Derivative and Non-derivative Financial Instruments

9 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 8—Derivative and Non-derivative Financial Instruments

Derivative Financial Instruments

The Company entered into currency forward contracts during the second and third quarters of fiscal 2016 to mitigate a portion of the foreign currency exchange rate risk associated with the upfront cash consideration paid in the Visa Europe acquisition. Subsequently, the Company entered into additional offsetting currency forward contracts to eliminate its risk-mitigation positions at June 30, 2016. All contracts outstanding at June 30, 2016 are set to mature during the fourth 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 gains and losses related to these contracts as follows:

	Three Months Ended March 31, 2016		Three Months Ended June 30, 2016			Nine Months Ended June 30, 2016
	(in millions)
Gains (losses) on currency forward contracts — Visa Europe acquisition	$	116	$	(42	)	$	74

The Company maintains a rolling cash flow hedge program with the objective of reducing foreign currency exchange rate risk from forecasted net exposures of revenues derived from and payments made in non-functional currencies during the following twelve months. The aggregate notional amount of the Company's derivative contracts outstanding in its hedge program was $1.6 billion at June 30, 2016 and $1.2 billion at September 30, 2015. The increase in the aggregate notional amounts of the Company's derivative contracts includes the addition of $202 million notional of derivative contracts entered into for Visa Europe after the Closing.

The Company utilizes foreign exchange derivative contracts to hedge against foreign currency exchange rate fluctuations related to certain monetary assets and liabilities denominated in foreign currency held by Visa Europe. As of June 30, 2016, the aggregate notional amount of these balance sheet hedges was $900 million. The Company did not have any balance sheet hedges outstanding at September 30, 2015. Gains and losses on the derivative contracts partially offset gains and losses on the hedged monetary assets and liabilities denominated in foreign currency. These amounts are recorded in general and administrative expense in the Company's unaudited consolidated statement of operations as these instruments are not designated for hedge accounting.

Non-derivative Financial Instrument Designated as a Net Investment Hedge

The Company designated the euro-denominated deferred cash consideration liability of $1.2 billion (see Note 2—Visa Europe), a non-derivative financial instrument, as a hedge against a portion of the foreign currency exchange rate exposure of the Company's euro-denominated net investment of $18.8 billion in Visa Europe. Changes in the value of the deferred cash consideration liability, attributable to the change in exchange rates at the end of each reporting period, partially offset the foreign currency translation of the Company's net investment recorded in accumulated other comprehensive income in the Company's unaudited consolidated balance sheet.