Visa 2013 Annual Report Download - page 65

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10% change in the value of the U.S. dollar is estimated to create an additional fair value gain or loss of
approximately $85 million on our foreign currency forward contracts outstanding at September 30,
2013. See Note 1—Summary of Significant Accounting Policies and Note 12—Derivative Financial
Instruments to our consolidated financial statements.
We are also subject to foreign currency exchange risk in daily settlement activities. This risk arises
from the timing of rate setting for settlement with clients relative to the timing of market trades for
balancing currency positions. Risk in settlement activities is limited through daily operating procedures,
including the utilization of Visa settlement systems and our interaction with foreign exchange trading
counterparties.
Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These
assets are included in cash equivalents and short-term or long-term available-for-sale investments.
Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate
securities may be adversely impacted due to a rise in interest rates. Additionally, a falling-rate
environment creates reinvestment risk because as securities mature, the proceeds are reinvested at a
lower rate, generating less interest income. Historically, we have been able to hold investments until
maturity. Neither our operating results or cash flows have been, nor are expected to be, materially
impacted by a sudden change in market interest rates.
The fair value balances of our fixed-rate investment securities at September 30, 2013 and 2012
were $3.5 billion and $3.0 billion, respectively. A hypothetical 100 basis point increase or decrease in
interest rates would create an estimated change in fair value of approximately $38 million on our fixed-
rate investment securities at September 30, 2013. The fair value balances of our adjustable-rate debt
securities were $1.1 billion and $923 million at September 30, 2013 and 2012, respectively.
Visa Europe Put Option
We have a liability related to the put option with Visa Europe which is recorded at fair value at
September 30, 2013. We are required to record any change in the fair value of the put option on a
quarterly basis. In the determination of the fair value of the put option at September 30, 2013, we have
assumed a 40% probability of exercise by Visa Europe at some point in the future and a P/E
differential, at the time of exercise, of approximately 1.9x. The use of a probability of exercise 5%
higher than our estimate would have resulted in an increase of approximately $18 million in the value
of the put option. An increase of 1.0x in the assumed P/E differential would have resulted in an
increase of approximately $84 million in the value of the put option. See Liquidity and Capital
Resources and Critical Accounting Estimates above.
Pension Plan Risk
Our U.S. defined benefit pension plan assets were $1.1 billion and $973 million and projected
benefit obligations were $897 million and $990 million at September 30, 2013 and 2012, respectively.
A material adverse decline in the value of pension plan assets and/or the discount rate for benefit
obligations would result in a decrease in the funded status of the pension plan, an increase in pension
cost and an increase in required funding. We will continue to monitor the performance of pension plan
assets and market conditions as we evaluate the amount of our contribution to the pension plan for
fiscal 2014, if any, which would be made in September 2014.
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