VISA INC., 10-Q filed on 4/25/2016
Quarterly Report
Document and Entity Information
6 Months Ended
Mar. 31, 2016
Apr. 15, 2016
Class A common stock
Apr. 15, 2016
Class B common stock
Apr. 15, 2016
Class C common stock
Entity Registrant Name
VISA INC. 
 
 
 
Entity Central Index Key
0001403161 
 
 
 
Current Fiscal Year End Date
--09-30 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
Document Type
10-Q 
 
 
 
Document Period End Date
Mar. 31, 2016 
 
 
 
Document Fiscal Year Focus
2016 
 
 
 
Document Fiscal Period Focus
Q2 
 
 
 
Amendment Flag
false 
 
 
 
Entity Common Stock, Shares Outstanding
 
1,904,791,047 
245,513,385 
18,859,025 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Mar. 31, 2016
Sep. 30, 2015
Assets
 
 
Cash and cash equivalents
$ 15,943 
$ 3,518 
Restricted cash—litigation escrow (Note 3)
1,061 
1,072 
Investment securities (Note 4):
 
 
Trading
69 
66 
Available-for-sale
3,885 
2,431 
Settlement receivable
414 
408 
Accounts receivable
944 
847 
Customer collateral (Note 7)
1,050 
1,023 
Current portion of client incentives
291 
303 
Prepaid expenses and other current assets
646 
353 
Total current assets
24,303 
10,021 
Investment securities, available-for-sale (Note 4)
3,577 
3,384 
Client incentives
540 
110 
Property, equipment and technology, net
1,883 
1,888 
Other assets
852 
778 
Intangible assets, net
11,335 
11,361 
Goodwill
11,836 
11,825 
Total assets
54,326 
39,367 
Liabilities
 
 
Accounts payable
90 
127 
Settlement payable
723 
780 
Customer collateral (Note 7)
1,050 
1,023 
Accrued compensation and benefits
376 
503 
Client incentives
1,132 
1,049 
Accrued liabilities
741 
849 
Accrued litigation (Note 13)
1,013 
1,024 
Total current liabilities
5,125 
5,355 
Long-term debt (Note 5)
15,876 
0 
Deferred tax liabilities
3,256 
3,273 
Other liabilities
938 
897 
Total liabilities
25,195 
9,525 
Equity
 
 
Preferred stock, $0.0001 par value, 25 shares authorized and none issued
0 
0 
Additional paid-in capital
17,645 
18,073 
Accumulated income
11,582 
11,843 
Accumulated other comprehensive loss, net:
 
 
Investment securities, available-for-sale
40 
5 
Defined benefit pension and other postretirement plans
(126)
(161)
Derivative instruments classified as cash flow hedges
(9)
83 
Foreign currency translation adjustments
(1)
(1)
Total accumulated other comprehensive loss, net
(96)
(74)
Total equity
29,131 
29,842 
Total liabilities and equity
54,326 
39,367 
Class A common stock
 
 
Equity
 
 
Common stock
0 
0 
Class B common stock
 
 
Equity
 
 
Common stock
0 
0 
Class C common stock
 
 
Equity
 
 
Common stock
$ 0 
$ 0 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Mar. 31, 2016
Sep. 30, 2015
Preferred Stock
 
 
Preferred stock, par value
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized
25 
25 
Preferred stock, shares issued
0 
0 
Class A common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
2,001,622 
2,001,622 
Common stock, shares issued
1,905 
1,950 
Common stock, shares outstanding
1,905 
1,950 
Class B common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
622 
622 
Common stock, shares issued
245 
245 
Common stock, shares outstanding
245 
245 
Class C common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
1,097 
1,097 
Common stock, shares issued
19 
20 
Common stock, shares outstanding
19 
20 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Mar. 31, 2015
Operating Revenues
 
 
 
 
Service revenues
$ 1,699 
$ 1,577 
$ 3,344 
$ 3,115 
Data processing revenues
1,473 
1,340 
2,952 
2,723 
International transaction revenues
1,045 
964 
2,076 
1,934 
Other revenues
198 
204 
396 
408 
Client incentives
(789)
(676)
(1,577)
(1,389)
Total operating revenues
3,626 
3,409 
7,191 
6,791 
Operating Expenses
 
 
 
 
Personnel
528 
483 
1,027 
992 
Marketing
186 
190 
380 
395 
Network and processing
126 
109 
254 
223 
Professional fees
66 
77 
138 
147 
Depreciation and amortization
121 
125 
241 
245 
General and administrative
164 
141 
320 
267 
Litigation provision (Note 13)
1 
3 
1 
3 
Total operating expenses
1,192 
1,128 
2,361 
2,272 
Operating income
2,434 
2,281 
4,830 
4,519 
Non-operating Income
 
 
 
 
Interest expense
(132)
(7)
(161)
(10)
Other (Note 4 and Note 8)
139 
8 
411 
35 
Total non-operating income
7 
1 
250 
25 
Income before income taxes
2,441 
2,282 
5,080 
4,544 
Income tax provision (Note 12)
734 
732 
1,432 
1,425 
Net income
$ 1,707 
$ 1,550 
$ 3,648 
$ 3,119 
Class A common stock
 
 
 
 
Earnings Per Share
 
 
 
 
Basic earnings per share (Note 10) (in dollars per share)
$ 0.71 1
$ 0.63 1
$ 1.51 1
$ 1.27 1
Basic weighted-average shares outstanding (Note 10) (in shares)
1,909 
1,963 
1,923 
1,969 
Diluted earnings per share (Note 10) (in dollars per share)
$ 0.71 1
$ 0.63 1
$ 1.51 1
$ 1.26 1
Diluted weighted-average shares outstanding (Note 10) (in shares)
2,401 2
2,460 2
2,416 2
2,469 2
Class B common stock
 
 
 
 
Earnings Per Share
 
 
 
 
Basic earnings per share (Note 10) (in dollars per share)
$ 1.17 1
$ 1.04 1
$ 2.49 1
$ 2.09 1
Basic weighted-average shares outstanding (Note 10) (in shares)
245 
245 
245 
245 
Diluted earnings per share (Note 10) (in dollars per share)
$ 1.17 1
$ 1.04 1
$ 2.49 1
$ 2.08 1
Diluted weighted-average shares outstanding (Note 10) (in shares)
245 
245 
245 
245 
Class C common stock
 
 
 
 
Earnings Per Share
 
 
 
 
Basic earnings per share (Note 10) (in dollars per share)
$ 2.85 1
$ 2.53 1
$ 6.05 1
$ 5.06 1
Basic weighted-average shares outstanding (Note 10) (in shares)
19 
20 
19 
21 
Diluted earnings per share (Note 10) (in dollars per share)
$ 2.84 1
$ 2.52 1
$ 6.04 1
$ 5.05 1
Diluted weighted-average shares outstanding (Note 10) (in shares)
19 
20 
19 
21 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 1,707 
$ 1,550 
$ 3,648 
$ 3,119 
Investment securities, available-for-sale:
 
 
 
 
Net unrealized gain (loss)
26 
(9)
60 
(19)
Income tax effect
(7)
4 
(23)
7 
Reclassification adjustment for net gain realized in net income
(3)
0 
(3)
(21)
Income tax effect
1 
0 
1 
8 
Defined benefit pension and other postretirement plans:
 
 
 
 
Net unrealized actuarial gain (loss) and prior service credit
5 
(6)
61 
0 
Income tax effect
(2)
1 
(23)
0 
Amortization of actuarial loss (gain) and prior service credit realized in net income
2 
1 
(5)
0 
Income tax effect
0 
0 
2 
0 
Derivative instruments classified as cash flow hedges:
 
 
 
 
Net unrealized (loss) gain
(54)
65 
(38)
128 
Income tax effect
11 
(20)
6 
(37)
Reclassification adjustment for net gain realized in net income
(37)
(20)
(85)
(26)
Income tax effect
11 
5 
25 
7 
Foreign currency translation adjustments
0 
0 
0 
1 
Other comprehensive (loss) income, net of tax
(47)
21 
(22)
48 
Comprehensive income
$ 1,660 
$ 1,571 
$ 3,626 
$ 3,167 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $)
In Millions, unless otherwise specified
Total
USD ($)
Additional Paid-in Capital
USD ($)
Accumulated Income
USD ($)
Accumulated Other Comprehensive Loss
USD ($)
Class A common stock
Common Stock
Class B common stock
Common Stock
Class C common stock
Common Stock
Beginning Balance at Sep. 30, 2015
$ 29,842 
$ 18,073 
$ 11,843 
$ (74)
 
 
 
Beginning Balance (in shares) at Sep. 30, 2015
 
 
 
 
1,950 
245 
20 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Net income
3,648 1
 
3,648 
 
 
 
 
Other comprehensive loss, net of tax
(22)
 
 
(22)
 
 
 
Comprehensive income
3,626 
 
 
 
 
 
 
Conversion of class C common stock upon sale into public market (in shares)
 
 
 
 
3 
 
(1)
Issuance and vesting of restricted stock and performance-based shares (in shares)
 
 
 
 
2 
 
 
Issuance and vesting of restricted stock and performance-based shares
0 
 
 
 
 
 
 
Share-based compensation, net of forfeitures (Note 11) (in shares)2
 
 
 
 
0 
 
 
Share-based compensation, net of forfeitures (Note 11)
97 
97 
 
 
 
 
 
Restricted stock and performance-based shares settled in cash for taxes (shares)
 
 
 
 
(1)
 
 
Restricted stock and performance-based shares settled in cash for taxes
(85)
(85)
 
 
 
 
 
Excess tax benefit for share-based compensation
43 
43 
 
 
 
 
 
Cash proceeds from issuance of common stock under equity plans (in shares)
 
 
 
 
1 
 
 
Cash proceeds from issuance of common stock under employee equity plans
49 
49 
 
 
 
 
 
Cash dividends declared and paid, at a quarterly amount of $0.14 per as-converted share (Note 9)
(676)
 
(676)
 
 
 
 
Repurchase of class A common stock (Note 9) (in shares)
(50)3
 
 
 
(50)
 
 
Repurchase of class A common stock (Note 9)
(3,765)
(532)
(3,233)
 
 
 
 
Ending Balance at Mar. 31, 2016
$ 29,131 
$ 17,645 
$ 11,582 
$ (96)
 
 
 
Ending Balance (in shares) at Mar. 31, 2016
 
 
 
 
1,905 
245 
19 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical)
6 Months Ended
Mar. 31, 2016
Dividends, Common Stock, Cash
$ 0.14 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Operating Activities
 
 
Net income
$ 3,648 
$ 3,119 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Client incentives
1,577 
1,389 
Fair value adjustment for the Visa Europe put option
(255)
0 
Share-based compensation
97 
93 
Excess tax benefit for share-based compensation
(43)
(70)
Depreciation and amortization of property, equipment, technology and intangible assets
241 
245 
Deferred income taxes
(29)
173 
Other
17 
15 
Change in operating assets and liabilities:
 
