Visa 2007 Annual Report Download - page 117

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company classifies its debt and marketable equity securities as available-for-sale. These securities are recorded at cost at the time of purchase and
are carried at fair value, based on current market or broker quotations. Unrealized gains and losses are reported in Other Comprehensive Income, net of tax.
The Company does not engage in investment trading activities. A decline in the market value of any available-for-sale security below cost that is deemed to
be other-than-temporary results in a reduction in its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security
is established. In evaluating other-than-temporary impairment, the Company reviews sustained declines in market price below the amount recorded for the
investment and the Company's intent and ability to hold the investment until recovery, which may in certain cases be maturity. The Company considers the
length of time and extent to which market value has been less than cost and other relevant factors such as the issuer's financial condition and the Company's
investment horizon. Net realized gains and losses are determined on a specific identification basis and are included in Investment Income, Net on the
Company's consolidated statements of operations.
Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield and are included in
Investment Income, Net on the Company's consolidated statements of operations. Dividend and interest income are recognized when earned and are included
in Investment Income, Net on the Company's consolidated statements of operations.
Financial Instruments
The Company considers cash and cash equivalents, short-term investments, long-term investments, notes receivable, short-term debt, notes payable,
settlement guarantees and settlement receivable and payable to be financial instruments. Except as described in Note 14—Debt, the estimated fair value of
such instruments at September 30, 2007 and 2006 approximate their carrying values as reported in the Company's consolidated balance sheets.
Settlement Receivable and Payable
The Company operates systems for clearing and settling deposit access products. Net settlements are generally cleared within one to two business days,
resulting in amounts due from and to financial institutions customers. These settlement amounts are stated at cost and presented on a gross basis on the
Company's consolidated balance sheets.
Indemnification
The Company accounts for indemnifications using the framework of Financial Accounting Standards Board (FASB) Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45), which requires that an
obligation be recorded if estimable, regardless of the probability of occurrence. The Company indemnifies issuing and acquiring financial institution
customers from settlement losses suffered by reason of the failure of any other customer to honor drafts, travelers checks, or other instruments processed in
accordance with operating regulations. The Company's estimate of its liability for settlement indemnification is included in accrued liabilities on the
Company's consolidated balance sheets and is described in Note 19—Commitments and Contingencies.
Prepaid Assets
The Company records prepayments of goods and services. The amounts are recorded in prepaid and other current assets and other assets on the
Company's consolidated balance sheets. The Company expenses these amounts ratably to the consolidated statements of operations over the period of benefit.
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