VISA, INC.

V
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VISA INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

11/18/2021 | 04:10pm


This management's discussion and analysis provides a review of the results of
operations, financial condition and liquidity and capital resources of Visa Inc.
and its subsidiaries ("Visa," "we," "us," "our" and the "Company") on a
historical basis and outlines the factors that have affected recent earnings, as
well as those factors that may affect future earnings. The following discussion
and analysis should be read in conjunction with the consolidated financial
statements and related notes included in Item 8-Financial Statements and
Supplementary Data of this report.
This section of this Form 10-K generally discusses fiscal 2021 compared to
fiscal 2020. Discussions of fiscal 2020 compared to 2019 that are not included
in this Form 10-K can be found in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations in our
fiscal 2020 Form 10-K, filed with the United States Securities and Exchange
Commission
on November 19, 2020.
Overview
Visa is a global payments technology company that enables innovative, reliable
and secure electronic payments across more than 200 countries and territories.
We facilitate global commerce and money movement across a global network of
consumers, merchants, financial institutions, businesses, strategic partners and
government entities through innovative technologies. Our advanced transaction
processing network, VisaNet, enables authorization, clearing and settlement of
payment transactions and allows us to offer products and solutions that
facilitate secure, reliable, and efficient money movement for all participants
in the ecosystem.
Financial overview. A summary of our as-reported U.S. GAAP and non-GAAP
operating results are as follows:
For the Years Ended
September 30, % Change(1)
2021 2020
vs. vs.
2021 2020 2019 2020 2019
(in millions, except percentages and per share data)
Net revenues $ 24,105 $ 21,846 $ 22,977 10 % (5 %)
Operating expenses $ 8,301 $ 7,765 $ 7,976 7 % (3 %)
Net income $ 12,311 $ 10,866 $ 12,080 13 % (10 %)
Diluted earnings per share $ 5.63 $ 4.89 $ 5.32 15 % (8 %)



Non-GAAP operating expenses(2) $ 8,077 $ 7,702


$ 7,596 5 % 1 %
Non-GAAP net income(2) $ 12,933 $ 11,193 $ 12,274 16 % (9 %)


Non-GAAP diluted earnings per share(2) $ 5.91 $ 5.04


$ 5.40 17 % (7 %)


(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
(2)For a full reconciliation of our GAAP to non-GAAP financial results, see
tables in Non-GAAP financial results below.
Coronavirus. As the effects of an evolving coronavirus ("COVID-19") pandemic
continues, much remains uncertain. Our priority remains the safety of our
employees, clients and the communities in which we live and operate. We are
taking a phased approach to reopening our offices, with most of our employees
currently working remotely. We continue to remain in close and regular contact
with our employees, clients, partners and governments globally to help them
navigate these challenging times.
The ongoing effects of COVID-19 remain difficult to predict due to numerous
uncertainties, including the transmissibility, severity, duration and resurgence
of the outbreak; new variants of the virus; the uptake and effectiveness of
health and safety measures or actions that are voluntarily adopted by the public
or required by governments or public health authorities, including vaccines and
treatments; the speed and strength of an economic recovery, including the
reopening of borders and the resumption of international travel; and the impact
to our employees and our operations, the business of our clients, suppliers and
business partners; and other factors identified in Part I, Item 1A "Risk
Factors" in this Form 10-K. We will continue to evaluate the nature and extent
of the impact to our business.
Highlights for fiscal 2021. Net revenues were $24.1 billion, an increase of 10%
over the prior year, primarily due to the year-over-year growth in payments
volume, processed transactions and cross-border volume, helped by
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fewer COVID-19 restrictions, partially offset by higher client incentives.
Exchange rate movements and our hedging program positively impacted our net
revenues growth by approximately half a percentage point.
GAAP operating expenses were $8.3 billion and increased 7% over the prior year,
primarily driven by higher personnel and marketing expenses, partially offset by
lower general and administrative expenses. Non-GAAP operating expenses were $8.1
billion
and increased 5% over the prior year, primarily driven by higher
personnel and marketing expenses, partially offset by lower general and
administrative expenses. Exchange rate movements negatively impacted our
operating expense growth by approximately half a percentage point.
Non-GAAP financial results. We use non-GAAP financial measures of our
performance which exclude certain items which we believe are not representative
of our continuing operations, as they may be non-recurring or have no cash
impact, and may distort our longer-term operating trends. We consider non-GAAP
measures useful to investors because they provide greater transparency into
management's view and assessment of our ongoing operating performance.
•Gains and losses on equity investments. Gains and losses on equity investments
include periodic non-cash fair value adjustments and gains and losses upon sale
of an investment. These long-term investments are strategic in nature and are
primarily private company investments. Gains and losses and the related tax
impacts associated with these investments are tied to the performance of the
companies that we invest in and therefore do not correlate to the underlying
performance of our business.
•Amortization of acquired intangible assets. Amortization of acquired intangible
assets consists of amortization of intangible assets such as developed
technology, customer relationships and brands acquired in connection with
business combinations executed beginning in fiscal 2019. Amortization charges
for our acquired intangible assets are non-cash and are significantly affected
by the timing, frequency and size of our acquisitions, rather than our core
operations. As such, we have excluded this amount and the related tax impact to
facilitate an evaluation of our current operating performance and comparison to
our past operating performance.
•Acquisition-related costs. Acquisition-related costs consist primarily of
one-time transaction and integration costs associated with our business
combinations. These costs include professional fees, technology integration
fees, restructuring activities and other direct costs related to the purchase
and integration of acquired entities. It also includes retention equity and
deferred equity compensation when they are agreed upon as part of the purchase
price of the transaction but are required to be recognized as expense
post-combination. We have excluded these amounts and the related tax impacts as
the expenses are recognized for a limited duration and do not reflect the
underlying performance of our business.
•Remeasurement of deferred tax balances. During fiscal 2021, in connection with
the UK enacted legislation on June 10, 2021 that increases the tax rate from 19%
to 25%, effective April 1, 2023, we remeasured our UK deferred tax liabilities,
resulting in the recognition of a non-recurring, non-cash income tax expense of
$1.0 billion.
During fiscal 2020, in connection with the UK enacted legislation that repealed
the previous tax rate reduction from 19% to 17% that was effective on April 1,
2020
, we remeasured our UK deferred tax liabilities as of the enactment date,
resulting in the recognition of a non-recurring, non-cash income tax expense of
$329 million. See Note 19-Income Taxes to our consolidated financial statements
included in Item 8-Financial Statements and Supplementary Data of this report.
•Indirect taxes. During fiscal 2021, we recognized a one-time charge within
general and administrative expense of $152 million, before tax. Net of the
related income tax benefit of $40 million, determined by applying applicable tax
rates, non-GAAP net income increased by $112 million. This charge is to record
our estimate of probable additional indirect taxes, related to prior periods,
for which we could be liable as a result of certain changes in applicable law.
This one-time charge is not representative of our ongoing operations.
•Resolution of a tax item. During fiscal 2020, we resolved a long-outstanding
tax matter, dating back more than 12 years, relating to certain tax filing
positions taken prior to our initial public offering. The resolution of this
matter resulted in the recognition of a one-time charge to income tax expense of
$28 million, which we believe is not representative of our continuing operations
and ongoing effective tax rate.
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•Litigation provision. During fiscal 2019, we recorded a litigation provision of
$370 million and related tax benefits of $83 million associated with the
interchange multidistrict litigation. The tax impact is determined by applying
applicable federal and state tax rates to the litigation provision. Under the
U.S. retrospective responsibility plan, we recover the monetary liabilities
related to the U.S. covered litigation through a reduction to the conversion
rate of our class B common stock to shares of class A common stock. See Note
5-U.S. and Europe Retrospective Responsibility Plans and Note 20-Legal Matters
to our consolidated financial statements included in Item 8-Financial Statements
and Supplementary Data of this report.
Non-GAAP operating expenses, non-operating income (expense), income tax
provision, effective income tax rate, net income and diluted earnings per share
should not be relied upon as substitutes for, or considered in isolation from,
measures calculated in accordance with U.S. GAAP. The following tables reconcile
our as-reported financial measures, calculated in accordance with U.S. GAAP, to
our respective non-GAAP financial measures:
For the Year Ended
September 30, 2021
Diluted
Operating Non-operating Income Tax Effective Income