 
Settlement receivable
(6)
107 
Accounts receivable
(97)
(74)
Client incentives
(1,912)
(1,479)
Other assets
(397)
(467)
Accounts payable
(34)
(44)
Settlement payable
(57)
(206)
Accrued and other liabilities
81 
262 
Accrued litigation (Note 13)
(12)
(324)
Net cash provided by operating activities
2,819 
2,739 
Investing Activities
 
 
Purchases of property, equipment, technology and intangible assets
(250)
(202)
Proceeds from sales of property, equipment and technology
0 
10 
Investment securities, available-for-sale:
 
 
Purchases
(17,437)
(1,267)
Proceeds from maturities and sales
15,860 
895 
Acquisition of business
(14)
0 
Purchases of / contributions to other investments
(9)
(2)
Proceeds / distributions from other investments
4 
9 
Net cash used in investing activities
(1,846)
(557)
Financing Activities
 
 
Repurchase of class A common stock (Note 9)
(3,765)
(1,855)
Dividends paid (Note 9)
(676)
(591)
Proceeds from issuance of senior notes (Note 5)
15,971 
0 
Debt issuance costs (Note 5)
(96)
0 
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 3 and Note 13)
11 
321 
Cash proceeds from issuance of common stock under employee equity plans
49 
46 
Restricted stock and performance-based shares settled in cash for taxes
(85)
(106)
Excess tax benefit for share-based compensation
43 
70 
Net cash provided by (used in) financing activities
11,452 
(2,115)
Effect of exchange rate changes on cash and cash equivalents
0 
1 
Increase in cash and cash equivalents
12,425 
68 
Cash and cash equivalents at beginning of year
3,518 
1,971 
Cash and cash equivalents at end of period
15,943 
2,039 
Supplemental Disclosure
 
 
Income taxes paid, net of refunds
1,501 
1,376 
Net unrealized gains on currency forward contracts (Note 8)
116 
0 
Accruals related to purchases of property, equipment, technology and intangible assets
$ 38 
$ 26 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Note 1—Summary of Significant Accounting Policies
Organization. Visa Inc. (“Visa” or the “Company”) is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. (“Visa U.S.A.”), Visa International Service Association (“Visa International”), Visa Worldwide Pte. Limited, Visa Canada Corporation, Inovant LLC and CyberSource Corporation (“CyberSource”), operate one of the world’s most advanced processing networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions worldwide. VisaNet also offers fraud protection for account holders and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for account holders on Visa-branded cards and payment products. In most cases, account holder and merchant relationships belong to, and are managed by, Visa's financial institution clients. Visa provides a wide variety of payment solutions that support payment products that issuers can offer to their account holders: pay now with debit, pay ahead with prepaid or pay later with credit products. Visa also offers a growing suite of innovative digital, eCommerce and mobile products and services. These services facilitate transactions on Visa's network among account holders, merchants, financial institutions and governments in mature and emerging markets globally.
Consolidation and basis of presentation. The accompanying unaudited 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. All significant intercompany accounts and transactions are eliminated in consolidation.
The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for Quarterly Reports on Form 10-Q and, consequently, do not include all of the annual disclosures required by U.S. GAAP. Reference should be made to the Visa Annual Report on Form 10-K for the year ended September 30, 2015 for additional disclosures, including a summary of the Company’s significant accounting policies.
In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented.
Recently Issued and Adopted Accounting Pronouncements.
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The standard impacts presentation only. The Company elected to early adopt the standard effective October 1, 2015 and the carrying amount of the Company's debt liability is presented net of issuance costs on the consolidated financial statements. Also see Note 5—Debt.
In September 2015, the FASB issued ASU No. 2015-16, which simplifies the accounting for post-acquisition adjustments by eliminating the requirement to retrospectively account for the adjustments made to provisional amounts recognized in a business combination. The Company elected to early adopt this guidance on a prospective basis effective October 1, 2015. The adoption did not have a material impact on the consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current. Previously, current deferred tax assets had been presented separately and current deferred tax liabilities had been included in accrued liabilities on the consolidated balance sheets. All prior period amounts within the consolidated financial statements have been reclassed to conform to current period presentation. The reclass did not affect the Company's total equity, operating revenues, net income, comprehensive income or cash flows as of and for the periods presented.
In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. The Company will adopt the standard effective October 1, 2018. The adoption is not expected to have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets and lease liabilities arising from operating leases in the statement of financial position. The Company will adopt the standard effective October 1, 2019 and does not anticipate that this new accounting guidance will have a material impact on its consolidated statement of operations. The Company has not yet completed its evaluation of the impact on the consolidated balance sheet, but at this time estimates the value of leased assets and liabilities that may be recognized could be in the hundreds of millions of dollars. The actual impact will depend on the Company's lease portfolio at the time of adoption.
In March 2016, the FASB issued ASU 2016-05, which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815, Derivatives and Hedging, does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-06, which clarifies the requirements for assessing whether contingent call/put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call/put options solely in accordance with a four-step decision sequence. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, which eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The equity method investor is required to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08, which clarifies the implementation guidance on principal versus agent considerations under the new revenue recognition standard, ASU 2014-09, Revenue from Contracts with Customers. In April 2016, the FASB issued ASU 2016-10, which clarifies the implementation guidance on identifying promised goods or services and on determining whether an entity's promise to grant a license with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The Company will adopt the standard effective October 1, 2018. The Company is evaluating the full effect that ASU 2014-09 and related subsequent updates will have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. The Company is evaluating the full effect that ASU 2016-09 will have on its consolidated financial statements and will adopt the standard effective October 1, 2017.
Visa Europe
Visa Europe
Note 2—Visa Europe
Acquisition of Visa Europe
On November 2, 2015, the Company and Visa Europe entered into a transaction agreement (the "Transaction Agreement"), pursuant to which the Company and Visa Europe agreed on the terms and conditions of the Company's acquisition of 100% of the share capital of Visa Europe for a total purchase price of up to €21.2 billion. As originally agreed, the purchase price consisted of: (a) at the closing of the transaction, up-front cash consideration of €11.5 billion and preferred stock of the Company convertible upon certain conditions into class A common stock or class A equivalent preferred stock of the Company, as described below, valued at approximately €5.0 billion, and (b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up to €4.0 billion (plus up to an additional €0.7 billion in interest), determined based on the achievement of specified net revenue levels during such post-closing period (the "Earn-out").
On April 21, 2016, the Company and Visa Europe reached preliminary agreement to amend the Transaction Agreement to eliminate the Earn-out portion of the transaction consideration (the "Preliminary Agreement"). Instead of an earn-out, the cash consideration payable in the transaction would be increased by €1.75 billion: €750 million payable upon closing, and €1.0 billion, plus 4% compound annual interest, payable on the third anniversary of closing. The terms of the transaction otherwise remain unchanged. The transaction remains subject to the negotiation of definitive documentation of this amendment and to regulatory approval. While the parties continue to work toward closing as soon as possible, closing could extend beyond the end of the Company’s fiscal third quarter.
Transaction agreement and option amendment. The Transaction Agreement provides for the acquisition to be effected pursuant to the exercise of the amended Visa Europe put option (as it may be further amended, the "Amended Put Option"), as described further below. In connection with the execution of the Transaction Agreement, the Company and Visa Europe entered into an amendment (the "Put Option Amendment") to the Visa Europe put option (the "Put") to align certain terms of the Put with the terms of the Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa's purchase of all of Visa Europe's share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form. The Transaction Agreement may be terminated by the Company or Visa Europe, subject to specified exceptions, if the transaction is not consummated by August 2, 2016, or if legal restraints that prohibit the closing have become final and non-appealable. On April 21, 2016, the Company and Visa Europe also agreed that the Amended Put Option will be further amended as needed to reflect the changes in transaction consideration under the Preliminary Agreement. The terms of the Amended Put Option will otherwise remain unchanged.
Preferred stock. In connection with the transaction, the board of directors of the Company has authorized the creation of three new series of preferred stock of the Company:
•
series A convertible participating preferred stock, par value $0.0001 per share, which is designed to be economically equivalent to the Company’s class A common stock (the “class A equivalent preferred stock”);
•
series B convertible participating preferred stock, par value $0.0001 per share (the “U.K.&I preferred stock”); and
•
series C convertible participating preferred stock, par value $0.0001 per share (the “Europe preferred stock”).
The Transaction Agreement provides that, subject to the terms and conditions thereof, at closing, the Company will issue 2,480,500 shares of U.K.&I preferred stock to those of Visa Europe’s member financial institutions in the United Kingdom and Ireland that are entitled to receive preferred stock at closing, and 3,157,000 shares of Europe preferred stock to those of Visa Europe’s other member financial institutions that are entitled to receive preferred stock at closing. Subject to the reduction in conversion rates described below, the U.K.&I preferred stock will be convertible into a number of shares of class A common stock or class A equivalent preferred stock valued at approximately €2.2 billion, and the Europe preferred stock will be convertible into a number of shares of class A common stock or class A equivalent preferred stock valued at approximately €2.8 billion. These approximate values of the UK&I and Europe preferred stock to be issued at closing are based on the average price of the class A common stock of $71.68 per share, and the euro-dollar exchange rate of 1.12750 for the 30 trading days ended October 19, 2015.
The UK&I and Europe preferred stock will be convertible into shares of class A common stock or class A equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for each share of U.K.&I preferred stock and Europe preferred stock. The conversion rates may be reduced from time to time to offset certain liabilities, if any, 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 of multilateral interchange fee rates in the Visa Europe territory. A reduction in the conversion rates of the U.K.&I preferred stock and the Europe preferred stock have the same economic effect on earnings per share as repurchasing the Company's class A common stock because it reduces the as-converted class A common stock share count. Additionally, the shares of U.K.&I and Europe preferred stock will be subject to restrictions on transfer and may become convertible in stages based on developments in the existing and potential litigation. The shares of U.K.&I and Europe preferred stock will become fully convertible on the 12th anniversary of closing, subject only to a holdback to cover any then-pending claims. See Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities.
Upon issuance of the preferred stock at closing, the holders of the U.K.&I and Europe preferred stock will have no right to vote on any matters, except for certain defined matters, including, in specified circumstances, any consolidation, merger or combination of the Company. Holders of the class A equivalent preferred stock, upon issuance at conversion, will have similar voting rights to the rights of the holders of the U.K.&I and Europe preferred stock. With respect to those limited matters on which the holders of preferred stock may vote, approval by the holders of the preferred stock requires the affirmative vote of the outstanding voting power of each such series of preferred stock, each such series voting as a single class. Once issued, all three series of preferred stock will participate on an as-converted basis in regular quarterly cash dividends declared on the Company's class A common stock.
U.K. loss sharing agreement and litigation management deed. On November 2, 2015, the Company, Visa Europe and certain of Visa Europe’s member financial institutions located in the United Kingdom (the “U.K. LSA members”) entered into a loss sharing agreement (the “U.K. loss sharing agreement”), pursuant to which each of the U.K. 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, subject to the terms and conditions set forth therein and, with respect to each U.K. LSA member, up to a maximum amount of the up-front cash consideration to be received by such U.K. LSA member. The U.K. LSA members’ obligations under the U.K. loss sharing agreement are conditional upon, among other things, the acquisition closing, and additionally upon either (a) losses valued at in excess of the sterling equivalent at closing of €1.0 billion having arisen in claims relating to the U.K. domestic multilateral interchange fees (with such losses being recoverable through reductions in the conversion rate of the U.K.&I preferred stock), or (b) the conversion rate of the UK&I 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, as described above. See Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities.
Prior to closing, the Company and the other parties thereto will enter into a litigation management deed, which will set forth the agreed upon procedures for the management of the existing and potential litigation, as described above, relating to the setting and implementation of multilateral interchange fee rates in the Visa Europe territory (the "Europe covered claims"), the allocation of losses resulting from the Europe covered claims, and any accelerated conversion or reduction in the conversion rate of the shares of U.K.&I and Europe preferred stock. Subject to the terms and conditions set forth therein, the litigation management deed provides that the Company will generally control the conduct of the Europe covered claims, subject to certain obligations to report and consult with newly established Europe litigation management committees. The Europe litigation management committees, which will be composed of representatives of certain Visa Europe members, will also be granted consent rights to approve certain material decisions in relation to the Europe covered claims.
U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities
U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities
Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities
U.S. Retrospective Responsibility Plan
Under the terms of the U.S. retrospective responsibility plan, the Company maintains an escrow account from which settlements of, or judgments in, the U.S. covered litigation are paid. The balance of the escrow account was $1.1 billion at March 31, 2016 and September 30, 2015. The Company paid $11 million to opt-out merchants from the litigation escrow account during the six months ended March 31, 2016 to settle their claims associated with the interchange multidistrict litigation. See Note 13—Legal Matters.
The accrual related to the covered litigation could be either higher or lower than the litigation escrow account balance. The Company did not record an additional accrual for the covered litigation during the six months ended March 31, 2016. See Note 13—Legal Matters.
Potential Visa Europe Liabilities
On November 2, 2015, the Company and Visa Europe entered into the Transaction Agreement pursuant to which the Company agreed to acquire Visa Europe. On April 21, 2016, the two parties reached the Preliminary Agreement, which would impact only transaction consideration. The transaction remains subject to the negotiation of definitive documentation of the amendment and to regulatory approval. While the parties continue to work toward closing as soon as possible, closing could extend beyond the end of the Company's fiscal third quarter. Visa Inc., Visa Europe or their affiliates are, or may become, a party to certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory. The Company has obtained certain protection in respect of losses resulting from existing and potential litigation through the preferred stock and the U.K. loss sharing agreement, and has agreed to certain terms regarding the conduct of such litigation, all of which is conditioned on the closing of the acquisition of Visa Europe by the Company. See Note 2—Visa Europe.
Fair Value Measurements and Investments
Fair Value Measurements and Investments
Note 4—Fair Value Measurements and Investments
Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
Fair Value Measurements
Using Inputs Considered as
 
