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PayPal Inflates Operating Cash Flow By $543 Million
Payments firm included collateral from derivatives in prior year operating cash flows.
February 10, 2022
PayPal (PYPL), a digital payments platform, has been including collateral security arrangements for derivative instruments as operating cash flows. The company reclassified the collateral as cash flows from investing and financing activities for the previous two years in its latest annual report.

Lumping in the collateral had a significant impact on operating cash flows in the prior two years:

— In 2021, PayPal inflated Op cash flow $543 million, or 9.36%.
— In 2020, Paypal understated Op cash flow $365 million, or 5.86%

PayPal provided no new detail related to how it determines whether derivative collateral should be classified as cash flow from financing or investing activities.

Separately, we’ve documented PayPal’s long history with regulators in the U.S. In January 2023 PayPal was notified the German Federal Cartel Office (FCO) is probing whether the company used surcharges to harm competing payment methods and drive up costs for consumers.
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