Visa 2011 Annual Report Download - page 86

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2011
(in millions, except as noted)
are not expected to be realized based on the level of historical taxable income, projections of future taxable income over the periods in which the temporary
differences are deductible, and qualifying tax planning strategies.
Where interpretation of the tax law may be uncertain, the Company recognizes, measures and discloses income tax uncertainties. The Company
accounts for interest expense and penalties related to uncertain tax positions in other income (expense) in the consolidated statements of operations. The
Company files a consolidated federal income tax return and, in certain states, combined state tax returns. Historically, foreign taxes paid have generally been
deducted to reduce federal income taxes payable. The Company may elect to claim foreign tax credits in the future.
Pension and other postretirement benefit plans. The Company's defined benefit pension and other postretirement benefit plans are actuarially evaluated,
incorporating various critical assumptions including the discount rate and the expected rate of return on plan assets (for qualified pension plans). The discount
rate is based on matching the duration of a pool of high quality corporate bonds to the expected benefit payment stream, and is used to determine the present
value of the Company's future benefit obligations. The expected rate of return on pension plan assets considers the current and expected asset allocation, as
well as historical and expected returns on each plan asset class. Any difference between actual and expected plan experience, including asset return
experience, in excess of a 10% corridor is recognized in net periodic pension cost over the expected average employee future service period, approximately
8.5 years for United States plans. Other assumptions involve demographic factors such as retirement age, mortality, attrition and the rate of compensation
increases. The Company evaluates assumptions annually and modifies them as appropriate.
The Company recognizes the funded status of its benefit plans in its consolidated balance sheet as other assets, accrued liabilities, and other liabilities.
The Company recognizes settlement losses when it settles pension benefit obligations, including making lump-sum cash payments to plan participants in
exchange for their rights to receive specified pension benefits, when certain thresholds are met. The Company began including annual disclosures about the
fair value of its pension plan assets in fiscal 2010, as required. See Note 11—Pension, Postretirement and Other Benefits.
Foreign currency remeasurement and translation. The Company's functional currency is the U.S. dollar for the majority of its foreign operations.
Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the
transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet
date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses related to conversion and remeasurement are recorded
in general and administrative in the consolidated statements of operations.
The functional currency for Visa Canada is the Canadian dollar. Translation from the Canadian dollar to the U.S. dollar is performed for balance sheet
accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate for the period.
Resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets.
Derivative financial instruments. The Company uses forward foreign exchange contracts to reduce its exposure to foreign currency rate changes on
non-functional currency denominated forecasted
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