Level 1
 
Level 2
 
Level 3
 
March 31,
2016
 
September 30,
2015
 
March 31,
2016
 
September 30,
2015
 
March 31,
2016
 
September 30,
2015
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents and restricted cash:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
6,765

 
$
3,051

 
 
 
 
 
 
 
 
U.S. Treasury securities
5,099

 
—

 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
$
3,328

 
$
280

 
 
 
 
Investment securities, trading:
 
 
 
 
 
 
 
 
 
 
 
Equity securities
69

 
66

 
 
 
 
 
 
 
 
Investment securities, available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
3,079

 
2,656

 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
4,043

 
2,615

 
 
 
 
Equity securities
67

 
4

 
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
273

 
533

 
 
 
 
Auction rate securities
 
 
 
 
 
 
 
 
$
—

 
$
7

Prepaid and other current assets:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
 
 
 
188

 
76

 
 
 
 
Total
$
15,079

 
$
5,777

 
$
7,832

 
$
3,504

 
$
—

 
$
7

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Accrued liabilities:
 
 
 
 
 
 
 
 
 
 
 
Visa Europe put option
 
 
 
 
 
 
 
 
$
—

 
$
255

Foreign exchange derivative instruments
 
 
 
 
$
114

 
$
13

 
 
 
 
Total
$
—

 
$
—

 
$
114

 
$
13

 
$
—

 
$
255


There were no transfers between Level 1 and Level 2 assets during the six months ended March 31, 2016 and 2015.
Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.
Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S. government-sponsored debt securities and corporate debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the six months ended March 31, 2016.
Level 3 assets and liabilities measured at fair value on a recurring basis. Auction rate securities are classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in measuring fair value. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the six months ended March 31, 2016.
Visa Europe put option agreement. On November 2, 2015, the Company and Visa Europe entered into the Put Option Amendment to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa’s purchase of all of Visa Europe’s share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form. On April 21, 2016, the Company and Visa Europe agreed that the Amended Put Option will be further amended as needed to reflect the changes in transaction consideration under the Preliminary Agreement. The terms of the Amended Put Option will otherwise remain unchanged.
Exercise of the Amended Put Option by the Visa Europe board of directors is mandatory, subject to the satisfaction of the terms and conditions of the Transaction Agreement. As such, for accounting purposes, it is not treated as a written put option and is not required to be recorded at fair value. At March 31, 2016, Visa expected to complete the transaction through exercise of the Amended Put Option. Therefore, management concluded that it does not expect the Put to revert to its original, unamended form or to be unilaterally exercised by Visa Europe in the future. As a result, the value of the Put was estimated to be zero at March 31, 2016 and December 31, 2015. During the first quarter of fiscal 2016, the Company recorded a $255 million non-cash decrease in the fair value of the Put as non-operating income in the Company's consolidated statements of operations.
Assets Measured at Fair Value on a Non-recurring Basis
Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. There were no
significant impairments during the six months ended March 31, 2016 or 2015. These investments totaled $45 million at March 31, 2016 and September 30, 2015 and are classified in other assets on the consolidated balance sheets.
Due to the completion of an initial public offering by one of the Company's investees during fiscal 2016, the Company reclassified equity securities previously accounted for as a cost method investment, with a carrying value of $4 million, to short-term available-for-sale investment securities. The fair value of this investment at March 31, 2016 was $64 million, resulting in the recognition of a pre-tax unrealized gain of $60 million in other comprehensive income.
Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade names and reseller relationships, all of which were obtained through acquisitions.
If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach. As the assumptions employed to measure these assets on a non-recurring basis are based on management's judgment using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2016, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at March 31, 2016.
Other Fair Value Disclosures
Long-term debt. In December 2015, the Company issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. See Note 5—Debt. These debt instruments are measured at amortized cost on the Company's consolidated balance sheet at March 31, 2016. The fair value of these notes, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.
The following table presents the carrying amount and estimated fair value of the Company’s debt in order of maturity:
 
March 31, 2016
 
Carrying Amount
 
Estimated Fair Value
 
(in millions)
1.20% Senior Notes due December 2017
$
1,745

 
$
1,760

2.20% Senior Notes due December 2020
2,986

 
3,075

2.80% Senior Notes due December 2022
2,237

 
2,346

3.15% Senior Notes due December 2025
3,962

 
4,176

4.15% Senior Notes due December 2035
1,485

 
1,612

4.30% Senior Notes due December 2045
3,461

 
3,829

 
$
15,876

 
$
16,798


Other financial instruments not measured at fair value. The following financial instruments are not measured at     fair value on the Company's consolidated balance sheet at March 31, 2016, but require disclosure of their fair values: time deposits recorded in prepaid expenses and other current assets, settlement receivable and payable, and customer collateral. The estimated fair value of such instruments at March 31, 2016 approximates their carrying value due to their generally short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.
Investments
Available-for-sale investment securities. The Company had $65 million in gross unrealized gains and $2 million in gross unrealized losses at March 31, 2016. The unrealized gains were primarily related to the Company's reclassified equity investment discussed above. There were $7 million gross unrealized gains and no gross unrealized losses at September 30, 2015. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to two years.
Debt
Debt
Note 5—Debt
The Company had outstanding debt as follows:
 
March 31, 2016
 
 
 
Principal Amount
 
Unamortized Discounts and Debt Issuance Costs
 
Carrying Amount
 
Effective Interest Rate
 
(in millions, except percentages)
1.20% Senior Notes due December 2017 (the "2017 Notes")
$
1,750

 
$
(5
)
 
$
1,745

 
1.37
%
2.20% Senior Notes due December 2020 (the "2020 Notes")
3,000

 
(14
)
 
2,986

 
2.30
%
2.80% Senior Notes due December 2022 (the "2022 Notes")
2,250

 
(13
)
 
2,237

 
2.89
%
3.15% Senior Notes due December 2025 (the "2025 Notes")
4,000

 
(38
)
 
3,962

 
3.26
%
4.15% Senior Notes due December 2035 (the "2035 Notes")
1,500

 
(15
)
 
1,485

 
4.23
%
4.30% Senior Notes due December 2045 (the "2045 Notes")
3,500

 
(39
)
 
3,461

 
4.37
%
Total long-term debt
$
16,000

 
$
(124
)
 
$
15,876

 
 

Senior Notes
In December 2015, the Company issued fixed-rate senior notes (the 2017 Notes, 2020 Notes, 2022 Notes, 2025 Notes, 2035 Notes and 2045 Notes, or collectively, the "Notes") in conjunction with the anticipated acquisition of Visa Europe, in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14 of each year, commencing June 14, 2016. The Company recognized related interest expense of $125 million and $149 million for the three and six months ended March 31, 2016, respectively, as non-operating expense. The net aggregate proceeds from the issuance of the Notes, after deducting discounts and debt issuance costs, were $15.9 billion. The discounts and debt issuance costs will be amortized over the respective term of each note using the effective interest method. The indenture governing the Notes contains customary event of default provisions. The Notes are senior unsecured obligations of the Company, ranking equally and ratably among themselves and with the Company's existing and future unsecured and unsubordinated debt. The Notes are not secured by any assets of the Company and are not guaranteed by any of the Company's subsidiaries. The Company was in compliance with all related covenants as of March 31, 2016.
Each series of the Notes may be redeemed as a whole or in part, at the Company’s option at any time, prior to, with respect to the 2017 Notes, their maturity date, and with respect to the 2020 Notes, the 2022 Notes, the 2025 Notes, the 2035 Notes and the 2045 Notes, the applicable par call date (as set forth in the table below), at a price equal to the greater of:
•
100% of the principal amount of such Notes; and
•
the sum of the present value of the remaining scheduled payments of principal and interest through the maturity or par call date for each of the Notes below at the treasury rate defined under the terms of the Notes, plus the applicable spread for such Notes (as set forth in the table below),
plus, in each case, accrued and unpaid interest to, but excluding, the date of redemption.
Series
 
