What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2020-11-19 compared with 2019-11-14 · 729 added, 630 removed, 1336 unchanged (50% of the section changed)

19 unchanged sentences

Changes in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue from contracts with customers in fiscal year 2019 due to the adoption of Accounting Standards Update 2014-09 “Revenue from Contracts with Customers (Topic 606)”.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue from contracts with customers in the year ended September 30, 2019 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09 “Revenue from Contracts with Customers (Topic 606)”.

Basis for Opinions

19 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the accrued litigation liability for class members opting out of the Damages Class settlement

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the accrued litigation liability for class members opting out of the Damages Class settlement in the Interchange Multidistrict Litigation (MDL)

As discussed in Note 20 to the consolidated financial statements, the Company is involved in various legal proceedings including the Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions , and has recorded an accrued litigation liability of $914 million as of September 30, 2020.

In preparing its consolidated financial statements, the Company is required to assess the probability of loss associated with each legal proceeding and the amount of such loss, if any.

The outcome of the legal proceedings to which the Company is a party is not within the complete control of the Company or may not be known for prolonged periods of time.

We identified the assessment of the accrued litigation liability for class members opting out of the Damages Class settlement, also know as the MDL - Individual Merchant Actions, as a critical audit matter.

In preparing its consolidated financial statements, the Company is required to assess the probability of loss associated with each legal proceeding and amount of such loss, if any.

The outcome of legal proceedings to which the Company is a party is not within the complete control of the Company or may not be known for prolonged periods of time.

We identified the assessment of the accrued liability for class matters opting out of the Damages Class settlement, also known as the MDL - Individual Merchant Actions, as a critical audit matter.

This proceeding involves complex claims that are subject to substantial uncertainties and unascertainable damages.

The assessment of the accrued litigation liability for the MDL - Individual Merchant Actions required especially challenging auditor judgment due to the assumptions and estimates associated with the consideration and evaluation of possible outcomes.

Changes to the outcomes could have a significant effect on the estimated amount of the liability.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s litigation assessment process, including internal controls over the Company’s litigation accrual process for the MDL - Individual Merchant Actions .

Changes to the outcome could have a significant effect on the estimated amount of the liability.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s litigation accrual process, including internal controls over the Company’s litigation accrual process for the MDL - Individual Merchant Actions .

We assessed the amounts accrued by reading letters received directly from the Company’s external legal counsel and in-house legal counsel that discussed the Company’s legal matters, including the MDL - Individual Merchant Actions .

1 unchanged sentence

We evaluated the Company’s ability to estimate its monetary exposure by comparing historically recorded liabilities to actual monetary amounts incurred upon resolution of legal matters for merchants that opted out of the previous MDL class settlement.

We assessed the Company’s analysis of the estimated monetary exposure by checking that it included a complete population of opt-out merchants and performing sensitivity analysis over the Company’s monetary exposure calculations.

To assess the estimated monetary exposure in the Company's analysis, we compared such amounts to the complete population of amounts attributable to opt-out merchants.

We also performed sensitivity analysis over the Company's monetary exposure calculations.

Report of Independent Registered Public Accounting Firm—(Continued)

Evaluation of the revenue recognition for incentive arrangements with certain strategic partners upon adoption of ASC Topic 606

As discussed in Note 1 to the consolidated financial statements, the Company enters into long-term contracts with financial institution clients, merchants, and strategic partners for various programs.

The determination of whether incentive payments to certain strategic partners should be recorded as an operating expense or a reduction to operating revenues is dependent upon the application of the consideration payable to a customer guidance within ASC Topic 606.

We identified the evaluation of the revenue recognition for incentive arrangements with certain strategic partners upon adoption of ASC Topic 606 as a critical audit matter.

A higher degree of auditor judgment was required to evaluate the application of the consideration payable to customer guidance due to the unique nature and complexity of the Company’s open-loop payment network.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s revenue recognition process, including controls related to the accounting for incentive payments to strategic partners and the application of the consideration payable to a customer guidance.

We evaluated a sample of arrangements with certain strategic partners that participate in the Company’s open-loop payment network to understand the rights and obligations of the strategic partners, and how the Company earns revenue from and incentivizes the strategic partner.

We selected a sample of certain strategic partner contracts and independently assessed the application of the consideration payable to a customer guidance, and compared our assessment to that of the Company’s.

We have served as the Company’s auditor since 2007.

3 unchanged sentences

September 30,

(in millions, except par value data)

1 unchanged sentence

Restricted cash equivalents—U.S.

litigation escrow (Note 4 and Note 5)

Investment securities (Note 6)

litigation escrow 901 1,205

Investment securities 3,752 4,236

Settlement receivable 1,264 3,048

Accounts receivable 1,618 1,542

Customer collateral (Note 4 and Note 11)

Customer collateral 1,850 1,648

Current portion of client incentives 1,214 741

1 unchanged sentence

Total current assets 27,645 20,970

Investment securities (Note 6)

Investment securities 231 2,157

Client incentives 3,175 2,084

Property, equipment and technology, net (Note 7)

Goodwill (Note 8)

Intangible assets, net (Note 8)

Property, equipment and technology, net 2,737 2,695

Goodwill 15,910 15,656

Intangible assets, net 27,808 26,780

Other assets 3,413 2,232

Total assets $ 80,919 $ 72,574

Accounts payable $ 174 $ 156

Settlement payable 1,736 3,990

Customer collateral (Note 4 and Note 11)

Customer collateral 1,850 1,648

Accrued compensation and benefits 821 796

1 unchanged sentence

Accrued liabilities 1,840 1,625

Deferred purchase consideration

Accrued litigation (Note 20)

Current maturities of debt 2,999 —

Accrued litigation 914 1,203

Total current liabilities 14,510 13,415

Long-term debt (Note 9)

Deferred tax liabilities (Note 19)

Long-term debt 21,071 16,729

Deferred tax liabilities 5,237 4,807

Other liabilities 3,891 2,939

2 unchanged sentences

Preferred stock, $ 0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:

Series A convertible participating preferred stock, none issued (the “class A equivalent preferred stock”) (Note 14)

Series B convertible participating preferred stock, 2 shares issued and outstanding at September 30, 2019 and 2018 (the “UK&I preferred stock”) (Note 5 and Note 14)

Series C convertible participating preferred stock, 3 shares issued and outstanding at September 30, 2019 and 2018 (the “Europe preferred stock”) (Note 5 and Note 14)

Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,718 and 1,768 shares issued and outstanding at September 30, 2019 and 2018, respectively (Note 14)

Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at September 30, 2019 and 2018, respecti vely (Note 14)

Class C common stock, $0.0001 par value, 1,097 shares authorized, 11 and 12 shares issued and outstanding at September 30, 2019 and 2018, respectively (Note 14)

Right to recover for covered losses (Note 5)

Series A convertible participating preferred stock, less than one and no shares issued and outstanding at September 30, 2020 and 2019 (the “series A preferred stock”), respectively

Series B convertible participating preferred stock, 2 shares issued and outstanding at September 30, 2020 and 2019 (the “UK&I preferred stock”)

Series C convertible participating preferred stock, 3 shares issued and outstanding at September 30, 2020 and 2019 (the “Europe preferred stock”)

Class A common stock, $ 0.0001 par value, 2,001,622 shares authorized, 1,683 and 1,718 shares issued and outstanding at September 30, 2020 and 2019, respectively

Class B common stock, $ 0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at September 30, 2020 and 2019

Class C common stock, $ 0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at September 30, 2020 and 2019

Right to recover for covered losses ( 39 ) ( 171 )

Additional paid-in capital 16,721 16,541

6 unchanged sentences

Total accumulated other comprehensive income (loss), net 354 ( 650 )

Total equity 36,210 34,684

Total liabilities and equity $ 80,919 $ 72,574

3 unchanged sentences

September 30,

2020 2019 2018

(in millions, except per share data)

Net revenues $ 21,846 $ 22,977 $ 20,609

Operating Expenses

Personnel 3,785 3,444 3,170

Marketing 971 1,105 988

Network and processing 727 721 686

2 unchanged sentences

General and administrative 1,096 1,196 1,145

Litigation provision (Note 20)

Litigation provision 11 400 607

Total operating expenses 7,765 7,976 7,655

5 unchanged sentences

Income before income taxes 13,790 14,884 12,806

Income tax provision (Note 19)

Basic Earnings Per Share (Note 15)

Income tax provision 2,924 2,804 2,505

Net income $ 10,866 $ 12,080 $ 10,301

Basic Earnings Per Share

Class A common stock $ 4.90 $ 5.32 $ 4.43

1 unchanged sentence

Class C common stock $ 19.58 $ 21.30 $ 17.72

Basic Weighted-average Shares Outstanding (Note 15)

Basic Weighted-average Shares Outstanding

Class A common stock 1,697 1,742 1,792

1 unchanged sentence

Class C common stock 11 12 12

Diluted Earnings Per Share (Note 15)

Diluted Earnings Per Share

Class A common stock $ 4.89 $ 5.32 $ 4.42

1 unchanged sentence

Class C common stock $ 19.56 $ 21.26 $ 17.69

Diluted Weighted-average Shares Outstanding (Note 15)

Diluted Weighted-average Shares Outstanding

Class A common stock 2,223 2,272 2,329

5 unchanged sentences

September 30,

2020 2019 2018

(in millions)

Net income $ 10,866 $ 12,080 $ 10,301

Other comprehensive income (loss), net of tax:

19 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Preferred Stock (1)

Preferred Stock

Treasury Stock

Right to Recover for Covered Losses

Paid-In Capital

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2017

2 3 1,818 245 13 $ 5,526 $ ( 52 ) $ 16,900 $ 9,508 $ 878 $ 32,760

10,301 10,301

Other comprehensive income (loss), net of tax

( 331 ) ( 331 )

Comprehensive income 9,970

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and Note 14)

Charitable contribution of Visa Inc.

Treasury stock appreciation, net of tax

VE territory covered losses incurred ( 11 ) ( 11 )

Recovery through conversion rate adjustment ( 56 ) 56 —

Conversion of class C common stock upon sales into public market

Vesting of restricted stock and performance-based shar es

Share-based compensation, net of forfeitures (Note 16)

Restricted stock and performance-based shares s ettled in cash for taxes

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures — (1) 327 327

Restricted stock and performance-based shares settled in cash for taxes

( 1 ) ( 94 ) ( 94 )

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.165 per class A share (Note 14)

Repurchase of class A common stock (Note 14)

Cash dividends declared and paid, at a quarterly amount of $ 0.195 per class A common stock in the first quarter and $ 0.210 per class A common stock for the rest of the fiscal year

( 1,918 ) ( 1,918 )

Repurchase of class A common stock ( 58 ) ( 619 ) ( 6,573 ) ( 7,192 )

Balance as of September 30, 2018

Series B and C preferred stock are alternatively referred to as UK&I and Europe preferred stock, respectively.

2 3 1,768 245 12 $ 5,470 $ ( 7 ) $ 16,678 $ 11,318 $ 547 $ 34,006

(1) Decrease in Class A common stock related to forfeitures of restricted stock awards is less than one million shares.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Preferred Stock (1)

Preferred Stock

Right to Recover for Covered Losses

Paid-In Capital

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series B Series C Class

A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2018

2 3 1,768 245 12 $ 5,470 $ ( 7 ) $ 16,678 $ 11,318 $ 547 $ 34,006

12,080 12,080

Other comprehensive income (loss), net of tax

( 1,204 ) ( 1,204 )

Comprehensive income

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and Note 14)

Adoption of new accounting standards 385 7 392

VE territory covered losses incurred ( 172 ) ( 172 )

Recovery through conversion rate adjustment ( 8 ) 8 —

Conversion of class C common stock upon sales into public market

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures (Note 16)

Share-based compensation, net of forfeitures 407 407

Restricted stock and performance-based shares settled in cash for taxes

( 1 ) ( 111 ) ( 111 )

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.195 per class A share in the first q uarter and $0.210 per class A share for the rest of the fiscal year (Note 14)

Repurchase of class A common stock (Note 14)

Cash dividends declared and paid, at a quarterly amount of $ 0.25 per class A common stock

( 2,269 ) ( 2,269 )

Repurchase of class A common stock ( 56 ) ( 595 ) ( 8,012 ) ( 8,607 )

Balance as of September 30, 2019

Series B and C preferred stock are alternatively referred to as UK&I and Europe preferred stock, respectively.

Decrease in Class A common stock related to forfeitures of restricted stock awards is less than one million shares.

2 3 1,718 245 11 $ 5,462 $ ( 171 ) $ 16,541 $ 13,502 $ ( 650 ) $ 34,684

See accompanying notes, which are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Preferred Stock (1)

Preferred Stock

Right to Recover for Covered Losses

Paid-In Capital

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series A Series B Series C Class

A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2019

— 2 3 1,718 245 11 $ 5,462 $ ( 171 ) $ 16,541 $ 13,502 $ ( 650 ) $ 34,684

10,866 10,866

Other comprehensive income (loss), net of tax

Comprehensive income

Adoption of new accounting standards (Note 1)

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and Note 14)

Adoption of new accounting standards 25 ( 25 ) —

VE territory covered losses incurred ( 37 ) ( 37 )

Recovery through conversion rate adjustment ( 164 ) 169 5

Issuance of series A preferred stock

Conversion of series A preferred stock upon sales into public market

3 ( 207 ) 207 —

Conversion of class C common stock upon sales into public market

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures (Note 16)

Share-based compensation, net of forfeitures 416 416

Restricted stock and performance-based shares settled in cash for taxes

( 1 ) ( 160 ) ( 160 )

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.25 per class A share (Note 14)

Repurchase of class A common stock (Note 14)

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock

( 2,664 ) ( 2,664 )

Repurchase of class A common stock ( 44 ) ( 473 ) ( 7,641 ) ( 8,114 )

Balance as of September 30, 2020

Series B and C preferred stock are alternatively referred to as UK&I and Europe preferred stock, respectively.

2 3 1,683 245 11 $ 5,086 $ ( 39 ) $ 16,721 $ 14,088 $ 354 $ 36,210

(1) Increase, decrease or balance is less than one million shares.

See accompanying notes, which are an integral part of these consolidated financial statements.

