Visa 2010 Annual Report Download - page 88

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
technology and information processing services and participation in the Visa system. Visa Europe may sublicense the Visa trademarks and technology
intellectual property to its members and other sublicensees under agreed upon circumstances.
The quarterly base fee for these irrevocable and perpetual licenses is recorded in other revenues and is approximately $143 million per year, except for
fiscal 2008 during which the fee was $41 million due to an agreed upon formula. A liability of $132 million representing the estimated obligation to provide
the licenses during fiscal 2008 at below fair value was included in the total purchase consideration in the reorganization, and fully settled upon redemption of
Visa Europe's class C (series II) and class C (series III) common shares in October 2008.
Beginning November 9, 2010, the quarterly base fee is adjusted annually based on the annual growth of the gross domestic product of the European
Union, although the adjustment can never reduce the quarterly base fee below $143 million per year. The Company determined through an analysis of the fee
rates implied by the economics of the agreement that the quarterly base fee, as adjusted in future periods based on the growth of the gross domestic product of
the European Union, approximates fair value.
Visa Europe must comply with certain agreed upon global rules governing the use and interoperability of the Visa trademarks and interoperability of
Visa Inc.'s systems with the systems of Visa Europe. The parties will also guarantee the obligations of their respective clients and members to settle
transactions, manage certain relationships with sponsors, clients and merchants, and comply with rules relating to the operation of the Visa enterprise. The
Company will indemnify Visa Europe for claims arising from activities in the field of financial payment and processing services brought outside Visa
Europe's region and Visa Europe will indemnify Visa Inc. for any likewise claims brought within Visa Europe's region. The Company has not recorded
liabilities associated with these obligations as the fair value of such obligations was determined to be nominal at September 30, 2010 and 2009, respectively.
Visa Inc. also provides Visa Europe with authorization, clearing and settlement services for cross-border transactions involving Visa Europe's region
and the rest of the world. During fiscal 2010, Visa Europe substantially deployed its own regional clearing and settlement system and Visa Inc. ceased the
provision of clearing and settlement system services for transactions occurring within Visa Europe's region. The parties are expected to continue to share
foreign exchange revenues related to currency conversion for transactions involving European cardholders, as well as other cross-border transactions that take
place in Visa Europe's region, until mid fiscal 2011. The parties also use each others' value-added processing products and other services. The Company has
determined that the value of services exchanged as a result of these various agreements approximates fair value at September 30, 2010 and 2009, respectively.
Note 4—Retrospective Responsibility Plan
The Company has established several related mechanisms designed to address potential liability under certain litigation referred to as the "covered
litigation". These mechanisms are included in and referred to as the retrospective responsibility plan, or the plan, and consist of an escrow agreement, a loss
sharing agreement, an interchange judgment sharing agreement, the conversion feature of the Company's shares of class B common stock and the
indemnification obligations of the Visa U.S.A.
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