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Item 7. Management’s Discussion and Analysis

2021-11-18 compared with 2020-11-19 · 182 added, 249 removed, 361 unchanged (54% of the section changed)

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Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2020 Form 10-K, filed with the United States Securities and Exchange Commission on November 19, 2020.

Visa is a global payments technology company that enables innovative, secure and reliable electronic payments across more than 200 countries and territories.

We facilitate digital payments across a global network of consumers, merchants, financial institutions, businesses, strategic partners and government entities through innovative technologies.

Our advanced transaction processing network, VisaNet, enables authorization, clearing and settlement of payment transactions and allows us to provide our financial institution and merchant clients a wide range of products, platforms and value added services.

Visa is a global payments technology company that enables innovative, reliable and secure electronic payments across more than 200 countries and territories.

We facilitate global commerce and money movement across a global network of consumers, merchants, financial institutions, businesses, strategic partners and government entities through innovative technologies.

Our advanced transaction processing network, VisaNet, enables authorization, clearing and settlement of payment transactions and allows us to offer products and solutions that facilitate secure, reliable, and efficient money movement for all participants in the ecosystem.

Financial overview.

Our as-reported U.S.

GAAP and non-GAAP net income and diluted earnings per share are as follows:

A summary of our as-reported U.S.

GAAP and non-GAAP operating results are as follows:

For the Years Ended

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(in millions, except percentages and per share data)

Net income, as reported $ 10,866 $ 12,080 $ 10,301 (10) % 17 %

Diluted earnings per share, as reported $ 4.89 $ 5.32 $ 4.42 (8) % 20 %

Net revenues $ 24,105 $ 21,846 $ 22,977 10 % (5 %)

Operating expenses $ 8,301 $ 7,765 $ 7,976 7 % (3 %)

Net income $ 12,311 $ 10,866 $ 12,080 13 % (10 %)

Diluted earnings per share $ 5.63 $ 4.89 $ 5.32 15 % (8 %)

Non-GAAP operating expenses (2)

$ 8,077 $ 7,702 $ 7,596 5 % 1 %

Non-GAAP net income (2)

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Percentage changes are calculated based on unrounded numbers.

(2) For a full reconciliation of our non-GAAP financial results, see tables in Non-GAAP financial results below.

COVID-19 continues to have an impact globally.

While we have been actively monitoring the worldwide spread of COVID-19, the extent to which COVID-19 will ultimately impact our business remains difficult to predict.

(2) For a full reconciliation of our GAAP to non-GAAP financial results, see tables in Non-GAAP financial results below.

As the effects of an evolving coronavirus (“COVID-19”) pandemic continues, much remains uncertain.

Our priority remains the safety of our employees, clients and the communities in which we live and operate.

We are taking a measured approach in bringing our employees back in the office and will continue to have most of our employees work remotely for the rest of 2020.

We are taking a phased approach to reopening our offices, with most of our employees currently working remotely.

We continue to remain in close and regular contact with our employees, clients, partners and governments globally to help them navigate these challenging times.

Revenues in the latter half of fiscal 2020 were impacted by declines in volumes and transactions as a result of COVID-19, although we are exiting the year with improved results and most countries had stable to positive year-over-year domestic spending growth in the fiscal fourth quarter.

Cross-border volume however, remained depressed, led by travel spending, as the majority of borders remain closed.

While we have taken measures to modify our business practices and reduce operating expenses, including scaling back hiring plans, restricting travel, lowering marketing spend and the use of external resources, the impact that COVID-19 will have on our business remains difficult to predict due to numerous uncertainties, including the transmissibility, severity and duration of the outbreak, the effectiveness of social distancing measures or actions that are voluntarily adopted by the public or required by governments or public health authorities, the development and availability of effective treatments or vaccines, and the impact to our employees and our operations, the business of our clients, supplier and business partners, and other factors identified in Part I, Item 1A “Risk Factors” in this Form 10-K.

The ongoing effects of COVID-19 remain difficult to predict due to numerous uncertainties, including the transmissibility, severity, duration and resurgence of the outbreak;

new variants of the virus;

the uptake and effectiveness of health and safety measures or actions that are voluntarily adopted by the public or required by governments or public health authorities, including vaccines and treatments;

the speed and strength of an economic recovery, including the reopening of borders and the resumption of international travel;

and the impact to our employees and our operations, the business of our clients, suppliers and business partners;

and other factors identified in Part I, Item 1A “Risk Factors” in this Form 10-K.

We will continue to evaluate the nature and extent of the impact to our business.

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Highlights for fiscal 2021 .

Net revenues for fiscal 2020 were $21.8 billion, a decrease of 5% over the prior year, primarily due to the year-over-year changes payments volume, cross-border volume and processed transactions, which were impacted by the spread of COVID-19 globally starting in the latter part of March 2020.

Exchange rate movements in fiscal 2020, partially mitigated by our hedging program, negatively impacted our net revenues growth by approximately half a percentage point.

Total operating expenses for fiscal 2020 were $7.8 billion on a GAAP basis, and decreased 3% over the prior year, driven by lower litigation provision and our overall cost reduction strategy, offset by higher personnel and depreciation and amortization from our ongoing investments in support of our strategy for future growth.

Total operating expenses for fiscal 2020 were $7.7 billion on a non-GAAP basis, and increased 1% over the prior year primarily driven by higher personnel, offset by our overall cost reduction strategy.

Net revenues were $24.1 billion, an increase of 10% over the prior year, primarily due to the year-over-year growth in payments volume, processed transactions and cross-border volume, helped by

fewer COVID-19 restrictions, partially offset by higher client incentives.