Maturity/Par Call Date
 
Spread
2017 Notes
 
December 14, 2017
 
5 bps
2020 Notes
 
November 14, 2020
 
10 bps
2022 Notes
 
October 14, 2022
 
12.5 bps
2025 Notes
 
September 14, 2025
 
15 bps
2035 Notes
 
June 14, 2035
 
20 bps
2045 Notes
 
June 14, 2045
 
20 bps

On or after the applicable par call date, the Notes, except the 2017 Notes, may be redeemed as a whole or in part, at the Company’s option at any time, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued interest.
In the event that the Visa Europe acquisition has not been consummated on or prior to February 2, 2017 (which date may be extended in accordance with the terms of the Notes), the Company will be required to redeem all outstanding 2017 Notes, 2020 Notes, 2022 Notes and 2025 Notes on the special mandatory redemption date, as defined in the terms of the Notes, at a redemption price equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest. The 2035 Notes and 2045 Notes are not subject to the special mandatory redemption provision.
Future principal payments on the Company's outstanding debt are as follows:
Fiscal Year
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
 
Total
(in millions)
$
—

 
$
—

 
$
1,750

 
$
—

 
$
—

 
$
14,250

 
$
16,000


Credit Facility Renewal. On January 27, 2016, the Company, Visa International Service Association and Visa U.S.A. Inc. (collectively, the "Borrowers") entered into a 5-year, unsecured $4.0 billion revolving credit facility (the "Credit Facility") with Bank of America, N.A., as administrative agent and the lenders party thereto. JP Morgan Chase Bank, N.A., acted as syndication agent in connection with the Credit Facility; Bank of China, Los Angeles Branch, Barclays Bank PLC, Citibank, N.A., HSBC Bank USA, N.A., Royal Bank of Canada, Standard Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Bank, National Association, Deutsche Bank Securities Inc. and Toronto Dominion (New York) LLC, acted as Documentation Agents; and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of China, Los Angeles Branch, Barclays Bank PLC, Citigroup Global Markets, Inc., HSBC Bank USA, N.A., RBC Capital Markets, Standard Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc. and TD Securities (USA) LLC, acted as joint lead arrangers and joint book runners. The Credit Facility, which expires on January 27, 2021, replaced the Company's prior $3.0 billion credit facility, which expired on January 27, 2016.
The Credit Facility provides the Borrowers with a borrowing capacity of up to $4.0 billion. Borrowings under the Credit Facility are available for general corporate purposes. Interest on the borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) or an alternative base rate, in each case plus applicable margins that fluctuate based on the applicable rating of senior unsecured long-term debt securities of the Company. The Borrowers have agreed to pay a commitment fee which will fluctuate based on such applicable rating of the Company.
Other material terms are:
•
a financial covenant which requires the Company to maintain a Consolidated Indebtedness to Consolidated EBITDA Ratio (as defined in the Credit Facility) of not greater than 3.75 to 1.00;
•
customary restrictive covenants, which limit the Borrowers' ability to, among other things, create certain liens, effect fundamental changes to their business, or merge or dispose of substantially all of their assets, subject in each case to customary exceptions and amounts;
•
customary events of default, upon the occurrence of which, after any applicable grace period, the requisite lenders will have the ability to accelerate all outstanding loans thereunder and terminate the commitments; and
•
other customary and standard terms and conditions.
The Borrowers currently have no borrowings under the Credit Facility. The participating lenders in the Credit Facility include certain holders of the Company's class B and class C common stock, certain of the Borrowers' customers and their affiliates.
Pension and Other Postretirement Benefits
Pension and Other Postretirement Benefits
Note 6—Pension and Other Postretirement Benefits
The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all 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, which are not presented below as they are not material.
In October 2015, the Company's board of directors approved an amendment of the qualified defined benefit pension plan such that the Company discontinued employer provided credits after December 31, 2015. Plan participants continue to earn interest credits on existing balances at the time of the freeze. As a result, a curtailment gain totaling $8 million was recognized as part of the Company's net periodic benefit cost. The Company also recorded a net unrealized actuarial gain of $56 million from the remeasurement of its pension plan in the first quarter of fiscal 2016 within other comprehensive income.
The components of net periodic benefit cost are as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016

2015
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Service cost
$
—

 
$
11

 
$
13

 
$
23

 
$
—

 
$
—

 
$
—

 
$
—

Interest cost
10

 
10

 
21

 
20

 
—

 
—

 
—

 
—

Expected return on assets
(18
)
 
(18
)
 
(35
)
 
(36
)
 
—

 
—

 
—

 
—

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       Prior service credit
—

 
(1
)
 
(1
)
 
(3
)
 
(1
)
 
(1
)
 
(2
)
 
(2
)
       Actuarial loss
2

 
—

 
4

 
—

 
—

 
—

 
—

 
—

Curtailment gain
—

 
—

 
(8
)
 
—

 
—

 
—

 
—

 
—

Settlement loss
—

 
2

 
—

 
4

 
—

 
—

 
—

 
—

Total net periodic benefit cost
$
(6
)
 
$
4

 
$
(6
)
 
$
8

 
$
(1
)
 
$
(1
)
 
$
(2
)
 
$
(2
)
Settlement Guarantee Management
Settlement Guarantee Management
Note 7—Settlement Guarantee Management
The Company indemnifies its clients for settlement losses suffered due to failure of any other clients to fund its settlement obligations in accordance with the Visa 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. The exposure to settlement losses through Visa's settlement indemnification is accounted for as a settlement risk guarantee. The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company requires certain clients that do not meet its credit standards to post collateral to offset potential loss from their estimated unsettled transactions. The Company’s estimated maximum settlement exposure was $43.8 billion for the quarter ended March 31, 2016, compared to $43.5 billion for the quarter ended September 30, 2015. Of these amounts, $2.2 billion were covered by collateral at March 31, 2016 and September 30, 2015.
The Company maintained collateral as follows:

March 31,
2016
 
September 30,
2015
 
(in millions)
Cash equivalents
$
1,050

 
$
1,023

Pledged securities at market value
151

 
154

Letters of credit
1,103

 
1,178

Guarantees
961

 
971

Total
$
3,265

 
$
3,326


The total available collateral balances presented in the table above were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.
The fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $1 million at March 31, 2016 and September 30, 2015. These amounts are reflected in accrued liabilities on the consolidated balance sheets.
Derivative Financial Instruments
Derivative Financial Instruments
Note 8—Derivative Financial Instruments
The Company entered into currency forward contracts during the second quarter of fiscal 2016 to mitigate a portion of the foreign currency exchange rate risk associated with the upfront cash consideration to be paid in the anticipated Visa Europe acquisition. Subsequently, prior to the end of the quarter, the Company entered into additional currency forward contracts to fully offset the original positions, eliminating its risk-mitigation position. All contracts are set to mature during the third quarter of fiscal 2016. As these contracts are not designated in hedging relationships, related gains and losses are recorded directly in earnings as part of non-operating income. The Company recorded net unrealized gains of $116 million related to these contracts during the three and six months ended March 31, 2016.
Stockholders' Equity
Stockholders' Equity
Note 9—Stockholders' Equity
As-Converted Class A Common Stock. The number of shares of each class and the number of shares of class A common stock on an as-converted basis at March 31, 2016, are as follows:
(in millions, except conversion rates)
Shares Outstanding
 
Conversion Rate
Into Class A
Common Stock
 
As-converted Class A Common
Stock(1)
Class A common stock
1,905

 
—

 
1,905

Class B common stock
245

 
1.6483

(2) 
405

Class C common stock
19

 
4.0000

 
75

Total
 
 
 
 
2,385


(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 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.
Reduction in as-converted class A common stock. The following table presents share repurchases in the open market.
(in millions, except per share data)
Three Months Ended
March 31, 2016
 
Six Months Ended
March 31, 2016
Shares repurchased in the open market (1)
24

 
50

Average repurchase price per share (2)
$
72.23

 
$
75.47

Total cost
$
1,750

 
$
3,765

(1)  
All shares 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 price per share is calculated based on unrounded numbers.
As of March 31, 2016, the October 2015 program had remaining authorized funds of $4.0 billion for share repurchase. All share repurchase programs authorized prior to October 2015 have been completed.
Dividends. In April 2016, the Company’s board of directors declared a quarterly cash dividend of $0.14 per share of class A common stock (determined in the case of class B and C common stock on an as-converted basis). The cash dividend will be paid on June 7, 2016, to all holders of record of the Company's common stock as of May 13, 2016. The Company declared and paid $336 million and $676 million in dividends during the three and six months ended March 31, 2016, respectively.
Earnings Per Share
Earnings Per Share
Note 10—Earnings Per Share
Basic earnings per share is computed by dividing net income available to each class and series by the weighted-average number of shares of common stock outstanding and participating securities in the form of unvested restricted stock awards, unvested restricted stock units and unvested earned performance-based shares during the period. Net income is allocated to each class and series of common stock based on its proportional ownership on an as-converted basis. The weighted number of shares of each class and series of common stock outstanding reflects changes in ownership over the periods presented. See Note 9—Stockholders' Equity.
Diluted earnings per share is computed by dividing net income available by the weighted-average number of shares of common stock outstanding, participating securities in the form of unvested restricted stock awards, unvested restricted stock units and unvested earned performance-based shares 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 class B and class C common stock based on the conversion rate in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.
The following table presents earnings per share for the three months ended March 31, 2016.(1)     
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
1,360

 
1,909

 
$
0.71

 
 
$
1,707

 
2,401

(3) 
$
0.71

Class B common stock
288

 
245

 
$
1.17

 
 
$
288

 
245

 
$
1.17

Class C common stock
55

 
19

 
$
2.85

 
 
$
55

 
19

 
$
2.84

Participating securities(4)
4

 
Not presented

 
Not presented

 
 
$
4

 
Not presented

 
Not presented

Net income
$
1,707

 
 
 
 
 
 
 
 
 
 
 
The following table presents earnings per share for the six months ended March 31, 2016.(1)     
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
2,910

 
1,923

 
$
1.51

 
 
$
3,648

 
2,416

(3) 
$
1.51

Class B common stock
612

 
245

 
$
2.49

 
 
$
611

 
245

 
$
2.49

Class C common stock
118

 
19

 
$
6.05

 
 
$
117

 
19

 
$
6.04

Participating securities(4)
8

 
Not presented

 
Not presented

 
 
$
8

 
Not presented

 
Not presented

Net income
$
3,648

 
 
 
 
 
 
 
 
 
 
 

The following table presents earnings per share for the three months ended March 31, 2015.(1)    
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
1,240

 
1,963

 
$
0.63

 
 
$
1,550

 
2,460

(3) 
$
0.63

Class B common stock
255

 
245

 
$
1.04

 
 
$
255

 
245

 
$
1.04

Class C common stock
51

 
20

 
$
2.53

 
 
$
51

 
20

 
$
2.52

Participating securities(4)
4

 
Not presented

 
Not presented

 
 
$
4

 
Not presented

 
Not presented

Net income
$
1,550

 
 
 
 
 
 
 
 
 
 
 

The following table presents earnings per share for the six months ended March 31, 2015.(1)    
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
2,492

 
1,969

 
$
1.27

 
 
$
3,119

 
2,469

(3) 
$
1.26

Class B common stock
512

 
245

 
$
2.09

 
 
$
511

 
245

 
$
2.08

Class C common stock
107

 
21

 
$
5.06

 
 
