Visa 2011 Annual Report Download - page 88

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2011
(in millions, except as noted)
In December 2010, the FASB issued ASU 2010-29, which provides requirements over pro forma revenue and earnings disclosures related to business
combinations. The ASU will require disclosure of revenue and earnings of the combined business as if the combination occurred at the start of the prior
annual reporting period only. Adoption will be effective October 1, 2012, and is not expected to have a material impact on the consolidated financial
statements.
In May 2011, the FASB issued ASU 2011-04, which provides common fair value measurement and disclosure requirements in accordance with U.S.
GAAP and International Financial Reporting Standards ("IFRS"). The Company will adopt ASU 2011-04 effective January 1, 2012. The adoption is not
expected to have a material impact on the consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, which impacts the presentation of comprehensive income. The guidance requires components of other
comprehensive income to be presented with net income to arrive at total comprehensive income. This ASU impacts presentation only and does not impact the
underlying components of other comprehensive income or net income. The Company will adopt ASU 2011-05 effective October 1, 2012. Adoption is not
expected to have a material impact on the consolidated financial statements.
Note 2—Visa Europe
As part of Visa's October 2007 reorganization, Visa Europe exchanged its ownership interest in Visa International and Inovant for Visa Inc. common
stock, a put-call option agreement and a Framework Agreement, as described below.
Visa Europe Put Option Agreement. The Company granted Visa Europe a perpetual put option, which if exercised, will require Visa Inc. to purchase all
of the outstanding shares of capital stock of Visa Europe from its members. The Company is required to purchase the shares of Visa Europe no later than 285
days after exercise of the put option. The put option provides a formula for determining the purchase price of the Visa Europe shares, which, subject to certain
adjustments, applies Visa Inc.'s forward price-to-earnings multiple, or the P/E ratio (as defined in the option agreement), at the time the option is exercised to
Visa Europe's adjusted sustainable income for the forward 12-month period (as defined in the option agreement), or the adjusted sustainable income. The
calculation of Visa Europe's adjusted sustainable income under the terms of the put option agreement includes potentially material adjustments for cost
synergies and other negotiated items. Upon exercise, the key inputs to this formula, including Visa Europe's adjusted sustainable income, will be the result of
negotiation between the Company and Visa Europe. The put option provides an arbitration mechanism in the event that the two parties are unable to agree on
the ultimate purchase price.
The fair value of the put option represents the value of Visa Europe's option, which under certain conditions, could obligate the Company to purchase
its member equity interest for an amount above fair value. The fair value of the put option does not represent the actual purchase price that the Company may
be required to pay if the option is exercised, which could be several billion dollars or more. While the put option is in fact non-transferable, its fair value
represents the Company's estimate of the amount the Company would be required to pay a third-party market participant to transfer the potential obligation in
an orderly transaction.
The fair value of the put option is computed by comparing the estimated strike price, under the terms of the Put agreement, to the estimated fair value of
Visa Europe. The fair value of Visa Europe is
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