What changed in this filing

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Item 1. Financial Statements

2021-01-29 compared with 2020-07-31 · 194 added, 398 removed, 522 unchanged (53% of the section changed)

5 unchanged sentences

Restricted cash equivalents—U.S.

litigation escrow (Note 4 and Note 5) 1,148 1,205

Investment securities (Note 6) 2,739 4,236

litigation escrow 894 901

Investment securities 3,009 3,752

Settlement receivable 1,596 1,264

Accounts receivable 1,746 1,618

Customer collateral (Note 4 and Note 9) 1,759 1,648

Customer collateral 1,993 1,850

Current portion of client incentives 1,281 1,214

1 unchanged sentence

Total current assets 26,280 27,645

Investment securities (Note 6) 547 2,157

Investment securities 161 231

Client incentives 3,192 3,175

6 unchanged sentences

Settlement payable 2,048 1,736

Customer collateral (Note 4 and Note 9) 1,759 1,648

Customer collateral 1,993 1,850

Accrued compensation and benefits 600 821

1 unchanged sentence

Accrued liabilities 2,230 1,840

Current maturities of debt (Note 8) 2,999 —

Accrued litigation (Note 14) 1,156 1,203

Current maturities of debt — 2,999

Accrued litigation 909 914

Total current liabilities 12,390 14,510

Long-term debt (Note 8) 17,880 16,729

Long-term debt 21,055 21,071

Deferred tax liabilities 5,343 5,237

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 10)

Series B convertible participating preferred stock, 2 shares issued and outstanding at June 30, 2020 and September 30, 2019 (the “UK&I preferred stock”) (Note 5 and Note 10)

Series C convertible participating preferred stock, 3 shares issued and outstanding at June 30, 2020 and September 30, 2019 (the “Europe preferred stock”) (Note 5 and Note 10)

Class A common stock, $ 0.0001 par value, 2,001,622 shares authorized, 1,687 and 1,718 shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively (Note 10)

Class B common stock, $ 0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at June 30, 2020 and September 30, 2019 (Note 10)

Class C common stock, $ 0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at June 30, 2020 and September 30, 2019 (Note 10)

Right to recover for covered losses (Note 5) ( 24 ) ( 171 )

Series A convertible participating preferred stock, less than one shares issued and outstanding at December 31, 2020 and September 30, 2020 (the “series A preferred stock”) 1,049 2,437

Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2020 and September 30, 2020 (the “UK&I preferred stock”)

Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2020 and September 30, 2020 (the “Europe preferred stock”)

Class A common stock, $ 0.0001 par value, 2,001,622 shares authorized, 1,696 and 1,683 shares issued and outstanding at December 31, 2020 and September 30, 2020, respectively

Class B common stock, $ 0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2020 and September 30, 2020

Class C common stock, $ 0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at December 31, 2020 and September 30, 2020

Right to recover for covered losses ( 34 ) ( 39 )

Additional paid-in capital 18,063 16,721

11 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions, except per share data)

7 unchanged sentences

General and administrative 203 313

Litigation provision (Note 14) 1 1 9 30

Litigation provision 1 —

Total operating expenses 1,843 2,038

5 unchanged sentences

Income before income taxes 3,748 3,974

Income tax provision (Note 13) 559 765 2,006 2,118

Income tax provision 622 702

Net income $ 3,126 $ 3,272

Basic Earnings Per Share (Note 11)

Basic Earnings Per Share

Class A common stock $ 1.42 $ 1.46

1 unchanged sentence

Class C common stock $ 5.69 $ 5.85

Basic Weighted-average Shares Outstanding (Note 11)

Basic Weighted-average Shares Outstanding

Class A common stock 1,694 1,713

1 unchanged sentence

Class C common stock 11 11

Diluted Earnings Per Share (Note 11)

Diluted Earnings Per Share

Class A common stock $ 1.42 $ 1.46

1 unchanged sentence

Class C common stock $ 5.68 $ 5.84

Diluted Weighted-average Shares Outstanding (Note 11)

Diluted Weighted-average Shares Outstanding

Class A common stock 2,200 2,240

4 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

3 unchanged sentences

Net unrealized gain (loss) ( 1 ) —

Income tax effect 1 ( 1 ) — ( 5 )

Reclassification adjustments ( 1 ) 1 ( 3 ) 1

Income tax effect 1 — 1 —

Defined benefit pension and other postretirement plans:

Net unrealized actuarial gain (loss) and prior service credit (cost)

— ( 1 ) 2 ( 8 )

Income tax effect 1 —

11 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended June 30, 2020

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

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of March 31, 2020 2 3 1,693 245 11 $ 5,462 $ ( 184 ) $ 16,385 $ 13,366 $ ( 444 ) $ 34,585

Net income 2,373 2,373

Other comprehensive income (loss), net of tax

Comprehensive income 2,538

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and 10)

( 164 ) 169 5

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures (Note 12)

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

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock (Note 10)

( 663 ) ( 663 )

