VISA INC. 10-K

ITEM 8. Financial Statements and Supplementary Data VISA INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( KPMG LLP , Santa Clara, CA , Auditor Firm ID: 185 ) 50 Consolidated Balance Sheets 53 Consolidated Statements of Operations 54 Consolidated Statements of Comprehensive Income 55 Consolidated Statements of Changes in Equity 56 Consolidated Statements of Cash Flows 59 Notes to Consolidated Financial Statements 60 49 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors Visa Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Visa Inc. and subsidiaries (the Company) as of September 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended September 30, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 50 Table of Contents Report of Independent Registered Public Accounting Firm—(Continued) Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the litigation accrual for class members opting out of the Damages Class settlement in the Interchange Multidistrict Litigation (MDL) As discussed in Notes 5 and 20 to the consolidated financial statements, the Company is party to various legal proceedings including the Interchange Multidistrict Litigation (MDL) – Individual Merchant Actions, and has recorded a litigation accrual of $1,621 million as of September 30, 2023. In preparing its consolidated financial statements, the Company is required to assess the probability of loss associated with each legal proceeding and estimate the amount of such loss, if any. The outcome of legal proceedings to which the Company is a party is not within the complete control of the Company and may not be known for prolonged periods of time. We identified the assessment of the litigation accrual for class members opting out of the Damages Class settlement in the Interchange Multidistrict Litigation (MDL) , also known as the MDL – Individual Merchant Actions , as a critical audit matter. This proceeding involves claims that are subject to inherent uncertainties and unascertainable damages. The assessment of the litigation accrual for the MDL – Individual Merchant Actions required especially challenging auditor judgment due to the assumptions and estimation associated with the consideration and evaluation of possible outcomes. The Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of merchants’ claims, which could have a material effect on the estimated amount of the liability in the period in which the effect becomes probable and reasonably estimable. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s litigation accrual process for the MDL – Individual Merchant Actions . We evaluated the Company’s ability to estimate its monetary exposure by comparing historically recorded liabilities to actual monetary amounts incurred upon resolution of legal matters for merchants that opted out of the previous MDL class settlement. To assess the estimated monetary exposure in the Company’s analysis, we compared such amounts to the complete population of amounts attributable to the remaining opt-out merchants. We performed a sensitivity analysis over the Company’s monetary exposure calculations, and we recalculated the amount of the ending litigation accrual. We read letters received directly from the Company’s external legal counsel and internal legal counsel that discussed the Company’s legal matters, including the MDL – Individual Merchant Actions . We also considered relevant publicly available information. 51 Table of Contents Report of Independent Registered Public Accounting Firm—(Continued) /s/ KPMG LLP We have served as the Company’s auditor since 2007. Santa Clara, California November 15, 2023 52 Table of Contents VISA INC. CONSOLIDATED BALANCE SHEETS September 30, 2023 2022 (in millions, except per share data) Assets Cash and cash equivalents $ 16,286 $ 15,689 Restricted cash equivalents—U.S. litigation escrow 1,764 1,449 Investment securities 3,842 2,833 Settlement receivable 2,183 1,932 Accounts receivable 2,291 2,020 Customer collateral 3,005 2,342 Current portion of client incentives 1,577 1,272 Prepaid expenses and other current assets 2,584 2,668 Total current assets 33,532 30,205 Investment securities 1,921 2,136 Client incentives 3,789 3,348 Property, equipment and technology, net 3,425 3,223 Goodwill 17,997 17,787 Intangible assets, net 26,104 25,065 Other assets 3,731 3,737 Total assets $ 90,499 $ 85,501 Liabilities Accounts payable $ 375 $ 340 Settlement payable 3,269 3,281 Customer collateral 3,005 2,342 Accrued compensation and benefits 1,506 1,359 Client incentives 8,177 6,099 Accrued liabilities 5,015 3,726 Current maturities of debt — 2,250 Accrued litigation 1,751 1,456 Total current liabilities 23,098 20,853 Long-term debt 20,463 20,200 Deferred tax liabilities 5,114 5,332 Other liabilities 3,091 3,535 Total liabilities 51,766 49,920 Commitments and contingencies (Note 18 and Note 20) Equity Series A, Series B and Series C convertible participating preferred stock (preferred stock), $ 0.0001 par value: 25 shares authorized and 5 (Series A less than one, Series B 2 , Series C 3 ) shares issued and outstanding as of September 30, 2023 and 2022 1,698 2,324 Class A, Class B and Class C common stock and additional paid-in capital, $ 0.0001 par value: 2,003,341 shares authorized (Class A 2,001,622 , Class B 622 , Class C 1,097 ); 1,849 (Class A 1,594 , Class B 245 , Class C 10 ) and 1,890 (Class A 1,635 , Class B 245 , Class C 10 ) shares issued and outstanding as of September 30, 2023 and 2022, respectively 20,452 19,545 Right to recover for covered losses ( 140 ) ( 35 ) Accumulated income 18,040 16,116 Accumulated other comprehensive income (loss): Investment securities ( 64 ) ( 106 ) Defined benefit pension and other postretirement plans ( 155 ) ( 169 ) Derivative instruments ( 177 ) 418 Foreign currency translation adjustments ( 921 ) ( 2,512 ) Total accumulated other comprehensive income (loss) ( 1,317 ) ( 2,369 ) Total equity 38,733 35,581 Total liabilities and equity $ 90,499 $ 85,501 See accompanying notes, which are an integral part of these consolidated financial statements. 53 Table of Contents VISA INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended September 30, 2023 2022 2021 (in millions, except per share data) Net revenues $ 32,653 $ 29,310 $ 24,105 Operating Expenses Personnel 5,831 4,990 4,240 Marketing 1,341 1,336 1,136 Network and processing 736 743 730 Professional fees 545 505 403 Depreciation and amortization 943 861 804 General and administrative 1,330 1,194 985 Litigation provision 927 868 3 Total operating expenses 11,653 10,497 8,301 Operating income 21,000 18,813 15,804 Non-operating Income (Expense) Interest expense ( 644 ) ( 538 ) ( 513 ) Investment income (expense) and other 681 ( 139 ) 772 Total non-operating income (expense) 37 ( 677 ) 259 Income before income taxes 21,037 18,136 16,063 Income tax provision 3,764 3,179 3,752 Net income $ 17,273 $ 14,957 $ 12,311 Basic Earnings Per Share Class A common stock $ 8.29 $ 7.01 $ 5.63 Class B common stock $ 13.26 $ 11.33 $ 9.14 Class C common stock $ 33.17 $ 28.03 $ 22.53 Basic Weighted-average Shares Outstanding Class A common stock 1,618 1,651 1,691 Class B common stock 245 245 245 Class C common stock 10 10 10 Diluted Earnings Per Share Class A common stock $ 8.28 $ 7.00 $ 5.63 Class B common stock $ 13.24 $ 11.31 $ 9.13 Class C common stock $ 33.13 $ 28.00 $ 22.51 Diluted Weighted-average Shares Outstanding Class A common stock 2,085 2,136 2,188 Class B common stock 245 245 245 Class C common stock 10 10 10 See accompanying notes, which are an integral part of these consolidated financial statements. 54 Table of Contents VISA INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended September 30, 2023 2022 2021 (in millions) Net income $ 17,273 $ 14,957 $ 12,311 Other comprehensive income (loss): Investment securities: Net unrealized gain (loss) 53 ( 133 ) ( 4 ) Income tax effect ( 11 ) 28 1 Reclassification adjustments — — ( 1 ) Defined benefit pension and other postretirement plans: Net unrealized actuarial gain (loss) and prior service credit (cost) 6 ( 168 ) 178 Income tax effect — 38 ( 41 ) Reclassification adjustments 10 13 13 Income tax effect ( 2 ) ( 3 ) ( 3 ) Derivative instruments: Net unrealized gain (loss) ( 126 ) 917 19 Income tax effect 24 ( 177 ) ( 1 ) Reclassification adjustments 49 ( 67 ) 15 Income tax effect ( 24 ) 2 1 Foreign currency translation adjustments: Translation adjustments 975 ( 3,255 ) ( 95 ) Income tax effect 98 — — Other comprehensive income (loss) 1,052 ( 2,805 ) 82 Comprehensive income $ 18,325 $ 12,152 $ 12,393 See accompanying notes, which are an integral part of these consolidated financial statements. 55 Table of Contents VISA INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Preferred Stock Common Stock and Additional Paid-in Capital Right to Recover for Covered Losses Accumulated Income Accumulated Other Comprehensive Income (Loss) Total Equity Shares Amount Shares Amount (in millions, except per share data) Balance as of September 30, 2022 5 $ 2,324 (1) 1,890 $ 19,545 $ ( 35 ) $ 16,116 $ ( 2,369 ) $ 35,581 Net income 17,273 17,273 Other comprehensive income (loss) 1,052 1,052 VE territory covered losses incurred ( 136 ) ( 136 ) Recovery through conversion rate adjustment ( 30 ) 31 1 Conversion to class A common stock upon sales into public market — (2) ( 596 ) 10 596 — Share-based compensation 765 765 Stock issued under equity plans 5 260 260 Restricted stock and performance-based shares settled in cash for taxes ( 1 ) ( 130 ) ( 130 ) Cash dividends declared and paid, at a quarterly amount of $ 0.45 per class A common stock ( 3,751 ) ( 3,751 ) Repurchase of class A common stock ( 55 ) ( 584 ) ( 11,598 ) ( 12,182 ) Balance as of September 30, 2023 5 $ 1,698 (1) 1,849 $ 20,452 $ ( 140 ) $ 18,040 $ ( 1,317 ) $ 38,733 (1) As of September 30, 2023 and 2022, the book value of series A preferred stock was $ 456 million and $ 1.0 billion, respectively. Refer to Note 5—U.S. and Europe Retrospective Responsibility Plans for the book value of series B and series C preferred stock. (2) Increase or decrease is less than one million shares. See accompanying notes, which are an integral part of these consolidated financial statements. 56 Table of Contents VISA INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued) Preferred Stock Common Stock and Additional Paid-in Capital Right to Recover for Covered Losses Accumulated Income Accumulated Other Comprehensive Income (Loss) Total Equity Shares Amount Shares Amount (in millions, except per share data) Balance as of September 30, 2021 5 $ 3,080 (1) 1,932 $ 18,855 $ ( 133 ) $ 15,351 $ 436 $ 37,589 Net income 14,957 14,957 Other comprehensive income (loss) ( 2,805 ) ( 2,805 ) VE territory covered losses incurred ( 43 ) ( 43 ) Recovery through conversion rate adjustment ( 141 ) 141 — Issuance of series A preferred stock — (2) ( 3 ) ( 3 ) Conversion to class A common stock upon sales into public market — (2) ( 612 ) 10 612 — Share-based compensation 602 602 Stock issued under equity plans 4 196 196 Restricted stock and performance-based shares settled in cash for taxes — (2) ( 120 ) ( 120 ) Cash dividends declared and paid, at a quarterly amount of $ 0.375 per class A common stock ( 3,203 ) ( 3,203 ) Repurchase of class A common stock ( 56 ) ( 600 ) ( 10,989 ) ( 11,589 ) Balance as of September 30, 2022 5 $ 2,324 (1) 1,890 $ 19,545 $ ( 35 ) $ 16,116 $ ( 2,369 ) $ 35,581 (1) As of September 30, 2022 and 2021, the book value of series A preferred stock was $ 1.0 billion and $ 486 million, respectively. Refer to Note 5—U.S. and Europe Retrospective Responsibility Plans for the book value of series B and series C preferred stock. (2) Increase or decrease is less than one million shares. See accompanying notes, which are an integral part of these consolidated financial statements. 57 Table of Contents VISA INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued) Preferred Stock Common Stock and Additional Paid-in Capital Right to Recover for Covered Losses Accumulated Income Accumulated Other Comprehensive Income (Loss) Total Equity Shares Amount Shares Amount (in millions, except per share data) Balance as of September 30, 2020 5 $ 5,086 1,939 $ 16,721 $ ( 39 ) $ 14,088 $ 354 $ 36,210 Net income 12,311 12,311 Other comprehensive income (loss) 82 82 Adoption of new accounting standards 3 3 VE territory covered losses incurred ( 147 ) ( 147 ) Recovery through conversion rate adjustment ( 55 ) 53 ( 2 ) Conversion to class A common stock upon sales into public market — (1) ( 1,951 ) 29 1,951 — Share-based compensation 542 542 Stock issued under equity plans 5 208 208 Restricted stock and performance-based shares settled in cash for taxes ( 1 ) ( 144 ) ( 144 ) Cash dividends declared and paid, at a quarterly amount of $ 0.32 per class A common stock ( 2,798 ) ( 2,798 ) Repurchase of class A common stock ( 40 ) ( 423 ) ( 8,253 ) ( 8,676 ) Balance as of September 30, 2021 5 $ 3,080 1,932 $ 18,855 $ ( 133 ) $ 15,351 $ 436 $ 37,589 (1) Increase or decrease is less than one million shares. See accompanying notes, which are an integral part of these consolidated financial statements. 58 Table of Contents VISA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended September 30, 2023 2022 2021 (in millions) Operating Activities Net income $ 17,273 $ 14,957 $ 12,311 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Client incentives 12,297 10,295 8,367 Share-based compensation 765 602 542 Depreciation and amortization 943 861 804 Deferred income taxes ( 483 ) ( 336 ) 873 VE territory covered losses incurred ( 136 ) ( 43 ) ( 147 ) (Gains) losses on equity investments, net 104 264 ( 712 ) Other 14 ( 94 ) ( 109 ) Change in operating assets and liabilities: Settlement receivable ( 160 ) ( 397 ) ( 468 ) Accounts receivable ( 250 ) ( 97 ) ( 343 ) Client incentives ( 11,014 ) ( 9,351 ) ( 7,510 ) Other assets ( 24 ) ( 666 ) ( 147 ) Accounts payable 34 67 88 Settlement payable ( 194 ) 1,256 679 Accrued and other liabilities 1,291 1,055 929 Accrued litigation 295 476 70 Net cash provided by (used in) operating activities 20,755 18,849 15,227 Investing Activities Purchases of property, equipment and technology ( 1,059 ) ( 970 ) ( 705 ) Investment securities: Purchases ( 4,363 ) ( 5,997 ) ( 5,111 ) Proceeds from maturities and sales 3,160 4,585 5,701 Acquisitions, net of cash and restricted cash acquired — ( 1,948 ) ( 75 ) Purchases of other investments ( 121 ) ( 86 ) ( 71 ) Settlement of derivative instruments 402 — — Other investing activities ( 25 ) 128 109 Net cash provided by (used in) investing activities ( 2,006 ) ( 4,288 ) ( 152 ) Financing Activities Repurchase of class A common stock ( 12,101 ) ( 11,589 ) ( 8,676 ) Repayments of debt ( 2,250 ) ( 1,000 ) ( 3,000 ) Dividends paid ( 3,751 ) ( 3,203 ) ( 2,798 ) Proceeds from issuance of senior notes — 3,218 — Cash proceeds from issuance of class A common stock under equity plans 260 196 208 Restricted stock and performance-based shares settled in cash for taxes ( 130 ) ( 120 ) ( 144 ) Other financing activities 200 ( 198 ) — Net cash provided by (used in) financing activities ( 17,772 ) ( 12,696 ) ( 14,410 ) Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 636 ( 1,287 ) ( 37 ) Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 1,613 578 628 Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year 20,377 19,799 19,171 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year $ 21,990 $ 20,377 $ 19,799 Supplemental Disclosure Cash paid for income taxes, net $ 3,433 $ 3,741 $ 3,012 Interest payments on debt $ 617 $ 607 $ 643 Accruals related to purchases of property, equipment and technology $ 96 $ 56 $ 41 See accompanying notes, which are an integral part of these consolidated financial statements. 59 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2023 Note 1—Summary of Significant Accounting Policies Organization . Visa Inc. (Visa or the Company), is a global payments technology company that facilitates global commerce and money movement across more than 200 countries and territories. Visa operates one of the world’s largest electronic payments networks — VisaNet — which provides transaction processing services (primarily authorization, clearing and settlement). The Company offers products, solutions and services that facilitate secure, reliable and efficient money movement for participants in the ecosystem. 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. Consolidation and basis of presentation . The consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Company consolidates its majority-owned and controlled entities, including variable interest entities (VIEs) for which the Company is the primary beneficiary. The Company’s investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. Intercompany balances and transactions have been eliminated in consolidation. During fiscal 2022, economic sanctions were imposed on Russia, impacting Visa and its clients. In March 2022, the Company suspended its operations in Russia and deconsolidated its Russian subsidiary. The Company’s activities are interrelated, and each activity is dependent upon and supportive of the other. All significant operating decisions are based on analysis of Visa as a single global business. The Company has one reportable segment, Payment Services. Use of estimates . The preparation of 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 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 period in which such changes occur. Future actual results could differ materially from these estimates. The use of estimates in specific accounting policies is described further below as appropriate. Cash, cash equivalents, restricted cash, and restricted cash equivalents . Cash and cash equivalents include cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are primarily recorded at cost, which approximates fair value due to their generally short maturities. The Company defines restricted cash and restricted cash equivalents as cash and cash equivalents that cannot be withdrawn or used for general operating activities. See Note 4—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents. Restricted cash equivalents—U.S. litigation escrow . The Company maintains an escrow account from which monetary liabilities from settlements of, or judgments in, the U.S. covered litigation are paid. See Note 5—U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters for a discussion of the U.S. covered litigation. The escrow funds are held in money market investments, and classified as restricted cash equivalents on the consolidated balance sheets. Interest earned on escrow funds is recognized in investment income (expense) and other on the consolidated statements of operations. Fair value. The Company measures certain financial assets and liabilities at fair value on a recurring basis. Certain non-financial assets such as goodwill, intangible assets and property, equipment and technology are subject to nonrecurring fair value measurements if they are deemed to be impaired. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are reported under a three-level valuation hierarchy. See Note 6—Fair Value Measurements and Investments. Marketable equity securities. Marketable equity securities, which are reported in investment securities on the consolidated balance sheets, include investments in publicly traded companies as well as mutual fund investments related to various employee compensation and benefit plans. Interest and dividend income as well as gains and losses, realized and unrealized, from changes in fair value are recognized in investment income (expense) and other on the consolidated statements of operations. 60 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Trading activity in the mutual fund investments is at the direction of the Company’s employees. These investments are held in a trust and are not considered by the Company to be available for its operational or liquidity needs. The corresponding liability is reported in accrued liabilities on the consolidated balance sheets, with changes in the liability recognized in personnel expense on the consolidated statements of operations. Available-for-sale debt securities. The Company’s investments in debt securities, which are classified as available-for-sale and reported in investment securities or cash and cash equivalents on the consolidated balance sheets, include U.S. government-sponsored debt securities and U.S. Treasury securities. These securities are recorded at cost at the time of purchase and are carried at fair value. The Company considers these securities to be available-for-sale to meet working capital and liquidity needs. Investments with stated maturities of less than one year from the balance sheet date, or investments that the Company intends to sell within one year, are classified as current assets, while all other securities are classified as non-current assets. Unrealized gains and losses are reported in other comprehensive income (loss). The specific identification method is used to calculate realized gain or loss on the sale of securities, which is recorded in investment income (expense) and other on the consolidated statements of operations. Interest income is recognized when earned and is included in investment income (expense) and other on the consolidate d statements of operations. The Company evaluates its debt securities for impairment on an ongoing basis. When there has been a decline in fair value of a debt security below the amortized cost basis, the Company recognizes an impairment in investment income (expense) and other on the consolidated statements of operations if it has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis. In addition, if the Company identifies that the decline in fair value has resulted from credit losses, the credit loss component is recognized as an allowance on the consolidated balance sheets and in investment income (expense) and other o n the consolidat ed statements of operations. The non-credit loss component remains in accumulated other comprehensive income (loss) until realized from a sale or subsequent impairment. Non-marketable equity securities. The Company’s non-marketable equity securities, which are reported in other assets on the consolidated balance sheets, include investments in privately held entities without readily determinable fair values. All gains and losses on non-marketable equity securities are recognized in inv estment income (expense) and other on the consolidated statements of operations. The Company applies the equity method of accounting when it does not have control but has the ability to exercise significant influence over the entity. Under the equity method, the Company’s share of each entity’s profit or loss is recognized in investment income (expense) and other on the co nsolidated statements of operations. The Company applies the fair value measurement alternative for equity securities in certain other entities when it does not have the ability to exercise significant influence over the entity. The Company adjusts the carrying value of these equity securities to fair value when orderly transactions for identical or similar investments of the same issuer are observable. The Company regularly reviews investments accounted for under the equity method and the fair value measurement alternative for possible impairment, which generally involves an analysis of the facts and changes in circumstances influencing the investment, expectations of the entity’s cash flows and capital needs, and the viability of its business model. Financial instruments . The Company considers the following to be financial instruments: cash, cash equivalents, restricted cash, restricted cash equivalents, investment securities, settlement receivable and payable, accounts receivable, customer collateral, non-marketable equity securities and derivative instruments. See Note 6—Fair Value Measurements and Investments. Settlement receivable and payable . The Company operates systems for authorizing, clearing and settling payment transactions worldwide. Most U.S. dollar settlements with the Company’s financial institution clients are settled within the same day and do not result in a receivable or payable balance. Settlements in currencies other than the U.S. dollar generally remain outstanding for one to two business days, resulting in amounts due from and to clients. These amounts are presented as settlement receivable and settlement payable on the consolidated balance sheets. 61 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Customer collateral . The Company holds cash deposits and other non-cash assets from certain clients in order to ensure that their performance of settlement obligations arising from Visa payment services are processed in accordance with the Company’s operating rules. The cash collateral assets are restricted and fully offset by corresponding liabilities, and both balances are presented on the consolidated balance sheets. Pledged securities are held by a custodian in accounts under the Company’s name and ownership. The Company does not have the right to repledge these securities, but may sell these securities in the event of default by the client on its settlement obligations. Letters of credit are provided primarily by a client’s financial institutions to serve as irrevocable guarantees of payment. Guarantees are provided primarily by a client’s parent to secure the obligations of its subsidiaries. The Company routinely evaluates the financial viability of institutions providing the letters of credit and guarantees. See Note 12—Settlement Guarantee Management. Guarantees and indemnifications . The Company recognizes an obligation at inception for guarantees and indemnifications that qualify for recognition, regardless of the probability of occurrence. The Company indemnifies its financial institution clients for settlement losses suffered due to the failure of any other client to fund its settlement obligations in accordance with the Visa operating rules. The Company estimates expected credit losses and recognizes an allowance for those credit losses related to its settlement indemnification obligations. The estimated fair value of the liability for settlement indemnification is included in accrued liabilities on the consolidated balance sheets. Property, equipment and technology, net . Property, equipment and technology are recorded at historical cost less accumulated depreciation and amortization, which are computed on a straight-line basis over the asset’s estimated useful life. Depreciation and amortization of technology, furniture, fixtures and equipment are computed over estimated useful lives ranging from 2 to 10 years. Leasehold improvements are amortized over the shorter of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40 years, and buildings are depreciated over 40 years. Improvements that increase functionality of the asset are capitalized and depreciated over the asset’s remaining useful life. Land and construction-in-progress are not depreciated. Technology includes purchased and internally developed software, including technology assets obtained through acquisitions. Internally developed software represents software primarily used by the VisaNet electronic payments network. Internal and external costs incurred during the preliminary project stage are expensed as incurred. Qualifying costs incurred during the application development stage are capitalized. Once the project is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology’s estimated useful life. Acquired technology assets are initially recorded at fair value and amortized on a straight-line basis over the estimated useful life. The Company evaluates the recoverability of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of expected undiscounted net future cash flows is less than the carrying amount of an asset or asset group, an impairment loss is recognized to the extent that the carrying amount of the asset or asset group exceeds its fair value. See Note 7—Property, Equipment and Technology, Net . Leases . 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. Lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The Company does not combine lease payments with non-lease components for any of its leases. Operating leases are recorded as ROU assets, which are included in other assets on the consolidated balance sheets. The current portion of lease liabilities are included in accrued liabilities and the long-term portion is included in other liabilities on the consolidated balance sheets. The Company’s lease cost is included in general and administrative expense on the consolidated statements of operations and consists of amounts recognized under lease agreements, adjusted for impairment and sublease income. 62 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Business combinations . The Company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are generally recorded at their acquisition date fair values. The excess of the purchase price over the fair value of net assets acquired, including identifiable intangible assets, is recorded as goodwill. Acquisition-related costs are expensed in the periods in which the costs are incurred. Intangible assets, net and goodwill . The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset. Finite-lived intangible assets primarily consist of customer relationships and trade names obtained through acquisitions. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 3 to 15 years. Indefinite-lived intangible assets consist of trade name, customer relationships and reacquired rights. Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment annually or more frequently if events or changes in circumstances indicate that impairment may exist. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangible assets. The Company assesses each category of indefinite-lived intangible assets for impairment on an aggregate basis, which may require the allocation of cash flows and/or an estimate of fair value to the assets or asset group. Impairment exists if the fair value of the indefinite-lived intangible asset is less than the carrying value. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate that impairment may exist. The Company performed its annual impairment review of indefinite-lived intangible assets and goodwill as of February 1, 2023, and concluded there was no impairment as of that date. No recent events or changes in circumstances indicate that impairment existed as of September 30, 2023. See Note 8—Intangible Assets and Goodwill . Accrued litigation . The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are subjective and based on a number of factors, including the specifics of such legal or regulatory proceedings, the merits of the Company’s defenses and consultation with internal and external legal counsel. Actual outcomes of these legal and regulatory proceedings may differ materially from the Company’s estimates. The Company expenses legal costs as incurred in professional fees on the consolidated statements of operations. See Note 20—Legal Matters. Revenue recognition . The Company’s net revenues are comprised principally of the following categories: service revenues, data processing revenues, international transaction revenues and other revenues, reduced by client incentives. As a payments network service provider, the Company’s obligation to the customer is to stand ready to provide continuous access to Visa’s payments network over the contractual term, facilitate the processing of payment transactions, including authorization, clearing and settlement, and deliver related products and services. The Company delivers its payments network services directly to issuers and acquirers, who provide those services to others within the payments network: the merchants and consumers. The Company considers all parties in Visa’s payments network as customers. The Company earns net revenues primarily from issuers and acquirers. Consideration is variable based primarily upon the amount and type of transactions and payments volume on Visa’s products. The transaction price for each specific service is reported net of discounts attributable to individual services or fees. The Company recognizes revenue, net of sales and other similar taxes, as the payments network services are performed in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company has elected the optional exemption to not disclose the remaining performance obligations related to payments network services and other performance obligations which are constrained by and dependent upon the future performance of its clients, which are variable in nature. The Company also recognizes revenues, net of sales and other similar taxes, from other value added services, including issuing solutions, acceptance solutions, risk and identity solutions, open banking and advisory services, as these value added services are performed. 63 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Service revenues consist mainly of revenues earned for services provided in support of client usage of Visa payment services. These revenues include fees related to payments volumes. Visa’s obligation is to stand ready to provide continuous access to Visa’s payments network and related services with respect to Visa-branded payments programs. Current quarter service revenues are primarily assessed using a calculation of current quarter’s pricing applied to the prior quarter’s payments volume. Data processing revenues consist of revenues earned for authorization, clearing, settlement; value added services related to issuing, acceptance, and risk and identity solutions; network access; and other maintenance and support services that facilitate transaction and information processing among the Company’s 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 related to advisory, marketing and certain card benefits; license fees for use of the Visa brand or technology; and fees for account holder services, certification and licensing. Other revenues are recognized in the same period the related transactions occur or services are performed. Client incentives. The Company enters into long-term contracts 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 Visa’s network and driving innovation. Incentives are classified as reductions to net revenues within client incentives, unless the incentive is a cash payment made in exchange for a distinct good or service provided by the customer, in which case the payment is classified as operating expense. The Company generally capitalizes upfront and fixed incentive payments as client incentive assets under these agreements when paid and amortizes the amounts as a reduction to revenues ratably over the contractual term. Incentives that are earned by the customer based on performance targets are recorded when earned and disclosed as client incentive liabilities and as reductions to revenues based on management's estimate of each client's future performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts. Client incentive assets and liabilities are classified on the consolidated balance sheets as current or long-term based on a 12-month operating cycle. Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media advertising is expensed when the advertising takes place. Sponsorship costs are recognized over the period in which the Company benefits from the sponsorship rights. Promotional costs are expensed as incurred, when the related services are received, or when the related event occurs. Income taxes . The Company’s income tax expense consists of two components: current and deferred. Current income tax expense represents taxes paid or payable for the current period. Deferred tax assets and liabilities are recognized to reflect the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the respective tax basis of existing assets and liabilities, and operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is recorded for the portions that are not expected to be realized based on the level of historical taxable income, projections of future taxable income over the periods in which the temporary differences are deductible, and qualifying tax planning strategies. Where interpretation of the tax law may be uncertain, the Company recognizes, measures and discloses income tax uncertainties. The Company accounts for interest expense and penalties related to uncertain tax positions in interest expense and investment income (expense) and other, respectively, on the consolidated statements of operations. The Company files a consolidated federal income tax return and, in certain states, combined state tax returns. The Company elects to claim foreign tax credits in any given year if such election is beneficial to the Company. See Note 19—Income Taxes . 