Visa 2007 Annual Report Download - page 119

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impairment
In accordance with FASB Statement of Financial Accounting Standard (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", the Company evaluates the recoverability of all long-lived assets whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of an
asset, an impairment loss is recognized. The loss is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using
the present value of estimated net future cash flows.
Volume and Support Incentives
Volume and support incentives are incentive agreements with financial institutions, merchants and other business partners designed to build payments
volume and increase product acceptance. The Company capitalizes certain incentive payments under volume and support incentives on the Company's
consolidated balance sheets related to signing or renewing long-term contracts in instances where the Company receives a commitment from the member to
generate a substantial portion of its credit and debit card payments volume on Visa-branded products for an agreed upon period of time. Volume and support
incentives are accrued based on management's estimate of the members' performance according to provisions in the related agreements. These accruals are
regularly reviewed and estimates of performance are adjusted as appropriate. Capitalized costs and the Company's estimated obligations under these
agreements are amortized as a reduction of operating revenue on either a straight-line or a sales-volume basis over the period of benefit.
Accrued Litigation
The Company evaluates the likelihood of an unfavorable outcome of the legal or regulatory proceedings to which it is a party in accordance with SFAS
No. 5, "Accounting for Contingencies." These judgments are subjective based on the status of legal or regulatory proceedings, the merits of the Company's
defenses and consultation with in-house and external legal counsel. The Company records a loss contingency when it is probable that a liability has been
incurred and the amount of the loss can be reasonably estimated. Litigation contingencies are reviewed on an ongoing basis to confirm that the appropriate
liability has been recorded on the Company's consolidated balance sheets. The actual outcomes of related legal proceedings may materially differ from the
Company's judgment.
Accrued litigation obligation is accounted for using the present value of actual and estimable future payment obligations, discounted at the estimated
rate of sources of credit that could be used to finance the payment of such obligations with similar terms. The current portion of accrued litigation obligation
represents the present value of payments to be made over the next year. See Note 20—Legal Matters.
The Company expenses legal costs as incurred.
Revenue Recognition
The Company's revenue is comprised principally of service fees, data processing fees, international transaction fees and other revenues, reduced by
costs incurred under volume and support incentives. The Company recognizes revenue in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 104 "Revenue Recognition" (SAB 104) and Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple
Deliverables" (EITF 00-21). Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is
performed and collectability of the resulting receivable is reasonably assured.
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