costs related to planning and other preliminary project activities and to post-implementation activities are expensed as incurred. We test these assets for impairment whenever events or changes in circumstances occur that could impact their recoverability.

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Advertising

We expense all advertising costs as we incur them to selling and marketing expense in our consolidated statements of operations. We recorded advertising expense of approximately $1.1 billion for the twelve months ended July 31, 2021, $778 million for the twelve months ended July 31, 2020, and $800 million for the twelve months ended July 31, 2019.

Leases

Our leases are primarily operating leases for office facilities. We do not have significant finance leases. We determine if an arrangement is a lease and classify it as either a finance or operating lease at lease inception. Operating leases are included in operating lease right-of-use (ROU) assets, other current liabilities, and operating lease liabilities on our consolidated balance sheets.

Operating lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. Our leases generally do not have a readily determinable implicit rate, therefore we use our incremental borrowing rate at the commencement date in determining the present value of future payments. Our incremental borrowing rate is determined based on a yield curve derived from publicly traded bond offerings for companies with similar credit ratings to us. Our lease terms may include options to purchase, extend or terminate the lease when it is reasonably certain that we will exercise that option. We account for the lease and non-lease components as a single lease component.

We measure ROU assets based on the corresponding lease liabilities adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date, net of lease incentives. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the calculation of the ROU asset and lease liability and are recognized as lease expense is incurred. Our variable lease payments generally relate to amounts paid to lessors for common area maintenance under our real estate leases.

Our subleases generally do not relieve us of our primary obligations under the corresponding head lease. As a result, we account for the head lease based on the original assessment at inception. We determine if the sublease arrangement is either a sales-type, direct financing, or operating lease at inception. If the total remaining lease cost on the head lease for the term of the sublease is greater than the anticipated sublease income, the ROU asset is assessed for impairment. Our subleases are generally operating leases and we recognize sublease income on a straight-line basis over the sublease term.

Capitalization of Interest Expense

We capitalize interest on capital projects, including facilities build-out projects and internal use computer software projects. Capitalization commences with the first expenditure for the project and continues until the project is substantially complete and ready for its intended use. We amortize capitalized interest to depreciation expense using the straight-line method over the same lives as the related assets. Capitalized interest was not significant for any period presented.

Foreign Currency

The functional currencies of our international operating subsidiaries are generally the local currencies. We translate the assets and liabilities of our foreign subsidiaries at the exchange rates in effect on the balance sheet date. We translate their revenue, costs and expenses at the average rates of exchange in effect during the period. We include translation gains and losses in the stockholders’ equity section of our consolidated balance sheets. We include net gains and losses resulting from foreign exchange transactions in interest and other income in our consolidated statements of operations. Translation gains and losses and transaction gains and losses were not significant for any period presented.

Income Taxes

We estimate our income taxes based on the various jurisdictions where we conduct business. Significant judgment is required in determining our worldwide income tax provision. We estimate our current tax liability and assess temporary differences that result from differing treatments of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we show on our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be realized. To the extent we believe that realization is not likely, we establish a valuation allowance. When we establish a valuation allowance or increase this allowance in an accounting period, we record a corresponding income tax expense in our consolidated statement of operations.

We review the need for a valuation allowance to reflect uncertainties about whether we will be able to utilize some of our deferred tax assets before they expire. The valuation allowance analysis is based on our estimates of taxable income for the jurisdictions in which we operate and the periods over which our deferred tax assets will be realizable. While we have considered future taxable income in assessing the need for a valuation allowance for the periods presented, we could be required to record a valuation allowance to take into account additional deferred tax assets that we may be unable to realize. An increase in the valuation allowance would have an adverse impact, which could be material, on our income tax provision and net income in the period in which we record the increase.

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We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not of being sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. We evaluate our uncertain tax positions on a quarterly basis. Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.

A description of our accounting policies associated with tax-related contingencies and valuation allowances assumed as part of a business combination is provided under “Business Combinations” below.

Computation of Net Income (Loss) Per Share

We compute basic net income or loss per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of the shares issuable upon the exercise of stock options and upon the vesting of restricted stock units (RSUs) under the treasury stock method.

We include stock options with combined exercise prices and unrecognized compensation expense that are less than the average market price for our common stock, and RSUs with unrecognized compensation expense that is less than the average market price for our common stock, in the calculation of diluted net income per share. We exclude stock options with combined exercise prices and unrecognized compensation expense that are greater than the average market price for our common stock, and RSUs with unrecognized compensation expense that is greater than the average market price for our common stock, from the calculation of diluted net income per share because their effect is anti-dilutive. Under the treasury stock method, the amount that must be paid to exercise stock options and the amount of compensation expense for future service that we have not yet recognized for stock options and RSUs are assumed to be used to repurchase shares.

All of the RSUs we grant have dividend rights. Dividend rights are accumulated and paid when the underlying RSUs vest. Since the dividend rights are subject to the same vesting requirements as the underlying equity awards they are considered a contingent transfer of value. Consequently, the RSUs are not considered participating securities and we do not present them separately in earnings per share.

The following table presents the composition of shares used in the computation of basic and diluted net income per share for the periods indicated.

			Twelve Months Ended July 31,
(In millions, except per share amounts)			2021						2020						2019
Numerator:
Net income			$	2,062					$	1,826					$	1,557
Denominator:
Shares used in basic per share amounts:
Weighted average common shares outstanding			270						261						260
Shares used in diluted per share amounts:
Weighted average common shares outstanding			270						261						260
Dilutive common equivalent shares from stock options and restricted stock awards			3						3						4
Dilutive weighted average common shares outstanding			273						264						264
Basic and diluted net income per share:
Basic net income per share			$	7.65					$	6.99					$	5.99
Diluted net income per share			$	7.56					$	6.92					$	5.89
Shares excluded from diluted net income per share:
Weighted average stock options and restricted stock units that have been excluded from dilutive common equivalent shares outstanding due to their anti-dilutive effect			—						—						1

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Cash Equivalents and Investments

We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. In all periods presented, cash equivalents consist primarily of money market funds and time deposits. Investments consist primarily of investment-grade available-for-sale debt securities. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market funds, we diversify our investments by limiting our holdings with any individual issuer.

We use the specific identification method to compute gains and losses on investments. We record unrealized gains and losses on investments, net of tax, in accumulated other comprehensive income in the stockholders’ equity section of our consolidated balance sheets and reflect unrealized gain and loss activity in other comprehensive income on our consolidated statement of comprehensive income. We generally classify available-for-sale debt securities as current assets based upon our ability and intent to use any and all of these securities as necessary to satisfy the significant short-term liquidity requirements that may arise from the highly seasonal nature of our businesses. Because of our significant business seasonality, stock repurchase programs, and acquisition opportunities, cash flow requirements may fluctuate dramatically from quarter to quarter and require us to use a significant amount of the investments we hold as available-for-sale.

Accounts Receivable and Allowances for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and are not interest bearing. We maintain an allowance for doubtful accounts to reserve for credit losses. In determining the amount of the allowance, we consider our historical level of credit losses, current economic trends that might impact the level of future credit losses, customer-specific information, and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. We make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. When we determine that amounts are uncollectible we write them off against the allowance.

Notes Receivable and Allowances for Loan Losses

Notes receivable consist of term loans to small businesses and are included in prepaid expenses and other current assets and other assets on our consolidated balance sheets. As of July 31, 2021 and July 31, 2020, the notes receivable balance was $139 million and $40 million, respectively, and the allowances for loan losses were not material. The term loans are not secured and are recorded at amortized cost, net of allowances for loan losses. We maintain an allowance for loan losses to reserve for potentially uncollectible notes receivable. We evaluate the creditworthiness of our loan portfolio on a pooled basis due to its composition of small, homogeneous loans with similar general credit risk and characteristics and apply a loss rate at the time of loan origination. The loss rate and underlying model are updated periodically to reflect actual loan performance and changes in assumptions. We make judgments about the known and inherent risks in the loan portfolio, adverse situations that may affect borrowers’ ability to repay and current economic conditions. When we determine that amounts are uncollectible, we write them off against the allowance.

Paycheck Protection Program - In April 2020, Intuit was approved as a non-bank Small Business Administration (SBA) lender for the Paycheck Protection Program (PPP). The PPP was authorized under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide small businesses loans to pay payroll and group health costs, salaries and commissions, mortgage and rent payments, utilities, and interest on other debt which is designed to provide assistance to small businesses during the COVID-19 pandemic. Lending under the program expired on August 8, 2020. As of July 31, 2021, all of the loans held for sale under this program have been sold. When loans under this program do not qualify to be sold, they are held for investment. As of July 31, 2021 and July 31, 2020, PPP loans held for investment were not material and are included in prepaid expenses and other current assets and other assets on our consolidated balance sheets. The SBA re-opened the PPP in January 2021 under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021. We marketed and referred small businesses to another lender under the re-opened program, but did not originate or service loans in this round of the program, which ended in May 2021.

Funds Held for Customers and Customer Fund Deposits

Funds held for customers represent cash held on behalf of our customers that is invested in cash and cash equivalents and investment-grade available-for-sale debt securities, restricted for use solely for the purpose of satisfying amounts we owe on behalf of our customers. Customer fund deposits consist of amounts we owe on behalf of our customers, such as direct deposit payroll funds and payroll taxes.

Property and Equipment

Property and equipment is stated at the lower of cost or realizable value, net of accumulated depreciation. We calculate depreciation using the straight-line method over the estimated useful lives of the assets, which range from two to 30 years. We amortize leasehold improvements using the straight-line method over the lesser of their estimated useful lives or remaining lease terms. We include the amortization of assets that are recorded under finance leases in depreciation expense. We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an

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asset may not be recoverable. We did not record any significant property impairment charges during the twelve months ended July 31, 2021, 2020, or 2019.

