Visa 2013 Annual Report Download - page 116

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2013
market condition is based on the Company’s total shareholder return ranked against that of other
companies that are included in the Standard & Poor’s 500 Index. The fair value of the performance-
based shares, incorporating the market condition, is estimated on the grant date using a Monte Carlo
simulation model. The grant-date fair value of performance-based shares in fiscal 2013, 2012 and
2011 was $164.14, $97.84 and $85.05 per share, respectively. Earned performance shares granted in
fiscal 2013 and 2012 vest approximately three years from the initial grant date. Earned performance
shares granted in fiscal 2011 vest in two equal installments approximately two and three years from
their respective grant dates. All performance awards are subject to earlier vesting in full under certain
conditions.
Compensation cost for performance-based shares is initially estimated based on target
performance. It is recorded net of estimated forfeitures and adjusted as appropriate throughout the
performance period. At September 30, 2013, there was $15 million of total unrecognized compensation
cost related to unvested performance-based shares, which is expected to be recognized over a
weighted-average period of approximately 1.0 years.
Note 17—Commitments and Contingencies
Commitments. The Company leases certain premises and equipment throughout the world with
varying expiration dates. The Company incurred total rent expense of $94 million, $89 million and $76
million in fiscal 2013, 2012 and 2011, respectively. Future minimum payments on leases, and
marketing and sponsorship agreements per fiscal year, at September 30, 2013, are as follows:
(in millions) 2014 2015 2016 2017 2018 Thereafter Total
Operating leases .............. $ 100 $ 77 $ 43 $ 35 $ 20 $ 82 $ 357
Marketing and sponsorships ..... 116 117 61 54 54 178 580
Total ........................ $ 216 $ 194 $ 104 $ 89 $ 74 $ 260 $ 937
Select sponsorship agreements require the Company to spend certain minimum amounts for
advertising and marketing promotion over the life of the contract. For commitments where the
individual years of spend are not specified in the contract, the Company has estimated the timing of
when these amounts will be spent. In addition to the fixed payments stated above, select sponsorship
agreements require the Company to undertake marketing, promotional or other activities up to stated
monetary values to support events which the Company is sponsoring. The stated monetary value of
these activities typically represents the value in the marketplace, which may be significantly in excess
of the actual costs incurred by the Company.
Client incentives. The Company has agreements with financial institution clients and other
business partners for various programs designed to build payments volume, increase Visa-branded
card and product acceptance and win merchant routing transactions. These agreements, with original
terms ranging from one to thirteen years, can provide card issuance and/or conversion support,
volume/growth targets and marketing and program support based on specific performance
requirements. These agreements are designed to encourage client business and to increase overall
Visa-branded payment and transaction volume, thereby reducing per-unit transaction processing costs
and increasing brand awareness for all Visa clients.
Payments made that qualify for capitalization, and obligations incurred under these programs are
reflected on the consolidated balance sheet. Client incentives are recognized primarily as a reduction
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