Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments - Recurring Measurements

The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy were as follows:


	December 31, 2022								December 31, 2021
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in millions)
Assets
Investment securities available-for-sale 1:
Municipal securities	$	—	$	—	$	—	$	—	$	—	$	2	$	—	$	2
Government and agency securities	35		54		—		89		35		63		—		98
Corporate securities	—		183		—		183		—		214		—		214


Derivative instruments 2:
Foreign exchange contracts	—		108		—		108		—		8		—		8
Interest rate contracts	—		—		—		—		—		6		—		6
Marketable securities 3:
Equity securities	399		—		—		399		627		—		—		627
Deferred compensation plan 4:
Deferred compensation assets	74		—		—		74		89		—		—		89

Liabilities
Derivative instruments 2:
Foreign exchange contracts	$	—	$	21	$	—	$	21	$	—	$	15	$	—	$	15
Interest rate contracts	—		105		—		105		—		8		—		8
Deferred compensation plan 5:
Deferred compensation liabilities	73		—		—		73		89		—		—		89

1The Company’s U.S. government securities are classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices for identical assets in active markets. The fair value of the Company’s available-for-sale municipal securities, non-U.S. government and agency securities and corporate securities are based on observable inputs such as quoted prices, benchmark yields and issuer spreads for similar assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy.

2The Company’s foreign exchange and interest rate derivative asset and liability contracts have been classified within Level 2 of the Valuation Hierarchy as the fair value is based on observable inputs such as broker quotes for similar derivative instruments. See Note 23 (Derivative and Hedging Instruments) for further details.

3The Company’s Marketable securities are publicly held and classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices in their respective active markets.

4The Company has a nonqualified deferred compensation plan where assets are invested primarily in mutual funds held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for these mutual funds, which are measured using quoted prices of identical instruments in active markets and are included in prepaid expenses and other current assets on the consolidated balance sheet.

5The deferred compensation liabilities are measured at fair value based on the quoted prices of identical instruments to the investment vehicles selected by the participants. These are included in other liabilities on the consolidated balance sheet.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments - Nonrecurring Measurements

Nonmarketable Securities

The Company’s Nonmarketable securities are recorded at fair value on a nonrecurring basis in periods after initial recognition under the equity method or measurement alternative method. Nonmarketable securities are classified within Level 3 of the Valuation Hierarchy due to the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value that require management’s judgment. The Company uses discounted cash flows and market assumptions to estimate the fair value of its Nonmarketable securities when certain events or circumstances indicate that impairment may exist. See Note 7 (Investments) for further details.

Debt

The Company estimates the fair value of its debt based on either market quotes or observable market data. Debt is classified as Level 2 of the Valuation Hierarchy as it is generally not traded in active markets. At December 31, 2022, the carrying value and fair value of debt was $14.0 billion and $12.7 billion, respectively. At December 31, 2021, the carrying value and fair value of debt was $13.9 billion and $15.3 billion, respectively. See Note 15 (Debt) for further details.

Other Financial Instruments

Certain other financial instruments are carried on the consolidated balance sheet at cost or amortized cost basis, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, restricted cash, time deposits, accounts receivable, settlement assets, restricted security deposits held for customers, accounts payable, settlement obligations and other accrued liabilities.

Note 9. Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consisted of the following at December 31:


	2022		2021
	(in millions)
Customer and merchant incentives	$	1,392	$	1,326
Prepaid income taxes	34		92
Other	920		853
Total prepaid expenses and other current assets	$	2,346	$	2,271

Other assets consisted of the following at December 31:


	2022		2021
	(in millions)
Customer and merchant incentives	$	4,578	$	3,798
Equity investments	1,730		1,834
Income taxes receivable	633		645
Other	639		717
Total other assets	$	7,580	$	6,994

Customer and merchant incentives represent payments made to customers and merchants under business agreements. Payments made directly related to entering into such an agreement are generally capitalized and amortized over the life of the agreement.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Property, Equipment and Right-of-Use Assets

Property, equipment and right-of-use assets consisted of the following at December 31:


	2022		2021
	(in millions)
Building, building equipment and land	$	652	$	615
Equipment	1,711		1,456
Furniture and fixtures	96		96
Leasehold improvements	376		371
Operating lease right-of-use assets	1,075		983
Property, equipment and right-of-use assets	3,910		3,521
Less: Accumulated depreciation and amortization	(1,904)		(1,614)
Property, equipment and right-of-use assets, net	$	2,006	$	1,907

Depreciation and amortization expense for the above property, equipment and right-of-use assets was $473 million, $424 million and $400 million for 2022, 2021 and 2020, respectively.

Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheet as follows at December 31:


	2022		2021
	(in millions)
Balance sheet location
Property, equipment and right-of-use assets, net	$	679	$	671
Other current liabilities	140		127
Other liabilities	630		645

Operating lease amortization expense was $137 million, $122 million and $123 million for 2022, 2021 and 2020, respectively. As of December 31, 2022 and 2021, the weighted-average remaining lease term of operating leases was 8.4 years and 8.8 years and the weighted-average discount rate for operating leases was 2.5% and 2.6%, respectively.

The following table summarizes the maturity of the Company’s operating lease liabilities at December 31, 2022 based on lease term:


	Operating Leases
	(in millions)
2023	$	136
2024	135
2025	106
2026	91
2027	73
Thereafter	308
Total operating lease payments	849
Less: Interest	(79)
Present value of operating lease liabilities	$	770

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Goodwill

The changes in the carrying amount of goodwill for the years ended December 31 were as follows:


	2022		2021
	(in millions)
Beginning balance	$	7,662	$	4,960
Additions	200		2,842
Foreign currency translation	(340)		(140)

Ending balance	$	7,522	$	7,662

The Company performed its annual qualitative assessment of goodwill during the fourth quarter of 2022 and determined a quantitative assessment was not necessary. The Company concluded that goodwill was not impaired and had no accumulated impairment losses at December 31, 2022.

Note 12. Other Intangible Assets

The following table sets forth net intangible assets, other than goodwill, at December 31:


	2022						2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Finite-lived intangible assets
Capitalized software	$	3,448	$	(1,402)	$	2,046	$	2,929	$	(1,288)	$	1,641
Customer relationships	2,161		(521)		1,640		2,272		(429)		1,843
Other	54		(37)		17		59		(38)		21
Total	5,663		(1,960)		3,703		5,260		(1,755)		3,505
Indefinite-lived intangible assets
Customer relationships	156		—		156		166		—		166
Total	$	5,819	$	(1,960)	$	3,859	$	5,426	$	(1,755)	$	3,671

The increase in the gross carrying amount of amortized intangible assets in 2022 was primarily related to software additions and the business acquired in 2022. See Note 2 (Acquisitions) for further details. Certain intangible assets are denominated in foreign currencies. As such, the change in intangible assets includes a component attributable to foreign currency translation. Based on the qualitative assessment performed in 2022, it was determined that the Company’s indefinite-lived intangible assets were not impaired.

Amortization on the assets above amounted to $414 million, $424 million and $303 million in 2022, 2021 and 2020, respectively. The following table sets forth the estimated future amortization expense on finite-lived intangible assets on the consolidated balance sheet at December 31, 2022 for the years ending December 31:


	(in millions)
2023	$	493
2024	468
2025	450
2026	455
2027 and thereafter	1,837
Total	$	3,703

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Accrued Expenses and Accrued Litigation

Accrued expenses consisted of the following at December 31:


	2022		2021
	(in millions)
Customer and merchant incentives	$	5,600	$	4,730
Personnel costs	1,322		980
Income and other taxes	279		337
Other	600		595
Total accrued expenses	$	7,801	$	6,642

Customer and merchant incentives represent amounts to be paid to customers under business agreements. As of December 31, 2022 and 2021, long-term customer and merchant incentives included in other liabilities were $2,293 million and $1,835 million, respectively.

As of December 31, 2022 and 2021, the Company’s provision for litigation was $1,094 million and $840 million, respectively. These amounts are not included in the accrued expenses table above and are separately reported as accrued litigation on the consolidated balance sheet. See Note 21 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation.

Note 14. Pension, Postretirement and Savings Plans

The Company and certain of its subsidiaries maintain various pension and other postretirement plans that cover substantially all employees worldwide.

Defined Contribution Plans

The Company sponsors defined contribution retirement plans. The primary plan is the Mastercard Savings Plan, a 401(k) plan for substantially all of the Company’s U.S. employees, which is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. In addition, the Company has several defined contribution plans outside of the U.S. The Company’s total expense for its defined contribution plans was $204 million, $175 million and $150 million in 2022, 2021 and 2020, respectively.

Defined Benefit and Other Postretirement Plans

The Company sponsors pension and postretirement plans for certain non-U.S. employees (the “non-U.S. Plans”) that cover various benefits specific to their country of employment. Additionally, Vocalink has a defined benefit pension plan (the “Vocalink Plan”) which was permanently closed to new entrants and future accruals as of July 21, 2013, however, plan participants’ obligations are adjusted for future salary changes. The term “Pension Plans” includes the non-U.S. Plans and the Vocalink Plan.

The Company maintains a postretirement plan providing health coverage and life insurance benefits for substantially all of its U.S. employees hired before July 1, 2007 (the “Postretirement Plan”).

