Visa 2015 Annual Report Download - page 129

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
Note 17—Commitments and Contingencies
Commitments. The Company leases certain premises and equipment throughout the world with
varying expiration dates. The Company incurred total rent expense of $136 million, $134 million and
$94 million in fiscal 2015, 2014 and 2013, respectively. Future minimum payments on leases, and
marketing and sponsorship agreements per fiscal year, at September 30, 2015, are as follows:
2016 2017 2018 2019 2020 Thereafter Total
(in millions)
Operating leases ............... $ 95 $ 63 $ 57 $ 39 $ 31 $ 107 $ 392
Marketing and sponsorships ...... 112 121 121 119 110 71 654
Total ......................... $ 207 $ 184 $ 178 $ 158 $ 141 $ 178 $ 1,046
Select sponsorship agreements require the Company to spend certain minimum amounts for
advertising and marketing promotion over the life of the contract. For commitments where the
individual years of spend are not specified in the contract, the Company has estimated the timing of
when these amounts will be spent. In addition to the fixed payments stated above, select sponsorship
agreements require the Company to undertake marketing, promotional or other activities up to stated
monetary values to support events which the Company is sponsoring. The stated monetary value of
these activities typically represents the value in the marketplace, which may be significantly higher than
the actual costs incurred by the Company.
Client incentives. The Company has agreements with financial institution clients and other
business partners for various programs designed to build payments volume, increase Visa-branded
card and product acceptance and win merchant routing transactions. These agreements, with terms
ranging from one to thirteen years, can provide card issuance and/or conversion support, volume/
growth targets and marketing and program support based on specific performance requirements.
These agreements are designed to encourage client business and to increase overall Visa-branded
payment and transaction volume, thereby reducing per-unit transaction processing costs and
increasing brand awareness for all Visa clients.
Payments made that qualify for capitalization, and obligations incurred under these programs are
reflected on the consolidated balance sheet. Client incentives are recognized primarily as a reduction
to operating revenue in the period the related volumes and transactions occur, based on
management’s estimate of the client’s performance in accordance with the terms of the incentive
agreement. The agreements may or may not limit the amount of client incentive payments.
The table below sets forth the expected future reduction of revenue per fiscal year for client
incentive agreements in effect at September 30, 2015:
(in millions) 2016 2017 2018 2019 2020 Thereafter Total
Client incentives ....... $3,237 $ 3,130 $ 2,670 $ 2,205 $ 1,610 $ 3,965 $16,817
The amount of client incentives recorded as a reduction of revenue in future periods under the
Company’s incentive arrangements, will be greater or less than the estimates above due to changes in
performance expectations, actual client performance, amendments to existing contracts or the
execution of new contracts. Based on these agreements, increases in incentive payments are
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