Earnings Per
Expenses Income (Expense) Provision Tax Rate(1) Net Income Share(1)



(in millions, except percentages and per share data)
As reported


$ 8,301 $ 259 $ 3,752 23.4 % $ 12,311 $ 5.63
(Gains) losses on equity investments,
net - (712) (159) (553) (0.25)
Amortization of acquired intangible
assets (51) - 12 39 0.02
Acquisition-related costs (21) - 4 17 0.01
Remeasurement of deferred tax balances - - (1,007) 1,007 0.46
Indirect taxes (152) - 40 112 0.05
Non-GAAP $ 8,077 $ (453) $ 2,642 17.0 % $ 12,933 $ 5.91



For the Year Ended
September 30, 2020
Diluted
Operating Non-operating Income Tax Effective Income



Earnings Per
Expenses Income (Expense) Provision Tax Rate(1) Net Income Share(1)



(in millions, except percentages and per share data)
As reported


$ 7,765 $ (291) $ 2,924 21.2 % $ 10,866 $ 4.89
(Gains) losses on equity investments,
net - (101) (23) (78) (0.04)
Amortization of acquired intangible
assets (46) - 11 35 0.02
Acquisition-related costs (17) - 4 13 0.01
Remeasurement of deferred tax balances - - (329) 329 0.15
Resolution of a tax item - - (28) 28 0.01
Non-GAAP $ 7,702 $ (392) $ 2,559 18.6 % $ 11,193 $ 5.04



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For the Year Ended
September 30, 2019
Diluted
Operating Non-operating Income Tax Effective Income



Earnings Per
Expenses Income (Expense) Provision Tax Rate(1) Net Income Share(1)



(in millions, except percentages and per share data)
As reported


$ 7,976 $ (117) $ 2,804 18.8 % $ 12,080 $ 5.32
(Gains) losses on equity investments,
net - (131) (30) (101) (0.04)
Amortization of acquired intangible
assets (6) - 1 5 -
Acquisition-related costs (4) - 1 3 -

Litigation provision (370) - 83 287 0.13

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


(1)Figures in the table may not recalculate exactly due to rounding. Effective
income tax rate, diluted earnings per share and their respective totals are
calculated based on unrounded numbers.
Common stock repurchases. In January 2021, our board of directors authorized an
$8.0 billion share repurchase program (the "January 2021 Program"). During
fiscal 2021, we repurchased 40 million shares of our class A common stock in the
open market for $8.7 billion. As of September 30, 2021, our January 2021 Program
had remaining authorized funds of $4.8 billion for share repurchase. See Note
15-Stockholders' Equity to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Pending acquisitions. On June 24, 2021, we entered into a definitive agreement
to acquire Tink AB ("Tink") for €1.8 billion, inclusive of cash and retention
incentives. This acquisition is subject to customary closing conditions,
including regulatory reviews and approvals.
On July 22, 2021, we entered into a definitive agreement to acquire The Currency
Cloud Group Limited
("Currencycloud"). The acquisition values Currencycloud at
£700 million, inclusive of cash and retention incentives. The financial
consideration will be reduced by the outstanding equity of Currencycloud that we
already own. This acquisition is subject to customary closing conditions,
including regulatory reviews and approvals.
Terminated acquisition. On January 12, 2021, Visa and Plaid Inc. mutually
terminated their merger agreement announced on January 13, 2020. See Note
20-Legal Matters to our consolidated financial statements included in Item
8-Financial Statements and Supplementary Data of this report.
Payments volume and processed transactions. Payments volume is the primary
driver for our service revenues, and the number of processed transactions is the
primary driver for our data processing revenues.
Payments volume represents the aggregate dollar amount of purchases made with
cards and other form factors carrying the Visa, Visa Electron, V PAY and
Interlink brands and excludes Europe co-badged volume. Nominal payments volume
is denominated in U.S. dollars and is calculated each quarter by applying an
established U.S. dollar/local currency exchange rate for each local currency in
which our volumes are reported. Processed transactions represent transactions
using cards and other form factors carrying the Visa, Visa Electron, V PAY,
Interlink and PLUS brands processed on Visa's networks.
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The following tables present nominal payments and cash volume:
U.S. International Visa Inc.
12 months 12 months 12 months
ended June 30,(1) ended June 30,(1) ended June 30,(1)
% % %
2021 2020 Change(2) 2021 2020 Change(2) 2021 2020 Change(2)
(in billions, except percentages)



