Visa 2007 Annual Report Download - page 122

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
provides guidance related to investments where the investor has the ability to exercise significant influence over operating and financial policies of the
investee and where the investment conveys rights and privileges substantially similar to common stock. EITF 02-14 defines criteria for evaluating whether an
investment is "in-substance" common stock. Investments meeting these criteria are accounted for under the equity method if significant influence is deemed to
exist.
Visa U.S.A.'s influence over Visa International is demonstrated by its representation on Visa International's Board of Directors, significant related party
transactions and technological interdependence. Dividend and dissolution rights are based upon cumulative volume-based service fees paid by members to
Visa International since inception, as a percentage of total volume based service fees received. Therefore, the percentage of equity ownership fluctuates over
time.
In accordance with the provisions of EITF 02-14, the Company recorded the cumulative effect of its equity in earnings of Visa International for prior
years through fiscal 2004 of $95.7 million (net of taxes of $54.1 million) in income during fiscal 2005. The amount recorded represents a 33% share in Visa
International's accumulated equity at the end of fiscal 2004. The effect of the change in fiscal 2005 was to increase income before cumulative effect of change
in accounting principle by $9.5 million and Net Income by $105.2 million. These equity estimates are based on an interpretation of "volume-based" service
fees. Pro forma amounts on the consolidated statements of operations reflect the impact on prior year results as if the accounting change had been in effect
during the periods presented.
Summarized consolidated financial information for Visa International is as follows:
At September 30
2007 2006
(in thousands)
Current Assets $ 2,174,315 $ 1,684,221
Facilities and equipment, net 154,392 162,617
Other assets 162,016 165,701
Total assets $ 2,490,723 $ 2,012,539
Current liabilities $ 1,521,256 $ 1,315,511
Long-term debt and other liabilities 99,080 90,748
Equity 870,387 606,280
Total liabilities and equity $ 2,490,723 $ 2,012,539
For the Years Ended September 30,
2007 2006 2005
(in thousands)
Total operating revenues $ 1,902,496 $ 1,262,555 $ 1,147,430
Total operating expenses 1,541,590 1,242,109 1,045,829
Non-operating income, net 105,663 78,511 40,469
Provision for income taxes 196,332 29,202 58,869
Net income $ 270,237 $ 69,755 $ 83,201
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