Business Combinations

The acquisition method of accounting for business combinations requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which we may adjust the provisional amounts recognized for a business combination).

Under the acquisition method of accounting we recognize separately from goodwill the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree, generally at the acquisition date fair value. We measure goodwill as of the acquisition date as the excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed. Costs that we incur to complete the business combination such as investment banking, legal and other professional fees are not considered part of consideration and we charge them to general and administrative expense as they are incurred. Under the acquisition method we also account for acquired company restructuring activities that we initiate separately from the business combination.

Should the initial accounting for a business combination be incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date and we record those adjustments to our financial statements. We apply those measurement period adjustments that we determine to be significant retrospectively to comparative information in our financial statements, including adjustments to depreciation and amortization expense.

Under the acquisition method of accounting for business combinations, if we identify changes to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement period adjustment and we record the offset to goodwill. We record all other changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions in current period income tax expense. This accounting applies to all of our acquisitions regardless of acquisition date.

Goodwill, Acquired Intangible Assets and Other Long-Lived Assets

Goodwill

We record goodwill when the fair value of consideration transferred in a business combination exceeds the fair value of the identifiable assets acquired and liabilities assumed. Goodwill and other intangible assets that have indefinite useful lives are not amortized, but we test them for impairment annually during our fourth fiscal quarter and whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable.

In accordance with authoritative guidance, we define fair value as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We consider and use all valuation methods that are appropriate in estimating the fair value of our reporting units and generally use a weighted combination of income and market approaches. Under the income approach, we estimate the fair value of each reporting unit based on the present value of future cash flows. We use a number of assumptions in our discounted cash flow model, including market factors specific to the business, the amount and timing of estimated future cash flows to be generated by the business over an extended period of time, long-term growth rates for the business, and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. Under the market approach, we estimate the fair value of each reporting unit based on market multiples of revenue, operating income, and earnings for comparable publicly traded companies engaged in similar businesses. If the estimated fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired.

If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of the unit, we would record an impairment loss equal to the difference. We recorded no goodwill impairment charges for the twelve months ended July 31, 2021, 2020 or 2019.

Acquired Intangible Assets and Other Long-Lived Assets

We generally record acquired intangible assets that have finite useful lives, such as purchased technology, in connection with business combinations. We amortize the cost of acquired intangible assets on a straight-line basis over their estimated useful lives, which range from two to fifteen years. We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. We estimate the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate. We estimate the fair value of assets that have finite useful lives based on the present value of future cash flows for those assets. If the carrying value of an asset with a finite life exceeds its estimated fair

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value, we would record an impairment loss equal to the difference. Impairment charges for acquired intangible assets were not significant for the twelve months ended July 31, 2021, 2020 or 2019.

Share-Based Compensation Plans

We estimate the fair value of stock options granted using a lattice binomial model and a multiple option award approach. We amortize the fair value of stock options on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods.

Restricted stock units (RSUs) granted typically vest based on continued service. We value these time-based RSUs at the date of grant using the intrinsic value method. We amortize the fair value of time-based RSUs on a straight-line basis over the service period. Certain RSUs granted to senior management vest based on the achievement of pre-established performance or market goals. We estimate the fair value of performance-based RSUs at the date of grant using the intrinsic value method and the probability that the specified performance criteria would be met. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust our estimate of the fair value of the performance-based RSUs if necessary. We amortize the fair values of performance-based RSUs over the requisite service period for each separately vesting tranche of the award. We estimate the fair value of market-based RSUs at the date of grant using a Monte Carlo valuation methodology and amortize those fair values over the requisite service period for each separately vesting tranche of the award. The Monte Carlo methodology that we use to estimate the fair value of market-based RSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the market-based RSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria. All of the RSUs we grant have dividend rights that are subject to the same vesting requirements as the underlying equity awards, so we do not adjust the intrinsic (market) value of our RSUs for dividends.

See Note 11, “Stockholders’ Equity,” for a description of our share-based compensation plans and more information on the assumptions we use to calculate the fair value of share-based compensation.

Concentration of Credit Risk and Significant Customers and Suppliers

We operate in markets that are highly competitive and rapidly changing. Significant technological changes, shifting customer needs, the emergence of competitive products or services with new capabilities and other factors could negatively impact our operating results.

We are also subject to risks related to changes in the value of our significant balance of investments. Our portfolio of investments consists of investment-grade securities. Except for direct obligations of the United States government, securities issued by agencies of the United States government and money market funds, we diversify our investments by limiting our holdings with any individual issuer.

We sell a portion of our products through third-party retailers and distributors. As a result, we face risks related to the collectibility of our accounts receivable. To appropriately manage this risk, we perform ongoing evaluations of customer credit and limit the amount of credit extended as we deem appropriate, but generally do not require collateral. We maintain reserves for estimated credit losses and these losses have historically been within our expectations. However, since we cannot predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate. No customer accounted for 10% or more of total net revenue for the twelve months ended July 31, 2021, 2020 or 2019, nor did any customer account for 10% or more of total accounts receivable at July 31, 2021 or July 31, 2020.

We rely primarily on one third-party vendor to perform the manufacturing and distribution functions for our retail desktop software products. We also have a key single-source vendor that prints and fulfills orders for most of our financial supplies business. While we believe that relying on key vendors improves the efficiency and reliability of our business operations, relying on any one vendor for a significant aspect of our business can have a significant negative impact on our revenue and profitability if that vendor fails to perform at acceptable service levels for any reason, including financial difficulties of the vendor.

Accounting Standards Recently Adopted

Internal-Use Software - In August 2018 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, “Intangibles—Goodwill and Other (Topic 350): Internal-Use Software.” This standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted this standard in the first quarter of our fiscal year beginning August 1, 2020 on a prospective basis. The adoption did not have a material impact on our consolidated financial statements.

Goodwill Impairment - In January 2017 the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill

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allocated to the reporting unit. We adopted this standard in the first quarter of our fiscal year beginning August 1, 2020 on a prospective basis. The adoption did not have a material impact on our consolidated financial statements.

Financial Instruments - In June 2016 the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” This standard requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. We adopted this standard in the first quarter of our fiscal year beginning August 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

Accounting Standards Not Yet Adopted

We do not expect that any other recently issued accounting pronouncements will have a significant effect on our financial statements.

2. Fair Value Measurements

Fair Value Hierarchy

The authoritative guidance defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, we consider the principal or most advantageous market for an asset or liability and assumptions that market participants would use when pricing the asset or liability. In addition, we consider and use all valuation methods that are appropriate in estimating the fair value of an asset or liability.

The authoritative guidance establishes a fair value hierarchy that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities. In general, the authoritative guidance requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the measurement of its fair value. The three levels of input defined by the authoritative guidance are as follows:

• Level 1** uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.

• Level 2** uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices in active markets for similar assets or liabilities: quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the assets or liabilities.

• Level 3** uses one or more unobservable inputs that are supported by little or no market activity and that are significant to the determination of fair value. Level 3 assets and liabilities include those whose fair values are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial assets and financial liabilities that we measured at fair value on a recurring basis at the dates indicated, classified in accordance with the fair value hierarchy described above.

			At July 31, 2021																		At July 31, 2020
(In millions)			Level 1						Level 2												Total Fair Value						Level 1						Level 2												Total Fair Value
Assets:
Cash equivalents, primarily money market funds and time deposits			$	1,660					$	—											$	1,660					$	5,765					$	—											$	5,765
Available-for-sale debt securities:
Municipal bonds			—						38												38						—						9												9
Corporate notes			—						1,400												1,400						—						752												752
U.S. agency securities			—						70												70						—						47												47
Total available-for-sale securities			—						1,508												1,508						—						808												808
Total assets measured at fair value on a recurring basis			$	1,660					$	1,508											$	3,168					$	5,765					$	808											$	6,573
Liabilities:
Senior unsecured notes(1)			$	—					$	1,986											$	1,986					$	—					$	2,042											$	2,042

(1) Carrying value on our balance sheet at July 31, 2021 and July 31, 2020 was $1.99 billion and $1.98 billion, respectively. See Note 8, “Long-Term Obligations and Commitments” for more information.

The following table summarizes our cash equivalents and available-for-sale debt securities by balance sheet classification and level in the fair value hierarchy at the dates shown:

			At July 31, 2021																		At July 31, 2020
(In millions)			Level 1						Level 2												Total Fair Value						Level 1						Level 2												Total Fair Value
Cash equivalents:
In cash and cash equivalents			$	1,660					$	—											$	1,660					$	5,765					$	—											$	5,765
Available-for-sale debt securities:
In investments			$	—					$	1,308											$	1,308					$	—					$	608											$	608
In funds held for customers			—						200												200						—						200												200
Total available-for-sale debt securities			$	—					$	1,508											$	1,508					$	—					$	808											$	808

We value our Level 1 assets, consisting primarily of money market funds and time deposits, using quoted prices in active markets for identical instruments.

Financial assets whose fair values we measure on a recurring basis using Level 2 inputs consist of municipal bonds, corporate notes and U.S. agency securities. We measure the fair values of these assets with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments. Our fair value processes include controls designed to ensure that we record appropriate fair values for our Level 2 investments. These controls include comparison to pricing provided by a secondary pricing service or investment manager, validation of pricing sources and models, review of key model inputs, analysis of period-over-period price fluctuations, and independent recalculation of prices where appropriate.

Financial assets whose fair values we measure using Level 3 inputs consist of loans held for sale. These loans are recorded at the lower of cost or fair value. We had no loans held for sale at July 31, 2021 and $98 million at July 31, 2020. The difference between cost and fair value was not material.

