Visa 2012 Annual Report Download - page 51

Table of Contents
represent the associated expected reduction of revenue related to these agreements which we estimate we will record.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United
States of America which requires us to make judgments, assumptions and estimates that affect the amounts reported. See Note
1—Summary of Significant Accounting Policies to our consolidated financial statements. We have established policies and control
procedures which seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period
to period. However, actual results could differ from our assumptions and estimates, and such differences could be material.
We believe that the following accounting estimates are the most critical to fully understand and evaluate our reported financial
results, as they require our most subjective or complex management judgments, resulting from the need to make estimates about
the effect of matters that are inherently uncertain and unpredictable.
Revenue Recognition — Client Incentives
Critical Estimates. We enter into incentive agreements with select clients and other business partners designed to build
payments volume, increase product acceptance and win merchant preference to route transactions over our network. These
incentives are primarily accounted for as reductions to operating revenues; however, if a separate identifiable benefit at fair value
can be established they are accounted for as operating expenses. We generally capitalize advance incentive payments under
these agreements if select criteria are met.
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(4)
Visa is a party to contractual sponsorship agreements ranging from approximately three to sixteen years. These contracts are
designed to help increase Visa-branded cards and volumes. Over the life of these contracts, Visa is required to make payments
in exchange for certain advertising and promotional rights. In connection with these contractual commitments, Visa has an
obligation to spend certain minimum amounts for advertising and marketing promotion over the life of the contract. For
obligations where the individual years of spend are not specified in the contract, we have estimated the timing of when these
amounts will be spent.
(5)
Visa, MasterCard, various U.S. financial institution defendants, and the class plaintiffs signed a settlement agreement to resolve
the class plaintiffs' claims in the interchange multidistrict litigation proceedings on October 19, 2012. The amount in the table
represents the maximum amount expected to be paid out in fiscal 2013 under the class plaintiffs' settlement agreement and the
individual plaintiffs' settlement agreement from the litigation escrow account. This amount includes the $350 million payment to
the Individual Plaintiffs' Settlement Fund made in October 2012. A litigation provision of $4.1 billion for the covered litigation was
booked during fiscal 2012. See Note 3—Retrospective Responsibility Plan and Note 21—Legal Matters to our consolidated
financial statements.
(6)
Includes expected dividend amount of $221 million as dividends were declared on October 24, 2012 and will be paid on
December 4, 2012 to all holders of record of Visa's common stock as of November 16, 2012 .
(7)
We have liabilities for uncertain tax positions of $139 million. At September 30, 2012, we also accrued $20 million
of interest and
$7 million of penalties associated with our uncertain tax positions. We cannot determine the range of cash payments that will be
made and the timing of the cash settlements, if any, associated with our uncertain tax positions. Therefore, no amounts related
to these obligations have been included in the table.
(8)
Visa granted a perpetual put option to Visa Europe, which if exercised, will require us to purchase all of the outstanding shares
of capital stock of Visa Europe from its members. Due to the perpetual nature of the instrument and the various economic
conditions, which could exist when the put is exercised, the ultimate amount and timing of Visa's obligation, if any, cannot be
reliably estimated. Therefore, no amounts related to this obligation have been included in the table. However, given the range of
different economic environments and circumstances under which Visa Europe could exercise its option, the ultimate purchase
price could be several billion dollars or more. The fair value of the Visa Europe put option itself totaling $145 million at
September 30, 2012 has also been excluded from this table as it does not represent the amount or an estimate of the amount of
Visa's obligation in the event of exercise. See
Liquidity and Critical Accounting Estimates sections of this Management's
Discussion and Analysis of Financial Condition and Results of Operations and Note 2—Visa Europe
to our consolidated financial
statements.
(9)
We evaluate the need to make contributions to our pension plan after considering the funded status of the pension plan,
movements in the discount rate, performance of the plan assets and related tax consequences. Expected contributions to our
pension plan have not been included in the table as such amounts are dependent upon the considerations discussed above,
and may result in a wide range of amounts. See Note 11—Pension, Postretirement and Other Benefits to our consolidated
financial statements .