Repurchase of class A common stock (Note 10)

( 6 ) ( 65 ) ( 1,004 ) ( 1,069 )

Balance as of June 30, 2020 2 3 1,687 245 11 $ 5,298 $ ( 24 ) $ 16,457 $ 14,072 $ ( 279 ) $ 35,524

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

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

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Nine Months Ended June 30, 2020

Three Months Ended December 31, 2020

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

3 unchanged sentences

Income (Loss), Net Total

Series B Series C Class A Class B Class C

Series A Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2020 — (1)

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

Net income 3,126 3,126

1 unchanged sentence

Comprehensive income 3,926

Adoption of new accounting standards (Note 1)

VE territory covered losses incurred (Note 5)

( 22 ) ( 22 )

Recovery through conversion rate adjustment (Note 5 and 10)

Adoption of new accounting standards 3 3

VE territory covered losses incurred ( 10 ) ( 10 )

Recovery through conversion rate adjustment ( 15 ) 15 —

Conversion of series A preferred stock upon sales into public market — (1)

20 ( 1,388 ) 1,388 —

1 unchanged sentence

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures (Note 12)

Share-based compensation, net of forfeitures 122 122

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

( 1 ) ( 134 ) ( 134 )

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock (Note 10)

( 2,002 ) ( 2,002 )

Repurchase of class A common stock (Note 10)

( 37 ) ( 390 ) ( 6,182 ) ( 6,572 )

Balance as of June 30, 2020 2 3 1,687 245 11 $ 5,298 $ ( 24 ) $ 16,457 $ 14,072 $ ( 279 ) $ 35,524

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

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

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Three Months Ended June 30, 2019

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

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of March 31, 2019 2 3 1,741 245 12 $ 5,464 $ ( 163 ) $ 16,547 $ 12,513 $ ( 86 ) $ 34,275

Net income 3,101 3,101

Other comprehensive income (loss), net of tax

Comprehensive income 3,297

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and 10)

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 12)

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

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 common stock (Note 10)

Cash proceeds from issuance of class A common stock under employee equity plans — (1)

Cash dividends declared and paid, at a quarterly amount of $ 0.32 per class A common stock

( 703 ) ( 703 )

Repurchase of class A common stock (Note 10)

Repurchase of class A common stock ( 9 ) ( 95 ) ( 1,701 ) ( 1,796 )

Balance as of December 31, 2020 — (1)

2 3 1,696 245 11 $ 3,683 $ ( 34 ) $ 18,063 $ 14,813 $ 1,154 $ 37,679

Balance as of June 30, 2019 2 3 1,729 245 12 $ 5,462 $ ( 169 ) $ 16,552 $ 13,040 $ 110 $ 34,995

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

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

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

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Nine Months Ended June 30, 2019

Three Months Ended December 31, 2019

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

8 unchanged sentences

Other comprehensive income (loss), net of tax

( 444 ) ( 444 )

Comprehensive income 3,607

Adoption of new accounting standards (Note 1)

VE territory covered losses incurred (Note 5)

( 170 ) ( 170 )

Recovery through conversion rate adjustment (Note 5 and 10)

Adoption of new accounting standards 25 ( 25 ) —

VE territory covered losses incurred ( 4 ) ( 4 )

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 12)

Share-based compensation, net of forfeitures 116 116

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

( 1 ) ( 147 ) ( 147 )

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 common stock (Note 10)

( 1,706 ) ( 1,706 )

Repurchase of class A common stock (Note 10)

Cash proceeds from issuance of class A common stock under employee equity plans 1 55 55

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

( 671 ) ( 671 )

Balance as of June 30, 2019 2 3 1,729 245 12 $ 5,462 $ ( 169 ) $ 16,552 $ 13,040 $ 110 $ 34,995

Repurchase of class A common stock ( 13 ) ( 141 ) ( 2,229 ) ( 2,370 )

Balance as of December 31, 2019 2 3 1,709 245 11 $ 5,462 $ ( 175 ) $ 16,424 $ 13,899 $ ( 340 ) $ 35,270

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(in millions)

2 unchanged sentences

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

Client incentives (Note 3) 4,966 4,480

Share-based compensation (Note 12) 322 321

Client incentives 1,858 1,748

Share-based compensation 122 116

Depreciation and amortization of property, equipment, technology and intangible assets 197 182

Deferred income taxes 5 ( 47 )

VE territory covered losses incurred (Note 5) ( 22 ) ( 170 )

VE territory covered losses incurred ( 10 ) ( 4 )

Other 25 ( 50 )

7 unchanged sentences

Accrued and other liabilities ( 357 ) 136

Accrued litigation (Note 14) ( 47 ) ( 577 )

Accrued litigation ( 6 ) 426

Net cash provided by (used in) operating activities 3,513 3,875

6 unchanged sentences

Purchases of / contributions to other investments ( 18 ) ( 9 )