Nominal payments volume
Consumer credit $ 1,641 $ 1,518 8 % $ 2,396 $ 2,362 1 % $ 4,036 $ 3,880 4 %
Consumer debit(3) 2,387 1,848 29 % 2,440 1,975 24 % 4,828 3,824 26 %
Commercial(4) 697 641 9 % 406 370 10 % 1,103 1,011 9 %
Total nominal payments volume(2) $ 4,725 $ 4,007 18 % $ 5,243 $ 4,707 11 % $ 9,968 $ 8,714 14 %
Cash volume(5) 635 573 11 % 1,927 2,045 (6 %) 2,561 2,619 (2 %)
Total nominal volume(2),(6) $ 5,359 $ 4,580 17 % $ 7,169 $ 6,753 6 % $ 12,529 $ 11,333 11 %


U.S. International Visa Inc.
12 months 12 months 12 months
ended June 30,(1) ended June 30,(1) ended June 30,(1)
% % %
2020 2019 Change(2) 2020 2019 Change(2) 2020 2019 Change(2)
(in billions, except percentages)



Nominal payments volume
Consumer credit $ 1,518 $ 1,540 (1 %) $ 2,362 $ 2,484 (5 %) $ 3,880 $ 4,024 (4 %)
Consumer debit(3) 1,848 1,699 9 % 1,975 1,878 5 % 3,824 3,577 7 %
Commercial(4) 641 634 1 % 370 381 (3 %) 1,011 1,015 - %
Total nominal payments volume(2) $ 4,007 $ 3,873 3 % $ 4,707 $ 4,743 (1 %) $ 8,714 $ 8,616 1 %
Cash volume(5) 573 573 - % 2,045 2,262 (10 %) 2,619 2,835 (8 %)
Total nominal volume(2),(6) $ 4,580 $ 4,447 3 % $ 6,753 $ 7,005 (4 %) $ 11,333 $ 11,451 (1 %)


The following table presents the change in nominal and constant payments and
cash volume:
International Visa Inc.
12 months ended 12 months ended 12 months ended 12 months ended
June 30, June 30, June 30, June 30,
2021
vs 2020(1),(2) 2020 vs 2019(1),(2) 2021 vs 2020(1),(2) 2020 vs 2019(1),(2)
Nominal Constant(7) Nominal Constant(7) Nominal Constant(7) Nominal Constant(7)
Payments volume growth
Consumer credit growth 1 % (1 %) (5 %) (3 %) 4 % 3 % (4 %) (2 %)
Consumer debit growth(3) 24 % 21 % 5 % 8 % 26 % 25 % 7 % 8 %
Commercial growth(4) 10 % 7 % (3 %) - % 9 % 8 % - % 1 %
Total payments volume growth 11 % 9 % (1 %) 2 % 14 % 13 % 1 % 2 %
Cash volume growth(5) (6 %) (3 %) (10 %) (7 %) (2 %) - % (8 %) (5 %)
Total volume growth 6 % 5 % (4 %) (1 %) 11 % 10 % (1 %) 1 %


(1)Service revenues in a given quarter are assessed based on nominal payments
volume in the prior quarter. Therefore, service revenues reported for the 12
months ended September 30, 2021, 2020 and 2019, were based on nominal payments
volume reported by our financial institution clients for the 12 months ended
June 30, 2021, 2020 and 2019, respectively. On occasion, previously presented
volume information may be updated. Prior period updates are not material.
(2)Figures in the tables may not recalculate exactly due to rounding. Percentage
changes and totals are calculated based on unrounded numbers.
(3)Includes consumer prepaid volume and Interlink volume.
(4)Includes large, medium and small business credit and debit, as well as
commercial prepaid volume.
(5)Cash volume generally consists of cash access transactions, balance access
transactions, balance transfers and convenience checks.
(6)Total nominal volume is the sum of total nominal payments volume and cash
volume. Total nominal volume is provided by our financial institution clients,
subject to review by Visa.
(7)Growth on a constant-dollar basis excludes the impact of foreign currency
fluctuations against the U.S. dollar.
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The following table provides the number of processed transactions:
For the Years Ended
September 30, % Change(1)
2021 2020
vs. vs.
2021 2020 2019 2020 2019
(in millions, except percentages)
Visa processed transactions 164,733 140,839 138,329 17 % 2 %


(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers. On occasion, previously
presented information may be updated. Prior period updates are not material.
Results of Operations
Net Revenues
Our net revenues are primarily generated from payments volume on Visa products
for purchased goods and services, as well as the number of transactions
processed on our network. See Note 1-Summary of Significant Accounting Policies
to our consolidated financial statements included in Item 8-Financial Statements
and Supplementary Data of this report for further discussion on the components
of our net revenues.
The following table presents our net revenues earned in the U.S. and
internationally:
For the Years Ended
September 30, % Change(1)
2021 2020
vs. vs.
2021 2020 2019 2020 2019
(in millions, except percentages)
U.S. $ 11,160 $ 10,125 $ 10,279 10 % (1 %)
International 12,945 11,721 12,698 10 % (8 %)
Net revenues $ 24,105 $ 21,846 $ 22,977 10 % (5 %)