$
106

 
21

 
$
5.05

Participating securities(4)
8

 
Not presented

 
Not presented

 
 
$
8

 
Not presented

 
Not presented

Net income
$
3,119

 
 
 
 
 
 
 
 
 
 
 

(1) 
Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.
(2) 
Net income is allocated based on proportional ownership on an as-converted basis. The weighted-average number of shares of as-converted class B common stock used in the income allocation was 405 million for the three and six months ended March 31, 2016 and 2015. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 77 million and 78 million for the three and six months ended March 31, 2016, respectively, and 81 million and 84 million for the three and six months ended March 31, 2015, respectively.
(3) 
Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 5 million common stock equivalents for the three and six months ended March 31, 2016 and 2015, because their effect would be dilutive. The computation excludes 1 million of common stock equivalents for the three and six months ended March 31, 2016 and 2015 because their effect would have been anti-dilutive.
(4) 
Participating securities are unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company's restricted stock awards, restricted stock units and unvested earned performance-based shares.
Share-based Compensation
Share-based Compensation
Note 11—Share-based Compensation
The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan during the six months ended March 31, 2016:
 
Granted
 
Weighted-Average
Grant Date Fair
Value
 
Weighted-Average
Exercise Price
Non-qualified stock options
1,393,565

 
$
15.06

 
$
80.02

Restricted stock units ("RSUs")
2,449,389

 
$
79.91

 
 
Performance-based shares(1)
604,219

 
$
92.71

 
 

(1)  
Represents the maximum number of performance-based shares which could be earned.
The Company’s non-qualified stock options and RSUs are equity awards with service-only conditions and are accordingly expensed on a straight-line basis over the vesting period. The Company's performance-based shares are equity awards with service, market and performance conditions that are accounted for using the graded-vesting method. Compensation cost is recorded net of estimated forfeitures, which are adjusted as appropriate.
Income Taxes
Income Taxes
Note 12—Income Taxes
The effective income tax rates were 30% and 28% for the three and six months ended March 31, 2016, respectively, and 32% and 31% for the three and six months ended March 31, 2015, respectively. The effective tax rates for the three and six months ended March 31, 2016 differ from the effective tax rates in the same periods in fiscal 2015 primarily due to:
•
the reversal of prior years' accrued taxes on undistributed intercompany dividends in the quarter ended March 31, 2016, as a result of revised intercompany dividend strategies between international subsidiaries;
•
the non-taxable revaluation of the Visa Europe put option recorded in the quarter ended December 31, 2015;
•
foreign tax credit benefits related to prior fiscal years recognized during the quarter ended December 31, 2015; and
•
the absence of the reversal of previously established state tax reserves in the quarter ended December 31, 2014.
During the three and six months ended March 31, 2016, the Company's gross unrecognized tax benefits increased by $31 million and $51 million, respectively, which would favorably impact the effective tax rate if recognized. The increase in gross unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three and six months ended March 31, 2016, there were no significant changes in interest and penalties related to uncertain tax positions.
During fiscal 2013, the Canada Revenue Agency ("CRA") completed its examination of the Company's fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments. Based on the findings of its examination, the CRA also proposed certain assessments to the Company's fiscal 2010 through 2014 Canadian tax returns. The Company filed notices of objection against these assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the CRA. In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA's assessments. The Company continues to believe that its income tax provision adequately reflects its obligations to the CRA.
The Company’s tax filings are subject to examination by the U.S. federal, state and foreign taxing authorities. The timing and outcome of the final resolutions of the various ongoing income tax examinations are highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.
In November 2015, the FASB issued Accounting Standards Update 2015-17, which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current on the Company's consolidated balance sheets. All prior period amounts have been reclassified to conform with the current period presentation.
Legal Matters
Legal Matters
Note 13—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. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. 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.
 
Fiscal 2016
 
Fiscal 2015
 
(in millions)
Balance at October 1
$
1,024

 
$
1,456

Provision for legal matters
1

 
3

Payments on legal matters
(12
)
 
(324
)
Balance at March 31
$
1,013

 
$
1,135


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. See Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities. An accrual for the U.S. covered litigation and a charge to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The total accrual related to the U.S. covered litigation could be either higher or lower than the escrow account balance.
The following table summarizes the activity related to U.S. covered litigation.
 
Fiscal 2016
 
Fiscal 2015
 
(in millions)
Balance at October 1
$
1,023

 
$
1,449

Payments on covered litigation
(11
)
 
(321
)
Balance at March 31
$
1,012

 
$
1,128

Consumer Interchange Litigation
On February 24, 2016, the MDL court denied plaintiffs' motion for reconsideration of the dismissal of plaintiffs' federal claim and dismissed plaintiffs' state law claim based on defendants' cross-motion for reconsideration. On March 4, 2016, plaintiffs filed a notice of appeal.
Interchange Opt-out Litigation
Beginning in May 2013, more than 60 opt-out cases have been filed by hundreds of merchants in various federal district courts, generally pursuing damages claims on allegations similar to those raised in MDL 1720. A number of the cases also include allegations that Visa has monopolized, attempted to monopolize, and/or conspired to monopolize debit card-related market segments, and one of the cases seeks an injunction against the fixed acquirer network fee. 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. Wal-Mart Stores Inc. and its subsidiaries filed an opt-out complaint that also adds Visa Europe Limited and Visa Europe Services Inc. as defendants.
A settlement agreement regarding all claims was reached with Wal-Mart Stores Inc. and its subsidiaries, which will terminate if, following all appeals, the MDL class settlement is reversed or vacated with respect to certification of the Rule 23 (b) (2) settlement class or the consideration provided to or release provided by that class. Including this settlement with Wal-Mart, as of the date of filing, Visa has reached settlement agreements with a number of merchants representing approximately 51% of the Visa-branded payment card sales volume of merchants who opted out.
European Competition Proceedings
U.K. Merchant Litigation. A total of approximately 50 merchants (together with subsidiary/affiliate companies) have now commenced proceedings against Visa Europe, Visa Inc. and Visa International relating to interchange rates in Europe.
Other Litigation
"Indirect Purchaser" Actions
On December 1, 2015, the objector's appeal from the trial court's order regarding the distribution of certain settlement funds was dismissed.
Canadian Competition Proceedings
Merchant Litigation. The court approved the settlement agreements entered into by the three named financial institutions, which are not significant Canadian issuers. A settlement with another financial institution is pending court approval.
U.S. ATM Access Fee Litigation
On January 27, 2016, defendants filed petitions for writ of certiorari with the U.S. Supreme Court seeking review of the decisions of the U.S. Court of Appeals for the District of Columbia Circuit. On February 18, 2016, the National ATM Council moved for a preliminary injunction to prohibit Visa and MasterCard from imposing ATM access fee non-discrimination rules.
Pulse Network
On December 17, 2015, the court denied Visa's motion to dismiss the complaint.
EMV Chip Liability Shift
On March 8, 2016, B&R Supermarket, Inc., d/b/a Milam’s Market, and Grove Liquors LLC filed a purported class action lawsuit against Visa Inc., Visa U.S.A., MasterCard, Discover, American Express, EMVCo, JCB, UnionPay, and certain financial institutions in the U.S. District Court for the Northern District of California. The complaint asserts that defendants, through EMVCo, conspired to shift liability for fraudulent, faulty or otherwise rejected consumer credit card transactions from defendants to the purported class of merchants. Plaintiffs allege that the class consists of merchants that purchased EMV-chip-compliant point-of-sale card readers, and otherwise complied with the defendants’ directives from October 1, 2015 to present. Plaintiffs claim that the so-called “Liability Shift” violates Section 1 and 3 of the Sherman Act and certain state laws, and seek treble damages, injunctive relief, and attorneys’ fees. On April 18, 2016, defendants filed motions to dismiss the complaint.
Summary of Significant Accounting Policies (Policies)
Organization 
Organization. Visa Inc. (“Visa” or the “Company”) is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. (“Visa U.S.A.”), Visa International Service Association (“Visa International”), Visa Worldwide Pte. Limited, Visa Canada Corporation, Inovant LLC and CyberSource Corporation (“CyberSource”), operate one of the world’s most advanced processing networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions worldwide. VisaNet also offers fraud protection for account holders and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for account holders on Visa-branded cards and payment products. In most cases, account holder and merchant relationships belong to, and are managed by, Visa's financial institution clients. Visa provides a wide variety of payment solutions that support payment products that issuers can offer to their account holders: pay now with debit, pay ahead with prepaid or pay later with credit products. Visa also offers a growing suite of innovative digital, eCommerce and mobile products and services. These services facilitate transactions on Visa's network among account holders, merchants, financial institutions and governments in mature and emerging markets globally.
Consolidation and basis of presentation 
Consolidation and basis of presentation. The accompanying unaudited 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. All significant intercompany accounts and transactions are eliminated in consolidation.
The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for Quarterly Reports on Form 10-Q and, consequently, do not include all of the annual disclosures required by U.S. GAAP. Reference should be made to the Visa Annual Report on Form 10-K for the year ended September 30, 2015 for additional disclosures, including a summary of the Company’s significant accounting policies.
In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented.
Recently issued and adopted accounting pronouncements 
Recently Issued and Adopted Accounting Pronouncements.
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The standard impacts presentation only. The Company elected to early adopt the standard effective October 1, 2015 and the carrying amount of the Company's debt liability is presented net of issuance costs on the consolidated financial statements. Also see Note 5—Debt.
In September 2015, the FASB issued ASU No. 2015-16, which simplifies the accounting for post-acquisition adjustments by eliminating the requirement to retrospectively account for the adjustments made to provisional amounts recognized in a business combination. The Company elected to early adopt this guidance on a prospective basis effective October 1, 2015. The adoption did not have a material impact on the consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current. Previously, current deferred tax assets had been presented separately and current deferred tax liabilities had been included in accrued liabilities on the consolidated balance sheets. All prior period amounts within the consolidated financial statements have been reclassed to conform to current period presentation. The reclass did not affect the Company's total equity, operating revenues, net income, comprehensive income or cash flows as of and for the periods presented.
In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. The Company will adopt the standard effective October 1, 2018. The adoption is not expected to have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets and lease liabilities arising from operating leases in the statement of financial position. The Company will adopt the standard effective October 1, 2019 and does not anticipate that this new accounting guidance will have a material impact on its consolidated statement of operations. The Company has not yet completed its evaluation of the impact on the consolidated balance sheet, but at this time estimates the value of leased assets and liabilities that may be recognized could be in the hundreds of millions of dollars. The actual impact will depend on the Company's lease portfolio at the time of adoption.
In March 2016, the FASB issued ASU 2016-05, which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815, Derivatives and Hedging, does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-06, which clarifies the requirements for assessing whether contingent call/put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call/put options solely in accordance with a four-step decision sequence. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, which eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The equity method investor is required to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08, which clarifies the implementation guidance on principal versus agent considerations under the new revenue recognition standard, ASU 2014-09, Revenue from Contracts with Customers. In April 2016, the FASB issued ASU 2016-10, which clarifies the implementation guidance on identifying promised goods or services and on determining whether an entity's promise to grant a license with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The Company will adopt the standard effective October 1, 2018. The Company is evaluating the full effect that ASU 2014-09 and related subsequent updates will have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. The Company is evaluating the full effect that ASU 2016-09 will have on its consolidated financial statements and will adopt the standard effective October 1, 2017.
Fair Value Measurements and Investments (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
Fair Value Measurements
Using Inputs Considered as
 