Proceeds / distributions from other investments 5 10

Other investing activities 44 37

1 unchanged sentence

Financing Activities

Repurchase of class A common stock (Note 10) ( 6,572 ) ( 6,480 )

Dividends paid (Note 10) ( 2,002 ) ( 1,706 )

Proceeds from issuance of senior notes (Note 8) 3,985 —

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

Cash proceeds from issuance of common stock under employee equity plans 142 127

Repurchase of class A common stock ( 1,796 ) ( 2,370 )

Repayments of debt ( 3,000 ) —

Dividends paid ( 703 ) ( 671 )

Cash proceeds from issuance of class A common stock under employee equity plans 61 55

Restricted stock and performance-based shares settled in cash for taxes ( 134 ) ( 147 )

Other financing activities ( 118 ) —

Net cash provided by (used in) financing activities ( 5,572 ) ( 3,133 )

2 unchanged sentences

( 1,116 ) 1,431

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (Note 4)

10,832 10,977

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (Note 4)

$ 16,934 $ 10,669

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 19,171 10,832

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 18,055 $ 12,263

Supplemental Disclosure

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.

(“Visa U.S.A.”), Visa International Service Association (“Visa International”), Visa Worldwide Pte.

Limited, Visa Europe Limited (“Visa Europe”), Visa Canada Corporation (“Visa Canada”), Visa Technology & Operations LLC and CyberSource Corporation, operate one of the world’s largest electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions and enables the Company to provide its financial institution and merchant clients a wide range of products, platforms and value-added services.

Visa is not a financial institution and does not issue cards, extend credit or set rates and fees for account holders on Visa products.

Limited, Visa Europe Limited (“Visa Europe”), Visa Canada Corporation (“Visa Canada”), Visa Technology & Operations LLC and CyberSource Corporation, operate one of the world’s largest electronic payments network — VisaNet — which facilitates authorization, clearing and settlement of payment transactions and enables the Company to provide its financial institution and seller clients a wide range of products, platforms and value added services.

Visa is not a financial institution and does not issue cards, extend credit or set rates and fees for account holders of Visa products.

In most cases, account holder and merchant relationships belong to, and are managed by, Visa’s financial institution clients.

9 unchanged sentences

Use of estimates.

The preparation of accompanying unaudited consolidated financial statements in conformity with U.S.

The preparation of the accompanying unaudited consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions about future events.

These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and reported amounts of revenues and expenses during the reporting period.

These estimates may change, as new events occur and additional information is obtained, and will be recognized in the consolidated financial statements in the period in which such changes occur.

These estimates may change, as new events occur and additional information is obtained, and will be recognized in the unaudited consolidated financial statements in the period in which such changes occur.

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 the spread of 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.

Recently Issued and Adopted Accounting Pronouncements.

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 leases standard that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new leases standard.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

contains a lease, lease classification and capitalization of initial direct costs.

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.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Board Update (“ASU”) 2016-13, which requires the measurement and recognition of expected credit losses for financial assets and certain other instruments held at amortized cost.

The Company adopted the standard effective October 1, 2020 using the modified retrospective transition method with comparative periods continuing to be reported using the previous applicable guidance.

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

In accordance with ASU 2016-02, 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.

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 sheet.

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

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 adopted the ASU effective October 1, 2019.

In accordance with ASU 2016-13, the Company uses a forward-looking expected credit loss model for financial instruments measured at amortized cost.

For available-for-sale debt securities, when credit loss indicators exist and a discounted cash flow approach results in a credit loss, the credit loss will be recorded through an allowance rather

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

than through an other-than-temporary impairment.

In addition to recording the fair value of its settlement indemnification liability, under the new standard, the Company estimates expected credit losses and recognizes an allowance for those credit losses related to its settlement indemnification obligations.

In January 2017, the FASB issued ASU 2017-04, which simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test.

Under the amendments in ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, which is Step 1 of the goodwill impairment test.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

The Company adopted the standard effective October 1, 2020.

The adoption had no impact on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, which modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures.

The Company adopted this standard effective October 1, 2020.

The adoption did not have a material impact on the 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.

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 ongoing regulatory reviews and approvals, which are expected to be completed by the end of 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Terminated Acquisition.

On January 12, 2021, Visa and Plaid Inc.

mutually terminated their merger agreement announced on January 13, 2020.

See Note 13—Legal Matters .

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.

The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three and nine months ended June 30, 2020 and 2019:

The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three months ended December 31, 2020 and 2019:

Three Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

6 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

2 unchanged sentences

Net revenues $ 5,687 $ 6,054

At December 31, 2020 and September 30, 2020, deferred revenue included in accrued liabilities on the consolidated balance sheets was $ 668 million and $ 533 million, respectively.

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

2 unchanged sentences

The Company defines restricted cash and restricted cash equivalents as cash and cash equivalents that cannot be withdrawn or used for general operating activities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated statements of cash flows as follows:

14 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

On December 13, 2019, the district court entered the final judgment order approving the Amended Settlement Agreement with the Damages Class plaintiffs in the Interchange Multidistrict Litigation proceedings.

