Visa 2007 Annual Report Download - page 87

Table of Contents
Litigation Provision
The decrease in the litigation provision in fiscal 2006 compared to the prior year was driven by the following:
• absence of the litigation provision for the multi-currency matter of $94 million, which was charged in fiscal 2005 and settled in fiscal 2006;
• downward adjustment of $16 million to the litigation provision reflecting the settlement of two matters in July 2006; and
• an $11 million insurance recovery related to one of the matters settled in July 2006. The insurance recovery was received during the fourth fiscal
quarter of fiscal 2006.
Total liabilities for legal matters changed as follows:
(in millions)
Balance at September 30, 2005 $ 1,208
Provision for legal matters 34
Insurance recovery (11)
Interest accretion on settled matters 92
Payments on settled matters (323)
Balance at September 30, 2006 $ 1,000
Other Income (Expense)
Other expense was $8 million in fiscal 2006 compared to other income of $3 million in fiscal 2005. The decrease in other income primarily reflected
the absence of a non-recurring gain-on-sale of a joint venture interest in Vital Processing Services LLC, a financial transaction processor for acquirers and
merchants, which occurred in fiscal 2005 and lower equity in earnings related to Visa U.S.A.'s ownership in Visa International.
Fiscal Year 2006 vs. 2005
2006 2005 $ Change % Change
(in millions, except percentages)
Equity in earnings of unconsolidated affiliates $ 13 $ 31 $ (18) (58)%
Interest expense (89) (109) 20 (18)%
Investment income, net 68 81 (13) (16)%
Other (Expense) Income $ (8) $ 3 $ (11) NM
Equity in Earnings of Unconsolidated Affiliates
The decrease in equity in earnings of unconsolidated affiliates in fiscal 2006 primarily reflected lower Visa International net income and a decrease in
Visa U.S.A.'s proportionate equity interest in Visa International earnings from the prior year, reflecting the fact that Visa U.S.A. comprised a lower percentage
of total payments volume-based fees paid to Visa International. The decrease also reflected the absence of equity in earnings from Vital Processing Services
LLC following the sale of Visa U.S.A.'s 50% equity interest in the joint venture during fiscal 2005.
Interest Expense
The decrease in interest expense in fiscal 2006 primarily reflected the absence of accretion expense on litigation for certain merchants who opted not to
participate in the plaintiff's class in the Retailers' Litigation matter. These litigation matters were settled in the first six months of fiscal 2005. See Note 20—
Legal Matters to the Visa U.S.A. fiscal 2007 consolidated financial statements.
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