Level 1
 
Level 2
 
Level 3
 
March 31,
2016
 
September 30,
2015
 
March 31,
2016
 
September 30,
2015
 
March 31,
2016
 
September 30,
2015
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents and restricted cash:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
6,765

 
$
3,051

 
 
 
 
 
 
 
 
U.S. Treasury securities
5,099

 
—

 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
$
3,328

 
$
280

 
 
 
 
Investment securities, trading:
 
 
 
 
 
 
 
 
 
 
 
Equity securities
69

 
66

 
 
 
 
 
 
 
 
Investment securities, available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
3,079

 
2,656

 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
4,043

 
2,615

 
 
 
 
Equity securities
67

 
4

 
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
273

 
533

 
 
 
 
Auction rate securities
 
 
 
 
 
 
 
 
$
—

 
$
7

Prepaid and other current assets:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
 
 
 
188

 
76

 
 
 
 
Total
$
15,079

 
$
5,777

 
$
7,832

 
$
3,504

 
$
—

 
$
7

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Accrued liabilities:
 
 
 
 
 
 
 
 
 
 
 
Visa Europe put option
 
 
 
 
 
 
 
 
$
—

 
$
255

Foreign exchange derivative instruments
 
 
 
 
$
114

 
$
13

 
 
 
 
Total
$
—

 
$
—

 
$
114

 
$
13

 
$
—

 
$
255

Schedule of Long-term Debt Instruments 
The following table presents the carrying amount and estimated fair value of the Company’s debt in order of maturity:
 
March 31, 2016
 
Carrying Amount
 
Estimated Fair Value
 
(in millions)
1.20% Senior Notes due December 2017
$
1,745

 
$
1,760

2.20% Senior Notes due December 2020
2,986

 
3,075

2.80% Senior Notes due December 2022
2,237

 
2,346

3.15% Senior Notes due December 2025
3,962

 
4,176

4.15% Senior Notes due December 2035
1,485

 
1,612

4.30% Senior Notes due December 2045
3,461

 
3,829

 
$
15,876

 
$
16,798

Debt (Tables)
Schedule of Debt 
The Company had outstanding debt as follows:
 
March 31, 2016
 
 
 
Principal Amount
 
Unamortized Discounts and Debt Issuance Costs
 
Carrying Amount
 
Effective Interest Rate
 
(in millions, except percentages)
1.20% Senior Notes due December 2017 (the "2017 Notes")
$
1,750

 
$
(5
)
 
$
1,745

 
1.37
%
2.20% Senior Notes due December 2020 (the "2020 Notes")
3,000

 
(14
)
 
2,986

 
2.30
%
2.80% Senior Notes due December 2022 (the "2022 Notes")
2,250

 
(13
)
 
2,237

 
2.89
%
3.15% Senior Notes due December 2025 (the "2025 Notes")
4,000

 
(38
)
 
3,962

 
3.26
%
4.15% Senior Notes due December 2035 (the "2035 Notes")
1,500

 
(15
)
 
1,485

 
4.23
%
4.30% Senior Notes due December 2045 (the "2045 Notes")
3,500

 
(39
)
 
3,461

 
4.37
%
Total long-term debt
$
16,000

 
$
(124
)
 
$
15,876

 
 
Debt Instrument Redemption 
Series
 
Maturity/Par Call Date
 
Spread
2017 Notes
 
December 14, 2017
 
5 bps
2020 Notes
 
November 14, 2020
 
10 bps
2022 Notes
 
October 14, 2022
 
12.5 bps
2025 Notes
 
September 14, 2025
 
15 bps
2035 Notes
 
June 14, 2035
 
20 bps
2045 Notes
 
June 14, 2045
 
20 bps
Schedule of Future Principal Payments on Outstanding Debt 
Future principal payments on the Company's outstanding debt are as follows:
Fiscal Year
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
 
Total
(in millions)
$
—

 
$
—

 
$
1,750

 
$
—

 
$
—

 
$
14,250

 
$
16,000

Pension and Other Postretirement Benefits (Tables)
Schedule of Defined Benefit Plans Disclosures
The components of net periodic benefit cost are as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016

2015
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Service cost
$
—

 
$
11

 
$
13

 
$
23

 
$
—

 
$
—

 
$
—

 
$
—

Interest cost
10

 
10

 
21

 
20

 
—

 
—

 
—

 
—

Expected return on assets
(18
)
 
(18
)
 
(35
)
 
(36
)
 
—

 
—

 
—

 
—

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       Prior service credit
—

 
(1
)
 
(1
)
 
(3
)
 
(1
)
 
(1
)
 
(2
)
 
(2
)
       Actuarial loss
2

 
—

 
4

 
—

 
—

 
—

 
—

 
—

Curtailment gain
—

 
—

 
(8
)
 
—

 
—

 
—

 
—

 
—

Settlement loss
—

 
2

 
—

 
4

 
—

 
—

 
—

 
—

Total net periodic benefit cost
$
(6
)
 
$
4

 
$
(6
)
 
$
8

 
$
(1
)
 
$
(1
)
 
$
(2
)
 
$
(2
)
Settlement Guarantee Management (Tables)
Schedule of Customer Collateral
The Company maintained collateral as follows:

March 31,
2016
 
September 30,
2015
 
(in millions)
Cash equivalents
$
1,050

 
$
1,023

Pledged securities at market value
151

 
154

Letters of credit
1,103

 
1,178

Guarantees
961

 
971

Total
$
3,265

 
$
3,326

Stockholders' Equity (Tables)
Schedule of Stock by Class 
As-Converted Class A Common Stock. The number of shares of each class and the number of shares of class A common stock on an as-converted basis at March 31, 2016, are as follows:
(in millions, except conversion rates)
Shares Outstanding
 
Conversion Rate
Into Class A
Common Stock
 
As-converted Class A Common
Stock(1)
Class A common stock
1,905

 
—

 
1,905

Class B common stock
245

 
1.6483

(2) 
405

Class C common stock
19

 
4.0000

 
75

Total
 
 
 
 
2,385


(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 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.
Share Repurchase Program Disclosure 
Reduction in as-converted class A common stock. The following table presents share repurchases in the open market.
(in millions, except per share data)
Three Months Ended
March 31, 2016
 
Six Months Ended
March 31, 2016
Shares repurchased in the open market (1)
24

 
50

Average repurchase price per share (2)
$
72.23

 
$
75.47

Total cost
$
1,750

 
$
3,765

(1)  
All shares 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 price per share is calculated based on unrounded numbers.
Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following table presents earnings per share for the three months ended March 31, 2016.(1)     
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
1,360

 
1,909

 
$
0.71

 
 
$
1,707

 
2,401

(3) 
$
0.71

Class B common stock
288

 
245

 
$
1.17

 
 
$
288

 
245

 
$
1.17

Class C common stock
55

 
19

 
$
2.85

 
 
$
55

 
19

 
$
2.84

Participating securities(4)
4

 
Not presented

 
Not presented

 
 
$
4

 
Not presented

 
Not presented

Net income
$
1,707

 
 
 
 
 
 
 
 
 
 
 
The following table presents earnings per share for the six months ended March 31, 2016.(1)     
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
2,910

 
1,923

 
$
1.51

 
 
$
3,648

 
2,416

(3) 
$
1.51

Class B common stock
612

 
245

 
$
2.49

 
 
$
611

 
245

 
$
2.49

Class C common stock
118

 
19

 
$
6.05

 
 
$
117

 
19

 
$
6.04

Participating securities(4)
8

 
Not presented

 
Not presented

 
 
$
8

 
Not presented

 
Not presented

Net income
$
3,648

 
 
 
 
 
 
 
 
 
 
 

The following table presents earnings per share for the three months ended March 31, 2015.(1)    
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
1,240

 
1,963

 
$
0.63

 
 
$
1,550

 
2,460

(3) 
$
0.63

Class B common stock
255

 
245

 
$
1.04

 
 
$
255

 
245

 
$
1.04

Class C common stock
51

 
20

 
$
2.53

 
 
$
51

 
20

 
$
2.52

Participating securities(4)
4

 
Not presented

 
Not presented

 
 
$
4

 
Not presented

 
Not presented

Net income
$
1,550

 
 
 
 
 
 
 
 
 
 
 

The following table presents earnings per share for the six months ended March 31, 2015.(1)    
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
 
 
Income
Allocation
(A)(2)
 
Weighted-
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B)
Class A common stock
$
2,492

 
1,969

 
$
1.27

 
 
$
3,119

 
2,469

(3) 
$
1.26

Class B common stock
512

 
245

 
$
2.09

 
 
$
511

 
245

 
$
2.08

Class C common stock
107

 
21

 
$
5.06

 
 
$
106

 
21

 
$
5.05

Participating securities(4)
8

 
Not presented

 
Not presented

 
 
$
8

 
Not presented

 
Not presented

Net income
$
3,119

 
 
 
 
 
 
 
 
 
 
 

(1) 
Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.
(2) 
Net income is allocated based on proportional ownership on an as-converted basis. The weighted-average number of shares of as-converted class B common stock used in the income allocation was 405 million for the three and six months ended March 31, 2016 and 2015. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 77 million and 78 million for the three and six months ended March 31, 2016, respectively, and 81 million and 84 million for the three and six months ended March 31, 2015, respectively.
(3) 
Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 5 million common stock equivalents for the three and six months ended March 31, 2016 and 2015, because their effect would be dilutive. The computation excludes 1 million of common stock equivalents for the three and six months ended March 31, 2016 and 2015 because their effect would have been anti-dilutive.
(4) 
Participating securities are unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company's restricted stock awards, restricted stock units and unvested earned performance-based shares.
Share-based Compensation (Tables)
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award
The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan during the six months ended March 31, 2016:
 
Granted
 
Weighted-Average
Grant Date Fair
Value
 
Weighted-Average
Exercise Price
Non-qualified stock options
1,393,565

 
$
15.06

 
$
80.02

Restricted stock units ("RSUs")
2,449,389

 
$
79.91

 
 
Performance-based shares(1)
604,219

 
$
92.71

 
 

(1)  
Represents the maximum number of performance-based shares which could be earned.
Legal Matters (Tables)
Schedule of Loss Contingencies by Contingency 
The following table summarizes the activity related to accrued litigation.
 
Fiscal 2016
 
Fiscal 2015
 
(in millions)
Balance at October 1
$
1,024

 
$
1,456

Provision for legal matters
1

 
3

Payments on legal matters
(12
)
 
(324
)
Balance at March 31
$
1,013

 
$
1,135


Schedule of Loss Contingencies by Contingency 
The following table summarizes the activity related to U.S. covered litigation.
 
