Visa 2007 Annual Report Download - page 120

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Service fees predominantly represent payments by customers with respect to their card programs carrying marks of the Visa brand. Service fees are
based principally upon spending on Visa-branded cards for goods and services as reported on member financial institution quarterly operating certificates.
Current quarter service fees are assessed and recognized ratably over the quarter using a calculation of pricing applied to prior quarter payments volumes.
Also included in service fees are acceptance fees which are designed to support ongoing acceptance and volume growth initiatives.
Data processing fees represent user fees for authorization, clearing, settlement, transaction processing services and other maintenance and support
services that facilitate transaction and information processing among the Company's members globally, Visa International, Visa Canada and Visa Europe.
These fees are recognized as revenue in the same period the related transactions occur or services are rendered.
International transaction fees are assessed to customers on foreign transactions of U.S.-based issuing banks and domestic transactions of foreign-based
issuing banks in cross-border transactions. These fees are recognized as revenue in the same period the related transactions occur or services are rendered.
Other revenues represent optional card enhancements, such as extended cardholder protection and concierge services, cardholder services, software
development services and other services provided to members, Visa International, Visa Canada and Visa Europe. Software development services are provided
through Inovant LLC on a time and materials basis primarily to Visa International, Visa Europe and Visa Canada. Development services are recognized as
revenue in the period services are rendered.
For certain programs, the Company records deferred revenue when cash is collected from members in advance of the use of funds for designated
program purposes. Revenue is recognized when funds are used for designated program purposes. Deferred revenue is included in accrued liabilities in the
Company's consolidated balance sheets. See Note 11—Accrued Liabilities.
Advertising Costs
In accordance with SOP 93-7, "Reporting on Advertising Costs," the Company expenses the production of advertising as incurred. The cost of media
advertising is expensed when the advertising takes place. Total advertising costs, included in advertising, marketing and promotion on the consolidated
statements of operations, were $344.1 million, $343.4 million and $335.4 million in fiscal 2007, 2006 and 2005, respectively.
Legal Costs
Legal costs for third party services provided in connection with ongoing legal matters are expensed as incurred. Legal costs are included in professional
and consulting fees on the consolidated statements of operations.
Operating Leases
The Company evaluates the impact of rent escalation clauses and lease incentives, including rent abatements and tenant improvement allowances
included in its operating leases. Rent escalation clauses and lease incentives are considered in determining total rent expense to be recognized during the term
of the lease, which begins on the date the Company takes control of the leased space. Rent expense related to lease agreements which contain escalation
clauses are recorded on a straight-line basis. Renewal options are considered by evaluating the overall term of the lease.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating
loss and tax credit carry
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