U.S. and Europe Retrospective Responsibility Plans

9 Months Ended

Jun. 30, 2021

Retrospective Responsibility Plan [Abstract]

U.S. and Europe Retrospective Responsibility Plans

Note 5—U.S. and Europe Retrospective Responsibility Plans

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, certain litigation referred to as the “U.S. covered litigation” are paid. The escrow funds are held in money market investments along with interest income earned, less applicable taxes, and are classified as restricted cash equivalents on the consolidated balance sheets. The accrual related to the U.S. covered litigation could be either higher or lower than the U.S. litigation escrow account balance. See Note 13—Legal Matters.

The following table sets forth the changes in the restricted cash equivalents—U.S. litigation escrow account:

	Nine Months Ended June 30,
	2021		2020
	(in millions)
Balance at beginning of period	$	901	$	1,205
Return of takedown payment to the litigation escrow account	—		467
Payments to opt-out merchants(1) and interest earned on escrow funds	(7)		(524)
Balance at end of period	$	894	$	1,148

(1)These payments are associated with the Interchange Multidistrict Litigation. See Note 13—Legal Matters.

Europe Retrospective Responsibility Plan

Visa Inc., Visa International and Visa Europe are parties to certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory (the “VE territory covered litigation”). Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover certain losses resulting from VE territory covered litigation (the “VE territory covered losses”) through a periodic adjustment to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. VE territory covered losses are recorded in “right to recover for covered losses” within stockholders’ equity before the corresponding adjustment to the applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in any six-month period unless a single, individual loss greater than €20 million is incurred, in which case, the six-month limitation does not apply. When the adjustment to the conversion rate is made, the amount previously recorded in “right to recover for covered losses” as contra-equity is then recorded against the book value of the preferred stock within stockholders’ equity. During the three and nine months ended June 30, 2021, the Company recovered $40 million and $55 million, respectively, of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock.

The following table sets forth the activities related to VE territory covered losses in preferred stock and “right to recover for covered losses” within stockholders’ equity during the nine months ended June 30, 2021:

	Preferred Stock				Right to Recover for Covered Losses
	UK&I		Europe
	(in millions)
Balance as of September 30, 2020	$	1,106	$	1,543	$	(39)
VE territory covered losses incurred(1)	—		—		(38)
Recovery through conversion rate adjustment(2)	(35)		(20)		53
Balance as of June 30, 2021	$	1,071	$	1,523	$	(24)

(1)VE territory covered losses incurred reflect settlements with merchants and additional legal costs. See Note 13—Legal Matters.

(2)Adjustment to right to recover for covered losses for the conversion rate adjustment differs from the actual recovered amount due to differences in foreign exchange rates between the time the losses were incurred and the subsequent recovery through the conversion rate adjustment.

The following table sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred stock recorded in stockholders’ equity within the Company’s consolidated balance sheets as of June 30, 2021 and September 30, 2020:

	June 30, 2021				September 30, 2020
	As-converted Value of Preferred Stock(1),(2)		Book Value of Preferred Stock(1)		As-converted Value of Preferred Stock(1),(3)		Book Value of Preferred Stock(1)
	(in millions)
UK&I preferred stock	$	3,666	$	1,071	$	3,168	$	1,106
Europe preferred stock	5,044		1,523		4,331		1,543
Total	8,710		2,594		7,499		2,649
Less: right to recover for covered losses	(24)		(24)		(39)		(39)
Total recovery for covered losses available	$	8,686	$	2,570	$	7,460	$	2,610

(1)Figures in the table may not recalculate exactly due to rounding. As-converted and book values are based on unrounded numbers.

(2)As of June 30, 2021, the as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively; (b) 6.321 and 6.834, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock, respectively; and (c) $233.82, Visa’s class A common stock closing stock price.

(3)As of September 30, 2020, the as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively; (b) 6.387 and 6.861, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock respectively; and (c) $199.97, Visa’s class A common stock closing stock price.