Visa 2013 Annual Report Download - page 122

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2013
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
2013 2012
(in millions)
Beginning balance at October 1 ...................................... $ 679 $ 850
Increases of unrecognized tax benefits related to prior years ................ 335 186
Decreases of unrecognized tax benefits related to prior years ............... (133) (445)
Increases of unrecognized tax benefits related to current year ............... 144 89
Reductions related to lapsing statute of limitations ......................... (2) (1)
Ending balance at September 30 ..................................... $ 1,023 $ 679
It is the Company’s policy to account for interest expense and penalties related to uncertain tax
positions in non-operating income, and general and administrative expense, respectively, in its
consolidated statements of operations. In fiscal 2013, the Company recognized $9 million of interest
expense, related to uncertain tax positions. In fiscal 2012 and 2011, the Company reversed
$45 million, and recognized $7 million, of interest expense, respectively, related to uncertain tax
positions. In fiscal 2013, 2012 and 2011, the Company reversed $4 million, $1 million and $2 million of
penalties, respectively. At September 30, 2013 and 2012, the Company had accrued interest of $29
million and $20 million, respectively, and accrued penalties of $3 million and $7 million, respectively,
related to uncertain tax positions in its other long-term liabilities.
In September 2012, the IRS completed the examination of the Company’s fiscal 2006, 2007 and
2008 U.S. federal income tax returns with no significant adjustments. The statute of limitations for
these years is expected to expire in December of 2013.
The IRS began the examination of the Company’s fiscal 2009, 2010 and 2011 tax returns in fiscal
2013. The Company’s California fiscal 2006, 2007 and 2008 tax returns are currently under
examination. Except for certain outstanding refund claims, the federal and California statutes of
limitations have expired for fiscal years prior to fiscal 2006. During fiscal 2013, the Canada Revenue
Agency (CRA) completed its examination of the Company’s fiscal 2003 to 2011 Canadian tax returns
and proposed certain assessments. The Company has filed or will file notices of objection against
these assessments and believes that its income tax provision adequately reflects its obligations to the
CRA. The Company is also subject to examinations by various state and foreign tax authorities. All
material state and foreign tax matters have been concluded for years through fiscal 2002. The timing
and outcome of the final resolutions of the federal, state and foreign tax examinations and refund
claims are uncertain. As such, it is not reasonably possible to estimate the impact that the final
outcomes could have on the Company’s unrecognized tax benefits in the next 12 months.
Note 20—Legal Matters
The Company is party to various legal and regulatory proceedings. Some of these proceedings
involve complex claims that are subject to substantial uncertainties and unascertainable damages.
Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss
related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable
loss and/or the amount or range of losses are not reasonably estimable. Although the Company
believes that it has strong defenses for the litigation and regulatory proceedings described below, it
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