Visa 2010 Annual Report Download - page 125

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
The Company believes that unrecognized tax benefits may possibly decrease by $50 million within the next 12 months, due to the possible effective
settlement on the timing of certain deductions, which would not impact the effective tax rate.
The Company's fiscal 2006, 2007 and 2008 U.S. federal income tax returns are currently under examination by the Internal Revenue Service. The
Company is also subject to examinations by various state and foreign tax authorities. The Company has concluded all California income tax matters for years
through fiscal 2003. All material state and foreign tax matters have been concluded for years through fiscal 2002.
Note 22—Legal Matters
The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial
uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to
these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or amounts are not reasonably estimable. Although the
Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could in the future incur judgments or fines or
enter into settlements of claims that could have a material adverse effect on the Company's results of operations, financial position or cash flows. From time to
time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own
behalf or collectively with other parties.
The Company recorded litigation provisions of approximately ($45 million), $2 million and $1,470 million in fiscal 2010, 2009 and 2008, respectively.
The credit to the provision in fiscal 2010 was primarily the result of a $41 million pre-tax gain recognized related to the prepayment of the remaining
obligations under the Retailers' litigation (discussed in Other Litigation below). The remaining credit balance was due to the release of accruals for certain
legal matters settled during fiscal 2010. There was no other significant provision activity to offset the credit balance in fiscal 2010. The litigation accrual is an
estimate and is based on management's understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and
management's best estimate of incurred loss at the balance sheet date.
The following table summarizes the activity related to accrued litigation for both covered and other non-covered litigation for the years ended
September 30, 2010 and 2009:
2010 2009
(in millions)
Balance at October 1 $ 1,717 $ 3,758
Provision for settled legal matters (45) (1)
Provision for unsettled legal matters — 3
Settlement obligation refunded by Morgan Stanley(1) — 65
Interest accretion on settled matters 27 93
Payments on settled matters(2) (1,002) (2,201)
Balance at September 30 $ 697 $ 1,717
(1) This balance represents the amount of a settlement refunded to the Company during fiscal 2009 by Morgan Stanley under a separate agreement.
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