Fiscal 2016
 
Fiscal 2015
 
(in millions)
Balance at October 1
$
1,023

 
$
1,449

Payments on covered litigation
(11
)
 
(321
)
Balance at March 31
$
1,012

 
$
1,128

Summary of Significant Accounting Policies (Details)
Mar. 31, 2016
country
Accounting Policies [Abstract]
 
Number of countries in which entity operates (more than)
200 
Visa Europe (Details)
6 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2016
USD ($)
Mar. 31, 2015
USD ($)
Nov. 2, 2015
Visa Europe
EUR (€)
quarter
Nov. 2, 2015
Visa Europe
EUR (€)
Oct. 19, 2015
Visa Europe
day
Nov. 2, 2015
Visa Europe
Class A equivalent preferred stock
USD ($)
Nov. 2, 2015
Visa Europe
U.K.&I. preferred stock
Nov. 2, 2015
Visa Europe
U.K.&I. preferred stock
USD ($)
Nov. 2, 2015
Visa Europe
U.K.&I. preferred stock
EUR (€)
Nov. 2, 2015
Visa Europe
Europe preferred stock
Nov. 2, 2015
Visa Europe
Europe preferred stock
USD ($)
Nov. 2, 2015
Visa Europe
Europe preferred stock
EUR (€)
Oct. 19, 2015
Visa Europe
Class A common stock
USD ($)
Nov. 2, 2015
Loss Sharing Agreement
Visa Europe
Nov. 2, 2015
Loss Sharing Agreement
Visa Europe
EUR (€)
Apr. 21, 2016
Subsequent Event
Visa Europe
EUR (€)
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share capital of Visa Europe acquired (percent)
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Total purchase price
 
 
€ 21,200,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Up-front cash consideration
14,000,000 
0 
11,500,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consideration, preferred stock of the Company
 
 
5,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of fiscal quarters included in contingent consideration period
 
 
16 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration
 
 
 
4,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued interest on contingent consideration
 
 
 
700,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Additional cash consideration payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,750,000,000 
Additional consideration payable at closing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
750,000,000 
Additional cash consideration payable on the third anniversary of closing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
Compound annual interest rate on additional consideration paid on third anniversary of closing (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.00% 
Preferred stock, par value
 
 
 
 
 
$ 0.0001 
 
$ 0.0001 
 
 
$ 0.0001 
 
 
 
 
 
Shares issued at closing (shares)
 
 
 
 
 
 
2,480,500 
 
 
3,157,000 
 
 
 
 
 
 
Value of shares issued at closing
 
 
 
 
 
 
 
 
2,200,000,000 
 
 
2,800,000,000 
 
 
 
 
Average price of common stock (in USD per share)
 
 
 
 
 
 
 
 
 
 
 
 
$ 71.68 
 
 
 
Euro-dollar exchange rate
 
 
 
 
1.12750 
 
 
 
 
 
 
 
 
 
 
 
Consecutive trading days used in calculation of average stock price and Euro-dollar exchange rate
 
 
 
 
30 
 
 
 
 
 
 
 
 
 
 
 
Initial conversion rate of UK&I and Europe preferred stock into Class A equivalent preferred stock
 
 
13.952 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss sharing agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
€ 1,000,000,000 
 
Conversion rate of U.K.&I. preferred stock
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities (Details) (USD $)
6 Months Ended
Mar. 31, 2016
Sep. 30, 2015
Mar. 31, 2016
Opt-out Merchants [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
 
 
 
Restricted Cash and Cash Equivalents
$ 1,100,000,000 
$ 1,100,000,000 
 
Payments for Legal Settlements
 
 
$ 11,000,000 
Fair Value Measurements and Investments - Additional Information (Detail) (USD $)
6 Months Ended 3 Months Ended
Mar. 31, 2016
Sep. 30, 2015
Mar. 31, 2016
Minimum
Mar. 31, 2016
Maximum
Mar. 31, 2016
Senior Notes
Minimum
Mar. 31, 2016
Senior Notes
Maximum
Mar. 31, 2016
Senior Notes
2017 Notes
Mar. 31, 2016
Senior Notes
2020 Notes
Mar. 31, 2016
Senior Notes
2022 Notes
Mar. 31, 2016
Senior Notes
2025 Notes
Mar. 31, 2016
Senior Notes
2035 Notes
Mar. 31, 2016
Senior Notes
2045 Notes
Dec. 31, 2015
Level 3
Visa Europe put option
Fair Value, Measurements, Recurring
Mar. 31, 2016
Level 3
Visa Europe put option
Fair Value, Measurements, Recurring
Sep. 30, 2015
Level 3
Visa Europe put option
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Visa Europe put option
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0 
$ 255,000,000 
Non-cash decrease in the fair value of the put
 
 
 
 
 
 
 
 
 
 
 
 
(255,000,000)
 
 
Non-marketable equity investments
45,000,000 
45,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carrying value of cost method investments, reclassified as available for sale
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of available for sale securities previously classified as cost method investments
64,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax unrealized gain on available-for-sale securities, previously classified as cost method investments
60,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal Amount
16,000,000,000 
 
 
 
 
 
1,750,000,000 
3,000,000,000 
2,250,000,000 
4,000,000,000 
1,500,000,000 
3,500,000,000 
 
 
 
Debt maturity period
 
 
 
 
2 years 
30 years 
 
 
 
 
 
 
 
 
 
Long-term Debt
15,876,000,000 
0 
 
 
 
 
1,745,000,000 
2,986,000,000 
2,237,000,000 
3,962,000,000 
1,485,000,000 
3,461,000,000 
 
 
 
Long-term Debt, Fair Value
16,798,000,000 
 
 
 
 
 
1,760,000,000 
3,075,000,000 
2,346,000,000 
4,176,000,000 
1,612,000,000 
3,829,000,000 
 
 
 
Available-for-sale securities, gross unrealized gains
65,000,000 
7,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities, gross unrealized losses
$ 2,000,000 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale investment securities, stated maturities
 
 
1 year 
2 years 
 
 
 
 
 
 
 
 
 
 
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2016
Sep. 30, 2015
Mar. 31, 2015
Investment securities:
 
 
 
Trading
$ 69 
$ 66 
 
Accrued liabilities
 
 
 
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount
0 
 
0 
Level 1 |
Fair Value, Measurements, Recurring
 
 
 
Prepaid and other current assets:
 
 
 
Fair value, total assets
15,079 
5,777 
 
Accrued liabilities
 
 
 
Fair value, total liabilities
0 
0 
 
Level 2 |
Fair Value, Measurements, Recurring
 
 
 
Prepaid and other current assets:
 
 
 
Fair value, total assets
7,832 
3,504 
 
Accrued liabilities
 
 
 
Fair value, total liabilities
114 
13 
 
Level 3 |
Fair Value, Measurements, Recurring
 
 
 
Prepaid and other current assets:
 
 
 
Fair value, total assets
0 
7 
 
Accrued liabilities
 
 
 
Fair value, total liabilities
0 
255 
 
Visa Europe put option |
Level 3 |
Fair Value, Measurements, Recurring
 
 
 
Accrued liabilities
 
 
 
Visa Europe put option
0 
255 
 
Foreign exchange derivative instruments |
Level 2 |
Fair Value, Measurements, Recurring
 
 
 
Accrued liabilities
 
 
 
Foreign exchange derivative instruments
114 
13 
 
Money market funds |
Level 1 |
Fair Value, Measurements, Recurring
 
 
 
Cash equivalents and restricted cash:
 
 
 
Cash equivalents and restricted cash:
6,765 
3,051 
 
U.S. Treasury securities |
Level 1 |
Fair Value, Measurements, Recurring
 
 
 
Cash equivalents and restricted cash:
 
 
 
Cash equivalents and restricted cash:
5,099 
0 
 
Investment securities:
 
 
 
Available-for-sale securities
3,079 
2,656 
 
U.S. government-sponsored debt securities |
Level 2 |
Fair Value, Measurements, Recurring
 
 
 
Cash equivalents and restricted cash:
 
 
 
Cash equivalents and restricted cash:
3,328 
280 
 
Investment securities:
 
 
 
Available-for-sale securities
4,043 
2,615 
 
Equity securities |
Level 1 |
Fair Value, Measurements, Recurring
 
 
 
Investment securities:
 
 
 
Trading
69 
66 
 
Available-for-sale securities
67 
4 
 
Corporate debt securities |
Level 2 |
Fair Value, Measurements, Recurring
 
 
 
Investment securities:
 
 
 
Available-for-sale securities
273 
533 
 
Auction rate securities |
Level 3 |
Fair Value, Measurements, Recurring
 
 
 
Investment securities:
 
 
 
Available-for-sale securities
0 
7 
 
Foreign exchange derivative instruments |
Level 2 |
Fair Value, Measurements, Recurring
 
 
 
Prepaid and other current assets:
 
 
 
Prepaid and other current assets:
$ 188 
$ 76 
 
Debt - Senior Notes (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2016
Sep. 30, 2015
Debt Instrument [Line Items]
 
 
Principal Amount
$ 16,000 
 
Unamortized discounts and Debt Issuance Costs
(124)
 
Long-term Debt
15,876 
0 
Senior Notes |
2017 Notes
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate (percent)
1.20% 
 
Principal Amount
1,750 
 
Unamortized discounts and Debt Issuance Costs
(5)
 
Long-term Debt
1,745 
 
Effective Interest Rate (percent)
1.37% 
 
Senior Notes |
2020 Notes
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate (percent)
2.20% 
 
Principal Amount
3,000 
 
Unamortized discounts and Debt Issuance Costs
(14)
 
Long-term Debt
2,986 
 
Effective Interest Rate (percent)
2.30% 
 
Senior Notes |
2022 Notes
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate (percent)
2.80% 
 
Principal Amount
2,250 
 
Unamortized discounts and Debt Issuance Costs
(13)
 
Long-term Debt
2,237 
 
Effective Interest Rate (percent)
2.89% 
 
Senior Notes |
2025 Notes
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate (percent)
3.15% 
 
Principal Amount
4,000 
 
Unamortized discounts and Debt Issuance Costs
(38)
 
Long-term Debt
3,962 
 
Effective Interest Rate (percent)
3.26% 
 
Senior Notes |
2035 Notes
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate (percent)
4.15% 
 
Principal Amount
1,500 
 
Unamortized discounts and Debt Issuance Costs
(15)
 
Long-term Debt
1,485 
 
Effective Interest Rate (percent)
4.23% 
 
Senior Notes |
2045 Notes
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate (percent)
4.30% 
 
Principal Amount
3,500 
 
Unamortized discounts and Debt Issuance Costs
(39)
 