A takedown payment of approximately $ 467 million was received on December 27, 2019, 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 the nine months ended June 30, 2020.

The accrual related to the U.S.

covered litigation could be either higher or lower than the litigation escrow account balance.

covered litigation could be either higher or lower than the U.S.

litigation escrow account balance.

See Note 13—Legal Matters .

1 unchanged sentence

litigation escrow account:

Nine Months Ended

Three Months Ended

(in millions)

1 unchanged sentence

Return of takedown payment to the litigation escrow account — 467

Payments to class plaintiffs’ settlement fund (1)

Payments to opt-out merchants (1) and interest earned on escrow funds

8 unchanged sentences

When the adjustment to the conversion rate is made, the amount previously recorded in “right to recover for covered losses” as contra-equity is then recorded against the book value of the preferred stock within stockholders’ equity.

During the three and nine months ended June 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 12.936 and 13.884 , respectively, as of September 30, 2019 to 12.775 and 13.722 , respectively, as of June 30, 2020.

During the three months ended December 31, 2020, the Company recovered $ 15 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

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 nine months ended June 30, 2020.

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 three months ended December 31, 2020.

Preferred Stock Right to Recover for Covered Losses

3 unchanged sentences

Recovery through conversion rate adjustment ( 9 ) ( 6 ) 15

( 72 ) ( 92 ) 169

Balance as of June 30, 2020 $ 2,213 $ 3,085 $ ( 24 )

Balance as of December 31, 2020 $ 1,097 $ 1,537 $ ( 34 )

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

See Note 13—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.

The following table sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred shares recorded in stockholders’ equity within the Company’s consolidated balance sheets as of June 30, 2020 and September 30, 2019:

June 30, 2020 September 30, 2019

December 31, 2020 September 30, 2020

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

11 unchanged sentences

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

(a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of June 30, 2020;

(b) 12.775 and 13.722 , the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of June 30, 2020, respectively;

and (c) $ 193.17 , Visa’s class A common stock closing stock price as of June 30, 2020.

(a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of December 31, 2020;

(b) 6.368 and 6.853 , the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of December 31, 2020, respectively;

and (c) $ 218.73 , Visa’s class A common stock closing stock price as of December 31, 2020.

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

9 unchanged sentences

2020 September 30,

2019 June 30,

2020 December 31,

2020 September 30,

4 unchanged sentences

government-sponsored debt securities

— — 850 1,469

Treasury securities

2,050 650 — —

Investment securities:

1 unchanged sentence

government-sponsored debt securities

— — 1,684 2,582

Treasury securities

1,302 1,253 — —

Other current and non-current assets:

Money market funds

Derivative instruments

2 unchanged sentences

Deferred compensation liability

$ 169 $ 135 $ — $ —

Accrued and other liabilities:

1 unchanged sentence

Total $ 169 $ 135 $ 355 $ 181

There were no transfers between Level 1 and Level 2 assets during the nine months ended June 30, 2020.

Level 1 assets.

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.

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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 the nine months ended June 30, 2020.

government-sponsored debt securities and U.S.

Treasury securities.

The Company considers U.S.

government-sponsored debt securities and U.S.

Treasury securities to be available-for-sale and held $ 3.1 billion and $ 6.3 billion of these investment securities as of June 30, 2020 and September 30, 2019, respectively.

As of December 31, 2020 and September 30, 2020, the Company held $ 3.0 billion and $ 3.8 billion of these investment securities, respectively.

All of the Company’s long-term available-for-sale investment securities are due within one to five years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Assets Measured at Fair Value on a Non-recurring Basis

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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.

During the three and nine months ended June 30, 2020, $ 56 million and $ 65 million, respectively, of upward adjustments were included in the carrying value of non-marketable equity securities.

No material downward adjustments were included during the same periods.

During the three and nine months ended June 30, 2020, $ 6 million in impairment was recognized.

There was no impairment recognized during the same prior-year comparable periods.

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

June 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

During the three months ended December 31, 2020 and 2019, upward adjustments of $ 14 million and $ 9 million, respectively, were included in the carrying value of non-marketable equity securities accounted for under the fair value measurement alternative.

The three months ended December 31, 2020 also included downward adjustments of $ 2 million.

During the three months ended December 31, 2020 and 2019, there was no impairment recognized.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of December 31, 2020 including cumulative unrealized gains and losses:

(in millions)

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The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2020, and concluded that there was no impairment.

No recent events or changes in circumstances indicate that impairment existed at June 30, 2020.

Gains and Losses on Marketable and Non-marketable Equity Securities

Gains and losses on the Company’s equity securities are summarized below.

Three Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

Net gain (loss) on equity securities sold during the period $ — $ 1 $ 5 $ 16

Unrealized gain (loss) on equity securities held as of the end of the period

Total gain (loss) recognized in non-operating income (expense), net

$ 68 $ 11 $ 64 $ 85

No recent events or changes in circumstances indicate that impairment existed at December 31, 2020.

