Visa 2010 Annual Report Download - page 80

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
Financial instruments. The Company considers the following to be financial instruments: cash and cash equivalents, restricted cash-litigation escrow,
trading and available-for sale investments, the Reserve Primary Fund (see Note 7—Prepaid Expenses and Other Assets), accounts receivable, non-marketable
equity investments, customer collateral, accounts payable, debt, settlement guarantees, derivative instruments, the Visa Europe put option, and settlement
receivable and payable. The estimated fair value of such instruments at September 30, 2010 approximates their carrying value as reported on the consolidated
balance sheets except as otherwise disclosed, or as deemed impracticable to estimate the fair value, such as for non-marketable equity investments. See Note 5
—Investments and Fair Value Measurements.
Settlement receivable and payable. The Company operates systems for clearing and settling customer payment transactions. Net settlements are
generally cleared within one to two business days, resulting in amounts due to and from clients. These settlement receivables and payables are stated at cost
and are presented gross on the consolidated balance sheets.
Customer collateral. The Company holds cash deposits and other non-cash assets from certain clients in order to ensure their performance of settlement
obligations arising from credit, debit and travelers cheque product clearings. The cash collateral assets are restricted and fully offset by corresponding
liabilities and both balances are presented on the consolidated balance sheets. Non-cash collateral assets are held on behalf of the Company by a third party
and are not recorded on the consolidated balance sheets. See Note 13—Settlement Guarantee Management.
Property, equipment and technology, net. Property, equipment and technology, net are recorded at historical cost less accumulated depreciation and
amortization, which are computed on a straight-line basis over the asset's estimated useful life. Depreciation and amortization of technology, furniture,
fixtures and equipment are computed over estimated useful lives ranging from 2 to 7 years. Capital leases are amortized over the lease term and leasehold
improvements are amortized over the shorter of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40 years, and
buildings are depreciated over 40 years. Improvements that increase functionality of the asset are capitalized and depreciated over the asset's remaining useful
life. Land and construction-in-progress are not depreciated. Fully depreciated assets are retained in property, equipment and technology, net, until removed
from service.
Technology includes purchased and internally developed software, including technology assets acquired in the July 2010 CyberSource acquisition.
Internally developed software represents software primarily used by the VisaNet electronic payment network. Internal and external costs incurred during the
preliminary project stage are expensed as incurred. Qualifying costs incurred during the application development stage are capitalized. Once the project is
substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology's estimated useful life.
The Company evaluates the recoverability of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. If the sum of expected undiscounted future cash flows is less than the carrying amount of an asset
or asset group, an impairment loss is recognized. The loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair
value.
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