64 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Foreign currency remeasurement and translation . The Company’s functional currency is the U.S. dollar for the majority of its foreign operations except for Visa Europe Limited (Visa Europe) whose functional currency is the Euro. Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet dates. Non-monetary assets and liabilities are remeasured at historical exchange rates. Resulting foreign currency transaction gains and losses related to conversion and remeasurement are recorded in general and administrative expense on the consolidated statements of operations and were not material for fiscal 2023, 2022 and 2021. Where a non-U.S. currency is the functional currency, translation from that functional currency to the U.S. dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for revenue and expense accounts using an average exchange rate for the period. Resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets. Derivative and hedging instruments . The Company uses foreign exchange forward derivative contracts to reduce its exposure to foreign currency rate changes on forecasted non-functional currency denominated operational cash flows. The terms of these derivative contracts designated as cash flow hedges are generally no more than 12 months. The Company uses regression analysis to assess hedge effectiveness prospectively and retrospectively. The effectiveness tests are performed on foreign exchange forward contracts based on changes in the spot rate of the derivative instrument compared to changes in the spot rate of the forecasted hedged transaction. Derivatives are carried at fair value on a gross basis on the consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivative contracts designated as cash flow hedges are recorded in other comprehensive income (loss). When the forecasted transaction occurs and is recognized in earnings, the amount in accumulated other comprehensive income (loss) related to that hedge is reclassified to the consolidated statements of operations in the corresponding account where revenue or expense is recorded. Forward points are excluded from effectiveness testing purposes and are reported in earnings. Derivatives designated as cash flow hedges are subject to master netting agreements, which provide the Company with a legal right to net settle multiple payable and receivable positions with the same counterparty, in a single currency through a single payment. However, the Company presents fair values on a gross basis on the consolidated balance sheets. The Company holds foreign exchange forward derivative contracts and other non-derivative financial instruments which were designated as net investment hedges against a portion of the Company’s net investment in Visa Europe. The Company also holds interest rate and cross-currency swap agreements on a portion of the outstanding senior notes that allows the Company to manage its interest rate exposure through a combination of fixed and floating rates and reduce the overall cost of borrowing. The Company designated the interest rate swaps as fair value hedges and the cross-currency swaps as net investment hedges. Gains and losses related to hedging instruments for fair value hedges are recognized in interest expense along with a corresponding loss or gain related to the change in the fair value of the underlying hedged item in the same line item on the consolidated statements of operations. Gains and losses related to hedging instruments for net investment hedges are recorded in other comprehensive income (loss). Amounts excluded from the effectiveness testing of net investment hedges are recognized in earnings. The Company utilizes foreign exchange forward derivative contracts to hedge against foreign currency exchange rate fluctuations related to certain monetary assets and liabilities denominated in foreign currencies. Gains and losses resulting from changes in the fair value of these derivative instruments not designated for hedge accounting are recorded in general and administrative expense on the consolidated statements of operations. Cash flows associated with a cash flow hedge are classified as an operating activity on the consolidated statements of cash flows. Cash flows associated with a fair value hedge may be included in operating, investing or financing activities depending on the classification of the items being hedged. Cash flows associated with a net investment hedge are classified as an investing activity. See Note 13—Derivative and Hedging Instruments . Share-based compensation . The Company measures share-based compensation cost at the grant date, net of estimated forfeitures, based on the estimated fair value of the award. The Company recognizes compensation cost for awards with only service conditions on a straight-line basis over the requisite service period, which is generally the vesting period. Compensation cost for performance-based awards is recognized on a graded-vesting basis. The 65 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 amount is initially estimated based on target performance and is adjusted as appropriate based on management’s best estimate throughout the performance period. See Note 17—Share-based Compensation. Earnings per share . The Company calculates earnings per share using the two-class method to reflect the different rights of each class and series of outstanding common stock. Basic earnings per share is computed by dividing net income available to each class of shares by the weighted-average number of shares of common stock and participating securities outstanding during the period. Participating securities include the Company’s series A, B and C preferred stock and restricted stock units (RSUs) that contain non-forfeitable rights to dividends or dividend equivalents. Net income is allocated to each class of common stock and participating securities based on its proportional ownership on an as-converted basis. The weighted-average number of shares outstanding of each class of common stock reflects changes in ownership over the periods presented. See Note 15—Stockholders’ Equity . Diluted earnings per share is computed by dividing net income available to each class of shares by the weighted-average number of shares of common stock outstanding, participating securities outstanding 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 series A, B and C 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. See Note 16—Earnings Per Share. Recently Adopted Accounting Pronouncement. In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Subsequently, the FASB also issued amendments to this standard. The amendments in the ASU are effective upon issuance through December 31, 2024. During fiscal 2023 , the Company adopted certain optional expedients provided in this ASU in relation to contract modifications and hedge accounting. The adoption did not have a material impact on the consolidated financial statements. Note 2—Acquisitions Pending Acquisition In June 2023, Visa entered into a definitive agreement to acquire Pismo Holdings, a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific and Europe, for $ 1.0 billion in cash. This acquisition is subject to customary closing conditions, including applicable regulatory reviews and approvals. Fiscal 2022 Acquisitions Currencycloud. In December 2021, Visa acquired The Currency Cloud Group Limited (Currencycloud), a global platform that enables financial institutions and fintechs to provide innovative cross-border foreign exchange solutions, for a total purchase consideration of $ 893 million (which includes the fair value of Visa’s previously held equity interest in Currencycloud). The Company allocated $ 150 million of the purchase consideration to technology, customer relationships, other net assets acquired and deferred tax liabilities and the remaining $ 743 million to goodwill. Tink. In March 2022, Visa acquired 100 % of the share capital of Tink AB (Tink) for $ 1.9 billion in cash. Tink is an open banking platform that enables financial institutions, fintechs and merchants to build financial products and services and move money. The acquisition is expected to help accelerate the adoption of open banking around the world by providing a secure, reliable platform for innovation. 66 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table summarizes the final purchase price allocation for Tink: Purchase Price Allocation Weighted-Average Useful Life (in millions) (in years) Technology $ 245 4 Customer relationships 90 6 Deferred tax liabilities ( 71 ) Other net assets acquired (liabilities assumed) 25 Goodwill 1,577 Total $ 1,866 5 Goodwill is primarily attributable to synergies expected to be achieved from the acquisition and the assembled workforce. The goodwill recognized is not deductible for tax purposes. 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 Years Ended September 30, 2023 2022 2021 (in millions) Service revenues $ 14,826 $ 13,361 $ 11,475 Data processing revenues 16,007 14,438 12,792 International transaction revenues 11,638 9,815 6,530 Other revenues 2,479 1,991 1,675 Client incentives ( 12,297 ) ( 10,295 ) ( 8,367 ) Net revenues $ 32,653 $ 29,310 $ 24,105 For the Years Ended September 30, 2023 2022 2021 (in millions) U.S. $ 14,138 $ 12,851 $ 11,160 International 18,515 16,459 12,945 Net revenues $ 32,653 $ 29,310 $ 24,105 Remaining performance obligations are comprised of deferred revenues and contract revenues that will be invoiced and recognized as revenues in future periods primarily related to value added services. As of September 30, 2023, the remaining performance obligations were $ 2.9 billion. The Company expects approximately half to be recognized as revenue in the next two years and the remaining thereafter. However, the amount and timing of revenue recognition is affected by several factors, including contract modifications and terminations, which could impact the estimate of amounts allocated to remaining performance obligations and when such revenues could be recognized. 67 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 4—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported on the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated statements of cash flows as follows: September 30, 2023 2022 (in millions) Cash and cash equivalents $ 16,286 $ 15,689 Restricted cash and restricted cash equivalents: U.S. litigation escrow 1,764 1,449 Customer collateral 3,005 2,342 Prepaid expenses and other current assets 935 897 Cash, cash equivalents, restricted cash and restricted cash equivalents $ 21,990 $ 20,377 Prepaid expenses and other current assets include restricted cash and restricted cash equivalents related to funds held by the Company on behalf of clients in segregated bank accounts that generally cannot be withdrawn or used for general operating activities. These amounts are fully offset by corresponding liabilities recorded in accrued liabilities on the Company’s consolidated balance sheets. Note 5—U.S. and Europe Retrospective Responsibility Plans U.S. Retrospective Responsibility Plan The Company has established several related mechanisms designed to address potential liability under certain litigation (U.S. covered litigation). These mechanisms are included in and referred to as the U.S. retrospective responsibility plan and consist of a U.S. litigation escrow agreement, the conversion feature of the Company’s shares of class B common stock, the indemnification obligations of the Visa U.S.A. Inc. (Visa U.S.A.) members, an interchange judgment sharing agreement, a loss sharing agreement and an omnibus agreement, as amended. U.S. covered litigation consists of a number of matters that have been settled or otherwise fully or substantially resolved, as well as the following: • the Interchange Multidistrict Litigation . In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 1:05-md-01720-JG-JO (E.D.N.Y.) or MDL 1720, including all cases currently included in MDL 1720, any other case that includes claims for damages relating to the period prior to the Company’s initial public offering (IPO) that has been or is transferred for coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction; • any claim that challenges the reorganization or the consummation thereof; provided that such claim is transferred for coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction; and • any case brought after October 22, 2015 by a merchant that opted out of the Rule 23(b)(3) settlement class in MDL 1720 that arises out of facts or circumstances substantially similar to those alleged in MDL 1720 and that is not transferred to or otherwise included in MDL 1720. See Note 20—Legal Matters . U.S. litigation escrow agreement. In accordance with the U.S. litigation escrow agreement, the Company maintains an escrow account, from which settlements of, or judgments in, the U.S. covered litigation are paid. The amount of the escrow is determined by the board of directors and the Company’s litigation committee, all members of which are affiliated with, or act for, certain Visa U.S.A. members. The accrual related to the U.S. covered litigation could be either higher or lower than the U.S. litigation escrow account balance. See Note 20—Legal Matters . 68 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table presents the changes in the restricted cash equivalents—U.S. litigation escrow account: For the Years Ended September 30, 2023 2022 (in millions) Balance as of beginning of period $ 1,449 $ 894 Deposits into the U.S. litigation escrow account 1,000 850 Payments to opt-out merchants (1) , net of interest earned on escrow funds ( 685 ) ( 295 ) Balance as of end of period $ 1,764 $ 1,449 (1) These payments are associated with the interchange multidistrict litigation. See Note 20—Legal Matters . Conversion feature. Under the terms of the plan, when the Company funds the U.S. litigation escrow account, the value of the Company’s class B common stock is subject to dilution through a downward adjustment to the rate at which shares of class B common stock ultimately convert into shares of class A common stock. This has the same economic effect on earnings per share as repurchasing the Company’s class A common stock, because it reduces the class B conversion rate and consequently the as-converted class A common stock share count with each deposit amount. See Note 15—Stockholders’ Equity . Indemnification obligations . To the extent that amounts available under the U.S. litigation escrow arrangement and other agreements in the plan are insufficient to fully resolve the U.S. covered litigation, the Company will use commercially reasonable efforts to enforce the indemnification obligations of Visa U.S.A.’s members for such excess amounts, including but not limited to enforcing indemnification obligations pursuant to Visa U.S.A.’s certificate of incorporation and bylaws and in accordance with their membership agreements. Interchange judgment sharing agreement. Visa U.S.A. and Visa International Service Association (Visa International) have entered into an interchange judgment sharing agreement with certain Visa U.S.A. members that have been named as defendants in the interchange multidistrict litigation, which is described in Note 20—Legal Matters . Under this judgment sharing agreement, Visa U.S.A. members that are signatories will pay their membership proportion of the amount of a final judgment not allocated to the conduct of Mastercard. Loss sharing agreement. Visa has entered into a loss sharing agreement with Visa U.S.A., Visa International and certain Visa U.S.A. members. The loss sharing agreement provides for the indemnification of Visa U.S.A., Visa International and, in certain circumstances, Visa with respect to: (i) the amount of a final judgment paid by Visa U.S.A. or Visa International in the U.S. covered litigation after the operation of the U.S. litigation escrow arrangement, conversion feature of the Company’s class B common stock and interchange judgment sharing agreement, plus any amounts reimbursable to the interchange judgment sharing agreement signatories; or (ii) the damages portion of a settlement of a U.S. covered litigation that is approved as required under Visa U.S.A.’s certificate of incorporation by the vote of Visa U.S.A.’s specified voting members. The several obligation of each bank that is a party to the loss sharing agreement will equal the amount of any final judgment enforceable against Visa U.S.A., Visa International or any other signatory to the interchange judgment sharing agreement, or the amount of any approved settlement of a U.S. covered litigation, multiplied by such bank’s then-current membership proportion as calculated in accordance with Visa U.S.A.’s certificate of incorporation. On October 22, 2015, Visa entered into an amendment to the loss sharing agreement. The amendment includes within the scope of U.S. covered litigation any action brought after the amendment by an opt-out from the Rule 23(b)(3) Settlement Class in MDL 1720 that arises out of facts or circumstances substantially similar to those alleged in MDL 1720 and that is not transferred to or otherwise included in MDL 1720. On the same date, Visa entered into amendments to the interchange judgment sharing agreement and omnibus agreement that include any such action within the scope of those agreements as well. Omnibus agreement. Visa entered into an omnibus agreement with Mastercard and certain Visa U.S.A. members that confirmed and memorialized the signatories’ intentions with respect to the loss sharing agreement, the interchange judgment sharing agreement and other agreements relating to the interchange multidistrict litigation, see Note 20—Legal Matters. Under the omnibus agreement, the monetary portion of any settlement of the interchange multidistrict litigation covered by the omnibus agreement would be divided into a Mastercard portion at 33.3333 % and a Visa portion at 66.6667 %. In addition, the monetary portion of any judgment assigned to Visa- 69 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 related claims in accordance with the omnibus agreement would be treated as a Visa portion. Visa would have no liability for the monetary portion of any judgment assigned to Mastercard-related claims in accordance with the omnibus agreement, and if a judgment is not assigned to Visa-related claims or Mastercard-related claims in accordance with the omnibus agreement, then any monetary liability would be divided into a Mastercard portion at 33.3333 % and a Visa portion at 66.6667 %. The Visa portion