Visa 2011 Annual Report Download - page 84

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2011
(in millions, except as noted)
preferable as the earlier date allows the Company additional time to perform the annual impairment testing after its annual forecast and budget are completed
and approved. A preferability letter from the Company's independent registered public accounting firm regarding this change in the method of applying an
accounting principle was filed as an exhibit to the quarterly report on Form 10-Q for the quarter ended March 31, 2011. The Company performed its annual
impairment review of goodwill and indefinite-lived intangible assets as of February 1, 2011, and concluded there was no impairment as of that date. No recent
events or changes in circumstances indicate that impairment of the Company's indefinite-lived intangible assets existed as of September 30, 2011.
Finite-lived intangible assets include those obtained through acquisitions, and consist of customer relationships, tradenames and reseller relationships.
These intangibles have useful lives ranging from 1 year to 15 years. Since the acquisition of these finite-lived intangible assets, no events or changes in
circumstances indicate that impairment exists. See Note 5—Acquisitions and Note 8—Intangible Assets, Net.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not
amortized but is evaluated for impairment at the reporting unit level annually as of February 1, or whenever events or changes in circumstances indicate that
impairment may exist. Impairment is reviewed using a two-step process. The first step compares the fair value of the reporting unit to its carrying value. If the
fair value exceeds the carrying value, no impairment exists, and the second step is not performed. If the fair value is less than the carrying value, the second
step is performed to compute the amount of the impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that
goodwill. The Company relies on a number of factors when completing impairment assessments including a review of discounted future cash flows, business
plans and use of present value techniques.
The Company evaluated its goodwill for impairment on February 1, 2011 and concluded there was no impairment as of that date. Subsequent to this
annual assessment, the Company acquired PlaySpan and Fundamo, which resulted in additional goodwill. The Company allocates goodwill to reporting units
based on the reporting unit expected to benefit from the acquisition. No recent events or changes in circumstances indicate that impairment existed as of
September 30, 2011, as reflected by the Company's overall business performance and market capitalization.
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and
records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are
subjective, based on the status of such legal or regulatory proceedings, the merits of the Company's defenses and consultation with corporate and external
legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company's estimates. Litigation accruals associated
with settled obligations to be paid over periods longer than one year are initially recorded using the present value of future payment obligations. The
obligation is accreted to its full payment value with the corresponding accretion charge included in interest expense on the consolidated statements of
operations. The Company expenses legal costs as incurred in professional fees. See Note 21—Legal Matters.
Revenue recognition. The Company's operating revenues are comprised principally of service revenues, data processing revenues, international
transaction revenues and other revenues, reduced
83