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Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
employment and investment thresholds being met by the Company. The tax incentive agreement decreased Singapore tax by
$130
million , $111 million and $93 million , and the benefit of the tax incentive agreement on diluted earnings per share was $0.19 ,
$0.16 and $0.13 in fiscal 2012 , 2011 and 2010 , respectively.
In accordance with ASC 740, the Company is required to inventory, evaluate, and measure all uncertain tax positions taken or
to be taken on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only partially
be sustained, upon examination by the relevant taxing authorities.
At September 30, 2012 and 2011 , the Company’s total gross unrecognized tax benefits were $679 million and $850 million ,
respectively, exclusive of interest and penalties described below. Included in the $679 million and $850 million are $537 million and
$696 million of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period.
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
It is the Company’s policy to account for interest expense and penalties related to uncertain tax positions as interest expense,
and general and administrative expense, respectively, in its consolidated statements of operations. In fiscal 2012, the Company
reversed $45 million of interest expense primarily associated with uncertainties related to the deductibility of covered litigation
expense. In fiscal 2011 and 2010 , the Company recognized $7 million and $37 million of interest expense, respectively, related to
uncertain tax positions. In fiscal 2012 and 2011, the Company reversed $1 million and $2 million of penalties, respectively. In fiscal
2010, the Company recognized $5 million of penalties. At September 30, 2012 and 2011 , the Company had accrued interest of
$20 million and $65 million , respectively, and accrued penalties of $7 million and $8 million , respectively, related to uncertain tax
positions in its other long-term liabilities.
In September 2012, the IRS completed the examination of the Company's fiscal 2006, 2007 and 2008 U.S. federal income tax
returns with no significant adjustments. The statute of limitations for these years is expected to expire in June of 2013. Upon the
successful completion of this examination in fiscal 2012, the Company reversed $425 million of unrecognized tax benefits, primarily
related to the deductibility of covered litigation.
The IRS will begin the examination of the Company's fiscal 2009, 2010 and 2011 tax returns in fiscal 2013. The Company's
California fiscal 2006, 2007 and 2008 tax returns are currently under examination. Except for certain outstanding refund claims, the
federal and California statutes of limitations have expired for fiscal years prior to fiscal 2006. The Company's fiscal 2003 to 2009
Canadian income tax returns are currently under examination by the Canada Revenue Agency. The Company is also subject to
examinations by various state and foreign tax authorities. All material state and foreign tax matters have been concluded for years
through fiscal 2002. The timings and outcomes of the final resolutions of the federal, state and foreign tax examinations and refund
claims are uncertain. As such, it is not reasonably possible to estimate the impacts that the final outcomes could have on the
Company's unrecognized tax benefits in the next 12 months.
Note 21—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
102
2012
2011
(in millions)
Beginning balance at October 1
$
850
$
545
Increases of unrecognized tax benefits related to prior years
186
206
Decreases of unrecognized tax benefits related to prior years
(445
)
(52
)
Increases of unrecognized tax benefits related to current year
89
158
Reductions related to lapsing statute of limitations
(1
)
(7
)
Ending balance at September 30
$
679
$
850