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company uses a December 31 measurement date for the Pension Plans and its Postretirement Plan (collectively the “Plans”). The Company recognizes the funded status of its Plans, measured as the difference between the fair value of the plan assets and the projected benefit obligation, on the consolidated balance sheet. The following table sets forth the Plans’ funded status, key assumptions and amounts recognized on the Company’s consolidated balance sheet at December 31:


	Pension Plans						Postretirement Plan
	2022			2021			2022			2021
	($ in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	596		$	604		$	62		$	70

Service cost	12			14			1			1
Interest cost	9			9			2			2
Actuarial (gain) loss	(156)			(6)			(16)			(7)
Benefits paid	(16)			(17)			(6)			(4)
Transfers in	5			4			—			—
Foreign currency translation	(58)			(12)			—			—

Benefit obligation at end of year	392			596			43			62

Change in plan assets
Fair value of plan assets at beginning of year	688			617			—			—

Actual gain/(loss) on plan assets	(203)			63			—			—
Employer contributions	25			32			6			4
Benefits paid	(16)			(17)			(6)			(4)
Transfers in	5			4			—			—
Foreign currency translation	(69)			(11)			—			—
Fair value of plan assets at end of year	430			688			—			—
Funded status at end of year	$	38		$	92		$	(43)		$	(62)

Amounts recognized on the consolidated balance sheet consist of:
Noncurrent assets	$	44		$	105		$	—		$	—
Other liabilities, short-term	—			—			(3)			(3)
Other liabilities, long-term	(6)			(13)			(40)			(59)
	$	38		$	92		$	(43)		$	(62)

Accumulated other comprehensive income consists of:
Net actuarial (gain) loss	$	23		$	(38)		$	(14)		$	2
Prior service credit	1			1			(1)			(2)
Balance at end of year	$	24		$	(37)		$	(15)		$	—

Weighted-average assumptions used to determine end of year benefit obligations
Discount rate
Non-U.S. Plans	3.80		%	0.90		%	*			*
Vocalink Plan	4.80		%	1.75		%	*			*
Postretirement Plan	*			*			5.50		%	2.75		%

Rate of compensation increase
Non-U.S. Plans	1.50		%	1.50		%	*			*
Vocalink Plan	2.70		%	3.20		%	*			*
Postretirement Plan	*			*			3.00		%	3.00		%

Not applicable

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2022 and 2021, the Company’s aggregated Pension Plan assets exceeded the benefit obligations. For plans where the benefit obligations exceeded plan assets, the projected benefit obligation was $8 million and $116 million, the accumulated benefit obligation was $6 million and $115 million and plan assets were $2 million and $104 million at December 31, 2022 and 2021, respectively. Information on the Pension Plans were as follows as of December 31:


	2022		2021
	(in millions)
Projected benefit obligation	$	392	$	596
Accumulated benefit obligation	388		592
Fair value of plan assets	430		688

For the year ended December 31, 2022, the Company’s projected benefit obligation related to its Pension Plans decreased $204 million, primarily attributable to actuarial gains related to higher discount rate assumptions. For the year ended December 31, 2021, the Company’s projected benefit obligation related to its Pension Plans decreased $8 million, primarily attributable to actuarial gains related to higher discount rate assumptions.

Components of net periodic benefit cost recorded in earnings were as follows for the Plans for each of the years ended December 31:


	Pension Plans						Postretirement Plan
	2022		2021		2020		2022		2021		2020
	(in millions)
Service cost	$	12	$	14	$	13	$	1	$	1	$	1
Interest cost	9		9		9		2		2		2
Expected return on plan assets	(14)		(19)		(18)		—		—		—

Amortization of actuarial loss	—		(1)		—		—		—		—
Amortization of prior service credit	—		—		—		(1)		(1)		(1)

Net periodic benefit cost	$	7	$	3	$	4	$	2	$	2	$	2

The service cost component is recognized in general and administrative expenses on the consolidated statement of operations. Net periodic benefit cost, excluding the service cost component, is recognized in other income (expense) on the consolidated statement of operations.

Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31 were as follows:


	Pension Plans						Postretirement Plan
	2022		2021		2020		2022		2021		2020
	(in millions)

Current year actuarial loss (gain)	$	61	$	(50)	$	5	$	(16)	$	(7)	$	7

Amortization of prior service credit	$	—	$	—	$	—	$	1	$	2	$	1

Total other comprehensive loss (income)	$	61	$	(50)	$	5	$	(15)	$	(5)	$	8
Total net periodic benefit cost and other comprehensive loss (income)	$	68	$	(47)	$	9	$	(13)	$	(3)	$	10

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assumptions

Weighted-average assumptions used to determine net periodic benefit cost were as follows for the years ended December 31:


	Pension Plans						Postretirement Plan
	2022		2021		2020		2022		2021		2020
Discount rate
Non-U.S. Plans	0.90	%	0.70	%	0.70	%	*		*		*
Vocalink Plan	1.75	%	1.55	%	1.55	%	*		*		*
Postretirement Plan	*		*		*		2.75	%	2.50	%	3.25	%
Expected return on plan assets
Non-U.S. Plans	1.60	%	1.60	%	1.60	%	*		*		*
Vocalink Plan	2.30	%	3.20	%	3.20	%	*		*		*
Rate of compensation increase
Non-U.S. Plans	1.50	%	1.50	%	1.50	%	*		*		*
Vocalink Plan	3.20	%	2.75	%	2.75	%	*		*		*
Postretirement Plan	*		*		*		3.00	%	3.00	%	3.00	%

Not applicable

The Company’s discount rate assumptions are based on yield curves derived from high quality corporate bonds, which are matched to the expected cash flows of each respective plan. The expected return on plan assets assumptions are derived using the current and expected asset allocations of the Pension Plans’ assets and considering historical as well as expected returns on various classes of plan assets. The rates of compensation increases are determined by the Company, based upon its long-term plans for such increases.

The following additional assumptions were used at December 31 in accounting for the Postretirement Plan:


	2022		2021
Healthcare cost trend rate assumed for next year	6.50	%	6.75	%
Ultimate trend rate	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	6		7

Assets

Plan assets are managed taking into account the timing and amount of future benefit payments. The Vocalink Plan assets are managed with the following target asset allocations: cash and cash equivalents 14%, U.K. government securities 41%, fixed income 18%, equity 16% and real estate 11%. For the non-U.S. Plans, the assets are concentrated primarily in insurance contracts.

The Valuation Hierarchy of the Pension Plans’ assets is determined using a consistent application of the categorization measurements for the Company’s financial instruments. See Note 1 (Summary of Significant Accounting Policies) for additional information.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth by level within the Valuation Hierarchy, the Pension Plans’ assets at fair value:


	December 31, 2022								December 31, 2021
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
Cash and cash equivalents 1	$	43	$	—	$	—	$	43	$	246	$	—	$	—	$	246

Mutual funds 2	106		128		—		234		185		102		—		287
Insurance contracts 3	—		114		—		114		—		104		—		104


Total	$	149	$	242	$	—	$	391	$	431	$	206	$	—	$	637

Investments at Net Asset Value (“NAV”) 4							39								51
Total Plan Assets							$	430							$	688

1Cash and cash equivalents are valued at quoted market prices, which represent the net asset value of the shares held by the Plans.

2Certain mutual funds are valued at quoted market prices, which represent the value of the shares held by the Plans, and are therefore included in Level 1. Certain other mutual funds are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors, and are therefore included in Level 2.

3Insurance contracts are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors.

4Investments at NAV include mutual funds (comprised primarily of credit investments) and other investments (comprised primarily of real estate investments) and are valued using the net asset value provided by the administrator as a practical expedient, and therefore these investments are not included in the valuation hierarchy. These investments have quarterly redemption frequencies with redemption notice periods ranging from 60 to 90 days.

The following table summarizes expected benefit payments (as of December 31, 2022) through 2032 for the Pension Plans and the Postretirement Plan, including those payments expected to be paid from the Company’s general assets. Actual benefit payments may differ from expected benefit payments.


	Pension Plans		Postretirement Plan
	(in millions)
2023	$	28	$	3
2024	20		3
2025	19		3
2026	18		3
2027	25		4
2028 - 2032	114		18

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Debt

Debt consisted of the following at December 31:


				2022		2021		Effective Interest Rate
				(in millions)
Senior Notes

2022 EUR Notes 1	1.000	%	Senior Notes due February 2029	$	800	$	—	1.138	%

2021 USD Notes	2.000	%	Senior Notes due November 2031	750		750		2.112	%
	1.900	%	Senior Notes due March 2031	600		600		1.981	%
	2.950	%	Senior Notes due March 2051	700		700		3.013	%

2020 USD Notes	3.300	%	Senior Notes due March 2027	1,000		1,000		3.420	%
	3.350	%	Senior Notes due March 2030	1,500		1,500		3.430	%
	3.850	%	Senior Notes due March 2050	1,500		1,500		3.896	%

2019 USD Notes	2.950	%	Senior Notes due June 2029	1,000		1,000		3.030	%
	3.650	%	Senior Notes due June 2049	1,000		1,000		3.689	%
	2.000	%	Senior Notes due March 2025	750		750		2.147	%

2018 USD Notes	3.500	%	Senior Notes due February 2028	500		500		3.598	%
	3.950	%	Senior Notes due February 2048	500		500		3.990	%

2016 USD Notes	2.950	%	Senior Notes due November 2026	750		750		3.044	%
	3.800	%	Senior Notes due November 2046	600		600		3.893	%

2015 EUR Notes 2	1.100	%	Senior Notes due December 2022	—		793		1.265	%
	2.100	%	Senior Notes due December 2027	854		906		2.189	%
	2.500	%	Senior Notes due December 2030	160		170		2.562	%

2014 USD Notes	3.375	%	Senior Notes due April 2024	1,000		1,000		3.484	%

Other Debt

INR Term Loan 3	8.640	%	Term Loan due July 2023	275		—		9.090	%

				14,239		14,019
Less: Unamortized discount and debt issuance costs				(111)		(116)
Less: Cumulative hedge accounting fair value adjustments 4				(105)		(2)
Total debt outstanding				14,023		13,901
Less: Short-term debt 5				(274)		(792)
Long-term debt				$	13,749	$	13,109

1€750 million euro-denominated debt issued in February 2022.