Exchange rate movements and our hedging program positively impacted our net revenues growth by approximately half a percentage point.

GAAP operating expenses were $8.3 billion and increased 7% over the prior year, primarily driven by higher personnel and marketing expenses, partially offset by lower general and administrative expenses.

Non-GAAP operating expenses were $8.1 billion and increased 5% over the prior year, primarily driven by higher personnel and marketing expenses, partially offset by lower general and administrative expenses.

Exchange rate movements negatively impacted our operating expense growth by approximately half a percentage point.

Non-GAAP financial results.

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We consider non-GAAP measures useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating performance.

Starting in fiscal 2020, we revised our non-GAAP methodology to also exclude the impact of gains and losses on our equity investments, amortization of acquired intangible assets and acquisition-related costs for acquisitions that closed in fiscal 2019 and subsequent periods.

Prior year amounts have been restated to conform to our current presentation.

• Gains and losses on equity investments.

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We have excluded these amounts and the related tax impacts as the expenses are recognized for a limited duration and do not reflect the underlying performance of our business.

• Remeasurement of deferred tax balances.

During fiscal 2021, in connection with the UK enacted legislation on June 10, 2021 that increases the tax rate from 19% to 25%, effective April 1, 2023, we remeasured our UK deferred tax liabilities, resulting in the recognition of a non-recurring, non-cash income tax expense of $1.0 billion.

During fiscal 2020, in connection with the UK enacted legislation that repealed the previous tax rate reduction from 19% to 17% that was effective on April 1, 2020, we remeasured our UK deferred tax liabilities as of the enactment date, resulting in the recognition of a non-recurring, non-cash income tax expense of $329 million.

See Note 19—Income Taxes to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Indirect taxes.

During fiscal 2021, we recognized a one-time charge within general and administrative expense of $152 million, before tax.

Net of the related income tax benefit of $40 million, determined by applying applicable tax rates, non-GAAP net income increased by $112 million.

This charge is to record our estimate of probable additional indirect taxes, related to prior periods, for which we could be liable as a result of certain changes in applicable law.

This one-time charge is not representative of our ongoing operations.

• Resolution of a tax item.

During fiscal 2020, we resolved a long-outstanding tax matter, dating back more than 12 years, relating to certain tax filing positions taken prior to our initial public offering.

The resolution of this matter resulted in the recognition of a one-time charge to income tax expense of $28 million, which we believe is not representative of our continuing operations and ongoing effective tax rate.

• Litigation provision.

During fiscal 2019 and 2018, we recorded a litigation provision of $370 million and $600 million, respectively, and related tax benefits of $83 million and $137 million, respectively, associated with the interchange multidistrict litigation.

During fiscal 2019, we recorded a litigation provision of $370 million and related tax benefits of $83 million associated with the interchange multidistrict litigation.

The tax impact is determined by applying applicable federal and state tax rates to the litigation provision.

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and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Charitable contributions .

During fiscal 2018, we donated investment securities to the Visa Foundation and recognized a non-cash general and administrative expense of $195 million, before tax, and recorded $193 million of realized gain on the donation of these investments as non-operating income.

Net of the related cash tax benefit of $51 million, determined by applying applicable tax rates, non-GAAP net income decreased by $49 million.

• Remeasurement of deferred tax balances.

During fiscal 2020, in connection with the UK enacted legislation that repealed the previous tax rate reduction from 19% to 17% that was effective on April 1, 2020, we

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remeasured our net deferred tax liabilities as of the enactment date, resulting in the recognition of a non-recurring, non-cash income tax expense of $329 million.

During fiscal 2018, in connection with the Tax Cuts and Jobs Act (the “Tax Act”) reduction of the corporate income tax rate, we remeasured our net deferred tax liabilities as of the enactment date, resulting in the recognition of a non-recurring, non-cash income tax benefit of $1.1 billion.

See Note 19—Income Taxes to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Transition tax on foreign earnings.

During fiscal 2018, in connection with the Tax Act requirement that we include certain untaxed foreign earnings of non-U.S.

subsidiaries in our fiscal 2018 taxable income, we recorded a one-time transition tax estimate of approximately $1.1 billion.

See Note 19—Income Taxes to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Resolution of a tax item.

During fiscal 2020, we resolved a long-outstanding tax matter, dating back more than 12 years, relating to certain tax filing positions taken prior to our initial public offering.

Non-GAAP operating expenses, non-operating income (expense), income tax provision, effective income tax rate, net income and diluted earnings per share should not be relied upon as substitutes for measures calculated in accordance with U.S.

The following tables reconcile our as-reported financial measures, calculated in accordance with U.S.

GAAP, to the respective non-GAAP financial measures:

GAAP, to our respective non-GAAP financial measures:

For the Year Ended

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Remeasurement of deferred tax balances — — (1,007) 1,007 0.46

Resolution of a tax item — — (28) 28 0.01

Indirect taxes (152) — 40 112 0.05

Non-GAAP $ 8,077 $ (453) $ 2,642 17.0 % $ 12,933 $ 5.91

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Acquisition-related costs (17) — 4 13 0.01

Litigation provision (370) — 83 287 0.13

Remeasurement of deferred tax balances — — (329) 329 0.15

Resolution of a tax item — — (28) 28 0.01

Non-GAAP $ 7,702 $ (392) $ 2,559 18.6 % $ 11,193 $ 5.04

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For the Year Ended

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(Gains) losses on equity investments, net — (131) (30) (101) (0.04)

Charitable contribution (195) (193) 51 (49) (0.02)

Amortization of acquired intangible assets (6) — 1 5 —

Acquisition-related costs (4) — 1 3 —

Litigation provision (370) — 83 287 0.13

Remeasurement of deferred tax balances — — 1,133 (1,133) (0.49)

Transition tax on foreign earnings — — (1,147) 1,147 0.49

Non-GAAP $ 7,596 $ (248) $ 2,859 18.9 % $ 12,274 $ 5.40

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Effective income tax rate, diluted earnings per share and their respective totals are calculated based on unrounded numbers.