Other Fair Value Disclosures

Long-term debt.

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

Debt instruments are measured at amortized cost on the Company’s unaudited 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 $ 20.9 billion and $ 23.4 billion, respectively, as of June 30, 2020.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

As of December 31, 2020, the carrying value and estimated fair value of debt was $ 21.1 billion and $ 23.8 billion, respectively.

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

Other financial instruments not measured at fair value.

The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at June 30, 2020, but disclosure of their fair values is required:

settlement receivable and payable, accounts receivable and customer collateral.

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

The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at December 31, 2020, but disclosure of their fair values is required:

settlement receivable and payable and customer collateral.

The estimated fair value of such instruments at December 31, 2020 approximates their carrying value due to their generally short maturities.

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

Note 7—Leases

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

The Company's leases have original lease periods expiring between fiscal 2020 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 June 30, 2020, the Company had no finance leases.

During the three and nine months ended June 30, 2020, total operating lease cost was $ 29 million and $ 84 million, respectively.

At June 30, 2020, the weighted average remaining lease term for operating leases was approximately 7 years and the weighted average discount rate for operating leases was 2.28 %.

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

June 30, 2020

(in millions)

Remainder of 2020 $ 29

Thereafter 226

Total undiscounted lease payments 635

imputed interest ( 52 )

Present value of lease liabilities $ 583

At June 30, 2020, the Company had additional operating leases that had not yet commenced with lease obligations of $ 465 million.

These operating leases will commence between fiscal 2020 and 2023 with non-cancellable lease terms of 1 to 15 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

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1,500 1,500 2.02 %

0.75 % Senior Notes due August 2027

500 500 0.84 %

2.75 % Senior Notes due September 2027

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1,500 1,500 2.13 %

1.10 % Senior Notes due February 2031

1,000 1,000 1.20 %

4.15 % Senior Notes due December 2035

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750 750 3.73 %

2.00 % Senior Notes due August 2050

1,750 1,750 2.09 %

Unamortized discounts and debt issuance costs

21,000 24,000

Unamortized discounts and debt issuance costs ( 173 ) ( 178 )

Hedge accounting fair value adjustments (2)

3 unchanged sentences

Long-term debt 21,055 21,071

17,880 16,729

Total carrying value of debt

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(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 certain outstanding senior notes.

Commercial Paper Program

Visa maintains a commercial paper program to support its working capital requirements and for other general corporate purposes.

Under the program, the Company is authorized to issue up to $ 3.0 billion in outstanding notes, with maturities up to 397 days from the date of issuance.

During the three months ended June 30, 2020, the Company repaid $ 1.0 billion of commercial paper that was issued during the three months ended March 31, 2020.

The Company had no outstanding obligations under the program at June 30, 2020 and September 30, 2019.

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

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

Interest on the 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 Company plans to use the net proceeds for general corporate purposes.

The 2020 Notes are senior unsecured obligations of the Company, ranking equally with the Company's other senior unsecured indebtedness.

The Company may redeem the 2020 Notes as a whole or in part at any time and from time to time at specified redemption prices.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Future principal payments on the Company’s outstanding debt are as follows:

For the Years Ending September 30,

2020 2021 2022 2023 2024 Thereafter Total

(in millions)

Future principal payments $ — $ 3,000 $ 1,000 $ 2,250 $ — $ 14,500 $ 20,750

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

During the three months ended December 31, 2020, the Company repaid $ 3.0 billion of principal upon maturity of its senior notes due December 14, 2020.

Note 8—Settlement Guarantee Management

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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 daily settlement exposure was $ 97.3 billion and the average daily settlement exposure was $ 54.4 billion during the nine months ended June 30, 2020.

During the three months ended December 31, 2020, the Company’s maximum daily settlement exposure was $ 97.5 billion and the average daily settlement exposure was $ 61.2 billion.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

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.

At June 30, 2020 and September 30, 2019, the Company held collateral as follows:

At December 31, 2020 and September 30, 2020, the Company held the following collateral to manage settlement exposure:

2020 September 30,

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Total $ 4,366 $ 4,101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Note 9—Stockholders’ Equity

As-converted class A common stock.

The following table presents the number of shares of each series and class of stock and the number of shares of class A common stock on an as-converted basis:

June 30, 2020 September 30, 2019

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

December 31, 2020 September 30, 2020

Outstanding Conversion Rate Into

3 unchanged sentences

(in millions, except conversion rates)

Series A preferred stock — (2)

100.0000 15 — (2)

UK&I preferred stock 2 6.3680 16 2 6.3870 16

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

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

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

(3) Class A common stock shares outstanding reflect repurchases that settled on or before December 31, 2020 and September 30, 2020.

(4) The class B to class A common stock conversion rate is presented on a rounded basis.

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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.

