UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

xþ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2016~~2017

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the transition period from to~~

Commission file number 001-33977

VISA INC.

(Exact name of Registrant as specified in its charter)



Delaware		26-0267673
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

P.O. Box 8999 San Francisco, California		94128-8999
(Address of principal executive offices)		(Zip Code)

(650) 432-3200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See definition of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filero	Smaller reporting company o
Non-accelerated filer o (Do not check if a smaller reporting company.)		~~Smaller Reporting Company~~Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of April ~~21, 2016~~14, 2017 there were ~~1,904,791,047~~1,846,250,328 shares of class A common stock, par value $0.0001 per share, 245,513,385 shares of class B common stock, par value $0.0001 per share, and ~~18,859,025~~13,684,312 shares of class C common stock, par value $0.0001 per share, of Visa Inc. outstanding.

VISA INC.

TABLE OF CONTENTS




		Page
PART I.	Financial Information	3

Item 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets—March 31, ~~2016~~2017 and September 30, ~~2015~~2016	3
	Consolidated Statements of Operations—Three and Six Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	5
	Consolidated Statements of Comprehensive Income—Three and Six Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	7
	~~Consolidated Statement of Changes in Equity—Six Months Ended March 31, 2016~~	8
	Consolidated Statements of Cash Flows—Six Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	98
	Notes to Consolidated Financial Statements (unaudited)	1110
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2928
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4039
Item 4.	Controls and Procedures	4039

PART II.	Other Information	4140

Item 1.	Legal Proceedings	4140
Item 1A.	Risk Factors	4140
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4140
Item 3.	Defaults Upon Senior Securities	4140
Item 4.	Mine Safety Disclosures	4140
Item 5.	Other Information	4140
Item 6.	Exhibits	4240
	Signatures	4341
	Exhibit Index	4442

PART I. FINANCIAL INFORMATION



ITEM 1.	Financial Statements

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31, 2016		September 30, 2015		March 31, 2017		September 30, 2016
	(in millions, except par value data)				(in millions, except par value data)
Assets
Cash and cash equivalents	$	15,943	$	3,518	$	6,427	$	5,619
Restricted cash—litigation escrow (Note 3)	1,061		1,072
Restricted cash—U.S. litigation escrow (Note 3)					1,029		1,027
Investment securities (Note 4):
Trading	69		66		78		71
Available-for-sale	3,885		2,431		1,417		3,248
Settlement receivable	414		408
Settlement receivable (Note 7)					3,350		1,467
Accounts receivable	944		847		1,081		1,041
Customer collateral (Note 7)	1,050		1,023		1,043		1,001
Current portion of client incentives	291		303		292		284
Prepaid expenses and other current assets	646		353		788		555
Total current assets	24,303		10,021		15,505		14,313
Investment securities, available-for-sale (Note 4)	3,577		3,384		2,882		3,931
Client incentives	540		110		486		448
Property, equipment and technology, net	1,883		1,888		2,133		2,150
Other assets	852		778		980		893
Intangible assets, net	11,335		11,361
Goodwill	11,836		11,825
Intangible assets, net (Note 2 and Note 5)					26,416		27,234
Goodwill (Note 2 and Note 5)					14,825		15,066
Total assets	$	54,326	$	39,367	$	63,227	$	64,035
Liabilities
Accounts payable	$	90	$	127	$	120	$	203
Settlement payable	723		780
Settlement payable (Note 7)					2,879		2,084
Customer collateral (Note 7)	1,050		1,023		1,043		1,001
Accrued compensation and benefits	376		503		500		673
Client incentives	1,132		1,049		1,753		1,976
Accrued liabilities	741		849		1,167		1,128
Current maturities of long-term debt (Note 6)					1,748		—
Accrued litigation (Note 13)	1,013		1,024		996		981
Total current liabilities	5,125		5,355		10,206		8,046
Long-term debt (Note 5)	15,876		—
Long-term debt (Note 6)					14,140		15,882
Deferred tax liabilities	3,256		3,273		5,731		4,808
Deferred purchase consideration					1,180		1,225
Other liabilities	938		897		1,187		1,162
Total liabilities	25,195		9,525		32,444		31,123

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(UNAUDITED)