2€1.650 billion euro-denominated debt issued in December 2015 of which €700 million ($724 million) matured and was paid during 2022.

3INR22.7 billion Indian rupee-denominated loan issued in July 2022.

4In 2021, the Company entered into an interest rate swap which is accounted for as a fair value hedge. See Note 23 (Derivative and Hedging Instruments) for additional information.

5The INR Term Loan due July 2023 is classified as short-term debt on the consolidated balance sheet as of December 31, 2022. The 2015 EUR Notes due December 2022 are classified as short-term debt on the consolidated balance sheet as of December 31, 2021.

Senior Notes

In February 2022, the Company issued €750 million ($800 million as of December 31, 2022) principal amount of notes due February 2029 (the “2022 EUR Notes”). The net proceeds from the issuance of the 2022 EUR Notes, after deducting the original issue discount, underwriting discount and offering expenses, were €743 million ($843 million as of the date of settlement).

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2021, the Company issued $600 million principal amount of notes due March 2031 and $700 million principal amount of notes due March 2051. In November 2021, the Company also issued $750 million principal amount of notes due November 2031. The two issuances in 2021 are collectively referred to as the “2021 USD Notes”. The net proceeds from the issuance of the 2021 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $2.024 billion.

In March 2020, the Company issued $1 billion principal amount of notes due March 2027, $1.5 billion principal amount of notes due March 2030 and $1.5 billion principal amount of notes due March 2050 (collectively the “2020 USD Notes”). The net proceeds from the issuance of the 2020 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $3.959 billion.

The Senior Notes described above are not subject to any financial covenants and may be redeemed in whole, or in part, at the Company’s option at any time for a specified make-whole amount. These notes are senior unsecured obligations and would rank equally with any future unsecured and unsubordinated indebtedness.

Indian Rupee (“INR”) Term Loan

In July 2022, the Company entered into an unsecured INR22.7 billion ($275 million as of December 31, 2022) term loan due July 2023 (the “INR Term Loan”). The net proceeds of the INR Term Loan, after deducting issuance costs, were INR22.6 billion ($284 million as of the date of settlement).

The Company obtained the INR Term Loan to serve as an economic hedge to offset possible changes in the value of INR-denominated monetary assets due to foreign exchange fluctuations. The INR Term Loan is not subject to any financial covenants and it may be repaid in whole at the Company’s option at any time for a specified make-whole amount.

Scheduled annual maturities of the principal portion of long-term debt outstanding at December 31, 2022 are summarized below.


	(in millions)
2023	$	275
2024	1,000
2025	750
2026	750
2027	1,854
Thereafter	9,610
Total	$	14,239

As of December 31, 2022, the Company has a commercial paper program (the “Commercial Paper Program”) under which the Company is authorized to issue up to $6 billion in unsecured commercial paper notes with maturities of up to 397 days from the date of issuance. On January 27, 2023, the Company increased its Commercial Paper Program from $6 billion to $8 billion. The Commercial Paper Program is available in U.S. dollars.

In conjunction with the Commercial Paper Program, the Company entered into a committed five-year unsecured $8 billion revolving credit facility (the “Credit Facility”) on November 10, 2022. The Credit Facility, which expires on November 10, 2027, amended and restated the Company’s prior $6 billion credit facility which was set to expire on November 12, 2026. Borrowings under the Credit Facility are available in U.S. dollars and/or euros. The facility fee under the Credit Facility is determined according to the Company’s credit rating and is payable on the average daily commitment, regardless of usage, per annum. In addition to the facility fee, interest rates on borrowings under the Credit Facility would be based on prevailing market interest rates plus applicable margins that fluctuate based on the Company’s credit rating. The Credit Facility contains customary representations, warranties, affirmative and negative covenants, events of default and indemnification provisions. The Company was in compliance in all material respects with the covenants of the Credit Facility at December 31, 2022 and 2021.

Borrowings under the Commercial Paper Program and the Credit Facility are to be used to provide liquidity for general corporate purposes, including providing liquidity in the event of one or more settlement failures by the Company’s customers. The Company may borrow and repay amounts under the Commercial Paper Program and Credit Facility from time to time. The Company had no borrowings under the Credit Facility or the Commercial Paper Program at December 31, 2022 and 2021.

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Note 16. Stockholders' Equity

Classes of Capital Stock

Mastercard’s amended and restated certificate of incorporation authorizes the following classes of capital stock:


Class	Par Value Per Share	Authorized Shares (in millions)	Dividend and Voting Rights
A	$0.0001	3,000	One vote per share Dividend rights
B	$0.0001	1,200	Non-voting Dividend rights
Preferred	$0.0001	300	No shares issued or outstanding at December 31, 2022 and 2021. Dividend and voting rights are to be determined by the Board of Directors of the Company upon issuance.

Dividends

The Company declared a quarterly cash dividend on its Class A and Class B Common Stock during each of the four quarters of 2022, 2021 and 2020.

The Company declared total per share dividends on its Class A and Class B Common Stock during the years ended December 31 as summarized below:


		2022		2021		2020
	(in millions, except per share data)
Dividends declared per share		$	2.04	$	1.81	$	1.64
Total dividends declared		$	1,968	$	1,781	$	1,641

Ownership and Governance Structure

Equity ownership and voting power of the Company’s shares were allocated as follows as of December 31:


	2022				2021
	Equity Ownership		General Voting Power		Equity Ownership		General Voting Power
Public Investors (Class A stockholders)	88.5	%	89.3	%	88.4	%	89.2	%
Principal or Affiliate Customers (Class B stockholders)	0.8	%	—	%	0.8	%	—	%
Mastercard Foundation (Class A stockholders)	10.7	%	10.7	%	10.8	%	10.8	%

Class B Common Stock Conversions

Shares of Class B common stock are convertible on a one-for-one basis into shares of Class A common stock. Entities eligible to hold Mastercard’s Class B common stock are defined in the Company’s amended and restated certificate of incorporation (generally the Company’s principal or affiliate customers), and they are restricted from retaining ownership of shares of Class A common stock. Class B stockholders are required to subsequently sell or otherwise transfer any shares of Class A common stock received pursuant to such a conversion.

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Mastercard Foundation

In connection and simultaneously with its 2006 initial public offering (the “IPO”), the Company issued and donated 135 million newly authorized shares of Class A common stock to Mastercard Foundation. Mastercard Foundation is a private charitable foundation incorporated in Canada that is controlled by directors who are independent of the Company and its principal customers. Under the terms of the donation, Mastercard Foundation became able to resell the donated shares in May 2010 to the extent necessary to meet charitable disbursement requirements pursuant to Canadian tax law. Under such current law, Mastercard Foundation must annually disburse at least 3.5% of its assets not used in its charitable activities and administration in the previous eight quarters (“Disbursement Quota”). However, Mastercard Foundation obtained permission from the Canada Revenue Agency to, until December 31, 2021, meet its cumulative Disbursement Quota obligations over a period of time that, on average, demonstrated compliance with the requirement for such established time period. Currently, Mastercard Foundation may not sell or otherwise transfer its donated shares prior to May 1, 2027, except to the extent necessary to satisfy the Disbursement Quota. Based on that timing, Mastercard Foundation would be permitted to sell all of its remaining shares beginning May 1, 2027, subject to certain conditions.

Common Stock Activity

The following table presents the changes in the Company’s outstanding Class A and Class B common stock for the years ended December 31:


	Outstanding Shares
	Class A	Class B
	(in millions)
Balance at December 31, 2019	996.0	11.2
Purchases of treasury stock	(14.3)	—
Share-based payments	2.3	—
Conversion of Class B to Class A common stock	2.9	(2.9)
Balance at December 31, 2020	986.9	8.3
Purchases of treasury stock	(16.5)	—
Share-based payments	1.2	—
Conversion of Class B to Class A common stock	0.5	(0.5)
Balance at December 31, 2021	972.1	7.8
Purchases of treasury stock	(25.7)	—
Share-based payments	1.8	—
Conversion of Class B to Class A common stock	0.2	(0.2)
Balance at December 31, 2022	948.4	7.6

The Company’s Board of Directors have approved share repurchase programs of its Class A Common Stock authorizing the Company to repurchase shares. The following table summarizes the Company’s share repurchase authorizations of its Class A common stock for the years ended December 31:


	2022		2021		2020
	(In millions, except per share data)
Board authorization	$	9,000	$	8,000	$	6,000
Dollar-value of shares repurchased	$	8,753	$	5,904	$	4,473
Shares repurchased	25.7		16.5		14.3
Average price paid per share	$	340.60	$	356.82	$	312.68

As of December 31, 2022, the remaining authorization under the share repurchase programs approved by the Company’s Board of Directors was $12.2 billion.

