MasterCard 2014 Annual Report Download - page 58

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
56
The useful lives of the Company’s assets are as follows:
Asset Category Estimated Useful Life
Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 years
Building equipment. . . . . . . . . . . . . . . . . . . . . . . 10 - 15 years
Furniture and fixtures and equipment. . . . . . . . . 2 - 5 years
Leasehold improvements . . . . . . . . . . . . . . . . . . Shorter of life of improvement or lease term
Capital leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease term
Leases - The Company enters into operating and capital leases for the use of premises, software and equipment. Rent expense
related to lease agreements that contain lease incentives is recorded on a straight-line basis over the term of the lease.
Pension and other postretirement plans - The Company recognizes the overfunded or underfunded status of its single-employer
defined benefit plans or postretirement plans as assets or liabilities on its balance sheet and recognizes changes in the funded status
in the year in which the changes occur through other comprehensive income. The funded status is measured as the difference
between the fair value of plan assets and the benefit obligation at December 31, the measurement date. The fair value of plan
assets represents the current market value of the pension assets. Overfunded plans are aggregated and recorded in long-term other
assets, while underfunded plans are aggregated and recorded as accrued expenses and long-term other liabilities.
Net periodic pension and postretirement benefit cost/(income) is recognized in general and administrative expenses in the
consolidated statement of operations. These costs include service costs, interest cost, expected return on plan assets, amortization
of prior service costs or credits and gains or losses previously recognized as a component of other comprehensive income or loss.
Defined contribution savings plans - The Company’s contributions to defined contribution savings plans are recorded when the
employee renders service to the Company. The charge is recorded in general and administrative expenses.
Advertising and marketing - The cost of media advertising is expensed when the advertising takes place. Advertising production
costs are expensed as incurred. Promotional items are expensed at the time the promotional event occurs. Sponsorship costs are
recognized over the period of benefit.
Foreign currency remeasurement and translation - Monetary assets and liabilities are remeasured to functional currencies using
current exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are recorded at historical exchange
rates. Revenue and expense accounts are remeasured at the weighted-average exchange rate for the period. Resulting exchange
gains and losses related to remeasurement are included in general and administrative expenses on the consolidated statement of
operations.
Where a non-U.S. currency is the functional currency, translation from that functional 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).
Treasury stock - The Company records the repurchase of shares of its common stock at cost on the settlement date of the transaction.
These shares are considered treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized
and issued shares but excluded from outstanding shares.
Share-based payments - The Company measures share-based compensation expense at the grant date, based on the estimated fair
value of the award and uses the straight-line method of attribution, net of estimated forfeitures, for expensing awards over the
requisite employee service period. The Company estimates the fair value of its non-qualified stock option awards using a Black-
Scholes valuation model. The fair value of restricted stock units (“RSUs”), including performance stock units (“PSUs”) granted
prior to 2013, is determined and fixed on the grant date based on the Company’s stock price, adjusted for the exclusion of dividend
equivalents. The Monte Carlo simulation valuation model was used to determine the grant date fair value of PSUs granted since
2013. All share-based compensation expenses are recorded in general and administrative expenses.