The following table presents the reduction in equivalent number of as-converted shares of class A common stock, effective price per share and recovery of VE territory covered losses through conversion rate adjustments:

Nine Months Ended

June 30, 2020 Nine Months Ended

June 30, 2019

UK&I Europe UK&I Europe

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table presents the reduction in as-converted UK&I and Europe preferred stock after the Company recovered VE territory covered losses through conversion rate adjustments in the three months ended December 31, 2020.

There were no conversion rate adjustments in the three months ended December 31, 2019.

Three Months Ended

December 31, 2020

(in millions, except per share data)

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

Reduction in equivalent number of as-converted shares of class A common stock — (1)

Effective price per share (2)

1 unchanged sentence

Recovery through conversion rate adjustment

$ 72 $ 92 $ 6 $ 2

(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 is calculated using the weighted-average effective prices of the respective adjustments made during the year.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Common stock repurchases.

1 unchanged sentence

Three Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions, except per share data)

4 unchanged sentences

$ 1,796 $ 2,370

(1) Shares repurchased in the open market reflect repurchases that settled during the three and nine months ended June 30, 2020 and 2019.

(1) Shares repurchased in the open market reflect repurchases that settled during the three months ended December 31, 2020 and 2019.

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

1 unchanged sentence

Average repurchase price per share and total cost 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 purchase program (the “January 2020 Program”).

In January 2020, the Company’s board of directors authorized a $ 9.5 billion share repurchase program (the “January 2020 Program”) and in January 2021, authorized an additional $ 8.0 billion share purchase program.

These authorizations have no expiration date.

As of June 30, 2020, the Company’s January 2020 Program had remaining authorized funds of $ 7.0 billion for share repurchase.

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

O n July 20, 2020, 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).

The cash dividend will be paid on September 1, 2020, to all holders of record as of August 14, 2020.

The Company declared and paid $ 663 million and $ 565 million during the three months ended June 30, 2020 and 2019, respectively and $ 2.0 billion and $ 1.7 billion during the nine months ended June 30, 2020 and 2019, respectively, in dividends to holders of the Company’s common and preferred stocks.

As of December 31, 2020, the Company’s January 2020 Program had remaining authorized funds of $ 3.7 billion.

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

O n January 26, 2021, 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 March 1, 2021, to all holders of record as of February 12, 2021.

During the three months ended December 31, 2020 and 2019, the Company declared and paid dividends of $ 703 million and $ 671 million, respectively.

Note 10—Earnings Per Share

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See Note 9—Stockholders’ Equity .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Diluted earnings per share is computed by dividing net income available by the weighted-average number of shares of common stock outstanding, participating securities and, if dilutive, potential class A common stock equivalent shares outstanding during the period.

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 Company’s Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table presents earnings per share for the three months ended June 30, 2020:

(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 Company’s Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table presents earnings per share for the three months ended December 31, 2020:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B) Earnings per

Class A common stock $ 1,814 1,690 $ 1.07 $ 2,373 2,214 (3)

Class B common stock 428 245 $ 1.74 $ 427 245 $ 1.74

Class C common stock 46 11 $ 4.29 $ 47 11 $ 4.29

Participating securities (4)

85 Not presented Not presented $ 85 Not presented Not presented

Net income $ 2,373

The following table presents earnings per share for the nine months ended June 30, 2020:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B) Earnings per

Class A common stock $ 2,410 1,694 $ 1.42 $ 3,126 2,200 (3)

4 unchanged sentences

Net income $ 3,126

The following table presents earnings per share for the three months ended June 30, 2019:

The following table presents earnings per share for the three months ended December 31, 2019:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B) Earnings per

Class A common stock $ 2,379 1,735 $ 1.37 $ 3,101 2,265 (3)

Class B common stock 549 245 $ 2.23 $ 548 245 $ 2.23

Class C common stock 63 12 $ 5.48 $ 63 12 $ 5.48

Participating securities (4)

110 Not presented Not presented $ 110 Not presented Not presented

Net income $ 3,101

The following table presents earnings per share for the nine months ended June 30, 2019:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B) Earnings per

Class A common stock $ 2,506 1,713 $ 1.46 $ 3,272 2,240 (3)

4 unchanged sentences

Net income $ 3,272

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

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

The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million for the three and nine months ended June 30, 2020 and 400 million for the three and nine months ended June 30, 2019.

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 43 million and 44 million for the three and nine months ended June 30, 2020, respectively, and 46 million and 47 million for the three and nine months ended June 30, 2019, respectively.

The weighted-average number of shares of preferred stock included within participating securities was 32 million of as-converted UK&I preferred stock for the three and nine months ended June 30, 2020 and 2019, and 44 million of as-converted Europe preferred stock for the three and nine months ended June 30, 2020 and 2019.

The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million for the three months ended December 31, 2020 and 2019.

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 43 million and 44 million for the three months ended December 31, 2020 and 2019, respectively.

