Visa 2015 Annual Report Download - page 106

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
There were no transfers between Level 1 and Level 2 assets during fiscal 2015.
Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded
equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy,
as fair value is based on quoted prices in active markets.
Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S.
government-sponsored debt securities and corporate debt securities, as provided by third-party pricing
vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data
obtained from outside sources is reviewed internally for reasonableness, compared against benchmark
quotes from independent pricing sources, then confirmed or revised accordingly. Commercial paper
and foreign exchange derivative instruments are valued using inputs that are observable in the market
or can be derived principally from or corroborated by observable market data. There were no
substantive changes to the valuation techniques and related inputs used to measure fair value during
fiscal 2015.
Level 3 assets and liabilities measured at fair value on a recurring basis. Auction rate securities
are classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in
measuring fair value. There were no substantive changes to the valuation techniques and related
inputs used to measure fair value during fiscal 2015.
Visa Europe put option agreement. On November 2, 2015, the Company and Visa Europe
amended the Visa Europe put option. At September 30, 2015, the fair value of the put option liability
was based on the unamended terms. The fair value of the unamended put option was $255 million at
September 30, 2015 and $145 million at September 30, 2014. Changes in fair value are recorded as
non-cash, non-operating expense in the Company’s consolidated statements of operations. See Note
2—Visa Europe. The liability is classified within Level 3 as the assumed probability that Visa Europe
will elect to exercise its option in its unamended form, and the estimated P/E differential are among
several unobservable inputs used to value the unamended put option.
Assets Measured at Fair Value on a Non-recurring Basis
Non-marketable equity investments and investments accounted for under the equity method.
These investments are classified as Level 3 due to the absence of quoted market prices, the inherent
lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require
management’s judgment. When certain events or circumstances indicate that impairment may exist,
the Company revalues the investments using various assumptions, including the financial metrics and
ratios of comparable public companies. The Company recognized a $15 million other-than-temporary
impairment loss related to these investments during fiscal 2013. There were no significant impairment
charges incurred during fiscal 2015 and fiscal 2014. At September 30, 2015 and 2014, these
investments totaled $45 million and $35 million, respectively. These assets are classified in other
assets on the consolidated balance sheets. See Note 5—Prepaid Expenses and Other Assets.
Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible
assets, finite-lived intangible assets, and property, equipment and technology are considered non-
financial assets. The Company does not have any non-financial liabilities measured at fair value on a
non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade
names, and reseller relationships, all of which were obtained through acquisitions. See Note 7—
Intangible Assets and Goodwill.
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