of a settlement or judgment covered by the omnibus agreement would be allocated in accordance with specified provisions of the Company’s U.S. retrospective responsibility plan. The litigation provision on the consolidated statements of operations was not impacted by the execution of the omnibus agreement. On August 26, 2014, Visa entered into an amendment to the omnibus agreement. The omnibus amendment makes applicable to certain settlements in opt-out cases in the interchange multidistrict litigation the settlement-sharing provisions of the omnibus agreement, pursuant to which the monetary portion of any settlement of the interchange multidistrict litigation covered by the omnibus agreement would be divided into a Mastercard portion at 33.3333 % and a Visa portion at 66.6667 %. The omnibus amendment also provides that in the event of termination of the class settlement agreement, Visa and Mastercard would make mutually acceptable arrangements so that Visa shall have received two-thirds and Mastercard shall have received one-third of the total of (i) the sums paid to defendants as a result of the termination of the settlement agreement and (ii) the takedown payments previously made to defendants. Europe Retrospective Responsibility Plan UK loss sharing agreement. The Company has entered into a loss sharing agreement with Visa Europe and certain of Visa Europe’s member financial institutions located in the United Kingdom (UK LSA members). Each of the UK LSA members has agreed, on a several and not joint basis, to compensate the Company for certain losses which may be incurred by the Company, Visa Europe or their affiliates as a result of certain existing and potential litigation relating to the setting and implementation of domestic multilateral interchange fee rates in the United Kingdom prior to the closing of the Visa Europe acquisition (Closing), subject to the terms and conditions set forth therein and, with respect to each UK LSA member, up to a maximum amount of the up-front cash consideration received by such UK LSA member. The UK LSA members’ obligations under the UK loss sharing agreement are conditional upon, among other things, either (a) losses valued in excess of the sterling equivalent on June 21, 2016 of € 1.0 billion having arisen in UK covered claims (and such losses having reduced the conversion rate of the series B preferred stock accordingly), or (b) the conversion rate of the series B preferred stock having been reduced to zero pursuant to losses arising in claims relating to multilateral interchange fee rate setting in the Visa Europe territory. Litigation management deed. The Company has entered into a litigation management deed with Visa Europe which sets forth the agreed upon procedures for the management of the VE territory covered litigation, the allocation of losses resulting from this litigation (VE territory covered losses) between the series B and C preferred stock, and any accelerated conversion or reduction in the conversion rate of the shares of series B and C preferred stock. The litigation management deed applies only to VE territory covered litigation (and resultant losses and liabilities). The litigation management deed provides that the Company will generally control the conduct of the VE territory covered litigation, subject to certain obligations to report and consult with the litigation management committee for VE territory covered litigation (VE Territory Litigation Management Committee). The VE Territory Litigation Management Committee, which is composed of representatives of certain Visa Europe members, has also been granted consent rights to approve certain material decisions in relation to the VE territory covered litigation. The Company obtained certain protections for VE territory covered losses through the series B and C preferred stock, the UK loss sharing agreement, and the litigation management deed, (collectively Europe retrospective responsibility plan). The plan covers VE territory covered litigation (and resultant liabilities and losses) relating to the covered period, which generally refers to the period before the Closing. Visa’s protection from the plan is further limited to 70 % of any liabilities where the claim relates to inter-regional multilateral interchange fee rates where the issuer is located outside the Visa Europe territory, and the merchant is located within the Visa Europe territory. The plan does not protect the Company in Europe against all types of litigation or remedies or fines imposed in competition law enforcement proceedings, only the interchange litigation specifically covered by the plan’s terms. Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to the series B and C preferred stock. The total amount of protection available through the preferred stock component of the 70 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Europe retrospective responsibility plan is equivalent to the as-converted value of the preferred stock, which can be calculated at any point in time as the product of: (a) the outstanding number of shares of preferred stock; (b) the current conversion rate applicable to each class of preferred stock; and (c) Visa’s class A common stock price. This amount differs from the value of the preferred stock recorded within stockholders’ equity on the Company’s consolidated balance sheets. The book value of the preferred stock reflects its historical value recorded at the Closing less VE territory covered losses recovered through a reduction of the applicable conversion rate. The book value does not reflect changes in the underlying class A common stock price subsequent to the Closing. Visa Inc. net income is not impacted by VE territory covered losses as long as the as-converted value of the preferred stock is greater than the covered loss. VE territory covered losses are recorded when the loss is deemed to be probable and reasonably estimable, or in the case of attorney’s fees, when incurred. Concurrently, the Company records a reduction to stockholders’ equity, which represents the Company’s right to recover such losses through adjustments to the conversion rate applicable to the preferred stock. The reduction to stockholders’ equity is recorded in the contra-equity account right to recover for covered losses. VE territory covered losses may be recorded before the corresponding adjustment to the applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in any six-month period unless a single, individual loss greater than € 20 million is incurred, in which case, the six-month limitation does not apply. When the adjustment to the conversion rate is made, the amount previously recorded in right to recover for covered losses is then recorded against the book value of the preferred stock within stockholders’ equity. As required by the litigation management deed, on June 21, 2022, the sixth anniversary of the Visa Europe acquisition, Visa, in consultation with the VE Territory Litigation Management Committee, carried out a release assessment. After the completion of this assessment, the Company released $ 3.5 billion of the as-converted value from its series B and C preferred stock and issued 176,655 shares of series A preferred stock on July 29, 2022 (Sixth Anniversary Release). Each holder of a share of series B and C preferred stock received a number of series A preferred stock equal to the applicable conversion adjustment divided by 100 . The Company paid $ 3 million in cash in lieu of issuing fractional shares of series A preferred stock. See Note 15—Stockholders’ Equity. The following table presents the activities related to VE territory covered losses in preferred stock and right to recover for covered losses within stockholders’ equity: Preferred Stock Right to Recover for Covered Losses Series B Series C (in millions) Balance as of September 30, 2022 $ 460 $ 812 $ ( 35 ) VE territory covered losses incurred (1) — — ( 136 ) Recovery through conversion rate adjustment (2) ( 19 ) ( 11 ) 31 Balance as of September 30, 2023 $ 441 $ 801 $ ( 140 ) Preferred Stock Right to Recover for Covered Losses Series B Series C (in millions) Balance as of September 30, 2021 $ 1,071 $ 1,523 $ ( 133 ) VE territory covered losses incurred (1) — — ( 43 ) Recovery through conversion rate adjustment ( 135 ) ( 6 ) 141 Sixth Anniversary Release ( 476 ) ( 705 ) — Balance as of September 30, 2022 $ 460 $ 812 $ ( 35 ) (1) VE territory covered losses incurred reflect settlements with merchants and additional legal costs. See Note 20—Legal Matters . (2) Adjustment to right to recover for covered losses for the conversion rate adjustment differs from the actual recovered amount due to differences in foreign exchange rates between the time the losses were incurred and the subsequent recovery through the conversion rate adjustment. 71 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table presents the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred stock recorded in stockholders’ equity within the Company’s consolidated balance sheets: September 30, 2023 2022 As-converted Value of Preferred Stock (1),(2) Book Value of Preferred Stock (1) As-converted Value of Preferred Stock (1),(3) Book Value of Preferred Stock (1) (in millions) Series B preferred stock $ 1,676 $ 441 $ 1,309 $ 460 Series C preferred stock 2,635 801 2,044 812 Total 4,311 1,242 3,353 1,272 Less: right to recover for covered losses ( 140 ) ( 140 ) ( 35 ) ( 35 ) Total recovery for covered losses available $ 4,171 $ 1,102 $ 3,318 $ 1,237 (1) Figures in the table may not recalculate exactly due to rounding. As-converted and book values are based on unrounded numbers. (2) As of September 30, 2023, the as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the series B and C preferred stock outstanding, respectively; (b) 2.937 and 3.629 , the class A common stock conversion rate applicable to the series B and C preferred stock outstanding, respectively; and (c) $ 230.01 , Visa’s class A common stock closing stock price. (3) As of September 30, 2022, the as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the series B and C preferred stock outstanding, respectively; (b) 2.971 and 3.645 , the class A common stock conversion rate applicable to the series B and C preferred stock outstanding, respectively; and (c) $ 177.65 , Visa’s class A common stock closing stock price. 72 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 6—Fair Value Measurements and Investments Assets and Liabilities Measured at Fair Value on a Recurring Basis Fair Value Measurements as of September 30 Using Inputs Considered as Level 1 Level 2 2023 2022 2023 2022 (in millions) Assets Cash equivalents and restricted cash equivalents: Money market funds $ 13,504 $ 11,736 $ — $ — U.S. Treasury securities 301 799 — — Investment securities: Marketable equity securities 339 437 — — U.S. government-sponsored debt securities — — 1,108 457 U.S. Treasury securities 4,316 4,005 — — Other current and non-current assets: Money market funds 23 22 — — Derivative instruments — — 293 1,131 Total $ 18,483 $ 16,999 $ 1,401 $ 1,588 Liabilities Accrued compensation and benefits: Deferred compensation liability $ 175 $ 146 $ — $ — Accrued and other liabilities: Derivative instruments — — 396 418 Total $ 175 $ 146 $ 396 $ 418 Level 1 assets and liabilities. Money market funds, U.S. Treasury securities and marketable equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in active markets for identical assets. The Company’s deferred compensation liability is measured at fair value based on marketable equity securities held under the deferred compensation plan. Level 2 assets and liabilities. The fair value of U.S. government-sponsored debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets . Derivative instruments are v alued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. U.S. Government-sponsored Debt Securities and U.S. Treasury Securities The amortized cost, unrealized gains and losses and fair value of debt securities were as follows: September 30, 2023 Amortized Cost Gross Unrealized Fair Value Gains Losses (in millions) U.S. government-sponsored debt securities $ 1,109 $ 1 $ ( 2 ) $ 1,108 U.S. Treasury securities 4,697 — ( 80 ) 4,617 Total $ 5,806 $ 1 $ ( 82 ) $ 5,725 73 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 September 30, 2022 Amortized Cost Gross Unrealized Fair Value Gains Losses (in millions) U.S. government-sponsored debt securities $ 458 $ — $ ( 1 ) $ 457 U.S. Treasury securities 4,937 — ( 133 ) 4,804 Total $ 5,395 $ — $ ( 134 ) $ 5,261 Debt securities with unrealized losses for less than 12 months and 12 months or greater were as follows: September 30, 2023 Less Than 12 Months 12 Months or Greater Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses (in millions) U.S. government-sponsored debt securities $ 412 $ ( 2 ) $ 50 $ — U.S. Treasury securities 1,360 ( 12 ) 2,128 ( 68 ) Total $ 1,772 $ ( 14 ) $ 2,178 $ ( 68 ) September 30, 2022 Less Than 12 Months Fair Value Gross Unrealized Losses (in millions) U.S. government-sponsored debt securities $ 408 $ ( 1 ) U.S. Treasury securities 3,507 ( 133 ) Total $ 3,915 $ ( 134 ) The unrealized losses were primarily attributable to changes in interest rates. The stated maturities of debt securities were as follows: September 30, 2023 (in millions) Due within one year $ 3,804 Due after one year through five years 1,921 Total $ 5,725 Equity Securities The Company’s non-marketable equity securities include investments in privately held companies without readily determinable fair values. These investments are measured at fair value on a non-recurring basis and are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that significant inputs used to measure fair value are unobservable and require management’s judgment. 74 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table summarizes the total carrying value of the Company’s non-marketable equity securities that were accounted for using the fair value measurement alternative and held as of September 30, 2023, including cumulative unrealized gains and losses: September 30, 2023 (in millions) Initial cost basis $ 719 Adjustments: Upward adjustments 899 Downward adjustments (including impairment) ( 445 ) Carrying amount $ 1,173 Unrealized gains and losses recognized during fiscal 2023 and 2022 that were included in the carrying value of the Company’s non-marketable equity securities accounted for using the fair value measurement alternative and still held as of September 30, 2023 and 2022, respectively, were as follows: For the Years Ended September 30, 2023 2022 (in millions) Upward adjustments $ 94 $ 231 Downward adjustments (including impairment) $ ( 99 ) $ ( 341 ) Investment Income (Expense) Investment income (expense) consisted of the following: For the Years Ended September 30, 2023 2022 2021 (in millions) Interest and dividend income on cash and investments $ 745 $ 69 $ ( 16 ) Equity securities: Unrealized gains (losses), net ( 84 ) ( 364 ) 721 Realized gains (losses), net 2 68 26 Investment income (expense) $ 663 $ ( 227 ) $ 731 Other Fair Value Disclosures Debt. Debt instruments are measured at amortized cost on the Company’s consolidated balance sheets. The fair value of the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy. As of September 30, 2023, the carrying value and estimated fair value of debt was $ 20.5 billion and $ 17.7 billion, respectively. As of September 30, 2022, the carrying value and estimated fair value of debt was $ 22.5 billion and $ 19.9 billion, respectively. Other financial instruments not measured at fair value. As of September 30, 2023, the carrying values of se ttlement receivable and payabl e and customer collateral are an approximate fair 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. 75 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 7—Property, Equipment and Technology, Net Property, equipment and technology, net, consisted of the following: September 30, 2023 2022 (in millions) Land $ 71 $ 72 Buildings and building improvements 1,022 1,003 Furniture, equipment and leasehold improvements 2,146 2,230 Construction-in-progress 344 285 Technology 5,197 5,291 Total property, equipment and technology 8,780 8,881 Accumulated depreciation and amortization ( 5,355 ) ( 5,658 ) Property, equipment and technology, net $ 3,425 $ 3,223 As of September 30, 2023 and 2022, accumulated amortization for technology was $ 3.4 billion and $ 3.7 billion, respectively. As of September 30, 2023, estimated future amortization expense on technology was as follows: For the Years Ending September 30, 2024 2025 2026 2027 2028 Thereafter Total (in millions) Estimated future amortization expense $ 605 $ 505 $ 341 $ 197 $ 84 $ 25 $ 1,757 For fiscal 2023, 2022 and 2021, depreciation and amortization expense related to property, equipment and technology was $ 867 million, $ 771 million and $ 721 million, respectively. 