Visa 2013 Annual Report Download - page 83

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2013
The Company evaluated its goodwill for impairment on February 1, 2013, and concluded there
was no impairment as of that date. No recent events or changes in circumstances indicate that
impairment existed as of September 30, 2013.
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or
regulatory proceedings to which it is a party and records a loss contingency when it is probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. These judgments
are subjective, based on the status of such legal or regulatory proceedings, the merits of the
Company’s defenses and consultation with corporate and external legal counsel. Actual outcomes of
these legal and regulatory proceedings may differ materially from the Company’s estimates. Litigation
accruals associated with settled obligations to be paid over periods longer than one year are recorded
at the present value of future payment obligations. The obligation is accreted to its full payment value
with the corresponding accretion charge included in non-operating income in the consolidated
statements of operations. The Company expenses legal costs as incurred in professional fees in the
consolidated statements of operations. See Note 20—Legal Matters.
Revenue recognition. The Company’s operating revenues are comprised principally of service
revenues, data processing revenues, international transaction revenues and other revenues, reduced
by costs incurred under client incentives arrangements. The Company recognizes revenue when the
price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed
and collectability of the resulting receivable is reasonably assured.
Service revenues consist of revenues earned for providing financial institution clients with support
services for the delivery of Visa-branded payment products and solutions. Current quarter service revenues
are primarily assessed using a calculation of current pricing applied to the prior quarter’s payments volume.
The Company also earns revenues from assessments designed to support ongoing acceptance and
volume growth initiatives, which are recognized in the same period the related volume is transacted.
Data processing revenues consist of revenues earned for authorization, clearing, settlement,
network access and other maintenance and support services that facilitate transaction and information
processing among the Company’s financial institution clients globally and with Visa Europe. Data
processing revenues are also earned for transactions processed by CyberSource’s online payment
gateway platform. Data processing revenues are recognized in the same period the related
transactions occur or services are rendered.
International transaction revenues are earned for cross-border transaction processing and
currency conversion activities. Cross-border transactions arise when the country of origin of the issuer
is different from that of the merchant. International transaction revenues are primarily generated by
cross-border payments and cash volume.
Other revenues consist mainly of license fees for use of the Visa brand, revenues earned from
Visa Europe in connection with the Visa Europe Framework Agreement (see Note 2—Visa Europe),
fees from account holder services, licensing and certification and other activities related to the
Company’s acquired entities. Other revenues also include optional service or product enhancements,
such as extended account holder protection and concierge services. Other revenues are recognized in
the same period the related transactions occur or services are rendered.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost of
media advertising is expensed when the advertising takes place. Sponsorship costs are recognized
75