Release of preferred stock.

In September 2020, we released $7.3 billion of the as-converted value from our series B and C preferred stock (alternatively referred to as UK&I and Europe preferred stock, respectively) and issued 374,819 shares of series A preferred stock in connection with the first mandatory release assessment, as required by the litigation management deed entered into at the time of the Visa Europe acquisition.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans and Note 15—Stockholders’ Equity to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Common stock repurchases.

In January 2020, our board of directors authorized a $9.5 billion share repurchase program (the “January 2020 Program”).

In January 2021, our board of directors authorized an $8.0 billion share repurchase program (the “January 2021 Program”).

During fiscal 2021, we repurchased 40 million shares of our class A common stock in the open market for $8.7 billion.

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See Note 15—Stockholders’ Equity to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Senior notes.

In fiscal 2020, we issued fixed-rate senior notes in public offerings in an aggregate principal amount of $7.3 billion with maturities ranging between 7 and 30 years.

See Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

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

for $5.3 billion.

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

Pending acquisitions.

On June 24, 2021, we entered into a definitive agreement to acquire Tink AB (“Tink”) for €1.8 billion, inclusive of cash and retention incentives.

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, 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.

See Note 2—Acquisitions and Note 20—Legal Matters to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

On July 22, 2021, we entered into a definitive agreement to acquire The Currency Cloud Group Limited (“Currencycloud”).

The acquisition values Currencycloud at £700 million, inclusive of cash and retention incentives.

The financial consideration will be reduced by the outstanding equity of Currencycloud that we already own.

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

Terminated acquisition.

On January 12, 2021, Visa and Plaid Inc.

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

See Note 20—Legal Matters to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Payments volume and processed transactions.

Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues.

Nominal payments volume growth in the U.S.

for the 12 months ended June 30, 2020 and 2019 was 4% and 10%, respectively.

The decrease in nominal international payments volume of 1% for the 12 months ended June 30, 2020 (1) was negatively impacted by the overall strengthening of the U.S.

On a constant-dollar basis, which excludes the impact of exchange rate movements, our international payments volume growth for the 12 months ended June 30, 2020 and 2019 was 2% and 9%, respectively.

Growth in processed transactions reflects the ongoing worldwide shift to electronic payments, partially offset by the impact of COVID-19.

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Payments volume represents the aggregate dollar amount of purchases made with cards and other form factors carrying the Visa, Visa Electron, V PAY and Interlink brands and excludes Europe co-badged volume.

Nominal payments volume is denominated in U.S.

dollars and is calculated each quarter by applying an established U.S.

dollar/local currency exchange rate for each local currency in which our volumes are reported.

Processed transactions represent transactions using cards and other form factors carrying the Visa, Visa Electron, V PAY, Interlink and PLUS brands processed on Visa’s networks.

The following tables present nominal payments and cash volume:

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$ 4,725 $ 4,007 18 % $ 5,243 $ 4,707 11 % $ 9,968 $ 8,714 14 %

Cash volume (5)

635 573 11 % 1,927 2,045 (6 %) 2,561 2,619 (2 %)

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$ 4,007 $ 3,873 3 % $ 4,707 $ 4,743 (1 %) $ 8,714 $ 8,616 1 %

Cash volume (5)

573 573 — % 2,045 2,262 (10 %) 2,619 2,835 (8 %)

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Total payments volume growth 11 % 9 % (1 %) 2 % 14 % 13 % 1 % 2 %

(1) % 2 % 3 % 9 % 1 % 3 % 6 % 10 %

Cash volume growth (5)

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Total volume growth 6 % 5 % (4 %) (1 %) 11 % 10 % (1 %) 1 %

(4) % (1) % (1) % 6 % (1) % 1 % 3 % 7 %

(1) Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter.

Therefore, service revenues reported for the 12 months ended September 30, 2021, 2020 and 2019, were based on nominal payments volume reported by our financial institution clients for the 12 months ended June 30, 2021, 2020 and 2019, respectively.

On occasion, previously presented volume information may be updated.

Prior period updates are not material.

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

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(4) Includes large, medium and small business credit and debit, as well as commercial prepaid volume.

(5) Total nominal volume is the sum of total nominal payments volume and cash volume.

Total nominal payments volume is the total monetary value of transactions for goods and services that are purchased on cards carrying the Visa, Visa Electron, Interlink and V PAY brands.

(5) Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks.

(6) Total nominal volume is the sum of total nominal payments volume and cash volume.

Total nominal volume is provided by our financial institution clients, subject to review by Visa.

On occasion, previously presented volume information may be updated.

Prior period updates are not material.

(7) Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S.

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The following table provides the number of transactions involving cards and other form factors carrying the Visa, Visa Electron, Interlink, VPAY and PLUS cards processed on Visa’s networks:

The following table provides the number of processed transactions:

For the Years Ended

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Prior period updates are not material.

Financial Information Presentation

Our net revenues are primarily generated from payments volume on Visa products for purchased goods and services, as well as the number of transactions processed on our network.

We do not earn revenues from, or bear credit risk with respect to, interest or fees paid by account holders on Visa products.

Our issuing clients have the responsibility for issuing cards and other payment products and determining the interest rates and fees paid by account holders.