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Note 17. Accumulated Other Comprehensive Income (Loss)

The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2022 and 2021 were as follows:


	December 31, 2021		Increase / (Decrease)		Reclassifications		December 31, 2022
	(in millions)
Foreign currency translation adjustments 1	$	(739)	$	(675)	$	—	$	(1,414)
Translation adjustments on net investment hedges 2	34		275		—		309
Cash flow hedges

Foreign exchange contracts 3	4		1		(13)		(8)
Interest rate contracts	(128)		—		5		(123)
Defined benefit pension and other postretirement plans 4	21		(31)		(1)		(11)
Investment securities available-for-sale	(1)		(5)		—		(6)
Accumulated other comprehensive income (loss)	$	(809)	$	(435)	$	(9)	$	(1,253)


	December 31, 2020		Increase / (Decrease)		Reclassifications		December 31, 2021
	(in millions)
Foreign currency translation adjustments 1	$	(352)	$	(387)	$	—	$	(739)
Translation adjustments on net investment hedges 2	(175)		209		—		34
Cash flow hedges
Foreign exchange contracts 3	—		5		(1)		4
Interest rate contracts	(133)		—		5		(128)
Defined benefit pension and other postretirement plans 4	(20)		43		(2)		21
Investment securities available-for-sale	—		(1)		—		(1)
Accumulated other comprehensive income (loss)	$	(680)	$	(131)	$	2	$	(809)

1During 2022, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro and British pound against the U.S. dollar. During 2021, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro against the U.S. dollar.

2During 2022 and 2021, the increase in the accumulated other comprehensive income related to the net investment hedges was driven by the depreciation of the euro against the U.S. dollar. See Note 23 (Derivative and Hedging Instruments) for additional information.

3Certain foreign exchange derivative contracts are designated as cash flow hedging instruments. Gains and losses resulting from changes in the fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings. See Note 23 (Derivative and Hedging Instruments) for additional information.

4During 2022, the increase in the accumulated other comprehensive loss related to the Plans was driven primarily by a net actuarial loss within the Pension Plans. During 2021, the increase in the accumulated other comprehensive income related to the Plans was driven primarily by a net actuarial gain within the Pension Plans. See Note 14 (Pension, Postretirement and Savings Plans) for additional information.

Note 18. Share-Based Payments

In May 2006, the Company granted the following awards under the Mastercard Incorporated 2006 Long Term Incentive Plan, which was amended and restated as of June 22, 2021 (the “LTIP”). The LTIP is a stockholder-approved plan that permits the grant of various types of equity awards to employees. The Company has granted Options, RSUs and PSUs under the LTIP. The Company uses the straight-line method of attribution for expensing all equity awards. Compensation expense is recorded net of estimated forfeitures, with estimates adjusted as appropriate.

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There are approximately 116 million shares of Class A common stock authorized for equity awards under the LTIP. Although the LTIP permits the issuance of shares of Class B common stock, no such shares have been authorized for issuance. Shares issued as a result of Option exercises and the conversions of RSUs and PSUs were funded primarily with the issuance of new shares of Class A common stock.

Stock Options

Options expire ten years from the date of grant and vest ratably over three years for awards granted on or after March 1, 2022. For awards granted before March 1, 2022, they vest ratably over four years. For Options granted, a participant’s unvested awards are forfeited upon termination. In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, however, the participant retains all of their awards without providing additional service to the Company. Retirement eligibility is dependent upon age and years of service. Compensation expense is recognized over the vesting period as stated in the LTIP.

The fair value of each Option is estimated on the date of grant using a Black-Scholes option pricing model. The following table presents the weighted-average assumptions used in the valuation and the resulting weighted-average fair value per Option granted for the years ended December 31:


	2022			2021			2020
Risk-free rate of return	1.6		%	0.9		%	1.0		%
Expected term (in years)	6.00			6.00			6.00
Expected volatility	24.6		%	26.1		%	19.3		%
Expected dividend yield	0.6		%	0.5		%	0.6		%
Weighted-average fair value per Option granted	$	86.92		$	91.70		$	80.92

The risk-free rate of return was based on the U.S. Treasury yield curve in effect on the date of grant. The expected term and the expected volatility were based on historical Mastercard information. The expected dividend yields were based on the Company’s expected annual dividend rate on the date of grant.

The following table summarizes the Company’s option activity for the year ended December 31, 2022:


	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in millions)			(in years)	(in millions)
Outstanding at January 1, 2022	5.4	$	152
Granted	0.3	$	344
Exercised	(0.9)	$	100
Forfeited	(0.1)	$	308
Expired	—	$	363
Outstanding at December 31, 2022	4.7	$	173	4.9	$	828
Exercisable at December 31, 2022	3.9	$	143	4.3	$	788
Options vested and expected to vest at December 31, 2022	4.7	$	173	4.9	$	827

As of December 31, 2022, there was $19 million of total unrecognized compensation cost related to non-vested Options. The cost is expected to be recognized over a weighted-average period of 1.7 years.

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Restricted Stock Units

For RSUs granted on or after March 1, 2022, the awards generally vest ratably over three years. For RSUs granted on or after March 1, 2020 but before March 1, 2022, the awards generally vest ratably over four years. A participant’s unvested awards are forfeited upon termination of employment. In the event of termination due to job elimination (as defined by the Company), however, a participant will retain a pro-rata portion of the unvested awards for services performed through the date of termination. In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, the participant retains all of their awards without providing additional service to the Company. Compensation expense is recognized over the shorter of the vesting periods stated in the LTIP or the date the individual becomes eligible to retire but not less than seven months.

The following table summarizes the Company’s RSU activity for the year ended December 31, 2022:


	Units	Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value
	(in millions)			(in millions)
Outstanding at January 1, 2022	2.2	$	291
Granted	1.0	$	340
Converted	(1.2)	$	258
Forfeited	(0.2)	$	332
Outstanding at December 31, 2022	1.8	$	335	$	641
RSUs expected to vest at December 31, 2022	1.8	$	335	$	615

The fair value of each RSU is the closing stock price on the New York Stock Exchange of the Company’s Class A common stock on the date of grant, adjusted for the exclusion of dividend equivalents. Upon vesting, a portion of the RSU award may be withheld to satisfy the minimum statutory withholding taxes. The remaining RSUs will be settled in shares of the Company’s Class A common stock after the vesting period. As of December 31, 2022, there was $334 million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 2.0 years.

Performance Stock Units

PSUs vest after three years and are subject to a mandatory one-year post-vest hold, during which they are eligible for dividend equivalents. A participant’s unvested awards are forfeited upon termination of employment. In the event of termination due to job elimination (as defined by the Company), however, a participant will retain a pro-rata portion of the unvested awards for services performed through the date of termination. In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, the participant retains all of their awards without providing additional service to the Company.

The following table summarizes the Company’s PSU activity for the year ended December 31, 2022:


	Units	Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value
	(in millions)			(in millions)
Outstanding at January 1, 2022	0.4	$	334
Granted	0.2	$	335
Converted	—	$	—
Other	(0.2)	$	291
Outstanding at December 31, 2022	0.4	$	352	$	128
PSUs expected to vest at December 31, 2022	0.4	$	352	$	128

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Since 2013, PSUs containing performance and market conditions have been issued. Performance measures used to determine the actual number of shares that vest after three years include net revenue growth, EPS growth and relative total shareholder return (“TSR”). Relative TSR is considered a market condition, while net revenue and EPS growth are considered performance conditions. The Monte Carlo simulation valuation model is used to determine the grant-date fair value.

Compensation expense for PSUs is recognized over the requisite service period, or the date the individual becomes eligible to retire but not less than seven months, if it is probable that the performance target will be achieved and subsequently adjusted if the probability assessment changes. During the year ended December 31, 2020, performance targets related to PSU awards granted in 2018 (“2018 PSU Awards”) were adjusted to exclude certain pandemic-related financial impacts deemed outside of the Company’s control. The adjustment during the year ended December 31, 2020 required the Company to apply modification accounting to the 2018 PSU Awards which had an immaterial impact on compensation expense. As of December 31, 2022, there was $29 million of total unrecognized compensation cost related to non-vested PSUs. The cost is expected to be recognized over a weighted-average period of 1.7 years.