(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
Net revenues increased in fiscal 2021 primarily due to the year-over-year growth
in payments volume, processed transactions and cross-border volume, helped by
fewer COVID-19 restrictions, partially offset by higher client incentives.
Our net revenues are impacted by the overall strengthening or weakening of the
U.S. dollar as payments volume and related revenues denominated in local
currencies are converted to U.S. dollars. In fiscal 2021, exchange rate
movements and our hedging program positively impacted our net revenues growth by
approximately half a percentage point.
The following table presents the components of our net revenues:
For the Years Ended
September 30, % Change(1)
2021 2020
vs. vs.
2021 2020 2019 2020 2019
(in millions, except percentages)
Service revenues $ 11,475 $ 9,804 $ 9,700 17 % 1 %
Data processing revenues 12,792 10,975 10,333 17 % 6 %


International transaction revenues 6,530 6,299 7,804



4 % (19 %)
Other revenues 1,675 1,432 1,313 17 % 9 %
Client incentives (8,367) (6,664) (6,173) 26 % 8 %
Net revenues $ 24,105 $ 21,846 $ 22,977 10 % (5 %)



(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.



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•Service revenues increased primarily due to 14% growth in nominal payments
volume. Service revenues were also impacted by select pricing modifications and
business mix.
•Data processing revenues increased due to 17% growth in processed transactions,
as the business laps the initial impacts of COVID-19 starting in March 2020.
•International transaction revenues increased primarily due to growth in nominal
cross-border volumes, excluding transactions within Europe, of 4%, as the
business laps the initial impacts of COVID-19 starting in March 2020 and border
restrictions were relaxed in various markets.
•Other revenues increased as the business laps the initial impacts of COVID-19
starting in March 2020, driven by higher consulting and data services revenues.
•Client incentives increased in conjunction with the increase in payments volume
during fiscal 2021. The amount of client incentives we record in future periods
will vary based on changes in performance expectations, actual client
performance, amendments to existing contracts or the execution of new contracts.
Operating Expenses
Our operating expenses consist of the following:
•Personnel expenses include salaries, employee benefits, incentive compensation,
share-based compensation, contractor expense and severance charges.
•Marketing expenses include expenses associated with advertising and marketing
campaigns, sponsorships and other related promotions of the Visa brand.
•Network and processing expenses mainly represent expenses for the operation of
our processing network, including maintenance, equipment rental and fees for
other data processing services.
•Professional fees mainly consist of fees for consulting, legal and other
professional services.
•Depreciation and amortization expenses include amortization of purchased and
internally developed software, as well as depreciation expense for property and
equipment. Also included in this amount is amortization of finite-lived
intangible assets primarily obtained through acquisitions.
•General and administrative expenses consist mainly of card benefits, indirect
taxes, facilities costs, travel and meeting costs, foreign exchange gains and
losses and other corporate expenses incurred in support of our business.
•Litigation provision represents litigation expenses and is based on
management's understanding of our litigation profile, the specifics of the
cases, advice of counsel to the extent appropriate and management's best
estimate of incurred loss.
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The following table presents the components of our total operating expenses:
For the Years Ended
September 30, % Change(1)
2021 2020
vs. vs.
2021 2020 2019 2020 2019
(in millions, except percentages)
Personnel $ 4,240 $ 3,785 $ 3,444 12 % 10 %
Marketing 1,136 971 1,105 17 % (12 %)
Network and processing 730 727 721 - % 1 %
Professional fees 403 408 454 (1 %) (10 %)
Depreciation and amortization 804 767 656 5 % 17 %
General and administrative 985 1,096 1,196 (10 %) (8 %)
Litigation provision 3 11 400 (76 %) (97 %)
Total operating expenses(2) $ 8,301 $ 7,765 $ 7,976 7 % (3 %)


(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
(2)Operating expenses for fiscal 2021 and 2019 include significant items that we
do not believe are indicative of our operating performance. See Overview within
this Item 7-Management's Discussion and Analysis of Financial Condition and
Results of Operations.
•Personnel expenses increased primarily due to higher headcount and incentive
compensation, reflecting our strategy to invest in future growth.
•Marketing expenses increased as we lapped reductions in spending in the prior
year at the outset of COVID-19 as well as higher spending in client marketing
and various campaigns, including the Olympic Games Tokyo 2020, which were held
in Summer 2021.
•General and administrative expenses decreased due to lower travel expenses,
favorable foreign currency fluctuations and lower usage of travel related card
benefits, partially offset by a one-time charge to record our estimate of
probable additional indirect taxes, related to prior periods, for which we could
be liable as a result of certain changes in applicable laws.
Non-operating Income (Expense)
Non-operating income (expense) primarily includes interest expense, gains and
losses earned on investments, income from derivative instruments not associated
with our core business, as well as the non-service components of net periodic
pension income and expense.
The following table presents the components of our non-operating income
(expense):
For the Years Ended
September 30, % Change(1)
2021 2020
vs. vs.
2021 2020 2019 2020 2019
(in millions, except percentages)
Interest expense, net $ (513) $ (516) $ (533) (1 %) (3 %)
Investment income and other 772 225 416 243 % (46 %)
Total non-operating income (expense) $ 259 $ (291) $ (117) (189 %) 148



%





(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
•Interest expense, net decreased primarily as a result of lower interest related
to income tax liabilities, partially offset by an increase in interest expense
due to the issuance of debt in fiscal 2020. See Note 10-Debt to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary
Data of this report.
•Investment income and other increased primarily due to higher gains from our
equity investments, partially offset by lower interest income on our cash and
investments. See Note 6-Fair Value Measurements and Investments to our
consolidated financial statements included in Item 8-Financial Statements and
Supplementary Data of this report.
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Effective Income Tax Rate
The following table presents our effective income tax rates:
For the Years Ended
September 30,
2021 2020 2019
Effective income tax rate 23 % 21 % 19 %


