Visa 2011 Annual Report Download - page 91

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2011
(in millions, except as noted)
The escrow funds are held in money market investments along with the income earned, less applicable taxes, and are classified as restricted cash on the
consolidated balance sheets. The amount of the escrow funds classified as a non-current asset is equivalent to the actual, undiscounted amount of covered
litigation payments expected to be made beyond one year from the balance sheet date for settled claims.
The following table sets forth the changes in the escrow account:
Fiscal 2011 Fiscal 2010
(in millions)
Balance at October 1 $ 1,936 $ 1,715
Funding under the plan 1,200 500
American Express settlement payments (280) (280)
Interest earned, less applicable taxes 1 1
Balance at September 30 $ 2,857 $ 1,936
Less: Current portion of escrow account (2,857) (1,866)
Long-term portion of escrow account $ — $ 70
An accrual for covered litigation and a change to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In
making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The accrual
related to covered litigation could be either higher or lower than the escrow account balance. The Company did not record an additional accrual for covered
litigation during fiscal 2011.
Conversion feature. Under the terms of the plan, when the Company funds the escrow account, the shares of class B common stock are subject to
dilution through an adjustment to the conversion rate of the shares of class B common stock to shares of class A common stock. This has the same effect on
earnings per share as repurchasing the Company's class A common stock, by reducing the as-converted class B common stock share count. See Note 15—
Stockholders' Equity.
Indemnification obligations. To the extent that amounts available under the escrow arrangement and agreements in the plan are insufficient to fully
resolve the covered litigation, the Company will use commercially reasonable efforts to enforce the indemnification obligations of Visa U.S.A.'s members for
such excess amount, including but not limited to enforcing indemnification obligations pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and
in accordance with their membership agreements.
Interchange judgment sharing agreement. Visa U.S.A. and Visa International have entered into an interchange judgment sharing agreement with certain
Visa U.S.A. members that have been named as defendants in the interchange litigation. Under this judgment sharing agreement, Visa U.S.A. members that are
signatories will pay their membership proportion of the amount of a final judgment not allocated to the conduct of MasterCard.
Loss sharing agreement. Visa Inc. has entered into a loss sharing agreement with Visa U.S.A., Visa International and certain Visa U.S.A. members. The
loss sharing agreement provides for the indemnification of Visa U.S.A., Visa International and, in certain circumstances, Visa Inc. with respect to: (i) the
amount of a final judgment paid by Visa U.S.A. or Visa International in the covered litigation
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