Additional Information

The following table includes additional share-based payment information for each of the years ended December 31:


	2022		2021		2020
	(in millions, except weighted-average fair value)
Share-based compensation expense: Options, RSUs and PSUs	$	295	$	273	$	254
Income tax benefit recognized for equity awards	61		57		53
Income tax benefit realized related to Options exercised	49		36		68

Options:
Total intrinsic value of Options exercised	231		169		317
RSUs:
Weighted-average grant-date fair value of awards granted	340		358		288
Total intrinsic value of RSUs converted into shares of Class A common stock	420		360		330
PSUs:
Weighted-average grant-date fair value of awards granted	335		385		291
Total intrinsic value of PSUs converted into shares of Class A common stock	—		32		92

Note 19. Commitments

At December 31, 2022, the Company had the following future minimum payments due under noncancelable agreements, primarily related to sponsorships to promote the Mastercard brand and licensing arrangements. The Company has accrued $12 million of these future payments as of December 31, 2022.


	(in millions)
2023	$	428
2024	317
2025	222
2026	106
2027	85
Thereafter	47
Total	$	1,205

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Note 20. Income Taxes

Components of Income and Income Tax Expense

The domestic and foreign components of income before income taxes for the years ended December 31 are as follows:


	2022		2021		2020
	(in millions)
United States	$	4,228	$	4,261	$	3,304
Foreign	7,504		6,046		4,456
Income before income taxes	$	11,732	$	10,307	$	7,760

The total income tax provision for the years ended December 31 is comprised of the following components:


	2022		2021		2020
	(in millions)
Current
Federal	$	1,024	$	663	$	439
State and local	133		51		56
Foreign	1,296		976		781
	2,453		1,690		1,276
Deferred
Federal	(661)		(31)		106
State and local	(40)		(4)		9
Foreign	50		(35)		(42)
	(651)		(70)		73
Income tax expense	$	1,802	$	1,620	$	1,349

Effective Income Tax Rate

A reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate for the years ended December 31, is as follows:


	2022				2021				2020
	Amount		Percent		Amount		Percent		Amount		Percent
	($ in millions)
Income before income taxes	$	11,732			$	10,307			$	7,760

Federal statutory tax	2,464		21.0	%	2,164		21.0	%	1,630		21.0	%
State tax effect, net of federal benefit	72		0.6	%	60		0.6	%	57		0.7	%
Foreign tax effect	(347)		(3.0)	%	(283)		(2.7)	%	(193)		(2.5)	%
Valuation allowance - U.S. foreign tax credit	(333)		(2.8)	%	—		—	%	—		—	%
U.S. tax expense on foreign operations	111		0.9	%	63		0.6	%	47		0.6	%
Foreign-derived intangible income deduction	(129)		(1.1)	%	(69)		(0.7)	%	(46)		(0.6)	%
U.S. tax benefits 1	—		—	%	(132)		(1.3)	%	—		—	%
Windfall benefit	(68)		(0.6)	%	(67)		(0.7)	%	(119)		(1.5)	%
Other, net	32		0.3	%	(116)		(1.1)	%	(27)		(0.3)	%
Income tax expense	$	1,802	15.4	%	$	1,620	15.7	%	$	1,349	17.4	%

Note: Table may not sum due to rounding.

The effective income tax rates for the years ended December 31, 2022, 2021 and 2020 were 15.4%, 15.7% and 17.4%, respectively. The effective income tax rate for 2022 was lower than the effective income tax rate for 2021, primarily due to a discrete tax benefit in the first quarter of 2022 related to final U.S. tax regulations published in the current year. These regulations resulted in a valuation allowance release of $333 million associated with the U.S. foreign tax credit carryforward deferred tax asset. The

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regulations limit the Company’s ability to generate foreign tax credits starting in 2022 for certain foreign taxes paid, resulting in additional U.S. tax expense. Additionally, a more favorable geographic mix of earnings in 2022 contributed to the lower effective tax rate. The lower effective income tax rate in 2022 was partially offset by:

the recognition of U.S. tax benefits in 2021 (the majority of which were discrete) resulting from a higher foreign derived intangible income deduction and greater utilization of foreign tax credits in the U.S.
a discrete tax benefit in 2021 related to the remeasurement of the Company’s net deferred tax asset in the U.K. due to an enacted tax rate change in 2021
a discrete tax expense related to an unfavorable court ruling in 2022

The effective income tax rate for 2021 was lower than the effective income tax rate for 2020, primarily due to the recognition of U.S. tax benefits (the majority of which were discrete) resulting from a higher foreign derived intangible income deduction and greater utilization of foreign tax credits in the U.S. In addition, a more favorable geographic mix of earnings in 2021 contributed to the Company’s lower effective tax rate. These benefits were partially offset by a lower discrete tax benefit related to share-based payments in 2021.

Singapore Income Tax Rate

In connection with the expansion of the Company’s operations in the Asia Pacific, Middle East and Africa region, the Company’s subsidiary in Singapore, Mastercard Asia Pacific Pte. Ltd. (“MAPPL”) received an incentive grant from the Singapore Ministry of Finance in 2010. The incentive had provided MAPPL with, among other benefits, a reduced income tax rate for the 10-year period commencing January 1, 2010 on taxable income in excess of a base amount. The Company continued to explore business opportunities in this region, resulting in an expansion of the incentives being granted by the Ministry of Finance, including a further reduction to the income tax rate on taxable income in excess of a revised fixed base amount commencing July 1, 2011 and continuing through December 31, 2025. Without the incentive grant, MAPPL would have been subject to the statutory income tax rate on its earnings. For 2022, 2021 and 2020, the impact of the incentive grant received from the Ministry of Finance resulted in a reduction of MAPPL’s income tax liability of $454 million, or $0.47 per diluted share, $300 million, or $0.30 per diluted share, and $260 million, or $0.26 per diluted share, respectively.

Indefinite Reinvestment

As of December 31, 2022 the Company does not accrue taxes on $1.6 billion of foreign earnings which remain permanently reinvested outside the U.S. The Company expects that taxes associated with any future repatriation of these earnings are immaterial.

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Deferred Taxes

Deferred tax assets and liabilities represent the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The components of deferred tax assets and liabilities at December 31 are as follows:


	2022		2021
	(in millions)
Deferred Tax Assets
Accrued liabilities	$	697	$	497
Compensation and benefits	316		260
State taxes and other credits	43		40
Net operating losses	156		136
U.S. foreign tax credits	274		333
Property, plant and equipment	52		—
Intangible assets	186		206
Other items	162		161
Less: Valuation allowance	(114)		(415)
Total Deferred Tax Assets	1,772		1,218

Deferred Tax Liabilities
Prepaid expenses and other accruals	186		114
Gains on equity investments	132		153
Goodwill and intangible assets	561		571
Property, plant and equipment	—		174
Other items	135		115
Total Deferred Tax Liabilities	1,014		1,127

Net Deferred Tax Assets	$	758	$	91

The valuation allowance balance at December 31, 2022 primarily related to the Company’s ability to recognize future tax benefits associated with certain foreign losses. The recognition of the foreign losses is dependent on the timing and character of future taxable income in the applicable jurisdictions. The valuation allowance balance at December 31, 2021 primarily related to the Company’s ability to recognize future tax benefits associated with the carry forward of U.S. foreign tax credits and certain foreign losses. The valuation allowance associated with the carryforward of U.S. foreign tax credits was released in 2022 as a result of the publication of final U.S. tax regulations. The regulations limit the Company’s ability to generate foreign tax credits for certain taxes paid beginning in 2022, but have the effect of allowing the Company to utilize its foreign tax credit carryforwards.

As of December 31, 2022, the Company had foreign tax credit and tax effected net operating loss carryforwards of $274 million and $156 million, respectively. The foreign tax credits begin to expire in 2029 and the majority of the net operating losses can be carried forward indefinitely.

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A reconciliation of the beginning and ending balance for the Company’s unrecognized tax benefits for the years ended December 31, is as follows:


	2022		2021		2020
	(in millions)
Beginning balance	$	360	$	388	$	203
Additions:
Current year tax positions	22		17		19
Prior year tax positions1	65		4		192
Reductions:
Prior year tax positions1	(14)		(31)		(10)
Settlements with tax authorities	(13)		(15)		(12)
Expired statute of limitations	(6)		(3)		(4)
Ending balance	$	414	$	360	$	388

1Includes immaterial translational impact of currency.

As of December 31, 2022, the amount of unrecognized tax benefit was $414 million. This amount, if recognized, would reduce the effective income tax rate by $362 million. The Company’s unrecognized tax benefits increased in 2020 primarily due to a prior year tax issue resulting from a refund claim filed in 2020.

The Company is subject to tax in the U.S., Belgium, Singapore, the United Kingdom and various other foreign jurisdictions, as well as state and local jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation. Within the next twelve months, the Company believes that the resolution of certain federal, foreign and state and local examinations is reasonably possible and that a change in estimate, reducing unrecognized tax benefits, may occur. While such a change may be significant, it is not possible to provide a range of the potential change until the examinations progress further or the related statutes of limitation expire. The Company has effectively settled its U.S. federal income tax obligations through 2014. With limited exception, the Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2011.

