PARTIV Note1—OverviewandSummaryofSignificantAccountingPolicies PayPalHoldings,Inc. NotestoConsolidatedFinancialStatements—(Continued) In June 2018, the Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”) agreed that PayPals managementmaydesignateupto35%ofEuropeancustomerbalancesheldinourLuxembourgbankingsubsidiarytofund European and U.S. credit activities. In August 2022, the CSSF approved PayPals management designating up to 50% of suchbalancestofundourcreditactivitiesthrough the end of February2023. During the year ended December31, 2022, an additional $1.1 billion was approved to fund our credit activities. As of December 31, 2022, the cumulative amount approved bymanagementtobedesignatedtofundcreditactivitiesaggregatedto$3.8billionandrepresentedapproximately37%of European customer balances made available for our corporate use at that date as determined by applying financial regulations maintainedby the CSSF. At the time PayPals managementdesignatesthe Europeancustomerbalancesheldin our Luxembourg banking subsidiary to be used to extend credit, the balances are classified as cash and cash equivalents and no longer classified as customer accounts on our consolidated balance sheets. The remaining assets underlying the customer balances remain separately classified as customer accounts on our consolidated balance sheets. We identify these customer accounts separately from corporate funds and maintain them in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities. Customer balances deposited with our partners on a short- termbasisinadvanceofcustomertransactionsandusedtofulfillourdirectobligationunderamountsduetocustomersare classified as cash and cash equivalents within our customer accounts classification on our consolidated balance sheets. See “Note 8—Funds Receivable and Customer Accounts and Investments” for additional information related to customer accounts. Wepresentchangesinfundsreceivableandcustomeraccountsascashflowsfrominvestingactivitiesinourconsolidated statementsofcashflowsbasedonthenatureoftheactivityunderlyingourcustomeraccounts. FundsReceivableandFundsPayable Fundsreceivableandfundspayableariseduetothetimerequiredtoinitiatecollectionfromandcleartransactionsthrough external payment networks. When customers fund their PayPal account using their bank account, credit card, debit card, or withdraw funds from their PayPal account to their bank account or through a debit card transaction, there is a clearing period before the cash is received or settled, usually one to three business days for U.S. transactions and generally up to five business days for international transactions. In addition, a portion of our customers funds are settled directly to their bank account. These funds are also classified as funds receivable and funds payable and arise due to the time required to initiate collection from and clear transactions through external payment networks. PropertyandEquipment Property and equipment consists primarily of computer equipment, software and website development costs, land and buildings, leasehold improvements, and furniture and fixtures. Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets; generally, one to four years for computer equipment and software, including capitalized software and website development costs, three years for furniture and fixtures, up to 30 years for buildings and building improvements,andtheshorteroffiveyearsorthenon-cancelabletermoftheleaseforleaseholdimprovements. Direct costs incurred to develop software for internal use and website developmentcosts, including those costs incurred in expanding and enhancing our payments platform, are capitalized and amortized generally over an estimated useful life of three years and are recorded as amortization within the financial statement captions aligned with the internal organizations that are the primary beneficiaries of such assets. We capitalized $511 million and $462 million of internally developed software and website development costs for the years ended December 31, 2022 and 2021, respectively. Amortization expense for these capitalized costs was $426 million, $366 million, and $322 million for the years ended December 31, 2022, 2021, and 2020, respectively. Costs related to the maintenance of internal use software and website development costsareexpensedasincurred. Leases We determine whether an arrangement is a lease for accounting purposes at contract inception. Operating leases are recorded as right-of-use (“ROU”) assets, which are included in other assets, and lease liabilities, which are included in accrued expenses and other current liabilities and deferred tax liability and other long-term liabilities on our consolidated balancesheets.For sale-leasebacktransactions,we evaluate the sale and the lease arrangementbased on our conclusion as to whether control of the underlying asset has been transferred, and recognize the sale-leaseback as either a sale transaction or under the financing method. The financing method requires the asset to remain on our consolidated balance sheetsthroughoutthetermoftheleaseandtheproceedstoberecognizedasafinancingobligation. 68 •2022AnnualReport