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Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
sheets and is described in Note 12—Settlement Guarantee Management . The Company also indemnifies Visa Europe for any
claims brought against Visa Europe arising out of the provision of services by Visa's customer financial institutions, as described in
Note 2—Visa Europe .
Share-based compensation . The Company recognizes share-based compensation cost using the fair value method of
accounting. The Company recognizes compensation cost for awards with only service conditions on a straight-line basis over the
requisite service period, which is generally the vesting period. Compensation cost for performance- and market-condition-based
awards is recognized on a graded-vesting basis. The amount is initially estimated based on target performance and is adjusted as
appropriate based on management's best estimate throughout the performance period. See Note 17—Share-based
Compensation .
Earnings per share . The Company calculates earnings per share using the two-class method to reflect the different rights of
each class and series of outstanding common stock. The dilutive effect of incremental common stock equivalents is reflected in
diluted earnings per share by application of the treasury stock method. See Note 16—Earnings Per Share .
Recently Issued Accounting Pronouncements
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 requires disclosure of revenue and earnings of the combined business as if
the combination occurred at the start of the prior annual reporting period only. The Company adopted ASU 2010-29 effective
October 1, 2011. The adoption did not 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. In
December 2011, the FASB issued an amendment to ASU 2011-05, which defers the requirement to present components of
reclassifications of other comprehensive income on the face of the income statement. All other components of ASU 2011-05 are
effective October 1, 2012. Adoption is not expected to have a material impact on the consolidated financial statements.
In July 2012, the FASB issued ASU 2012-02, which will allow an entity to first assess qualitative factors to determine whether
it is necessary to perform a quantitative impairment test for indefinite-lived intangible assets. The standard will be adopted on
October 1, 2012, and 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 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 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,
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