Visa 2007 Annual Report Download - page 121

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Pension and Postretirement Plans
The Company accounts for its defined benefit pension and postretirement plans within the framework of FASB SFAS No. 158, "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132(R))" (SFAS 158). See "—Recently
Adopted Accounting Pronouncements" below.
The plans are actuarially evaluated, which includes the use of several assumptions. Critical assumptions for qualified pension plans include the discount
rate and the expected rate of return on plan assets (for qualified pension plans), which are important elements of expense and/or liability measurement. Other
assumptions involve demographic factors such as retirement, mortality, turnover and the rate of compensation increases. The Company evaluates assumptions
annually and modifies the assumptions as appropriate.
The Company uses a discount rate to determine the present value of its future benefit obligations. The Company uses a "bond duration matching"
methodology to calculate the discount rate. Under this approach, the discount rate is determined by projecting the plans' expected future benefit payments, as
defined for the projected benefit obligations, and by discounting those expected payments using an average of yield curves constructed based on a large
population of high-quality corporate bonds. The resulting discount rate reflects the matching of plan liability cash flows to the yield curves.
To determine the expected long-term rate of return on pension plan assets, the Company considers the current and expected assets allocation, as well as
historical and expected returns on each plan asset class. Any difference between actual and expected plan experience, including asset return experience in
excess of the larger of 10% of assets or liabilities, is recognized in the net periodic pension calculation over the expected average employee future service,
approximately 9 years. The gains and losses of certain smaller nonqualified pension plans are recognized immediately in the year in which they occur.
The Company immediately recognizes a net settlement loss for previously unrecognized losses when it makes substantial excess pension plan
payments. See Note 12—Pension, Postretirement and Other Benefits.
Recently Adopted Accounting Pronouncements
In fiscal 2007, the Company adopted SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans (an
amendment of FASB Statements No. 87, 88, 106, and 132(R))" (SFAS 158). Visa U.S.A.'s adoption of SFAS 158 conformed the plan's measurement date to
the Company's fiscal year end and resulted in an after tax equity charge of approximately $9 million. The Company also recorded an after tax equity charge of
approximately $2 million to recognize the under-funded status of the plan. See Note 12—Pension, Postretirement and Other Benefits.
Note 3—Cumulative Effect of Adoption of Accounting Principle
Investment in Visa International
During 2005, the Company adopted Emerging Issues Task Force No. 02-14, "Whether an Investor Should Apply the Equity Method of Accounting to
Investments Other Than Common Stock" (EITF 02-14). EITF 02-14
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