Visa 2015 Annual Report Download - page 67

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extend our processing capabilities internationally. See Note 7—Intangible Assets and Goodwill to our
consolidated financial statements.
Fair Value Measurements—Financial Instruments
The assessment of fair value of our financial instruments is based on a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. Observable inputs are obtained from independent sources and can
be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third
party would use in pricing an asset or liability. As of September 30, 2015, our financial instruments
measured at fair value on a recurring basis included approximately $9.3 billion of assets and $268
million of liabilities. Of these instruments, $262 million had significant unobservable inputs, including
the unamended Visa Europe put option liability of $255 million, and $7 million of auction rate securities.
See Note 4—Fair Value Measurements and Investments to our consolidated financial statements.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements are primarily comprised of guarantees and indemnifications.
Visa has no off-balance sheet debt, other than lease and purchase order commitments, as discussed
below and reflected in our contractual obligations table.
Indemnifications
We indemnify our financial institution clients for settlement losses suffered due to the failure of any
other client to fund its settlement obligations in accordance with our rules. The amount of the
indemnification is limited to the amount of unsettled Visa payment transactions at any point in time. We
maintain global credit settlement risk policies and procedures to manage settlement risk, which may
require clients to post collateral if certain credit standards are not met. See Note 1—Summary of
Significant Accounting Policies and Note 11—Settlement Guarantee Management to our consolidated
financial statements.
In the ordinary course of business, we enter into contractual arrangements with financial
institutions and other clients under which we may agree to indemnify the client for certain types of
losses incurred relating to the services we provide or otherwise relating to our performance under the
applicable agreement.
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