Visa 2015 Annual Report Download - page 74

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Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These
assets are included in cash equivalents and short-term or long-term available-for-sale investments.
Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate
securities may be adversely impacted due to a rise in interest rates. Additionally, a falling-rate
environment creates reinvestment risk because as securities mature, the proceeds are reinvested at a
lower rate, generating less interest income. Historically, we have been able to hold investments until
maturity. Neither our operating results or cash flows have been, nor are expected to be, materially
impacted by a sudden change in market interest rates.
The fair value balances of our fixed-rate investment securities at September 30, 2015 and 2014
were $4.4 billion and $3.0 billion, respectively. A hypothetical 100 basis point increase or decrease in
interest rates would create an estimated change in fair value of approximately $48 million on our fixed-
rate investment securities at September 30, 2015. The fair value balances of our adjustable-rate debt
securities were $1.7 billion and $1.9 billion at September 30, 2015 and 2014, respectively.
Visa Europe Put Option
We have a liability related to the put option with Visa Europe, which is recorded at fair value at
September 30, 2015 based on its unamended terms. We are required to assess the fair value of the
put option on a quarterly basis and record adjustments as necessary. In the determination of the fair
value of the unamended put option at September 30, 2015, we assumed a 40% probability of exercise
by Visa Europe at some point in the future and a P/ E differential, at the time of exercise, of
approximately 1.5x. The use of a probability of exercise 5% higher than our estimate would have
resulted in an increase of approximately $37 million in the value of the unamended put option. An
increase of 1.0x in the assumed P/E differential would have resulted in an increase of approximately
$249 million in the value of the unamended put option. See Liquidity and Capital Resources and
Critical Accounting Estimates above.
Pension Plan Risk
At September 30, 2015 and 2014, our U.S. defined benefit pension plan assets were $1.0 billion
and $1.1 billion, respectively, and projected benefit obligations were $1.0 billion and $983 million,
respectively. A material adverse decline in the value of pension plan assets and/or the discount rate for
benefit obligations would result in a decrease in the funded status of the pension plan, an increase in
pension cost and an increase in required funding. A hypothetical 10% decrease in the value of pension
plan assets and a 1% decrease in the discount rate would result in an aggregate decrease of
approximately $248 million in the funded status and an increase of approximately $30 million in
pension cost. We will continue to monitor the performance of pension plan assets and market
conditions as we evaluate the amount of our contribution to the pension plan for fiscal 2016, if any,
which would be made in September 2016.
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