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Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
also formally assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged
items and whether those derivatives may be expected to remain highly effective in future periods.
The Company uses regression analysis to assess effectiveness prospectively and retrospectively. The effectiveness tests are performed on the foreign
exchange forward contracts based on changes in the spot rate of the derivative instrument compared to changes in the spot rate of the forecasted hedged
transaction. Forward points are excluded for effectiveness testing and measurement purposes. The excluded forward points are reported immediately in
earnings. For fiscal 2010, 2009 and 2008, the amount by which earnings were reduced relating to excluded forward points and ineffectiveness was $18
million, $18 million and $2 million, respectively.
The effective portion of changes in the fair value of derivatives designated as cash flow hedges is recorded as a component of accumulated other
comprehensive income on the consolidated balance sheet. When the forecasted transaction occurs and is recognized in earnings, the amount in accumulated
other comprehensive income related to that hedge is reclassified to operating revenue or expense. The balance in accumulated other comprehensive loss, net
was $40 million at September 30, 2010 and the Company expects to reclassify the entire amount to earnings in the consolidated statement of operations during
fiscal 2011 due to the recognition in earnings of the hedged forecasted transactions.
In the event there is recognized ineffectiveness or the underlying forecasted transaction does not occur within the designated hedge period, or it
becomes remote that the forecasted transaction will occur, the related gains and losses on the cash flow hedges are reclassified from accumulated other
comprehensive income on the consolidated balance sheet to administrative and other expense on the consolidated statement of operations at that time.
The Company's derivative financial instruments are subject to both credit and market risk. The Company monitors the credit-worthiness of the financial
institutions that are counterparties to its derivative financial instruments and does not consider the risks of counterparty nonperformance to be significant.
Notwithstanding the Company's efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect
against the risks associated with foreign currency fluctuations. Credit and market risks related to derivative instruments were not considered significant at
September 30, 2010.
Note 15—Enterprise-wide Disclosures and Concentration of Business
The Company's long-lived net property, equipment and technology assets are classified by major geographic area as follows:
September 30,
2010
September 30,
2009
(in millions)
U.S. $ 1,301 $ 1,128
Non-U.S. 56 76
Total $ 1,357 $ 1,204
108