Capital One 2011 Annual Report Download - page 278

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS—(Continued)
• Comparative consolidated pro forma revenue and net income results as if the acquisition of ING Direct had
occurred as of January 1, 2011.
• The fair value, gross contractually required payments, best estimate as of the acquisition date of the required
payments that are not expected to be collected, and other information related to acquired loans.
• The amounts recorded at acquisition for each major class of assets acquired and liabilities assumed.
• The nature, amounts recognized and measurement basis of assets and liabilities arising from contingencies
recognized at acquisition.
• Qualitative and quantitative information related to any goodwill or bargain purchase gain recorded at
acquisition.
Sale of Visa Shares
In January 2012, we sold our 4,030,842 Class B shares of Visa Inc. common stock to another financial institution
for approximately $189 million. We expect to recognize a pre-tax gain of approximately $138 million on the sale
of the Class B shares during the quarter ending March 31, 2012. Visa’s Class B shares are subject to certain
transfer restrictions prior to the settlement of covered litigation involving Visa, MasterCard International and
several member banks including Capital One. Upon the lifting of the transfer restrictions, the Class B shares
convert into Class A shares based on a conversion ratio calculated by Visa.
In conjunction with the sale of the Class B shares, we entered into a derivative agreement under which, among
other things, we will make cash payments to the buyer whenever the conversion ratio of the Class B shares into
Class A shares is reduced, and the buyer will make cash payments to us for any increase in the conversion ratio.
We determined that the initial fair value of this derivative was a liability of $51 million which represents an
estimate of the exposure liability from probable litigation losses, and is factored into the calculation of the
pre-tax gain. A fair degree of subjectivity is used in estimating the fair value of the derivative liability, as such,
our eventual cost could be significantly higher or lower than the current estimate.
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