2 unchanged sentences

September 30,

2020 2019 2018

(in millions)

Operating Activities

Net income $ 10,866 $ 12,080 $ 10,301

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Client incentives (Note 3)

Share-based compensation (Note 16)

Client incentives 6,664 6,173 5,491

Share-based compensation 416 407 327

Depreciation and amortization of property, equipment, technology and intangible assets 767 656 613

Deferred income taxes 307 214 ( 1,277 )

VE territory covered losses incurred (Note 5)

Charitable contribution of Visa Inc.

shares (Note 19)

VE territory covered losses incurred ( 37 ) ( 172 ) ( 11 )

Other ( 145 ) ( 271 ) ( 64 )

Change in operating assets and liabilities:

2 unchanged sentences

Client incentives ( 8,081 ) ( 6,430 ) ( 4,682 )

Other assets ( 402 ) ( 310 ) 59

Accounts payable 21 ( 24 ) 3

1 unchanged sentence

Accrued and other liabilities 923 627 1,760

Accrued litigation (Note 20)

Accrued litigation ( 290 ) ( 231 ) 452

Net cash provided by (used in) operating activities 10,440 12,784 12,941

1 unchanged sentence

Purchases of property, equipment and technology ( 736 ) ( 756 ) ( 718 )

Proceeds from sales of property, equipment and technolog y

Investment securities:

Purchases ( 2,075 ) ( 2,653 ) ( 5,772 )

Proceeds from maturities and sales 4,510 3,996 3,636

1 unchanged sentence

Purchases of / contributions to other investments ( 267 ) ( 501 ) ( 50 )

Proceeds / distributions from other investments

Other investing activities 72 22 16

1 unchanged sentence

Financing Activities

Repurchase of class A common stock (Note 14)

Repayments of long-term debt

Dividends paid (Note 14)

Payment of deferred purchase consideration related to the Visa Europe acquisition

Repurchase of class A common stock ( 8,114 ) ( 8,607 ) ( 7,192 )

Proceeds from issuance of senior notes 7,212 — —

Debt issuance costs

Repayments of debt — — ( 1,750 )

Dividends paid ( 2,664 ) ( 2,269 ) ( 1,918 )

Payment of deferred purchase consideration related to the Visa Europe acquisition — ( 1,236 ) —

Cash proceeds from issuance of common stock under employee equity plans 190 162 164

Restricted stock and performance-based shares settled in cash for taxes ( 160 ) ( 111 ) ( 94 )

Payments to settle derivative instruments ( 333 ) — —

Other financing activities ( 99 ) — —

Net cash provided by (used in) financing activities ( 3,968 ) ( 12,061 ) ( 10,790 )

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash, cash equivalents, r estricted cash and restricted cash equivalents

Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 440 ( 277 ) ( 101 )

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 8,339 ( 145 ) ( 1,034 )

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year 10,832 10,977 12,011

1 unchanged sentence

Supplemental Disclosure

Income taxes paid, net of refunds

Cash paid for income taxes, net $ 2,671 $ 2,648 $ 2,285

Interest payments on debt $ 537 $ 537 $ 545

6 unchanged sentences

Organization .

(“Visa” or the “Company”) is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories.

(“Visa” or the “Company”) is a global payments technology company that enables innovative, secure and reliable electronic payments across more than 200 countries and territories.

Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A.

16 unchanged sentences

Future actual results could differ materially from these estimates.

The worldwide spread of coronavirus (“COVID-19”) has created significant uncertainty in the global economy.

There have been no comparable recent events that provide guidance as to the effect COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

The use of estimates in specific accounting policies is described further below as appropriate.

11 unchanged sentences

covered litigation.

The escrow funds are held in money market investments, together with the interest earned, less applicable taxes payable, and classified as restricted cash on the consolidated balance sheets.

Interest earned on escrow funds is included in non-operating income on the consolidated statements of operations.

The escrow funds are held in money market investments, together with the interest earned, less applicable taxes payable, and classified as restricted cash equivalents on the consolidated balance sheets.

Interest earned on escrow funds is included in non-operating income (expense) on the consolidated statements of operations.

Investments and fair value.

3 unchanged sentences

See Note 6—Fair Value Measurements and Investments.

The classification of the Company’s financial assets and liabilities within the hierarchy is as follows:

Level 1 —Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities.

The Company’s Level 1 assets include money market funds, marketable equity securities and U.S.

Treasury securities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Level 2 —Inputs to the valuation methodology can include:

(1) quoted prices in active markets for similar (not identical) assets or liabilities;

(2) quoted prices for identical or similar assets in non-active markets;

(3) inputs other than quoted prices that are observable for the asset or liability;

or (4) inputs that are derived principally from or corroborated by observable market data.

The Company’s Level 2 assets and liabilities include U.S.

government-sponsored debt securities, and derivative instruments.

Level 3 —Inputs to the valuation methodology are unobservable and cannot be corroborated by observable market data.

The Company’s Level 3 assets include non-marketable equity investments and investments accounted for under the equity method.

Marketable equity securities.

2 unchanged sentences

These investments are held in a trust and are not available for the Company’s operational or liquidity needs.

Interest and dividend income and changes in fair value are recorded in non-operating income, and offset in personnel expense on the consolidated statements of operations.

The adoption of ASU 2016-01 changed the Company’s accounting for marketable equity securities.

Beginning on October 1, 2018, unrealized gains and losses from changes in fair value of marketable equity securities are recognized in non-operating income (expense).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

dividend income as well as gains and losses, realized and unrealized, from changes in fair value are recorded in non-operating income (expense), and offset in personnel expense on the consolidated statements of operations.

Available-for-sale debt securities.

5 unchanged sentences

Investments with original maturities of greater than 90 days and stated maturities of less than one year from the balance sheet date, or investments that the Company intends to sell within one year, are classified as current assets, while all other securities are classified as non-current assets.

These investments are generally available to meet short-term liquidity needs.

Unrealized gains and losses are reported in accumulated other comprehensive income or loss on the consolidated balance sheets until realized.

The specific identification method is used to calculate realized gain or loss on the sale of securities, which is recorded in non-operating income on the consolidated statements of operations.

Interest income is recognized when earned and is included in non-operating income on the consolidated statements of operations.

The Company evaluates its debt securities for other-than-temporary impairment, or OTTI, on an ongoing basis.

Unrealized gains and losses are reported in accumulated other comprehensive income (loss) on the consolidated balance sheets until realized.

The specific identification method is used to calculate realized gain or loss on the sale of securities, which is recorded in non-operating income (expense) on the consolidated statements of operations.

Interest income is recognized when earned and is included in non-operating income (expense) on the consolidated statements of operations.

The Company evaluates its debt securities for other-than-temporary impairment (“OTTI”) on an ongoing basis.

When there has been a decline in fair value of a debt security below the amortized cost basis, the Company recognizes OTTI if:

4 unchanged sentences

The Company’s non-marketable equity securities, which are reported in other assets on the consolidated balance sheets, include investments in privately held companies without readily determinable market values.

These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment.

Adoption of ASU 2016-01 changed the Company’s accounting for non-marketable equity securities.

Beginning on October 1, 2018, the Company’s policy is to adjust the carrying value of its non-marketable equity securities to fair value when transactions for identical or similar investments of the same issuer are observable.

The Company adjusts the carrying value of its non-marketable equity securities to fair value when transactions for identical or similar investments of the same issuer are observable.

All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in non-operating income (expense).

The Company applies the equity method of accounting for investments in other entities when it holds between 20% and 50% ownership in the entity or when it exercises significant influence.

Under the equity method, the Company’s share of each entity’s profit or loss is reflected in non-operating income on the consolidated statements of operations.

Under the equity method, the Company’s share of each entity’s profit or loss is reflected in non-operating income (expense) on the consolidated statements of operations.

The equity method of accounting is also used for flow-through entities such as limited partnerships and limited liability companies when the investment ownership percentage is equal to or greater than 5% of outstanding ownership interests, regardless of whether the Company has significant influence over the investees.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The Company applies the fair value measurement alternative for investments in other entities when it holds less than 20% ownership in the entity and does not exercise significant influence, or for flow-through entities when the investment ownership is less than 5% and the Company does not exercise significant influence.

3 unchanged sentences

The Company considers the following to be financial instruments:

cash and cash equivalents, restricted cash equivalents—U.S.

litigation escrow, investment securities, settlement receivable and payable, accounts receivable, customer collateral, non-marketable equity investments and derivative instruments.

cash, cash equivalents, restricted cash, restricted cash equivalents, investment securities, settlement receivable and payable, accounts receivable, customer collateral, non-marketable equity investments and derivative instruments.

See Note 6—Fair Value Measurements and Investments.

5 unchanged sentences

These amounts are presented as settlement receivable and settlement payable on the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

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 payment services are 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.

12 unchanged sentences

Depreciation and amortization of technology, furniture, fixtures and equipment are computed over estimated useful lives ranging from 2 to 10 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.

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.

8 unchanged sentences

Acquired technology assets are initially recorded at fair value and amortized on a straight-line basis over the estimated useful life.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The Company evaluates the recoverability of long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

1 unchanged sentence

See Note 7—Property, Equipment and Technology, Net .

The Company enters into operating leases for the use of premises, software and equipment.

Rent expense related to operating lease agreements, which may or may not contain lease incentives, is primarily recorded on a straight-line basis over the lease term.

The Company determines if an arrangement is a lease at its inception.

Right-of-use (“ROU”) assets, and corresponding lease liabilities, are recognized at the commencement date based on the present value of remaining lease payments over the lease term.

For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement.

As a majority of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company does not record a ROU asset and corresponding liability for leases with terms of 12 months or less.

The Company does not include renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement.

Lease agreements generally contain lease and non-lease components.

Non-lease components primarily include payments for maintenance and utilities.

The Company does not combine lease payments with non-lease components for any of its leases.

Operating leases are recorded as ROU assets, which are included in other assets on the consolidated balance sheets.

The current portion of lease liabilities are included in accrued liabilities and the long-term portion is included in other liabilities on the consolidated balance sheets.

The Company’s lease cost consists of amounts recognized under lease agreements in the results of operations adjusted for impairment and sublease income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Intangible assets, net .

The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset.

Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller relationships and trade names obtained through acquisitions.

Finite-lived intangible assets primarily consist of customer relationships, reseller relationships and trade names obtained through acquisitions.

Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable.

11 unchanged sentences

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.

Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate that impairment may exist.

The Company evaluated its goodwill for impairment as of February 1, 2020, and concluded there was no impairment as of that date.

6 unchanged sentences

See Note 20—Legal Matters.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Revenue recognition .

The Company adopted Accounting Standards Update (ASU) 2014-09 effective October 1, 2018 using the modified retrospective transition method.

Results for reporting periods beginning after October 1, 2018 are presented under the new revenue standard.

The comparative prior period amounts appearing on the financial statements have not been restated and continue to be reported under the prior revenue standard.

The Company’s net revenues are comprised principally of the following categories:

4 unchanged sentences

Fixed fees for payment network services are generally recognized ratably over the related service period.

The Company has elected the optional exemption to not disclose the remaining performance obligations related to payment network services.

The Company has elected the optional exemption to not disclose the remaining performance obligations related to payment network services and other performance obligations which are constrained by and dependent upon the future performance of its clients, which are variable in nature.

The Company also recognizes revenues, net of sales and other similar taxes, from other value added services, including issuer and consumer solutions, merchant and acquirer solutions, fraud

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

management and security services, data products, and consulting and analytics, as these value added services are performed.

Service revenues consist mainly of revenues earned for services provided in support of client usage of Visa payment services.

19 unchanged sentences

Promotional items are expensed as incurred, when the related services are received, or when the related event occurs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Income taxes .

7 unchanged sentences

Where interpretation of the tax law may be uncertain, the Company recognizes, measures and discloses income tax uncertainties.

The Company accounts for interest expense and penalties related to uncertain tax positions as non-operating expense in the consolidated statements of operations.

The Company accounts for interest expense and penalties related to uncertain tax positions in non-operating income (expense) in the consolidated statements of operations.

The Company files a consolidated federal income tax return and, in certain states, combined state tax returns.

1 unchanged sentence

See Note 19—Income Taxes .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Pension and other postretirement benefit plans .

1 unchanged sentence

The discount rate is based on a cash flow matching analysis, with the projected benefit payments matching spot rates from a yield curve developed from high-quality corporate bonds.

The expected rate of return on pension plan assets considers the current and expected asset allocation, as well as historical and expected returns on each plan asset class.

Any difference between actual and expected plan experience, including asset return experience, in excess of a 10% corridor is recognized in net periodic pension cost over the expected average employee future service period, which is approximately 7 years for the U.S.

plans and 10 years for the Visa Europe UK pension plan.

The expected rate of return on pension plan assets is primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as:

(i) actual return on plan assets;

(ii) historical rates of return on various asset classes in the portfolio;

(iii) projections of returns on various asset classes;

and (iv) current and prospective capital market conditions and economic forecasts.

pension plans.

Other assumptions involve demographic factors such as retirement age, mortality, attrition and the rate of compensation increases.

The Company evaluates assumptions annually and modifies them as appropriate.

The Company recognizes the funded status of its benefit plans in its consolidated balance sheets as other assets, accrued liabilities and other liabilities.

The Company recognizes settlement losses when it settles pension benefit obligations, including making lump-sum cash payments to plan participants in exchange for their rights to receive specified pension benefits, when certain thresholds are met.

4 unchanged sentences

Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date.

At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date.

At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet dates.

Non-monetary assets and liabilities are remeasured at historical exchange rates.

2 unchanged sentences

currency is the functional currency, translation from that functional currency to the U.S.

dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate for the period.

Resulting translation adjustments are reported as a component of accumulated other comprehensive income or loss on the consolidated balance sheets.

dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for revenue and expense accounts using an average exchange rate for the period.

Resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets.

Derivative financial instruments .

The Company uses foreign exchange forward derivative contracts to reduce its exposure to foreign currency rate changes on forecasted non-functional currency denominated operational cash flows.

The terms of these derivative contracts designated as cash flow hedges are generally less than 12 months.

To qualify for cash flow hedge accounting treatment, the Company formally documents, at inception of the hedge, all relationships between the hedging transactions and the hedged items, as well as the Company’s risk management objective and strategy for undertaking various hedging transactions.

The Company also formally assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items and whether those derivatives may be expected to remain highly effective in future periods.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Derivatives are carried at fair value on a gross basis in either prepaid and other current assets, non-current other assets, accrued liabilities or non-current other liabilities on the consolidated balance sheets.

Gains and losses resulting from changes in fair value of derivative instruments designated as cash flow hedges are accounted for either in accumulated other comprehensive income or loss on the consolidated balance sheets, or in the consolidated statements of operations in the corresponding account where revenue or expense is hedged.

Gains and losses resulting from changes in fair value of derivative instruments not designated for hedge accounting are recorded in general and administrative for hedges of operating activity, or non-operating income (expense) for hedges of non-operating activity.

Derivatives are carried at fair value on a gross basis on the consolidated balance sheets.

Gains and losses resulting from changes in fair value of derivative instruments designated as cash flow hedges are accounted for either in accumulated other comprehensive income (loss) on the consolidated balance sheets, or in the consolidated statements of operations in the corresponding account where revenue or expense is recorded.

Gains and losses resulting from changes in fair value of derivative instruments not designated for hedge accounting are recorded in general and administrative expense for hedges of operating activity, or non-operating income (expense) for hedges of non-operating activity.

Gains and losses related to changes in fair value hedges are recognized in non-operating income (expense) along with a corresponding loss or gain related to the change in value of the underlying hedged item in the same line item in the consolidated statement of operations.

The change in value of net investment hedges are recorded in other comprehensive income.

The change in value of net investment hedges are recorded in other comprehensive income (loss).

Amounts excluded from the effectiveness testing of net investment hedges are recognized in non-operating income (expense).

1 unchanged sentence

Cash flows associated with financial instruments designated as net investment hedges are classified as an investing activity.

See Note 12—Derivative and Non-derivative Financial Instruments .

Non-derivative financial instrument designated as a net investment hedge.

The Company designated the euro-denominated deferred cash consideration liability, a non-derivative financial instrument, as a hedge against a portion of the Company’s euro-denominated net investment in Visa Europe.

Changes in the value of the deferred cash consideration liability, attributable to the change in exchange rates at the end of each reporting period, partially offset the foreign currency translation adjustments resulting from the euro-denominated net investment, are reported as a component of accumulated other comprehensive income or loss on the Company’s consolidated balance sheets.

See Note 12—Derivative and Non-derivative Financial Instruments .

See Note 13—Derivative Financial Instruments .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Share-based compensation .

The Company recognizes share-based compensation cost using the fair value method of accounting.

The Company recognizes share-based compensation cost, net of estimated forfeitures, using the fair value method of accounting.

The Company recognizes compensation cost for awards with only service conditions on a straight-line basis over the requisite service period, which is generally the vesting period.

Compensation cost for performance and market-condition-based awards is recognized on a graded-vesting basis.

