Visa 2007 Annual Report Download - page 143

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total net deferred tax asset are included in the company's consolidated balance sheets as follows:
At September 30
2007 2006
(in thousands)
Current deferred tax assets, net $ 795,013 $ 149,671
Non current deferred tax assets, net 470,626 237,533
Net deferred tax asset $ 1,265,639 $ 387,204
The increase in the Company's deferred tax assets during fiscal 2007 was primarily attributable to the tax benefits recorded associated with the
American Express settlement and the recording of a liability under the guidelines of SFAS No. 5 related to the Discover litigation and other matters. For tax
purposes, the deduction related to these matters will be deferred until the payments are made and thus the Company established a deferred tax asset of $778
million related to these payments, which was net of a reserve to reflect the management's best estimate of the amount of the benefit to be realized. See Note 20
—Legal Matters.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income
over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of
these deductible differences.
The Company purchased the stock of Inovant, Inc. on January 1, 2003. The fiscal 2007 and 2006 deferred tax assets and liabilities reflect the addition of
deferred tax assets and liabilities from Inovant, Inc. A valuation allowance had previously been established for the state research and development credit
carry-forwards acquired as part of the Inovant, Inc. transaction since the Company believed it more likely than not that those credits would not be realized.
Based upon audit results related to research and development at the Federal level which impacted these credits, a corresponding adjustment had been made to
the deferred tax asset and the associated valuation allowance on these underlying credits at September 30, 2005. In fiscal 2006, it was determined that it was
not probable that the position that gave rise to the deferred tax asset relating to a state filing methodology would be sustainable. Accordingly, both the
underlying deferred tax assets and the accompanying valuation allowance were reversed.
In fiscal 2006, the Company performed a historical analysis of its deferred tax assets and liabilities. As a result of this analysis, adjustments were made
to deferred tax assets and liabilities. The net effect of the adjustments is approximately a $3.3 million increase to deferred tax assets, which is primarily
attributable to fixed asset adjustments related to years prior to fiscal 2002.
In fiscal 2007, the Company adopted SFAS 158. The adoption of SFAS 158 conformed the pension and postretirement plans' measurement date to the
Company's fiscal year end and resulted in an after tax equity charge of $8.7 million. The Company also recorded an after tax equity charge of $2.3 million to
recognize the under-funded status of the plan. The adoption resulted in an increase to deferred tax assets of $6.4 million. See Note 12—Pension,
Postretirement and Other Benefits.
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