Financial liabilities whose fair values we measure using Level 2 inputs consist of senior unsecured notes. See Note 8, “Long-Term Obligations and Commitments” for more information. We measure the fair value of our senior unsecured notes based on their trading prices and the interest rates we could obtain for other borrowings with similar terms.

There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the twelve months ended July 31, 2021, 2020 or 2019.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis include reporting units measured at fair value in a goodwill impairment test and our long-term investments.

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Estimates of fair value for reporting units fall under Level 3 of the fair value hierarchy. During the fourth quarters of fiscal 2021, fiscal 2020, and fiscal 2019 we performed our annual goodwill impairment tests. Using the methodology described in Note 1, we determined that the estimated fair values of all of our reporting units exceeded their carrying values and that they were not impaired.

Long-term investments represent non-marketable equity securities in privately held companies that do not have a readily determinable fair value. They are accounted for at cost and adjusted based on observable price changes from orderly transactions for identical or similar investments of the same issuer or impairment. These investments are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. As of July 31, 2021 and July 31, 2020, the carrying value of long-term investments was $43 million and $19 million, respectively, and adjustments to the carrying value of these investments for the twelve months ended July 31, 2021 were not significant.

3. Cash and Cash Equivalents, Investments, and Funds Held for Customers

The following table summarizes our cash and cash equivalents, investments and funds held for customers by balance sheet classification at the dates indicated.

			July 31, 2021												July 31, 2020
(In millions)			Amortized Cost						Fair Value						Amortized Cost						Fair Value
Classification on consolidated balance sheets:
Cash and cash equivalents			$	2,562					$	2,562					$	6,442					$	6,442
Investments			1,305						1,308						600						608
Funds held for customers			456						457						455						455
Total cash and cash equivalents, investments, and funds held for customers			$	4,323					$	4,327					$	7,497					$	7,505

The following table summarizes our cash and cash equivalents, investments and funds held for customers by investment category at the dates indicated.

			July 31, 2021												July 31, 2020
(In millions)			Amortized Cost						Fair Value						Amortized Cost						Fair Value
Type of issue:
Total cash, cash equivalents, restricted cash, and restricted cash equivalents			$	2,819					$	2,819					$	6,697					$	6,697
Available-for-sale debt securities:
Municipal bonds			37						38						9						9
Corporate notes			1,397						1,400						744						752
U.S. agency securities			70						70						47						47
Total available-for-sale debt securities			1,504						1,508						800						808
Total cash, cash equivalents, restricted cash, restricted cash equivalents, and investments			$	4,323					$	4,327					$	7,497					$	7,505

We include realized gains and losses on our available-for-sale debt securities in interest and other income or expense on our consolidated statements of operations. Gross realized gains and losses on our available-for-sale debt securities for the twelve months ended July 31, 2021, 2020 and 2019 were not significant.

We accumulate unrealized gains and losses on our available-for-sale debt securities, net of tax, in accumulated other comprehensive income or loss in the stockholders’ equity section of our consolidated balance sheets, except for certain unrealized losses described below. Gross unrealized gains and losses on our available-for-sale debt securities at July 31, 2021 and July 31, 2020 were not significant.

For available-for sale debt securities in an unrealized loss position, we determine whether a credit loss exists. The estimate of the credit loss is determined by considering available information relevant to the collectibility of the security and information about past events, current conditions, and reasonable and supportable forecasts. The allowance for credit loss is recorded to interest and other income on our consolidated statement of operations, not to exceed the amount of the unrealized loss. Any excess unrealized loss greater than the credit loss at a security level is recognized in accumulated other comprehensive income or loss in the stockholders' equity section of our consolidated balance sheets. We determined there were no credit losses related to available-for-sale securities as of July 31, 2021. Unrealized losses on available-for-sale debt securities at July 31,

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2021 were not significant. We do not intend to sell these investments. In addition, it is more likely than not that we will not be required to sell them before recovery of the amortized cost basis, which may be at maturity.

The following table summarizes our available-for-sale debt securities, included in investments and funds held for customers, classified by the stated maturity date of the security at the dates indicated.

			July 31, 2021												July 31, 2020
(In millions)			Amortized Cost						Fair Value						Amortized Cost						Fair Value
Due within one year			$	551					$	553					$	389					$	390
Due within two years			550						551						256						261
Due within three years			398						398						137						139
Due after three years			5						6						18						18
Total available-for-sale debt securities			$	1,504					$	1,508					$	800					$	808

The following table summarizes our funds held for customers by investment category at the dates indicated.

(In millions)			July 31, 2021						July 31, 2020						July 31, 2019						July 31, 2018
Restricted cash and restricted cash equivalents			$	257					$	255					$	236					$	167
Restricted available-for-sale debt securities			200						200						200						200
Total funds held for customers			$	457					$	455					$	436					$	367

4. Property and Equipment

Property and equipment consisted of the following at the dates indicated:

			Life in						July 31,
(Dollars in millions)			Years						2021						2020
Equipment			3-5						$	199					$	226
Computer software			2-6						899						870
Furniture and fixtures			5						96						93
Leasehold improvements			2-16						350						298
Land			NA						79						79
Buildings			5-30						375						372
Capital in progress			NA						122						90
									2,120						2,028
Less accumulated depreciation and amortization									(1,340)						(1,294)
Total property and equipment, net									$	780					$	734

---

NA = Not Applicable

Capital in progress at July 31, 2021 and 2020 consisted primarily of costs related to various buildings and site improvements that have not yet been placed into service.

As discussed in Note 1, “Description of Business and Summary of Significant Accounting Policies – Internal Use Software,” we capitalize costs related to the development of computer software for internal use. We capitalized internal use software costs totaling $72 million for the twelve months ended July 31, 2021; $78 million for the twelve months ended July 31, 2020; and $79 million for the twelve months ended July 31, 2019. These amounts included capitalized labor costs of $30 million, $40 million, and $43 million, respectively. Costs related to internal use software projects are included in the capital in progress category of property and equipment until project completion, at which time they are transferred to the computer software category.

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5. Goodwill and Acquired Intangible Assets

Goodwill

Changes in the carrying value of goodwill by reportable segment during the twelve months ended July 31, 2021 and July 31, 2020 were as shown in the following table. Our reportable segments are described in Note 14, “Segment Information.”

(In millions)			Balance July 31, 2019						Goodwill Acquired						Foreign Currency Translation						Balance July 31, 2020						Goodwill Acquired						Foreign Currency Translation						Balance July 31, 2021
Small Business & Self-Employed			$	1,518					$	—					$	—					$	1,518					$	59					$	1					$	1,578
Consumer			42						—						—						42						—						—						42
ProConnect			95						—						(1)						94						—						1						95
Credit Karma			—						—						—						—						3,898						—						3,898
Totals			$	1,655					$	—					$	(1)					$	1,654					$	3,957					$	2					$	5,613

Goodwill is net of accumulated impairment losses of $114 million, which were recorded prior to July 31, 2019 and are included in our Consumer segment. The increase in goodwill during the twelve months ended July 31, 2021 was primarily due to the acquisition of Credit Karma.

Acquired Intangible Assets

The following table shows the cost, accumulated amortization and weighted average life in years for our acquired intangible assets at the dates indicated. The increases in intangible assets during the twelve months ended July 31, 2021 were primarily related to the acquisition of Credit Karma. See Note 6, “Business Combinations.” The weighted average lives are calculated for assets that are not fully amortized.

(Dollars in millions)			Customer Lists / User Relationships						Purchased Technology						Trade Names and Logos						Covenants Not to Compete or Sue						Total
At July 31, 2021:
Cost			$	3,038					$	686					$	400					$	42					$	4,166
Accumulated amortization			(377)						(455)						(41)						(41)						(914)
Acquired intangible assets, net			$	2,661					$	231					$	359					$	1					$	3,252
Weighted average life in years			15						5						15						3						14
At July 31, 2020:
Cost			$	256					$	421					$	25					$	42					$	744
Accumulated amortization			(248)						(404)						(25)						(39)						(716)
Acquired intangible assets, net			$	8					$	17					$	—					$	3					$	28
Weighted average life in years			5						3						0						3						4

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The following table shows the expected future amortization expense for our acquired intangible assets at July 31, 2021. Amortization of purchased technology is charged to amortization of acquired technology in our consolidated statements of operations. Amortization of other acquired intangible assets such as customer lists is charged to amortization of other acquired intangible assets in our consolidated statements of operations. If impairment events occur, they could accelerate the timing of acquired intangible asset charges.

(In millions)			Expected Future Amortization Expense
Twelve months ending July 31,
2022			$	274
2023			264
2024			248
2025			247
2026			247
Thereafter			1,972
Total expected future amortization expense			$	3,252

6. Business Combinations

Credit Karma

On December 3, 2020 we acquired all of the outstanding shares of Credit Karma, a consumer technology platform. We acquired Credit Karma to help consumers unlock smart money decisions and accelerate our mission of powering prosperity around the world, by creating a personal financial assistant that helps consumers find the right financial products, put more money in their pockets and access financial expertise and advice. Credit Karma is a separate reportable segment. See Note 14, "Segment Information," for more information. We have included the financial results of Credit Karma in the consolidated financial statements from the date of acquisition. For the twelve months ended July 31, 2021 and July 31, 2020, the transaction costs associated with the acquisition were approximately $31 million and $28 million, respectively, and were recorded in general and administrative expenses.

We acquired Credit Karma for total consideration of $8.1 billion which included assumed equity awards and restricted shares subject to a revest provision.

The fair value of the purchase consideration totaled $7.2 billion and included $3.4 billion in cash, 10.6 million shares of Intuit common stock with a fair value of $3.8 billion and assumed equity awards for services rendered through the acquisition date of $47 million.

