Visa 2008 Annual Report Download - page 111

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2008
(in millions, except as noted)
Principles of consolidation—The Company consolidates all entities that are controlled by ownership of a majority voting interest as well as variable
interest entities for which the Company is the primary beneficiary. All significant intercompany accounts and transactions are eliminated in consolidation.
Reclassifications—Certain reclassifications, not affecting net income, have been made to prior period information to conform to the current period
presentation format.
Use of estimates—The preparation of the accompanying audited consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Such estimates include purchase consideration, valuation of goodwill and intangible assets,
valuation of the Visa Europe put option, legal contingencies, guarantees and indemnifications, and assumptions used in the calculation of income taxes,
retirement benefits and volume and support incentives, among others. These estimates and assumptions are based on management's best estimates and
judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to
be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their
effects cannot be determined with absolute certainty, actual results could differ from these estimates.
Cash and cash equivalents—Cash and cash equivalents include cash and certain highly liquid investments with original maturities of ninety days or less
from the date of purchase. Cash equivalents are recorded at cost, which approximates fair value.
Restricted Cash—Litigation Escrow—In accordance with the Retrospective Responsibility Plan, shortly following the Company's IPO, the Company
deposited $3.0 billion of the proceeds from the offering into an escrow account from which settlements of, or judgments in, the covered litigation will be paid.
See Note 5—Retrospective Responsibility Plan. The escrow funds are held in money market investments together with the income earned, less applicable
taxes payable, and classified as restricted cash on the Company's consolidated balance sheet. The amount of the escrow funds equivalent to the actual,
undiscounted amount of payments expected to be made beyond one year from the balance sheet date for settled claims is classified as a non-current asset.
Interest earned on escrow funds is included in investment income, net, on the Company's consolidated statement of operations.
Investments—Investments in debt and marketable equity securities are accounted for in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Investments with original maturities greater than ninety days and with stated maturities less than one year from the
balance sheet date are considered current assets. Investments with stated maturities greater than one year from the balance sheet date are considered non-
current assets.
The Company classifies its debt and marketable equity securities as available-for-sale to meet investment objectives such as liquidity management and
to promote business and strategic objectives. These securities are recorded at cost at the time of purchase and are carried at fair value, based on
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