Note 21. Legal and Regulatory Proceedings

Mastercard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business. Some of these proceedings are based on complex claims involving substantial uncertainties and unascertainable damages. Accordingly, except as discussed below, it is not possible to determine the probability of loss or estimate damages, and therefore, Mastercard has not established reserves for any of these proceedings. When the Company determines that a loss is both probable and reasonably estimable, Mastercard records a liability and discloses the amount of the liability if it is material. When a material loss contingency is only reasonably possible, Mastercard does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Unless otherwise stated below with respect to these matters, Mastercard cannot provide an estimate of the possible loss or range of loss based on one or more of the following reasons: (1) actual or potential plaintiffs have not claimed an amount of monetary damages or the amounts are unsupportable or exaggerated, (2) the matters are in early stages, (3) there is uncertainty as to the outcome of pending appeals or motions, (4) there are significant factual issues to be resolved, (5) the existence in many such proceedings of multiple defendants or potential defendants whose share of any potential financial responsibility has yet to be determined and/or (6) there are novel legal issues presented. Furthermore, except as identified with respect to the matters below, Mastercard does not believe that the outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its results of operations, financial condition and overall business. However, an adverse judgment or other outcome or settlement with respect to any proceedings discussed below could result in fines or payments by Mastercard and/or could require Mastercard to change its business practices. In addition, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage claims and possibly result in significant damage awards. Any of these events could have a material adverse effect on Mastercard’s results of operations, financial condition and overall business.

Interchange Litigation and Regulatory Proceedings

Mastercard’s interchange fees and other practices are subject to regulatory, legal review and/or challenges in a number of jurisdictions, including the proceedings described below. When taken as a whole, the resulting decisions, regulations and legislation with respect to interchange fees and acceptance practices may have a material adverse effect on the Company’s prospects for future growth and its overall results of operations, financial position and cash flows.

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United States. In June 2005, the first of a series of complaints were filed on behalf of merchants (the majority of the complaints were styled as class actions, although a few complaints were filed on behalf of individual merchant plaintiffs) against Mastercard International, Visa U.S.A., Inc., Visa International Service Association and a number of financial institutions. Taken together, the claims in the complaints were generally brought under both Sections 1 and 2 of the Sherman Act, which prohibit monopolization and attempts or conspiracies to monopolize a particular industry, and some of these complaints contain unfair competition law claims under state law. The complaints allege, among other things, that Mastercard, Visa, and certain financial institutions conspired to set the price of interchange fees, enacted point of sale acceptance rules (including the no surcharge rule) in violation of antitrust laws and engaged in unlawful tying and bundling of certain products and services, resulting in merchants paying excessive costs for the acceptance of Mastercard and Visa credit and debit cards. The cases were consolidated for pre-trial proceedings in the U.S. District Court for the Eastern District of New York in MDL No. 1720. The plaintiffs filed a consolidated class action complaint seeking treble damages.

In July 2006, the group of purported merchant class plaintiffs filed a supplemental complaint alleging that Mastercard’s initial public offering of its Class A Common Stock in May 2006 (the “IPO”) and certain purported agreements entered into between Mastercard and financial institutions in connection with the IPO: (1) violate U.S. antitrust laws and (2) constituted a fraudulent conveyance because the financial institutions allegedly attempted to release, without adequate consideration, Mastercard’s right to assess them for Mastercard’s litigation liabilities. The class plaintiffs sought treble damages and injunctive relief including, but not limited to, an order reversing and unwinding the IPO.

In February 2011, Mastercard and Mastercard International entered into each of: (1) an omnibus judgment sharing and settlement sharing agreement with Visa Inc., Visa U.S.A. Inc. and Visa International Service Association and a number of financial institutions; and (2) a Mastercard settlement and judgment sharing agreement with a number of financial institutions. The agreements provide for the apportionment of certain costs and liabilities which Mastercard, the Visa parties and the financial institutions may incur, jointly and/or severally, in the event of an adverse judgment or settlement of one or all of the merchant litigation cases. Among a number of scenarios addressed by the agreements, in the event of a global settlement involving the Visa parties, the financial institutions and Mastercard, Mastercard would pay 12% of the monetary portion of the settlement. In the event of a settlement involving only Mastercard and the financial institutions with respect to their issuance of Mastercard cards, Mastercard would pay 36% of the monetary portion of such settlement.

In October 2012, the parties entered into a definitive settlement agreement with respect to the merchant class litigation (including with respect to the claims related to the IPO) and the defendants separately entered into a settlement agreement with the individual merchant plaintiffs. The settlements included cash payments that were apportioned among the defendants pursuant to the omnibus judgment sharing and settlement sharing agreement described above. Mastercard also agreed to provide class members with a short-term reduction in default credit interchange rates and to modify certain of its business practices, including its “no surcharge” rule. The court granted final approval of the settlement in December 2013, and objectors to the settlement appealed that decision to the U.S. Court of Appeals for the Second Circuit. In June 2016, the court of appeals vacated the class action certification, reversed the settlement approval and sent the case back to the district court for further proceedings. The court of appeals’ ruling was based primarily on whether the merchants were adequately represented by counsel in the settlement. As a result of the appellate court ruling, the district court divided the merchants’ claims into two separate classes - monetary damages claims (the “Damages Class”) and claims seeking changes to business practices (the “Rules Relief Class”). The court appointed separate counsel for each class.

In September 2018, the parties to the Damages Class litigation entered into a class settlement agreement to resolve the Damages Class claims. The time period during which Damages Class members were permitted to opt out of the class settlement agreement ended in July 2019 with merchants representing slightly more than 25% of the Damages Class interchange volume choosing to opt out of the settlement. The district court granted final approval of the settlement in December 2019. The district court’s settlement approval order has been appealed and oral argument on the appeal was heard in March 2022. Mastercard has commenced settlement negotiations with a number of the opt-out merchants and has reached settlements and/or agreements in principle to settle a number of these claims. The Damages Class settlement agreement does not relate to the Rules Relief Class claims. Separate settlement negotiations with the Rules Relief Class are ongoing. Briefing on summary judgment motions in the Rules Relief Class and opt-out merchant cases was completed in December 2020. In September 2021, the district court granted the Rules Relief Class’s motion for class certification.

As of December 31, 2022 and 2021, Mastercard had accrued a liability of $894 million and $783 million, respectively, as a reserve for both the Damages Class litigation and the opt-out merchant cases. During 2022, Mastercard recorded an additional accrual of $133 million as a result of a change in estimate with respect to the claims of merchants who opted out of the Damages Class litigation. As of December 31, 2022 and 2021, Mastercard had $589 million and $586 million, respectively, in a qualified cash settlement fund related to the Damages Class litigation and classified as restricted cash on its consolidated balance sheet. The reserve as of December 31, 2022 for both the Damages Class litigation and the opt-out merchants represents Mastercard’s best estimate of its

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probable liabilities in these matters. The portion of the accrued liability relating to both the opt-out merchants and the Damages Class litigation settlement does not represent an estimate of a loss, if any, if the matters were litigated to a final outcome. Mastercard cannot estimate the potential liability if that were to occur.

Europe. Since May 2012, a number of United Kingdom (“U.K.”) merchants filed claims or threatened litigation against Mastercard seeking damages for excessive costs paid for acceptance of Mastercard credit and debit cards arising out of alleged anti-competitive conduct with respect to, among other things, Mastercard’s cross-border interchange fees and its U.K. and Ireland domestic interchange fees (the “U.K. Merchant claimants”). In addition, Mastercard, has faced similar filed or threatened litigation by merchants with respect to interchange rates in other countries in Europe (the “Pan-European Merchant claimants”). Mastercard has resolved a substantial amount of these damages claims through settlement or judgment. During 2022, Mastercard incurred charges of $223 million as a result of settlements (both final and agreements in principle) with a number of U.K. merchants. During 2021 and 2020, Mastercard incurred charges of $94 million and $28 million, respectively, to reflect both the litigation settlements and estimated attorneys’ fees with a number of U.K. and Pan-European merchants. Following these settlements, an amount in excess of £0.6 billion (approximately $0.7 billion as of December 31, 2022) of unresolved damages claims remain.

In January 2017, Mastercard received a liability judgment in its favor on all significant matters in a separate action brought by ten of the U.K. Merchant claimants. Three of the U.K. Merchant claimants appealed the judgment, and these appeals were combined with Mastercard’s appeal of a 2016 judgment in favor of one U.K. merchant. In July 2018, the U.K. appellate court heard the appeals of the four merchant claimants and ruled against both Mastercard and Visa on two of the three legal issues being considered. The parties appealed the rulings to the U.K. Supreme Court. In June 2020, the U.K. Supreme Court ruled against Mastercard and Visa with respect to one of the liability issues being considered by the Court related to U.K domestic interchange fees. Additionally, the U.K. Supreme Court set out the legal standard that should be applied by lower trial courts with respect to determining whether interchange was exemptible under applicable law, and provided guidance to lower courts with regard to the legal standard that should be applied in assessing merchants’ damages claims. The U.K. Supreme Court sent three of the merchant cases back to the trial court solely for the purpose of determining damages issues. Mastercard subsequently reached settlement agreements with all four merchants.

Mastercard continues to litigate with the remaining U.K. and Pan-European Merchant claimants and it has submitted statements of defense disputing liability and damages claims. A number of those matters are now progressing with motion practice and discovery. In one of the actions involving multiple merchant plaintiff claims, the U.K. trial court in November 2021 denied the plaintiffs’ motion for summary judgment on certain liability issues. In October 2022, the appellate court rejected the plaintiffs’ appeal. In a separate matter filed in Belgium involving multiple merchants from the Czech Republic and Slovakia, the trial court held a hearing in June 2022 on liability issues, and the decision is pending.