	March 31, 2016			September 30, 2015			March 31, 2017			September 30, 2016
	(in millions, except par value data)						(in millions, except par value data)
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and none issued	$	—		$	—
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,905 and 1,950 shares issued and outstanding at March 31, 2016 and September 30, 2015, respectively (Note 9)	—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2016 and September 30, 2015 (Note 9)	—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 19 and 20 shares issued and outstanding at March 31, 2016 and September 30, 2015, respectively (Note 9)	—			—
Preferred stock, $0.0001 par value, 25 shares authorized and 5 issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (Note 2 and Note 9)							$	—		$	—
Series B convertible participating preferred stock, 2 shares issued and outstanding at March 31, 2017 and September 30, 2016 (Note 2 and Note 9)							2,397			2,516
Series C convertible participating preferred stock, 3 shares issued and outstanding at March 31, 2017 and September 30, 2016 (Note 2 and Note 9)							3,200			3,201
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,847 and 1,871 shares issued and outstanding at March 31, 2017 and September 30, 2016, respectively (Note 9)							—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2017 and September 30, 2016 (Note 9)							—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 14 and 17 shares issued and outstanding at March 31, 2017 and September 30, 2016, respectively (Note 9)							—			—
Treasury stock (Note 9)							—			(170		)
Right to recover for covered losses (Note 3)							(77		)	(34		)
Additional paid-in capital	17,645			18,073			17,103			17,395
Accumulated income	11,582			11,843			9,140			10,462
Accumulated other comprehensive loss, net:
Investment securities, available-for-sale	40			5			45			36
Defined benefit pension and other postretirement plans	(126		)	(161		)	(216		)	(225		)
Derivative instruments classified as cash flow hedges	(9		)	83			(6		)	(50		)
Foreign currency translation adjustments	(1		)	(1		)	(803		)	(219		)
Total accumulated other comprehensive loss, net	(96		)	(74		)	(980		)	(458		)
Total equity	29,131			29,842			30,783			32,912
Total liabilities and equity	$	54,326		$	39,367		$	63,227		$	64,035

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015			2017			2016			2017			2016
	(in millions, except per share data)												(in millions, except per share data)
Operating Revenues
Service revenues	$	1,699		$	1,577		$	3,344		$	3,115		$	1,993		$	1,699		$	3,911		$	3,344
Data processing revenues	1,473			1,340			2,952			2,723			1,843			1,473			3,735			2,952
International transaction revenues	1,045			964			2,076			1,934			1,469			1,045			2,958			2,076
Other revenues	198			204			396			408			203			198			406			396
Client incentives	(789		)	(676		)	(1,577		)	(1,389		)	(1,031		)	(789		)	(2,072		)	(1,577		)
Total operating revenues	3,626			3,409			7,191			6,791
Net operating revenues													4,477			3,626			8,938			7,191
Operating Expenses
Personnel	528			483			1,027			992			704			528			1,275			1,027
Marketing	186			190			380			395			193			186			411			380
Network and processing	126			109			254			223			150			126			295			254
Professional fees	66			77			138			147			83			66			163			138
Depreciation and amortization	121			125			241			245			131			121			277			241
General and administrative	164			141			320			267			406			164			592			320
Litigation provision (Note 13)	1			3			1			3			2			1			17			1
Total operating expenses	1,192			1,128			2,361			2,272			1,669			1,192			3,030			2,361
Operating income	2,434			2,281			4,830			4,519			2,808			2,434			5,908			4,830
Non-operating Income
Non-operating (Expense) Income
Interest expense	(132		)	(7		)	(161		)	(10		)	(135		)	(132		)	(275		)	(161		)
Other (Note 4 and Note 8)	139			8			411			35
Total non-operating income	7			1			250			25
Other													29			139			48			411
Non-operating (expense) income													(106		)	7			(227		)	250
Income before income taxes	2,441			2,282			5,080			4,544			2,702			2,441			5,681			5,080
Income tax provision (Note 12)	734			732			1,432			1,425			2,272			734			3,181			1,432
Net income	$	1,707		$	1,550		$	3,648		$	3,119		$	430		$	1,707		$	2,500		$	3,648

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS—(Continued)

(UNAUDITED)


