Visa 2012 Annual Report Download - page 72

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
The Company evaluates the recoverability of long-
lived assets for impairment annually or more frequently if 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 to the
extent that the carrying amount of the asset or asset group exceeds its fair value.
Leases . The Company enters into operating and capital leases for the use of premises, software and equipment. Rent
expense related to operating lease agreements which may or may not contain lease incentives is primarily recorded on a straight-
line basis over the lease term.
Intangible assets, net . The Company records identifiable intangible assets at fair value on the date of acquisition and
evaluates the useful life of each asset.
Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller relationships and
tradenames obtained through acquisitions. Finite-lived intangible assets are amortized on a straight-line basis and are tested for
recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles
have useful lives ranging from 1 to 15 years. No events or changes in circumstances indicate that impairment existed as of
September 30, 2012 . See Note 5—Acquisitions and Note 8—Intangible Assets, Net .
Indefinite-lived intangible assets consist of tradename, customer relationships and the Visa Europe franchise right acquired in
the October 2007 reorganization. Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment
annually or more frequently if events or changes in circumstances indicate that impairment may exist. The Company tests each
category of indefinite-lived intangible assets for impairment on an aggregate basis, which may require the allocation of cash flows
and/or an estimate of fair value to the assets or asset group. Impairment exists if the fair value of the indefinite-
lived intangible asset
is less than the carrying value. The Company relies on a number of factors when completing impairment assessments, including a
review of discounted future cash flows, business plans and the use of present value techniques.
The Company completed its annual impairment review of indefinite-lived intangible assets as of February 1, 2012 , and
concluded there was no impairment as of that date. No recent events or changes in circumstances indicate that impairment of the
Company's indefinite-lived intangible assets existed as of September 30, 2012 .
Goodwill . Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business
combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually as of February 1, or more
frequently if events or changes in circumstances indicate that impairment may exist.
Effective October 1, 2011, the Company adopted ASU 2011-
08, which allows the Company to first assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This step serves as
the basis for determining whether it is necessary to perform the two-step goodwill impairment test. The two-step test first compares
the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, no impairment exists, and the
second step is not performed. If the fair value is less than the carrying value, the second step is performed to compute the amount
of the impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The
adoption did not have a material impact on the consolidated financial statements.
The Company evaluated its goodwill for impairment on February 1, 2012 , and concluded there was no impairment as of that
date. No recent events or changes in circumstances indicate that impairment existed as of September 30, 2012 .
Accrued litigation . The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to
which it is a party and records a loss contingency when it is probable that a liability has been incurred and the amount of the loss
can be reasonably estimated. These judgments are subjective, based on the status of such legal or regulatory proceedings, the
merits of the Company's defenses and consultation with corporate and external legal counsel. Actual outcomes of these legal and
regulatory proceedings may differ materially from the Company's estimates. Litigation accruals associated with settled obligations
to be paid over
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