76 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 8—Intangible Assets and Goodwill Indefinite-lived and finite-lived intangible assets consisted of the following: September 30, 2023 2022 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (in millions) Finite-lived intangible assets: Customer relationships $ 829 $ ( 572 ) $ 257 $ 836 $ ( 513 ) $ 323 Trade names 195 ( 172 ) 23 195 ( 159 ) 36 Reseller relationships 95 ( 95 ) — 95 ( 95 ) — Other 16 ( 16 ) — 16 ( 16 ) — Total finite-lived intangible assets 1,135 ( 855 ) 280 1,142 ( 783 ) 359 Indefinite-lived intangible assets: Customer relationships and reacquired rights 21,740 — 21,740 20,622 — 20,622 Visa trade name 4,084 — 4,084 4,084 — 4,084 Total indefinite-lived intangible assets 25,824 — 25,824 24,706 — 24,706 Total intangible assets $ 26,959 $ ( 855 ) $ 26,104 $ 25,848 $ ( 783 ) $ 25,065 For fiscal 2023, 2022 and 2021, amortization expense related to finite-lived intangible assets was $ 76 million, $ 90 million and $ 83 million, respectively. As of September 30, 2023, estimated future amortization expense on finite-lived intangible assets was as follows: For the Years Ending September 30, 2024 2025 2026 2027 2028 Thereafter Total (in millions) Estimated future amortization expense $ 73 $ 57 $ 42 $ 40 $ 23 $ 45 $ 280 The changes in goodwill were as follows: For the Years Ended September 30, 2023 2022 (in millions) Balance as of beginning of period $ 17,787 $ 15,958 Goodwill from acquisitions, net of adjustments — 2,320 Foreign currency translation 210 ( 491 ) Balance as of end of period $ 17,997 $ 17,787 Note 9—Leases The Company entered into various operating lease agreements primarily for real estate. The Company's leases have original lease periods expiring between fiscal 2024 and 2035. For certain leases the Company has options to extend the lease term for up to five years . Payments under the Company’s lease arrangements are generally fixed. As of September 30, 2023 and 2022, ROU assets included in other assets on the consolidated balance sheets was $ 488 million and $ 480 million, respectively. As of September 30, 2023 and 2022, the current portion of lease 77 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 liabilities included in accrued liabilities on the consolidated balance sheets was $ 106 million and $ 98 million, respectively, and the long-term portion included in other liabilities was $ 412 million and $ 422 million, respectively. During fiscal 2023, 2022 and 2021, total operating lease cost was $ 129 million, $ 117 million and $ 111 million respectively. As of September 30, 2023 and 2022, the weighted-average remaining lease term for operating leases was approximately six years and the weighted-average discount rate for operating leases was 2.43 % and 2.15 %, respectively. As of September 30, 2023, the present value of future minimum lease payments was as follows: Operating Leases (in millions) Fiscal: 2024 $ 123 2025 111 2026 98 2027 76 2028 60 Thereafter 100 Total undiscounted lease payments 568 Less: imputed interest ( 50 ) Present value of lease liabilities $ 518 During fiscal 2023, 2022 and 2021, ROU assets obtained in exchange for lease liabilities was $ 82 million, $ 74 million and $ 96 million, respectively. As of September 30, 2023, the Company had additional operating leases that had not yet commenced with lease obligations of $ 433 million. These operating leases will commence in fiscal 2024 with non-cancellable lease terms of 1 to 14 years. 78 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 10—Debt The Company had outstanding debt as follows: September 30, Effective Interest Rate (1) 2023 2022 (in millions, except percentages) U.S. dollar notes 2.80 % Senior Notes due December 2022 $ — $ 2,250 2.89 % 3.15 % Senior Notes due December 2025 4,000 4,000 3.26 % 1.90 % Senior Notes due April 2027 1,500 1,500 2.02 % 0.75 % Senior Notes due August 2027 500 500 0.84 % 2.75 % Senior Notes due September 2027 750 750 2.91 % 2.05 % Senior Notes due April 2030 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 1,500 1,500 4.23 % 2.70 % Senior Notes due April 2040 1,000 1,000 2.80 % 4.30 % Senior Notes due December 2045 3,500 3,500 4.37 % 3.65 % Senior Notes due September 2047 750 750 3.73 % 2.00 % Senior Notes due August 2050 1,750 1,750 2.09 % Euro notes 1.50 % Senior Notes due June 2026 1,434 1,325 1.71 % 2.00 % Senior Notes due June 2029 1,062 982 2.13 % 2.375 % Senior Notes due June 2034 690 638 2.53 % Total debt 20,936 22,945 Unamortized discounts and debt issuance costs ( 159 ) ( 173 ) Hedge accounting fair value adjustments (2) ( 314 ) ( 322 ) Total carrying value of debt $ 20,463 $ 22,450 Reported as: Current maturities of debt $ — $ 2,250 Long-term debt 20,463 20,200 Total carrying value of debt $ 20,463 $ 22,450 (1) Effective interest rates disclosed do not reflect hedge accounting adjustments. (2) Represents the fair value of interest rate swap agreements entered into on a portion of the outstanding senior notes. See Note 1—Summary of Significant Accounting Policies and Note 13—Derivative and Hedging Instruments . Senior Notes The Company’s outstanding senior notes are senior unsecured obligations of the Company, ranking equally and ratably among themselves and with the Company’s existing and future unsecured and unsubordinated debt. The senior notes are not secured by any assets of the Company and are not guaranteed by any of the Company’s subsidiaries. As of September 30, 2023, the Company was in compliance with all related covenants. Each series of senior notes may be redeemed as a whole or in part at the Company’s option at any time at specified redemption prices. In addition, each series of the Euro notes may be redeemed as a whole at specified redemption prices upon the occurrence of certain U.S. tax events. During fiscal 2023, the Company repaid $ 2.25 billion of principal upon maturity of its senior notes due December 2022. 79 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 As of September 30, 2023, future principal payments on the Company’s outstanding debt were as follows: For the Years Ending September 30, 2024 2025 2026 2027 2028 Thereafter Total (in millions) Future principal payments $ — $ — $ 5,434 $ 2,750 $ — $ 12,752 $ 20,936 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. As of September 30, 2023 and 2022, the Company had no outstanding obligations under the program. Credit Facility In May 2023, the Company entered into an amended and restated credit agreement for a five-year , unsecured $ 7.0 billion revolving credit facility, which will expire in May 2028. Interest on borrowings will be charged at the applicable reference rate or an alternative base rate as defined in the credit agreement based on the currency and type of the borrowing, plus an applicable margin based on the applicable credit rating of the Company’s senior unsecured long-term debt. The Company has agreed to pay a commitment fee which will fluctuate based on such applicable rating of the Company. As of September 30, 2023, the Company was in compliance with all related covenants. This credit facility is maintained to ensure the integrity of the payment card settlement process and for general corporate purposes. As of September 30, 2023 and 2022, the Company had no amounts outstanding under the credit facility. Note 11—Pension and Other Postretirement Benefits Defined Benefit and Other Postretirement Plans The Company sponsors qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for all eligible employees residing in the U.S. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations. The Company’s defined benefit pension and other postretirement benefit plans are actuarially evaluated, incorporating various assumptions such as the discount rate and the expected rate of return on plan assets. Disclosures below include U.S. pension plans and certain non-U.S. pension plans. The Company uses a September 30 measurement date for its pension and other postretirement benefit plans. The U.S. pension plans are closed to new entrants and frozen. However, existing plan participants continue to earn interest credits on existing balances at the time of the freeze. Additionally, the Visa Europe plans are closed to new entrants. However, future benefits continue to accrue for active participants. The funded status of the Company’s defined benefit pension plans is substantially recorded in other assets on the consolidated balance sheets and is measured as the difference between the fair value of plan assets and the accumulated benefit obligation. As of September 30, 2023 and 2022, for U.S. pension plans, the fair value of plan assets was $ 1.0 billion and $ 960 million, respectively, accumulated benefit obligation was $ 640 million and $ 663 million, respectively, and the funded status was $ 374 million and $ 297 million, respectively. As of September 30, 2023 and 2022, for non-U.S. pension plans, the fair value of plan assets was $ 317 million and $ 327 million, respectively, accumulated benefit obligation was $ 287 million and $ 278 million, respectively, and funded status was $ 30 million and $ 49 million, respectively. As of September 30, 2023 and 2022, the amount recognized in accumulated other comprehensive income (loss) before tax for U.S. pension plans was ($ 82 ) million and ($ 150 ) million, respectively. As of September 30, 2023 and 2022, the amount recognized in accumulated other comprehensive income (loss) before tax for non-U.S. pension plans was ($ 87 ) million and ($ 35 ) million, respectively. Defined Contribution Plan The Company sponsors a defined contribution plan, or 401(k) plan, that covers its employees residing in the U.S. In fiscal 2023, 2022 and 2021, personnel expenses included $ 192 million, $ 161 million, and $ 141 million, 80 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 respectively, attributable to the Company’s employees under the 401(k) plan. The Company’s contributions to this 401(k) plan are funded on a current basis, and the related expenses are recognized in the period that the payroll expenses are incurred. Note 12—Settlement Guarantee Management The Company indemnifies its clients for settlement losses suffered due to failure of any other client to fund its settlement obligations in accordance with the Visa operating rules. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. Historically, the Company has experienced minimal losses as a result of its settlement risk guarantee. However, the Company’s future obligations, which could be material under its guarantees, are not determinable as they are dependent upon future events. 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. For fiscal 2023, the Company’s maximum daily settlement exposure was $ 126.9 billion and the average daily settlement exposure was $ 77.1 billion. The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met. The Company held the following collateral to manage settlement exposure: September 30, 2023 2022 (in millions) Restricted cash $ 3,005 $ 2,342 Pledged securities 411 213 Letters of credit 1,738 1,582 Guarantees 1,047 950 Total $ 6,201 $ 5,087 Note 13—Derivative and Hedging Instruments As of September 30, 2023 and 2022, the aggregate notional amount of the Company’s derivative contracts outstanding in its hedge program was $ 11.0 billion and $ 11.9 billion, respectively. As of September 30, 2023 and 2022, the aggregate notional amount of the derivative contracts not designated as hedging instruments was $ 0.8 billion and $ 1.5 billion, respectively. 81 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table shows the Company’s derivative instruments at gross fair value: September 30, Balance Sheet Location 2023 2022 (1) (in millions) Assets Designated as Hedging Instrument: Foreign exchange forward contracts Prepaid expenses and other current assets $ 100 $ 718 Cross-currency swaps Other assets $ 178 $ 378 Not Designated as Hedging Instrument: Foreign exchange forward contracts Prepaid expenses and other current assets $ 15 $ 35 Liabilities Designated as Hedging Instrument: Foreign exchange forward contracts Accrued liabilities $ 66 $ 49 Interest rate swaps Other liabilities $ 314 $ 322 Not Designated as Hedging Instrument: Foreign exchange forward contracts Accrued liabilities $ 16 $ 47 (1) The fiscal 2022 amounts have been revised to conform to the fiscal 2023 presentation. For fiscal 2023, 2022 and 2021, the Company recognized an increase (decrease) in earnings related to excluded forward points from forward contracts designated as net investment hedges and interest differentials from swap agreements of ($ 25 ) million, $ 151 million and $ 156 million, respectively. Cash flow hedges. For fiscal 2023 and 2022, the Company recognized pre-tax net gains (losses) from cash flow hedges in other comprehensive income (loss) of ($ 126 ) million and $ 190 million, respectively. The amount recognized in other comprehensive income (loss) was no t material for fiscal 2021. The Company estimates that $ 46 million of pre-tax net gains related to cash flow hedges recorded in accumulated other comprehensive income (loss) as of September 30, 2023 will be reclassified into the consolidated statements of operations within the next 12 months. Net investment hedges . For fiscal 2023, 2022 and 2021, the Company recognized pre-tax net gains (losses) in other comprehensive income (loss) related to net investment hedges of ($ 445 ) million, $ 845 million and $ 20 million, respectively. As of September 30, 2023 and 2022, the Company designated € 3.0 billion and € 1.2 billion, respectively, of Euro notes, a non-derivative financial instrument, as a hedge against a portion of the Company’s Euro-denominated net investment in Visa Europe. Credit and market risks. The Company’s derivative financial instruments are subject to both credit and market risk. The Company monitors the credit-worthiness of the financial institutions that are counterparties to its derivative financial instruments and does not consider the risks of counterparty nonperformance to be significant. The Company mitigates this risk by entering into master netting agreements, and such agreements require each party to post collateral against its net liability position with the respective counterparty. As of September 30, 2023, the Company has received collateral of $ 91 million from counterparties, which is included in accrued liabilities on the consolidated balance sheets, and posted collateral of $ 47 million, which is included in prepaid expenses and other current assets on the consolidated balance sheets. Notwithstanding the Company’s efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect against the risks associated with foreign currency fluctuations. As of September 30, 2023, credit and market risks related to derivative instruments were not considered significant. 82 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 14—Enterprise-wide Disclosures and Concentration of Business The Company’s long-lived net property and equipment and ROU assets are classified by major geographic areas as follows: September 30, 2023 2022 (in millions) U.S. $ 1,286 $ 1,312 International 544 531 Total $ 1,830 $ 1,843 Revenues by geographic market is primarily based on the location of the issuing financial institution. Net revenues earned in the U.S. were approximately 43 %, 44 % and 46 % of total net revenues in fiscal 2023, 2022, and 2021, respectively. No individual country, other than the U.S., generated 10% or more of total net revenues in these years. In fiscal 2023, 2022 and 2021, the Company had one client that accounted for 11 %, 10 % and 11 % of its total net revenues, respectively. Note 15—Stockholders’ Equity As-converted class A common stock. 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: September 30, 2023 2022 Shares Outstanding Conversion Rate Into Class A Common Stock As-converted Class A Common Stock (1) Shares Outstanding Conversion Rate Into Class A Common Stock As-converted Class A Common Stock (1) (in millions, except conversion rate) Series A preferred stock — (2) 100.0000 7 — (2) 100.0000 16 Series B preferred stock 2 2.9370 7 2 2.9710 7 Series C preferred stock 3 3.6290 11 3 3.6450 12 Class A common stock 1,594 — 1,594 1,635 — 1,635 Class B common stock 245 1.5875 (3) 390 245 1.6059 (3) 394 Class C common stock 10 4.0000 38 10 4.0000 39 Total 2,047 2,103 (1) Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on unrounded numbers. (2) The number of shares outstanding was less than one million. (3) The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend payments are based on a conversion rate rounded to the tenth decimal. Series A preferred stock issuance. In July 2022, the Company issued 176,655 shares of series A preferred stock in connection with the Sixth Anniversary Release. See Note 5—U.S. and Europe Retrospective Responsibility Plans . Reduction in as-converted shares. Under the terms of the U.S. retrospective responsibility plan, when the Company funds the U.S. litigation escrow account, the value of the Company’s class B common stock is subject to dilution through a downward adjustment to the rate at which shares of class B common stock ultimately convert into shares of class A common stock. See Note 5—U.S. and Europe Retrospective Responsibility Plans. 83 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table presents the reduction in the number of as-converted class B common stock after deposits into the U.S. litigation escrow account under the U.S. retrospective responsibility plan for fiscal 2023 and 2022. There was no comparable adjustment recorded for class B common stock for fiscal 2021. For the Years Ended September 30, 2023 2022 (in millions, except per share data) Reduction in equivalent number of class A common stock 5 4 Effective price per share (1) $ 221.33 $ 205.06 Deposits into the U.S. litigation escrow account $ 1,000 $ 850 (1) Effective price per share for the period represents the weighted-average price calculated using the effective prices per share of the respective adjustments made during the period. Effective price per share for each adjustment is calculated using the volume-weighted average price of the Company’s class A common stock over a pricing period in accordance with the Company’s current certificate of incorporation. Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to the series B and C preferred stock, and is required to undertake periodic release assessments following the anniversary of the Visa Europe acquisition to determine if value should be released from the series B and C preferred stock. The recovery and any releases of value have the same economic effect on earnings per share as repurchasing the Company’s class A common stock because it reduces the series B and C preferred stock conversion rates and consequently, reduces the as-converted class A common stock share count. See Note 5—U.S. and Europe Retrospective Responsibility Plans . The following table present s the reduction in the number of as-converted series B and C preferred stock after the Company recovered V E territory covered losses through conversion rate adjustments and completed its Sixth Anniversary Release: For the Years Ended September 30, 2023 2022 2021 Series B Series C Series B Series C Series B Series C (in millions, except per share data) Reduction in equivalent number of class A common stock — (1) — (1) 8 10 — (1) — (1) Effective price per share (2) $ 219.12 $ 215.28 $ 197.93 $ 197.50 $ 220.84 $ 220.71 Recovery through conversion rate adjustment $ 19 $ 11 $ 135 $ 6 $ 35 $ 20 Sixth Anniversary Release $ — $ — $ 1,510 $ 1,982 $ — $ — (1) The reduction in equivalent number of shares of class A common stock was less than one million shares. (2) Effective price per share for the period represents the weighted-average price calculated using the effective price per share of the respective adjustments made during the period. Effective price per share for each adjustment is calculated using the volume-weighted average price of the Company’s class A common stock over a pricing period in accordance with the Company’s current certificates of designations for its series B and C preferred stock. Common stock repurchases. The following table presents share repurchases in the open market: For the Years Ended September 30, 2023 2022 2021 (in millions, except per share data) Shares repurchased in the open market (1) 55 56 40 Average repurchase cost per share (2) $ 222.27 $ 206.47 $ 219.03 Total cost (2) $ 12,182 $ 11,589 $ 8,676 (1) Shares repurchased in the open market reflect repurchases that settled during fiscal 2023, 2022 and 2021. All sh ares repurchased in the open market have been retired and constitute authorized but unissued shares. (2) Figures in the table may not recalculate exactly due to rounding. Average repurchase cost per share and total cost are calculated based on unrounded numbers and include applicable taxes. 