Note 2—Revenues

Impact of the New Revenue Standard

The following tables summarize the impact of the new revenue standard on the Company’s consolidated statement of operations for the three months ended December 31, 2018 and the consolidated balance sheet as of December 31, 2018:



	For the Three Months Ended December 31, 2018
	As Reported		Impact of the New Revenue Standard			Results Under Prior Revenue Standard
	(in millions)
Net revenues	$	5,506	$	(52	)	$	5,454

Operating Expenses
Marketing	276		(30		)	246
Professional fees	91		(3		)	88
General and administrative	276		(3		)	273
Total operating expenses	1,789		(36		)	1,753
Operating income	3,717		(16		)	3,701

Income before income taxes	3,630		(16		)	3,614
Income tax provision	653		(1		)	652
Net income	2,977		(15		)	2,962



	December 31, 2018
	As Reported		Impact of the New Revenue Standard			Results Under Prior Revenue Standard
	(in millions)
Assets
Current portion of client incentives	$	547	$	(198	)	$	349
Client incentives	1,264		(661		)	603
Liabilities
Accounts payable	124		(23		)	101
Client incentives	3,345		(260		)	3,085
Accrued liabilities	1,487		(7		)	1,480
Deferred tax liabilities	4,835		(109		)	4,726
Other liabilities	2,703		(45		)	2,658
Equity
Accumulated income	11,908		(415		)	11,493

Disaggregation of Revenues

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets. The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three months ended December 31, 2018 and 2017:



	Three Months Ended December 31,
	2018			2017
	(in millions)
Service revenues	$	2,342		$	2,146
Data processing revenues	2,470			2,147
International transaction revenues	1,851			1,666
Other revenues	299			229
Client incentives	(1,456		)	(1,326		)
Net revenues	$	5,506		$	4,862



	Three Months Ended December 31,
	2018			2017
	(in millions)
U.S.	$	2,508		$	2,265
International	2,998		2,597
Net revenues	$	5,506		$	4,862

Revenue recognition. The Company's net revenues are comprised principally of the following categories: service revenues, data processing revenues, international transaction revenues, and other revenues, reduced by costs incurred under client incentives arrangements. As a payment network service provider, the Company’s obligation to the customer is to stand ready to provide continuous access to our payment network over the contractual term. Consideration is variable based primarily upon the amount and type of transactions and payments volume on Visa’s products. The Company recognizes revenues, net of sales and other similar taxes, as the payment network services are performed. Fixed fees for payment network services are generally recognized ratably over the related service period. The Company has elected the optional exemption to not disclose the remaining performance obligations related to payment network services.

Service revenues consist of revenues earned for services provided in support of client usage of Visa products. Current quarter service revenues are primarily assessed using a calculation of current pricing applied to the prior quarter's payments volume. The Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volume is transacted.

Data processing revenues consist of revenues earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among the Company's clients globally. Data processing revenues are recognized in the same period the related transactions occur or services are performed.

International transaction revenues are earned for cross-border transaction processing and currency conversion activities. Cross-border transactions arise when the country of origin of the issuer is different from that of the merchant. International transaction revenues are primarily generated by cross-border payments and cash volume.

Other revenues consist mainly of license fees for use of the Visa brand, fees for account holder services, licensing and certification and other activities related to the Company's acquired entities. Other revenues also include optional services or product enhancements, such as extended account holder protection and concierge services. Other revenues are recognized in the same period the related transactions occur or services are performed.

Client incentives. The Company enters into long-term contracts with financial institution clients, merchants and strategic partners for various programs designed to increase revenues recognized by growing payments volume, increasing Visa product acceptance, winning merchant routing transactions over to Visa's network and driving innovation. These incentives are primarily accounted for as reductions to revenues or as operating expenses if the payment is in exchange for a distinct good or service provided by the customer. The Company generally capitalizes upfront and fixed incentive payments under these agreements and amortizes the amounts as a reduction to revenues ratably over the contractual term. Incentives that are earned by the customer based on performance targets are recorded as reductions to revenues based on management's estimate of each client's future performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.