Visa 2008 Annual Report Download - page 117

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2008
(in millions, except as noted)
The Company files a consolidated federal income tax return and, in certain states, combined state tax returns. Foreign taxes paid are generally deducted
to reduce federal income taxes payable.
Pension and postretirement plans—The Company accounts for its defined benefit pension and other postretirement benefit plans in accordance with
SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and
132(R).
The plans are actuarially evaluated, incorporating the use of various assumptions. Critical assumptions for pension and other postretirement plans
include the discount rate and the expected rate of return on plan assets (for qualified pension plans). Other assumptions involve demographic factors such as
retirement, mortality, turnover and the rate of compensation increases. The Company evaluates assumptions annually and modifies the assumptions as
appropriate.
The Company uses a discount rate to determine the present value of its future benefit obligations. The discount rate is based on matching the duration of
a pool of high quality corporate bonds to the expected benefit payment stream.
To determine the expected long-term rate of return on pension plan assets, the Company considers the current and expected asset allocation, as well as
historical and expected returns on each plan asset class. Any difference between actual and expected plan experience, including asset return experience in
excess of the 10% corridor (as defined in SFAS No. 87, Employers' Accounting for Pensions), is recognized in the net periodic pension calculation over the
expected average employee future service period, approximately 9 years for United States plans and approximately 14 years for United Kingdom plans. The
gains and losses of certain smaller nonqualified pension plans are recognized immediately in the year in which they occur.
The Company recognizes the funded status of its benefit plans in its consolidated balance sheet as a separate component of accumulated other
comprehensive income (loss) within stockholders' equity. The Company immediately recognizes a settlement loss for net actuarial losses when it makes
substantial excess pension plan payments. For additional information about our pension plans, refer to Note 12—Pension, Postretirement and Other Benefits.
Foreign currency translation—The Company's functional currency is the U.S. dollar for each of its foreign operations except Canada.
Transactions denominated in currencies other than the U.S. dollar are converted to U.S. dollars at the exchange rate on the transaction date. Monetary
assets and liabilities denominated in non-U.S. currencies are remeasured to U.S. dollars using exchange rates in effect at the balance sheet date. Non-monetary
assets and liabilities denominated in non-U.S. currencies are maintained at historical U.S. dollar exchange rates.
The functional currency in Canada is the Canadian dollar. Translation from the Canadian dollar to the U.S. dollar is performed for balance sheet
accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate for the period.
Resulting translation adjustments are reported as a component of accumulated other comprehensive income on the consolidated balance sheets.
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