84 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 In December 2021, the Company’s board of directors authorized a $ 12.0 billion share repurchase program and in October 2022, authorized an additional $ 12.0 billion share repurchase program (October 2022 Program). As of September 30, 2023, the Company’s October 2022 Program had remaining authorized funds of $ 5.0 billion. All share repurchase programs authorized prior to the October 2022 Program have been completed. In October 2023, the Company’s board of directors authorized a new $ 25.0 billion share repurchase program, providing multi-year flexibility. These authorizations have no expiration date. Dividends. In fiscal 2023, 2022 and 2021, the Company declared and paid dividends of $ 3.8 billion, $ 3.2 billion and $ 2.8 billion, respectively. On October 24, 2023, the Company’s board of directors declared a quarterly cash dividend of $ 0.52 per share of class A common stock (determined in the case of class B and C common stock and series A, B and C preferred stock on an as-converted basis), payable on December 1, 2023, to all holders of record as of November 9, 2023. Class B common stock. Under the current certificate of incorporation, the class B common stock is not convertible or transferable until the date on which all of the U.S. covered litigation has been finally resolved. This transfer restriction is subject to limited exceptions, including transfers to other holders of class B common stock. After termination of the restrictions, the class B common stock will be convertible into class A common stock if transferred to a person that was not a Visa Member (as defined in the current certificate of incorporation) or similar person or an affiliate of a Visa Member or similar person. Upon such transfer, each share of class B common stock will automatically convert into a number of shares of class A common stock based upon the applicable conversion rate in effect at the time of such transfer. Adjustment of the conversion rate occurs upon: (i) the completion of any follow-on offering of class A common stock completed to increase the size of the U.S. litigation escrow account (or any cash deposit by the Company in lieu thereof) resulting in a further corresponding decrease in the conversion rate; or (ii) the final resolution of the U.S. covered litigation and the release of funds remaining on deposit in the U.S. litigation escrow account to the Company resulting in a corresponding increase in the conversion rate. See Note 5—U.S. and Europe Retrospective Responsibility Plans. In September 2023, the Company announced that it was engaging with its common stockholders on the subject of potential amendments to the certificate of incorporation that, if proposed, approved and implemented, would authorize Visa to conduct an exchange offer program that would have the effect of releasing transfer restrictions on portions of Visa’s Class B common stock prior to the final resolution of the U.S. covered litigation. Class C common stock. There are no existing transfer restrictions on class C common stock. Preferred stock. In connection with the Visa Europe acquisition, three series of preferred stock of the Company were created. Upon issuance, all of the preferred stock participate on an as-converted basis in regular quarterly cash dividends declared on the Company’s class A common stock. Preferred stock may be issued as redeemable or non-redeemable, and has preference over any class of common stock with respect to the payment of dividends and distribution of the Company’s assets in the event of a liquidation or dissolution. The series B and C preferred stock is convertible upon certain conditions into shares of class A common stock or series A preferred stock. The shares of series B and C preferred stock are subject to restrictions on transfer and may become convertible in stages based on developments in the VE territory covered litigation. The shares of series B and C preferred stock will become fully convertible on the 12th anniversary of the closing of the Visa Europe acquisition, subject only to a holdback to cover any then-pending claims. Upon any such conversion of the series B and C preferred stock (whether by such 12th anniversary, or thereafter with respect to claims pending on such anniversary), the conversion rate would be adjusted downward and the holder would receive either class A common stock or series A preferred stock (for those who are not eligible to hold class A common stock pursuant to the Company’s certificate of incorporation). The conversion rates may also be reduced from time to time to offset certain liabilities. The series A preferred stock, generally designed to be economically equivalent to the Company’s class A common stock, is freely transferable and each share of series A preferred stock will automatically convert into 100 shares of class A common stock upon a transfer to any holder that is eligible to hold class A common stock under the charter. See Note 5—U.S. and Europe Retrospective Responsibility Plans. 85 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Voting rights. The holders of the series B and C preferred stock have no right to vote on any matters, except for certain defined matters, including, in specified circumstances, any consolidation, merger, combination or similar transaction of the Company in which the preferred stockholders would either (i) receive shares of common stock or other equity securities of the Company with preferences, rights and privileges that are not substantially identical to the preferences, rights and privileges of the applicable series of preferred stock or (ii) receive securities, cash or other property that is different from what the Company’s class A common stockholders would receive. With respect to these limited matters on which the holders of preferred stock may vote, approval by the preferred stockholders requires the affirmative vote of the outstanding voting power of each such series of preferred stock, each such series voting as a single class. In either case, the series B and C preferred stockholders are entitled to cast a number of votes equal to the number of shares held by each such holder. Holders of the series A preferred stock, upon issuance at conversion, will have similar voting rights to the rights of the holders of the series B and C preferred stock. Class A common stockholders have the right to vote on all matters on which stockholders generally are entitled to vote. Class B and C common stockholders have no right to vote on any matters, except for certain defined matters, including (i) any decision to exit the core payments business, in which case the class B and C common stockholders will vote together with the class A common stockholders in a single class, (ii) in specified circumstances, any consolidation, merger, combination or similar transaction of the Company, in which case the class B and C common stockholders will vote together as a single class, and (iii) the approval of certain amendments to the Company’s certificate of incorporation, in which case class A, B and C common stockholders will vote as a separate class, including if such amendments affect the terms of class B or C common stock. In these cases, the class B and C common stockholders are entitled to cast a number of votes equal to the number of shares of class B or C common stock held multiplied by the applicable conversion rate in effect on the record date. Holders of the Company’s common stock have no right to vote on any amendment to the current certificate of incorporation that relates solely to any series of preferred stock. 86 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 16—Earnings Per Share The following table presents earnings per share for fiscal 2023: Basic Earnings Per Share Diluted Earnings Per Share Income Allocation (A) (1) Weighted- Average Shares Outstanding (B) Earnings per Share = (A)/(B) (2) Income Allocation (A) (1) Weighted- Average Shares Outstanding (B) Earnings per Share = (A)/(B) (2) (in millions, except per share data) Class A common stock $ 13,415 1,618 $ 8.29 $ 17,273 2,085 (3) $ 8.28 Class B common stock 3,254 245 $ 13.26 $ 3,251 245 $ 13.24 Class C common stock 320 10 $ 33.17 $ 319 10 $ 33.13 Participating securities 284 Not presented Not presented $ 284 Not presented Not presented Net income $ 17,273 The following table presents earnings per share for fiscal 2022: Basic Earnings Per Share Diluted Earnings Per Share Income Allocation (A) (1) Weighted- Average Shares Outstanding (B) Earnings per Share = (A)/(B) (2) Income Allocation (A) (1) Weighted- Average Shares Outstanding (B) Earnings per Share = (A)/(B) (2) (in millions, except per share data) Class A common stock $ 11,569 1,651 $ 7.01 $ 14,957 2,136 (3) $ 7.00 Class B common stock 2,781 245 $ 11.33 $ 2,778 245 $ 11.31 Class C common stock 280 10 $ 28.03 $ 280 10 $ 28.00 Participating securities 327 Not presented Not presented $ 326 Not presented Not presented Net income $ 14,957 The following table presents earnings per share for fiscal 2021: Basic Earnings Per Share Diluted Earnings Per Share Income Allocation (A) (1) Weighted- Average Shares Outstanding (B) Earnings per Share = (A)/(B) (2) Income Allocation (A) (1) Weighted- Average Shares Outstanding (B) Earnings per Share = (A)/(B) (2) (in millions, except per share data) Class A common stock $ 9,527 1,691 $ 5.63 $ 12,311 2,188 (3) $ 5.63 Class B common stock 2,244 245 $ 9.14 $ 2,242 245 $ 9.13 Class C common stock 237 10 $ 22.53 $ 236 10 $ 22.51 Participating securities 303 Not presented Not presented $ 303 Not presented Not presented Net income $ 12,311 (1) The weighted-average number of shares of as-converted class B common stock used in the income allocation was 392 million, 397 million and 398 million for fiscal 2023, 2022 and 2021, respectively. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 39 million, 40 million and 42 million for fiscal 2023, 2022 and 2021, respectively. The weighted-average number of shares of preferred stock included within participating securities was 10 million, 8 million and 12 million of as-converted series A preferred stock for fiscal 2023, 2022 and 2021, respectively, 7 million, 14 million and 16 million of as-converted series B preferred stock for fiscal 2023, 2022 and 2021, respectively, and 11 million, 20 million and 22 million of as-converted series C preferred stock for fiscal 2023, 2022 and 2021, respectively. (2) Figures in the table may not recalculate exactly due to rounding. Basic and diluted earnings per share are calculated based on unrounded numbers. (3) Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The common stock equivalents are not material for each of fiscal 2023, 2022 and 2021. 87 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 17—Share-based Compensation Equity Incentive Compensation Plan The Company’s 2007 Amended and Restated Equity Incentive Compensation Plan (EIP) authorizes the compensation committee of the board of directors to grant non-qualified stock options (options), RSUs, performance-based shares and restricted stock awards to its employees and non-employee directors, for up to 198 million shares of class A common stock. Shares available for grant may be either authorized and unissued or previously issued shares subsequently acquired by the Company. Under the EIP, 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. The EIP will continue to be in effect until all of the common stock available under the EIP is delivered and all restrictions on those shares have lapsed, unless the EIP is terminated earlier by the Company’s board of directors. For fiscal 2023, 2022 and 2021, the Company recorded share-based compensation cost related to the EIP of $ 734 million, $ 571 million and $ 518 million, respectively, in personnel expense on its consolidated statements of operations. The related tax benefits for fiscal 2023, 2022 and 2021 were $ 112 million, $ 82 million and $ 73 million, respectively. Options Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably over three years from the date of grant, subject to earlier vesting in full under certain conditions. The fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: For the Years Ended September 30, 2023 2022 2021 Expected term (in years) (1) 4.17 4.11 4.07 Risk-free rate of return (2) 4.0 % 1.1 % 0.3 % Expected volatility (3) 28.6 % 27.1 % 25.1 % Expected dividend yield (4) 0.8 % 0.7 % 0.6 % Fair value per option granted $ 57.31 $ 43.16 $ 39.51 (1) Based on Visa’s historical exercise experience. (2) Based on the zero-coupon U.S. Treasury constant maturity yield curve, continuously compounded over the expected term of the awards. (3) Based on the Company’s implied and historical volatilities. (4) Based on the Company’s annual dividend rate on the date of grant. 88 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table summarizes the Company’s option activity: Options Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) (in millions) Outstanding as of September 30, 2022 6,168,624 $ 145.92 Granted 798,017 $ 211.09 Forfeited ( 32,358 ) $ 205.35 Expired ( 2,716 ) $ 191.77 Exercised ( 1,006,212 ) $ 98.54 Outstanding as of September 30, 2023 5,925,355 $ 162.40 5.96 $ 401 Options exercisable as of September 30, 2023 4,241,861 $ 144.75 5.01 $ 362 Options exercisable and expected to vest as of September 30, 2023 (2) 5,884,022 $ 162.07 5.94 $ 400 (1) Calculated using the closing stock price on the last trading day of fiscal 2023 of $ 230.01 , less the option exercise price, multiplied by the number of instruments. (2) Applied a forfeiture rate to unvested options outstanding as of September 30, 2023 to estimate the options expected to vest in the future. During fiscal 2023, 2022 and 2021, the total intrinsic value of options exercised was $ 134 million, $ 56 million and $ 124 million, respectively, and the tax benefit realized was $ 28 million, $ 11 million and $ 23 million, respectively. As of September 30, 2023, there was $ 25 million of total unrecognized compensation cost related to unvested options, which is expected to be recognized over a weighted-average period of approximately 0.38 year. Restricted Stock Units RSUs issued under the EIP primarily vest ratably over three years from the date of grant, subject to earlier vesting in full under certain conditions. Upon vesting, RSUs can be settled in class A common stock on a one-for-one basis or in cash, or a combination thereof, at the Company’s option. T he Company does not currently intend to settle any RSUs in cash. During the vesting period, RSU award recipients are eligible to receive dividend equivalents, but do not participate in the voting rights granted to the holders of the underlying class A common stock. The fair value and compensation cost before estimated forfeitures is calculated using the closing price of class A common stock on the date of grant. During fiscal 2023, 2022 and 2021, the weighted-average grant date fair value of RSUs granted was $ 212.94 , $ 204.73 and $ 209.00 , respectively. During fiscal 2023, 2022 and 2021, the total grant date fair value of RSUs vested was $ 486 million , $ 380 million and $ 331 million, respectively. The following table summarizes the Company’s RSU activity: Units Weighted- Average Grant Date Fair Value Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) (in millions) Outstanding as of September 30, 2022 5,794,320 $ 203.23 Granted 3,373,137 $ 212.94 Vested ( 2,428,334 ) $ 200.33 Forfeited ( 321,726 ) $ 207.97 Outstanding as of September 30, 2023 6,417,397 $ 209.19 0.96 $ 1,476 (1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2023 of $ 230.01 by the number of instruments. As of September 30, 2023, there was $ 745 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 0.96 year. 89 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Performance-based Shares For the Company’s performance-based shares, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of both performance and market conditions. T he performance condition is based on the Company’s earnings per share target. The market condition is based on the Company’s total shareholder return ranked against that of other companies that are included in the Standard & Poor’s 500 Index. The fair value of each performance-based shares incorporating the market condition was estimated on the date of grant using a Monte Carlo simulation model with the following weighted-average assumptions: For the Years Ended September 30, 2023 2022 2021 Expected term (in years) 2.15 2.05 2.00 Risk-free rate of return (1) 4.4 % 0.5 % 0.2 % Expected volatility (2) 28.9 % 28.3 % 27.2 % Expected dividend yield (3) 0.8 % 0.8 % 0.6 % Fair value per performance-based share granted $ 221.32 $ 186.50 $ 229.81 (1) Based on the zero-coupon U.S. treasury constant maturity yield curve, continuously compounded over the expected term of the awards. (2) Based on the Company’s implied and historical volatilities. (3) Based on the Company’s annual dividend rate on the date of grant. Performance-based shares vest over three years and are subject to earlier vesting in full under certain conditions. During fiscal 2023, 2022 and 2021, the total grant date fair value of performance-based shares vested and earned was $ 44 million , $ 49 million and $ 47 million, respectively. Compensation cost for performance-based shares is initially estimated based on target performance. It is recorded net of estimated forfeitures and adjusted as appropriat e throughout the performance period. The following table summarizes the maximum number of performance-based shares which could be earned and related activity: Shares Weighted- Average Grant Date