We also issued shares of common stock with a fair value of $275 million which are restricted due to a revest provision, and are being be expensed over a service period of three years. The share-based compensation expense related to these restricted shares is non-deductible for income tax purposes. Additionally, we assumed equity awards for future services with a fair value of $663 million that are being charged to expense over the remaining service periods, which average approximately three years.

The fair value of the stock consideration is based on the December 2, 2020 closing price of Intuit common stock of $355.49.

As part of the merger agreement, following the close of the transaction, we issued approximately $300 million of restricted stock units to the employees of Credit Karma, which is being charged to expense over a service period of four years.

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The preliminary allocation of the Credit Karma purchase price is as follows:

(In millions)			Amount
Cash and cash equivalents			$	436
Accounts receivable, net			141
Income taxes receivable			59
Prepaid expenses and other current assets			7
Long-term investments			3
Property and equipment, net			63
Operating lease right-of-use assets			167
Goodwill			3,898
Intangible assets			3,372
Other assets			81
Accounts payable			(86)
Accrued compensation and related liabilities			(113)
Other current liabilities			(24)
Operating lease liabilities			(172)
Long-term deferred income tax liabilities			(627)
Other long-term obligations			(10)
Total preliminary purchase price allocation			$	7,195

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Credit Karma and the synergies expected to be achieved. This goodwill is assigned to the new Credit Karma segment and is non-deductible for income tax purposes. The fair values assigned to tangible assets acquired and liabilities assumed are preliminary based on management's estimates and assumptions and may be subject to change as additional information is received and certain tax returns are finalized. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

Intangible assets consist of user relationships, trade names/trademarks, purchased technology, and partner relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is 14.4 years. The following table presents the details of identifiable intangible assets acquired.

(In millions, except years)			Estimated Useful Life						Amount
User relationships			15 years						$	2,781
Trade names/Trademarks			15 years						375
Purchased technology			6 years						216
Total identifiable intangible assets									$	3,372

The following table summarizes the long-term deferred income tax assets and liabilities included in the purchase price allocation above:

(In millions)			Amount
Intangibles			$	(851)
Federal and state net operating loss carryforwards			138
Federal research and experimentation credit carryforwards			51
Other, net			35
Total net long-term deferred income tax liabilities			$	(627)

The unaudited financial information in the table below summarizes the combined results of operations of Intuit and Credit Karma on a pro forma basis, as though the companies had been combined as of the beginning of our fiscal 2020. These pro forma results were based on estimates and assumptions, which we believe are reasonable. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of our fiscal 2020. The pro forma financial information assumes our senior unsecured notes were issued as of the beginning of our fiscal 2020 and includes adjustments to share-based compensation

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expense, amortization for acquired intangible assets, interest expense, transaction costs, capitalization and amortization of certain activities associated with the development of internal use software to conform with Intuit's accounting policy, and related tax effects.

The pro forma financial information for the twelve months ended July 31, 2021 combines our results for the twelve months ended July 31, 2021, which include the results of Credit Karma subsequent to December 3, 2020, and the historical results for Credit Karma for the three months ended September 30, 2020 and one month ended November 30, 2020. The pro forma financial information for the twelve months ended July 31, 2020 combines our results for the twelve months ended July 31, 2020 and the historical results for Credit Karma for the twelve months ended June 30, 2020.

The following table summarizes the pro forma financial information:

			Twelve Months Ended July 31,
(In millions)			2021						2020
Total revenue			$	9,876					$	8,549
Net income			$	1,977					$	1,319
Basic net income per share			$	7.21					$	4.85
Diluted net income per share			$	7.11					$	4.80

7. Current Liabilities

Short-Term Debt

On May 2, 2019 we entered into an amended and restated credit agreement with certain institutional lenders with an aggregate principal amount of $1.4 billion, including a $1 billion unsecured revolving credit facility that matures on May 2, 2024 and a $400 million unsecured term loan that was due on February 1, 2021.

Unsecured Revolving Credit Facility

The amended and restated credit agreement we entered into on May 2, 2019 includes a $1 billion unsecured revolving credit facility that will expire on May 2, 2024. Under this agreement we may, subject to certain customary conditions including lender approval, on one or more occasions increase commitments under the unsecured revolving credit facility in an amount not to exceed $250 million in the aggregate and may extend the maturity date up to two times. Advances under the unsecured revolving credit facility accrue interest at rates that are equal to, at our election, either Bank of America's alternate base rate plus a margin that ranges from 0.0% to 0.1% or the London Interbank Offered Rate (LIBOR) plus a margin that ranges from 0.69% to 1.1%. Actual margins under either election will be based on our senior debt credit ratings. The amended and restated credit agreement includes customary affirmative and negative covenants, including financial covenants that require us to maintain a ratio of total gross debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 as of any date and a ratio of annual EBITDA to annual interest expense of not less than 3.00 to 1.00 as of the last day of each fiscal quarter. As of July 31, 2021 we were compliant with all required covenants. We repaid the $1 billion that was outstanding as of July 31, 2020 under this unsecured revolving credit facility during the first quarter of fiscal 2021, and at July 31, 2021 no amounts were outstanding. We paid $1 million for interest on the unsecured revolving credit facility during the twelve months ended July 31, 2021 and $2 million during the twelve months ended July 31, 2020. We paid no interest on the unsecured revolving credit facility during the twelve months ended July 31, 2019.

Term Loan

On February 1, 2021, we paid the $325 million remaining balance of the term loan upon maturity and at July 31, 2021, no amount was outstanding. The term loan accrued interest at rates that were equal to, at our election, either Bank of America's alternate base rate plus a margin that ranges from 0.0% to 0.125% or LIBOR plus a margin that ranges from 0.625% to 1.125%. Interest on the term loan was payable monthly. We paid $2 million for interest on the term loan during the twelve months ended July 31, 2021, $9 million during the twelve months ended July 31, 2020, and $15 million during the twelve months ended July 31, 2019. Under the amended and restated agreement we may, subject to certain customary conditions including lender approval, on one or more occasions increase commitments under the term loan in an amount not to exceed $400 million in the aggregate. This option continues to be available to us through the expiration of the amended and restated credit agreement on May 2, 2024.

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Other Current Liabilities

Other current liabilities were as follows at the dates indicated:

			July 31,
(In millions)			2021						2020
Executive deferred compensation plan liabilities			$	153					$	123
Current portion of operating lease liabilities			66						46
Reserve for returns and credits			21						24
Amounts due for share repurchases			17						—
Reserve for promotional discounts and rebates			10						11
Current portion of dividend payable			9						6
Interest payable			1						3
Other			84						84
Total other current liabilities			$	361					$	297

8. Long-Term Obligations and Commitments

Senior Unsecured Notes

In June 2020 we issued four series of senior unsecured notes (together, the Notes) pursuant to a public debt offering. The proceeds from the issuance were $1.98 billion, net of debt discount of $2 million and debt issuance costs of $15 million.

The carrying value of the Notes was as follows at the date indicated:

			July 31,						July 31,						Effective
(In millions)			2021						2020						Interest Rate
Senior unsecured notes issued June 2020:
0.650% notes due July 2023			$	500					$	500					0.837%
0.950% notes due July 2025			500						500						1.127%
1.350% notes due July 2027			500						500						1.486%
1.650% notes due July 2030			500						500						1.767%
Total senior unsecured notes			2,000						2,000
Unamortized discount and debt issuance costs			(14)						(17)
Net carrying value senior unsecured notes			$	1,986					$	1,983

Interest is payable semiannually on January 15 and July 15 of each year. The discount and debt issuance costs are amortized to interest expense over the term of the Notes under the effective interest method. We paid $24 million for interest on the Notes during the twelve months ended July 31, 2021 and no interest during the twelve months ended July 31, 2020.

The Notes are senior unsecured obligations of Intuit and rank equally with all existing and future unsecured and unsubordinated indebtedness of Intuit and are redeemable by us at any time, subject to a make-whole premium. Upon the occurrence of change of control transactions that are accompanied by certain downgrades in the credit ratings of the Notes, we will be required to repurchase the Notes at a repurchase price equal to 101% of the aggregate outstanding principal plus any accrued and unpaid interest to but not including the date of repurchase. The indenture governing the Notes requires us to comply with certain covenants. For example, the Notes limit our ability to create certain liens and enter into sale and leaseback transactions. As of July 31, 2021 we were compliant with all covenants governing the Notes.

Secured Revolving Credit Facility

On February 19, 2019 a subsidiary of Intuit entered into a $300 million secured revolving credit facility with a lender to fund a portion of our loans to qualified small businesses. The revolving credit facility is secured by cash and receivables of the subsidiary and is non-recourse to Intuit Inc. We have entered into several amendments to the secured revolving credit facility, most recently on July 16, 2021, primarily to extend the commitment term and maturity date. Under the amended agreement, $150 million of the facility is committed and $150 million is uncommitted. Advances accrue interest at LIBOR plus 1.5%. Unused portions of the committed credit facility accrue interest at a rate ranging from 0.25% to 0.75%, depending on the total unused committed balance. The commitment term is through July 17, 2023 and the final maturity date is January 17, 2024. The amended agreement allows for the transition of the benchmark interest rate used to calculate finance charges from LIBOR to the Secured Overnight Finance Rate (SOFR) plus related benchmark adjustments that represent the prevailing

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market convention for dollar-denominated syndicated credit facilities. The agreement includes certain affirmative and negative covenants, including financial covenants that require the subsidiary to maintain specified financial ratios. As of July 31, 2021 we were compliant with all required covenants. At July 31, 2021, $48 million was outstanding under this facility and the weighted-average interest rate was 3.21%, which includes the interest on the unused committed portion. The outstanding balance is secured by cash and receivables of the subsidiary totaling $199 million. Interest on the facility is payable monthly. We paid $3 million for interest on the secured revolving credit facility during each of the twelve months ended July 31, 2021 and 2020.