Compensation cost for performance-based awards is recognized on a graded-vesting basis.

The amount is initially estimated based on target performance and is adjusted as appropriate based on management’s best estimate throughout the performance period.

5 unchanged sentences

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services to customers.

This new revenue standard replaces all existing revenue recognition guidance in U.S.

Subsequently, the FASB also issued a series of amendments to the new revenue standard.

The new revenue standard changes the classification and timing of recognition of certain client incentives and marketing-related funds paid to customers, as well as revenues and expenses for market development funds and services provided to customers as an incentive.

The Company adopted the standard effective October 1, 2018 using the modified retrospective transition method applied to the aggregate of all modifications for contracts not completed as of October 1, 2018.

Results for reporting periods beginning after October 1, 2018 are presented under the new revenue standard.

The comparative prior period amounts appearing on the financial statements have not been restated and continue to be reported under the prior revenue standard.

See Note 3—Revenues for the impact of the new revenue standard on the accompanying unaudited consolidated financial statements as of and for the year ended September 30, 2019 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The following table summarizes the cumulative transition adjustments for the adoption of the new revenue standard recorded on the October 1, 2018 consolidated balance sheet to reflect the aggregate impact to all contracts not completed as of October 1, 2018:

Fiscal Year 2018 Closing Balance Sheet

Cumulative Transition Adjustment for New Revenue Standard

Fiscal Year 2019 Opening Balance Sheet

(in millions)

Current portion of client incentives

Client incentives

Accrued liabilities

Deferred tax liabilities

Other liabilities

Accumulated income

In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income.

The Company adopted the standard effective October 1, 2018, using the modified retrospective transition method for marketable equity securities and the prospective method for non-marketable equity securities.

The Company has elected to use the measurement alternative for non-marketable equity securities, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment.

The adoption did not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets and lease liabilities arising from operating leases on the balance sheet.

Subsequently, the FASB also issued a series of amendments to this new lease standard that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new lease standard.

The Company will adopt the standard effective October 1, 2019 and expects to adopt using the modified retrospective transition method without restating comparative periods.

The adoption is not expected to have a material impact on the consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, which requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.

The Company adopted the standard effective October 1, 2018.

The adoption did not have a material impact on the consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows includes the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts.

The Company adopted the standard effective October 1, 2018.

The adoption impacted the presentation of transactions related to the U.S.

litigation escrow account and customer collateral on the consolidated statements of cash flows.

The prior period statement of cash flows have been retrospectively adjusted to reflect the impact of this ASU, which had no impact on the Company’s balance sheets, statements of operations or statements of comprehensive income for any period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

In March 2017, the FASB issued ASU 2017-07, which requires that the service cost component of net periodic pension and postretirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense).

In addition, only the service cost component is eligible for capitalization, when applicable.

Retrospective application is required for the change in income statement presentation while the change in capitalized benefit cost is required to be applied prospectively.

The Company adopted the standard effective October 1, 2018, which did not have a material impact on the consolidated financial statements.

The service cost component of net periodic pension and postretirement benefit cost is presented in personnel expenses while the other components are presented in other non-operating expense on the Company’s consolidated statement of operations.

The Company did not apply the standard retrospectively for the change in income statement presentation as the impact would have been immaterial.

In May 2017, the FASB issued ASU 2017-09, which amends the scope of modification accounting for share-based payment arrangements.

Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification.

The Company adopted the standard effective October 1, 2018.

The Company adopted the standard effective October 1, 2019 using the modified retrospective transition method with comparative periods continuing to be reported using the prior leases standard.

The Company elected to apply the package of practical expedients permitted under the transition guidance, allowing the Company to carry forward the historical assessment of whether a contract was or contains a lease, lease classification and capitalization of initial direct costs.

The adoption did not have a material impact on the consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, which improves the financial reporting of hedging instruments to better portray the economic results of an entity’s risk management activities in its financial statements.

Visa early adopted the standard effective January 1, 2019, which did not have a material impact on the consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S.

federal corporate income tax rate resulting from the enactment of the U.S.

tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Company will adopt the standard effective October 1, 2019.

The adoption is not expected to have a material impact on the consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05 to insert the SEC’s interpretive guidance from Staff Accounting Bulletin No.

118 into the income tax accounting codification under U.S.

The ASU permits companies to use provisional amounts for certain income tax effects of the Tax Act during a one-year measurement period.

The Company previously recorded provisional amounts for the transition tax and the tax effects of various other tax provisions enacted by the Tax Act.

As permitted by ASU 2018-05, the Company completed the determination of the accounting impacts of the transition tax and the tax effects of these various tax provisions in the three months ended December 31, 2018.

The adjustments to the provisional amounts were not material.

In addition, the Company adopted the accounting policy of accounting for taxes on global intangible low-tax income (“GILTI”) in the period that it is subject to such tax.

In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation cost incurred to develop or obtain internal-use software.

The Company early adopted this standard effective October 1, 2018.

tax reform legislation on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Company adopted the ASU effective October 1, 2019.

The adoption did not have a material impact on the consolidated financial statements.

Note 2—Acquisitions

In fiscal 2019 , the Company acquired several businesses for a total purchase consideration of $ 940 million , which consisted of $ 886 million in cash and $ 54 million of deferred cash consideration.

Total purchase consideration has been allocated to the tangible and intangible assets acquired, and to liabilities assumed based on preliminary valuations as the Company continues to gather information necessary to finalize the valuations.

These preliminary values may further change in future reporting periods until finalization of the valuations, which will occur no later than the fourth quarter of fiscal 2020.

Goodwill of $ 643 million was recorded to reflect the excess purchase consideration over net assets acquired, which represents the value that is expected from expanding the Company’s product offerings and other synergies.

Goodwill that is expected to be deductible for tax purposes amounts to $ 360 million .

In June 2016, the FASB issued ASU 2016-13, and also issued subsequent amendments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

The amendments in the ASU are effective for the Company on October 1, 2020.

The Company is evaluating the impact ASU 2016-13 will have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements.

The amendments in the ASU are effective for the Company on October 1, 2021.

The Company does not plan to early adopt the ASU at this time.

The adoption is not expected to have a material impact on the consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, which clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the fair value measurement alternative.

The amendments in the ASU are effective for the Company on October 1, 2021.

The adoption is not expected to have a material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform.

The amendments in the ASU are effective for the Company upon issuance through December 31, 2022.

The Company is evaluating the effect ASU 2020-04 will have on its consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

The following table summarizes the preliminary purchase price allocation in aggregate for the businesses acquired in fiscal 2019 .

Preliminary Purchase Price Allocation

Note 2—Acquisitions

Pending Acquisition.

On January 13, 2020, the Company entered into a definitive agreement to acquire Plaid Inc.

for $ 5.3 billion.

The Company will pay approximately $ 4.9 billion of cash and $ 0.4 billion of retention equity and deferred equity consideration.

This acquisition is subject to customary closing conditions, including regulatory reviews and approvals.

On November 5, 2020, the U.S.

Department of Justice filed a complaint in the U.S.

District Court for the Northern District of California seeking a permanent injunction to prevent Visa from acquiring Plaid.

See Note 20—Legal Matters .

Fiscal 2019 Acquisitions.

The Company acquired several businesses for a total purchase consideration of $ 942 million, which consisted of $ 888 million in cash and $ 54 million of deferred cash consideration.

The allocation of the purchase price to the tangible and intangible assets acquired and to liabilities have been completed as of September 30, 2020.

There were no material adjustments to the preliminary purchase price allocation as of September 30, 2019.

Goodwill was recorded to reflect the excess purchase consideration over net assets acquired, which represents the value that is expected from expanding the Company’s product offerings and other synergies.

Goodwill that is expected to be deductible for tax purposes amounts to approximately $ 360 million.

The following table summarizes the purchase price allocation in aggregate for the businesses acquired:

Purchase Price Allocation

(in millions)

2 unchanged sentences

(1) Includes fair value of previously-held interest in the acquired entities of $ 47 million.

The following table summarizes the identified intangible assets acquired based on the preliminary purchase price allocations.

Acquisition Date Fair Value

Weighted-Average Useful Life

(in millions)

The following table summarizes the identified intangible assets acquired based on the purchase price allocations:

Acquisition Date Fair Value Weighted-Average Useful Life

(in millions) (in years)

Developed technologies $ 70 4

Customer relationships 249 12

Pro forma information related to the acquisitions has not been presented as the impact is not material to the Company’s financial results.

Transaction costs incurred in fiscal 2019 were not material and were included in the Company’s consolidated statements of operations.

Note 3—Revenues

Impact of the New Revenue Standard

The following tables summarize the impact of the new revenue standard on the Company’s consolidated statement of operations for the year ended September 30, 2019 and the consolidated balance sheet as of September 30, 2019 :

For the Year Ended

September 30, 2019

Impact of the New Revenue Standard

Results Under Prior Revenue Standard

(in millions)

Operating expenses

Professional fees

General and administrative

Total operating expenses

Operating income

Income before income taxes

Income tax provision

Total $ 319 10

Pro forma information related to the acquisitions has not been presented as the impact was not material to the Company’s financial results.

Transaction costs incurred were not material and were included in the Company’s consolidated statements of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

September 30, 2019

Impact of the New Revenue Standard

Results Under Prior Revenue Standard

(in millions)

Current portion of client incentives

Client incentives

Accounts payable

Client incentives

Accrued liabilities

Deferred tax liabilities

Other liabilities

Accumulated income

Disaggregation of Revenues

Note 3—Revenues

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets.

2 unchanged sentences

September 30,

2020 2019 2018

(in millions)

4 unchanged sentences

Client incentives ( 6,664 ) ( 6,173 ) ( 5,491 )

Net revenues $ 21,846 $ 22,977 $ 20,609

For the Years Ended

September 30,

2020 2019 2018

(in millions)

$ 10,125 $ 10,279 $ 9,332

International 11,721 12,698 11,277

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Net revenues $ 21,846 $ 22,977 $ 20,609

Remaining performance obligations are comprised of deferred revenue and unbilled contract revenues that will be invoiced and recognized as revenues in future periods primarily related to value added services.

As of September 30, 2020, the remaining performance obligations were $ 1.4 billion.

The Company expects approximately half to be recognized as revenue in the next two years and the remaining thereafter.

However, the amount and timing of revenue recognition is affected by several factors, including contract modifications and terminations, which could impact the estimate of amounts allocated to remaining performance obligations and when such revenues could be recognized.

Note 4—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

1 unchanged sentence

September 30,

2020 2019 2018

(in millions)

3 unchanged sentences

Customer collateral

1,850 1,648 1,324

Prepaid expenses and other current assets

Cash, cash equivalents, restricted cash and restricted cash equivalents $ 19,171 $ 10,832 $ 10,977

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

and Europe Retrospective Responsibility Plans

10 unchanged sentences

provided that such claim is transferred for coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction;

any case brought after October 22, 2015 by a merchant that opted out of the Rule 23(b)(3) settlement class pursuant to the 2012 Settlement Agreement in MDL 1720 that arises out of facts or circumstances substantially similar to those alleged in MDL 1720 and that is not transferred to or otherwise included in MDL 1720.

• any case brought after October 22, 2015 by a merchant that opted out of the Rule 23(b)(3) settlement class in MDL 1720 that arises out of facts or circumstances substantially similar to those alleged in MDL 1720 and that is not transferred to or otherwise included in MDL 1720.

See Note 20—Legal Matters .

5 unchanged sentences

The escrow funds are held in money market investments along with the interest earned, less applicable taxes and are classified as restricted cash equivalents on the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The following table sets forth the changes in the restricted cash equivalents—U.S.

2 unchanged sentences

Balance at beginning of period $ 1,205 $ 1,491

Return of takedown payment to the litigation escrow account 467 —

Deposits into the litigation escrow account — 300

7 unchanged sentences

litigation escrow account balance.

The Company recorded an additional accrual of $ 370 million and $ 600 million for the U.S.

covered litigation during fiscal 2019 and 2018 , respectively.

A takedown payment of approximately $ 467 million was received and deposited into the Company’s litigation escrow account.

The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during fiscal 2020.

The Company recorded an accrual of $ 370 million for the U.S.

covered litigation during fiscal 2019.

See Note 20—Legal Matters .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Conversion feature.

26 unchanged sentences

On the same date, Visa entered into amendments to the interchange judgment sharing agreement and omnibus agreement that include any such action within the scope of those agreements as well.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Omnibus agreement.

7 unchanged sentences

The litigation provision on the consolidated statements of operations was not impacted by the execution of the omnibus agreement.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

On August 26, 2014, Visa entered into an amendment to the omnibus agreement.

11 unchanged sentences

The VE territory litigation management committees, which are composed of representatives of certain Visa Europe members, have also been granted consent rights to approve certain material decisions in relation to the VE territory covered litigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The Company obtained certain protections for VE territory covered losses through the UK&I and Europe preferred stock, the UK loss sharing agreement, and the litigation management deed, referred to as the “Europe retrospective responsibility plan.” The plan covers VE territory covered litigation (and resultant liabilities and losses) relating to the covered period, which generally refers to the period before the Closing.

9 unchanged sentences

This amount differs from the value of the preferred stock recorded within stockholders’ equity on the Company’s consolidated balance sheets.

The book value of the preferred stock reflects its historical value recorded at the Closing less VE territory covered losses recovered through a reduction of the applicable conversion rate.

The book value of the preferred stock reflects its historical value recorded at the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Closing less VE territory covered losses recovered through a reduction of the applicable conversion rate.

The book value does not reflect changes in the underlying class A common stock price subsequent to the Closing.

3 unchanged sentences

The reduction to stockholders’ equity is recorded in a contra-equity account referred to as “right to recover for covered losses.”

As required by the litigation management deed, at the fourth anniversary of the Visa Europe acquisition, Visa, in consultation with the VE territories litigation management committee, carried out a release assessment of the extent to which, if at all, it would be appropriate to effect a partial conversion of UK&I or Europe preferred stock into class A common stock or series A preferred stock.

After the completion of this assessment, in September 2020, the Company released $ 7.3 billion of the as-converted value from its UK&I and Europe preferred stock and issued 374,819 shares of series A preferred stock (the “Fourth anniversary release”).

Each holder of a share of UK&I and Europe preferred stock received a number of series A preferred stock equal to the applicable conversion adjustment divided by 100 .

The Company paid $ 5 million in cash in lieu of issuing fractional shares of series A preferred stock.

The release resulted in a downward adjustment to the UK&I and Europe preferred stock conversion rates.

See Note 15—Stockholders’ Equity.

VE territory covered losses may be recorded before the corresponding adjustment to the applicable conversion rate is effected.

2 unchanged sentences

During the year ended September 30, 2020, the Company recovered $ 164 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock.

The conversion rates applicable to the UK&I and Europe preferred stock were reduced from 12.955 and 13.888 , respectively, as of September 30, 2018 to 12.936 and 13.884 , respectively, as of September 30, 2019 .

The following table sets forth the activities related to VE territory covered losses in preferred stock and “right to recover for covered losses” within equity during the year ended September 30, 2019 .

VE territory covered losses incurred reflect settlements with merchants and additional legal costs.

See Note 20—Legal Matters .

Preferred Stock

Right to Recover for Covered Losses

The following table sets forth the activities related to VE territory covered losses in preferred stock and “right to recover for covered losses” within stockholders’ equity during the year ended September 30, 2020:

Preferred Stock Right to Recover for Covered Losses

(in millions)

2 unchanged sentences

Recovery through conversion rate adjustment (2)

( 72 ) ( 92 ) 169

Fourth anniversary release ( 1,107 ) ( 1,542 ) —

Balance as of September 30, 2020 $ 1,106 $ 1,543 $ ( 39 )

(1) VE territory covered losses incurred reflect settlements with merchants and additional legal costs.