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended March 31,				Six Months Ended March 31,
	2016		2015		2016		2015		2017		2016		2017		2016
	(in millions, except per share data)								(in millions, except per share data)
Basic earnings per share (Note 10)
Class A common stock	$	0.71	$	0.63	$	1.51	$	1.27	$	0.18	$	0.71	$	1.04	$	1.51
Class B common stock	$	1.17	$	1.04	$	2.49	$	2.09	$	0.30	$	1.17	$	1.71	$	2.49
Class C common stock	$	2.85	$	2.53	$	6.05	$	5.06	$	0.72	$	2.85	$	4.15	$	6.05
Basic weighted-average shares outstanding (Note 10)
Class A common stock	1,909		1,963		1,923		1,969		1,854		1,909		1,857		1,923
Class B common stock	245		245		245		245		245		245		245		245
Class C common stock	19		20		19		21		15		19		16		19
Diluted earnings per share (Note 10)
Class A common stock	$	0.71	$	0.63	$	1.51	$	1.26	$	0.18	$	0.71	$	1.04	$	1.51
Class B common stock	$	1.17	$	1.04	$	2.49	$	2.08	$	0.29	$	1.17	$	1.71	$	2.49
Class C common stock	$	2.84	$	2.52	$	6.04	$	5.05	$	0.72	$	2.84	$	4.14	$	6.04
Diluted weighted-average shares outstanding (Note 10)
Class A common stock	2,401		2,460		2,416		2,469		2,406		2,401		2,413		2,416
Class B common stock	245		245		245		245		245		245		245		245
Class C common stock	19		20		19		21		15		19		16		19

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015			2017			2016			2017			2016
	(in millions)												(in millions)
Net income	$	1,707		$	1,550		$	3,648		$	3,119		$	430		$	1,707		$	2,500		$	3,648
Other comprehensive income, net of tax:
Other comprehensive income (loss), net of tax:
Investment securities, available-for-sale:
Net unrealized gain (loss)	26			(9		)	60			(19		)
Net unrealized gain													19			26			16			60
Income tax effect	(7		)	4			(23		)	7			(7		)	(7		)	(8		)	(23		)
Reclassification adjustment for net gain realized in net income	(3		)	—			(3		)	(21		)
Reclassification adjustment for net loss (gain) realized in net income													1			(3		)	1			(3		)
Income tax effect	1			—			1			8			—			1			—			1
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain (loss) and prior service credit	5			(6		)	61			—
Net unrealized actuarial (loss) gain and prior service credit													(5		)	5			(5		)	61
Income tax effect	(2		)	1			(23		)	—			2			(2		)	2			(23		)
Amortization of actuarial loss (gain) and prior service credit realized in net income	2			1			(5		)	—
Amortization of actuarial loss and prior service credit realized in net income													15			2			21			(5		)
Income tax effect	—			—			2			—			(7		)	—			(9		)	2
Derivative instruments classified as cash flow hedges:
Net unrealized (loss) gain	(54		)	65			(38		)	128			(49		)	(54		)	25			(38		)
Income tax effect	11			(20		)	6			(37		)	11			11			4			6
Reclassification adjustment for net gain realized in net income	(37		)	(20		)	(85		)	(26		)
Reclassification adjustment for net loss (gain) realized in net income													8			(37		)	20			(85		)
Income tax effect	11			5			25			7			(3		)	11			(5		)	25
Foreign currency translation adjustments	—			—			—			1			404			—			(584		)	—
Other comprehensive (loss) income, net of tax	(47		)	21			(22		)	48
Other comprehensive income (loss), net of tax													389			(47		)	(522		)	(22		)
Comprehensive income	$	1,660		$	1,571		$	3,626		$	3,167		$	819		$	1,660		$	1,978		$	3,626

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES IN EQUITY~~CASH FLOWS

(UNAUDITED)

Common Stock Additional Paid-in Capital Accumulated Income Accumulated
Other
Comprehensive
Loss Total
Equity
Class A Class B Class C
(in millions, except per share data)
Balance as of September 30, 2015 1,950
245
20
$ 18,073
$ 11,843
$ (74 ) $ 29,842
Net income 3,648
3,648
Other comprehensive loss, net of tax (22 ) (22 )
Comprehensive income 3,626
Conversion of class C common stock upon sale into public market 3
(1 ) —
Issuance and vesting of restricted stock and performance-based shares 2
—
Share-based compensation, net of forfeitures (Note 11) —
⁽¹⁾
97
97
Restricted stock and performance-based shares settled in cash for taxes (1 ) (85 ) (85 )
Excess tax benefit for share-based compensation 43
43
Cash proceeds from issuance of common stock under employee equity plans 1
49
49
Cash dividends declared and paid, at a quarterly amount of $0.14 per as-converted share (Note 9) (676 ) (676 )
Repurchase of class A common stock (Note 9) (50 ) (532 ) (3,233 ) (3,765 )
Balance as of March 31, 2016 1,905
245
19
$ 17,645
$ 11,582
$ (96 ) $ 29,131