Future principal payments for long-term debt at July 31, 2021 were as shown in the table below.

(In millions)
Fiscal year ending July 31,
2022			$	—
2023			500
2024			48
2025			500
2026			—
Thereafter			1,000
Total commitments			$	2,048

Other Long-Term Obligations

Other long-term obligations were as follows at the dates indicated:

			July 31,
(In millions)			2021						2020
Long-term income tax liabilities			$	24					$	10
Total dividend payable			17						12
Long-term deferred revenue			8						13
Other			15						17
Total long-term obligations			64						52
Less current portion (included in other current liabilities)			(11)						(10)
Long-term obligations due after one year			$	53					$	42

Unconditional Purchase Obligations

In the ordinary course of business we enter into certain unconditional purchase obligations with our suppliers. These are agreements to purchase products and services that are enforceable, legally binding, and specify terms that include fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the payments.

Annual minimum commitments under purchase obligations at July 31, 2021 were as shown in the table below.

(In millions)			Purchase Obligations
Fiscal year ending July 31,
2022			$	205
2023			147
2024			68
2025			58
2026			53
Thereafter			—
Total commitments			$	531

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9. Leases

We lease office facilities under non-cancellable operating lease arrangements. Our facility leases generally provide for periodic rent increases and may contain escalation clauses and renewal options. Our leases have remaining lease terms of up to 10 years, some of which include one or more options to extend the leases for up to 10 years per option, generally at rates to be determined in accordance with the agreements. Options to extend the lease are included in the lease liability if they are reasonably certain of being exercised. We do not have significant finance leases.

We sublease certain office facilities to third parties. These subleases have remaining lease terms of up to 4 years, some of which include one or more options to extend the subleases for up to 5 years per option.

In March 2020, we entered into an agreement to terminate an office facility lease and related sublease, which were due to expire in 2025 and 2022, respectively. As a result, we reduced our operating lease right-of-use assets and lease liabilities by $61 million during the twelve months ended July 31, 2020.

The components of lease expense were as follows:

			Twelve Months Ended July 31,
(In millions)			2021						2020
Operating lease cost (1)			$	75					$	69
Variable lease cost			11						13
Sublease income			(16)						(22)
Total net lease cost			$	70					$	60

(1) Includes short-term leases, which are not significant for the twelve months ended July 31, 2021 or 2020.

Prior to the adoption of ASC 842 on August 1, 2019, rent expense under operating leases, net of sublease income was $42 million for the twelve months ended July 31, 2019. Sublease income was $24 million for the twelve months ended July 31, 2019.

Supplemental cash flow information related to operating leases was as follows:

			Twelve Months Ended July 31,
			2021						2020
(In millions)
Cash paid for amounts included in the measurement of operating lease liabilities			$	76					$	70
Right-of-use assets obtained in exchange for new operating lease liabilities (1)			$	60					$	346

(1) For the twelve months ended July 31, 2020, this includes $319 million for operating leases existing on August 1, 2019 and $27 million for operating leases that commenced during fiscal 2020.

Other information related to operating leases was as follows at the dates indicated:

			July 31,
			2021						2020
Weighted-average remaining lease term for operating leases			6.8 years						5.5 years
Weighted-average discount rate for operating leases			2.3		%				3.1		%

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Future minimum lease payments under non-cancellable operating leases as of July 31, 2021 were as follows:

(In millions)			Operating Leases (1)
Fiscal year ending July 31,
2022			$	76
2023			81
2024			78
2025			62
2026			45
Thereafter			139
Total future minimum lease payments			481
Less imputed interest			(35)
Present value of lease liabilities			$	446

(1) Non-cancellable sublease proceeds for the fiscal years ending July 31, 2022, 2023, 2024, and 2025 of $18 million, $11 million, $8 million, and $4 million, respectively, are not included in the table above.

Supplemental balance sheet information related to operating leases was as follows at the date indicated:

			July 31,
(In millions)			2021						2020
Operating lease right-of-use assets			$	380					$	226
Other current liabilities			$	66					$	46
Operating lease liabilities			380						221
Total operating lease liabilities			$	446					$	267

As of July 31, 2021, we have additional operating leases of $43 million, primarily for office facilities, that have not yet commenced and therefore are not reflected on the consolidated balance sheet nor in the tables above. These operating leases will commence in fiscal year 2022 with lease terms of 1 to 11 years.

10. Income Taxes

The provision for income taxes consisted of the following for the periods indicated:

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Current:
Federal			$	399					$	372					$	271
State			121						79						67
Foreign			17						21						14
Total current			537						472						352
Deferred:
Federal			(33)						(47)						(23)
State			(11)						(47)						(4)
Foreign			1						(6)						(1)
Total deferred			(43)						(100)						(28)
Total provision for income taxes			$	494					$	372					$	324

We recognized excess tax benefits on share-based compensation of $126 million, $90 million, and $120 million in the provision for income taxes for the twelve months ended July 31, 2021, 2020, and 2019, respectively.

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The sources of income before the provision for income taxes consisted of the following for the periods indicated:

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
United States			$	2,497					$	2,206					$	1,826
Foreign			59						(8)						55
Total			$	2,556					$	2,198					$	1,881

Differences between income taxes calculated using the federal statutory income tax rate and the provision for income taxes were as follows for the periods indicated:

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Income before income taxes			$	2,556					$	2,198					$	1,881
U.S. federal statutory rate			21		%				21		%				21		%
Statutory federal income tax			$	537					$	462					$	395
State income tax, net of federal benefit			87						25						50
Federal research and experimentation credits			(70)						(54)						(48)
Share-based compensation			38						22						15
Federal excess tax benefits related to share-based compensation			(105)						(79)						(106)
Effects of non-U.S. operations			4						13						13
Other, net			3						(17)						5
Total provision for income taxes			$	494					$	372					$	324

The state income tax line in the table above includes excess tax benefits related to share-based compensation of $21 million, $11 million and $14 million for the twelve months ended July 31, 2021, 2020 and 2019, respectively.

In the current global tax policy environment, the U.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment.

Significant deferred tax assets and liabilities were as follows at the dates indicated:

			July 31,
(In millions)			2021						2020
Deferred tax assets:
Accruals and reserves not currently deductible			$	48					$	23
Operating lease liabilities			113						64
Accrued and deferred compensation			132						112
Loss and tax credit carryforwards			282						114
Intangible assets			33						26
Share-based compensation			59						44
Other, net			16						13
Total gross deferred tax assets			683						396
Valuation allowance			(205)						(132)
Total deferred tax assets			478						264
Deferred tax liabilities:
Deferred revenue			32						68
Operating lease right-of-use assets			96						55
Intangibles			844						45
Property and equipment			10						22
Other, net			13						11
Total deferred tax liabilities			995						201
Net deferred tax assets (liabilities)			$	(517)					$	63

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The components of total net deferred tax assets (liabilities), net of valuation allowances, as shown on our consolidated balance sheets were as follows at the dates indicated:

			July 31,
(In millions)			2021						2020
Long-term deferred income taxes			$	8					$	65
Long-term deferred income tax liabilities			(525)						(2)
Net deferred tax assets (liabilities)			$	(517)					$	63

We have provided a valuation allowance related to state research and experimentation tax credit carryforwards, foreign loss carryforwards, foreign intangible deferred tax assets and state operating and capital loss carryforwards that we believe are unlikely to be realized. Changes in the valuation allowance during the twelve months ended July 31, 2021 and July 31, 2020 were primarily related to state research and experimentation tax credit carryforwards, foreign intangible deferred tax assets and foreign loss carryforwards.

At July 31, 2021, we had total federal net operating loss carryforwards of approximately $216 million that will start to expire in fiscal 2033. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization.

At July 31, 2021, we had total state net operating loss carryforwards of approximately $304 million for which we have recorded a deferred tax asset of $17 million and a valuation allowance of $4 million. The state net operating loss carryforwards will start to expire in fiscal 2022. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization.

At July 31, 2021, we had United Kingdom operating loss carryforwards of approximately $67 million, Singapore operating loss carryforwards of approximately $63 million, Brazil operating loss carryforwards of approximately $59 million and Australia operating loss carryforwards of $2 million which have an indefinite carryforward period. We maintain a full valuation allowance with respect to operating losses in Singapore, Brazil and United Kingdom jurisdictions, as there is not sufficient evidence of future sources of taxable income required to utilize such carryforwards.

At July 31, 2021, we had federal research and experimentation credit carryforwards of approximately $71 million that will start to expire in fiscal 2036. Utilization of the federal research and experimentation credit is subject to annual limitation. The annual limitation may result in the expiration of the Federal research and experimentation credit before utilization.

At July 31, 2021, we had California research and experimentation credit carryforwards of approximately $227 million. The California research and experimentation credit will carryforward indefinitely. We recorded a full valuation on the related deferred tax asset, as we believe it is more likely than not that these credits will not be utilized.

Unrecognized Tax Benefits

The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the periods indicated:

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Gross unrecognized tax benefits, beginning balance			$	101					$	120					$	90
Increases related to tax positions from prior fiscal years, including acquisitions			69						2						13
Decreases related to tax positions from prior fiscal years			—						(35)						—
Increases related to tax positions taken during current fiscal year			31						21						23
Settlements with tax authorities			—						(1)						(1)
Lapse of statute of limitations			(11)						(6)						(5)
Gross unrecognized tax benefits, ending balance			$	190					$	101					$	120

The total amount of our unrecognized tax benefits at July 31, 2021 was $190 million. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $109 million. The increase in the unrecognized tax benefits related to prior years includes $41 million of unrecognized tax benefits from the Credit Karma acquisition. We do not believe that it is reasonably possible that there will be a significant increase or decrease in unrecognized tax benefits over the next 12 months.