Fair Value Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) (in millions) Outstanding as of September 30, 2022 834,196 $ 199.92 Granted (2) 551,818 $ 221.32 Vested and earned ( 219,523 ) $ 201.70 Unearned ( 167,989 ) $ 194.42 Outstanding as of September 30, 2023 998,502 $ 212.28 1.00 $ 230 (1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2023 of $ 230.01 by the number of instruments. (2) Represents the maximum number of performance-based shares which could be earned. As of September 30, 2023, there was $ 81 million of total unrecognized compensation cost related to unvested performance-based shares, which is expected to be recognized over a weighted-average period of approximately one year. 90 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 18—Commitments The Company has software licenses throughout the world with varying expiration dates. As of September 30, 2023, future minimum payments on software licenses were as follows: For the Years Ending September 30, 2024 2025 2026 2027 2028 Thereafter Total (in millions) Software licenses $ 85 $ 33 $ 5 $ — $ — $ — $ 123 Note 19—Income Taxes The Company’s income before income taxes by fiscal year consisted of the following: For the Years Ended September 30, 2023 2022 2021 (in millions) U.S. $ 13,339 $ 11,051 $ 11,002 Non-U.S. 7,698 7,085 5,061 Total income before income taxes $ 21,037 $ 18,136 $ 16,063 For fiscal 2023, 2022 and 2021, U.S. income before income taxes included $ 4.2 billion, $ 3.6 billion, and $ 3.1 billion, respectively, of the Company’s U.S. entities’ income from operations outside of the U.S. Income tax provision by fiscal year consisted of the following: For the Years Ended September 30, 2023 2022 2021 (in millions) Current: U.S. federal $ 2,630 $ 2,166 $ 1,943 State and local 293 104 69 Non-U.S. 1,324 1,245 869 Total current taxes 4,247 3,515 2,881 Deferred: U.S. federal ( 339 ) ( 231 ) ( 57 ) State and local ( 1 ) ( 77 ) ( 28 ) Non-U.S. ( 143 ) ( 28 ) 956 Total deferred taxes ( 483 ) ( 336 ) 871 Total income tax provision $ 3,764 $ 3,179 $ 3,752 91 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table presents the components of deferred tax assets and liabilities: September 30, 2023 2022 (in millions) Deferred Tax Assets: Accrued compensation and benefits $ 212 $ 172 Accrued litigation obligation 365 331 Client incentives 630 442 Net operating loss carryforwards 232 117 Comprehensive loss 72 21 Federal benefit of state taxes 125 133 Other 66 71 Valuation allowance ( 149 ) ( 120 ) Deferred tax assets 1,553 1,167 Deferred Tax Liabilities: Property, equipment and technology, net ( 350 ) ( 450 ) Intangible assets ( 6,063 ) ( 5,788 ) Unrealized gains on equity securities ( 103 ) ( 124 ) Foreign taxes ( 25 ) ( 50 ) Deferred tax liabilities ( 6,541 ) ( 6,412 ) Net deferred tax liabilities $ ( 4,988 ) $ ( 5,245 ) As of September 30, 2023 and 2022, net deferred tax assets of $ 126 million and $ 87 million, respectively, were reflected in other assets on the consolidated balance sheets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The fiscal 2023 and 2022 valuation allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years. As of September 30, 2023, the Company had $ 1.0 billion of foreign net operating loss carryforwards, which may be carried forward indefinitely. 92 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 The following table presents a reconciliation of the income tax provision to the amount of income tax determined by applying the U.S. federal statutory income tax rate to income before income taxes: For the Years Ended September 30, 2023 2022 2021 (in millions, except percentages) U.S. federal income tax at statutory rate $ 4,418 21 % $ 3,809 21 % $ 3,373 21 % State income taxes, net of federal benefit 245 1 % 216 1 % 222 1 % Non-U.S. tax effect, net of federal benefit ( 758 ) ( 3 %) ( 588 ) ( 3 %) ( 505 ) ( 3 %) Remeasurement of deferred tax balances — — % — — % 1,007 6 % Reassessment of an uncertain tax position ( 142 ) ( 1 %) — — % — — % Conclusion of audits — — % — — % ( 255 ) ( 2 %) State tax apportionment position — — % ( 176 ) ( 1 %) — — % Other, net 1 — % ( 82 ) — % ( 90 ) — % Income tax provision $ 3,764 18 % $ 3,179 18 % $ 3,752 23 % In fiscal 2023 and fiscal 2022, the effective income tax rates were 18 % including the following: • during fiscal 2023, a $ 142 million tax benefit related to prior years due to the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination; and • during fiscal 2022, a $ 176 million tax benefit related to prior years due to a decrease in the state apportionment ratio as a result of a tax position taken related to a ruling. In fiscal 2022 and fiscal 2021, the effective income tax rates were 18 % and 23 %, respectively. The effective income tax rate in fiscal 2022 differs from the effective income tax rate in fiscal 2021 primarily due to the following: • during fiscal 2022, a $ 176 million tax benefit related to prior years due to a decrease in the state apportionment ratio as a result of a tax position taken related to a ruling; • during fiscal 2021, a $ 1.0 billion non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities as a result of the increase in UK tax rate from 19% to 25%, effective April 1, 2023; and • during fiscal 2021, $ 255 million of tax benefits recognized as a result of the conclusion of audits by taxing authorities. As of September 30, 2023 and 2022, current income taxes receivable of $ 206 million and $ 190 million, respectively, were included in prepaid expenses and other current assets; non-current income taxes receivable of $ 961 million and $ 1.0 billion, respectively, were included in other assets; income taxes payable of $ 1.5 billion and $ 365 million, respectively, were included in accrued liabilities; and accrued income taxes of $ 1.9 billion and $ 2.3 billion, respectively, were included in other liabilities on the consolidated balance sheets. The Company’s operating hub in the Asia Pacific region is located in Singapore. It was subject to a tax incentive, effective October 1, 2008 through September 30, 2023, conditional upon meeting certain business operations and employment thresholds in Singapore. In fiscal 2023, 2022 and 2021, the tax incentive decreased Singapore tax by $ 468 million , $ 362 million and $ 273 million, and the gross benefit of the tax incentive on diluted earnings per share was $ 0.22 , $ 0.17 and $ 0.12 , respectively. The Company is 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 partially be sustained, upon examination by the relevant taxing authorities. 93 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 As of September 30, 2023, 2022 and 2021, the Company’s total gross unrecognized tax benefits were $ 3.5 billion, $ 2.7 billion and $ 2.5 billion, respectively, exclusive of interest and penalties described below. Included in the $ 3.5 billion, $ 2.7 billion and $ 2.5 billion are $ 1.6 billion, $ 1.3 billion and $ 1.3 billion of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period. The following table presents a reconciliation of beginning and ending unrecognized tax benefits by fiscal year: 2023 2022 2021 (in millions) Balance as of beginning of period $ 2,683 $ 2,488 $ 2,579 Increase in unrecognized tax benefits related to prior years 515 10 34 Decrease in unrecognized tax benefits related to prior years ( 190 ) ( 143 ) ( 386 ) Increase in unrecognized tax benefits related to current year 510 350 326 Decrease related to settlements with taxing authorities ( 17 ) ( 19 ) ( 63 ) Reduction related to lapsing statute of limitations ( 4 ) ( 3 ) ( 2 ) Balance as of end of period $ 3,497 $ 2,683 $ 2,488 The increases in unrecognized tax benefits include refund claims filed during the year, an increase in gross timing differences, and various tax positions across several jurisdictions. The decrease in unrecognized tax benefits primarily includes the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination, as mentioned above. In fiscal 2023, 2022 and 2021, the Company recognized $ 34 million, $ 15 million and $ 1 million of net interest expense, respectively, related to uncertain tax positions. In fiscal 2023 and 2021, the Company accrued no significant penalties and in fiscal 2022, the Company reversed accrued penalties of $ 31 million related to uncertain tax positions. As of September 30, 2023 and 2022, the Company had accrued interest of $ 271 million and $ 238 million, respectively, and no significant accrued penalties related to uncertain tax positions. The Company’s U.S. federal income tax returns for fiscal 2016 through 2018 are currently under examination. For fiscal 2008 through 2015, one unresolved issue related to an income tax deduction remains. During fiscal 2022, the Company completed the administrative appeals process for this issue without reaching a settlement with the Internal Revenue Service. The Company is evaluating its next steps. Except for the unresolved issue, the federal statute of limitations has expired for fiscal years prior to 2016. The Company’s California income tax returns for fiscal 2012 through 2015 are currently under examination and refund claims filed for fiscal 2006 through 2011 are currently under administrative appeal. Except for the refund claims, the California statute of limitations has expired for fiscal years prior to 2012. The India tax authorities completed the assessment of the Company’s income tax returns for the taxable years falling within the period from fiscal 2010 to 2021 and made certain adjustments. The Company objected to these adjustments and filed appeals to the appellate authorities. The Company is also subject to examinations by various state and foreign tax authorities. All material state and foreign tax matters have been concluded for years through fiscal 2007. The timing and outcome of the final resolutions of the federal, state and foreign tax examinations and refund claims are uncertain. However, it is reasonably possible that the Company’s net unrecognized tax benefits could decrease by approximately $ 400 million in the next 12 months. 94 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Note 20—Legal Matters The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. For those proceedings where a loss is determined to be only reasonably possible or probable but not estimable, the Company has disclosed the nature of the claim. Additionally, unless otherwise disclosed below with respect to these proceedings, the Company cannot provide an estimate of the possible loss or range of loss. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the Company’s financial position, results of operations or cash flows. 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. The following table summarizes the activity related to accrued litigation: For the Years Ended September 30, 2023 2022 (in millions) Balance as of beginning of period $ 1,456 $ 983 Provision for uncovered legal matters 21 6 Provision for covered legal matters 1,024 885 Payments for legal matters ( 750 ) ( 418 ) Balance as of end of period $ 1,751 $ 1,456 Accrual Summary—U.S. Covered Litigation Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. 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 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: For the Years Ended September 30, 2023 2022 (in millions) Balance as of beginning of period $ 1,441 $ 881 Provision for interchange multidistrict litigation 906 861 Payments for U.S. covered litigation ( 726 ) ( 301 ) Balance as of end of period $ 1,621 $ 1,441 During fiscal 2023, the Company recorded additional accruals of $ 906 million and deposited $ 1.0 billion into the U.S. litigation escrow account to address claims of certain merchants who opted out of the Amended Settlement Agreement (as described herein). The accrual balance is consistent with the Company’s best estimate of its share of a probable and reasonably estimable loss with respect to the U.S. covered litigation. While this estimate is consistent with the Company’s view of the current status of the litigation, the probable and reasonably estimable loss or range of such loss could materially vary based on developments in the litigation. The Company will continue 95 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 to consider and reevaluate this estimate in light of the substantial uncertainties with respect to the litigation. The Company is unable to estimate a potential loss or range of loss, if any, at trial if negotiated resolutions cannot be reached. Accrual Summary—VE Territory Covered Litigation Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory covered losses through periodic adjustments to the conversion rates applicable to the series B and C preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders’ equity will be recorded when the loss is deemed to be probable and reasonably estimable. See further discussion below under VE Territory Covered Litigation and Note 5—U.S. and Europe Retrospective Responsibility Plans . The following table summarizes the accrual activity related to VE territory covered litigation: For the Years Ended September 30, 2023 2022 (in millions) Balance as of beginning of period $ 11 $ 102 Provision for VE territory covered litigation 118 24 Payments for VE territory covered litigation ( 19 ) ( 115 ) Balance as of end of period $ 110 $ 11 U.S. Covered Litigation Interchange Multidistrict Litigation (MDL) – Class Actions Beginning in May 2005, a series of complaints (the majority of which were styled as class actions) were filed in U.S. federal district courts by merchants against Visa U.S.A., Visa International and/or Mastercard, and in some cases, certain U.S. financial institutions. The Judicial Panel on Multidistrict Litigation issued an order transferring the cases to the U.S. District Court for the Eastern District of New York (Court) for coordination of pre-trial proceedings in MDL 1720. A group of purported class plaintiffs subsequently filed amended and supplemental class complaints. The individual and class complaints generally challenged, among other things, Visa’s and Mastercard’s purported setting of interchange reimbursement fees, their “no surcharge” and honor-all-cards rules, alleged tying and bundling of transaction fees, and Visa’s reorganization and IPO, under the federal antitrust laws and, in some cases, certain state unfair competition laws. The complaints sought money damages, declaratory and injunctive relief, attorneys’ fees and, in one instance, an order that the IPO be unwound. Visa Inc., Visa U.S.A., Visa International, Mastercard Incorporated, Mastercard International Incorporated, various U.S. financial institution defendants, and the class plaintiffs signed a settlement agreement (2012 Settlement Agreement) to resolve the class plaintiffs’ claims. Pursuant to the 2012 Settlement Agreement, the Company deposited approximately $ 4.0 billion from the U.S. litigation escrow account and approximately $ 500 million attributable to interchange reductions for an eight -month period into court-authorized settlement accounts. Visa subsequently received from the Court and deposited into the Company’s U.S. litigation escrow account “takedown payments” of approximately $ 1.1 billion. On June 30, 2016, the U.S. Court of Appeals for the Second Circuit vacated the lower court’s certification of the merchant class, reversed the approval of the settlement, and remanded the case to the lower court for further proceedings. 96 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 On remand, the district court entered an order appointing interim counsel for two putative classes of plaintiffs, a “Damages Class” and an “Injunctive Relief Class.” The plaintiffs purporting to act on behalf of the putative Damages Class subsequently filed a Third Consolidated Amended Class Action Complaint, seeking money damages and attorneys’ fees, among other relief. A new group of purported class plaintiffs, acting on behalf of the putative Injunctive Relief Class, filed a class action complaint against Visa, Mastercard, and certain bank defendants seeking, among other things, an injunction against the setting of default interchange rates; against certain Visa operating rules relating to merchants, including the honor-all-cards rule; and against various transaction fees, including the fixed acquirer network fee, as well as attorneys’ fees. On September 17, 2018, Visa, Mastercard, and certain U.S. financial institutions reached an agreement with plaintiffs purporting to act on behalf of the putative Damages Class to resolve all Damages Class claims (Amended Settlement Agreement). The Amended Settlement Agreement supersedes the 2012 Settlement Agreement and includes, among other terms, a release from participating class members for liability arising out of conduct alleged by the Damages Class in the litigation, including claims that accrue no later than five years after the Amended Settlement Agreement becomes final. Participating class members will not release injunctive relief claims as a named representative or non-representative class member in the putative Injunctive Relief Class. The Amended Settlement Agreement also required an additional settlement payment from all defendants totaling $ 900 million, with the Company’s share of $ 600 million paid from the Company’s litigation escrow account established pursuant to the Company’s retrospective responsibility plan. See Note 5—U.S. and Europe Retrospective Responsibility Plans. The additional settlement payment was added to the approximately $ 5.3 billion previously deposited into settlement accounts by the defendants pursuant to the 2012 Settlement Agreement. Certain merchants in the proposed settlement class objected to the settlement and/or submitted requests to opt out of the settlement class. On December 13, 2019, the district court granted final approval of the Amended Settlement Agreement, which was subsequently appealed. Based on the percentage of class members (by payment volume) that opted out of the class, $ 700 million was returned to defendants. Visa’s portion of the takedown payment, approximately $ 467 million, was deposited into the U.S. litigation escrow account. On March 15, 2023, the U.S. Court of Appeals for the Second Circuit affirmed the final approval of the Amended Settlement Agreement by the district court. On August 3, 2023, the district court entered an order appointing a special master to resolve matters arising out of or relating to the Amended Settlement Agreement’s plan of administration. 