During the third quarter of 2022, Mastercard and Visa were served with a proposed collective action complaint in the U.K. on behalf of merchants seeking damages for commercial card transactions and inter-regional consumer card transactions in both the U.K. and the European Union. The plaintiffs have claimed damages against Mastercard of approximately £0.5 billion (approximately $0.6 billion as of December 31, 2022). The court has scheduled a hearing on the plaintiffs’ collective action application for April 2023.

In September 2016, a proposed collective action was filed in the United Kingdom on behalf of U.K. consumers seeking damages for intra-EEA and domestic U.K. interchange fees that were allegedly passed on to consumers by merchants between 1992 and 2008. The complaint, which seeks to leverage the European Commission’s 2007 decision on intra-EEA interchange fees, claims damages in an amount that exceeds £14 billion (approximately $17 billion as of December 31, 2022). Following various hearings since July 2017 regarding collective action and scope, in August 2021, the trial court issued a decision in which it granted class certification to the plaintiffs but narrowed the scope of the class. In January 2023, the trial court held a hearing on Mastercard’s request to narrow the number of years of damages sought by the plaintiffs on statute of limitations grounds. The trial court has scheduled an additional hearing for July 2023 regarding Mastercard’s request to preclude the plaintiffs from seeking damages with respect to U.K. domestic interchange fees.

Mastercard has been named as a defendant in a proposed consumer collective action filed in Portugal on behalf of Portuguese consumers. The complaint, which seeks to leverage the 2019 resolution of the European Commission’s investigation of Mastercard’s central acquiring rules and interregional interchange fees, claims damages of approximately €0.4 billion (approximately $0.4 billion as of December 31, 2022) for interchange fees that were allegedly passed on to consumers by Portuguese merchants for a period of approximately 20 years. Mastercard has submitted a statement of defense that disputes both liability and damages.

Australia. In May 2022, the Australian Competition & Consumer Commission (“ACCC”) filed a complaint targeting certain agreements entered into by Mastercard and certain Australian merchants related to Mastercard’s debit program. The ACCC alleges that by entering into such agreements, Mastercard engaged in conduct with the purpose of substantially lessening competition in the supply of debit card acceptance services. The ACCC seeks both declaratory relief and monetary fines and costs.

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ATM Non-Discrimination Rule Surcharge Complaints

United States. In October 2011, a trade association of independent Automated Teller Machine (“ATM”) operators and 13 independent ATM operators filed a complaint styled as a class action lawsuit in the U.S. District Court for the District of Columbia against both Mastercard and Visa (the “ATM Operators Complaint”). Plaintiffs seek to represent a class of non-bank operators of ATM terminals that operate in the United States with the discretion to determine the price of the ATM access fee for the terminals they operate. Plaintiffs allege that Mastercard and Visa have violated Section 1 of the Sherman Act by imposing rules that require ATM operators to charge non-discriminatory ATM surcharges for transactions processed over Mastercard’s and Visa’s respective networks that are not greater than the surcharge for transactions over other networks accepted at the same ATM. Plaintiffs seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including attorneys’ fees.

Subsequently, multiple related complaints were filed in the U.S. District Court for the District of Columbia alleging both federal antitrust and multiple state unfair competition, consumer protection and common law claims against Mastercard and Visa on behalf of putative classes of users of ATM services (the “ATM Consumer Complaints”). The claims in these actions largely mirror the allegations made in the ATM Operators Complaint, although these complaints seek damages on behalf of consumers of ATM services who pay allegedly inflated ATM fees at both bank and non-bank ATM operators as a result of the defendants’ ATM rules. Plaintiffs seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including attorneys’ fees.

In January 2012, the plaintiffs in the ATM Operators Complaint and the ATM Consumer Complaints filed amended class action complaints that largely mirror their prior complaints. In September 2019, the plaintiffs filed with the district court their motions for class certification in which the plaintiffs, in aggregate, allege over $1 billion in damages against all of the defendants. In August 2021, the trial court issued an order granting the plaintiffs’ request for class certification. Visa and Mastercard subsequently appealed the certification decision to the appellate court and oral argument on the appeal was heard in September 2022.

Europe. Mastercard has been named as a defendant in an action brought by Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o. and Euronet Services spol. s.r.o. (“Euronet”) alleging that certain rules affecting ATM access fees in Poland, the Czech Republic and Greece by Visa and Mastercard, and certain of their subsidiaries, breach various competition laws. Euronet seeks damages, costs and injunctive relief to prevent the defendants from enforcing these rules. A trial has been scheduled for October 2023.

U.S. Liability Shift Litigation

In March 2016, a proposed U.S. merchant class action complaint was filed in federal court in California alleging that Mastercard, Visa, American Express and Discover (the “Network Defendants”), EMVCo, and a number of issuing banks (the “Bank Defendants”) engaged in a conspiracy to shift fraud liability for card present transactions from issuing banks to merchants not yet in compliance with the standards for EMV chip cards in the United States (the “EMV Liability Shift”), in violation of the Sherman Act and California law. Plaintiffs allege damages equal to the value of all chargebacks for which class members became liable as a result of the EMV Liability Shift on October 1, 2015. The plaintiffs seek treble damages, attorney’s fees and costs and an injunction against future violations of governing law, and the defendants filed a motion to dismiss. In September 2016, the district court denied the Network Defendants’ motion to dismiss the complaint, but granted such a motion for EMVCo and the Bank Defendants. In May 2017, the district court transferred the case to New York so that discovery could be coordinated with the U.S. merchant class interchange litigation described above. In August 2020, the district court issued an order granting the plaintiffs’ request for class certification and in January 2021, the Network Defendants’ request for permission to appeal that decision was denied. The plaintiffs have submitted expert reports that allege aggregate damages in excess of $1 billion against the four Network Defendants. The Network Defendants have submitted expert reports rebutting both liability and damages. Briefing on summary judgment is scheduled to conclude in July 2023.

Telephone Consumer Protection Class Action

Mastercard is a defendant in a Telephone Consumer Protection Act (“TCPA”) class action pending in Florida. The plaintiffs are individuals and businesses who allege that approximately 381,000 unsolicited faxes were sent to them advertising a Mastercard co-brand card issued by First Arkansas Bank (“FAB”). The TCPA provides for uncapped statutory damages of $500 per fax. Mastercard has asserted various defenses to the claims, and has notified FAB of an indemnity claim that it has (which FAB has disputed). In December 2019, the Federal Communications Commission (“FCC”) issued a declaratory ruling clarifying that the TCPA does not apply to faxes sent to online fax services that are received online via email. In December 2021, the trial court granted plaintiffs’ request for class certification, but narrowed the scope of the class to stand alone fax recipients only. Mastercard’s request to appeal that decision was denied.

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U.S. Federal Trade Commission Investigation

In June 2020, the U.S. Federal Trade Commission’s Bureau of Competition (“FTC”) informed Mastercard that it has initiated a formal investigation into compliance with the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. In particular, the investigation focused on Mastercard’s compliance with the debit routing provisions of the Durbin Amendment. In December 2022, the FTC voted to issue an administrative complaint and accept a consent agreement with Mastercard. Pursuant to this agreement, Mastercard agreed to provide primary account numbers (PANs) so that merchants can route tokenized online debit transactions to alternative networks. The consent agreement does not include any monetary penalty. The consent agreement is currently undergoing a comment period, after which the FTC will decide whether to make the proposed consent agreement final.

U.K. Prepaid Cards Matter

In 2019, Mastercard was informed by the U.K. Payment Systems Regulator (“PSR”) that Mastercard was a target of its investigation into alleged anti-competitive conduct by public sector prepaid card program managers in the U.K. This matter focused exclusively on historic behavior. In March 2021, the PSR announced the resolution and settlement of this investigation. As part of the resolution, Mastercard agreed to pay a maximum fine of £32 million. This matter has no prospective impact on Mastercard’s on-going business. In connection with this matter, in the fourth quarter of 2020, Mastercard recorded a litigation charge of $45 million. Mastercard paid the agreed fine in March 2022.

Note 22. Settlement and Other Risk Management

Mastercard’s rules guarantee the settlement of many of the transactions between its customers (“settlement risk”). Settlement exposure is the settlement risk to customers under Mastercard’s rules due to the difference in timing between the payment transaction date and subsequent settlement. For those transactions the Company guarantees, the guarantee will cover the full amount of the settlement obligation to the extent the settlement obligation is not otherwise satisfied. Settlement is generally completed on a same-day basis, however, in some circumstances, funds may not settle until subsequent business days creating a short-term settlement exposure.

Gross settlement exposure is estimated using the average daily payment volume during the three months prior to period end multiplied by the estimated number of days of exposure. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Company’s settlement risk and exposure. In the event of failed settlement by a customer, Mastercard may pursue one or more remedies available under the Company’s rules to recover potential losses. Historically, the Company has experienced a low level of losses from customer settlement failures.

As part of its policies, Mastercard requires certain customers that are not in compliance with the Company’s risk standards to enter into risk mitigation arrangements, including cash collateral and/or other forms of credit enhancement such as letters of credit and guarantees. This requirement is based on a review of the individual risk circumstances for each customer. Mastercard monitors its credit risk portfolio and the adequacy of its risk mitigation arrangements on a regular basis. Additionally, from time to time, the Company reviews its risk management methodology and standards. As such, the amounts of estimated settlement exposure are revised as necessary.