We file U.S. federal, U.S. state, and foreign tax returns. Our major tax jurisdictions are the U.S. federal jurisdiction and California. For U.S. federal tax returns, we are no longer subject to tax examinations for fiscal 2017 and for years prior to fiscal 2016. For California tax returns, we are no longer subject to tax examination for years prior to fiscal 2016.

We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes. Amounts accrued at July 31, 2021 and July 31, 2020 for the payment of interest and penalties were not significant. The amounts of

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interest and penalties that we recognized during the twelve months ended July 31, 2021, 2020 and 2019 were also not significant.

We have offset a $75 million long-term liability for uncertain tax positions against our long-term income tax receivable at July 31, 2021. We have offset a $59 million long-term income tax receivable against our long-term liability for uncertain tax positions at July 31, 2020. The long-term income tax receivable at July 31, 2021 was primarily related to the government’s approval of a method of accounting change request for fiscal 2018 and a refund claim related to Credit Karma’s alternative minimum tax credit that was recorded as part of the acquisition. The long-term income tax receivable at July 31, 2020 was primarily related to the method of accounting change request.

11. Stockholders’ Equity

Stock Repurchase Programs

Intuit’s Board of Directors has authorized a series of common stock repurchase programs. Shares of common stock repurchased under these programs become treasury shares. Under these programs, we repurchased 2.4 million shares of our common stock for $1.0 billion during the twelve months ended July 31, 2021. Included in this amount were $17 million of repurchases which occurred in late July 2021 and settled in August 2021. At July 31, 2021, we had authorization from our Board of Directors to expend up to an additional $1.3 billion for stock repurchases. On August 20, 2021 our Board approved a new stock repurchase program under which we are authorized to repurchase up to an additional $2 billion of our common stock. Future stock repurchases under the current program are at the discretion of management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors.

Our treasury shares are repurchased at the market price on the trade date; accordingly, all amounts paid to reacquire these shares have been recorded as treasury stock on our consolidated balance sheets. Repurchased shares of our common stock are held as treasury shares until they are reissued or retired. When we reissue treasury stock, if the proceeds from the sale are more than the average price we paid to acquire the shares we record an increase in additional paid-in capital. Conversely, if the proceeds from the sale are less than the average price we paid to acquire the shares, we record a decrease in additional paid-in capital to the extent of increases previously recorded for similar transactions and a decrease in retained earnings for any remaining amount.

In the past we have satisfied option exercises and restricted stock unit vesting under our employee equity incentive plans by reissuing treasury shares, and we may do so again in the future. During the second quarter of fiscal 2014 we began issuing new shares of common stock to satisfy option exercises and RSU vesting under our 2005 Equity Incentive Plan. We have not yet determined the ultimate disposition of the shares that we have repurchased in the past, and consequently we continue to hold them as treasury shares.

Dividends on Common Stock

During fiscal 2021 we declared cash dividends that totaled $2.36 per share of outstanding common stock or approximately $651 million. In August 2021 our Board of Directors declared a quarterly cash dividend of $0.68 per share of outstanding common stock payable on October 18, 2021 to stockholders of record at the close of business on October 11, 2021. Future declarations of dividends and the establishment of future record dates and payment dates are subject to the final determination of our Board of Directors.

Description of 2005 Equity Incentive Plan and Credit Karma, Inc. 2015 Equity Incentive Plan

Our stockholders initially approved our 2005 Equity Incentive Plan (2005 Plan) on December 9, 2004. On January 19, 2017 our stockholders approved an Amended and Restated 2005 Equity Incentive Plan (Restated 2005 Plan) that expires on January 19, 2027. Under the Restated 2005 Plan, we are permitted to grant incentive and non-qualified stock options, restricted stock awards, restricted stock units (RSUs), stock appreciation rights and stock bonus awards to our employees, non-employee directors, and consultants. The Compensation and Organizational Development Committee of our Board of Directors or its delegates determine who will receive grants, when those grants will be exercisable, their exercise price and other terms. We are permitted to issue up to 138.1 million shares under the Restated 2005 Plan. The plan provides a fungible share reserve. Each stock option granted on or after November 1, 2010 reduces the share reserve by one share and each restricted stock award or restricted stock unit granted reduces the share reserve by 2.3 shares. Stock options forfeited and returned to the pool of shares available for grant increase the pool by one share for each share forfeited. Restricted stock awards and RSUs forfeited and returned to the pool of shares available for grant increase the pool by 2.3 shares for each share forfeited. Shares withheld for income taxes upon vesting of RSUs that were granted on or after July 21, 2016 are also returned to the pool of shares available for grant. Stock options granted under the 2005 Plan and the Restated 2005 Plan typically vest over three to four years based on continued service and have a seven year term. RSUs granted under those plans typically vest over three to four years based on continued service. Certain RSUs granted to senior management vest based on the achievement of pre-established performance or market goals.

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In connection with our acquisition of Credit Karma on December 3, 2020, we assumed the Credit Karma, Inc. 2015 Equity Incentive Plan, as amended (Credit Karma Plan), under which the assumed equity awards were granted. The assumed equity awards will be settled in shares of our common stock and will retain the terms and conditions under which they were originally granted. See Note 6, "Business Combinations," for more information on the Credit Karma acquisition and the related equity awards assumed.

On December 3, 2020, we filed a Form S-8 to register a total of 4,298,127 shares of common stock. This includes 1,997,881 shares of common stock that are issuable upon vesting of assumed equity awards and 2,300,246 shares that are available for issuance under the Credit Karma Plan. The plan provides a fungible share reserve. Each restricted stock unit granted reduces the share reserve by one share. RSUs forfeited and returned to the pool of shares available for grant increase the pool by one share for each share forfeited. Shares withheld for income taxes upon vesting of RSUs are also returned to the pool of shares available for grant. New RSUs granted under the Credit Karma Plan typically vest over four years based on continued service.

At July 31, 2021, there were approximately 16.9 million shares available for grant under the Restated 2005 Plan and Credit Karma Plan.

Description of Employee Stock Purchase Plan

On November 26, 1996 our stockholders initially adopted our Employee Stock Purchase Plan (ESPP) under Section 423 of the Internal Revenue Code. The ESPP permits our eligible employees to make payroll deductions to purchase our stock on regularly scheduled purchase dates at a discount. Our stockholders have approved amendments to the ESPP to permit the issuance of up to 23.8 million shares under the ESPP, which expires upon the earliest to occur of (a) termination of the ESPP by the Board, or (b) issuance of all the shares of Intuit’s common stock reserved for issuance under the ESPP. Offering periods under the ESPP are six months in duration and composed of two consecutive three-month accrual periods. Shares are purchased at 85% of the lower of the closing price for Intuit common stock on the first day of the offering period or the last day of the accrual period.

Under the ESPP, employees purchased 405,268 shares of Intuit common stock during the twelve months ended July 31, 2021; 449,999 shares during the twelve months ended July 31, 2020; and 485,011 shares during the twelve months ended July 31, 2019. At July 31, 2021, there were 1,050,916 shares available for issuance under this plan.

Share-Based Compensation Expense

The following table summarizes the total share-based compensation expense that we recorded in operating income for the periods shown.

			Twelve Months Ended July 31,
(In millions except per share amounts)			2021						2020						2019
Cost of product revenue			$	1					$	1					$	1
Cost of service and other revenue			68						59						57
Selling and marketing			183						116						103
Research and development			281						151						136
General and administrative			220						108						104
Total share-based compensation expense			753						435						401
Income tax benefit			(269)						(173)						(200)
Decrease in net income			$	484					$	262					$	201
Decrease in net income per share:
Basic			$	1.79					$	1.00					$	0.77
Diluted			$	1.77					$	0.99					$	0.76

We capitalized $2 million, $3 million, and $4 million in share-based compensation related to internal use software projects during the twelve months ended July 31, 2021, 2020, and 2019.

Determining Fair Value

Valuation and Amortization Methods

Restricted stock units (RSUs) granted typically vest based on continued service. We value these time-based RSUs at the date of grant using the intrinsic value method. We amortize the fair value of time-based RSUs on a straight-line basis over the service period. These time-based RSUs accounted for approximately 80% of our total share-based compensation expense during the twelve months ended July 31, 2021. Certain RSUs granted to senior management vest based on the achievement of pre-established performance or market goals. We estimate the fair value of performance-based RSUs at the date of grant using the

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intrinsic value method and the probability that the specified performance criteria will be met. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust our estimate of the fair value of the performance-based RSUs if necessary. We amortize the fair values of performance-based RSUs over the requisite service period for each separately vesting tranche of the award. We estimate the fair value of market-based RSUs at the date of grant using a Monte Carlo valuation methodology and amortize those fair values over the requisite service period for each separately vesting tranche of the award. The Monte Carlo methodology that we use to estimate the fair value of market-based RSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the market-based RSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria. All of the RSUs we grant have dividend rights that are subject to the same vesting requirements as the underlying equity awards, so we do not adjust the market price of our stock on the date of grant for dividends.

We estimate the fair value of stock options granted using a lattice binomial model and a multiple option award approach. Our stock options have various restrictions, including vesting provisions and restrictions on transfer, and are often exercised prior to their contractual maturity. We believe that lattice binomial models are more capable of incorporating the features of our stock options than closed-form models such as the Black Scholes model. The use of a lattice binomial model requires the use of extensive actual employee exercise behavior and a number of complex assumptions including the expected volatility of our stock price over the term of the options, risk-free interest rates and expected dividends. We amortize the fair value of options on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods.