	Six Months Ended March 31,
	2017			2016
	(in millions)
Operating Activities
Net income	$	2,500		$	3,648
Adjustments to reconcile net income to net cash provided by operating activities:
Client incentives	2,072			1,577
Fair value adjustment for the Visa Europe put option	—			(255		)
Share-based compensation (Note 11)	116			97
Excess tax benefit for share-based compensation	—			(43		)
Depreciation and amortization of property, equipment, technology and intangible assets	277			241
Deferred income taxes	1,700			(29		)
Right to recover for covered losses recorded in equity	(163		)	—
Charitable contribution of Visa Inc. shares (Note 9 and Note 12)	192			—
Other	23			17
Change in operating assets and liabilities:
Settlement receivable	(1,946		)	(6		)
Accounts receivable	(40		)	(97		)
Client incentives	(2,306		)	(1,912		)
Other assets	(301		)	(397		)
Accounts payable	(83		)	(34		)
Settlement payable	883			(57		)
Accrued and other liabilities	(35		)	81
Accrued litigation (Note 13)	15			(12		)
Net cash provided by operating activities	2,904			2,819
Investing Activities
Purchases of property, equipment, technology and intangible assets	(317		)	(250		)
Investment securities, available-for-sale:
Purchases	(1,083		)	(17,437		)
Proceeds from maturities and sales	3,972			15,860
Acquisition of business, net of cash received	(302		)	(14		)
Purchases of / contributions to other investments	(2		)	(9		)
Proceeds / distributions from other investments	—			4
Net cash provided by (used in) investing activities	2,268			(1,846		)


⁽¹⁾	~~Decrease in class A common stock related to forfeitures of restricted stock awards is less than 1 million shares.~~

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF CASH ~~FLOWS~~FLOWS—(Continued)

(UNAUDITED)

Six Months Ended
March 31,
2016 2015
(in millions)
Operating Activities
Net income $ 3,648
$ 3,119
Adjustments to reconcile net income to net cash provided by operating activities:
Client incentives 1,577
1,389
Fair value adjustment for the Visa Europe put option (255 ) —
Share-based compensation 97
93
Excess tax benefit for share-based compensation (43 ) (70 )
Depreciation and amortization of property, equipment, technology and intangible assets 241
245
Deferred income taxes (29 ) 173
Other 17
15
Change in operating assets and liabilities:
Settlement receivable (6 ) 107
Accounts receivable (97 ) (74 )
Client incentives (1,912 ) (1,479 )
Other assets (397 ) (467 )
Accounts payable (34 ) (44 )
Settlement payable (57 ) (206 )
Accrued and other liabilities 81
262
Accrued litigation (Note 13) (12 ) (324 )
Net cash provided by operating activities 2,819
2,739
Investing Activities
Purchases of property, equipment, technology and intangible assets (250 ) (202 )
Proceeds from sales of property, equipment and technology —
10
Investment securities, available-for-sale:

Purchases (17,437 ) (1,267 )
Proceeds from maturities and sales 15,860
895
Acquisition of business (14 ) —
Purchases of / contributions to other investments (9 ) (2 )
Proceeds / distributions from other investments 4
9
Net cash used in investing activities (1,846 ) (557 )



	Six Months Ended March 31,
	2017			2016
	(in millions)
Financing Activities
Repurchase of class A common stock (Note 9)	$	(3,469	)	$	(3,765	)
Dividends paid (Note 9)	(795		)	(676		)
Proceeds from issuance of senior notes (Note 6)	—			15,971
Debt issuance costs (Note 6)	—			(96		)
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 3 and Note 13)	—			11
Cash proceeds from issuance of common stock under employee equity plans	87			49
Restricted stock and performance-based shares settled in cash for taxes	(66		)	(85		)
Excess tax benefit for share-based compensation	—			43
Net cash (used in) provided by financing activities	(4,243		)	11,452
Effect of exchange rate changes on cash and cash equivalents	(121		)	—
Increase in cash and cash equivalents	808			12,425
Cash and cash equivalents at beginning of year	5,619			3,518
Cash and cash equivalents at end of period	$	6,427		$	15,943
Supplemental Disclosure
Income taxes paid, net of refunds	$	1,611		$	1,501
Interest payments on debt (Note 6)	$	244		$	—
Net unrealized gain on currency forward contracts	$	—		$	116
Accruals related to purchases of property, equipment, technology and intangible assets	$	37		$	38