See Note 20—Legal Matters .

(2) Adjustment to right to recover for covered losses for the conversion rate adjustment differs from the actual recovered amount due to differences in foreign exchange rates between the time the losses were incurred and the subsequent recovery through the conversion rate adjustment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2 unchanged sentences

September 30,

September 30, 2018

As-converted Value of Preferred Stock (1),(2)

5 unchanged sentences

Europe preferred stock 4,331 1,543 7,539 3,177

Total 7,499 2,649 13,058 5,462

right to recover for covered losses ( 39 ) ( 39 ) ( 171 ) ( 171 )

6 unchanged sentences

and (c) $ 199.97 , Visa’s class A common stock closing stock price as of September 30, 2020.

Earnings per share is calculated based on unrounded numbers.

(3) The as-converted value of preferred stock is calculated as the product of:

2 unchanged sentences

and (c) $ 172.01 , Visa’s class A common stock closing stock price as of September 30, 2019.

Earnings per share is calculated based on unrounded numbers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6 unchanged sentences

Using Inputs Considered as

Level 1 Level 2

2020 2019 2020 2019

(in millions)

2 unchanged sentences

government-sponsored debt securities — — 1,469 150

Treasury securities 650 — — —

Investment securities:

4 unchanged sentences

Derivative instruments — — 512 437

Total $ 14,573 $ 7,295 $ 4,563 $ 6,179

Accrued compensation and benefits:

2 unchanged sentences

Derivative instruments — — 181 52

There were no transfers between Level 1 and Level 2 assets during fiscal 2019 .

Total $ 135 $ 113 $ 181 $ 52

Level 1 assets and liabilities.

Money market funds, marketable equity securities and U.S.

Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.

Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in active markets for identical assets and liabilities.

The Company’s deferred compensation liability is measured at fair value based on marketable equity securities held under the deferred compensation plan.

2 unchanged sentences

government-sponsored debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets .

The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly.

Derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

There were no substantive changes to the valuation techniques and related inputs used to measure fair value during fiscal 2019 .

Derivative instruments are v alued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2 unchanged sentences

Treasury securities.

The Company classifies U.S.

government-sponsored debt securities and U.S.

Treasury securities as available-for-sale.

The amortized cost, unrealized gains and losses and fair value of debt securities are as follows:

September 30, 2019

The amortized cost, unrealized gains and losses and fair value of debt securities were as follows:

September 30,

Gross Unrealized

Cost Gross Unrealized Fair

Value Amortized

Cost Gross Unrealized Fair

Gains Losses Gains Losses

(in millions)

government-sponsored debt securities

$ 2,581 $ 1 $ — $ 2,582 $ 5,590 $ 4 $ ( 2 ) $ 5,592

Treasury securities 1,251 2 — 1,253 672 3 — 675

Total $ 3,832 $ 3 $ — $ 3,835 $ 6,262 $ 7 $ ( 2 ) $ 6,267

current portion

$ ( 3,604 ) $ ( 4,110 )

Long-term debt securities

$ 231 $ 2,157

Debt securities are presented below in accordance with their stated maturities.

A portion of these investments, $ 2.2 billion , are classified as non-current, as they have stated maturities of more than one year from the balance sheet date.

A portion of these investments are classified as non-current as they have stated maturities of more than one year from the balance sheet date.

However, these investments are generally available to meet short-term liquidity needs.

(in millions)

September 30,

(in millions)

Due within one year $ 3,604

Due after 1 year through 5 years 231

Total $ 3,835

Assets Measured at Fair Value on a Non-recurring Basis

2 unchanged sentences

The following table summarizes the total carrying value of our non-marketable equity securities held as of September 30, 2019 including unrealized gains and losses since the adoption of ASU 2016-01:

For the Year Ended

During fiscal 2020 and 2019, $ 102 million and $ 110 million of upward adjustments, and $ 6 million and $ 4 million of downward adjustments including impairment, respectively, were included in the carrying value of non-marketable equity securities accounted for under the fair value measurement alternative.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of September 30, 2020 including cumulative unrealized gains and losses:

September 30,

(in millions)

Carrying amount, beginning of period

Adjustments related to non-marketable equity securities:

Net additions (reductions) (1)

Initial cost basis $ 841

Upward adjustments 212

Downward adjustments (2)

Downward adjustments (including impairment) ( 11 )

Carrying amount, end of period $ 1,042

Net reductions include transfers to marketable equity securities upon investments becoming a public company.

There were no significant impairment charges of non-marketable equity securities during fiscal 2019 , 2018 and 2017 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Non-financial assets and liabilities.

3 unchanged sentences

See Note 8—Intangible Assets and Goodwill.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach.

4 unchanged sentences

Investment Income

Investment income is recorded as non-operating income in the Company’s consolidated statements of operations and consisted of the following:

Investment income is recorded as non-operating income (expense) in the Company’s consolidated statements of operations and consisted of the following:

For the Years Ended

September 30,

2020 2019 2018

(in millions)

7 unchanged sentences

Other Fair Value Disclosures

Long-term debt.

Debt instruments are measured at amortized cost on the Company’s consolidated balance sheets.

The fair value of the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets.

The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly.

If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.

The carrying value and estimated fair value of long-term debt was $ 16.7 billion and $ 18.4 billion as of September 30, 2019 .

The carrying value and estimated fair value of long-term debt were both $ 16.6 billion as of September 30, 2018 .

As of September 30, 2020, the carrying value and estimated fair value of debt was $ 24.1 billion and $ 26.6 billion, respectively.

As of September 30, 2019, the carrying value and estimated fair value of debt was $ 16.7 billion and $ 18.4 billion, respectively.

Other Financial Instruments not Measured at Fair Value.

The following financial instruments are not measured at fair value on the Company’s consolidated balance sheet at September 30, 2019 , but require disclosure of their fair values:

settlement receivable and payable, accounts receivable and customer collateral.

The following financial i nstruments are not measured at fair value on the Company’s consolidated balance sheet at September 30, 2020, but require disclosure of their fair values:

se ttlement receivable and payabl e and customer collateral.

The estimated fair value of such instruments at September 30, 2020 approximates their carrying value due to their generally short maturities.

5 unchanged sentences

September 30,

(in millions)

Land $ 71 $ 71

Buildings and building improvements 1,007 965

1 unchanged sentence

Construction-in-progress 163 180

Technology 3,923 3,441

Total property, equipment and technology 7,161 6,570

6 unchanged sentences

For the Years Ending September 30,

2021 2022 2023 2024 2025 Thereafter Total

(in millions)

Estimated future amortization expense $ 419 $ 313 $ 225 $ 142 $ 62 $ 24 $ 1,185

Depreciation and amortization expense related to property, equipment and technology was $ 596 million , $ 558 million and $ 500 million for fiscal 2019 , 2018 and 2017 , respectively.

Included in those amounts was amortization expense on technology of $ 357 million , $ 312 million and $ 285 million for fiscal 2019 , 2018 and 2017 , respectively.

For fiscal 2020, 2019 and 2018, depreciation and amortization expense related to property, equipment and technology was $ 687 million, $ 596 million and $ 558 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Note 8—Intangible Assets and Goodwill

1 unchanged sentence

September 30,

September 30, 2018

Gross Accumulated

Amortization Net Gross Accumulated

Amortization Net

(in millions)

1 unchanged sentence

Customer relationships $ 709 $ ( 376 ) $ 333 $ 701 $ ( 314 ) $ 387

Trade names 199 ( 134 ) 65 199 ( 120 ) 79

Reseller relationships 95 ( 89 ) 6 95 ( 86 ) 9

Other 17 ( 14 ) 3 17 ( 13 ) 4

Total finite-lived intangible assets 1,020 ( 613 ) 407 1,012 ( 533 ) 479

1 unchanged sentence

Customer relationships and reacquired rights

23,317 — 23,317 22,217 — 22,217

Visa trade name 4,084 — 4,084 4,084 — 4,084

1 unchanged sentence

Total intangible assets $ 28,421 $ ( 613 ) $ 27,808 $ 27,313 $ ( 533 ) $ 26,780

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Amortization expense related to finite-lived intangible assets was $ 60 million , $ 55 million and $ 56 million for fiscal 2019 , 2018 and 2017 , respectively.

For fiscal 2020, 2019 and 2018, amortization expense related to finite-lived intangible assets was $ 80 million, $ 60 million and $ 55 million, respectively.

At September 30, 2020, estimated future amortization expense on finite-lived intangible assets is as follows:

For the Years Ending September 30,

2021 2022 2023 2024 2025 Thereafter Total

(in millions)

1 unchanged sentence

The change in goodwill during the years ended September 30, 2020 and 2019 are as follows:

September 30, 2019

September 30, 2018

(in millions)

Goodwill—beginning of fiscal year

Goodwill, beginning of period

$ 15,656 $ 15,194

Goodwill from acquisitions, net of adjustments

Foreign currency translation

Goodwill—end of fiscal year

For additional information on the current year acquisitions, see Note 2—Acquisitions .

Goodwill, end of period $ 15,910 $ 15,656

For additional information on acquisitions, see Note 2—Acquisitions.

There was no impairment related to the Company’s finite-lived or indefinite-lived intangible assets (including goodwill) during fiscal 2020, 2019 or 2018.

The Company had outstanding debt as follows:

Note 9—Leases

The Company entered into various operating lease agreements primarily for real estate.

The Company's leases have original lease periods expiring between fiscal 2021 and 2030.

Many leases include one or more options to renew.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Payments under the Company’s lease arrangements are generally fixed.

At September 30, 2020, the Company had no finance leases.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

During fiscal 2020, total operating lease cost was $ 114 million.

At September 30, 2020, the weighted-average remaining lease term for operating leases was approximately 6 years and the weighted-average discount rate for operating leases was 2.29 %.

At September 30, 2020, the present value of future minimum lease payments was as follows:

September 30,

(in millions)

Thereafter 163

Total undiscounted lease payments 621

imputed interest ( 51 )

Present value of lease liabilities $ 570

At September 30, 2020, the Company had additional operating leases that had not yet commenced with lease obligations of $ 466 million.

These operating leases will commence between fiscal 2021 and 2023 with non-cancellable lease terms of 1 to 15 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

The Company had outstanding debt as follows:

September 30,

2020 2019 Effective Interest Rate (1)

1 unchanged sentence

2.20 % Senior Notes due December 2020

$ 3,000 $ 3,000 2.30 %

2.15 % Senior Notes due September 2022

1,000 1,000 2.30 %

2.80 % Senior Notes due December 2022

2,250 2,250 2.89 %

3.15 % Senior Notes due December 2025

4,000 4,000 3.26 %

1.90 % Senior Notes due April 2027

1,500 — 2.02 %

0.75 % Senior Notes due August 2027

2.75 % Senior Notes due September 2027

750 750 2.91 %

2.05 % Senior Notes due April 2030

1,500 — 2.13 %

1.10 % Senior Notes due February 2031

1,000 — 1.20 %

4.15 % Senior Notes due December 2035

1,500 1,500 4.23 %

2.70 % Senior Notes due April 2040

1,000 — 2.80 %

4.30 % Senior Notes due December 2045

3,500 3,500 4.37 %

3.65 % Senior Notes due September 2047

Total senior notes

750 750 3.73 %

2.00 % Senior Notes due August 2050

1,750 — 2.09 %

Total debt 24,000 16,750

Unamortized discounts and debt issuance costs ( 178 ) ( 108 )

Hedge accounting fair value adjustments (2)

Total long-term debt

Total carrying value of debt $ 24,070 $ 16,729

Current maturities of debt $ 2,999 $ —

Long-term debt 21,071 16,729

Total carrying value of debt $ 24,070 $ 16,729

(1) Effective interest rates disclosed do not reflect hedge accounting adjustments.

(2) Represents the change in fair value of interest rate swap agreements entered into on a portion of the outstanding senior notes.

See Note 1—Summary of Significant Accounting Policies and Note 12—Derivative and Non-derivative Financial Instruments .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

See Note 1—Summary of Significant Accounting Policies and Note 13—Derivative Financial Instruments .

The Company’s outstanding senior notes, or collectively, the “Notes”, are senior unsecured obligations of the Company, ranking equally and ratably among themselves and with the Company’s existing and future unsecured and unsubordinated debt.

2 unchanged sentences

Each series of Notes may be redeemed as a whole or in part at the Company’s option at any time at specified redemption prices.

At September 30, 2019 , future principal payments on the Company’s outstanding debt are as follows:

For the Years Ending September 30,

(in millions)

Future principal payments

In August 2020, the Company issued fixed-rate senior notes in a public offering in an aggregate principal amount of $ 3.3 billion with maturities of 7 , 10 and a half and 30 years.

The August 2027 Notes, 2031 Notes and 2050 Notes, or collectively, the “August 2020 Notes”, have interest rates of 0.75 %, 1.10 % and 2.00 %, respectively.

Interest on the August 2020 Notes is payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2021.

The net aggregate proceeds, after deducting discounts and debt issuance costs, were approximately $ 3.2 billion.

The net proceeds from the offering of the August 2027 Notes will be used to fund eligible green projects and the net proceeds from the offering of the 2031 Notes and 2050 Notes will be used for general corporate purposes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

In April 2020, the Company issued fixed-rate senior notes in a public offering in an aggregate principal amount of $ 4.0 billion with maturities of 7 , 10 and 20 years.

The April 2027 Notes, 2030 Notes and 2040 Notes, or collectively, the “April 2020 Notes”, have interest rates of 1.90 %, 2.05 % and 2.70 %, respectively.

Interest on the April 2020 Notes is payable semi-annually on April 15 and October 15 of each year, commencing October 15, 2020.

The net aggregate proceeds, after deducting discounts and debt issuance costs, were approximately $ 4.0 billion.

The net proceeds from the offering of the April 2020 Notes will be used for general corporate purposes.

Commercial Paper Program

4 unchanged sentences

On July 25, 2019, the Company entered into an amended and restated credit agreement for a 5 year, unsecured $ 5.0 billion revolving credit facility (the "Credit Facility"), which will expire on July 25, 2024.

The Credit Facility is no longer governed by any financial covenants.

The Credit Facility is not governed by any financial covenants.

This Credit Facility is maintained to ensure the integrity of the payment card settlement process and for general corporate purposes.

2 unchanged sentences

The Company had no amounts outstanding under the Credit Facility as of September 30, 2020 and 2019.

At September 30, 2020, future principal payments on the Company’s outstanding debt were as follows:

For the Years Ending September 30,

2021 2022 2023 2024 2025 Thereafter Total

(in millions)

Future principal payments $ 3,000 $ 1,000 $ 2,250 $ — $ — $ 17,750 $ 24,000

Note 11—Pension and Other Postretirement Benefits

The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for all eligible employees residing in the U.

The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S.

14 unchanged sentences

pension benefits is to contribute annually no less than the minimum required contribution under ERISA.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Under the Visa Europe plans, retirement benefits are provided based on the participants’ final pensionable pay and are currently closed to new entrants.

2 unchanged sentences

Additional funding amounts may be agreed to with the UK pension plan trustees.

Summary of Plan Activities

Reconciliation of pension benefit obligations, plan assets, funded status and amounts recognized in the Company’s consolidated balance sheets:

September 30,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Summary of Plan Activities

A reconciliation of pension benefit obligations, plan assets, funded status and amounts recognized in the Company’s consolidated balance sheets were as follows:

Plans Non-U.S.