We generally do not earn revenues from the fees that merchants are charged for acceptance by acquirers, including the merchant discount rate.

Our acquiring clients are generally responsible for soliciting merchants as well as establishing and earning these fees.

The following sets forth the components of our net revenues:

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

Current quarter service revenues are primarily assessed using a calculation of current quarter’s pricing applied to the prior quarter’s payments volume.

Service revenues also include assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volumes are transacted.

Data processing revenues are earned for authorization, clearing, settlement, value added services, network access and other maintenance and support services that facilitate transaction and information processing among our clients globally.

Data processing revenues are recognized in the same period the related transactions occur or services are performed.

International transaction revenues are earned for cross-border transaction processing and currency conversion activities.

Cross-border transactions arise when the country of origin of the issuer, or financial institution originating the transaction, is different from that of the beneficiary.

International transaction revenues are recognized in the same period the cross-border transactions occur or services are performed.

Other revenues consist mainly of value added services, license fees for use of the Visa brand or technology, fees for account holder services, certification, licensing and product enhancements, such as extended account holder protection and concierge services.

Other revenues are recognized in the same period the related transactions occur or services are performed.

Client incentives consist of incentives provided in contracts with financial institution clients, merchants and strategic partners for various programs designed to grow payments volume, increase Visa product acceptance, win merchant routing transactions over our network and drive innovation.

These incentives are primarily accounted for as reductions to revenues.

Operating Expenses

Personnel expenses include salaries, employee benefits, incentive compensation, share-based compensation, severance charges and contractor expense.

Marketing expenses include expenses associated with advertising and marketing campaigns, sponsorships and other related promotions of the Visa brand.

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Network and processing expenses mainly represent expenses for the operation of our processing network, including maintenance, equipment rental and fees for other data processing services.

Professional fees mainly consist of fees for consulting, legal and other professional services.

Depreciation and amortization expenses include depreciation expense for property and equipment, as well as amortization of purchased and internally developed software.

Also included in this amount is amortization of finite-lived intangible assets primarily obtained through acquisitions.

General and administrative expenses consist mainly of product enhancements, facilities costs, travel activities, indirect taxes, foreign exchange gains and losses and other corporate expenses incurred in support of our business.

Litigation provision represents litigation expenses and is based on management’s understanding of our litigation profile, the specifics of the cases, advice of counsel to the extent appropriate and management’s best estimate of incurred loss.

Non-operating Income (Expense)

Non-operating income (expense) primarily includes interest expense, gains and losses earned on investments, income from derivative instruments not associated with our core business, as well as the non-service components of net periodic pension income and expenses.

Results of Operations

The following table sets forth our net revenues earned in the U.S.

Our net revenues are primarily generated from payments volume on Visa products for purchased goods and services, as well as the number of transactions processed on our network.

See Note 1—Summary of Significant Accounting Policies to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report for further discussion on the components of our net revenues.

The following table presents our net revenues earned in the U.S.

and internationally:

For the Years Ended

September 30, $ Change % Change (1)

September 30, % Change (1)

2021 2020 2019 2021

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Percentage changes are calculated based on unrounded numbers.

Net revenues decreased in fiscal 2020 primarily due to the year-over-year changes in payments volume, cross-border volume and processed transactions, which were impacted by COVID-19 starting in the latter part of March 2020.

Net revenues increased in fiscal 2021 primarily due to the year-over-year growth in payments volume, processed transactions and cross-border volume, helped by fewer COVID-19 restrictions, partially offset by higher client incentives.

Our net revenues are impacted by the overall strengthening or weakening of the U.S.

dollar as payments volume and related revenues denominated in local currencies are converted to U.S.

Exchange rate movements in fiscal 2020, as partially mitigated by our hedging program, negatively impacted our net revenues growth by approximately half a percentage point.

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The following table sets forth the components of our net revenues:

In fiscal 2021, exchange rate movements and our hedging program positively impacted our net revenues growth by approximately half a percentage point.

The following table presents the components of our net revenues:

For the Years Ended

September 30, $ Change % Change (1)

September 30, % Change (1)

2021 2020 2019 2021

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• Service revenues increased primarily due to 14% growth in nominal payments volume.

• Data processing revenues increased due to 2% growth in processed transactions, growth in value added services and select pricing modifications.

• International transaction revenues decreased due to a 23% decline in nominal cross-border volumes, excluding transactions within Europe, as COVID-19 spread globally starting in the latter part of March 2020.

International transaction revenues were also impacted by select pricing modifications.

• Other revenues increased primarily due to the increase in consulting and marketing services related fees, other value added services and acquisition-related revenues.

• Client incentives increased mainly due to incentives recognized on long-term client contracts that were initiated or renewed during fiscal 2020 partially offset by the recent decline in global payments volume.

Service revenues were also impacted by select pricing modifications and business mix.

• Data processing revenues increased due to 17% growth in processed transactions, as the business laps the initial impacts of COVID-19 starting in March 2020.

• International transaction revenues increased primarily due to growth in nominal cross-border volumes, excluding transactions within Europe, of 4%, as the business laps the initial impacts of COVID-19 starting in March 2020 and border restrictions were relaxed in various markets.

• Other revenues increased as the business laps the initial impacts of COVID-19 starting in March 2020, driven by higher consulting and data services revenues.

• Client incentives increased in conjunction with the increase in payments volume during fiscal 2021.

The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.

Operating Expenses

The following table sets forth the components of our total operating expenses:

Our operating expenses consist of the following:

• Personnel expenses include salaries, employee benefits, incentive compensation, share-based compensation, contractor expense and severance charges.