Expected Term. The expected term of options granted represents the period of time that they are expected to be outstanding and is a derived output of the lattice binomial model. The expected term of stock options is impacted by all of the underlying assumptions and calibration of our model. The lattice binomial model assumes that option exercise behavior is a function of the option’s remaining vested life and the extent to which the market price of our common stock exceeds the option exercise price. The lattice binomial model estimates the probability of exercise as a function of these two variables based on the history of exercises and cancellations on all past option grants made by us.

Expected Volatility. We estimate the volatility of our common stock at the date of grant based on the implied volatility of one-year and two-year publicly traded options on our common stock. Our decision to use implied volatility was based upon the availability of actively traded options on our common stock and our assessment that implied volatility is more representative of future stock price trends than historical volatility.

Risk-Free Interest Rate*.* We base the risk-free interest rate that we use in our option valuation model on the implied yield in effect at the time of option grant on constant maturity U.S. Treasury issues with equivalent remaining terms.

Dividends*.* We use an annualized expected dividend yield in our option valuation model. We paid quarterly cash dividends during all years presented and currently expect to continue to pay cash dividends in the future.

Forfeitures*.* We adjust share-based compensation expense for actual forfeitures as they occur.

We used the following assumptions to estimate the fair value of stock options granted and shares purchased under our Employee Stock Purchase Plan for the periods indicated:

			Twelve Months Ended July 31,
			2021						2020						2019
Assumptions for stock options:
Expected volatility (range)			29		%				32		%				26% - 27%
Weighted average expected volatility			29		%				32		%				27		%
Risk-free interest rate (range)			0.62		%				0.20		%				1.84% - 2.92%
Expected dividend yield			0.45		%				0.70		%				0.67% - 0.85%
Assumptions for ESPP:
Expected volatility (range)			31% - 36%						23% - 72%						21% - 33%
Weighted average expected volatility			34		%				39		%				26		%
Risk-free interest rate (range)			0.02% - 0.17%						0.24% - 2.23%						1.94% - 2.44%
Expected dividend yield			0.60% - 0.75%						0.74% - 0.95%						0.73% - 0.95%

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Share-Based Awards Available for Grant

A summary of share-based awards available for grant under our plans for the fiscal periods indicated was as follows:

(Shares in thousands)			Shares Available for Grant
Balance at July 31, 2018			22,791
Restricted stock units granted (1)			(5,639)
Options granted			(487)
Share-based awards canceled/forfeited/expired (1)(2)			4,393
Balance at July 31, 2019			21,058
Restricted stock units granted (1)			(6,111)
Options granted			(382)
Share-based awards canceled/forfeited/expired (1)(2)			3,482
Balance at July 31, 2020			18,047
Shares available for grant under the Credit Karma Plan			4,298
Restricted stock units granted (1)			(9,191)
Options granted			(323)
Share-based awards canceled/forfeited/expired (1)(2)			4,020
Balance at July 31, 2021			16,851

(1)RSUs granted from the pool of shares available for grant under our 2005 Equity Incentive Plan reduce the pool by 2.3 shares for each share granted. RSUs forfeited and returned to the pool of shares available for grant under the 2005 Equity Incentive Plan increase the pool by 2.3 shares for each share forfeited. Shares granted from the Credit Karma Plan reduce the pool by one share for each share granted. Shares forfeited and returned to the pool from the Credit Karma Plan increase the pool by one share for each share forfeited

(2)Stock options and RSUs canceled, expired or forfeited under our 2005 Equity Incentive Plan and Credit Karma Plan are returned to the pool of shares available for grant. Under the 2005 Equity Incentive Plan, shares withheld for income taxes upon vesting of RSUs that were granted on or after July 21, 2016 are also returned to the pool of shares available for grant. Stock options and RSUs canceled, expired or forfeited under older expired plans are not returned to the pool of shares available for grant. Under the Credit Karma Plan, shares withheld for income taxes are also returned to the pool of shares available for grant.

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Restricted Stock Unit and Restricted Stock Activity and Related Share-Based Compensation Expense

A summary of restricted stock unit (RSU) and restricted stock activity for the periods indicated was as follows:

(Shares in thousands)			Number of Shares						Weighted Average Grant Date Fair Value
Nonvested at July 31, 2018			7,383						$131.50
Granted			2,452						245.40
Vested			(3,123)						129.31
Forfeited			(1,029)						107.40
Nonvested at July 31, 2019			5,683						186.22
Granted			2,657						271.80
Vested			(2,039)						180.40
Forfeited			(637)						154.91
Nonvested at July 31, 2020			5,664						231.97
Assumed through acquisition			1,998						355.49
Granted(1)			3,877						431.82
Restricted stock subject to revest provisions issued in connection with acquisition			775						355.49
Vested			(2,242)						262.23
Forfeited			(1,034)						251.41
Nonvested at July 31, 2021			9,038						$345.86

(1)This includes 809,000 RSUSs granted to the employees of Credit Karma in connection with the acquisition with a grant date fair value of $300 million. See Note 6, “Business Combinations.”

Additional information regarding our RSUs is shown in the table below.

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Total fair market value of shares vested			$	942					$	620					$	676
Share-based compensation for RSUs			$	708					$	382					$	351
Total tax benefit related to RSU share-based compensation expense			$	225					$	134					$	141
Cash tax benefits realized for tax deductions for RSUs			$	221					$	139					$	150

At July 31, 2021, there was $2.8 billion of unrecognized compensation cost related to non-vested RSUs and restricted stock with a weighted average vesting period of 3.0 years. We will adjust unrecognized compensation cost for actual forfeitures as they occur.

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Stock Option Activity and Related Share-Based Compensation Expense

A summary of stock option activity for the periods indicated was as follows:

			Options Outstanding
(Shares in thousands)			Number of Shares						Weighted Average Exercise Price Per Share
Balance at July 31, 2018			5,154						$120.26
Granted			487						274.26
Exercised			(1,924)						102.49
Canceled or expired			(343)						138.59
Balance at July 31, 2019			3,374						150.75
Granted			382						303.94
Exercised			(993)						111.82
Canceled or expired			(82)						188.39
Balance at July 31, 2020			2,681						185.83
Granted			323						525.51
Exercised			(718)						128.39
Canceled or expired			(82)						264.53
Balance at July 31, 2021			2,204						$251.48

Information regarding stock options outstanding as of July 31, 2021 is summarized below:

			Number of Shares (in thousands)						Weighted Average Remaining Contractual Life (in Years)						Weighted Average Exercise Price per Share						Aggregate Intrinsic Value (in millions)
Options outstanding			2,204						4.33						$251.48						$614
Options exercisable			1,358						3.31						$173.90						$483

The aggregate intrinsic values at July 31, 2021 are calculated as the difference between the exercise price of the underlying options and the market price of our common stock for shares that were in-the-money at that date. In-the-money options at July 31, 2021 were options that had exercise prices that were lower than the $529.97 market price of our common stock at that date.

Additional information regarding our stock options and ESPP shares is shown in the table below.

			Twelve Months Ended July 31,
(In millions except per share amounts)			2021						2020						2019
Weighted average fair value of options granted (per share)			$	122.16					$	74.85					$	63.18
Total grant date fair value of options vested			$	17					$	23					$	30
Aggregate intrinsic value of options exercised			$	179					$	159					$	248
Share-based compensation expense for stock options and ESPP			$	45					$	53					$	50
Total tax benefit for stock option and ESPP share-based compensation			$	44					$	39					$	59
Cash received from option exercises			$	92					$	111					$	197
Cash tax benefits realized related to tax deductions for non-qualified option exercises and disqualifying dispositions under all share-based payment arrangements			$	48					$	39					$	58

At July 31, 2021, there was approximately $75 million of unrecognized compensation cost related to non-vested stock options with a weighted average vesting period of 3.3 years. We will adjust unrecognized compensation cost for actual forfeitures as they occur.

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Accumulated Other Comprehensive Loss

Comprehensive income consists of two elements, net income and other comprehensive income (loss). Other comprehensive income (loss) items are recorded in the stockholders’ equity section of our consolidated balance sheets and excluded from net income. Our other comprehensive income (loss) consists of unrealized gains and losses on marketable debt securities classified as available-for-sale and foreign currency translation adjustments for subsidiaries with functional currencies other than the U.S. dollar.

The following table shows the components of accumulated other comprehensive loss, net of income taxes, in the stockholders’ equity section of our consolidated balance sheets at the dates indicated.

			July 31,
(In millions)			2021						2020
Unrealized gain on available-for-sale debt securities			$	3					$	6
Foreign currency translation adjustments			(27)						(38)
Total accumulated other comprehensive loss			$	(24)					$	(32)

12. Benefit Plans

Non-Qualified Deferred Compensation Plan

Intuit’s Executive Deferred Compensation Plan provides that executives who meet minimum compensation requirements are eligible to defer up to 75% of their salaries and up to 75% of their bonuses. We have agreed to credit the participants’ contributions with earnings that reflect the performance of certain independent investment funds. We do not guarantee above-market interest on account balances. We may also make discretionary employer contributions to participant accounts in certain circumstances. The timing, amounts, and vesting schedules of employer contributions are at the sole discretion of the Compensation and Organizational Development Committee of our Board of Directors or its delegate. The benefits under this plan are unsecured and are general assets of Intuit. Participants are generally eligible to receive payment of their vested benefit at the end of their elected deferral period or after termination of their employment with Intuit for any reason or at a later date to comply with the restrictions of Section 409A of the Internal Revenue Code. Participants may elect to receive their payments in a lump sum or installments. Discretionary company contributions and the related earnings vest completely upon the participant’s disability, death, or a change in control of Intuit. We made no employer contributions to the plan for any period presented.