The effective tax rate in fiscal 2021 differs from the effective tax rate in
fiscal 2020 mainly due to the following:
•during fiscal 2021, a $1.0 billion non-recurring non-cash tax expense related
to the remeasurement of UK deferred tax liabilities, as discussed below;
•during fiscal 2021, $255 million of tax benefits recognized as a result of the
conclusion of audits by taxing authorities; and
•during fiscal 2020, a $329 million non-recurring, non-cash tax expense related
to the remeasurement of UK deferred tax liabilities, as discussed below.
On June 10, 2021, the UK enacted legislation that increases the tax rate from
19% to 25%, effective April 1, 2023. On July 22, 2020, the UK enacted
legislation that repealed the previous tax rate reduction from 19% to 17% that
was effective on April 1, 2020. As a result, in fiscal 2021 and fiscal 2020, we
recorded non-recurring, non-cash tax expense related to the remeasurement of our
UK deferred tax liabilities, primarily related to intangibles recorded upon the
acquisition of Visa Europe Limited ("Visa Europe") in fiscal 2016.
Liquidity and Capital Resources
Management of Our Liquidity
We regularly evaluate cash requirements for current operations, commitments,
development activities and capital expenditures, and we may elect to raise
additional funds for these purposes in the future through the issuance of either
debt or equity. Our treasury policies provide management with the guidelines and
authority to manage liquidity risk in a manner consistent with our corporate
objectives.
The objectives of our treasury policies are to:
•provide adequate liquidity to cover operating expenditures and liquidity
contingency scenarios;
•ensure timely completion of payments settlement activities;
•ensure payments on required litigation settlements;
•make planned capital investments in our business;
•pay dividends and repurchase our shares at the discretion of our board of
directors; and
•invest excess cash in securities that enable us to first meet our working
capital and liquidity needs, and earn additional income.
Based on our current cash flow budgets and forecasts of our short-term and
long-term liquidity needs, we believe that our current and projected sources of
liquidity will be sufficient to meet our projected liquidity needs for more than
the next 12 months. We will continue to assess our liquidity position and
potential sources of supplemental liquidity in view of our operating
performance, current economic and capital market conditions and other relevant
circumstances.
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Cash Flow Data
The following table summarizes our cash flow activity for the fiscal years
presented:
For the Years Ended
September 30,
2021 2020 2019
(in millions)
Total cash provided by (used in):
Operating activities $ 15,227 $ 10,440 $ 12,784
Investing activities (152) 1,427 (591)
Financing activities (14,410) (3,968) (12,061)
Effect of exchange rate changes on cash, cash
equivalents, restricted cash and restricted cash
equivalents (37) 440 (277)