The weighted-average number of shares of preferred stock included within participating securities was 21 million of as-converted series A preferred stock for the three months ended December 31, 2020, 16 million and 32 million of as-converted UK&I preferred stock for the three months ended December 31, 2020 and 2019, respectively, and 22 million and 44 million of as-converted Europe preferred stock for the three months ended December 31, 2020 and 2019, respectively.

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

1 unchanged sentence

(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 common stock equivalents of 3 million for the three and nine months ended June 30, 2020 and 2019, because their effect would have been dilutive.

The computation excludes common stock equivalents of 1 million for the three and nine months ended June 30, 2020, and less than 1 million for the three and nine months ended June 30, 2019, 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 UK&I and Europe preferred stock and restricted stock units.

The computation includes common stock equivalents of 3 million for the three months ended December 31, 2020 and 2019, because their effect would have been dilutive.

The computation excludes common stock equivalents of 1 million for the three months ended December 31, 2020 and 2019, 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 and restricted stock units.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Note 11—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the nine months ended June 30, 2020:

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the three months ended December 31, 2020:

Granted Weighted-Average

7 unchanged sentences

(1) Represents the maximum number of performance-based shares which could be earned.

The Company recorded share-based compensation cost related to the EIP of $ 102 million and $ 106 million for the three months ended June 30, 2020 and 2019, respectively, and $ 306 million and $ 307 million for the nine months ended June 30, 2020 and 2019, respectively, net of estimated forfeitures.

For the three months ended December 31, 2020 and 2019, the Company recorded share-based compensation cost related to the EIP of $ 116 million and $ 111 million, respectively, net of estimated forfeitures.

On January 26, 2021, the EIP was amended to extend the termination date from January 31, 2022 to January 26, 2031 and reduce the number of shares authorized for grant from 236 million to 198 million.

Additionally, shares available for grant may be either unissued or previously issued shares subsequently acquired by the Company, except that shares withheld for taxes, or shares used to pay the exercise or purchase price of an award, shall not again be available for future grant.

Note 12—Income Taxes

The effective income tax rates were 19 % for the three and nine months ended June 30, 2020, and 20 % and 19 % for the three and nine months ended June 30, 2019, respectively.

The difference in the effective tax rates between the three-month periods was primarily due to the change in geographic mix of income.

During the three and nine months ended June 30, 2020, the Company’s gross unrecognized tax benefits increased by $ 55 million and $ 230 million, respectively.

The Company’s net unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate, increased by $ 31 million and $ 70 million, respectively.

The change in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions.

The Company’s accrued interest related to uncertain tax positions increased by $ 18 million and $ 56 million during the three and nine months ended June 30, 2020, respectively, and $ 19 million and $ 51 million during the three and nine months ended June 30, 2019, respectively.

During the three and nine months ended June 30, 2020 and 2019, there were no significant changes in penalties related to uncertain tax positions.

The Company’s tax filings are subject to examination by the U.S.

For the three months ended December 31, 2020 and 2019, the effective income tax rates were 17 % and 18 %, respectively.

The difference in the effective tax rates between the three-month periods was primarily due to an $ 81 million tax benefit recognized during the three months ended December 31, 2020 as a result of the conclusion of audits by taxing authorities.

During the three months ended December 31, 2020, the Company’s gross and net unrecognized tax benefits decreased by $ 6 million and $ 49 million, respectively.

The decrease in unrecognized tax benefits is primarily due to the recognition of previously unrecognized tax benefits as a result of the conclusion of audits by taxing authorities, partially offset by increases in gross timing differences as well as various tax positions across several jurisdictions.

During the three months ended December 31, 2020 and 2019, there were no significant changes in accrued interest and penalties related to uncertain tax positions.

The Company’s tax filings are subject to examination by U.S.

federal, state and foreign taxing authorities.

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It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.

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 is not expected to have a material impact on the Company’s financial results.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

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

The repeal of the UK tax rate reduction is not expected to significantly increase the Company’s ongoing effective tax rate, however, it will result in a one-time non-cash tax expense in the fourth quarter of fiscal 2020, due to the re-measurement of deferred taxes which are primarily related to intangibles recorded in purchase accounting upon the acquisition of Visa Europe in fiscal 2016.

In September 2020, the Company accepted a settlement offer related to the examination of Canadian tax returns dating back to fiscal 2003, which was subject to approval by the Tax Court of Canada.

On January 21, 2021, the Tax Court of Canada approved the settlement agreement related to the examination.

The Company’s income tax provision was already adjusted to reflect the estimated impact of the settlement in fiscal 2020.

Note 13—Legal Matters

4 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 (UNAUDITED)—(Continued)

The litigation accrual is an estimate and is based on management’s understanding of the Company’s 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.

The following table summarizes the activity related to accrued litigation:

Nine Months Ended

Three Months Ended

(in millions)

11 unchanged sentences

covered litigation.

See further discussion below under U.S.

Covered Litigation and Note 5—U.S.

and Europe Retrospective Responsibility Plans.

An accrual for the U.S.

covered litigation and a charge to the litigation provision are recorded when a loss is deemed to be probable and reasonably estimable.