• Marketing expenses include expenses associated with advertising and marketing campaigns, sponsorships and other related promotions of the Visa brand.

• Network and processing expenses mainly represent expenses for the operation of our processing network, including maintenance, equipment rental and fees for other data processing services.

• Professional fees mainly consist of fees for consulting, legal and other professional services.

• Depreciation and amortization expenses include amortization of purchased and internally developed software, as well as depreciation expense for property and equipment.

Also included in this amount is amortization of finite-lived intangible assets primarily obtained through acquisitions.

• General and administrative expenses consist mainly of card benefits, indirect taxes, facilities costs, travel and meeting costs, foreign exchange gains and losses and other corporate expenses incurred in support of our business.

• Litigation provision represents litigation expenses and is based on management’s understanding of our litigation profile, the specifics of the cases, advice of counsel to the extent appropriate and management’s best estimate of incurred loss.

The following table presents the components of our total operating expenses:

For the Years Ended

September 30, $ Change % Change (1)

September 30, % Change (1)

2021 2020 2019 2021

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Percentage changes are calculated based on unrounded numbers.

(2) Operating expenses for fiscal 2019 and 2018 include significant items that we do not believe are indicative of our operating performance as they are related to the interchange multidistrict litigation provision or charitable donations.

(2) Operating expenses for fiscal 2021 and 2019 include significant items that we do not believe are indicative of our operating performance.

See Overview within this Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

• Personnel expenses increased due to continued headcount growth in support of our investment strategy for future growth.

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• Marketing expenses decreased reflecting our overall cost reduction strategy, the absence of FIFA women’s world cup and the delay of the Tokyo Olympics to fiscal 2021, partially offset by an increase in client marketing spend.

• Professional fees decreased reflecting our overall cost reduction strategy.

• Depreciation and amortization expenses increased primarily due to additional depreciation and amortization from our on-going investments, including acquisitions.

• General and administrative expenses decreased primarily due to travel restrictions and our overall cost reduction strategy.

• Litigation provision decreased primarily due to lower accruals for uncovered litigation in fiscal 2020 and a $370 million accrual in fiscal 2019 related to the interchange multidistrict litigation.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Personnel expenses increased primarily due to higher headcount and incentive compensation, reflecting our strategy to invest in future growth.

• Marketing expenses increased as we lapped reductions in spending in the prior year at the outset of COVID-19 as well as higher spending in client marketing and various campaigns, including the Olympic Games Tokyo 2020, which were held in Summer 2021.

• General and administrative expenses decreased due to lower travel expenses, favorable foreign currency fluctuations and lower usage of travel related card benefits, partially offset by a one-time charge to record our estimate of probable additional indirect taxes, related to prior periods, for which we could be liable as a result of certain changes in applicable laws.

Non-operating Income (Expense)

The following table sets forth the components of our non-operating income (expense):

The following table presents the components of our non-operating income (expense):

For the Years Ended

September 30, $ Change % Change (1)

September 30, % Change (1)

2021 2020 2019 2021

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Percentage changes are calculated based on unrounded numbers.

• Interest expense, net decreased primarily as a result of derivative instruments that lowered the cost of borrowing on a portion of our outstanding debt, offset by additional interest expense related to the issuance of debt in fiscal 2020.

See Note 10—Debt and Note 13—Derivative Financial Instruments to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Investment income and other decreased primarily due to lower gains on our equity investments and lower interest income on our cash and investments.

• Interest expense, net decreased primarily as a result of lower interest related to income tax liabilities, partially offset by an increase in interest expense due to the issuance of debt in fiscal 2020 .

See Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

• Investment income and other increased primarily due to higher gains from our equity investments, partially offset by lower interest income on our cash and investments.

See Note 6—Fair Value Measurements and Investments to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Effective Income Tax Rate

The following table sets forth our effective income tax rate:

The following table presents our effective income tax rates:

For the Years Ended

September 30, Change

September 30,

2021 2020 2019

Effective income tax rate 23 % 21 % 19 %

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 relating to the remeasurement of UK deferred tax liabilities, as a result of the enactment of UK legislation on July 22, 2020 that repealed the previous tax rate reduction from 19% to 17% that was effective on April 1, 2020.

The remeasurement of UK deferred tax liabilities was primarily related to deferred taxes on intangibles recorded upon the acquisition of Visa Europe in fiscal 2016.

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The effective tax rate in fiscal 2021 differs from the effective tax rate in fiscal 2020 mainly due to the following:

• during fiscal 2021, a $1.0 billion non-recurring non-cash tax expense related to the remeasurement of UK deferred tax liabilities, as discussed below;

• during fiscal 2021, $255 million of tax benefits recognized as a result of the conclusion of audits by taxing authorities;

• during fiscal 2020, a $329 million non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities, as discussed below.

On June 10, 2021, the UK enacted legislation that increases the tax rate from 19% to 25%, effective April 1, 2023.

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

As a result, in fiscal 2021 and fiscal 2020, we recorded non-recurring, non-cash tax expense related to the remeasurement of our UK deferred tax liabilities, primarily related to intangibles recorded upon the acquisition of Visa Europe Limited (“Visa Europe”) in fiscal 2016.

Liquidity and Capital Resources

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• invest excess cash in securities that enable us to first meet our working capital and liquidity needs, and earn additional income.

Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we believe that our projected sources of liquidity will be sufficient to meet our projected liquidity needs for more than the next 12 months.

Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity needs for more than the next 12 months.

We will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions and other relevant circumstances.

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Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents $ 628 $ 8,339 $ (145)

$ 8,339 $ (145) $ (1,034)

Operating activiti es.