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)~~

~~(UNAUDITED)~~

Six Months Ended
March 31,
2016 2015
(in millions)
Financing Activities
Repurchase of class A common stock (Note 9) $ (3,765 ) $ (1,855 )
Dividends paid (Note 9) (676 ) (591 )
Proceeds from issuance of senior notes (Note 5) 15,971
—
Debt issuance costs (Note 5) (96 ) —
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 3 and Note 13) 11
321
Cash proceeds from issuance of common stock under employee equity plans 49
46
Restricted stock and performance-based shares settled in cash for taxes (85 ) (106 )
Excess tax benefit for share-based compensation 43
70
Net cash provided by (used in) financing activities 11,452
(2,115 )
Effect of exchange rate changes on cash and cash equivalents —
1
Increase in cash and cash equivalents 12,425
68
Cash and cash equivalents at beginning of year 3,518
1,971
Cash and cash equivalents at end of period $ 15,943
$ 2,039
Supplemental Disclosure
Income taxes paid, net of refunds $ 1,501
$ 1,376
Net unrealized gains on currency forward contracts (Note 8) $ 116
$ —
Accruals related to purchases of property, equipment, technology and intangible assets $ 38
$ 26

~~See accompanying notes, which are an integral part of these unaudited consolidated financial statements.~~

~~Table of Contents~~

~~VISA INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2016~~2017

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies

Organization. Visa Inc. ~~(“Visa”~~("Visa" or the ~~“Company”~~"Company") is a global payments technology company that connects consumers, ~~businesses,~~merchants, financial institutions, businesses, strategic partners and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. (“("Visa U.S.A.”"), Visa International Service Association (“("Visa ~~International”~~International"), Visa Worldwide Pte. Limited, Visa Europe Limited ("Visa Europe"), Visa Canada Corporation, Inovant LLC and CyberSource Corporation ~~(“CyberSource”~~("CyberSource"), operate one of the world’s ~~most advanced processing~~largest retail electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions ~~worldwide.~~and enables us to provide our financial institution and merchant clients a wide range of products, platforms and value-added services. VisaNet also offers fraud protection for account holders and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for account holders on ~~Visa-branded cards and payment~~Visa products. In most cases, account holder and merchant relationships belong to, and are managed by, Visa's financial institution clients. Visa provides a wide variety of payment solutions that support payment products that issuers can offer to their account holders: pay now with debit, pay ahead with prepaid or pay later with credit products. Visa also offers a growing suite of innovative digital, eCommerce and mobile products and services. These services facilitate transactions on Visa's network among account holders, merchants, financial institutions and governments in mature and emerging markets globally.

Consolidation and basis of presentation. The accompanying unaudited consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America (“("U.S. ~~GAAP”~~GAAP"). The Company consolidates its majority-owned and controlled entities, including variable interest entities ~~(“VIEs”~~("VIEs") for which the Company is the primary beneficiary. The Company’s investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. All significant intercompany accounts and transactions are eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission ~~(“SEC”~~("SEC") requirements for Quarterly Reports on Form 10-Q and, consequently, do not include all of the annual disclosures required by U.S. GAAP. Reference should be made to the Visa Annual Report on Form 10-K for the year ended September 30, ~~2015~~2016 for additional disclosures, including a summary of the Company’s significant accounting policies.

In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented.

Recently Issued and Adopted Accounting Pronouncements.

In ~~April 2015,~~May 2014, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~2015-03,~~2014-09, which ~~simplifies~~requires an entity to recognize the ~~presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying~~ amount of ~~debt liability, consistent with debt discounts~~revenue to which it expects to be entitled for the transfer of goods or ~~premiums.~~services to customers. The standard impacts presentation only. The Company elected to early adopt the standard effective October 1, 2015 and the carrying amount of the Company's debt liability is presented net of issuance costs on the consolidated financial statements. Also see ~~Note 5—Debt.~~

~~In September 2015,~~ASU will replace existing revenue recognition guidance in U.S. GAAP when it becomes effective. Subsequently, the FASB also issued ~~ASU No. 2015-16, which simplifies~~a series of amendments to the accounting for post-acquisition adjustments by eliminating the requirement to retrospectively account for the adjustments made to provisional amounts recognized in a business combination. The Company elected to early adopt this guidance on a prospective basis effective October 1, 2015. The adoption did not have a material impact on the consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current. Previously, current deferred tax assets had been presented separately and current deferred tax liabilities had been included in accrued liabilities on the consolidated

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~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

balance sheets. All prior period amounts within the consolidated financial statements have been reclassed to conform to current period presentation. The reclass did not affect the Company's total equity, operating revenues, net income, comprehensive income or cash flows as of and for the periods presented.