In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee.

In making this determination, the Company evaluates available information, including but not limited to actions taken by the Company’s litigation committee.

The total accrual related to the U.S.

covered litigation could be either higher or lower than the escrow account balance.

See further discussion below under U.S.

Covered Litigation and Note 5—U.S.

and Europe Retrospective Responsibility Plans.

The following table summarizes the accrual activity related to U.S.

covered litigation:

Nine Months Ended

Three Months Ended

(in millions)

4 unchanged sentences

Balance at end of period $ 881 $ 1,624

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

In fiscal 2019, the Company paid $ 600 million from its litigation escrow account into a settlement fund established pursuant to the Amended Settlement Agreement with the Damages Class plaintiffs in the Interchange Multidistrict Litigation.

Under the Amended Settlement Agreement, if class members opt out of the Damages Class, the defendants are entitled to receive takedown payments of up to $ 700 million (up to $ 467 million for Visa), based on the percentage of payment card sales volume attributable to merchants who have chosen to opt out.

On December 13, 2019, the district court entered a final judgment order approving the Amended Settlement Agreement with the Damages Class plaintiffs.

A takedown payment of approximately $ 467 million was received on December 27, 2019, 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 the nine months ended June 30, 2020.

See further discussion below under U.S.

Covered Litigation .

Accrual Summary—VE Territory Covered Litigation

6 unchanged sentences

and Europe Retrospective Responsibility Plans .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table summarizes the accrual activity related to VE territory covered litigation:

Nine Months Ended

Three Months Ended

(in millions)

5 unchanged sentences

Interchange Multidistrict Litigation (MDL) – Putative Class Actions

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 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.

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.

Visa believes Plaintiffs’ claims are released by the Amended Settlement Agreement and are, nevertheless, 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.

On December 18, 2020, the plaintiffs purporting to act on behalf of the putative Injunctive Relief Class moved for class certification.

Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

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.

VE Territory Covered Litigation

6 unchanged sentences

Standstill agreements have been entered into with respect to some of those threatened Merchant claims, several of which have been settled.

On June 17, 2020, the Supreme Court of the United Kingdom found that Visa’s UK domestic interchange restricted competition.

The case will now continue before the UK Competition Appeals Tribunal to determine the lawful level of interchange and the amount the plaintiff may be entitled to recover.

With regard to the claim asserted by one Merchant, trial before the UK Competition Appeal Tribunal to determine the lawful amount, if any, the plaintiff may be entitled to recover is set for June 2022.

Other plaintiffs, whose claims were stayed pending the Supreme Court of the United Kingdom's judgment, are moving their claims forward, mostly before the UK Competition Appeal Tribunal.

Other Litigation

Canadian Merchant Litigation

Between August 2019 and January 2020, 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.

In January 2020, Wal-Mart Canada and Home Depot of Canada Inc.

filed applications to appeal the decisions of the British Columbia, Quebec and Ontario courts to the Supreme Court of Canada and those applications were denied on March 26, 2020.

Wal-Mart Canada and Home Depot of Canada Inc.

also filed an application seeking the Supreme Court’s review of the Saskatchewan court's decision.

The application and an appeal to the Alberta Court of Appeal remain pending.

Pulse Network

On June 5, 2020, the U.S.

Court of Appeals for the Fifth Circuit set the case for re-argument during the week of August 31, 2020.

Nuts for Candy

On December 31, 2019, plaintiff filed a motion to dismiss and for attorneys’ fees and costs based on the settlement reached between the parties and the grant of final approval of the 2018 Amended Settlement Agreement as discussed above in Interchange Multidistrict Litigation (MDL) - Putative Class Actions .

On February 25, 2020, the court granted plaintiff’s motion to dismiss and for attorneys’ fees and costs.

The case has been dismissed with prejudice.

Federal Trade Commission Civil Investigative Demand (Formerly Voluntary Access Letter)

On June 9, 2020, the Federal Trade Commission issued a Civil Investigative Demand to Visa requesting additional documents and information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

EMV Chip Liability Shift

On January 19, 2021, the U.S.

Court of Appeals for the Second Circuit denied defendants’ request to appeal the district court’s decision granting plaintiffs’ motion for class certification.

Euronet Litigation

On December 13, 2019, Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o.

In the claim by 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.

s.r.o., trial has been set for January 2023.

On January 12, 2021, the case filed by the U.S.

Department of Justice against Visa and Plaid was dismissed.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

German ATM Litigation

In December 2020 and January 2021, six savings banks and cooperative banks filed claims in Germany against Visa Europe Ltd.

challenging Visa’s ATM rules prohibiting the charging of access fees on domestic cash withdrawals with a credit card as anti-competitive.

No damages are currently sought.

On December 24, 2020, 275 German savings banks initiated conciliation proceedings against Visa Europe Ltd., Visa Europe Services, LLC., and Visa Europe Services, Inc.

asserting claims related to the same rules.

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-Q

Item 1. Financial Statements