MasterCard 2009 Annual Report Download - page 96

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
payment-related services are dependent on the nature of the products or services provided to our customers and
are recognized as revenue in the same period as the related transactions occur or services are rendered.
MasterCard has business agreements with certain customers that provide for fee rebates when the customers
meet certain volume hurdles as well as other support incentives such as marketing, which are tied to
performance. Rebates and incentives are recorded as a reduction of revenue in the same period as the revenue is
earned or performance has occurred. Rebates and incentives are calculated on a monthly basis based upon
estimated performance and the terms of the related business agreements. In addition, MasterCard may incur costs
directly related to the acquisition of the contract, which are deferred and amortized over the life of the contract.
Pension and other postretirement plans—Compensation cost of an employee’s pension benefit is
recognized in general and administrative expenses on the projected unit credit method over the employee’s
approximate service period. The unit credit cost method is utilized for funding purposes.
The Company recognizes the overfunded or underfunded status of its single-employer defined benefit plan
or postretirement plan as an asset or liability in its balance sheet and recognizes changes in the funded status in
the year in which the changes occur through comprehensive income. The Company also measures the funded
status of a plan as of the date of its year-end balance sheet.
The accounting disclosure standards for employers’ disclosures about postretirement benefit plan assets
were amended and became effective for the Company in 2009. These new standards provide guidance on an
employer’s disclosures about plan assets of a defined benefit pension plan or other postretirement plan, including
disclosure of how investment allocation decisions are made, major categories of plan assets, inputs and valuation
techniques used to measure the fair value of plan assets and concentrations of credit risk. The Company adopted
the guidance in 2009, as required, and the adoption had no impact on the Company’s financial position or results
of operations. See Note 12 (Pension, Savings Plan and Other Benefits) for further detail.
Share based payments—The Company recognizes the fair value of all share-based payments to employees
in its financial statements. The Company recognizes a realized tax benefit associated with dividends on certain
equity shares and options as an increase to additional paid-in capital. The benefit is included in the pool of excess
tax benefits available to absorb potential future tax liabilities on share based payment awards.
Advertising expense—Cost of media advertising is expensed when the advertising takes place. Production
costs are expensed as costs are incurred. Promotional items are expensed at the time the promotional event
occurs. Sponsorship costs are recognized over the period of benefit based on the estimated value of certain
events.
Foreign currency translation—The U.S. dollar is the functional currency for the majority of the Company’s
businesses except for MasterCard Europe’s operations, for which the functional currency is the euro, and
MasterCard’s operations in Brazil, for which the functional currency is the real. Where the U.S. dollar is
considered the functional currency, monetary assets and liabilities are re-measured to U.S. dollars using current
exchange rates in effect at the balance sheet date; non-monetary assets and liabilities are re-measured at historical
exchange rates; and revenue and expense accounts are re-measured at a weighted average exchange rate for the
period. Resulting exchange gains and losses and transactional foreign exchange gains and losses are included in
general and administrative expenses in the statement of operations. Where local currency is the functional
currency, translation from the local currency to U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average
exchange rate for the period. Resulting translation adjustments are reported as a component of other
comprehensive income (loss).
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