We had liabilities related to this plan of $153 million at July 31, 2021 and $123 million at July 31, 2020. We have matched the plan liabilities with similar-performing assets, which are primarily investments in life insurance contracts. These assets are recorded in other long-term assets while liabilities related to obligations are recorded in other current liabilities on our consolidated balance sheets.

401(k) Plans

In the United States, employees who participate in the Intuit Inc. 401(k) Plan may currently contribute up to 50% of pre-tax compensation, subject to Internal Revenue Service limitations and the terms and conditions of the plan. We match a portion of employee contributions, currently 125% up to six percent of salary, subject to Internal Revenue Service limitations.

Additionally, Credit Karma employees in the United States who participate in the Credit Karma 401(k) Plan may currently contribute up to 90% of pre-tax compensation, subject to Internal Revenue Service limitations and the terms and conditions of the plan. We match a portion of Credit Karma employee contributions, currently 100% up to six percent of salary, subject to Internal Revenue Service limitations.

Matching contributions for both plans were $80 million for the twelve months ended July 31, 2021; $69 million for the twelve months ended July 31, 2020; and $59 million for the twelve months ended July 31, 2019.

13. Litigation

Beginning in May 2019, various legal proceedings were filed and certain regulatory inquiries were commenced in connection with our provision and marketing of free online tax preparation programs. We believe that the allegations contained within these legal proceedings are without merit. We are vigorously defending our interests in the legal proceedings and cooperating in the inquiries. These proceedings include, among others, multiple putative class actions that were consolidated into a single putative class action in the Northern District of California in September 2019 (the “Intuit Free File Litigation”) and demands for arbitration that were filed beginning in October 2019. In August 2020, the Ninth Circuit Court of Appeals ordered that the putative class action claims be resolved through arbitration. Intuit entered into a proposed settlement agreement in November 2020 to resolve the putative class action, which was rejected by the court. On May 20, 2021, Intuit entered into an agreement

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that resolved the Intuit Free File Litigation on an individual non-class basis, without any admission of wrongdoing, for a non-material amount and, on May 26, 2021, it was dismissed on a non-class basis.

In June 2021, Intuit received a demand and draft complaint from the Federal Trade Commission (“FTC”) and certain state attorneys general relating to the ongoing inquiries described above. Although we believe that the allegations contained therein are without merit, if we are not able to reach a resolution, the FTC and one or more state attorneys general may seek resolution through litigation. The defense and resolution of this matter could involve significant costs to us.

As of July 31, 2021, there were approximately 126,000 individual arbitration claims pending and we could incur significant arbitration and legal fees associated with the defense of these claims. We recorded approximately $14 million in arbitration fees related to these claims in fiscal 2020. The amount of our fiscal 2021 arbitration fees net of insurance proceeds and rebates was not material. The arbitration fees are unrelated to the underlying merits of the claims and are accrued at the earlier of when invoiced or when the services are rendered. We could incur additional arbitration fees of approximately $360 million in future periods. We are continuing to dispute the applicability and propriety of these fees. An immaterial number of claims have been resolved through the arbitration process to date and we expect that more claims will continue through the process.

In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible financial loss or range of financial loss that we may incur to resolve or settle the remaining matters.

To date, the legal and other fees we have incurred related to these proceedings and inquiries have not been material. The ongoing defense and any resolution or settlement of these proceedings and inquiries could involve significant costs to us.

Intuit is subject to certain routine legal proceedings, including class action lawsuits, as well as demands, claims, government inquiries and threatened litigation, that arise in the normal course of our business, including assertions that we may be infringing patents or other intellectual property rights of others. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims could adversely affect our business. We currently believe that, in addition to any amounts accrued, the amount of potential losses, if any, for any pending claims of any type (either alone or combined) will not have a material impact on our consolidated financial statements. The ultimate outcome of any legal proceeding is uncertain and, regardless of outcome, legal proceedings can have an adverse impact on Intuit because of defense costs, negative publicity, diversion of management resources and other factors.

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14. Segment Information

We have defined four reportable segments, described below, based on factors such as how we manage our operations and how our chief operating decision maker views results. We define the chief operating decision maker as our Chief Executive Officer and our Chief Financial Officer. Our chief operating decision maker organizes and manages our business primarily on the basis of product and service offerings.

In August 2020, we reorganized certain technology and customer success functions that support and benefit our overall platform. Additionally, certain legal, facility and employee service costs are now managed at the corporate level. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the twelve months ended July 31, 2020 and 2019, we reclassified $180 million and $172 million from Small Business & Self-Employed, $121 million and $78 million from Consumer, and $13 million and $12 million from ProConnect to other corporate expenses. In August 2020, we also renamed our Strategic Partner segment as the ProConnect segment. This segment continues to serve professional accountants.

In December 2020 we acquired Credit Karma in a business combination and it operates as a separate reportable segment. We have included the results of operations of Credit Karma in our consolidated statements of operations from the date of acquisition. See Note 6, "Business Combinations," for more information. Segment operating income for Credit Karma includes all direct expenses, which is different from our other reportable segments where we do not fully allocate corporate expenses.

Small Business & Self-Employed**:** This segment serves small businesses and the self-employed around the world, and the accounting professionals who assist and advise them. Our offerings include QuickBooks financial and business management online services and desktop software, payroll solutions, merchant payment processing solutions, and financing for small businesses. Consumer**:** This segment serves consumers and includes do-it-yourself and assisted TurboTax income tax preparation products and services sold in the U.S. and Canada. Our Mint offering is a personal finance offering which helps customers track their finances and daily financial behaviors. Credit Karma**:** This segment serves consumers with a personal finance platform that provides personalized recommendations of credit card, home, auto and personal loan, and insurance products; online savings and checking accounts through an FDIC member bank partner; and access to their credit scores and reports, credit and identity monitoring, credit report dispute, and data-driven resources. ProConnect**:** This segment serves professional accountants in the U.S. and Canada, who are essential to both small business success and tax preparation and filing. Our professional tax offerings include Lacerte, ProSeries, and ProConnect Tax Online in the U.S., and ProFile and ProTax Online in Canada.

All of our segments operate primarily in the United States and sell primarily to customers in the United States. Total international net revenue was less than 5% of consolidated total net revenue for the twelve months ended July 31, 2021, 2020 and 2019.

For our Small Business & Self-Employed, Consumer, and ProConnect reportable segments, we include expenses such as corporate selling and marketing, product development and general and administrative, which are not allocated to specific segments, in unallocated corporate items as part of other corporate expenses. For our Credit Karma reportable segment, segment expenses include all direct expenses related to selling and marketing, product development, and general and administrative. Unallocated corporate items for all segments include share-based compensation, amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges.

The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies in Note 1. Except for goodwill and purchased intangible assets, we do not generally track assets by reportable segment and, consequently, we do not disclose total assets by reportable segment. See Note 5, “Goodwill and Acquired Intangible Assets,” for goodwill by reportable segment.

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The following table shows our financial results by reportable segment for the periods indicated.

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Net revenue:
Small Business & Self-Employed			$	4,688					$	4,050					$	3,533
Consumer			3,563						3,136						2,775
Credit Karma			865						—						—
ProConnect			517						493						476
Total net revenue			$	9,633					$	7,679					$	6,784
Operating income:
Small Business & Self-Employed			$	2,590					$	2,091					$	1,722
Consumer			2,237						2,063						1,820
Credit Karma			182						—						—
ProConnect			372						346						330
Total segment operating income			5,381						4,500						3,872
Unallocated corporate items:
Share-based compensation expense			(753)						(435)						(401)
Other corporate expenses			(1,932)						(1,861)						(1,591)
Amortization of acquired technology			(50)						(22)						(20)
Amortization of other acquired intangible assets			(146)						(6)						(6)
Total unallocated corporate items			(2,881)						(2,324)						(2,018)
Total operating income			$	2,500					$	2,176					$	1,854

Revenue classified by significant product and service offerings was as follows:

			Twelve Months Ended July 31,
(In millions)			2021						2020						2019
Net revenue:
QuickBooks Online Accounting			$	1,699					$	1,354					$	980
Online Services			1,051						828						683
Total Online Ecosystem			2,750						2,182						1,663
QuickBooks Desktop Accounting			789						755						732
Desktop Services and Supplies			1,149						1,113						1,138
Total Desktop Ecosystem			1,938						1,868						1,870
Small Business & Self-Employed			4,688						4,050						3,533
Consumer			3,563						3,136						2,775
Credit Karma			865						—						—
ProConnect			517						493						476
Total net revenue			$	9,633					$	7,679					$	6,784

Revenue from our QuickBooks Desktop packaged software products was $133 million, $147 million, and $167 million for the twelve months ended July 31, 2021, 2020, and 2019, respectively. These amounts are included in the QuickBooks Desktop Accounting revenue presented in the table above.

Credit Karma revenue is primarily generated from cost-per-action transactions which are related to credit card issuances and personal loan funding.

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INTUIT INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In millions)			Beginning Balance						Additions Charged to Expense/ Revenue						Deductions						Ending Balance
Year ended July 31, 2021
Allowance for doubtful accounts			$	12					$	92					$	(8)					$	96
Reserve for returns and credits			24						168						(171)						21
Reserve for promotional discounts and rebates			11						62						(63)						10
Year ended July 31, 2020
Allowance for doubtful accounts			$	3					$	68					$	(59)					$	12
Reserve for returns and credits			24						170						(170)						24
Reserve for promotional discounts and rebates			11						73						(73)						11
Year ended July 31, 2019
Allowance for doubtful accounts			$	5					$	59					$	(61)					$	3
Reserve for returns and credits			17						190						(183)						24
Reserve for promotional discounts and rebates			10						92						(91)						11

			Intuit Fiscal 2021 Form 10-K			96

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