Visa 2015 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2015 Visa annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 163

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
Financial instruments. The Company considers the following to be financial instruments: cash and
cash equivalents, restricted cash-litigation escrow, trading and available-for-sale investment securities,
settlement receivable and payable, customer collateral, non-marketable equity investments, settlement
risk guarantee, derivative instruments, and the Visa Europe put option. See Note 4—Fair Value
Measurements and Investments.
Settlement receivable and payable. The Company operates systems for authorizing, clearing and
settling payment transactions worldwide. U.S. dollar settlements with the Company’s financial
institution clients are typically settled within the same day and do not result in a receivable or payable
balance, while settlement in currencies other than the U.S. dollar generally remain outstanding for one
to two business days, resulting in amounts due from and to clients. These amounts are presented as
settlement receivable and settlement payable on the consolidated balance sheets.
Customer collateral. The Company holds cash deposits and other non-cash assets from certain
clients in order to ensure their performance of settlement obligations arising from Visa-branded cards
and payment products processed in accordance with the Company’s rules. The cash collateral assets
are restricted and fully offset by corresponding liabilities and both balances are presented on the
consolidated balance sheets. Non-cash collateral assets are held on behalf of the Company by a third
party and are not recorded on the consolidated balance sheets. See Note 11—Settlement Guarantee
Management.
Client incentives. The Company enters into long-term contracts with financial institution clients and
other business partners for various programs designed to build payments volume, increase Visa-
branded card and product acceptance and win merchant routing transactions over Visa’s network.
These incentives are primarily accounted for as reductions to operating revenues or as operating
expenses if a separate identifiable benefit at fair value can be established. The Company generally
capitalizes advance incentive payments under these agreements if select criteria are met. The
capitalization criteria include the existence of future economic benefits to Visa, the existence of legally
enforceable recoverability language (e.g., early termination clauses), management’s ability and intent
to enforce the recoverability language and the ability to generate future earnings from the agreement in
excess of amounts deferred. Capitalized amounts are amortized over the shorter of the period of
contractual recoverability or the corresponding period of economic benefit. Incentives not yet paid are
accrued systematically and rationally based on management’s estimate of each client’s performance.
These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate,
based on changes in performance expectations, actual client performance, amendments to existing
contracts or the execution of new contracts. See Note 17—Commitments and Contingencies.
Property, equipment and technology, net. Property, equipment and technology are recorded at
historical cost less accumulated depreciation and amortization, which are computed on a straight-line
basis over the asset’s estimated useful life. Depreciation and amortization of technology, furniture,
fixtures and equipment are computed over estimated useful lives ranging from 2 to 7 years. Capital
leases are amortized over the lease term and leasehold improvements are amortized over the shorter
of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40
years, and buildings are depreciated over 40 years. Improvements that increase functionality of the
asset are capitalized and depreciated over the asset’s remaining useful life. Land and construction-in-
progress are not depreciated. Fully depreciated assets are retained in property, equipment and
technology, net, until removed from service.
77