MasterCard 2012 Annual Report Download - page 69

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1The capital lease for the global technology and operations center located in O’Fallon, Missouri has been
excluded from this table, since the Company holds refunding revenue bonds equal to the payments due on
the lease. See Note 7 (Property, Plant and Equipment) included in Part II, Item 8 of this Report for further
information.
2The table does not include the $726 million provision as of December 31, 2012 related to the proposed
settlement of the U.S. merchant class litigation since the Company has made a payment into escrow to fund
the settlement. See Note 18 (Legal and Regulatory Proceedings) to the consolidated financial statements
included in Part II, Item 8 of this Report for further discussion.
3Amounts primarily relate to sponsorships to promote the MasterCard brand and amounts due in accordance
with merchant agreements that are fixed and non-cancelable. Future cash payments that will become due to
our customers under agreements which provide pricing rebates on our standard fees and other incentives in
exchange for transaction volumes are not included in the table because the amounts due are contingent on
future performance. MasterCard has accrued $1.1 billion as of December 31, 2012 related to customer and
merchant agreements.
4The Company has recorded a liability for unrecognized tax benefits of $257 million at December 31, 2012
and estimates that approximately $2 million of this liability is expected to be settled within the next 12
months. These amounts have been excluded from the table since the settlement period for the non-current
portion of this liability cannot be reasonably estimated. The timing of these payments will ultimately depend
on the progress of tax examinations with the various authorities.
Seasonality
The Company does not experience meaningful seasonality. No individual quarter in 2012, 2011 or 2010
accounted for more than 30% of net revenues.
Critical Accounting Estimates
The application of U.S. GAAP requires the Company to make estimates and assumptions about certain
items and future events that directly affect the Company’s reported financial condition. We have established
detailed policies and control procedures to provide reasonable assurance that the methods used to make estimates
and assumptions are well controlled and are applied consistently from period to period. The accounting estimates
and assumptions discussed in this section are those that the Company considers to be the most critical to its
financial statements. An accounting estimate is considered critical if both (a) the nature of the estimate or
assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact within a
reasonable range of outcomes of the estimate and assumption is material to the Company’s financial condition.
Senior management has discussed the development, selection and disclosure of these estimates with the Audit
Committee of the Company’s Board of Directors. The Company’s significant accounting policies, including
recent accounting pronouncements, are described in Note 1 (Summary of Significant Accounting Policies) to the
consolidated financial statements included in Part II, Item 8 of this Report.
A quantitative sensitivity analysis is provided where that information is reasonably available, can be reliably
estimated and provides material information to investors. The amounts used to assess sensitivity (e.g., 10
percent) are included to allow users of this Report to understand a general direction cause and effect of changes
in the estimates and do not represent management’s predictions of variability. For all of these estimates, it should
be noted that future events rarely develop exactly as forecasted, and estimates require regular review and
adjustment.
Rebates and Incentives
Rebates and incentives are recorded as a reduction of revenue based on our estimates of each customer’s
future performance according to the terms of the related customer agreements. We consider various factors in
estimating customer performance, including a review of specific transactions, historical experience with that
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