September 30, September 30,

2020 2019 2020 2019

(in millions)

Change in pension benefit obligation:

Benefit obligation—beginning of fiscal year

Benefit obligation at beginning of period

$ 919 $ 844 $ 528 $ 452

Service cost — — 4 4

Interest cost 28 32 10 13

3 unchanged sentences

Foreign currency exchange rate changes

Benefit obligation—end of fiscal year

— — 27 ( 29 )

Benefit obligation at end of period $ 920 $ 919 $ 563 $ 528

Accumulated benefit obligation $ 920 $ 919 $ 563 $ 528

Change in plan assets:

Fair value of plan assets—beginning of fiscal year

Fair value of plan assets at beginning of period

$ 1,090 $ 1,090 $ 490 $ 436

Actual return on plan assets 114 52 5 93

2 unchanged sentences

Foreign currency exchange rate changes

Fair value of plan assets—end of fiscal year

Funded status at end of fiscal year

— — 25 ( 27 )

Fair value of plan assets at end of period

$ 1,142 $ 1,090 $ 525 $ 490

Funded status at end of period $ 222 $ 171 $ ( 38 ) $ ( 38 )

Recognized in consolidated balance sheets:

2 unchanged sentences

Non-current liability ( 6 ) ( 6 ) ( 38 ) ( 38 )

Funded status at end of fiscal year

Amounts recognized in accumulated other comprehensive income before tax:

September 30,

Funded status at end of period $ 222 $ 171 $ ( 38 ) $ ( 38 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Amounts recognized in accumulated other comprehensive income (loss) before tax consist of the following:

Plans Non-U.S.

September 30, September 30,

2020 2019 2020 2019

(in millions)

Net actuarial loss $ 135 $ 154 $ 93 $ 70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Benefit obligations in excess of plan assets:

September 30,

Benefit obligations in excess of plan assets were as follows:

Plans Non-U.S.

September 30, September 30,

2020 2019 2020 2019

(in millions)

Accumulated benefit obligation in excess of plan assets

Accumulated benefit obligation—end of year

Fair value of plan assets—end of year

Accumulated benefit obligation at end of period $ ( 7 ) $ ( 7 ) $ ( 563 ) $ ( 528 )

Fair value of plan assets at end of period $ — $ — $ 525 $ 490

Projected benefit obligation in excess of plan assets

Benefit obligation—end of year

Fair value of plan assets—end of year

Net periodic pension cost:

Benefit obligation at end of period $ ( 7 ) $ ( 7 ) $ ( 563 ) $ ( 528 )

Fair value of plan assets at end of period $ — $ — $ 525 $ 490

Net periodic benefit cost consist of the following:

Plans Non-U.S.

For the Years Ended September 30,

2020 2019 2018 2020 2019 2018

(in millions)

Service cost $ — $ — $ — $ 4 $ 4 $ 4

Interest cost 28 32 32 10 13 12

3 unchanged sentences

Total net periodic benefit cost $ ( 30 ) $ ( 32 ) $ ( 35 ) $ 1 $ ( 1 ) $ ( 4 )

Other changes in plan assets and benefit obligations recognized in other comprehensive income:

The service cost component of net periodic benefit cost is presented in personnel expenses while the other components are presented in other non-operating income (expense) on the Company’s consolidated statement of operations.

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) consist of the following:

Plans Non-U.S.

For the Years Ended September 30,

2020 2019 2018 2020 2019 2018

(in millions)

2 unchanged sentences

Current year prior service cost — — — — 1 —

Total recognized in other comprehensive income

Total recognized in net periodic benefit cost and other comprehensive income

Total recognized in other comprehensive income (loss)

$ ( 19 ) $ 107 $ ( 50 ) $ 19 $ 28 $ 30

Total recognized in net periodic benefit cost and other comprehensive income (loss)

$ ( 49 ) $ 75 $ ( 85 ) $ 20 $ 27 $ 26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Weighted-Average Actuarial Assumptions:

Weighted-average actuarial assumptions used to estimate the benefit obligation and net periodic benefit cost were as follows:

Plans Non-U.S.

For the Years Ended September 30,

2020 2019 2018 2020 2019 2018

Discount rate for benefit obligation:

Pension 2.88 % 3.26 % 4.23 % 1.60 % 1.80 % 2.90 %

Discount rate for net periodic benefit cost:

Pension 3.27 % 4.23 % 3.84 % 1.80 % 2.90 % 2.70 %

Expected long-term rate of return on plan assets 7.00 % 7.00 % 7.00 % 3.00 % 3.00 % 4.25 %

Rate of increase (1) in compensation levels for:

Benefit obligation

Net periodic benefit cost

Represents a single weighted-average discount rate derived based on a cash flow matching analysis, with the projected benefit payments matching spot rates from a yield curve developed from high-quality corporate bonds.

Primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as:

(i) actual return on plan assets;

(ii) historical rates of return on various asset classes in the portfolio;

(iii) projections of returns on various asset classes;

and (iv) current and prospective capital market conditions and economic forecasts.

Benefit obligation NA NA NA 2.50 % 2.50 % 3.20 %

Net periodic benefit cost NA NA NA 2.50 % 2.50 % 3.20 %

(1) This assumption is not applicable for the U.S.

13 unchanged sentences

pension plan assets, the Company’s investment strategy is to invest in the following:

equity securities of 15 % , interest and inflation hedging assets of 40 % and other of 45 % , consisting of cash and cash equivalents, corporate debt and asset-backed securities, multi-asset funds and property.

equity funds of 12 %, interest and inflation hedging assets of 50 % and other of 38 %, consisting of cash and cash equivalents, corporate debt and asset-backed securities, multi-asset funds and property.

At September 30, 2020, non-U.S.

4 unchanged sentences

Fair Value Measurements at September 30 Using Inputs Considered as

Level 1 Level 2 Level 3 Total

2020 2019 2020 2019 2020 2019 2020 2019

(in millions)

3 unchanged sentences

government-sponsored debt securities

— — 30 35 — — 30 35

Treasury securities

84 99 — — — — 84 99

Asset-backed securities — — — — 37 37 37 37

Equity securities 92 133 — — — — 92 133

$ 193 $ 250 $ 912 $ 803 $ 37 $ 37 $ 1,142 $ 1,090

Fair Value Measurements at September 30 Using Inputs Considered as

Level 1 Level 2 Level 3 Total

2020 2019 2020 2019 2020 2019 2020 2019

(in millions)

Cash and cash equivalents $ 6 $ 16 $ — $ — $ — $ — $ 6 $ 16

Equity securities — 66 — — — — — 66

Corporate debt securities — — 48 44 — — 48 44

Asset-backed securities — — — — 67 51 67 51

Equity securities

Equity funds — — 65 — — — 65 —

Multi-asset securities (1)

— — 339 313 — — 339 313

$ 6 $ 82 $ 452 $ 357 $ 67 $ 51 $ 525 $ 490

(1) Multi-asset securities represent pension plan assets that are invested in funds comprised of broad ranges of assets.

1 unchanged sentence

Cash equivalents (money market funds and time deposits), U.S.

Treasury securities and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.

Treasury securities and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in active markets for identical assets.

Level 2 assets.

Collective investment funds are unregistered investment vehicles that generally commingle the assets of multiple fiduciary clients, such as pension and other employee benefit plans, to invest in portfolio of stocks, bonds or other securities.

Although the collective investment funds held by the plan are ultimately invested in publicly traded equity securities, their own unit values are not directly observable, and therefore they are classified as Level 2.

The fair values of corporate debt, multi-asset, derivatives and U.S.

government-sponsored securities are based on quoted prices in active markets for similar assets as provided by third-party pricing vendors.

This pricing data is reviewed internally for reasonableness through comparisons with benchmark quotes from independent third-party sources.

Based on this review, the valuation is confirmed or revised accordingly.

Equity funds are investments in mutual funds that in-turn ultimately invest in equity securities of various jurisdictions.

These are classified as level 2 as the equity funds held by the plan are not actively traded but the fair value of underlying securities are generally, although not always, determined with observable data and inputs.

The fair values of corporate debt, multi-asset and U.S.

government-sponsored securities are based on quoted prices in active markets for similar, not identical, assets.

Level 3 assets.

1 unchanged sentence

Asset-backed securities are classified as Level 3 due to a lack of observable inputs in measuring fair value.

There were no transfers between Level 1 and Level 2 assets during fiscal 2019 or 2018 .

A roll-forward of Level 3 plan assets measured at fair value is not presented because activities during fiscal 2019 and 2018 were immaterial.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Expected future employer contributions and benefit payments are as follows:

Plans Non-U.S.

(in millions)

Actual employer contributions

Expected employer contributions

2021 $ 1 $ 10

Expected benefit payments

2026-2030 289 43

Other Benefits

The Company sponsors a defined contribution plan, or 401(k) plan, that covers substantially all of its employees residing in the U.S.

Personnel costs included $ 121 million , $ 93 million , and $ 58 million in fiscal 2019 , 2018 and 2017 , respectively, for expenses attributable to the Company’s employees under the 401(k) plan.

In fiscal 2020, 2019 and 2018, personnel costs included $ 140 million, $ 121 million, and $ 93 million, respectively, of expenses attributable to the Company’s employees under the 401(k) plan.

The Company’s contributions to this 401(k) plan are funded on a current basis, and the related expenses are recognized in the period that the payroll expenses are incurred.

5 unchanged sentences

The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time, which vary significantly day to day.

The Company’s maximum settlement exposure was $ 92.0 billion and the average daily settlement exposure was $ 57.1 billion during the year ended September 30, 2019 .

During the year ended September 30, 2020, the Company’s maximum settlement exposure was $ 97.3 billion and the average daily settlement exposure was $ 55.6 billion.

The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met.

1 unchanged sentence

September 30,

(in millions)

Restricted cash equivalents

Restricted cash and restricted cash equivalents $ 1,850 $ 1,648

Pledged securities at market value 228 259

Letters of credit 1,306 1,293

Guarantees 717 477

Total $ 4,101 $ 3,677

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Note 12—Derivative and Non-derivative Financial Instruments

Derivative Financial Instruments

Note 13—Derivative Financial Instruments

Designated derivative financial instrument hedges.

The aggregate notional amount of the Company’s derivative contracts outstanding in its hedge program was $ 10.9 billion at September 30, 2019 and $ 2.5 billion at September 30, 2018 .

At September 30, 2020 and 2019, the aggregate notional amount of the Company’s derivative contracts outstanding in its hedge program was $ 10.7 billion and $ 10.9 billion, respectively.

Cash Flow Hedges

11 unchanged sentences

When the forecasted transaction occurs and is recognized in earnings, the amount in accumulated other comprehensive income or loss related to that hedge is reclassified to operating revenue or expense.

The Company expects to reclassify $ 22 million of pre-tax gains to earnings during fiscal 2020.

During fiscal 2021, the Company expects to reclassify $ 40 million of pre-tax gains to earnings.

Net Investment and Fair Value Hedges

In fiscal 2019, the Company entered into foreign exchange forward contracts which were designated as a net investment hedge against a portion of the Company’s $ 18.8 billion net investment in Visa Europe as of September 30, 2019 .

In fiscal 2019, the Company entered into foreign exchange forward contracts which were designated as a net investment hedge against a portion of the Company’s net investment in Visa Europe.

In fiscal 2019, the Company also entered into interest rate and cross-currency swap agreements on a portion of the Company’s outstanding 3.15 % Senior Notes due December 2025.

The Company designated the interest rate swap as a fair value hedge and the cross-currency swap as a net investment hedge.

There were no swap agreements outstanding as of September 30, 2018 .

As of September 30, 2019 , the Company’s net investment hedges in an asset position totaled $ 298 million and were classified in prepaid expenses and other current assets and other assets on the consolidated balance sheets, and no net investment hedges were in a liability position.

There were no derivative instruments designated as a net investment hedge outstanding as of September 30, 2018 .

As of September 30, 2019 , the Company’s fair value hedges in an asset position totaled $ 89 million and were classified in other assets on the consolidated balance sheets, while fair value hedges in a liability position totaled $ 2 million and were classified in other liabilities on the consolidated balance sheets.

There were no fair value hedges outstanding as of September 30, 2018 .

For fiscal 2019 , the Company recorded an increase in earnings of $ 95 million related to forward points and interest differentials from forward contracts and swap agreements, respectively, which are excluded from effectiveness testing.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

As of September 30, 2020 and 2019, the Company’s net investment hedges in an asset position totaled $ 186 million and $ 298 million, respectively, and were classified in prepaid expenses and other current assets and other assets on the consolidated balance sheets.

As of September 30, 2020, the Company’s net investment hedges in a liability position was $ 137 million, and classified in other liabilities on the consolidated balance sheets.

As of September 30, 2020 and 2019, the Company’s fair value hedges in an asset position totaled $ 248 million and $ 89 million, respectively, and were classified in other assets on the consolidated balance sheets.

As of September 30, 2019, the Company’s fair value hedges in a liability position was $ 2 million and was classified in other liabilities on the consolidated balance sheets.

For fiscal 2020 and 2019, the Company recorded an increase in earnings of $ 150 million and $ 95 million, respectively, related to forward points and interest differentials from forward contracts and swap agreements, respectively, which are excluded from effectiveness testing.

Non-designated derivative financial instrument hedges

1 unchanged sentence

As of September 30, 2020 and 2019, the aggregate notional amount of these balance sheet hedges was $ 1.6 billion and $ 0.8 billion, respectively.

As of September 30, 2020 and 2019, the Company’s balance sheet hedges in an asset position totaled $ 7 million and $ 3 million, respectively, and were classified in other assets on the consolidated balance sheets, while

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

balance sheet hedges in a liability position totaled $ 5 million and $ 19 million, respectively, and were classified in accrued liabilities on the consolidated balance sheets.

Credit and market risks.

5 unchanged sentences

Credit and market risks related to derivative instruments were not considered significant as of September 30, 2020.

Non-derivative Financial Instrument Designated as a Net Investment Hedge

As of September 30, 2018 , the Company had designated $ 1.1 billion of its euro-denominated deferred cash consideration liability, a non-derivative financial instrument, as a hedge against a portion of the foreign currency exchange rate exposure of the Company’s euro-denominated net investment in Visa Europe.

In June 2019, the Company paid the deferred consideration and therefore there were no hedged non-derivative financial instruments as of September 30, 2019 .

Note 14—Enterprise-wide Disclosures and Concentration of Business

The Company’s long-lived net property, equipment and technology assets are classified by major geographic areas as follows:

September 30,

The Company’s long-lived net property and equipment and ROU assets are classified by major geographic areas as follows:

September 30,

2020 2019 (1)

(in millions)

$ 1,350 $ 1,186

International 558 263

Total $ 1,908 $ 1,449

(1) The fiscal 2019 amounts have been revised to conform to the fiscal 2020 presentation.

Revenues by geographic market is primarily based on the location of the issuing financial institution.

Revenues earned in the U.S.

were approximately 45 % of net revenues in fiscal 2019 , 45 % in fiscal 2018 and 47 % in fiscal 2017 .

No individual country, other than the U.S., generated more than 10% of net revenues in these years.

A significant portion of Visa’s net revenues is concentrated among its largest clients.

Loss of business from any of these clients could have an adverse effect on the Company.

The Company did not have any customer that generated greater than 10% of its net revenues in fiscal 2019, 2018 and 2017 .

Net revenues earned in the U.S.

were approximately 46 % of total net revenues in fiscal 2020 and 45 % of total net revenues in each of fiscal 2019 and fiscal 2018.

No individual country, other than the U.S., generated more than 10% of total net revenues in these years.

In fiscal 2020, the Company had two clients that accounted for 11 % and 10 % of its total net revenues, respectively.

