Visa 2014 Annual Report Download - page 74

resulted in an increase of approximately $18 million in the value of the put option. An increase of 1.0x
in the assumed P/E differential would have resulted in an increase of approximately $84 million in the
value of the put option. The put option is exercisable at any time at the sole discretion of Visa Europe.
As such, the put option liability is included in accrued liabilities in our consolidated balance sheet at
September 30, 2014. Classification in current liabilities is not an indication of management’s
expectation of exercise and simply reflects the fact that this obligation could become payable within 12
months.
Legal and Regulatory Matters
Critical estimates. We are currently involved in various legal proceedings, the outcomes of which
are not within our complete control or may not be known for prolonged periods of time. Management is
required to assess the probability of loss and amount of such loss, if any, in preparing our financial
statements.
Assumptions and judgment. We evaluate the likelihood of a potential loss from legal or regulatory
proceedings to which we are a party. We record a liability for such claims when a loss is deemed
probable and the amount can be reasonably estimated. Significant judgment may be required in the
determination of both probability and whether an exposure is reasonably estimable. Our judgments are
subjective based on the status of the legal or regulatory proceedings, the merits of our defenses and
consultation with in-house and outside legal counsel. As additional information becomes available, we
reassess the potential liability related to pending claims and may revise our estimates.
Our retrospective responsibility plan only addresses monetary liabilities from settlements of, or
final judgments in, the covered litigation. The plan’s mechanisms include the use of the litigation
escrow account. The accrual related to the covered litigation could be either higher or lower than the
litigation escrow account balance. In fiscal 2014, we recorded litigation accruals totaling $1.5 billion for
covered litigation, reflecting $1.1 billion of take-down payments received and an additional provision of
$450 million. See Note 3—Retrospective Responsibility Plan and Note 20—Legal Matters to our
consolidated financial statements.
Impact if actual results differ from assumptions. Due to the inherent uncertainties of the legal and
regulatory processes in the multiple jurisdictions in which we operate, our judgments may be materially
different than the actual outcomes, which could have material adverse effects on our business,
financial conditions and results of operations. See Note 20—Legal Matters to our consolidated financial
statements.
Income Taxes
Critical estimates. In calculating our effective income tax rate, we make judgments regarding
certain tax positions, including the timing and amount of deductions and allocations of income among
various tax jurisdictions.
Assumptions and judgment. We have various tax filing positions with regard to the timing and
amount of deductions and credits, the establishment of liabilities for uncertain tax positions and the
allocation of income among various tax jurisdictions. We are also 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 be partially sustained, upon
examination by the relevant taxing authorities.
Impact if actual results differ from assumptions. Although we believe that our estimates and
judgments are reasonable, actual results may differ from these estimates. Some or all of these
judgments are subject to review by the taxing authorities. If one or more of the taxing authorities were
to successfully challenge our right to realize some or all of the tax benefit we have recorded, and we
were unable to realize this benefit, it could have a material adverse effect on our financial results and
cash flows.
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