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





Operating activities. Cash provided by operating activities in fiscal 2021 was
higher than the prior fiscal year primarily due to growth in our underlying
business, lower client incentive payments and timing and impact of COVID-19 on
settlement in the prior fiscal year.
Investing activities. Cash was used in investing activities in fiscal 2021
compared to cash provided by investing activities in fiscal 2020, primarily due
to higher purchases, net of proceeds from sales and maturities of investment
securities.
Financing activities. Cash used in financing activities in fiscal 2021 was
higher than the prior fiscal year primarily due to the absence of proceeds
received from the issuance of senior notes in the prior year, the $3.0 billion
principal debt payment upon maturity of our senior notes and higher share
repurchases. See Note 10-Debt and Note 15-Stockholders' Equity, to our
consolidated financial statements included in Item 8-Financial Statements and
Supplementary Data of this report.
Sources of Liquidity
Our primary sources of liquidity are cash on hand, cash flow from our
operations, our investment portfolio and access to various equity and borrowing
arrangements. Funds from operations are maintained in cash and cash equivalents
and short-term or long-term investment securities based upon our funding
requirements, access to liquidity from these holdings and the return that these
holdings provide.
Cash, cash equivalents and investments. As of September 30, 2021, our cash and
cash equivalents balance were $16.5 billion and our available-for-sale debt
securities were $3.2 billion. Our investment portfolio is designed to invest
cash in securities which enables us to meet our working capital and liquidity
needs. Our investment portfolio consists of debt securities issued by the U.S.
Treasury or U.S. government-sponsored agencies. $1.5 billion of the investments
are classified as current and are available to meet short-term liquidity needs.
The remaining non-current investments have stated maturities of more than one
year from the balance sheet date; however, they are also generally available to
meet short-term liquidity needs.
Factors that may impact the liquidity of our investment portfolio include, but
are not limited to, changes to credit ratings of the securities, uncertainty
related to regulatory developments, actions by central banks and other monetary
authorities and the ongoing strength and quality of credit markets. We will
continue to review our portfolio in light of evolving market and economic
conditions. However, if current market conditions deteriorate, the liquidity of
our investment portfolio may be impacted and we could determine that some of our
investments are impaired, which could adversely impact our financial results. We
have policies that limit the amount of credit exposure to any one financial
institution or type of investment.
Commercial paper program. We maintain a commercial paper program to support our
working capital requirements and for other general corporate purposes. Under the
program, we are authorized to issue up to $3.0 billion in outstanding notes,
with maturities up to 397 days from the date of issuance. At September 30, 2021,
we had no outstanding obligations under the program. See Note 10-Debt to our
consolidated financial statements included in Item 8-Financial Statements and
Supplementary Data of this report.
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Credit facility. We have an unsecured $5.0 billion revolving credit facility
(the "Credit Facility") which expires on July 25, 2024. As of September 30,
2021
, there were no borrowings under the Credit Facility. See Note 10-Debt to
our consolidated financial statements included in Item 8-Financial Statements
and Supplementary Data of this report.
U.S. Litigation escrow account. Pursuant to the terms of the U.S. retrospective
responsibility plan, which was created to insulate Visa and our class A common
shareholders from financial liability for certain litigation cases, we maintain
a U.S. litigation escrow account from which monetary liabilities from
settlements of, or judgments in, the U.S. covered litigation will be payable. As
these funds are restricted for the sole purpose of making payments related to
the U.S. covered litigation matters, we do not rely on them for other
operational needs. See Note 5-U.S. and Europe Retrospective Responsibility Plans
and Note 20-Legal Matters to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Credit Ratings
Various factors affect our credit ratings, including changes in our operating
performance, the economic environment, conditions in the electronic payments
industry, our financial position and changes in our business strategy. Our
credit ratings are published by nationally recognized statistical rating
organizations in the U.S. and have not changed from the prior-year comparable
period. We do not currently foresee any reasonable circumstances under which our
credit ratings would be significantly downgraded. If a downgrade were to occur,
it could adversely impact, among other things, our future borrowing costs and
access to capital markets.
Uses of Liquidity
Payments settlement. Payments settlement due to and from our financial
institution clients can represent a substantial daily liquidity requirement.
Most U.S. dollar settlements are settled within the same day and do not result
in a receivable or payable balance, while settlements in currencies other than
the U.S. dollar generally remain outstanding for one to two business days, which
is consistent with industry practice for such transactions. In general, during
fiscal 2021, we were not required to fund settlement-related working capital. At
September 30, 2021, we held $9.1 billion of our total available liquidity to
fund daily settlement in the event one or more of our financial institution
clients are unable to settle, with the remaining liquidity available to support
our working capital and other liquidity needs. See Note 12-Settlement Guarantee
Management to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report.
Litigation. Judgments in and settlements of litigation or other fines imposed in
investigations and proceedings, other than the U.S. covered litigation and VE
territory covered litigation, which are covered by the U.S. and Europe
retrospective responsibility plans, could give rise to future liquidity needs.
See Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 20-Legal
Matters to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report.
Common stock repurchases. During fiscal 2021, we repurchased 40 million shares
of our class A common stock in the open market for $8.7 billion. As of
September 30, 2021, our January 2021 Program had remaining authorized funds of
$4.8 billion. See Note 15-Stockholders' Equity to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of
this report.
Dividends. During fiscal 2021, we declared and paid $2.8 billion in dividends at
a quarterly rate of $0.32 per share. On October 22, 2021, our board of directors
declared a quarterly cash dividend of $0.375 per share of class A common stock
(determined in the case of class B and C common stock and series A, B and C
convertible participating preferred stock on an as-converted basis). We expect
to pay approximately $812 million in connection with this dividend on
December 7, 2021. See Note 15-Stockholders' Equity to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of
this report. We expect to continue paying quarterly dividends in cash, subject
to approval by the board of directors. All preferred and class B and C common
stock will share ratably on an as-converted basis in such future dividends.
Capital expenditures. During fiscal 2021, our capital expenditures decreased
slightly. We expect to continue investing in technology assets and payments
system infrastructure to support our digital solutions and core business
initiatives.
Senior notes. As of September 30, 2021, we had an outstanding aggregate
principal amount relating to our fixed-rate senior notes of $21.0 billion with
maturity dates ranging from September 2022 to August 2050. During fiscal 2021,
we repaid $3.0 billion of principal upon maturity of our senior notes. A
principal payment of $1.0 billion is
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due on September 14, 2022 on our fixed-rate senior notes issued in December
2015
, for which we have sufficient liquidity. In August 2020, we issued a $500
million
green bond as part of our commitment to sustainable living and a
sustainable payments ecosystem. In fiscal 2021, we allocated $165 million to
eligible green projects. See Note 10-Debt to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of
this report.
Client incentives. As the future cash payments for these agreements, which range
in terms from less than one to fifteen years, are based on specific performance
requirements, the timing of payments can vary. As of September 30, 2021, we had
$5.4 billion of client incentives liability recorded on the consolidated balance
sheet related to these agreements. See Note 1-Summary of Significant Accounting
Policies to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report.
Uncertain tax positions. As of September 30, 2021, we had liabilities for
uncertain tax positions of $1.8 billion for which we cannot determine the range
and timing of the cash payments. See Note 19-Income Taxes to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary
Data of this report.
Pending acquisitions. On June 24, 2021, we entered into a definitive agreement
to acquire Tink for €1.8 billion, inclusive of cash and retention incentives.
This acquisition is subject to customary closing conditions, including
regulatory reviews and approvals.
On July 22, 2021, we entered into a definitive agreement to acquire
Currencycloud for a value of £700 million, inclusive of cash and retention
incentives. The financial consideration will be reduced by the outstanding
equity of Currencycloud that we already own. This acquisition is subject to
customary closing conditions, including regulatory reviews and approvals. See
Note 2-Acquisitions to our consolidated financial statements included in Item
8-Financial Statements and Supplementary Data of this report.
Other uses of cash. The following table represents material, expected or
contractually committed future obligations as of September 30, 2021. We believe
that we will be able to fund these obligations through cash generated from our
operations and available credit facility.
Payments Due by Period
Less than 1-3 3-5 More than
1 Year Years Years 5 Years Total
(in millions)

Purchase obligations(1) $ 1,730 $ 685 $ 384 $ 569 $ 3,368
Leases not yet commenced(2) 1 41 58 367 467

Transition tax(3) 87 249 455 - 791

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


(1)Represents agreements to purchase goods and services that specify significant
terms, including: fixed or minimum quantities to be purchased, minimum or
variable price provisions, and the approximate timing of the transaction. For
obligations where the individual years of spend are not specified in the
contract, we have estimated the timing of when these amounts will be spent.
(2)Represents future payments under leases that have not yet commenced and are
not included in the consolidated balance sheet. For future lease payments
related to leases that have commenced and are included in the consolidated
balance sheet, see Note 9-Leases to our consolidated financial statements
included in Item 8-Financial Statements and Supplementary Data of this report.
(3)Amounts presented relate to the estimated transition tax, net of foreign tax
credit carryovers, on certain foreign earnings of non-U.S. subsidiaries
recognized during fiscal 2018 in connection with the Tax Cuts and Jobs Act.
Indemnifications
We indemnify our financial institution clients for settlement losses suffered
due to the failure of any other client to fund its settlement obligations in
accordance with our operating rules. The amount of the indemnification is
limited to the amount of unsettled Visa payment transactions at any point in
time. We maintain and regularly review global settlement risk policies and
procedures to manage settlement risk, which may require clients to post
collateral if certain credit standards are not met. See Note 1-Summary of
Significant Accounting Policies and Note 12-Settlement Guarantee Management to
our consolidated financial statements included in Item 8-Financial Statements
and Supplementary Data of this report.

