Visa 2009 Annual Report Download - page 50

Table of Contents
Fair Value Measurements—Financial Instruments
Beginning in the first quarter of fiscal 2009, the assessment of fair value of our financial instruments is based on the provisions of Accounting
Standards Codification ("ASC") 820. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party,
whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability.
As of September 30, 2009, our financial instruments measured at fair value on a recurring basis included approximately $6.3 billion of assets, of which
$34 million, or less than 1%, had significant unobservable inputs. For these instruments, we lacked observable market data to corroborate either the non-
binding market consensus prices or the non-binding broker quotes. Marketable debt instruments in this category include corporate debt securities, mortgage
backed securities, other asset backed securities and auction rate securities. See Note 5—Investments and Fair Value Measurements to our consolidated
financial statements.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements are comprised of guarantees. Visa has no off-balance sheet debt, other than lease and purchase order commitments
as discussed below and reflected in our contractual obligations table.
Guarantees and Indemnifications
In 2001, Visa International entered into a 20-year lease agreement for premises in London to be occupied by the EU region and Visa CEMEA. The
lease is assigned to Visa Europe Services, Inc., or VESI, a wholly-owned subsidiary of Visa Europe, with Visa International acting as a guarantor to the
landlord as required by the United Kingdom. In the event of a default by VESI, Visa International is obligated to make base lease payments. VESI has agreed
to reimburse Visa International for any liabilities that may arise under Visa International's guarantee to the landlord. Visa International has not made any
payments under this guarantee and the estimated fair value of this guarantee was less than $1 million at September 30, 2009.
We indemnify customers for settlement losses suffered by reason of the failure of any other customer to honor Visa cards, traveler's cheques, or other
instruments processed in accordance with our operating regulations. The amount of the indemnification is unlimited. We maintain global credit settlement risk
policies and procedures to manage settlement risk which may require customers to post collateral if certain credit standards are not met. See Note 1—
Summary of Significant Accounting Policies and Note 12—Settlement Guarantee Management to our consolidated financial statements.
In the ordinary course of business, we enter into contractual arrangements with financial institution and other customers under which we may agree to
indemnify the customer for certain types of losses incurred relating to the services we provide or otherwise relating to our performance under the applicable
agreement. Historically, payments we have made related to these indemnification obligations have been immaterial.
Contractual Obligations
Our contractual commitments will have an impact on our future liquidity. The contractual obligations identified in the table below include both on- and
off-balance sheet transactions that represent a material expected or contractually committed future obligation at September 30, 2009. We believe that we will
be able to fund these obligations through cash generated from our operations and
49