In fiscal 2019 and 2018, no clients generated greater than 10% of the Company’s total net revenues .

Note 15—Stockholders’ Equity

Visa Europe acquisition.

In connection with the Visa Europe acquisition, three new series of preferred stock of the Company were created.

Upon issuance, all of the preferred stock participate on an as-converted basis in regular quarterly cash dividends declared on the Company’s class A common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

As-converted class A common stock .

The UK&I and Europe preferred stock, issued in the Visa Europe acquisition, is convertible upon certain conditions into shares of class A common stock or class A equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for each share of UK&I and Europe preferred stock.

The conversion rates may be reduced from time to time to offset certain liabilities.

Series A preferred stock issuance.

In September 2020, the Company issued 374,819 shares of series A preferred stock in connection with the Fourth anniversary release.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans .

The number of shares of each series and class, and the number of shares of class A common stock on an as-converted basis at September 30, 2019 and 2018 , are as follows:

September 30, 2019

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Conversion Rate Into Class A Common Stock

As-converted class A common stock.

Conversion Rate Into Class A Common Stock

As-converted Class A Common Stock (1)

The number of shares of each series and class, and the number of shares of class A common stock on an as-converted basis at September 30, 2020 and 2019, were as follows:

September 30,

Outstanding Conversion Rate Into Class A Common Stock As-converted Class A Common Stock (1)

(in millions, except conversion rate)

Series A preferred stock — (2)

100.0000 35 — — —

UK&I preferred stock 2 6.3870 16 2 12.9360 32

1 unchanged sentence

Class A common stock (3)

1,683 — 1,683 1,718 — 1,718

Class B common stock 245 1.6228 (4)

398 245 1.6228 (4)

Class C common stock 11 4.0000 43 11 4.0000 45

Total 2,197 2,237

(1) Figures in the table may not recalculate exactly due to rounding.

As-converted class A common stock is calculated based on unrounded numbers.

(2) The number of shares outstanding was less than one million.

(3) Class A common stock shares outstanding reflect repurchases settled on or before September 30, 2020 and 2019.

2 unchanged sentences

Reduction in as-converted shares.

During fiscal 2019 , total as-converted class A common stock was reduced by 58 million shares at an average price of $ 154.62 per share.

Of the 58 million shares, 56 million were repurchased in the open market using $ 8.6 billion of operating cash on hand.

Additionally, in fiscal 2019, the Company deposited $ 300 million of operating cash into the litigation escrow account previously established under the U.S.

retrospective responsibility plan.

Also, the Company recovered $ 8 million of VE territory covered losses in accordance with the Europe retrospective responsibility plan during fiscal 2019 .

The deposit and recovery have the same economic effect on earnings per share as repurchasing the Company’s class A common stock because they reduce the class B common stock conversion rate and the UK&I and Europe preferred stock conversion rates and consequently, reduce the as-converted class A common stock share count.

Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock.

The recovery has the same economic effect on earnings per share as repurchasing the Company’s class A common stock, because it reduces the UK&I and Europe preferred stock conversion rates and consequently, reduces the as-converted class A common stock share count.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The following table presents as-converted UK&I and Europe preferred stock, after the Company recovered VE territory covered losses through conversion rate adjustments:

The following table present s the reduction in as-converted UK&I and Europe preferred stock after the Company recovered V E territory covered losses recovered through conversion rate adjustments and the Fourth anniversary release:

For the Years Ended September 30,

(in millions, except per share and conversion rate data)

2020 2019 2018

UK&I Europe UK&I Europe UK&I Europe

(in millions, except per share data)

Reduction in equivalent number of as-converted shares of class A common stock

Effective price per share (2)

$ 194.31 $ 194.33 $ 141.32 $ 150.26 $ 113.05 $ 112.92

Recovery through conversion rate adjustment

$ 72 $ 92 $ 6 $ 2 $ 35 $ 21

Fourth anniversary release $ 3,084 $ 4,216 $ — $ — $ — $ —

(1) The reduction in equivalent number of shares of class A common stock was less than one million shares.

1 unchanged sentence

Effective price per share for each fiscal year is calculated using the weighted-average effective prices of the respective adjustments made during the year.

Common stock repurchases.

The following table (1) presents share repurchases in the open market for the following fiscal years:

For the Years Ended September 30,

(in millions, except per share data)

Shares repurchased in the open market (2)

Average repurchase price per share (3)

Shares repurchased in the open market reflect repurchases settled during fiscal 2019 , 2018 and 2017 .

These amounts include repurchases traded but not yet settled on or before September 30, 2019 , September 30, 2018 and September 30, 2017 for fiscal 2019 , 2018 and 2017 , respectively.

Also, these exclude repurchases traded but not yet settled on or before September 30, 2019 , September 30, 2018 and September 30, 2017 for fiscal 2019 , 2018 and 2017 , respectively.

All shares repurchased in the open market have been retired and constitute authorized but unissued shares.

Average repurchase price per share is calculated based on unrounded numbers.

In January 2019 , the Company’s board of directors authorized an additional $ 8.5 billion share repurchase program.

This authorization has no expiration date.

As of September 30, 2019 , the Company’s January 2019 share repurchase program had remaining authorized funds of $ 4.1 billion .

All share repurchase programs authorized prior to January 2019 have been completed.

Under the terms of the U.S.

retrospective responsibility plan, when the Company makes a deposit into the litigation escrow account, the shares of class B common stock are subject to dilution through a reduction to the conversion rate of the shares of class B common stock to shares of class A common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

The following table presents as-converted class B common stock after deposits into the litigation escrow account for fiscal 2019 and 2018 .

There were no comparable adjustments recorded for as-converted class B common stock for fiscal 2017 .

Under the terms of the U.S.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans.

The following table presents the reduction in as-converted class B common stock after deposits into the litigation escrow account for the following fiscal years:

For the Years Ended September 30,

2020 2019 2018

(in millions, except per share data)

1 unchanged sentence

Effective price per share (1)

$ — $ 174.73 $ 132.32

Deposits under the U.S.

1 unchanged sentence

(1) Effective price per share is calculated using the volume-weighted average price of the Company’s class A common stock over a pricing period in accordance with the Company’s current certificate of incorporation.

Common stock repurchases.

The following table presents share repurchases in the open market for the following fiscal years:

For the Years Ended September 30,

2020 2019 2018

(in millions, except per share data)

Shares repurchased in the open market (1)

Average repurchase price per share (2)

$ 183.00 $ 154.01 $ 123.76

Total cost $ 8,114 $ 8,607 $ 7,192

(1) Shares repurchased in the open market reflect repurchases that settled during fiscal 2020, 2019 and 2018.

All sh ares repurchased in the open market have been retired and constitute authorized but unissued shares.

(2) Average repurchase price per share is calculated based on unrounded numbers.

In January 2019, the Company’s board of directors authorized an $ 8.5 billion share repurchase program and in January 2020, authorized an additional $ 9.5 billion share repurchase program (the “January 2020 Program”).

This authorization has no expiration date.

As of September 30, 2020, the Company’s January 2020 program had remaining authorized funds of $ 5.5 billion.

All share repurchase programs authorized prior to January 2020 have been completed.

Dividends declared.

In fiscal 2020, the Company declared and paid $ 2.7 billion in dividends at a quarterly rate of $ 0.30 per share.

On October 23, 2020, the Company’s board of directors declared a quarterly cash dividend of $ 0.32 per share of class A common stock (determined in the case of class B and C common stock and series A, UK&I and Europe preferred stock on an as-converted basis), which will be paid on December 1, 2020, to all holders of record of the Company’s common and preferred stock as of November 13, 2020.

Class B common stock.

12 unchanged sentences

and Europe Retrospective Responsibility Plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Class C common stock.

2 unchanged sentences

Preferred stock.

In connection with the Visa Europe acquisition, three new series of preferred stock of the Company were created.

Upon issuance, all of the preferred stock participate on an as-converted basis in regular quarterly cash dividends declared on the Company’s class A common stock.

Preferred stock may be issued as redeemable or non-redeemable, and has preference over any class of common stock with respect to the payment of dividends and distribution of the Company’s assets in the event of a liquidation or dissolution.

The Company had 5 million shares of UK&I and Europe preferred stock outstanding at the end of fiscal 2019 and 2018 .

The UK&I and Europe preferred stock is convertible upon certain conditions into shares of class A common stock or series A preferred stock.

The shares of UK&I and Europe preferred stock are subject to restrictions on transfer and may become convertible in stages based on developments in the VE territory covered litigation.

The shares of UK&I and Europe preferred stock will become fully convertible on the 12th anniversary of the Closing, subject only to a holdback to cover any then-pending claims.

Upon any such conversion of the UK&I or Europe preferred stock (whether by such 12th anniversary, or thereafter with respect to claims pending on such anniversary), the holder would receive either class A common stock or class A equivalent preferred stock (for those who are not eligible to hold class A common stock pursuant to the Company’s charter).

The class A equivalent preferred stock will be freely transferable and each share of class A equivalent preferred stock will automatically convert into 100 shares of class A common stock upon a transfer to any holder that is eligible to hold class A common stock under the charter.

The shares of UK&I and Europe preferred stock will become fully convertible on the 12th anniversary of the closing of the Visa Europe acquisition, subject only to a holdback to cover any then-pending claims.

Upon any such conversion of the UK&I or Europe preferred stock (whether by such 12th anniversary, or thereafter with respect to claims pending on such anniversary), the conversion rate would be adjusted downward and the holder would receive either class A common stock or series A preferred stock (for those who are not eligible to hold class A common stock pursuant to the Company’s charter).

The conversion rates may also be reduced from time to time to offset certain liabilities.

The series A preferred stock, generally designed to be economically equivalent to the Company’s class A common stock, is freely transferable and each share of series A preferred stock will automatically convert into 100 shares of class A common stock upon a transfer to any holder that is eligible to hold class A common stock under the charter.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Voting rights.

2 unchanged sentences

In either case, the UK&I and Europe preferred stockholders are entitled to cast a number of votes equal to the number of shares held by each such holder.

Holders of the class A equivalent preferred stock, upon issuance at conversion, will have similar voting rights to the rights of the holders of the UK&I and Europe preferred stock.

Holders of the series A preferred stock, upon issuance at conversion, will have similar voting rights to the rights of the holders of the UK&I and Europe preferred stock.

Class A common stockholders have the right to vote on all matters on which stockholders generally are entitled to vote.

2 unchanged sentences

Holders of the Company’s common stock have no right to vote on any amendment to the current certificate of incorporation that relates solely to any series of preferred stock.

Dividends declared.

The Company declared and paid $ 2.3 billion in dividends in fiscal 2019 at a quarterly rate of $ 0.25 per share in the fiscal year.

On October 22, 2019 , the Company’s board of directors declared a quarterly cash dividend of $ 0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on December 3, 2019 , to all holders of record of the Company’s common and preferred stock as of November 15, 2019 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Note 16—Earnings Per Share

5 unchanged sentences

Dilutive class A common stock equivalents may consist of:

(1) shares of class A common stock issuable upon the conversion of UK&I and Europe preferred stock and class B and C common stock based on the conversion rates in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

(1) shares of class A common stock issuable upon the conversion of series A, UK&I and Europe preferred stock and class B and C common stock based on the conversion rates in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table presents earnings per share for fiscal 2020:

Basic Earnings Per Share

Diluted Earnings Per Share

Outstanding (B)

Basic Earnings Per Share Diluted Earnings Per Share

Outstanding (B) Earnings per

(in millions, except per share data)

3 unchanged sentences

Participating securities (4)

Not presented

391 Not presented Not presented 391 Not presented Not presented

Net income $ 10,866

The following table presents earnings per share for fiscal 2019:

Basic Earnings Per Share

Diluted Earnings Per Share

Outstanding (B)

Basic Earnings Per Share Diluted Earnings Per Share

Outstanding (B) Earnings per

(in millions, except per share data)

3 unchanged sentences

Participating securities (4)

Not presented

430 Not presented Not presented 429 Not presented Not presented

Net income $ 12,080

The following table presents earnings per share for fiscal 2018:

Basic Earnings Per Share

Diluted Earnings Per Share

Outstanding (B)

Basic Earnings Per Share Diluted Earnings Per Share

Outstanding (B) Earnings per

(in millions, except per share data)

3 unchanged sentences

Participating securities (4)

Not presented

Figures in the table may not recalculate exactly due to rounding.

Earnings per share is calculated based on unrounded numbers.

359 Not presented Not presented 358 Not presented Not presented

Net income $ 10,301

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(1) Net income is allocated based on proportional ownership on an as-converted basis.

1 unchanged sentence

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 44 million, 46 million and 49 million for fiscal 2020, 2019 and 2018, respectively.

The weighted-average number of shares of preferred stock included within participating securities was 32 million , 32 million and 33 million of as-converted UK&I preferred stock for fiscal 2019, 2018 and 2017, respectively, and 44 million of as-converted Europe preferred stock for fiscal 2019 , 2018 and 2017 .

The weighted-average number of shares of preferred stock included within participating securities was 1 million of as-converted series A preferred stock for fiscal 2020, 32 million of as-converted UK&I preferred stock for each of fiscal 2020, 2019 and 2018, and 43 million of as-converted Europe preferred stock for fiscal 2020 and 44 million of as-converted Europe preferred stock for each of fiscal 2019 and 2018.

(2) Figures in the table may not recalculate exactly due to rounding.

Earnings per share is calculated based on unrounded numbers.

(3) Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method.

The computation includes 3 million , 3 million and 5 million common stock equivalents for fiscal 2019 , 2018 and 2017 , respectively, because their effect would have been dilutive.

The computation excludes 1 million , 1 million and 2 million of common stock equivalents for fiscal 2019 , 2018 and 2017 , respectively, because their effect would have been anti-dilutive.

Participating securities include preferred stock outstanding and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company’s UK&I and Europe preferred stock, restricted stock awards, restricted stock units and earned performance-based shares.

The computation includes 3 million common stock equivalents for each of fiscal 2020, 2019 and 2018 because their effect would have been dilutive.

The computation excludes 1 million of common stock equivalents for each of fiscal 2020, 2019 and 2018, because their effect would have been anti-dilutive.

(4) Participating securities include preferred stock outstanding and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company’s series A preferred stock, UK&I and Europe preferred stock, restricted stock awards, restricted stock units and earned performance-based shares.

Participating securities’ income is allocated based on the weighted-average number of shares of as-converted stock.

See Note 15—Stockholders’ Equity.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Note 17—Share-based Compensation

4 unchanged sentences

Awards may be granted under the plan until January 31, 2022.

Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis for awards with service conditions only, and on a graded-vesting basis for awards with service, performance and market conditions.

For fiscal 2020, 2019 and 2018, the Company recorded share-based compensation cost related to the EIP of $ 393 million, $ 388 million and $ 312 million, respectively, in personnel expense on its consolidated statements of operations.

The related tax benefits were $ 59 million , $ 53 million and $ 67 million for fiscal 2019 , 2018 and 2017 , respectively.

The amount of capitalized share-based compensation cost was immaterial during fiscal 2019 , 2018 and 2017 .

The related tax benefits for fiscal 2020, 2019 and 2018 were $ 63 million, $ 59 million and $ 53 million, respectively.

Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably over 3 years from the date of grant, subject to earlier vesting in full under certain conditions.

1 unchanged sentence

For the Years Ended September 30,

2020 2019 2018

Expected term (in years) (1)

4.03 3.98 4.00

Risk-free rate of return (2)

1.6 % 2.9 % 2.0 %

Expected volatility (3)

18.7 % 20.2 % 18.3 %

Expected dividend yield (4)

0.7 % 0.7 % 0.7 %

Fair value per option granted $ 29.37 $ 25.89 $ 18.24

1 unchanged sentence

The Company’s data was weighted based on the number of years between the measurement date and Visa’s IPO date as a percentage of the options’ contractual term.

