Visa 2012 Annual Report Download - page 80

Download and view the complete annual report

Please find page 80 of the 2012 Visa annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 136

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
$145 million at September 30, 2012 and 2011 . During fiscal 2011, the Company reduced the value of the put option by $122
million , recording non-cash, non-operating income in the consolidated statement of operations. See Note 2—Visa Europe . The
liability is classified within Level 3 as the assumed probability that Visa Europe will elect to exercise its option and the estimated P/E
differential are among several unobservable inputs used to value the put option.
Earn-out related to PlaySpan acquisition.
In connection with the PlaySpan acquisition, the Company initially recorded a liability
of $24 million to reflect the fair value of a potential earn-out provision included in the purchase agreement. The liability is classified
as Level 3 due to a lack of observable inputs, such as the likelihood of meeting certain future revenue targets and other milestones.
The fair value of the earn-out decreased to $12 million at September 30, 2012 , primarily reflecting payments made upon
achievement of certain revenue targets and other milestones during fiscal 2012 . The remaining liability related to the earn-out is
included in accrued liabilities on the consolidated balance sheets. Changes in fair value are included in general and administrative
expense on the consolidated statements of operations. See Note 5—Acquisitions and Note 8—Intangible Assets, Net .
A separate roll-forward of Level 3 investments measured at fair value on a recurring basis is not presented because the
primary activities during fiscal 2012 and 2011 are already discussed above.
Assets Measured at Fair Value on a Nonrecurring Basis
Non-marketable equity investments and investments accounted for under the equity method . These investments are
classified as Level 3 due to the absence of quoted market prices, inherent lack of liquidity, and the fact that inputs used to measure
fair value are unobservable and require management judgment. When certain events or circumstances indicate that impairment
may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of
comparable public companies. The Company recognized a $2 million OTTI during fiscal 2012 , compared with no impairment
charges during fiscal 2011 and $3 million impairment loss recognized during fiscal 2010 . At September 30, 2012 and 2011 , these
investments totaled $86 million and $100 million , respectively. These assets are classified in other assets on the consolidated
balance sheets. See Note 6—Prepaid Expenses and Other Assets .
Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible
assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-
financial liabilities measured at fair value on a nonrecurring basis. Finite-lived intangible assets primarily consist of customer
relationships, reacquired rights, reseller relationships and tradenames obtained through acquisitions. See Note 5—Acquisitions .
The Company primarily uses an income approach for estimating the fair values of goodwill and indefinite-lived intangible
assets when testing for and recording impairment, if any. As the assumptions employed to measure these assets on a non-
recurring basis are based on management's judgment using internal and external data, these fair value determinations are
classified in Level 3 of the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived
intangible assets and goodwill as of February 1, 2012 , and concluded there was no impairment. No recent events or changes in
circumstances indicate that impairment existed at September 30, 2012 . See Note 1—Summary of Significant Accounting Policies .
Other Financial Instruments not Measured at Fair Value
Certain financial instruments are not measured at fair value on the Company's consolidated balance sheet but require
disclosure of their fair values, including cash, settlement receivable and payable, and customer collateral. The estimated fair value
of such instruments at September 30, 2012 , approximates their carrying value due to their generally short maturities.
Investments
Trading Investment Securities
Trading investment securities include mutual fund equity security investments related to various employee compensation and
benefit plans. Trading activity in these investments is at the direction of the Company's
77