Visa 2015 Annual Report Download - page 92

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net
assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at
the reporting unit level annually as of February 1, or more frequently if events or changes in
circumstances indicate that impairment may exist.
The Company evaluated its goodwill for impairment on February 1, 2015, and concluded there
was no impairment as of that date. No recent events or changes in circumstances indicate that
impairment existed as of September 30, 2015.
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or
regulatory proceedings to which it is a party and records a loss contingency when it is probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. These judgments
are subjective, based on the status of such legal or regulatory proceedings, the merits of the
Company’s defenses and consultation with corporate and external legal counsel. Actual outcomes of
these legal and regulatory proceedings may differ materially from the Company’s estimates. The
Company expenses legal costs as incurred in professional fees in the consolidated statements of
operations. See Note 20—Legal Matters.
Revenue recognition. The Company’s operating revenues are comprised principally of service
revenues, data processing revenues, international transaction revenues and other revenues, reduced
by costs incurred under client incentives arrangements. The Company recognizes revenue, net of
sales and other similar taxes, when the price is fixed or determinable, persuasive evidence of an
arrangement exists, the service is performed and collectability of the resulting receivable is reasonably
assured.
Service revenues consist of revenues earned for providing financial institution clients with support
services for the delivery of Visa-branded payment products and solutions. Current quarter service
revenues are primarily assessed using a calculation of current pricing applied to the prior quarter’s
payments volume. The Company also earns revenues from assessments designed to support ongoing
acceptance and volume growth initiatives, which are recognized in the same period the related volume
is transacted.
Data processing revenues consist of revenues earned for authorization, clearing, settlement,
network access and other maintenance and support services that facilitate transaction and information
processing among the Company’s clients globally and with Visa Europe. Data processing revenues are
recognized in the same period the related transactions occur or services are rendered.
International transaction revenues are earned for cross-border transaction processing and
currency conversion activities. Cross-border transactions arise when the country of origin of the issuer
is different from that of the merchant. International transaction revenues are primarily generated by
cross-border payments and cash volume.
Other revenues consist mainly of license fees for use of the Visa brand, revenues earned from
Visa Europe in connection with the Visa Europe Framework Agreement (see Note 2—Visa Europe),
fees from account holder services, licensing and certification and other activities related to the
Company’s acquired entities. Other revenues also include optional service or product enhancements,
such as extended account holder protection and concierge services. Other revenues are recognized in
the same period the related transactions occur or services are rendered.
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