Cash provided by operating activities in fiscal 2020 was lower than the prior fiscal year primarily due to lower net income, higher client incentive payments and timing of settlement.

Cash provided by operating activities in fiscal 2021 was higher than the prior fiscal year primarily due to growth in our underlying business, lower client incentive payments and timing and impact of COVID-19 on settlement in the prior fiscal year.

Investing activities.

Cash provided by investing activities in fiscal 2020 was higher than the prior fiscal year primarily due to higher proceeds from sales and maturities of investment securities, combined with fewer investment security purchases, lower purchase consideration paid for acquisitions, net of cash and restricted cash acquired, due to fewer acquisitions and lower purchases of other investments.

Cash was used in investing activities in fiscal 2021 compared to cash provided by investing activities in fiscal 2020, primarily due to higher purchases, net of proceeds from sales and maturities of investment securities.

Financing activities.

Cash used in financing activities in fiscal 2020 was lower than the prior fiscal year primarily due to proceeds received from the issuance of senior notes, the absence of the deferred purchase consideration payment made in the prior year and lower share repurchases, partially offset by higher dividends paid.

Cash used in financing activities in fiscal 2021 was higher than the prior fiscal year primarily due to the absence of proceeds received from the issuance of senior notes in the prior year, the $3.0 billion principal debt payment upon maturity of our senior notes and higher share repurchases.

See Note 10—Debt and Note 15—Stockholders’ Equity , to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

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Sources of Liquidity

Our primary sources of liquidity are cash on hand, cash flow from our operations, our investment portfolio and access to various equity and borrowing arrangements.

Funds from operations are maintained in cash and cash equivalents and short-term or long-term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings and the return that these holdings provide.

We believe that cash flow generated from operations, in conjunction with access to our other sources of liquidity, will be more than sufficient to meet our ongoing operational needs.

Available-for-sale debt securities.

Funds from operations are maintained in cash and cash equivalents and short-term or long-term investment securities based upon our funding requirements, access to liquidity from these holdings and the return that these holdings provide.

Cash, cash equivalents and investments.

As of September 30, 2021, our cash and cash equivalents balance were $16.5 billion and our available-for-sale debt securities were $3.2 billion.

Our investment portfolio is designed to invest cash in securities which enables us to meet our working capital and liquidity needs.

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government-sponsored agencies.

The majority of these investments, $3.6 billion, are classified as current and are available to meet short-term liquidity needs.

$1.5 billion of the investments are classified as current and are available to meet short-term liquidity needs.

The remaining non-current investments have stated maturities of more than one year from the balance sheet date;

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

We had no outstanding obligations under the program at September 30, 2020.

At September 30, 2021, we had no outstanding obligations under the program.

See Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

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We have an unsecured $5.0 billion revolving credit facility (the “Credit Facility”) which expires on July 25, 2024.

There were no borrowings under the Credit Facility as of September 30, 2020.

See Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Senior notes.

In fiscal 2020, we issued fixed-rate senior notes in public offerings in an aggregate principal amount of $7.3 billion with maturities between 7 and 30 years.

As of September 30, 2021, there were no borrowings under the Credit Facility.

See Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

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covered litigation will be payable.

When we fund the U.S.

litigation escrow account, the shares of class B common stock held by our stockholders are subject to dilution through an adjustment to the conversion rate of the shares of class B common stock to shares of class A common stock.

The balance in this account at September 30, 2020, was $0.9 billion and is reflected as restricted cash equivalents in our consolidated balance sheets.

As these funds are restricted for the sole purpose of making payments related to the U.S.

covered litigation matters, as described below under Uses of Liquidity , we do not rely on them for other operational needs.

covered litigation matters, we do not rely on them for other operational needs.

See Note 5—U.S.

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Credit Ratings

At September 30, 2020, our credit ratings by Standard and Poor’s and Moody’s were as follows:

Standard and Poor’s Moody’s

Debt type Rating Outlook Rating Outlook

Short-term unsecured debt A-1+ Stable P-1 Stable

Long-term unsecured debt AA- Stable Aa3 Stable

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Various factors affect our credit ratings, including changes in our operating performance, the economic environment, conditions in the electronic payment industry, our financial position and changes in our business strategy.

Various factors affect our credit ratings, including changes in our operating performance, the economic environment, conditions in the electronic payments industry, our financial position and changes in our business strategy.

Our credit ratings are published by nationally recognized statistical rating organizations in the U.S.

and have not changed from the prior-year comparable period.

We do not currently foresee any reasonable circumstances under which our credit ratings would be significantly downgraded.

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In general, during fiscal 2021, we were not required to fund settlement-related working capital.

Our average daily net settlement position was a net payable of $452 million.

We hold approximately $7.7 billion of available liquidity globally as of September 30, 2020, in the form of cash, cash equivalents and available-for-sale investment securities, to fund daily settlement in the event one or more of our financial institution clients are unable to settle.

covered litigation.

We are parties to legal and regulatory proceedings with respect to a variety of matters, including certain litigation that we refer to as the U.S.

covered litigation.

As noted above, monetary liabilities from settlements of, or judgments in, the U.S.

covered litigation are payable from the U.S.

litigation escrow account.

In September 2018, Visa and other defendants entered into an Amended Settlement Agreement with plaintiffs in the interchange multidistrict litigation purporting to represent a class of plaintiffs seeking monetary damages, which superseded and amended the 2012 Settlement Agreement.

In December 2019, the district court granted final approval of the Amended Settlement Agreement relating to claims by the Damages Class, which was subsequently appealed.

Settlement discussions with plaintiffs purporting to act on behalf of the putative Injunctive Relief Class are ongoing.

