Visa 2007 Annual Report Download - page 97

Table of Contents
Critical Estimates Assumptions and Judgment
Impact if Actual Results
Differ from Assumptions
Income Taxes
In calculating its effective
tax rate Visa U.S.A. makes
judgments regarding certain
tax positions, including the
timing and amount of
deductions and allocations
of income among various
tax jurisdictions.
Visa U.S.A. has various tax filing positions, with
regard to the timing and amount of deductions and
credits, the establishment of reserves for audit
matters and the allocation of income among various
tax jurisdictions.
Visa U.S.A. has procedures to inventory, evaluate
and measure all uncertain tax positions taken or to be
taken on tax returns, and to record liabilities for the
amount of such positions that may not be sustained,
or may only partially be sustained, upon examination
by the relevant taxing authorities.
Although Visa U.S.A. believes that its estimates and judgments are
reasonable, actual results may differ from these estimates. Some or all of
these judgments are subject to review by the taxing authorities, including
Visa U.S.A.'s tax benefit of $778 million associated with the settlement
of the American Express litigation and the recognition of a liability under
the guidelines of SFAS No. 5 related to the Discover litigation and other
matters. If one or more of the taxing authorities were to successfully
challenge our right to realize some or all of the tax benefit we have
recorded and we were unable to realize this benefit, it could have a
material and adverse effect on our financial results and cash flows.
Seasonality
Visa U.S.A. does not experience a pronounced seasonality in its business. No individual quarter of fiscal 2007, fiscal 2006 or fiscal 2005 has
historically accounted for more than 30% of annual revenue.
Impact of Recent Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an
interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. For the benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. FIN 48 also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Visa U.S.A. expects the
adoption of FIN 48 on October 1, 2007 will result in an increase to accumulated net income of approximately $6.3 million.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (SFAS 157), which defines
fair value and establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure requirements about fair
value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Visa U.S.A. is in the process of determining the effect, if any,
of adopting SFAS 157 on its consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards 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), which amends FASB issued Statement No. 87,
"Employers' Accounting for Pensions" (SFAS 87) and FASB issued Statement No. 106, "Employers Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106) to require recognition of the over-funded or under-funded status of pension and other postretirement benefit plans on the balance sheet.
Under SFAS 158,
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