Visa 2009 Annual Report Download - page 77

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2009
(in millions, except as noted)
Foreign currency remeasurement and translation—The Company's functional currency is the U.S. dollar for the majority of its foreign operations.
Transactions denominated in currencies other than the applicable functional currency are remeasured to the functional currency at the exchange rate on the
transaction date. Monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-
monetary assets and liabilities are maintained at historical exchange rates. Gains and losses related to remeasurement are recorded in administrative and other
in the consolidated statements of operations.
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 an average exchange rate for the period.
Resulting translation adjustments are reported as a component of accumulated other comprehensive income on the consolidated balance sheets.
Derivative financial instruments—The Company uses forward foreign exchange contracts to reduce its exposure to foreign currency rate changes on
non-functional currency denominated forecasted operating revenues and expenses. Derivatives are carried at fair value on the consolidated balance sheets.
Gains and losses resulting from changes in fair value of derivative instruments are accounted for either in accumulated other comprehensive income (loss) on
the consolidated balance sheets, or in the consolidated statements of operations (in the corresponding account where revenue or expense is hedged, or to
administrative and other for hedge amounts determined to be ineffective) depending on whether they are designated and qualify for hedge accounting. Fair
value represents the difference in the value of the contracts at the contractual rate and the value at current market rates, and generally reflects the estimated
amounts that the Company would receive or pay to terminate the contracts at the reporting date based on broker quotes for the same or similar instruments.
Additional disclosures that demonstrate how derivative instruments and related hedged items affect an entity's financial position, financial performance
and cash flows have not been presented because the impact of derivative instruments is immaterial to the overall consolidated balance sheets, statements of
operations and statements of comprehensive income. See Note 13—Derivative Financial Instruments.
Guarantees and indemnifications—The Company recognizes an obligation for guarantees and indemnifications at inception if the fair value is
estimable, regardless of the probability of occurrence. The Company indemnifies issuing and acquiring customers from settlement losses suffered by the
failure of any other customer to honor drafts, travelers cheques, or other instruments processed in accordance with Visa's operating regulations. The estimated
fair value of the liability for settlement indemnification is included in accrued liabilities on the consolidated balance sheets and is described in Note 12—
Settlement Guarantee Management. The Company also indemnifies Visa Europe for any claims arising out of the provision of services brought against Visa
Europe by Visa Inc.'s customer financial institutions, as described in Note 18—Commitments and Contingencies.
Share-based compensation—The Company recognizes share-based compensation cost using the fair value method of accounting. The Company
recognizes compensation cost for awards with only service conditions on a straight-line basis over the requisite service period, which is generally the vesting
period. Compensation cost for performance awards is initially estimated based on target performance and is adjusted as appropriate throughout the
performance period. See Note 17—Share-based Compensation.
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