Visa 2013 Annual Report Download - page 80

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2013
Investments with original maturities of greater than 90 days and stated maturities of less than one year
from the balance sheet date, or investments that the Company intends to sell within one year, are
classified as current assets, while all other securities are classified as non-current assets. The majority of
these investments are classified as non-current as they have stated maturities of more than one year
from the balance sheet date. However, these investments are generally available to meet short-term
liquidity needs. Unrealized gains and losses are reported in accumulated other comprehensive income or
loss on the consolidated balance sheets until realized. The specific identification method is used to
calculate realized gain or loss on the sale of marketable securities, which is recorded in non-operating
income on the consolidated statements of operations. Dividend and interest income are recognized when
earned and are included in non-operating income on the consolidated statements of operations.
The Company evaluates its debt and equity securities for other-than-temporary impairment, or
OTTI, on an ongoing basis. When there has been a decline in fair value of a debt or equity security
below the amortized cost basis, the Company recognizes OTTI if: (1) it has the intent to sell the
security; (2) it is more likely than not that it will be required to sell the security before recovery of the
amortized cost basis; or (3) it does not expect to recover the entire amortized cost basis of the security.
The Company has not presented required separate disclosures because its gross unrealized loss
positions in debt or equity securities for the periods presented are not material. The Company had no
OTTI for available-for-sale securities during fiscal 2013 and 2011. The Company recognized $4 million
of OTTI for available-for-sale securities during fiscal 2012.
The Company applies the equity method of accounting for investments in other entities when it
holds between 20% and 50% ownership in the entity or when it exercises significant influence. Under
the equity method, the Company’s share of each entity’s profit or loss is reflected in non-operating
income on the consolidated statements of operations. The equity method of accounting is also used for
flow-through entities such as limited partnerships and limited liability companies when the investment
ownership percentage is equal to or greater than 5% of outstanding ownership interests, regardless of
whether the Company has significant influence over the investees.
The Company applies the cost method of accounting for investments in other entities when it holds
less than 20% ownership in the entity and does not exercise significant influence, or for flow-through
entities when the investment ownership is less than 5% and the Company does not exercise significant
influence. These investments consist of equity holdings in non-public companies and are recorded in
other assets on the consolidated balance sheets.
The Company regularly reviews investments accounted for under the cost and equity methods for
possible impairment, which generally involves an analysis of the facts and changes in circumstances
influencing the investment, expectations of the entity’s cash flows and capital needs, and the viability of
its business model.
Financial instruments. The Company considers the following to be financial instruments: cash and
cash equivalents, restricted cash-litigation escrow, trading and available-for-sale investment securities,
settlement receivable and payable, customer collateral, non-marketable equity investments, settlement
risk guarantee, derivative instruments, the Visa Europe put option and the earn-out provision related to
the PlaySpan acquisition. See Note 4—Fair Value Measurements and Investments.
Settlement receivable and payable. The Company operates systems for authorizing, clearing and
settling payment transactions worldwide. U.S. dollar settlements are typically settled within the same
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