Visa 2009 Annual Report Download - page 72

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2009
(in millions, except as noted)
Level 3—Inputs to the valuation methodology are unobservable and cannot be corroborated by observable market data. Inputs reflect the use of
significant management judgment via the use of pricing models for which the assumptions include estimates of market participant assumptions. Level 3 assets
include the Company's auction rate securities, corporate debt securities, mortgage backed securities and other asset backed securities. Level 3 liabilities
include the Visa Europe put option. See Note 3—Visa Europe.
FASB provided further guidance in April 2009 on how to determine the fair value of assets and liabilities when there is no active market or where the
price inputs being used to determine fair value represent distressed sales. The adoption of this guidance did not have a material impact on the consolidated
financial statements.
Available-for-sale securities include investments in debt and marketable equity securities. These securities are recorded at cost at the time of purchase
and are carried at fair value. The Company classifies its debt and marketable equity securities as available-for-sale to meet its operational needs. Investments
with original maturities greater than 90 days and stated maturities less than one year from the balance sheet date are current assets, while those with stated
maturities greater than one year from the balance sheet date are non-current assets. Unrealized gains and losses are reported in accumulated other
comprehensive income (loss) on the consolidated balance sheets. The specific identification method is used to determine realized gain or loss. Dividend and
interest income are recognized when earned and are included in investment income, net on the consolidated statements of operations.
The Company evaluates its debt securities for other-than-temporary impairment ("OTTI") on an ongoing basis. OTTI is assessed when fair value is
below amortized cost. OTTI can be triggered when a company has the intent to sell a security, is more likely than not required to sell the security before
recovery of the amortized cost basis, or does not expect to recover the entire amortized cost basis of the security. The Company has not presented required
separate disclosures because its gross unrealized loss positions in debt securities for the periods presented are not material. In addition, the credit and non-
credit loss components of debt securities on the balance sheet for which OTTI was previously recognized were not material. The Company recognized $9
million in OTTI during fiscal 2009 primarily related to corporate debt, mortgage backed and asset backed securities. In fiscal 2008, the Company recognized
$9 million in OTTI primarily related to auction rate securities.
Trading assets include mutual fund equity security investments related to various employee compensation and benefit plans. The trading activity of
these investments is dependent upon the actions of the Company's employees. On October 1, 2008, the Company adopted FASB ASC 825 and elected the fair
value option to account for these investments, which had previously been reported as available-for-sale investments. There was no impact to the consolidated
statements of operations as a result of this adoption. Changes in fair value are recorded in investment income, net, and offset in personnel expense on the
consolidated statements of operations.
The Company uses the equity method of accounting for investments in other entities when it holds between 20% and 50% ownership in the entity or
when it exercises significant influence. Under the equity method, the Company's share of each entity's profit or loss is reflected in equity in earnings of
unconsolidated affiliates on the consolidated statements of operations. The equity method of accounting is also used for flow-through entities such as limited
partnerships and limited liability
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