During fiscal 2020, we have 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.

At September 30, 2020, the U.S.

litigation escrow account had an available balance of $0.9 billion for settlement with opt-out merchants.

Other litigation.

Judgments in and settlements of litigation, other than the U.S.

covered litigation, including VE territory covered litigation or other fines imposed in investigations and proceedings, could give rise to future liquidity needs.

At September 30, 2021, we held $9.1 billion of our total available liquidity to fund daily settlement in the event one or more of our financial institution clients are unable to settle, with the remaining liquidity available to support our working capital and other liquidity needs.

See Note 12—Settlement Guarantee Management to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report .

Judgments in and settlements of litigation or other fines imposed in investigations and proceedings, other than the U.S.

covered litigation and VE territory covered litigation, which are covered by the U.S.

and Europe retrospective responsibility plans, could give rise to future liquidity needs.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this repor t.

Common stock repurchases.

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During fiscal 2021, we declared and paid $2.8 billion in dividends at a quarterly rate of $0.32 per share.

On October 23, 2020, our 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).

On October 22, 2021, our board of directors declared a quarterly cash dividend of $0.375 per share of class A common stock (determined in the case of class B and C common stock and series A, B and C convertible participating preferred stock on an as-converted basis).

We expect to pay approximately $812 million in connection with this dividend on December 7, 2021.

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All preferred and class B and C common stock will share ratably on an as-converted basis in such future dividends.

Pension and other postretirement benefits.

We sponsor various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the U.S.

As a result of the acquisition of Visa Europe, we assumed the obligations related to Visa Europe’s defined benefit plan, primarily consisting of the UK pension plans.

Our policy with respect to our U.S.

qualified pension plan is to contribute annually in September of each year, an amount not less than the minimum required under the Employee Retirement Income Security Act.

non-qualified pension and other postretirement benefit plans are funded on a current basis.

In relation to the Visa Europe UK pension plans, our funding policy is to contribute in accordance with the appropriate funding requirements agreed with the trustees of our UK pension plans.

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

In fiscal 2020, we made contributions to our U.S.

pension and other postretirement benefit plans of $3 million and to our Visa Europe’s UK pension plans of $22 million.

In fiscal 2021, given current projections and assumptions, we anticipate funding

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pension and other postretirement benefit plans and Visa Europe’s UK defined benefit pension plans by approximately $2 million and $10 million, respectively.

The actual contribution amount will vary depending upon the funded status of the pension plan, movements in the discount rate, performance of the plan assets and related tax consequences.

See Note 11—Pension and Other Postretirement Benefits to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Capital expenditures.

Our capital expenditures decreased slightly during fiscal 2020.

During fiscal 2021, our capital expenditures decreased slightly.

We expect to continue investing in technology assets and payments system infrastructure to support our digital solutions and core business initiatives.

Senior notes.

A principal payment of $3.0 billion is due on December 14, 2020 on our fixed-rate senior notes issued in December 2015, for which we have sufficient liquidity.

As of September 30, 2021, we had an outstanding aggregate principal amount relating to our fixed-rate senior notes of $21.0 billion with maturity dates ranging from September 2022 to August 2050.

During fiscal 2021, we repaid $3.0 billion of principal upon maturity of our senior notes.

A principal payment of $1.0 billion is

due on September 14, 2022 on our fixed-rate senior notes issued in December 2015, for which we have sufficient liquidity.

In August 2020, we issued a $500 million green bond as part of our commitment to sustainable living and a sustainable payments ecosystem.

In fiscal 2021, we allocated $165 million to eligible green projects.

See Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Acquisitions.

In fiscal 2020, we entered into a definitive agreement to acquire Plaid Inc.

for $5.3 billion.

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

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 2—Acquisitions and Note 20—Legal Matters to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements are primarily comprised of guarantees and indemnifications.

Visa has no off-balance sheet arrangements, other than purchase order commitments, as discussed and reflected in our contractual obligations table below.

Indemnifications

We indemnify our financial institution clients for settlement losses suffered due to the failure of any other client to fund its settlement obligations in accordance with our operating rules.

The amount of the indemnification is limited to the amount of unsettled Visa payment transactions at any point in time.

We maintain and regularly review global settlement risk policies and procedures to manage settlement risk, which may require clients to post collateral if certain credit standards are not met.

See Note 1—Summary of Significant Accounting Policies and Note 12—Settlement Guarantee Management to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

In the ordinary course of business, we enter into contractual arrangements with financial institutions and other clients and partners under which we may agree to indemnify the client for certain types of losses incurred relating to the services we provide or otherwise relating to our performance under the applicable agreement.

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Contractual Obligations

Our contractual commitments will have an impact on our future liquidity.

The contractual obligations identified in the table below include both on- and off-balance sheet transactions that represent a material, expected or contractually committed future obligation as of September 30, 2020.

We believe that we will be able to fund these obligations through cash generated from our operations and available credit facilities.

Client incentives.

As the future cash payments for these agreements, which range in terms from less than one to fifteen years, are based on specific performance requirements, the timing of payments can vary.

As of September 30, 2021, we had $5.4 billion of client incentives liability recorded on the consolidated balance sheet related to these agreements.

See Note 1—Summary of Significant Accounting Policies to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Uncertain tax positions.

As of September 30, 2021, we had liabilities for uncertain tax positions of $1.8 billion for which we cannot determine the range and timing of the cash payments.

See Note 19—Income Taxes to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Pending acquisitions.

On June 24, 2021, we entered into a definitive agreement to acquire Tink for €1.8 billion, inclusive of cash and retention incentives.

