Visa 2015 Annual Report Download - page 133

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
Expenses and Other Assets. At September 30, 2015 and 2014, income taxes payable of $75 million
and $73 million, respectively, were included in accrued income taxes as part of accrued liabilities, and
accrued income taxes of $752 million and $855 million, respectively, were included in other long-term
liabilities. See Note 8—Accrued and Other Liabilities.
Cumulative undistributed earnings of the Company’s international subsidiaries that are intended to
be reinvested indefinitely outside the United States amounted to $6.4 billion at September 30, 2015.
The amount of income taxes that would have resulted had such earnings been repatriated is not
practicably determinable.
The Company’s largest operating hub outside the United States is located in Singapore. It
operates under a tax incentive agreement which is effective through September 30, 2023, and is
conditional upon meeting certain business operations and employment thresholds in Singapore. The
tax incentive agreement decreased Singapore tax by $192 million, $168 million and $158 million, and
the benefit of the tax incentive agreement on diluted earnings per share was $0.08, $0.07 and $0.06 in
fiscal 2015, 2014 and 2013, respectively.
In accordance with Accounting Standards Codification 740—Income Taxes, the Company is
required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax
returns, and to record liabilities for the amount of such positions that may not be sustained, or may only
partially be sustained, upon examination by the relevant taxing authorities.
At September 30, 2015 and 2014, the Company’s total gross unrecognized tax benefits were $1.1
billion and $1.3 billion, respectively, exclusive of interest and penalties described below. Included in the
$1.1 billion and $1.3 billion are $859 million and $1.1 billion of unrecognized tax benefits, respectively,
that if recognized, would reduce the effective tax rate in a future period.
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
2015 2014
(in millions)
Beginning balance at October 1 ....................................... $ 1,303 $ 1,023
Increases of unrecognized tax benefits related to prior years ................. 44 139
Decreases of unrecognized tax benefits related to prior years ................ (413) (54)
Increases of unrecognized tax benefits related to current year ................ 120 199
Reductions related to lapsing statute of limitations .......................... (3) (4)
Ending balance at September 30 ...................................... $ 1,051 $ 1,303
It is the Company’s policy to account for interest expense and penalties related to uncertain tax
positions in non-operating expense in its consolidated statements of operations. The Company
reversed $6 million of interest expense in fiscal 2015 and recognized $10 million and $9 million of
interest expense in fiscal 2014 and 2013, respectively, related to uncertain tax positions. The Company
accrued $1 million and $2 million of penalties in fiscal 2015 and 2014, respectively, and reversed $4
million of penalties in fiscal 2013, related to uncertain tax positions. At September 30, 2015 and 2014,
the Company had accrued interest of $33 million and $39 million, respectively, and accrued penalties
of $6 million and $5 million, respectively, related to uncertain tax positions in its other long-term
liabilities.
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