MasterCard 2015 Annual Report Download - page 66

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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which are not recorded on the balance sheet. Additionally, MasterCard holds cash deposits and certificates of deposit from
certain customers of MasterCard as collateral for settlement of their transactions. These assets are fully offset by corresponding
liabilities included on the consolidated balance sheet.
Property, plant and equipment - Property, plant and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets.
Depreciation of leasehold improvements and amortization of capital leases is included in depreciation and amortization expense.
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 funded status of its single-employer defined benefit
pension 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 accumulated other comprehensive income (loss). 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 accumulated other
comprehensive income (loss).
Defined contribution plans - The Company’s contributions to defined contribution plans are recorded when employees render
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
accumulated other comprehensive income (loss).
Treasury stock - The Company records the repurchase of shares of its common stock at cost on the trade 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