MasterCard 2008 Annual Report Download - page 94

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except percent and per share data)
Note 1. Summary of Significant Accounting Policies
Organization—MasterCard Incorporated and its consolidated subsidiaries, including MasterCard
International Incorporated (“MasterCard International”) and MasterCard Europe sprl (“MasterCard Europe”)
(together, “MasterCard” or the “Company”), provide payment solutions, including transaction processing and
related services to customers principally in support of their credit, deposit access (debit), electronic cash and
Automated Teller Machine (“ATM”) payment card programs, and travelers cheque programs. Our financial
institution customers are generally either principal members (“principal members”) of MasterCard International,
which participate directly in MasterCard International’s business, or affiliate members of MasterCard
International, which participate indirectly in MasterCard International’s business through a principal member.
Consolidation and basis of presentation—The consolidated financial statements include the accounts of
MasterCard and its majority-owned and controlled entities, including the Company’s variable interest entity. The
Company’s variable interest entity was established for the purpose of constructing the Company’s global
technology and operations center; it is not an operating entity and has no employees. Intercompany transactions
and balances are eliminated in consolidation. The Company follows accounting principles generally accepted in
the United States of America (“GAAP”).
The Company consolidates majority-owned and controlled entities, including variable interest entities which
are required to be consolidated in accordance with the provisions of Financial Accounting Standards Board
(“FASB”) Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46R”). Minority interest
represents the equity interest not owned by the Company and is recorded for consolidated entities in which the
Company owns less than 100% of the interest.
The Company accounts for investments in entities under the equity method of accounting when it holds
between 20% and 50% of the common stock in the entity and when it exercises significant influence. The equity
method of accounting is also utilized for limited partnerships and limited liability companies if the investment
ownership percentage is greater than 3% of outstanding ownership interests or common stock, respectively,
regardless of whether MasterCard has significant influence over the investees. MasterCard’s share of net
earnings or losses of entities accounted for under the equity method of accounting is included in other income
(expense) on the consolidated statements of operations.
The Company accounts for investments in affiliates under the historical cost method of accounting when it
holds less than 20% ownership in the common stock of the entity and when it does not exercise significant
influence.
Investments in entities for which the equity method and historical cost method of accounting are appropriate
are recorded in other assets on the consolidated balance sheets.
Certain prior period amounts have been reclassified to conform to 2008 classifications. In addition, amounts
previously reported within Accumulated Other Comprehensive Income as of December 31, 2006 have been
adjusted to reflect a revision of $22,804 to increase cumulative foreign currency translation adjustments with a
corresponding decrease in defined benefit pension and other postretirement plans. The revision had no impact on
total accumulated other comprehensive income, net of tax.
Use of estimates—The preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
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