The relative weighting placed on Visa’s data and peer data for stock options granted until March 2018 was approximately 97 % and 3 % in fiscal 2018 , respectively, and 87 % and 13 % in fiscal 2017 , respectively.

The relative weighting placed on Visa’s data and peer data for stock options granted until March 2018 was approximately 97 % and 3 % in fiscal 2018, respectively.

The assumptions for stock options granted after March 2018 was based on Visa’s historical exercise experience as the passage of time since the Company’s IPO has exceeded 10 years.

6 unchanged sentences

The following table summarizes the Company’s option activity for fiscal 2020:

Options Weighted-

Exercise Price

Per Share Weighted-

(in years) Aggregate

(in millions)

Outstanding at September 30, 2019 5,714,658 $ 90.18

Granted 1,247,982 $ 182.50

Forfeited ( 67,193 ) $ 140.17

Expired — $ —

Exercised ( 1,108,898 ) $ 63.53

Outstanding at September 30, 2020 5,786,549 $ 114.61 6.87 $ 494

1 unchanged sentence

Options exercisable and expected to vest at September 30, 2020 (2)

5,718,325 $ 113.96 6.84 $ 492

(1) Calculated using the closing stock price on the last trading day of fiscal 2020 of $ 199.97 , less the option exercise price, multiplied by the number of instruments.

17 unchanged sentences

The following table summarizes the Company’s RSU activity for fiscal 2020:

Restricted Stock Units

Restricted Stock Units Weighted-

Fair Value Weighted-

(in millions)

Outstanding at September 30, 2019 5,166,759 $ 118.79

2,352,714 $ 183.61

( 2,561,379 ) $ 110.73

( 267,594 ) $ 147.70

Outstanding at September 30, 2020 4,690,500 $ 154.06 0.83 $ 938

5 unchanged sentences

The market condition is based on the Company’s total shareholder return ranked against that of other companies that are included in the Standard & Poor’s 500 Index.

The fair value of the performance-based shares, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model.

The fair value of the performance-based shares for fiscal 2020, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model with the following weighted-average assumptions:

risk-free rate of return of 1.6 %, expected term of 1.9 years, expected volatility of 20.9 % and expected dividend yield of 0.7 %.

The grant-date fair value of performance-based shares granted in fiscal 2020, 2019 and 2018 was $ 211.08 , $ 153.42 and $ 120.11 per share, respectively.

Earned performance shares granted in fiscal 2019 , 2018 and 2017 vest approximately three years from the initial grant date.

All performance awards are subject to earlier vesting in full under certain conditions.

Performance-based shares vest over three years and are subject to earlier vesting in full under certain conditions.

The total grant date fair value of performance-based shares vested and earned during fiscal 2020, 2019 and 2018 was $ 65 million , $ 41 million and $ 31 million, respectively.

Compensation cost for performance-based shares is initially estimated based on target performance.

1 unchanged sentence

The following table summarizes the maximum number of performance-based shares which could be earned and related activity for fiscal 2020:

Shares Weighted-

(in millions)

Outstanding at September 30, 2019 1,070,690 $ 129.08

470,128 $ 211.08

Vested and earned ( 546,018 ) $ 118.18

Unearned — $ —

Forfeited — $ —

Outstanding at September 30, 2020 994,800 $ 171.33 0.73 $ 199

8 unchanged sentences

A total of 20 million shares of class A common stock have been reserved for issuance under the ESPP.

ESPP did not have a material impact on the consolidated financial statements in fiscal 2019 , 2018 or 2017 .

In fiscal 2020, 2019 and 2018, the ESPP did not have a material impact on the consolidated financial statements.

Note 18—Commitments and Contingencies

The Company leases certain premises, equipment and software licenses throughout the world with varying expiration dates.

The Company incurred total rent expense of $ 286 million , $ 224 million and $ 159 million in fiscal 2019 , 2018 and 2017 , respectively.

At September 30, 2019 , future minimum payments on leases are as follows:

The Company has software licenses throughout the world with varying expiration dates.

At September 30, 2020, future minimum payments on software licenses are as follows:

For the Years Ending September 30,

2021 2022 2023 2024 2025 Thereafter Total

(in millions)

Operating leases

Note 18—Related Parties

Visa considers an entity to be a related party for purposes of this disclosure if that entity owns more than 10 % of Visa’s total voting common stock at the end of the fiscal year, or if an officer or employee of that entity also serves on the Company’s board of directors.

The Company considers an investee to be a related party if the Company’s:

(i) ownership interest in the investee is greater than or equal to 10 % or (ii) if the investment is accounted for under the equity method of accounting.

At September 30, 2019 and 2018 , no entity owned more than 10% of the Company’s total voting common stock.

There were no significant transactions with related parties during fiscal 2019 , 2018 and 2017 .

Software licenses $ 61 $ 26 $ 5 $ 5 $ 5 $ — $ 102

Note 19—Income Taxes

1 unchanged sentence

For the Years Ended September 30,

2020 2019 2018

(in millions)

$ 9,178 $ 9,536 $ 8,088

4,612 5,348 4,718

Total income before taxes $ 13,790 $ 14,884 $ 12,806

income before taxes included $ 3.0 billion , $ 2.7 billion and $ 2.9 billion of the Company’s U.S.

For fiscal 2020 and 2019, U.S.

income before taxes included $ 3.0 billion, and for fiscal 2018 included $ 2.7 billion, of the Company’s U.S.

entities’ income from operations outside of the U.S.

for fiscal 2019 , 2018 and 2017 , respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

Income tax provision by fiscal year consisted of the following:

For the Years Ended September 30,

2020 2019 2018

(in millions)

federal $ 1,662 $ 1,504 $ 2,819

State and local 212 243 219

Total current taxes 2,617 2,590 3,792

federal 42 184 ( 1,214 )

State and local 9 28 ( 96 )

1 unchanged sentence

Total income tax provision $ 2,924 $ 2,804 $ 2,505

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 2020 and 2019, are presented below:

16 unchanged sentences

Net deferred tax liabilities $ ( 5,174 ) $ ( 4,783 )

The Tax Act, enacted on December 22, 2017, transitioned the U.S.

tax system to a territorial system and lowered the statutory federal corporate income tax rate from 35% to 21%.

The reduction of the statutory federal corporate tax rate to 21% became effective on January 1, 2018.

In fiscal 2018, the Company’s statutory federal corporate rate was a blended rate of 24.5 % , which was reduced to 21% in fiscal 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

In transitioning to the territorial tax system, the Tax Act required the Company to include certain untaxed foreign earnings of non-U.S.

subsidiaries in its fiscal 2018 taxable income.

Such foreign earnings were subject to a one-time tax at 15.5% on the amount held in cash or cash equivalents, and at 8% on the remaining non-cash amount.

The 15.5% and 8% tax, collectively referred to as the “transition tax”, was estimated to be $ 1.1 billion , and was recorded as a provisional amount in fiscal 2018.

The Company also recorded provisional amounts for the tax effects of various other new provisions in fiscal 2018.

As permitted by ASU 2018-05, the Company completed the determination of the accounting impacts of the transition tax and various provisions in the first quarter of fiscal 2019.

The adjustments to the provisional amounts were not material.

The transition tax will be paid over a period of eight years as permitted by the Tax Act.

In addition, the Tax Act enacted a new deduction for foreign-derived intangible income (“FDII”) and a tax on global intangible low-tax income (“GILTI”), effective for the Company on October 1, 2018.

In fiscal 2019, the Company adopted the accounting policy of accounting for taxes on GILTI in the period that it is subject to such tax.

On July 22, 2020, UK enacted legislation that repealed the previous tax rate reduction from 19% to 17% that was effective on April 1, 2020.

As a result, the Company recorded a $ 329 million non-recurring, non-cash tax expense related to the remeasurement of its net UK deferred tax liabilities, primarily related to intangibles recorded upon the acquisition of Visa Europe in fiscal 2016.

The increase in deferred tax liabilities reflects the remeasurement of UK deferred tax liabilities.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the U.S.

on March 27, 2020.

The CARES Act includes several U.S.

income tax provisions related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications to the net interest deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017.

The CARES Act does not have a material impact on the Company’s financial results.

At September 30, 2020 and 2019, net deferred tax assets of $ 63 million and $ 24 million, respectively, are reflected in other assets on the consolidated balance sheets.

4 unchanged sentences

Federal and state net operating loss carryforwards generated in years prior to fiscal 2018 will expire in fiscal 2028 through 2037.

Federal net operating losses generated after fiscal 2017 and the foreign net operating losses may be carried forward indefinitely.

Federal net operating losses generated after fiscal 2017 may be carried forward indefinitely.

Foreign net operating losses may be carried forward indefinitely, except for certain foreign losses that expire in fiscal 2025 through 2027.

The Company expects to fully utilize the state net operating loss carryforwards in future years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

The income tax provision differs from the amount of income tax determined by applying the applicable U.S.

1 unchanged sentence

For the Years Ended September 30,

2020 2019 2018

(in millions, except percentages)

4 unchanged sentences

Remeasurement of deferred tax balances 329 2 % — — % ( 1,133 ) ( 9 ) %

Reorganization of Visa Europe and other legal entities

Other, net ( 17 ) — % ( 18 ) — % ( 386 ) ( 3 ) %

Income tax provision $ 2,924 21 % $ 2,804 19 % $ 2,505 20 %

The effective income tax rate was 19 % in fiscal 2019 and 20 % in fiscal 2018 .

In fiscal 2020 and fiscal 2019, the effective income tax rate was 21 % and 19 %, respectively.

The effective tax rate in fiscal 2020 differs from the effective tax rate in fiscal 2019 mainly due to a $ 329 million non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities, as discussed above.

In fiscal 2019 and fiscal 2018, the effective income tax rate was 19 % and 20 %, respectively.

The effective tax rate in fiscal 2019 differs from the effective tax rate in fiscal 2018 primarily due to:

a decrease in federal statutory rate as a result of the Tax Act, from a blended rate of 24.5 % in fiscal 2018 to a rate of 21% in fiscal 2019, as discussed above;

new FDII and GILTI provisions enacted as part of the Tax Act, as discussed above;

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

the absence of the following items recorded in fiscal 2018:

• a decrease in federal statutory rate, from a blended rate of 24.5 % in fiscal 2018 to a rate of 21% in fiscal 2019, resulting from the Tax Act,

• new provisions enacted as part of the Tax Act, including the deduction for foreign-derived intangible income (“FDII”) and tax on global intangible low-tax income (“GILTI”), effective for the Company on October 1, 2018;

and the absence of the following items recorded in fiscal 2018:

• a $ 1.1 billion one-time transition tax expense on certain untaxed foreign earnings in accordance with the Tax Act;

2 unchanged sentences

• $ 161 million of tax benefits due to various non-recurring audit settlements.

The effective income tax rate was 20 % in fiscal 2018 and 43 % in fiscal 2017 .

The effective tax rate in fiscal 2018 differs from the effective tax rate in fiscal 2017 primarily due to:

the effects of the Tax Act, which include the decrease in the fiscal 2018 federal statutory rate, the transition tax, and the remeasurement of deferred taxes, as discussed above;

$ 161 million of tax benefits due to various non-recurring audit settlements in fiscal 2018;

the absence of the following items related to the Visa Europe reorganization recorded in fiscal 2017:

a $ 1.5 billion non-recurring, non-cash income tax provision primarily related to the elimination of deferred tax balances originally recognized upon the acquisition of Visa Europe;

a $ 71 million one-time tax benefit related to the Visa Foundation’s receipt of Visa Inc.

shares, previously recorded by Visa Europe as treasury stock.

Current income taxes receivable were $ 130 million and $ 82 million at September 30, 2019 and 2018 , respectively.

Non-current income taxes receivable of $ 771 million and $ 689 million at September 30, 2019 and 2018 , respectively, were included in other assets.

Income taxes payable of $ 327 million and $ 257 million at September 30, 2019 and 2018 , respectively, were included in accrued liabilities.

Accrued income taxes of $ 2.5 billion and $ 2.4 billion at September 30, 2019 and 2018 , respectively, were included in other liabilities.

Current income taxes receivable at September 30, 2020 and 2019 of $ 93 million and $ 130 million, respectively, were included in prepaid expenses and other current assets.

Non-current income taxes receivable at September 30, 2020 and 2019 of $ 988 million and $ 771 million, respectively, were included in other assets.

Income taxes payable at September 30, 2020 and 2019 of $ 134 million and $ 327 million, respectively, were included in accrued liabilities.

Accrued income taxes at September 30, 2020 and 2019 of $ 2.8 billion and $ 2.5 billion, respectively, were included in other liabilities.

The Company’s operating hub in the Asia Pacific region is located in Singapore.

It is subject to a tax incentive which is effective through September 30, 2023, and is conditional upon meeting certain business operations and employment thresholds in Singapore.

Effective October 1, 2008 through September 30, 2023, it is subject to a tax incentive which is conditional upon meeting certain business operations and employment thresholds in Singapore.

The tax incentive decreased Singapore tax by $ 280 million , $ 324 million and $ 295 million, and the benefit of the tax incentive on diluted earnings per share was $ 0.13 , $ 0.14 and $ 0.13 in fiscal 2020, 2019 and 2018, respectively.

2 unchanged sentences

Included in the $ 2.6 billion, $ 2.2 billion and $ 1.7 billion are $ 1.6 billion, $ 1.4 billion and $ 1.2 billion of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:

2020 2019 2018

(in millions)

6 unchanged sentences

Balance at end of period $ 2,579 $ 2,234 $ 1,658

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

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 recognized $ 66 million , $ 15 million and $ 23 million of interest expense in fiscal 2019 , 2018 and 2017 , respectively, related to uncertain tax positions.

The Company accrued $ 5 million and $ 1 million of penalties in fiscal 2019 and fiscal 2017, respectively, and accrued no penalties in fiscal 2018, related to uncertain tax positions.

In fiscal 2020, 2019 and 2018, the Company recognized $ 68 million, $ 66 million and $ 15 million of interest expense, respectively, related to uncertain tax positions.

In fiscal 2020, 2019 and 2018, the Company accrued penalties related to uncertain tax positions of $ 4 million, $ 5 million and no ne, respectively.

At September 30, 2020 and 2019, the Company had accrued interest of $ 233 million and $ 165 million, respectively, and accrued penalties of $ 31 million and $ 26 million, respectively, related to uncertain tax positions included in other long-term liabilities in its consolidated balance sheets.

The Company’s fiscal 2012 through 2015 U.S.

federal income tax return is currently under Internal Revenue Service (IRS) examination.

The Company has filed federal refund claims for fiscal years 2008 through 2011, which are also currently under IRS examination.

Except for the refund claims, the federal statutes of limitations have expired for fiscal years prior to 2012.

The Company’s fiscal years 2006 through 2015 California tax returns are currently under examination.

The California statutes of limitations have expired for fiscal years prior to 2006.

federal and California income tax returns are currently under examination.

The Company has filed federal refund claims for fiscal 2008 through 2011, and California refund claims for fiscal 2006 through 2011, which are also currently under examination.

Except for the refund claims, the federal and California statutes of limitations have expired for fiscal years prior to 2012.

During fiscal 2013, the Canada Revenue Agency (CRA) completed its examination of the Company’s fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments.

2 unchanged sentences

In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA’s assessments.

Legal proceedings continue to be in progress.

The Company continues to believe that its income tax provision adequately reflects its obligations to the CRA.