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Accounting Pronouncements Not Yet Adopted
In December 2019, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Board Update ("ASU") 2019-12, which simplifies the
accounting for income taxes by removing certain exceptions to the general
principles in the existing guidance and making other minor improvements. The
amendments in the ASU are effective on October 1, 2021. The adoption is not
expected to have a material impact on our consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, which clarifies that an entity
should consider observable transactions that require it to either apply or
discontinue the equity method of accounting for the purposes of applying the
fair value measurement alternative. The amendments in the ASU are effective on
October 1, 2021. The adoption is not expected to have a material impact on our
consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, which provides optional expedients
and exceptions for applying U.S. GAAP to contracts, hedging relationships and
other transactions that reference the London Interbank Offered Rate or another
reference rate expected to be discontinued because of reference rate reform.
Subsequently, the FASB also issued an amendment to this standard. The amendments
in the ASU are effective upon issuance through December 31, 2022. We are
evaluating the effect ASU 2020-04 and its subsequent amendment will have on our
consolidated financial statements. The adoption is not expected to have a
material impact on our consolidated financial statements.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America which require us
to make judgments, assumptions and estimates that affect the amounts reported.
See Note 1-Summary of Significant Accounting Policies to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary
Data of this report. We have established policies and control procedures which
seek to ensure that estimates and assumptions are appropriately governed and
applied consistently from period to period. However, actual results could differ
from our assumptions and estimates, and such differences could be material.
We believe that the following accounting estimates are the most critical to
fully understand and evaluate our reported financial results, as they require
our most subjective or complex management judgments, resulting from the need to
make estimates about the effect of matters that are inherently uncertain and
unpredictable.
Revenue Recognition-Client Incentives
Critical estimates. We enter into long-term incentive agreements with financial
institution clients, merchants and other business partners for various programs
that provide cash and other incentives designed to increase revenue by growing
payments volume, increasing Visa product acceptance, winning merchant routing
transactions over to our network and driving innovation. These incentives are
primarily accounted for as reductions to net revenues; however, if a separate
identifiable benefit at fair value can be established, they are accounted for as
operating expenses. Incentives are recognized systematically and rationally
based on management's estimate of each client's performance. These estimates are
regularly reviewed and adjusted as appropriate based on changes in performance
expectations, actual client performance, amendments to existing contracts or the
execution of new contracts.
Assumptions and judgment. Estimation of client incentives relies on forecasts of
payments and transaction volume, card issuance and card conversion. Performance
is estimated using client-reported information, transactional information
accumulated from our systems, historical information, market and economic
conditions and discussions with our clients, merchants and business partners.
Impact if actual results differ from assumptions. If actual performance is not
consistent with our estimates, client incentives may be materially different
than initially recorded. Increases in incentive payments are generally driven by
increased payments and transaction volume, which drive our net revenues. As a
result, in the event incentive payments exceed estimates, such payments are not
expected to have a material effect on our financial condition, results of
operations or cash flows. The cumulative impact of a revision in estimates is
recorded in the period such revisions become probable and estimable. For the
year ended September 30, 2021, client incentives represented 26% of gross
revenues.
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Legal and Regulatory Matters
Critical estimates. We are currently involved in various legal proceedings, the
outcomes of which are not within our complete control or may not be known for
prolonged periods of time. Management is required to assess the probability of
loss and estimate the amount of such loss, if any, in preparing our consolidated
financial statements.
Assumptions and judgment. We evaluate the likelihood of a potential loss from
legal or regulatory proceedings to which we are a party. We record a liability
for such claims when a loss is deemed probable and the amount can be reasonably
estimated. Significant judgment may be required in the determination of both
probability and whether a potential loss is reasonably estimable. Our judgments
are subjective based on management's understanding of the litigation profile,
the specifics of each case, our history with similar proceedings, advice of
in-house and outside legal counsel to the extent appropriate and management's
best estimate of incurred loss. As additional information becomes available, we
reassess the potential loss related to pending claims and may revise our
estimates.
We have entered into loss sharing agreements that reduce our potential liability
under certain litigation. However, our U.S. retrospective responsibility plan
only addresses monetary liabilities from settlements of, or final judgments in,
the U.S. covered litigation. The plan's mechanisms include the use of the U.S.
litigation escrow account. The accrual related to the U.S. covered litigation
could be either higher or lower than the U.S. litigation escrow account balance.
Our Europe retrospective responsibility plan only covers Visa Europe territory
covered litigation (and resultant liabilities and losses) relating to the
covered period, subject to certain limitations, and does not cover any fines or
penalties incurred in the European Commission proceedings or any other matter.
See Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 20-Legal
Matters to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data.
Impact if actual results differ from assumptions. Due to the inherent
uncertainties of the legal and regulatory processes in the multiple
jurisdictions in which we operate, our judgments may be materially different
than the actual outcomes, which could have material adverse effects on our
business, financial conditions and results of operations. See Note 20-Legal
Matters to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data.
Income Taxes
Critical estimates. In calculating our effective income tax rate, we make
judgments regarding certain tax positions, including the timing and amount of
deductions and allocations of income among various tax jurisdictions.
Assumptions and judgment. We have various tax filing positions with regard to
the timing and amount of deductions and credits and the allocation of income
among various tax jurisdictions, based on our interpretation of local tax laws.
We also inventory, evaluate and measure all uncertain tax positions taken or
expected to be taken on tax returns and to record liabilities for the amount of
such positions that may not be sustained, or may only be partially sustained,
upon examination by the relevant taxing authorities.
Impact if actual results differ from assumptions. Although we believe that our
estimates and judgments are reasonable, actual results may differ from these
estimates. Some or all of these judgments are subject to review by the taxing
authorities. If one or more of the taxing authorities were to successfully
