Visa 2014 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2014 Visa annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 161

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161

Capital expenditures. Our capital expenditures increased during fiscal 2014 due to investments in
technology, infrastructure and growth initiatives. We expect to continue investing in technology assets
and payments system infrastructure to support our digital solutions and core business initiatives.
Acquisitions. During fiscal 2014, we acquired a business in which we previously held a minority
interest using $134 million of cash on hand. This amount primarily reflects the purchase price of $170
million less cash received. The acquisition extends our processing capabilities internationally. There
were no material acquisitions during fiscal 2013 and 2012.
Fair Value Measurements—Financial Instruments
The assessment of fair value of our financial instruments is based on a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. Observable inputs are obtained from independent sources and can
be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third
party would use in pricing an asset or liability. As of September 30, 2014, our financial instruments
measured at fair value on a recurring basis included approximately $7.3 billion of assets and $151
million of liabilities. Of these instruments, $152 million had significant unobservable inputs, including
the Visa Europe put option liability of $145 million, and $7 million of auction rate securities. See Note
4—Fair Value Measurements and Investments to our consolidated financial statements.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements are primarily comprised of guarantees and indemnifications.
Visa has no off-balance sheet debt, other than lease and purchase order commitments, as discussed
below and reflected in our contractual obligations table.
Indemnifications
We indemnify our financial institution clients for settlement losses suffered due to the failure of any
other client to fund its settlement obligations in accordance with our operating regulations. The amount
of the indemnification is limited to the amount of unsettled Visa payment transactions at any point in
time. We maintain global credit settlement risk policies and procedures to manage settlement risk,
which may require clients to post collateral if certain credit standards are not met. See Note
1—Summary of Significant Accounting Policies and Note 11—Settlement Guarantee Management to
our consolidated financial statements.
In the ordinary course of business, we enter into contractual arrangements with financial
institutions and other clients under which we may agree to indemnify the client for certain types of
losses incurred relating to the services we provide or otherwise relating to our performance under the
applicable agreement.
55