Visa 2012 Annual Report Download - page 55

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Table of Contents
positions. Risk in settlement activities is limited through daily operating procedures, including the utilization of Visa settlement
systems and our interaction with foreign exchange trading counterparties.
Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These assets are included in cash
equivalents, short-term available-for-sale investments and long-term available-for-sale investments. Investments in fixed-rate
instruments carry a degree of interest rate risk. The fair value of fixed-rate securities may be adversely impacted due to a rise in
interest rates. Additionally, a falling-rate environment creates reinvestment risk because as securities mature, the proceeds are
reinvested at a lower rate, generating less interest income. Historically, we have been able to hold investments until maturity. Our
operating results or cash flows have not been, and are not expected to be, materially impacted by a sudden change in market
interest rates.
The fair value balances of our fixed-rate investment securities at September 30, 2012 and 2011 were $3.0 billion and $1.2
billion , respectively. A hypothetical 100 basis point increase or decrease in interest rates would create an estimated change in fair
value of approximately $42 million on our fixed-rate investment securities at September 30, 2012 . The fair value balances of our
adjustable-rate debt securities were $923 million and $764 million at September 30, 2012 and 2011 , respectively.
Visa Europe Put Option
We have a liability related to the put option with Visa Europe which is recorded at fair value at September 30, 2012 . We are
required to record any change in the fair value of the put option on a quarterly basis. In the determination of the fair value of the put
option at September 30, 2012 , we have assumed a 40% probability of exercise by Visa Europe at some point in the future and a
P/E differential, at the time of exercise, of approximately 1.9 x. The use of a probability of exercise 5% higher than our estimate
would have resulted in an increase of approximately
$18 million in the value of the put option. An increase of 1.0x in the assumed
P/E differential would have resulted in an increase of approximately $84 million in the value of the put option. See Liquidity and
Capital Resources and Critical Accounting Estimates above.
Pension Plan Risk
Our U.S. defined benefit pension plan assets were $973 million and $783 million and projected benefit obligations were $990
million and $839 million at September 30, 2012 and 2011 , respectively. A material adverse decline in the value of pension plan
assets and/or the discount rate for benefit obligations would result in a decrease in the funded status of the plan, an increase in
pension cost and an increase in required funding. We will continue to monitor the performance of pension plan assets and market
conditions as we evaluate the amount of our contribution to the plan for fiscal 2013 , which we expect to make in September 2013 .
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