Visa 2014 Annual Report Download - page 134

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2014
Current income taxes receivable were $91 million and $142 million at September 30, 2014 and
2013, respectively. Non-current income taxes receivable of $597 million were included in other assets
at September 30, 2014. See Note 5—Prepaid Expenses and Other Assets. At September 30, 2014
and 2013, income taxes payable of $73 million and $64 million, respectively, were included in accrued
income taxes as part of accrued liabilities, and accrued income taxes of $855 million and $453 million,
respectively, were included in other long-term liabilities. See Note 8—Accrued and Other Liabilities.
Cumulative undistributed earnings of the Company’s international subsidiaries that are intended to
be reinvested indefinitely outside the United States amounted to $5.0 billion at September 30, 2014.
The amount of income taxes that would have resulted had such earnings been repatriated is not
practicably determinable.
The Company’s largest operating hub outside the United States is located in Singapore. It
operates under a tax incentive agreement which is effective through September 30, 2023, and is
conditional upon meeting certain business operations and employment thresholds in Singapore. The
tax incentive agreement decreased Singapore tax by $168 million, $158 million and $130 million, and
the benefit of the tax incentive agreement on diluted earnings per share was $0.27, $0.24 and $0.19 in
fiscal 2014, 2013 and 2012, respectively.
In accordance with Accounting Standards Codification 740—Income Taxes, the Company is
required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax
returns, and to record liabilities for the amount of such positions that may not be sustained, or may only
partially be sustained, upon examination by the relevant taxing authorities.
At September 30, 2014 and 2013, the Company’s total gross unrecognized tax benefits were $1.3
billion and $1 billion, respectively, exclusive of interest and penalties described below. Included in the
$1.3 billion and $1 billion are $1.1 billion and $801 million of unrecognized tax benefits, respectively,
that if recognized, would reduce the effective tax rate in a future period.
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
2014 2013
(in millions)
Beginning balance at October 1 ..................................... $ 1,023 $ 679
Increases of unrecognized tax benefits related to prior years ............... 139 335
Decreases of unrecognized tax benefits related to prior years .............. (54) (133)
Increases of unrecognized tax benefits related to current year .............. 199 144
Reductions related to lapsing statute of limitations ........................ (4) (2)
Ending balance at September 30 .................................... $ 1,303 $ 1,023
It is the Company’s policy to account for interest expense and penalties related to uncertain tax
positions in non-operating income in its consolidated statements of operations. In fiscal 2014 and 2013,
the Company recognized $10 million and $9 million of interest expense, respectively, related to
uncertain tax positions. In fiscal 2012, the Company reversed $45 million of interest expense related to
uncertain tax positions. In fiscal 2014, the Company accrued $2 million of penalties related to uncertain
tax positions. In fiscal 2013 and 2012, the Company reversed $4 million and $1 million of penalties,
120