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

On July 22, 2021, we entered into a definitive agreement to acquire Currencycloud for a value of £700 million, inclusive of cash and retention incentives.

The financial consideration will be reduced by the outstanding equity of Currencycloud that we already own.

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

See Note 2—Acquisitions to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

Other uses of cash.

The following table represents material, expected or contractually committed future obligations as of September 30, 2021.

We believe that we will be able to fund these obligations through cash generated from our operations and available credit facility.

Payments Due by Period

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(in millions)

$ 3,643 $ 4,411 $ 1,046 $ 23,754 $ 32,854

Purchase obligations (1)

$ 1,730 $ 685 $ 384 $ 569 $ 3,368

Leases not yet commenced (2)

1 41 58 367 467

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87 249 455 — 791

Dividends (5)

703 — — — 703

Total $ 1,818 $ 975 $ 897 $ 936 $ 4,626

$ 6,081 $ 5,535 $ 2,037 $ 25,284 $ 38,937

(1) Amounts presented include payments for both interest and principal.

Also see Note 10—Debt to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

(1) Represents agreements to purchase goods and services that specify significant terms, including:

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For obligations where the individual years of spend are not specified in the contract, we have estimated the timing of when these amounts will be spent.

(3) Includes operating leases for premises and equipment, which range in original lease terms from less than one year to twenty-six years.

(2) Represents future payments under leases that have not yet commenced and are not included in the consolidated balance sheet.

For future lease payments related to leases that have commenced and are included in the consolidated balance sheet, see Note 9—Leases to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

(3) Amounts presented relate to the estimated transition tax, net of foreign tax credit carryovers, on certain foreign earnings of non-U.S.

subsidiaries.

See Note 19—Income Taxes to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report.

(5) Includes expected dividend amount of $703 million as dividends were declared on October 23, 2020 and will be paid on December 1, 2020 to all holders of record of Visa’s common and preferred stock as of November 13, 2020.

(6) We have liabilities for uncertain tax positions of $2.0 billion as of September 30, 2020.

At September 30, 2020, we had also accrued $233 million of interest and $31 million of penalties associated with our uncertain tax positions.

We cannot determine the range of cash payments that will be made and the timing of the cash settlements, if any, associated with our uncertain tax positions.

Therefore, no amounts related to these obligations have been included in the table.

(7) We evaluate the need to make contributions to our pension plan after considering the funded status of the pension plan, movements in the discount rate, performance of the plan assets and related tax consequences.

Expected contributions to our pension plan have not been included in the table as such amounts are dependent upon the considerations discussed above, and may result in a wide range of amounts.

See Note 11—Pension and Other Postretirement Benefits to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this report and the Liquidity and Capital Resources s ection of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(8) Future cash payments for long-term contracts with financial institution clients and other business partners are not included in the table as the amounts are unknowable due to the inherent unpredictability of payment and transaction volume.

These agreements, which range in terms from less than one to fifteen years, can provide card issuance and/or conversion support, volume/growth targets or marketing and program support based on specific performance requirements.

As of September 30, 2020, we have $4.4 billion of client incentives liability recorded on the consolidated balance sheet related to these arrangements.

subsidiaries recognized during fiscal 2018 in connection with the Tax Cuts and Jobs Act.

Indemnifications

We indemnify our financial institution clients for settlement losses suffered due to the failure of any other client to fund its settlement obligations in accordance with our operating rules.

The amount of the indemnification is limited to the amount of unsettled Visa payment transactions at any point in time.

We maintain and regularly review global settlement risk policies and procedures to manage settlement risk, which may require clients to post collateral if certain credit standards are not met.

Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Board Update (“ASU”) 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance and making other minor improvements.

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

The adoption is not expected to have a material impact on our 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 on October 1, 2021.

The adoption is not expected to have a material impact on our 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.

Subsequently, the FASB also issued an amendment to this standard.

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

We are evaluating the effect ASU 2020-04 and its subsequent amendment will have on our consolidated financial statements.

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

Critical Accounting Estimates

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We believe that the following accounting estimates are the most critical to fully understand and evaluate our reported financial results, as they require our most subjective or complex management judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain and unpredictable.

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Revenue Recognition — Client Incentives

Critical estimates.

We enter into long-term incentive agreements with financial institution clients, merchants and other business partners for various programs designed to increase revenue by growing payments volume, increasing Visa product acceptance, winning merchant routing transactions over to our network and driving innovation.

We enter into long-term incentive agreements with financial institution clients, merchants and other business partners for various programs that provide cash and other incentives designed to increase revenue by growing payments volume, increasing Visa product acceptance, winning merchant routing transactions over to our network and driving innovation.

These incentives are primarily accounted for as reductions to net revenues;

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In calculating our effective income tax rate, we make judgments regarding certain tax positions, including the timing and amount of deductions and allocations of income among various tax jurisdictions.

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Assumptions and judgment.

We have various tax filing positions with regard to the timing and amount of deductions and credits, the establishment of liabilities for uncertain tax positions and the allocation of income among various tax jurisdictions.

We are also required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and to record liabilities for the amount of such positions that may not be sustained, or may only be partially sustained, upon examination by the relevant taxing authorities.

We have various tax filing positions with regard to the timing and amount of deductions and credits and the allocation of income among various tax jurisdictions, based on our interpretation of local tax laws.

We also inventory, evaluate and measure all uncertain tax positions taken or expected to be taken on tax returns and to record liabilities for the amount of such positions that may not be sustained, or may only be partially sustained, upon examination by the relevant taxing authorities.

Impact if actual results differ from assumptions.

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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 7. Management’s Discussion and Analysis