MasterCard 2010 Annual Report Download - page 79

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Financial Statement Caption/
Critical Accounting Estimate Assumptions/Approach Used
Effect if Actual Results Differ
from Assumptions
Rebates and incentives are generally
recorded as contra-revenue based on
our estimate of each customer’s
performance in a given period and
according to the terms of the related
customer agreements. Examples of
the customer performance items
requiring estimation include GDV
or GEV, transactions, issuance of
new cards, launch of new programs
or the execution of marketing
programs.
In addition, certain customer
agreements include prepayment of
rebates and incentives. Amortization
of prepayments and other assets
may be on straight-line basis over
the life of the agreement or based on
customer performance depending on
the terms of the related customer
agreements.
Our estimates of each customer’s
performance are based on
historical customer performance,
transactional information
accumulated from our systems and
discussions with our customers.
Such estimates are subsequently
validated by information reported
by our customers. Differences are
adjusted in the period the
customer reports.
If customers’ actual performance is
not consistent with our estimates of
their performance, contra-revenues
may be materially different than
initially estimated.
Legal and Regulatory Matters
We are party to legal and regulatory
proceedings with respect to a
variety of matters. Except as
described in Note 20 (Obligations
Under Litigation Settlements) and
Note 22 (Legal and Regulatory
Proceedings) to the consolidated
financial statements in Part II,
Item 8 of this Report, MasterCard
does not believe that any legal or
regulatory proceedings to which it is
a party would have a material
adverse impact on its business or
prospects.
We evaluate the likelihood of an
unfavorable outcome of the legal
or regulatory proceedings to
which we are party. Our
judgments are subjective based on
the status of the legal or regulatory
proceedings, the merits of our
defenses and consultation with in-
house and outside legal counsel.
Due to the inherent uncertainties of
the legal and regulatory process in
the multiple jurisdictions in which
we operate, our judgments may be
materially different than the actual
outcomes.
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