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. On April 28, 2021, a complaint was filed by Hayley Lanning and others, and on June 16, 2021, a complaint was filed by Camp Grounds Coffee and others, each against Visa and Mastercard on behalf of a purported class of merchants located in 25 states and the District of Columbia who have taken payment using the Square card acceptance service. Each of these complaints alleges violations of the antitrust laws of those jurisdictions and seeks recovery for plaintiffs as indirect purchasers. To the extent these plaintiffs’ claims are not released by the Am ended Settlement Agreement, Visa believes they are covered by the U.S. Retrospective Responsibility Plan. On June 1, 2020, Visa, jointly with other defendants, served a motion for summary judgment regarding the claims in the Injunctive Relief Class complaint. The putative Injunctive Relief Class plaintiffs served a motion for partial summary judgment. On September 27, 2021, the district court certified without opt out rights an Injunctive Relief Class consisting of all merchants that accept Visa or Mastercard credit or debit cards in the United States at any time between December 18, 2020 and entry of final judgment. Interchange Multidistrict Litigation (MDL) – Individual Merchant Actions Since May 2013, more than 50 cases have been filed in or removed to various federal district courts by hundreds of merchants generally pursuing damages claims on allegations similar to those raised in MDL 1720. The cases name as defendants Visa Inc., Visa U.S.A., Visa International, Mastercard Incorporated and Mastercard International Incorporated, although some also include certain U.S. financial institutions as defendants. A number of the cases include allegations that Visa has monopolized, attempted to monopolize, and/or conspired to monopolize debit card-related market segments. Some of the cases seek an injunction against the setting of default interchange rates; certain Visa operating rules relating to merchants, including the honor-all-cards rule; and various transaction fees, including the fixed acquirer network fee. In addition, some cases assert that Visa, Mastercard and/or their member banks conspired to prevent the adoption of chip-and-PIN authentication in the U.S. or otherwise circumvent competition in the debit market. Certain individual merchants have filed amended complaints to, among other things, add claims for injunctive relief and update claims for damages. 97 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 In addition to the cases filed by individual merchants, Visa, Mastercard, and/or certain U.S. financial institution defendants in MDL 1720 filed complaints against certain merchants in the Eastern District of New York seeking, in part, a declaration that Visa’s conduct did not violate federal or state antitrust laws. The individual merchant actions described in this section have been either assigned to the judge presiding over MDL 1720, have been transferred, or are being considered for transfer by the Judicial Panel on Multidistrict Litigation for inclusion in MDL 1720. These individual merchant actions are U.S. covered litigation for purposes of the U.S. retrospective responsibility plan. See Note 5—U.S. and Europe Retrospective Responsibility Plans. Visa has reached settlements with a number of merchants representing approximately 72 % of the Visa-branded payment card sales volume of merchants who opted out of the Amended Settlement Agreement with the Damages Class plaintiffs. On June 1, 2020 and July 14, 2023, 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. On October 9, 2022, defendants’ motion for summary judgment regarding damages for EMV-related chargebacks was denied. The Company believes it has substantial defenses to the claims asserted in the putative class actions and individual merchant actions, but the final outcome of individual legal claims is inherently unpredictable. The Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of merchants’ claims, and such developments could have a material adverse effect on the Company’s financial results in the period in which the effect becomes probable and reasonably estimable. While the U.S. retrospective responsibility plan is designed to address monetary liability in these matters, see Note 5—U.S. and Europe Retrospective Responsibility Plans , judgments or settlements that require the Company to change its business practices, rules, or contractual commitments could adversely affect the Company’s financial results. Consumer Interchange Litigation On December 30, 2022, a putative class action was filed in California state court against Visa, Mastercard, and certain financial institutions on behalf of all Visa and Mastercard cardholders in California who made a purchase using a Visa-branded or Mastercard-branded payment card in California from January 1, 2004. Plaintiffs primarily allege a conspiracy to fix interchange fees and seek injunctive relief, attorneys’ fees and damages as direct and indirect purchasers based on alleged violations of California law. On January 11, 2023, plaintiffs filed an amended complaint asserting the same claims as asserted in the prior complaint. On January 30, 2023, Visa removed the action to federal court, and the Judicial Panel on Multidistrict Litigation subsequently issued an order transferring the case to MDL 1720. On June 15, 2023, plaintiffs’ motion to remand the case to California state court was denied, and plaintiffs appealed. On July 28, 2023, defendants filed a motion to dismiss that appeal, which was granted on November 14, 2023. VE Territory Covered Litigation Europe Merchant Litigation Since July 2013, proceedings have been commenced by more than 1,150 Merchants (the capitalized term “Merchant”, when used in this section, means a Merchant together with subsidiary/affiliate companies that are party to the same claim) against Visa Europe, Visa Inc. and other Visa subsidiaries in the UK and other countries, primarily relating to interchange rates in Europe and, in some cases, relating to fees charged by Visa and certain Visa rules. They seek damages for alleged anti-competitive conduct in relation to one or more of the following types of interchange fees for credit and debit card transactions: UK domestic, Irish domestic, other European domestic, intra-European Economic Area and/or other inter-regional. As of the filing date, Visa has settled the claims asserted by over 175 Merchants, and there are approximately 900 Merchants with outstanding claims. In addition, over 30 Merchants have threatened to commence similar proceedings. Standstill agreements have been entered into with respect to some of those threatened Merchant claims, several of which have been settled. While the amount of interchange being challenged could be substantial, these claims have not yet been filed and their full scope is not yet known. The Company has learned that several additional European entities have indicated they may also bring similar claims, and the Company anticipates additional claims in the future. 98 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 A trial took place from November 2016 to March 2017, relating to claims asserted by one Merchant. In judgments published in November 2017 and February 2018, the court found as to that Merchant that Visa’s UK domestic interchange did not restrict competition, but that if it had been found to restrict competition, it would not be exemptible under applicable law. On July 4, 2018, the Court of Appeal overturned the lower court’s rulings, finding that Visa’s UK domestic interchange restricted competition and the question of whether Visa’s UK domestic interchange was exempt from the finding of restriction under applicable law had been incorrectly decided. Following an appeal to the Supreme Court of the United Kingdom, on June 17, 2020, the Supreme Court found that Visa’s UK domestic interchange restricted competition under applicable competition law. On September 30, 2021, Visa reached a confidential settlement agreement resolving one Merchant’s claims. On November 26, 2021, with respect to certain pending Merchant claims, the UK Competition Appeal Tribunal (CAT) found that UK and certain other domestic and intra-European Economic Area consumer interchange fees before the introduction of the Interchange Fee Regulation (IFR) were a restriction of competition, but that the question of whether those fees, along with inter-European Economic Area fees, are a restriction of competition after the introduction of the IFR would need to be resolved at trial. Whether any interchange fees are exempt from the finding of restriction under applicable law and the assessment of damages, if any, will also need to be considered at trial. On October 4, 2022, the UK Court of Appeal affirmed the CAT’s ruling. On June 1, 2022, two class action claims were filed against Visa with the CAT on behalf of UK businesses that accepted Visa-branded payment cards at any time since June 1, 2016, alleging that UK domestic, intra-European Economic Area, and inter-regional interchange fees on commercial credit cards, and inter-regional interchange fees on consumer cards, are anti-competitive. The Europe retrospective responsibility plan covers liabilities and losses relating to the covered period, which generally refers to the period before the closing of the Visa Europe acquisition. On June 8, 2023, the UK Competition Appeal Tribunal denied class certification in the two class action claims. The full scope of potential damages is not yet known because not all Merchant claims have been served and Visa has substantial defenses. However, the claims that have been issued, served and/or preserved, seek several billion dollars in damages. Other Litigation On November 14, 2021, a motion to certify a class action was filed against Visa and Mastercard in the Israel Central District Court. The motion asserts that interchange fees on cross-border transactions in Israel and the Honor All Cards rule are anti-competitive and seeks damages and injunctive relief. Other Litigation U.S. ATM Access Fee Litigation National ATM Council Class Action . In October 2011, the National ATM Council and thirteen non-bank ATM operators filed a purported class action lawsuit against Visa (Visa Inc., Visa International, Visa U.S.A. and Plus System, Inc.) and Mastercard in the U.S. District Court for the District of Columbia. The complaint challenges Visa’s rule (and a similar Mastercard rule) that if an ATM operator chooses to charge consumers an access fee for a Visa or Plus transaction, that fee cannot be greater than the access fee charged for transactions on other networks. Plaintiffs claim that the rule violates Section 1 of the Sherman Act and seek treble damages, injunctive relief, and attorneys’ fees. On August 4, 2021, the district court granted plaintiffs’ motion for class certification. On July 25, 2023, the U.S. Court of Appeals for the District of Columbia affirmed the district court’s class certification decision, and on September 27, 2023, defendants’ petition for rehearing en banc was denied. 99 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 Consumer Class Actions . In October 2011, a purported consumer class action was filed against Visa and Mastercard in the same federal court challenging the same ATM access fee rules. Two other purported consumer class actions challenging the rules, later combined, were also filed in October 2011 in the same federal court naming Visa, Mastercard and three financial institutions as defendants. Plaintiffs seek treble damages, restitution, injunctive relief, and attorneys’ fees where available under federal and state law, including under Section 1 of the Sherman Act and consumer protection statutes. On August 4, 2021, the district court granted plaintiffs’ motion for class certification in each case. On August 8, 2022, in the case in which the three financial institutions were named, the district court granted plaintiffs’ motion for final approval of a class action settlement with those institutions and entered final judgments of dismissal as to those institutions. On July 25, 2023, the U.S. Court of Appeals for the District of Columbia affirmed the district court’s class certification decision, and on September 27, 2023, defendants’ petition for rehearing en banc was denied. U.S. Department of Justice Civil Investigative Demand ( 2012 ) On March 13, 2012, the Antitrust Division of the United States Department of Justice (Division) issued a Civil Investigative Demand (CID), to Visa Inc. seeking documents and information regarding a potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The CID focused on PIN-Authenticated Visa Debit and Visa’s competitive responses to the Dodd-Frank Act, including Visa’s fixed acquirer network fee. Visa has cooperated with the Division in connection with the CID. Pulse Network On November 25, 2014, Pulse Network LLC filed suit against Visa Inc. in federal district court in Texas, alleging that Visa has, among other things, monopolized and attempted to monopolize debit card network services markets. On August 29, 2022, Pulse filed an amended complaint, which makes similar allegations and seeks unspecified treble damages, attorneys’ fees and injunctive relief, including to enjoin the fixed acquirer network fee structure, and Visa’s agreements relating to debit with issuers, acquirers and merchants. EMV Chip Liability Shift Following their initial complaint filed on March 8, 2016, B&R Supermarket, Inc., d/b/a Milam’s Market, and Grove Liquors LLC filed an amended class action complaint on July 15, 2016, against Visa Inc., Visa U.S.A., Mastercard, Discover, American Express, EMVCo and certain financial institutions in the U.S. District Court for the Northern District of California. The amended complaint asserts that defendants, through EMVCo, conspired to shift liability for fraudulent, faulty, or otherwise rejected payment card transactions from defendants to the purported class of merchants, defined as those merchants throughout the U.S. who have been subjected to the “Liability Shift” since October 2015. Plaintiffs claim that the “Liability Shift” violates Sections 1 and 3 of the Sherman Act and certain state laws, and seek treble damages, injunctive relief and attorneys’ fees. EMVCo and the financial institution defendants were dismissed, and the matter was subsequently transferred to the U.S. District Court for the Eastern District of New York, which has clarified that this case is not part of MDL 1720. On August 28, 2020, the district court granted plaintiffs’ motion for class certification. On November 30, 2022, Visa, jointly with other defendants, served a motion for summary judgment regarding the claims in the amended complaint and a motion to decertify the class. Federal Trade Commission Civil Investigative Demand On November 4, 2019, the Bureau of Competition of the United States Federal Trade Commission (Bureau) requested that Visa provide, on a voluntary basis, documents and information relating to an investigation as to whether Visa’s actions inhibited merchant choice in the selection of debit payments networks in potential violation of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. On June 9, 2020, the Federal Trade Commission (FTC) issued a CID to Visa requesting additional documents and information. Visa has cooperated with the FTC in connection with the CID. Euronet Litigation On December 13, 2019, Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o. and Euronet Services spol. s.r.o. (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 100 Table of Contents VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) September 30, 2023 various competition laws. Euronet sought damages, costs, and injunctive relief to prevent the defendants from enforcing these rules. Visa reached a settlement with Euronet, and the claim against Visa has been dismissed. European Commission Staged Digital Wallets Investigation On June 26, 2020, the European Commission (EC) informed Visa that it opened a preliminary investigation into Visa’s rules regarding staged digital wallets. On February 16, 2023, the EC notified Visa that the investigation has been closed. German ATM Litigation Beginning in December 2021, Visa was served with claims in Germany brought by German banks against Visa Europe and Visa Inc. The banks claim that Visa’s ATM rules prohibiting the charging of access fees on domestic cash withdrawals are anti-competitive, and the majority seek damages. Visa has filed challenges to the jurisdiction of the German courts to hear these claims, one of which was denied and one of which was granted as to Visa Europe. U.S. Department of Justice Civil Investigative Demand (2021) On March 26, 2021, June 11, 2021, January 4, 2023, and May 2, 2023, the Antitrust Division of the U.S. Department of Justice (the Division) issued CIDs to Visa, seeking documents and information regarding a potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The CIDs focus on U.S. debit and competition with other payment methods and networks. Visa is cooperating with the Division in connection with the investigation. Foreign Currency Exchange Rate Litigation Following an initial class action complaint filed on July 9, 2021, an amended class action complaint was filed on December 6, 2021 against Visa in the U.S. District Court for the Northern District of California by several individuals on behalf of a purported nationwide class, and/or purported California, Washington, Massachusetts or New Jersey subclasses, of cardholders who conducted a transaction in a foreign currency. The amended complaint asserted claims for unjust enrichment and restitution as well as violations of the California Unfair Competition Law, the Washington Consumer Protection Act, the Massachusetts Consumer Protection Act, and the New Jersey Consumer Fraud Act. On December 21, 2022, plaintiffs filed a third amended complaint asserting the same claims. On August 30, 2023, the court granted Visa’s motion to dismiss with prejudice and directed the clerk to close the case. European Commission Client Incentive Agreements Investigation On December 2, 2022, the EC informed Visa that it had opened a preliminary investigation into Visa’s incentive agreements with clients. Visa is cooperating with the EC in connection with the investigation. 101 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not applicable.