Visa 2009 Annual Report Download - page 116

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Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2009
(in millions, except as noted)
Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the
proceedings, the matters do not relate to a probable loss and/or amounts are not reasonably estimable. Although the Company believes that it has strong
defenses for the litigation and regulatory proceedings described below, it could in the future incur judgments or fines or enter into settlements of claims that
could have a material adverse effect on the Company's results of operations, financial position or cash flows.
The Company recorded litigation provisions of approximately $2 million, $1,470 million and $2,653 million in fiscal year 2009, 2008 and 2007,
respectively. The litigation accrual is an estimate and is based on management's understanding of its litigation profile, the specifics of each case, advice of
counsel to the extent appropriate and management's best estimate of incurred loss at the balance sheet date. From time to time, the Company may engage in
settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other
parties.
The following table summarizes the activity related to accrued litigation for both covered and other non-covered litigation for the years ended
September 30, 2009 and 2008:
2009 2008
(in millions)
Balance at October 1 $ 3,758 $ 3,682
Provision for settled legal matters (1) 1,180
Provision for unsettled legal matters 3 290
Settlement obligation refunded by Morgan Stanley(1) 65 —
Interest accretion on settled matters 93 131
Payments on settled matters (2,201) (1,525)
Balance at September 30 $ 1,717 $ 3,758
(1) This balance represents the amount of the Discover settlement refunded to the Company during fiscal 2009 by Morgan Stanley under a separate
agreement.
Covered Litigation
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings discussed below that are subject to the Retrospective
Responsibility Plan, which the Company refers to as the covered litigation. See Note 4—Retrospective Responsibility Plan. An accrual for covered litigation is
recorded when loss is deemed to be probable and reasonably estimable. In making this determination the Company evaluates available information, including
funding decisions made by the litigation committee. The accrual related to covered litigation could be either higher or lower than the Escrow Account balance.
The Discover Litigation
On October 4, 2004, Discover Financial Services, Inc. filed a complaint against Visa U.S.A., Visa International and MasterCard International
Incorporated (MasterCard). The complaint was filed in the U.S. District Court for the Southern District of New York and was designated as a related case to a
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