Visa 2010 Annual Report Download - page 84

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
Company immediately recognizes settlement losses when it settles pension benefit obligations, including making lump-sum cash payments to plan
participants in exchange for their rights to receive specified pension benefits, when certain thresholds are met. The Company began including annual
disclosures about the fair value of its pension plan assets in fiscal 2010, as required. See Note 12—Pension, Postretirement and Other Benefits.
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 converted to the functional currency at the exchange rate on the
transaction date. At period end, 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 remeasured at historical exchange rates. Gains and losses related to conversion and remeasurement are recorded
in administrative and other in the consolidated statements of operations.
The functional currency for Visa 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 (loss) 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 14—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 clients 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 13—Settlement Guarantee
Management. The Company also indemnifies Visa Europe for any claims brought against Visa Europe arising out of the provision of services by Visa Inc.'s
customer financial institutions, as described in Note 3—Visa Europe.
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