Derivative and Non-derivative Financial Instruments

12 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative and Non-derivative Financial Instruments

Note 13—Derivative and Non-derivative Financial Instruments

As of September 30, 2022 and 2021, the aggregate notional amount of the Company’s derivative contracts outstanding in its hedge program was $11.9 billion and $11.2 billion, respectively. As of September 30, 2022 and 2021, the aggregate notional amount of the derivative contracts not designated as hedging instruments was $1.5 billion and $0.8 billion, respectively.

The following table shows the Company’s derivative instruments at gross fair value:

		September 30,
	Balance Sheet Location	2022		2021
		(in millions)
Assets
Designated as Hedging Instrument:
Foreign exchange contracts	Prepaid expenses and other current assets and other assets	$	1,096	$	270
Interest rate swap	Other assets	$	—	$	138
Not Designated as Hedging Instrument:
Foreign exchange contracts	Prepaid expenses and other current assets	$	35	$	2
Liabilities
Designated as Hedging Instrument:
Foreign exchange contracts	Accrued liabilities	$	49	$	13
Cross-currency swap	Other liabilities	$	—	$	90
Interest rate swap	Other liabilities	$	322	$	—
Not Designated as Hedging Instrument:
Foreign exchange contracts	Accrued liabilities	$	47	$	6

Cash flow hedges. For fiscal 2022, the Company recognized $190 million of pre-tax net gains from cash flow hedges in other comprehensive income (loss). The amounts recognized in other comprehensive income (loss) were not material for fiscal 2021 and 2020.

The Company estimates that $140 million of pre-tax net gains related to cash flow hedges recorded in accumulated other comprehensive income (loss) as of September 30, 2022, will be reclassified into the consolidated statement of operations within the next 12 months.

Net investment hedges. For fiscal 2022, 2021 and 2020, the Company recognized pre-tax net gains (losses) in other comprehensive income (loss) related to net investment hedges of $845 million, $20 million and ($318) million, respectively. For fiscal 2022, 2021 and 2020, the Company recognized an increase in earnings of $151 million, $156 million and $150 million, respectively, related to excluded forward points and interest differentials from forward contracts and swap agreements.

Non-derivative financial instrument designated as net investment hedge. As of September 30, 2022, the Company had designated €1.2 billion of the €3.0 billion Euro Notes issued in June 2022, a non-derivative financial instrument, as a hedge against a portion of the Company’s Euro-denominated net investment in Visa Europe. The foreign currency gains and losses associated with this hedging activity are recorded as foreign currency translation adjustments in accumulated other comprehensive income (loss).

Credit and market risks. The Company’s derivative financial instruments are subject to both credit and market risk. The Company monitors the credit-worthiness of the financial institutions that are counterparties to its derivative financial instruments and does not consider the risks of counterparty nonperformance to be significant. The Company mitigates this risk by entering into master netting agreements, and such agreements require each party to post collateral against its net liability position with the respective counterparty. As of September 30, 2022, the Company has received collateral of $348 million from counterparties, which is included in accrued liabilities in the consolidated balance sheets, and posted collateral of $62 million, which is included in prepaid expenses and other

current assets in the consolidated balance sheets. Notwithstanding the Company’s efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect against the risks associated with foreign currency fluctuations. As of September 30, 2022, credit and market risks related to derivative instruments were not considered significant.