Visa 2012 Annual Report Download - page 78

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
An accrual for the covered litigation and a change to the litigation provision are recorded when loss is deemed to be probable
and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to
recommendations made by the litigation committee. The accrual related to the covered litigation could be either higher or lower than
the litigation escrow account balance. The Company recorded an additional $4.1 billion accrual for the covered litigation during
fiscal 2012. See Note 21—Legal Matters .
Conversion feature.
Under the terms of the plan, when the Company funds the litigation escrow account, the shares of class B
common stock are subject to dilution through an adjustment to the conversion rate of the shares of class B common stock to shares
of class A common stock. This has the same effect on earnings per share as repurchasing the Company's class A common stock,
by reducing the class B conversion rate and consequently the as-converted class A common stock share count. See Note 15—
Stockholders' Equity .
Indemnification obligations . To the extent that amounts available under the litigation escrow arrangement and agreements in
the plan are insufficient to fully resolve the covered litigation, the Company will use commercially reasonable efforts to enforce the
indemnification obligations of Visa U.S.A.'s members for such excess amount, including but not limited to enforcing indemnification
obligations pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and in accordance with their membership agreements.
Interchange judgment sharing agreement. Visa U.S.A. and Visa International have entered into an interchange judgment
sharing agreement with certain Visa U.S.A. members that have been named as defendants in the interchange litigation, which is
described in Note 21—Legal Matters . Under this judgment sharing agreement, Visa U.S.A. members that are signatories will pay
their membership proportion of the amount of a final judgment not allocated to the conduct of MasterCard.
Loss sharing agreement. Visa has entered into a loss sharing agreement with Visa U.S.A., Visa International and certain Visa
U.S.A. members. The loss sharing agreement provides for the indemnification of Visa U.S.A., Visa International and, in certain
circumstances, Visa with respect to: (i) the amount of a final judgment paid by Visa U.S.A. or Visa International in the covered
litigation after the operation of the interchange judgment sharing agreement, plus any amounts reimbursable to the interchange
judgment sharing agreement signatories; or (ii) the damages portion of a settlement of a covered litigation that is approved as
required under Visa U.S.A.'s certificate of incorporation by the vote of Visa U.S.A.'s specified voting members. The several
obligation of each bank that is a party to the loss sharing agreement will equal the amount of any final judgment enforceable
against Visa U.S.A., Visa International or any other signatory to the interchange judgment sharing agreement, or the amount of any
approved settlement of a covered litigation, multiplied by such bank's then-current membership proportion as calculated in
accordance with Visa U.S.A.'s certificate of incorporation.
Omnibus agreement. Visa entered into an omnibus agreement with MasterCard and certain Visa U.S.A. members that
confirmed and memorialized the signatories’ intentions with respect to the loss sharing agreement, the interchange judgment
sharing agreement and other agreements relating to the interchange litigation. The Visa portion of a settlement or judgment in the
interchange litigation covered by the omnibus agreement would be allocated in accordance with specified provisions of the
retrospective responsibility plan. See Note 21—Legal Matters .
Note 4—Fair Value Measurements and Investments
75
Fiscal 2012
Fiscal 2011
(in millions)
Balance at October 1
$
2,857
$
1,936
Deposits into the litigation escrow account
1,715
1,200
American Express settlement payments
(140
)
(280
)
Interest earned, less applicable taxes
—
1
Balance at September 30
$
4,432
$
2,857
Individual Plaintiffs' Settlement Fund payment—(See Note 21—Legal Matters )
(350
)
Balance at October 29
$
4,082