PARTIV Note1—OverviewandSummaryofSignificantAccountingPolicies PayPalHoldings,Inc. NotestoConsolidatedFinancialStatements—(Continued) ROUassetsrepresentour right to use an underlying asset for the lease term and lease liabilities represent our obligation to makelease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Our leases do not provide an implicit rate and therefore we use an incremental borrowing rate for specific terms on a collateralized basis using information available on the commencement date in determining the present value of lease payments. The ROU asset calculation includes lease payments to be made and excludes lease incentives. The ROU asset and lease liability may include amounts attributed to options to extend or terminate the lease when it is reasonably certain we will exercise that option. When we reach a decisionto exercisea lease renewalor terminationoption, we recognizethe associatedimpactto the ROU assetandlease liability. Lease expense for operating leases is recognized on a straight-line basis over the lease term. ANNU We evaluate ROU assets related to leases for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an ROU asset may not be recoverable. When a decision has been made to exit a lease AL prior to the contractual term or to sublease that space, we evaluate the asset for impairment and recognize the associated REPOR impacttotheROUassetandrelatedexpense,ifapplicable.Theevaluationisperformedattheassetgrouplevelinitiallyand when appropriate, at the lowest level of identifiable cash flows, which is at the individual lease level. Undiscounted cash T flows expectedto be generatedby the related ROU assets are estimatedover the ROU assets useful lives. If the evaluation indicates that the carrying amount of the ROU assets may not be recoverable, any potential impairment is measured based uponthefairvalueoftherelatedROUassetorassetgroupasdeterminedbyappropriatevaluationtechniques. Wehavelease agreements with lease and non-lease components. We have elected to apply the practical expedient and accountfor the lease and non-lease componentsas a single lease component for all leases, where applicable. In addition, wehaveelectedtoapplythepracticalexpedientsrelatedto leaseclassification,hindsight, and land easement. We apply a single portfolio approachto accountfor the ROU assetsand leaseliabilities. GoodwillandIntangibleAssets Goodwill is tested for impairment, at a minimum, on an annual basis at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting units carrying value is comparedto its fair value. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The fair value of the reporting unit may be estimated using income and market approaches. The discounted cash flow method,aformoftheincomeapproach,usesexpectedfutureoperatingresultsandamarketparticipantdiscountrate.The market approach uses comparable company prices and other relevant information generated by market transactions (either publicly traded entities or mergers and acquisitions) to develop pricing metrics to be applied to historical and expected future operating results of the reporting unit. Failure to achieve these expected results, changes in the discount rate, or market pricing metrics may cause a future impairment of goodwill at the reporting unit level. We conducted our annual impairmenttest of goodwill as of August 31, 2022 and 2021. We determinedthat no adjustment to the carrying value of goodwill of our reporting unit was required. As of December 31, 2022, we determined that no events occurred, or circumstances changed from August 31, 2022 through December 31, 2022 that would more likely than not reduce the fair valueofthereportingunitbelowitscarryingamount. Intangible assets consist of acquired customer list and user base intangible assets, marketing related intangibles, developed technology, and other intangible assets. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from two to seven years. No significant residual value is estimatedforintangibleassets. ImpairmentofLong-livedAssets Weevaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carryingamountexceedsthefutureundiscountedcashflowtheassetisexpectedtogenerate. AllowanceforTransactionLosses Weareexposedtotransactionlossesduetocreditcardandotherpaymentmisuseaswellasnonperformancefromsellers whoaccept payments through PayPal. We establish an allowance for estimated losses arising from completing customer transactions, such as chargebacksfor unauthorized credit card use and merchant-relatedchargebacksdue to non-delivery or unsatisfactory delivery of purchased items, purchase protection program claims, and account takeovers. This allowance •2022AnnualReport 69