Visa 2014 Annual Report Download - page 90

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2014
estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. Future actual results could differ
materially from these estimates. The use of estimates in specific accounting policies is described
further below as appropriate.
Cash and cash equivalents. Cash and cash equivalents include cash and certain highly liquid
investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are
primarily recorded at cost, which approximates fair value due to their generally short maturities.
Restricted cash—litigation escrow. The Company maintains an escrow account from which
monetary liabilities from settlements of, or judgments in, the covered litigation are paid. See
Note 3—Retrospective Responsibility Plan and Note 20—Legal Matters for a discussion of the covered
litigation. The escrow funds are held in money market investments, together with the interest earned,
less applicable taxes payable, and classified as restricted cash on the consolidated balance sheets.
Interest earned on escrow funds is included in non-operating income on the consolidated statements of
operations.
Investments and fair value. The Company measures certain assets and liabilities at fair value. Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value measurements are
reported under a three-level valuation hierarchy. See Note 4—Fair Value Measurements and
Investments. The classification of the Company’s financial assets and liabilities within the hierarchy is
as follows:
Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for
identical assets or liabilities. The Company’s Level 1 assets include money market funds, publicly-
traded equity securities and U.S. Treasury securities.
Level 2—Inputs to the valuation methodology can include: (1) quoted prices in active markets for
similar (not identical) assets or liabilities; (2) quoted prices for identical or similar assets in non-active
markets; (3) inputs other than quoted prices that are observable for the asset or liability; or (4) inputs
that are derived principally from or corroborated by observable market data. The Company’s Level 2
assets and liabilities include commercial paper, U.S. government-sponsored debt securities, corporate
debt securities and foreign exchange derivative instruments.
Level 3—Inputs to the valuation methodology are unobservable and cannot be corroborated by
observable market data. The Company’s Level 3 assets and liabilities include auction rate securities
and the Visa Europe put option.
Trading investment securities include mutual fund equity security investments related to various
employee compensation and benefit plans. Trading activity in these investments is at the direction of
the Company’s employees. These investments are held in a trust and are not available for the
Company’s operational or liquidity needs. Interest and dividend income and changes in fair value are
recorded in non-operating income, and offset in personnel expense on the consolidated statements of
operations.
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