MasterCard 2013 Annual Report Download - page 47

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43
• Data processing and telecommunication expense consists of expenses to support our global
payments network infrastructure, expenses to operate and maintain our computer and
telecommunication system. These expenses vary with business volume growth, system upgrades
and usage.
• Other expenses include loyalty and rewards solutions, travel and entertainment, rental expense
for our facilities, litigation settlements not related to the MDL Provision, investment related
expenses and other miscellaneous operating expenses. The change in other expenses in 2013
compared to 2012 was primarily due to increased costs associated with loyalty and rewards
programs, investment related expenses and increased meeting and travel expenses to support
business and strategy development efforts. The 2012 increase in other expenses versus 2011
was primarily due to increased costs associated with loyalty and rewards programs and the
acquisition of Access Prepaid Worldwide ("Access") in 2011.
Advertising and Marketing
Our brands, principally MasterCard, are valuable strategic assets that drive acceptance and usage of our products and
facilitate our ability to successfully introduce new service offerings and access new markets globally. Our advertising
and marketing strategy is to increase global MasterCard brand awareness, preference and usage through integrated
advertising, sponsorship, promotions, interactive media and public relations programs on a global scale. We will
continue to invest in marketing programs at the regional and local levels and sponsor diverse events aimed at multiple
target audiences. In 2013, advertising and marketing expenses increased $66 million, or 8%, mainly due to new and
renewed sponsorships and increased media spend to support our strategic initiatives. Advertising and marketing
expenses decreased $66 million, or 8%, in 2012 mainly due to the non-recurrence of certain promotions and the impact
of changes in foreign currency rates. The net impact of foreign currency relating to the translation of advertising and
marketing expenses from our functional currencies to U.S. dollars increased advertising and marketing expenses by
less than 1 percentage point in 2013, and decreased advertising and marketing expense by 3 percentage points in 2012.
Depreciation and Amortization
Depreciation and amortization expenses increased $28 million, or 12%, in 2013 and $36 million, or 18%, in 2012. The
increase in depreciation and amortization expense in both 2013 and 2012 was primarily due to increased amortization
of capitalized software costs.
Provision for Litigation Settlement
As of December 31, 2013, the accrued litigation related to the MDL Provision was $886 million versus $726 million
as of December 31, 2012. In the fourth quarter of 2013, MasterCard recorded an incremental net pre-tax charge of $95
million related to the opt out merchants. The accrual also includes $68 million related to the timing of MasterCard's
administration of the short-term reduction in default credit interchange from U.S. issuers. There is a corresponding
equal amount presented in settlement due from customers. During 2012, accrued litigation related to the MDL Provision
decreased due to the payment of $64 million to individual merchant plaintiffs, partially offset by an increase of $20
million in the MDL Provision. See Note 18 (Legal and Regulatory Proceedings) to the consolidated financial statements
included in Part II, Item 8 of this Report for further discussion.
Other Income (Expense)
Other income (expense) is comprised primarily of investment income, interest expense, our share of income (losses)
from equity method investments and other gains and losses. Total other expense decreased $1 million in 2013 compared
to 2012, primarily related to an adjustment in interest expense due to the reversal of tax reserves, partially offset by
increased expenses from investments in joint ventures. The decrease in other income in 2012 of $39 million compared
to 2011 was primarily due to lower investment income, increased expenses from investments in joint ventures and an
adjustment to the earnout related to the Company's acquisition of Access in 2011.