Visa 2010 Annual Report Download - page 107

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
Other Benefits
The Company sponsors a defined contribution plan that covers substantially all of its employees residing in the United States. Personnel costs included
$29 million, $28 million and $33 million in fiscal 2010, 2009 and 2008, respectively, for expenses attributable to the Company's employees under the plan.
The Company's contributions to this plan are funded on a current basis, and the related expenses are recognized in the period that the payroll expenses are
incurred.
Note 13—Settlement Guarantee Management
The Company indemnifies clients for settlement losses suffered due to failure of any other customer to honor Visa cards, travelers cheques, deposit
access products, point-of-sale check service drivers and other instruments processed in accordance with the operating regulations. This indemnification
creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. The
term and amount of the indemnification are unlimited. Settlement at risk (or exposure) is estimated based on the sum of the following inputs: (1) average daily
volumes during the quarter multiplied by the estimated number of days to settle plus a safety margin; (2) four months of rolling average chargebacks volume;
and (3) the total balance for outstanding travelers cheques.
The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients
to post collateral if certain credit standards are not met. The Company refined its settlement risk policy during the fourth quarter of fiscal 2010 to reduce the
number of safety margin days when calculating U.S. settlement exposure, and to increase the U.S. debit and credit exposure thresholds for which collateral is
required.
The Company's estimated maximum settlement exposure was approximately $38.7 billion at September 30, 2010 compared to $41.8 billion at
September 30, 2009. Of these amounts, $3.0 billion at September 30, 2010 and $3.7 billion at September 30, 2009, are covered by collateral. Had the changes
to the settlement risk policy been applied to the prior year, the estimated maximum settlement exposure would have been approximately $33.9 billion at
September 30, 2009, of which approximately $2.8 billion would have been covered by collateral. The total available collateral balances presented below are
greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeds the total settlement
exposure for certain financial institutions at each date presented.
The Company maintained collateral as follows:
September 30,
2010
September 30,
2009
(in millions)
Cash equivalents $ 899 $ 812
Pledged securities at market value 470 243
Letters of credit 869 703
Guarantees 1,803 2,644
Total $ 4,041 $ 4,402
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