Long-term Debt
$ 3,461 
 
Effective Interest Rate (percent)
4.37% 
 
Debt - Narrative (Details) (USD $)
3 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended
Mar. 31, 2016
Sep. 30, 2015
Mar. 31, 2016
Senior Notes
Mar. 31, 2016
Senior Notes
Mar. 31, 2016
Senior Notes
Subsequent to defined date on 2017
2017 Notes, 2020 Notes, 2022 Notes, 2025 Notes
Mar. 31, 2016
Senior Notes
Minimum
Mar. 31, 2016
Senior Notes
Maximum
Jan. 27, 2016
Revolving Credit Facility
Credit Facility Expiring January 27, 2021 [Member]
Jan. 27, 2016
Revolving Credit Facility
Credit Facility Expiring January 27, 2021 [Member]
Jan. 28, 2015
Revolving Credit Facility
Credit Facility Expiring January 27, 2016 [Member]
Mar. 31, 2016
If Redeemed Prior to Maturity Date or Par Call Date, as Applicable
Senior Notes
Mar. 31, 2016
If Redeemed on or after Par Call Date, except for 2017 Notes
Senior Notes
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Principal Amount
$ 16,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
Debt maturity period
 
 
 
 
 
2 years 
30 years 
5 years 
 
 
 
 
Line of credit facility, maximum borrowing capacity
 
 
 
 
 
 
 
 
4,000,000,000.0 
3,000,000,000.0 
 
 
Interest rate on senior notes, minimum
 
 
 
1.20% 
 
 
 
 
 
 
 
 
Interest rate on senior notes, maximum
 
 
 
4.30% 
 
 
 
 
 
 
 
 
Interest expense
 
 
125,000,000 
149,000,000 
 
 
 
 
 
 
 
 
Net aggregate proceeds
$ 15,876,000,000 
$ 0 
 
 
 
 
 
 
 
 
 
 
Redemption price, as percentage of principal amount (percent)
 
 
 
 
101.00% 
 
 
 
 
 
100.00% 
100.00% 
Consolidated Indebtedness to Consolidated EBITDA Ratio (not greater than)
 
 
 
 
 
 
 
3.75 
 
 
 
 
Debt - Debt Redemption (Details) (Senior Notes)
6 Months Ended
Mar. 31, 2016
2017 Notes
 
Debt Instrument [Line Items]
 
Redemption price, additional basis spread (percent)
0.05% 
2020 Notes
 
Debt Instrument [Line Items]
 
Redemption price, additional basis spread (percent)
0.10% 
2022 Notes
 
Debt Instrument [Line Items]
 
Redemption price, additional basis spread (percent)
0.125% 
2025 Notes
 
Debt Instrument [Line Items]
 
Redemption price, additional basis spread (percent)
0.15% 
2035 Notes
 
Debt Instrument [Line Items]
 
Redemption price, additional basis spread (percent)
0.20% 
2045 Notes
 
Debt Instrument [Line Items]
 
Redemption price, additional basis spread (percent)
0.20% 
Debt - Debt Maturities (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2016
Debt Disclosure [Abstract]
 
2016
$ 0 
2017
0 
2018
1,750 
2019
0 
2020
0 
Thereafter
14,250 
Total
$ 16,000 
Components of Net Periodic Benefit Cost (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Mar. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Net unrealized actuarial gain
 
 
$ 56 
 
Pension Benefits
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Service cost
0 
11 
13 
23 
Interest cost
10 
10 
21 
20 
Expected return on assets
(18)
(18)
(35)
(36)
Amortization of:
 
 
 
 
Prior service credit
0 
(1)
(1)
(3)
Actuarial loss
2 
0 
4 
0 
Curtailment gain
0 
0 
(8)
0 
Settlement loss
0 
2 
0 
4 
Total net periodic benefit cost
(6)
4 
(6)
8 
Other Postretirement Benefits
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Service cost
0 
0 
0 
0 
Interest cost
0 
0 
0 
0 
Expected return on assets
0 
0 
0 
0 
Amortization of:
 
 
 
 
Prior service credit
(1)
(1)
(2)
(2)
Actuarial loss
0 
0 
0 
0 
Curtailment gain
0 
0 
0 
0 
Settlement loss
0 
0 
0 
0 
Total net periodic benefit cost
$ (1)
$ (1)
$ (2)
$ (2)
Settlement Guarantee Management - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2016
Sep. 30, 2015
Settlement Guarantee Management [Abstract]
 
 
Estimated Maximum Settlement Exposure
$ 43,800,000,000 
$ 43,500,000,000 
Covered settlement exposure
2,200,000,000 
2,200,000,000 
Estimated probability-weighted value of the guarantee
$ 1,000,000 
$ 1,000,000 
Collateral (Detail) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2016
Sep. 30, 2015
Settlement Guarantee Management [Abstract]
 
 
Cash equivalents
$ 1,050 
$ 1,023 
Pledged securities at market value
151 
154 
Letters of credit
1,103 
1,178 
Guarantees
961 
971 
Total
$ 3,265 
$ 3,326 
Derivative Financial Instruments (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended 3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
General and Administrative Expense
Mar. 31, 2016
General and Administrative Expense
Derivative [Line Items]
 
 
 
 
Gain (loss) on derivative instruments
$ 116 
$ 0 
$ 116 
$ 116 
Stockholders' Equity - Number of Shares of Class A Common Shares Outstanding on an As-Converted Basis (Detail)
In Millions, unless otherwise specified
Mar. 31, 2016
Sep. 30, 2015
Schedule of Common Stock as Converted [Line Items]
 
 
As-converted Class A Common Stock
2,385 1
 
Class A common stock
 
 
Schedule of Common Stock as Converted [Line Items]
 
 
Shares Outstanding
1,905 
1,950 
As-converted Class A Common Stock
1,905 1
 
Class B common stock
 
 
Schedule of Common Stock as Converted [Line Items]
 
 
Shares Outstanding
245 
245 
Conversion Rate Into Class A Common Stock
1.6483 2
 
As-converted Class A Common Stock
405 1
 
Class C common stock
 
 
Schedule of Common Stock as Converted [Line Items]
 
 
Shares Outstanding
19 
20 
Conversion Rate Into Class A Common Stock
4 
 
As-converted Class A Common Stock
75 1
 
Stockholders' Equity - Share Repurchases in the Open Market (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2016
Stockholders' Equity Note [Abstract]
 
 
Shares repurchased in the open market
24 1
50 1
Average repurchase price per share
$ 72.23 2
$ 75.47 2
Total cost
$ 1,750 
$ 3,765 
Stockholders' Equity - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2016
Apr. 21, 2016
Subsequent Event
Class A common stock
Stockholders Equity Note [Line Items]
 
 
 
Stock Repurchase Remaining Authorized Amount
$ 4,000,000,000 
$ 4,000,000,000 
 
Dividends Payable, Amount Per Share
 
 
$ 0.14 
Dividends, Cash
$ 336,000,000 
$ 676,000,000 
 
Basic and Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Mar. 31, 2015
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Net income
$ 1,707 1
$ 1,550 1
$ 3,648 1
$ 3,119 1
Class A common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
1,360 1
1,240 1
2,910 1
2,492 1
Weighted- Average Shares Outstanding (B)
1,909 
1,963 
1,923 
1,969 
Earnings per Share (A)/(B)
$ 0.71 2
$ 0.63 2
$ 1.51 2
$ 1.27 2
Income Allocation (A)
1,707 1
1,550 1
3,648 1
3,119 1
Weighted- Average Shares Outstanding (B)
2,401 3
2,460 3
2,416 3
2,469 3
Earnings per Share (A)/(B)
$ 0.71 2
$ 0.63 2
$ 1.51 2
$ 1.26 2
Class B common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
288 1
255 1
612 1
512 1
Weighted- Average Shares Outstanding (B)
245 
245 
245 
245 
Earnings per Share (A)/(B)
$ 1.17 2
$ 1.04 2
$ 2.49 2
$ 2.09 2
Income Allocation (A)
288 1
255 1
611 1
511 1
Weighted- Average Shares Outstanding (B)
245 
245 
245 
245 
Earnings per Share (A)/(B)
$ 1.17 2
$ 1.04 2
$ 2.49 2
$ 2.08 2
Class C common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
55 1
51 1
118 1
107 1
Weighted- Average Shares Outstanding (B)
19 
20 
19 
21 
Earnings per Share (A)/(B)
$ 2.85 2
$ 2.53 2
$ 6.05 2
$ 5.06 2
Income Allocation (A)
55 1
51 1
117 1
106 1
Weighted- Average Shares Outstanding (B)
19 
20 
19 
21 
Earnings per Share (A)/(B)
$ 2.84 2
$ 2.52 2
$ 6.04 2
$ 5.05 2
Participating securities
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
4 1 4
4 1 4
8 1 4
8 1 4
Income Allocation (A)
$ 4 1 4
$ 4 1 4
$ 8 1 4
$ 8 1 4
Basic and Diluted Earnings Per Share - Additional Information (Detail)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Mar. 31, 2015
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Common stock equivalents included in the computation of diluted shares outstanding
5 
5 
5 
5 
Common stock equivalents excluded from computation of average dilutive shares outstanding
1 
1 
1 
1 
Class B common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Weighted-average as-converted common stock used in income allocation
405 
405 
405 
405 
Class C common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Weighted-average as-converted common stock used in income allocation
77 
81 
78 
84 
Share-based Compensation - Awards Granted to Company Employees and Non-employee Directors Under the 2007 Equity Incentive Compensation Plan (Detail) (USD $)
6 Months Ended
Mar. 31, 2016
Non-qualified stock options
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Granted
1,393,565 
Weighted-Average Grant Date Fair Value
$ 15.06 
Weighted-Average Exercise Price
$ 80.02 
Restricted stock units (RSUs)
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Granted
2,449,389 
Weighted-Average Grant Date Fair Value
$ 79.91 
Performance-bases shares
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Granted
604,219 1
Weighted-Average Grant Date Fair Value
$ 92.71 1
Income Taxes - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Mar. 31, 2015
Income Tax Disclosure [Abstract]
 
 
 
 
Effective income tax rate reconciliation, percent
30.00% 
32.00% 
28.00% 
31.00% 
Increase in unrecognized tax benefits
$ 31 
 
$ 51 
 
Accrued Litigation for Both Covered and Non-Covered Litigation (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended 6 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Interchange Opt Out Litigation [Member]
case_filed
Apr. 21, 2016
Interchange Opt Out Litigation [Member]
Subsequent Event
Mar. 31, 2016
U.K. Merchant Litigation [Member]
merchant
Mar. 31, 2016
Settled [Member]
Mar. 31, 2015
Settled [Member]
Mar. 31, 2016
Covered Litigation [Member]
Mar. 31, 2015
Covered Litigation [Member]
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
Number of opt-out cases filed (more than)
 
 
60 
 
 
 
 
 
 
Settlements reached by percentage of sales volume of merchants who opted out (percent)
 
 
 
51.00% 
 
 
 
 
 
Number of plaintiffs
 
 
 
 
50 
 
 
 
 
Loss Contingency Accrual [Roll Forward]
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$ 1,024 
$ 1,456 
 
 
 
 
 
$ 1,023 
$ 1,449 
Provision for legal matters
1 
3 
 
 
 
 
 
 
 
Payments on litigation matters
 
 
 
 
 
(12)
(324)
(11)
(321)
Balance at end of period
$ 1,013 
$ 1,135 
 
 
 
 
 
$ 1,012 
$ 1,128