In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income.new revenue standard. The Company will adopt the standard effective October 1, ~~2018. The adoption is not expected~~2018, and expects to ~~have a material impact on the consolidated financial statements.~~

In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets and lease liabilities arising from operating leases in the statement of financial position. The Company will adopt the standard ~~effective October 1, 2019 and does not anticipate that this new accounting guidance will have a material impact on its consolidated statement of operations.~~using the modified retrospective transition method. The Company ~~has not yet completed its evaluation of the impact on the consolidated balance sheet, but at this time estimates the value of leased assets and liabilities~~expects that ~~may be recognized could be in the hundreds of millions of dollars. The actual impact will depend on the Company's lease portfolio at the time of adoption.~~

In March 2016, the FASB issued ASU 2016-05, which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815, Derivatives and Hedging, does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.

In March 2016, the FASB issued ASU 2016-06, which clarifies the requirements for assessing whether contingent call/put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call/put options solely in accordance with a four-step decision sequence. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07, which eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The equity method investor is required to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.

~~In March 2016, the FASB issued ASU 2016-08, which clarifies the implementation guidance on principal versus agent considerations under~~ the new ~~revenue~~standard will primarily impact recognition ~~standard, ASU 2014-09, Revenue from Contracts with Customers. In April 2016,~~timing for certain fixed incentives and price discounts provided to clients, and the ~~FASB issued ASU 2016-10, which clarifies the implementation guidance on identifying promised goods or services~~classification of certain client incentives between contra revenues and on determining whether an entity's promise to grant a license with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The Company will adopt the standard effective October 1, 2018.operating expenses. The Company is ~~evaluating~~still in the process of quantifying the full effect that ASU 2014-09 and all of its related subsequent updates will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for share-based payments, including ~~immediate recognition of all~~the accounting for excess tax benefits and deficiencies, ~~in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum~~forfeitures, and statutory tax ~~rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures~~withholding requirements, as ~~they occur, and clarifying the~~well as classification on the statement of cash flows ~~for the~~related to excess tax ~~benefit~~benefits and employee taxes paid when an employer withholds shares for tax-withholding purposes. The Company ~~is evaluating the full effect that ASU 2016-09 will have on its consolidated financial statements and will~~elected to early adopt ~~the standard~~this guidance effective October 1, ~~2017.~~2016. The adoption had the following impact on the consolidated financial statements:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company recorded excess tax benefits of $46 million in our provision for income taxes rather than as an increase to additional paid-in capital for the six months ended March 31, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted.

The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share, which did not have a material impact on our diluted earnings per share for the six months ended March 31, 2017.

The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase to both net cash provided by operating activities and net cash used in financing of $46 million for the six months ended March 31, 2017.

In October 2016, the FASB issued ASU 2016-16, which requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The standard will be effective for Visa on October 1, 2018. However, the Company is considering early adoption of the standard on October 1, 2017. The adoption is not expected to have a material impact on the consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows includes the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. The Company will adopt the standard effective October 1, 2018. The adoption will impact the presentation of transactions related to the U.S. litigation escrow account on the consolidated statements of cash flows.

In January 2017, the FASB issued ASU 2017-04, which simplifies the test for goodwill impairment by eliminating a previously required step. The Company will adopt the standard effective October 1, 2020. The adoption is not expected to have a material impact on the consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, which requires that the service cost component of net periodic pension and postretirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). Currently, all net periodic pension and postretirement benefit costs are presented in Personnel on the Company's consolidated statement of operations. The Company will adopt the standard effective October 1, 2018. The adoption is not expected to have a material impact on the consolidated financial statements.

