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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
82
The fair value of the foreign currency derivative contracts generally reflects the estimated amounts that the Company would
receive (or pay), on a pre-tax basis, to terminate the contracts at the reporting date based on broker quotes for the same or
similar instruments. The terms of the foreign currency derivative contracts are generally less than 18 months. The Company had
no deferred gains or losses related to foreign exchange contracts in accumulated other comprehensive income as of December
31, 2015 and 2014 as there were no derivative contracts accounted for under hedge accounting.
The Company’s derivative financial instruments are subject to both market and counterparty credit risk. Market risk is the risk
of loss due to the potential change in an instrument’s value caused by fluctuations in interest rates and other variables related
to currency exchange rates. The effect of a hypothetical 10% adverse change in foreign currency rates could result in a fair value
loss of approximately $128 million on the Company’s foreign currency derivative contracts outstanding at December 31, 2015.
Counterparty credit risk is the risk of loss due to failure of the counterparty to perform its obligations in accordance with contractual
terms. To mitigate counterparty credit risk, the Company enters into derivative contracts with selected financial institutions
based upon their credit ratings and other factors. Generally, the Company does not obtain collateral related to derivatives because
of the high credit ratings of the counterparties.
Net investment hedge
The Company uses foreign currency denominated debt to hedge a portion of its net investment in foreign operations against
adverse movements in exchange rates, with changes in the value of the debt recorded within currency translation adjustment
in accumulated other comprehensive income (loss). The Company monitors and manages those exposures as part of its overall
risk management program which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse
effects that the volatility of these markets may have on our operating results. A principal objective of the Company’s risk
management strategies is to reduce significant, unanticipated earnings fluctuations that may arise from volatility in foreign
currency exchange rates principally through the use of derivative instruments. During the fourth quarter of 2015, the Company
designated its €1.65 billion euro-denominated debt as a net investment hedge for a portion of its net investment in European
foreign operations. As of December 31, 2015, the Company had net foreign currency transaction pre-tax loss of $40 million in
accumulated other comprehensive income (loss) associated with hedging activity.
Note 21. Segment Reporting
MasterCard has concluded it has one operating and reportable segment, “Payment Solutions.” MasterCard’s President and Chief
Executive Officer has been identified as the chief operating decision-maker. All of the Company’s activities are interrelated, and
each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based upon
analysis of MasterCard at the consolidated level.
Revenue by geographic market is based on the location of the Company’s customer that issued the card, as well as the location
of the merchant acquirer where the card is being used. Revenue generated in the U.S. was approximately 39% of net revenue
in 2015, 2014 and 2013. No individual country, other than the U.S., generated more than 10% of total revenue in those periods.
MasterCard did not have any one customer that generated greater than 10% of net revenue in 2015, 2014 or 2013. The following
table reflects the geographical location of the Company’s property, plant and equipment, net, as of December 31:
2015 2014 2013
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 471 $ 450 $ 410
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 165 116
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 675 $ 615 $ 526