Visa 2012 Annual Report Download - page 73

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
periods longer than one year are recorded at 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 by costs incurred under client incentives arrangements.
The Company recognizes revenue when the price is fixed or determinable, persuasive evidence of an arrangement exists, the
service is performed and collectability of the resulting receivable is reasonably assured.
Service revenues consist primarily of revenues earned for providing clients with a supported global business infrastructure and
for services which support the various product platforms that enable clients to deliver Visa products and payment services. Current
quarter service revenues are primarily assessed using a calculation of pricing applied to the prior quarter's payments volume. The
Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which
are recognized in the same period the related volume is transacted.
Data processing revenues represent revenues earned for authorization, clearing, settlement, transaction processing services,
network access and other maintenance and support services that facilitate transaction and information processing among the
Company's clients globally and Visa Europe. Data processing revenues are also earned for transactions processed by
CyberSource's online payment gateway and PlaySpan's virtual goods payment platform. Data processing revenues are recognized
in the same period the related transactions occur or services are rendered.
International transaction revenues are earned for processing cross-border transactions, and currency conversion activities.
Cross-border transactions arise when the cardholder's issuer country is different from the merchant's country. International
transaction revenues are generally driven by cross-border payments and cash volume.
Other revenues consist primarily of license fees for use of the Visa brand, revenues earned from Visa Europe in connection
with the Visa Europe Framework Agreement (see
Note 2—Visa Europe ), fees from cardholder services, licensing and certification
and certain activities related to the Company's acquired entities. Other revenues also include optional service or product
enhancements, such as extended cardholder protection and concierge services. Other revenues are recognized in the same period
the related transactions occur or services are rendered.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media advertising is
expensed when the advertising takes place. Sponsorship costs are recognized over the period in which the Company benefits from
the sponsorship rights. Promotional items are expensed as incurred, when the related services are received, or when the related
event occurs.
Income taxes . The Company's income tax expense consists of two components: current and deferred. Current income tax
expense represents taxes paid or payable for the current period. Deferred tax assets and liabilities are recognized to reflect the
future tax consequences attributable to temporary differences between the financial statement carrying amounts and the respective
tax basis of existing assets and liabilities, and operating loss and credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. In assessing whether deferred tax assets are realizable, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is recorded for the
portions that 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. Foreign taxes paid have
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