Note 2—Visa Europe

~~Acquisition of Visa Europe~~

On ~~November 2, 2015,~~June 21, 2016, the Company ~~and Visa Europe entered into a transaction agreement (the "Transaction Agreement"), pursuant to which the Company and Visa Europe agreed on the terms and conditions of the Company's acquisition of~~acquired 100% of the share capital of Visa Europe, ~~for~~ a ~~total purchase price~~payments technology business. The acquisition positions Visa to create additional value through increased scale, efficiencies realized by the integration of upboth businesses, and benefits related to ~~€21.2 billion. As originally agreed, the purchase price consisted of: (a) at~~Visa Europe's transition from an association to a for-profit enterprise. At the closing of the transaction (the "Closing"), the Company:

paid up-front cash consideration of ~~€11.5~~€12.2 billion ~~and~~($13.9 billion);

issued preferred stock of the Company convertible upon certain conditions into approximately 79 million shares of class A common ~~stock or class A equivalent preferred~~ stock of the Company, as described below, ~~valued~~equivalent to a value of €5.3 billion ($6.1 billion) at ~~approximately €5.0 billion,~~the closing stock price of $77.33 on June 21, 2016; and ~~(b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up~~

agreed to ~~€4.0 billion (plus up to~~pay an additional ~~€0.7 billion in interest), determined based on the achievement of specified net revenue levels during such post-closing period (the "Earn-out").~~

On April 21, 2016, the Company and Visa Europe reached preliminary agreement to amend the Transaction Agreement to eliminate the Earn-out portion of the transaction consideration (the "Preliminary Agreement"). Instead of an earn-out, the cash consideration payable in the transaction would be increased by €1.75 billion: €750 million payable upon closing, and €1.0 billion, plus 4% compound annual interest, ~~payable~~ on the third anniversary of ~~closing. The terms of~~ the transaction otherwise remain unchanged. The transaction remains subject to the negotiation of definitive documentation of this amendment and to regulatory approval. While the parties continue to work toward closing as soon as possible, closing could extend beyond the end of the Company’s fiscal third quarter.

~~Transaction agreement and option amendment~~. The Transaction Agreement provides for the acquisition to be effected pursuant to the exercise of the amended Visa Europe put option (as it may be further amended, the "Amended Put Option"), as described further below. In connection with the execution of the Transaction Agreement, the Company and Visa Europe entered into an amendment (the "Put Option Amendment") to the Visa Europe put option (the "Put") to align certain terms of the Put with the terms of the Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa's purchase of all of Visa Europe's share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form. The Transaction Agreement may be terminated by the Company or Visa Europe, subject to specified exceptions, if the transaction is not consummated by August 2, 2016, or if legal restraints that prohibit the closing have become final and non-appealable. On April 21, 2016, the Company and Visa Europe also agreed that the Amended Put Option will be further amended as needed to reflect the changes in transaction consideration under the Preliminary Agreement. The terms of the Amended Put Option will otherwise remain unchanged.Closing.

Preferred stock. In connection with the transaction, ~~the board of directors of the Company has authorized the creation of~~ three new series of preferred stock of the ~~Company:~~Company were created:

series A convertible participating preferred stock, par value $0.0001 per share, which is generally designed to be economically equivalent to the Company’s class A common stock (the “class A equivalent preferred stock”);

series B convertible participating preferred stock, par value $0.0001 per share (the “U.K.&I preferred stock”); and

series C convertible participating preferred stock, par value $0.0001 per share (the “Europe preferred stock”).

The ~~Transaction Agreement provides that, subject to the terms and conditions thereof, at closing, the~~ Company ~~will issue 2,480,500~~issued 2,480,466 shares of U.K.&I preferred stock to ~~those of~~ Visa Europe’s member financial institutions in the United Kingdom and Ireland ~~that are~~ entitled to receive preferred stock at ~~closing,~~the Closing, and ~~3,157,000~~3,156,823 shares of Europe preferred stock to ~~those of~~ Visa Europe’s other member financial institutions ~~that are~~ entitled to receive preferred stock at ~~closing. Subject to~~ the reduction in conversion rates described below, the U.K.&I preferred stock will be convertible into a number of shares of class A common stock or class A equivalent preferred stock valued at approximately €2.2 billion, and the Europe preferred stock will be convertible into a number of shares of class A common stock or class A equivalent preferred stock valued at approximately €2.8 billion. These approximate values of the UK&I and Europe preferred stock to be issued at closing are based on the average price of the class A common stock of $71.68 per share, and the euro-dollar exchange rate of 1.12750 for the 30 trading days ended October 19, 2015.Closing.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~The UK~~Under certain conditions described below, the U.K.&I and Europe preferred stock ~~will be~~is convertible into shares of class A common stock or class A equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for each share of U.K.&I preferred stock and Europe preferred stock. The conversion rates may be reduced from time to time to offset certain liabilities, ~~if any,~~ which may be incurred by the Company, Visa Europe or their affiliates as a result of certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe ~~territory. A reduction in~~territory, where, generally, the ~~conversion rates of~~relevant claims (and resultant liabilities and losses) relate to the ~~U.K.&I preferred stock and~~period before the Europe preferred stock have the same economic effect on earnings per share as repurchasing the Company's class A common stock because it reduces the as-converted class A common stock share count. Additionally, the shares of U.K.&I and Europe preferred stock will be subject to restrictions on transfer and may become convertible in stages based on developments in the existing and potential litigation. The shares of U.K.&I and Europe preferred stock will become fully convertible on the 12th anniversary of closing, subject only to a holdback to cover any then-pending claims.Closing. See Note 3—U.S. and Europe Retrospective Responsibility ~~Plan and Potential Visa Europe Liabilities.~~Plans.