In September 2020, the Company decided to accept a settlement offer provided by the CRA.

The settlement agreement is subject to approval by the Tax Court of Canada.

The Company’s income tax provision has been adjusted accordingly.

The India tax authorities completed the first level examination of the Company’s income tax returns for the taxable years falling within the period from fiscal 2010 to 2016, and proposed certain assessments.

11 unchanged sentences

From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.

The litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss as of the balance sheet date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

The following table summarizes the activity related to accrued litigation by fiscal year:

3 unchanged sentences

Provision for covered legal matters 26 535

Reestablishment of prior accrual related to interchange multidistrict litigation 467 —

Payments for legal matters ( 792 ) ( 803 )

6 unchanged sentences

covered litigation.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans .

An accrual for the U.S.

3 unchanged sentences

covered litigation could be either higher or lower than the escrow account balance.

See further discussion below under Interchange Multidistrict Litigation (MDL) – Individual Merchant Actions and Note 5—U.S.

and Europe Retrospective Responsibility Plans.

The following table summarizes the accrual activity related to U.S.

3 unchanged sentences

Provision for interchange multidistrict litigation — 370

Reestablishment of prior accrual related to interchange multidistrict litigation 467 —

Payments for U.S.

1 unchanged sentence

Balance at end of period $ 888 $ 1,198

During the third quarter of fiscal 2018, pursuant to an amended settlement agreement that superseded the 2012 Settlement Agreement, the Company recorded an additional accrual and deposited $ 600 million into the U.S.

litigation escrow account and in fiscal 2019 paid the amount into court-authorized settlement accounts established under the amended settlement agreement.

During the fourth quarter of fiscal 2019, the Company recorded an additional accrual of $ 370 million and deposited $ 300 million into the U.S.

litigation escrow account to address “opt-out” claims for merchants who opted out of the amended settlement agreement.

See further discussion below under Interchange Multidistrict Litigation (MDL) – Individual Merchant Actions and Note 5—U.S.

and Europe Retrospective Responsibility Plans .

Accrual Summary—VE Territory Covered Litigation

2 unchanged sentences

retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments.

The Company is entitled to recover VE territory covered losses through a periodic adjustment to the conversion rates applicable to the UK&I preferred stock and Europe preferred stock.

The Company is entitled to recover VE territory covered losses through periodic adjustments to the conversion rates applicable to the UK&I preferred stock and Europe preferred stock.

An accrual for the VE territory covered losses and a reduction to stockholders’ equity will be recorded when the loss is deemed to be probable and reasonably estimable.

1 unchanged sentence

and Europe Retrospective Responsibility Plans .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

The following table summarizes the accrual activity related to VE territory covered litigation by fiscal year:

4 unchanged sentences

Balance at end of period $ 21 $ 5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Covered Litigation

20 unchanged sentences

and against various transaction fees, including the fixed acquirer network fee, as well as attorneys’ fees.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2019

On September 17, 2018, Visa, Mastercard, and certain U.S.

6 unchanged sentences

The additional settlement payment was added to the approximately $ 5.3 billion previously deposited into settlement accounts by the defendants pursuant to the 2012 Settlement Agreement.

Based on the percentage of class members (by payment volume) that opted out of the class, following final approval of the Amended Settlement Agreement $ 700 million will be returned to defendants.

Visa’s portion of the takedown payment is calculated to be approximately $ 467 million , and upon receipt, will be deposited into the litigation escrow account with a corresponding increase in accrued litigation to address opt-out claims.

On January 24, 2019, the district court granted preliminary approval of the Amended Settlement Agreement, and on June 7, 2019, the Damages Class plaintiffs moved for final approval of the Amended Settlement Agreement.

Certain merchants in the proposed settlement class have objected to the settlement and/or submitted requests to opt out of the settlement class.

The district court held a settlement approval hearing on November 7, 2019.

Following a motion by the Damages Class plaintiffs for final approval of the Amended Settlement Agreement, certain merchants in the proposed settlement class objected to the settlement and/or submitted requests to opt out of the settlement class.

On December 13, 2019, the district court granted final approval of the Amended Settlement Agreement relating to claims by the Damages Class, which was subsequently appealed.

Based on the percentage of class members (by payment volume) that opted out of the class, $ 700 million was returned to defendants.

Visa’s portion of the takedown payment was calculated to be approximately $ 467 million, and upon receipt, was deposited into the U.S.

litigation escrow account with a corresponding increase in accrued litigation to address opt-out claims.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Settlement discussions with plaintiffs purporting to act on behalf of the putative Injunctive Relief Class are ongoing.

On January 16, 2019, the bank defendants moved to dismiss the claims brought against them by the Injunctive Relief Class on the grounds that plaintiffs lack standing and failed to state a claim against the bank defendants.

On November 20, 2019, the district court denied the bank defendants’ motion to dismiss the claims brought against them by the putative Injunctive Relief Class.

On May 29, 2020, a complaint was filed by Old Jericho Enterprise, Inc.

against Visa and Mastercard on behalf of a purported class of gasoline retailers operating in 24 states and the District of Columbia.

The complaint alleges violations of the antitrust laws of those jurisdictions and seeks recovery for plaintiffs as indirect purchasers.

To the extent that Plaintiffs’ claims are not released by the Amended Settlement Agreement, Visa believes they are covered by the U.S.

Retrospective Responsibility Plan.

On June 1, 2020, Visa, jointly with other defendants, served a motion for summary judgment regarding the claims in the Injunctive Relief Class complaint.

The putative Injunctive Relief Class plaintiffs served a motion for partial summary judgment.

Interchange Multidistrict Litigation (MDL) – Individual Merchant Actions

9 unchanged sentences

Certain individual merchants have filed amended complaints to, among other things, add claims for injunctive relief and update claims for damages.

In addition to the cases filed by individual merchants, Visa, Mastercard, and certain U.S.

In addition to the cases filed by individual merchants, Visa, Mastercard, and/or certain U.S.

financial institution defendants in MDL 1720 filed complaints against certain merchants in the Eastern District of New York seeking, in part, a declaration that Visa’s conduct did not violate federal or state antitrust laws.

5 unchanged sentences

and Europe Retrospective Responsibility Plans.

Visa has reached settlements with a number of merchants representing approximately 40 % of the Visa-branded payment card sales volume of merchants who opted out of the Amended Settlement Agreement with the Damages Class plaintiffs.

On June 1, 2020, Visa, jointly with other defendants, served motions for summary judgment regarding the claims in certain of the individual merchant actions, as well as certain declaratory judgment claims brought by Visa, Mastercard, and some U.S.

financial institutions.

Plaintiffs in certain of the individual merchant actions served motions for partial summary judgment.

The Company believes it has substantial defenses to the claims asserted in the putative class actions and individual merchant actions, but the final outcome of individual legal claims is inherently unpredictable.

8 unchanged sentences

Since July 2013, in excess of 550 Merchants (the capitalized term “Merchant,” when used in this section, means a merchant together with subsidiary/affiliate companies that are party to the same claim) have commenced proceedings against Visa Europe, Visa Inc.

and other Visa subsidiaries in the UK and Germany primarily relating to interchange rates in Europe and in some cases relating to fees charged by Visa and certain Visa rules.

and other Visa subsidiaries in the UK, Germany, Belgium and Poland primarily relating to interchange rates in Europe and in some cases relating to fees charged by Visa and certain Visa rules.

They seek damages for alleged anti-competitive conduct in relation to one or more of the following types of interchange fees for credit and debit card transactions:

1 unchanged sentence

As of the filing date, Visa Europe, Visa Inc.

and Visa International have settled the claims asserted by over 100 Merchants, leaving more than 400 Merchants with outstanding claims.

and other Visa subsidiaries have settled the claims asserted by over 100 Merchants, leaving more than 400 Merchants with outstanding claims.

In addition, over 30 additional Merchants have threatened to commence similar proceedings.

8 unchanged sentences

On November 29, 2018, Visa was granted permission to appeal aspects of the Court of Appeal’s judgment to the Supreme Court of the United Kingdom, including the question of whether Visa’s UK interchange restricted competition.

The Supreme Court is scheduled to hold a hearing on the appeal in January 2020.

The full scope of damages is not yet known because not all Merchant claims have been served and Visa has substantial defenses.

On June 17, 2020, the Supreme Court of the United Kingdom found that Visa’s UK domestic interchange restricted competition under applicable competition law.

The case will now continue before the UK Competition Appeals Tribunal to determine the lawful level of interchange and the amount, if any, the plaintiff may be entitled to recover.

The full scope of potential damages is not yet known because not all Merchant claims have been served and Visa has substantial defenses.

However, the claims that have been issued, served and/or preserved seek several billion dollars in damages.

2 unchanged sentences

In 2013, the European Commission (EC) opened an investigation against Visa Europe, based on a complaint alleging that Visa Europe’s pricing of and rules relating to Dynamic Currency Conversion (DCC) transactions infringe EU competition rules.

This investigation is pending.

On October 16, 2020, the EC informed Visa that it has closed the investigation.

Canadian Merchant Litigation

1 unchanged sentence

The actions allege a violation of Canada’s price-fixing law and various common law claims based on separate Visa and Mastercard conspiracies in respect of default interchange and certain of the networks’ rules.

In 2015 and 2016, four financial institutions settled with the plaintiffs.

In June 2017, Visa, Mastercard and a fifth financial institution also reached settlements with the plaintiffs.

Settlement approval hearings were held in 2018 and courts in each of the five provinces approved the settlements.

Wal-Mart Canada and/or Home Depot of Canada Inc.

have filed notices of appeal of the decisions approving the settlements.

On August 30, 2019, September 9, 2019, and October 17, 2019, the Court of Appeals in British Columbia, Quebec and Ontario, respectively, rejected the appeals filed by Wal-Mart Canada and Home Depot of Canada Inc.

Appeals are pending in the remaining provinces.

To date, five financial institutions have settled with the plaintiffs.

In June 2017, Visa and Mastercard also reached settlements with the plaintiffs.

Courts in each of the five provinces approved the settlements and Wal-Mart Canada and/or Home Depot of Canada Inc.

filed notices of appeal of the decisions approving the settlements.

The Courts of Appeal in British Columbia, Quebec, Ontario and Saskatchewan rejected the appeals filed by Wal-Mart Canada and Home Depot of Canada Inc.

Wal-Mart Canada and Home Depot of Canada Inc.

sought leave to appeal those decisions and the Supreme Court of Canada denied

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

those applications on March 26, 2020 (British Columbia, Quebec and Ontario) and October 29, 2020 (Saskatchewan).

An appeal to the Alberta Court of Appeal remains pending.

ATM Access Fee Litigation

11 unchanged sentences

On September 20, 2019, plaintiffs in both cases filed motions for class certification.

On October 5, 2020, plaintiffs in the case naming three financial institutions as defendants filed a motion for preliminary approval of a class action settlement reached with those financial institution defendants.

Department of Justice Civil Investigative Demand

11 unchanged sentences

Court of Appeals for the Fifth Circuit, which held oral argument on October 9, 2019.

On June 5, 2020, the U.S.

Court of Appeals for the Fifth Circuit set the case for re-argument.

EMV Chip Liability Shift

6 unchanged sentences

District Court for the Eastern District of New York, which has clarified that this case is not part of MDL 1720.

Plaintiffs filed a renewed motion for class certification on July 16, 2018, following an earlier denial of the motion without prejudice.

Plaintiffs’ renewed motion was terminated without prejudice to reinstatement on October 17, 2018, but was subsequently reinstated and is currently pending.

On August 28, 2020, the district court granted plaintiffs’ motion for class certification, and on September 11, 2020, defendants sought permission from the U.S.

Court of Appeals for the Second Circuit to appeal the decision.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

Nuts for Candy

On April 5, 2017, plaintiff Nuts for Candy, on behalf of itself and a putative class of California merchants that have accepted Visa-branded cards since January 1, 2004, filed a lawsuit against Visa Inc., Visa International and Visa U.S.A.

in California state court.

Nuts for Candy pursues claims under California state antitrust and unfair business statutes, seeking damages, costs and other remedies.

On October 18, 2018, the court stayed the Nuts for Candy case pending the district court’s decision on preliminary and final approval of the Amended Settlement Agreement discussed above under Interchange Multidistrict Litigation (MDL) – Putative Class Actions .

Brazilian Administrative Council for Economic Defense

On October 15, 2018, the Brazilian Administrative Council for Economic Defense (“CADE”) initiated an investigation against Visa, Mastercard, American Express and Elo seeking information regarding potential competition law violations with respect to network rules that require acquirers to receive certain information from payment facilitators.

On October 15, 2019, CADE issued a recommendation to dismiss the investigation, which was dismissed as of October 30, 2019.

Australian Competition & Consumer Commission

1 unchanged sentence

Visa is cooperating with the ACCC.

Federal Trade Commission Voluntary Access Letter

Federal Trade Commission Civil Investigative Demand (Formerly Voluntary Access Letter)

On November 4, 2019, the Bureau of Competition of the United States Federal Trade Commission (the “Bureau”) requested that Visa provide, on a voluntary basis, documents and information for an investigation as to whether Visa’s actions inhibited merchant choice in the selection of debit payments networks in potential violation of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Visa is cooperating with the Bureau.

On June 9, 2020, the Federal Trade Commission issued a Civil Investigative Demand to Visa requesting additional documents and information, and Visa is cooperating with the Bureau.

Euronet Litigation

On December 13, 2019, Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o.

and Euronet Services spol.

(“Euronet”) served a claim in the UK alleging that certain rules affecting ATM access fees in Poland, the Czech Republic and Greece by Visa Inc.

and Mastercard Incorporated, and certain of their subsidiaries, breach various competition laws.

Euronet seeks damages, costs, and injunctive relief to prevent the defendants from enforcing the aforementioned rules.

European Commission Staged Digital Wallets Investigation

On June 26, 2020, the European Commission (“EC”) informed Visa that it has opened a preliminary investigation into Visa’s rules regarding staged digital wallets and issued a request for information regarding such rules.

Visa is cooperating with the EC.

On November 5, 2020, the U.S.

Department of Justice filed a complaint in the U.S.

District Court for the Northern District of California seeking a permanent injunction to prevent Visa from acquiring Plaid Inc., alleging that the proposed acquisition would substantially lessen competition in violation of Section 7 of the Clayton Act and would constitute monopolization under Section 2 of the Sherman Act.

Visa intends to vigorously defend the lawsuit.

Selected Quarterly Financial Data (Unaudited)

The following tables show selected quarterly operating results for each quarter and full year of fiscal 2020 and 2019 for the Company:

Quarter Ended (unaudited)

Quarter Ended (unaudited) Fiscal Year

September 30,

2020 March 31,

2020 December 31,

(in millions, except per share data)

$ 5,101 $ 4,837 $ 5,854 $ 6,054 $ 21,846

Operating income

$ 3,142 $ 2,999 $ 3,924 $ 4,016 $ 14,081

$ 2,137 $ 2,373 $ 3,084 $ 3,272 $ 10,866

Basic earnings per share

6 unchanged sentences

Class C common stock $ 3.87 $ 4.29 $ 5.54 $ 5.84 $ 19.56

Quarter Ended (unaudited)

Quarter Ended (unaudited) Fiscal Year

September 30,

2019 March 31,

2019 December 31,

(in millions, except per share data)

$ 6,137 $ 5,840 $ 5,494 $ 5,506 $ 22,977

Operating income

$ 3,735 $ 3,908 $ 3,641 $ 3,717 $ 15,001

$ 3,025 $ 3,101 $ 2,977 $ 2,977 $ 12,080

Basic earnings per share

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data