The Company’s estimated settlement exposure was as follows at December 31:


	2022		2021
	(in millions)
Gross settlement exposure	$	64,885	$	59,571
Risk mitigation arrangements applied to settlement exposure	(10,697)		(7,710)
Net settlement exposure	$	54,188	$	51,861

Mastercard also provides guarantees to customers and certain other counterparties indemnifying them from losses stemming from failures of third parties to perform duties. This includes guarantees of Mastercard-branded travelers cheques issued, but not yet cashed of $342 million and $361 million at December 31, 2022 and 2021, respectively, of which the Company has risk mitigation arrangements for $273 million and $287 million at December 31, 2022 and 2021, respectively. In addition, the Company enters into agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company. Certain indemnifications do not provide a stated maximum exposure. As the extent of the Company’s obligations under these agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable. Historically, payments made by the Company under these types of contractual arrangements have not been material.

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Note 23. Derivative and Hedging Instruments

The Company monitors and manages its foreign currency and interest rate exposures as part of its overall risk management program which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. A primary objective of the Company’s risk management strategies is to reduce the financial impact that may arise from volatility in foreign currency exchange rates principally through the use of both foreign exchange derivative contracts and foreign currency denominated debt. In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances.

Cash Flow Hedges

The Company may enter into foreign exchange derivative contracts, including forwards and options, to manage the impact of foreign currency variability on anticipated revenues and expenses, which fluctuate based on currencies other than the functional currency of the entity. The objective of these hedging activities is to reduce the effect of movement in foreign exchange rates for a portion of revenues and expenses forecasted to occur. As these contracts are designated as cash flow hedging instruments, gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings.

In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances, and designate such derivatives as hedging instruments in a cash flow hedging relationship. In 2019, the Company entered into treasury rate locks which are accounted for as cash flow hedges. In the first quarter of 2020, in connection with the issuance of the 2020 USD Notes, these contracts were settled at a loss of $136 million, after tax, in accumulated other comprehensive income (loss). As of December 31, 2022, a cumulative loss of $123 million, after tax, remains in accumulated other comprehensive income (loss) associated with these contracts and will be reclassified as an adjustment to interest expense over the respective terms of the 2020 USD Notes due in March 2030 and March 2050.

Fair Value Hedges

The Company may enter into interest rate derivative contracts, including interest rate swaps, to manage the effects of interest rate movements on the fair value of the Company's fixed-rate debt and designate such derivatives as hedging instruments in a fair value hedging relationship. Changes in fair value of these contracts and changes in fair value of fixed-rate debt attributable to changes in the hedged benchmark interest rate generally offset each other and are recorded in interest expense on the consolidated statement of operations. Gains or losses related to the net settlements of interest rate swaps are also recorded in interest expense on the consolidated statement of operations. The periodic cash settlements are included in operating activities on the consolidated statement of cash flows.

During the fourth quarter of 2021, the Company entered into an interest rate swap designated as a fair value hedge related to $1.0 billion of the 3.850% Senior Notes due March 2050. In effect, the interest rate swap synthetically converts the fixed interest rate on this debt to a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap Rate. The net impact to interest expense for the years ended December 31, 2022 and 2021 was not material.

Net Investment Hedges

The Company may use foreign currency denominated debt and/or foreign exchange derivative contracts to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the net investment hedge is recorded as a currency translation adjustment in accumulated other comprehensive income (loss). Forward points are designated as an excluded component and recognized in general and administrative expenses on the consolidated statement of operations over the hedge period. The amounts recognized in earnings related to forward points for 2022 and 2021 were not material.

In 2015 and 2022, the Company designated its €1,650 million and €750 million euro-denominated debt, respectively, as hedges of a portion of its net investment in its European operations. In 2022, €700 million of the 2015 euro-denominated debt matured and was de-designated as a net investment hedge. During 2022, 2021 and 2020 the Company recorded a pre-tax net foreign currency gain of $176 million, gain of $155 million and loss of $177 million, respectively, in other comprehensive income (loss).

As of December 31, 2022 and 2021, the Company had net foreign currency gains of $309 million and $34 million, after tax, respectively, in accumulated other comprehensive income (loss) associated with this hedging activity.

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Non-designated Derivatives

The Company may also enter into foreign exchange derivative contracts to serve as economic hedges, such as to offset possible changes in the value of monetary assets and liabilities due to foreign exchange fluctuations, without designating these derivative contracts as hedging instruments. In addition, the Company is subject to foreign exchange risk as part of its daily settlement activities. This risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with customers. To manage this risk, the Company may enter into short duration foreign exchange derivative contracts based upon anticipated receipts and disbursements for the respective currency position. The objective of these activities is to reduce the Company’s exposure to volatility arising from gains and losses resulting from fluctuations of foreign currencies against its functional currencies. Gains and losses resulting from changes in fair value of these contracts are recorded in general and administrative expenses on the consolidated statement of operations, net, along with the foreign currency gains and losses on monetary assets and liabilities.

The following table summarizes the fair value of the Company’s derivative financial instruments and the related notional amounts:


	December 31, 2022						December 31, 2021
	Notional		Derivative Assets		Derivative Liabilities		Notional		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives designated as hedging instruments
Foreign exchange contracts in a cash flow hedge 1	$	642	$	4	$	15	$	206	$	7	$	3
Interest rate contracts in a fair value hedge 2	1,000		—		105		1,000		6		8
Foreign exchange contracts in a net investment hedge 1	1,814		103		4		1,473		—		4
Derivatives not designated as hedging instruments
Foreign exchange contracts 1	521		1		2		530		1		8
Total derivative assets/liabilities	$	3,977	$	108	$	126	$	3,209	$	14	$	23

1Foreign exchange derivative assets and liabilities are included within prepaid expenses and other current assets and other current liabilities, respectively, on the consolidated balance sheet.

2As of December 31, 2022, interest rate derivative liabilities are included within other current liabilities and other liabilities on the consolidated balance sheet. As of December 31, 2021, interest rate derivative assets and liabilities are included within prepaid expenses and other current assets and other liabilities, respectively, on the consolidated balance sheet.

The pre-tax gain (loss) related to the Company's derivative financial instruments designated as hedging instruments are as follows:


	Gain (Loss) Recognized in OCI								Gain (Loss) Reclassified from AOCI
	Year ended December 31,						Location of Gain (Loss) Reclassified from AOCI into Earnings		Year ended December 31,
	2022		2021		2020			2022			2021			2020
	(in millions)							(in millions)
Derivative financial instruments in a cash flow hedge relationship:
Foreign exchange contracts	$	1	$	6	$	—	Net revenue		$	16		$	1		$	—
Interest rate contracts	$	—	$	—	$	(189)	Interest expense		$	(6)		$	(6)		$	(4)

Derivative financial instruments in a net investment hedge relationship:
Foreign exchange contracts	$	177	$	114	$	—

The Company estimates that $17 million, pre-tax, of the net deferred loss on cash flow hedges recorded in accumulated other comprehensive income (loss) at December 31, 2022 will be reclassified into the consolidated statement of operations within the next 12 months. The term of the foreign exchange derivative contracts designated in hedging relationships are generally less than 18 months.

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The amount of gain (loss) recognized on the consolidated statement of operations for non-designated derivative contracts is summarized below:


	Year ended December 31,
Derivatives not designated as hedging instruments:	2022		2021		2020
	(in millions)
Foreign exchange derivative contracts
General and administrative	$	21	$	(10)	$	40

The Company’s derivative financial instruments are subject to both market and counterparty credit risk. Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as foreign currency exchange rates, interest rates and other related variables. Counterparty credit risk is the risk of loss due to failure of the counterparty to perform its obligations in accordance with contractual terms. The Company’s derivative contracts are subject to enforceable master netting arrangements, which contain various netting and setoff provisions. To mitigate counterparty credit risk, the Company enters into derivative contracts with a diversified group of selected financial institutions based upon their credit ratings and other factors. Generally, the Company does not obtain collateral related to derivatives because of the high credit ratings of the counterparties.

Note 24. Segment Reporting

Mastercard has concluded it has one reportable operating segment, “Payment Solutions.” Mastercard’s Chief Executive Officer has been identified as the chief operating decision-maker. All of the Company’s activities are interrelated, and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based upon analysis of Mastercard at the consolidated level.

Revenue by geographic market is based on the location of the Company’s customer that issued the card, the location of the merchant acquirer where the card is being used or the location of the customer receiving services. Revenue generated in the U.S. was approximately 33% of net revenue in 2022, 32% in 2021 and 33% in 2020. No individual country, other than the U.S., generated more than 10% of net revenue in those periods. Mastercard did not have any individual customer that generated greater than 10% of net revenue in 2022, 2021 or 2020.

The following table reflects the geographical location of the Company’s property, equipment and right-of-use assets, net, as of December 31:


	2022		2021		2020
	(in millions)
United States	$	1,123	$	1,117	$	1,185
Other countries	883		790		717
Total	$	2,006	$	1,907	$	1,902

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PART II

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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