Visa 2014 Annual Report Download - page 101

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2014
Litigation escrow agreement. In accordance with the litigation escrow agreement, the Company
maintains an escrow account, from which monetary liabilities from 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:
Fiscal 2014 Fiscal 2013
(in millions)
Balance at October 1 .......................................... $49$ 4,432
Return of takedown payments from settlement fund into the litigation
escrow account ................................................ 1,056 —
Deposits into the litigation escrow account .......................... 450 —
Payments to opt-out merchants(1) ................................. (57) —
Payments to class plaintiff settlement fund(1) ........................ — (4,033)
Payments to individual plaintiff settlement fund(1) .................... —(350)
Balance at September 30 ...................................... $ 1,498 $49
(1) These payments are associated with the interchange multidistrict litigation. The settlement with the
class plaintiffs in these proceedings is subject to the adjudication of appeals. See Note 20—Legal
Matters.
An accrual for the 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 recommendations made by the litigation
committee. The accrual related to the covered litigation could be either higher or lower than the
litigation escrow account balance. The Company recorded an additional $450 million accrual for the
covered litigation during fiscal 2014. See Note 20—Legal Matters.
Conversion feature. Under the terms of the plan, when the Company funds the litigation 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 economic effect on earnings per share as repurchasing the Company’s class A common
stock, because it reduces the class B conversion rate and consequently the as-converted class A
common stock share count. See Note 14—Stockholders’ Equity.
Indemnification obligations. To the extent that amounts available under the litigation escrow
arrangement and other 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.
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