Visa 2012 Annual Report Download - page 77

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
intellectual property to its members and other sublicensees under agreed upon circumstances.
The base fee for these irrevocable and perpetual licenses is recorded in other revenues and was approximately $143 million
per year for fiscal 2012, 2011 and 2010. This fee is eligible for adjustment annually based on the annual growth of the gross
domestic product of the European Union, although the adjustment can never reduce the annual fee below $143 million . The
Company determined through an analysis of the fee rates implied by the economics of the agreement that the base fee, as
adjusted in future periods based on the growth of the gross domestic product of the European Union, approximates fair value.
In addition to the licenses, Visa provides Visa Europe with authorization, clearing and settlement services for cross-border
transactions involving Visa Europe's region and the rest of the world. Visa Europe must comply with certain agreed upon global
rules governing the interoperability of Visa's systems with the systems of Visa Europe as well as the use and interoperability of the
Visa trademarks. The parties will also guarantee the obligations of their respective clients and members to settle transactions,
manage certain relationships with sponsors, clients and merchants, and comply with rules relating to the operation of the Visa
enterprise. The Company will indemnify Visa Europe for claims arising from activities in the field of financial payment and
processing services brought outside Visa Europe's region and Visa Europe will indemnify Visa for any likewise claims brought
within Visa Europe's region. The Company has not recorded liabilities associated with these obligations as the fair value of such
obligations was determined to be nominal at September 30, 2012 and 2011 , respectively. The Company has determined that the
value of services exchanged as a result of these various agreements approximates fair value at September 30, 2012 and 2011 ,
respectively.
Note 3—Retrospective Responsibility Plan
The Company has established several related mechanisms designed to address potential liability under certain litigation
referred to as the “covered litigation." These mechanisms are included in and referred to as the retrospective responsibility plan, or
the plan, and consist of a litigation escrow agreement, the conversion feature of the Company's shares of class B common stock,
the indemnification obligations of the Visa U.S.A. members, an interchange judgment sharing agreement and a loss sharing
agreement.
Covered litigation consists of:
Litigation escrow agreement. In accordance with the litigation escrow agreement, the Company maintains an escrow account,
from which settlements of, or judgments in, the covered litigation are paid. The amount of the escrow is determined by the board of
directors and the Company's litigation committee, all members of which are affiliated with, or act for, certain Visa U.S.A. members.
The escrow funds are held in money market investments along with the interest earned, less applicable taxes, and are classified as
restricted cash on the consolidated balance sheets.
The following table sets forth the changes in the litigation escrow account:
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• The Discover Litigation. Discover Financial Services Inc. v. Visa U.S.A. Inc., Case No. 04-CV-
07844 (S.D.N.Y) (settled);
• The American Express Litigation. American Express Travel Related Services Co., Inc. v. Visa U.S.A. Inc. et al., No. 04-
CV-0897 (S.D.N.Y.), which we refer to as the American Express litigation (settled);
• The Attridge Litigation. Attridge v. Visa U.S.A. Inc. et al., Case No. CGC-04-
436920 (Cal. Super.);
• The Interchange Litigation. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 1:05-md-
01720-JG-JO (E.D.N.Y.) or MDL 1720, including all cases currently included in MDL 1720, any other case that includes
claims for damages relating to the period prior to our initial public offering that has been or is transferred for coordinated
or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or
otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction and Kendall v. Visa U.S.A.,
Inc. et al., Case No. CO4-4276 JSW (N.D. Cal.); and
• any claim that challenges the reorganization or the consummation thereof; provided that such claim is transferred for
coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict
Litigation or otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction.