Visa 2007 Annual Report Download - page 150

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Holographic Magnetic Card Reimbursement
In January 2006, the Company introduced a new card design with holographic magnetic stripe technology as part of its global brand architecture
initiative. Limited technical problems were noted with regard to the use of the card and therefore the Company advised its members to discontinue its
manufacture and distribution. The Company is a committed partner to its financial institution customers and has established a reimbursement process for
members and card vendors that have incurred production and issuance costs. The Company agreed to reimburse members for certain costs they incurred with
regard to the manufacture and distribution of the holographic magnetic card design. Members had until December 31, 2006 to file their claims. The Company
received a total of $14.0 million in valid claims and has paid substantially all valid claims at September 30, 2007.
Visa Extras
Visa Extras is a points-based rewards program administered by Visa U.S.A. and offered by members to their cardholders, which enables enrolled
cardholders to earn reward points on qualifying purchases. The Company administers the program for participating members and contracts with a vendor to
perform the rewards fulfillment and other functions. During the transition of fulfillment services to a new vendor in fiscal 2007, conversion issues arose which
resulted in limited accessibility to the Visa Extras platform for participating members and cardholders for more than one month. During fiscal 2007, the
Company recorded a charge of $5.7 million to remunerate impacted members for certain costs. These amounts are included as reductions to other revenues on
the consolidated statements of operations for fiscal 2007 and in accrued liabilities on the consolidated balance sheets. The Company believes that these
amounts accurately reflect the Company's exposure for such expenses at the balance sheet date, but will regularly monitor the adequacy of the liability.
Note 20 —Legal Matters
Visa U.S.A. is a party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial
uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves related to these proceedings as at this
time in the proceedings the matter does not relate to a probable loss and/or amounts are not reasonably estimable. Although the Company believes that it has
strong defenses for the litigation and regulatory proceedings described below, it could in the future incur judgments or fines or enter into settlements of claims
that could have a material adverse effect on its results of operations, financial position, or cash flows.
The Company's litigation provision includes provisions of $2,652.8 million, $22.9 million and $132.3 million in fiscal 2007, 2006 and 2005,
respectively. The fiscal 2007 and 2006 provisions are net of insurance recoveries received in those years of $2.0 million and $11.5 million, respectively. There
was no insurance recovery in 2005. The litigation accrual is an estimate and is based on management's understanding of its litigation profile, the specifics of
each case, advice of counsel to the extent appropriate and management's best estimate of incurred loss at the balance sheet dates. The Company is presently
involved in the matters described below and other legal actions, except for those disclosed below as resolved or settled. The Company will continue to review
the litigation accrual and, if necessary, future adjustments to the accrual will be made.
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