challenge our right to realize some or all of the tax benefit we have recorded,
and we were unable to realize this benefit, it could have a material adverse
effect on our financial results and cash flows.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential economic loss arising from adverse changes in
market factors. Our exposure to financial market risks results primarily from
fluctuations in foreign currency exchange rates, interest rates and equity
prices. Aggregate risk exposures are monitored on an ongoing basis.
Foreign Currency Exchange Rate Risk
We are exposed to risks from foreign currency exchange rate fluctuations that
are primarily related to changes in the functional currency value of revenues
generated from foreign currency-denominated transactions and changes in the
functional currency value of payments in foreign currencies. We manage these
risks by entering into foreign currency forward contracts that hedge exposures
of the variability in the functional currency equivalent of anticipated
non-functional currency denominated cash flows. Our foreign currency exchange
rate risk management program reduces, but does not entirely eliminate, the
impact of foreign currency exchange rate movements.
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At September 30, 2021 and 2020, the aggregate notional amounts of our foreign
currency forward contracts outstanding in our exchange rate risk management
program, including contracts not designated for cash flow hedge accounting, were
$2.7 billion and $3.9 billion, respectively. The aggregate notional amount
outstanding at September 30, 2021 is fully consistent with our strategy and
treasury policy aimed at reducing foreign exchange risk below a predetermined
and approved threshold. However, actual results could materially differ from our
forecast. At September 30, 2021, the effect of a hypothetical 10% weakening in
the value of the functional currencies is estimated to create an additional fair
value loss of approximately $190 million on our outstanding foreign currency
forward contracts. The loss from this hypothetical weakening would be largely
offset by a corresponding gain on our cash flows from foreign
currency-denominated revenues and payments. See Note 1-Summary of Significant
Accounting Policies and Note 13-Derivative Financial Instruments to our
consolidated financial statements included in Item 8-Financial Statements and
Supplementary Data of this report.
We are further exposed to foreign currency exchange rate risk related to
translation as the functional currency of Visa Europe is the Euro. Translation
from the Euro to the U.S. dollar is performed for balance sheet accounts using
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using an average exchange rate for the period. Resulting translation
adjustments are reported as a component of accumulated other comprehensive
income (loss) on the consolidated balance sheets. A hypothetical 10% change in
the Euro against the U.S. dollar compared to the exchange rate at September 30,
2021
would result in a foreign currency translation adjustment of $2.0 billion.
See Note 1-Summary of Significant Accounting Policies to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary
Data of this report.
We are also subject to foreign currency exchange risk in daily settlement
activities. This risk arises from the timing of rate setting for settlement with
clients relative to the timing of market trades for balancing currency
positions. Risk in settlement activities is limited through daily operating
procedures, including the utilization of Visa settlement systems and our
interaction with foreign exchange trading counterparties.
Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate
securities. Investments in fixed-rate instruments carry a degree of interest
rate risk. The fair value of fixed-rate securities may be adversely impacted due
to a rise in interest rates. Additionally, a falling-rate environment creates
reinvestment risk because as securities mature, the proceeds are reinvested at a
lower rate, generating less interest income.
At September 30, 2021 and 2020, the fair value of our fixed-rate investment
securities were $5.5 billion and $4.0 billion, respectively, and the fair value
of our adjustable-rate investment securities were $0.2 billion and $2.0 billion,
respectively. At September 30, 2021, a hypothetical 100 basis point increase in
interest rates would create an estimated decrease in the fair value of our
investment securities of approximately $40 million. Any realized gains or losses
resulting from such interest rate changes would only occur if we sold the
investments prior to maturity. Historically, we have been able to hold
investments until maturity.
We have interest rate and cross-currency swap agreements on a portion of our
outstanding senior notes that allow us to manage our interest rate exposure
through a combination of fixed and floating rates and reduce our overall cost of
borrowing. Together these swap agreements effectively convert a portion of our
U.S. dollar denominated fixed-rate payments into U.S. dollar and Euro
denominated floating-rate payments. By entering into interest rate swaps, we
have assumed risks associated with market interest rate fluctuations. A
hypothetical 100 basis point increase in interest rates would have resulted in
an increase of approximately $40 million in annual interest expense. See Note
13-Derivative Financial Instruments to our consolidated financial statements
included in Item 8-Financial Statements and Supplementary Data of this report.
Equity Investment Risk
As of September 30, 2021 and 2020, the carrying value of our non-marketable
equity securities was $1.5 billion and $1.0 billion, respectively. These
investments are subject to a wide variety of market-related risks that could
substantially reduce or increase the carrying value of our holdings. A decline
in financial condition or operating results of these investments could result in
a loss of all or a substantial part of our carrying value in these companies. We
regularly review our non-marketable equity securities for possible impairment,
which generally involves an analysis of the facts and changes in circumstances
influencing the investment, expectations of the entity's cash flows and capital
needs, and the viability of its business model.
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Pension Plan Risk
At September 30, 2021 and 2020, our U.S. defined benefit pension plan assets
were $1.3 billion and $1.1 billion, respectively, and projected benefit
obligations were $0.9 billion at each year end. A material adverse decline in
the value of pension plan assets and/or in the discount rate for benefit
obligations would result in a decrease in the funded status of the pension
plans, an increase in pension cost and an increase in required funding. As of
September 30, 2021, a hypothetical 10% decrease in the value of pension plan
assets and a 1% decrease in the discount rate would result in an aggregate
decrease of approximately $225 million in the funded status and an increase of
approximately $26 million in pension cost.
At September 30, 2021 and 2020, our non-U.S. defined benefit pension plan assets
were $0.5 billion at each year end, and projected benefit obligations were $0.5
billion
and $0.6 billion, respectively. A material adverse decline in the value
of pension plan assets and/or in the discount rate for benefit obligations would
result in a decrease in the funded status of the pension plans, an increase in
pension cost and an increase in required funding. As of September 30, 2021, a
hypothetical 10% decrease in the value of pension plan assets and a 1% decrease
in the discount rate would result in an aggregate decrease of approximately $166
million
in the funded status and an increase of approximately $16 million in
pension cost.
We will continue to monitor the performance of pension plan assets and market
conditions as we evaluate the amount of our contribution to the pension plans
for fiscal 2022, if any, which would be made in September 2022.
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