Updated purchase price allocation.

Upon ~~issuance~~the Closing, total purchase consideration of $18.8 billion was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on a preliminary valuation. During the second quarter of fiscal year 2017, based on additional information that became available, which impacted certain of the preferred stock at closing, the holders of the U.K.&I and Europe preferred stock will have no right to vote on any matters, except for certain defined matters, including, in specified circumstances, any consolidation, merger or combination of the Company. Holders of the class A equivalent preferred stock, upon issuance at conversion, will have similar voting rights to the rights of the holders of the U.K.&I and Europe preferred stock. With respect to those limited matters on which the holders of preferred stock may vote, approval by the holders of the preferred stock requires the affirmative vote of the outstanding voting power of each such series of preferred stock, each such series voting as a single class. Once issued, all three series of preferred stock will participate on an as-converted basis in regular quarterly cash dividends declared on the Company's class A common stock.

~~U.K. loss sharing agreement and litigation management deed. On November 2, 2015,~~assumptions used, the Company ~~Visa Europe and certain of Visa Europe’s member financial institutions located in~~updated the ~~United Kingdom (the “U.K. LSA members”) entered into a loss sharing agreement (the “U.K. loss sharing agreement”), pursuant to which each of~~purchase price allocation.

The following table summarizes the U.K. LSA members has agreed, on a several and not joint basis, to compensate the Company for certain losses which may be incurred by the Company, Visa Europe or their affiliates as a result of certain existing and potential litigation relating to the setting and implementation of domestic multilateral interchange fee rates in the United Kingdom, subject to the terms and conditions set forth therein and, with respect to each U.K. LSA member, up to a maximum amount of the up-front cash consideration to be received by such U.K. LSA member. The U.K. LSA members’ obligations under the U.K. loss sharing agreement are conditional upon, among other things, the acquisition closing, and additionally upon either (a) losses valued at in excess of the sterling equivalent at closing of €1.0 billion having arisen in claims relating to the U.K. domestic multilateral interchange fees (with such losses being recoverable through reductions in the conversion rate of the U.K.&I preferred stock), or (b) the conversion rate of the UK&I preferred stock having been reduced to zero pursuant to losses arising in claims relating to multilateral interchange fee rate setting in the Visa Europe territory, as described above. See ~~Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities.~~updated purchase price allocation:

Prior to closing, the Company and the other parties thereto will enter into a litigation management deed, which will set forth the agreed upon procedures for the management of the existing and potential litigation, as described above, relating to the setting and implementation of multilateral interchange fee rates in the Visa Europe territory (the "Europe covered claims"), the allocation of losses resulting from the Europe covered claims, and any accelerated conversion or reduction in the conversion rate of the shares of U.K.&I and Europe preferred stock. Subject to the terms and conditions set forth therein, the litigation management deed provides that the Company will generally control the conduct of the Europe covered claims, subject to certain obligations to report and consult with newly established Europe litigation management committees. The Europe litigation management committees, which will be composed of representatives of certain Visa Europe members, will also be granted consent rights to approve certain material decisions in relation to the Europe covered claims.



	Preliminary Purchase Price Allocation			Measurement Period Adjustments			Updated Purchase Price Allocation
	(in millions)
Current assets⁽¹⁾	$	4,457		$	—		$	4,457
Non-current assets⁽²⁾	258			(46		)	212
Current liabilities⁽³⁾	(2,731		)	(39		)	(2,770		)
Non-current liabilities⁽²⁾	(2,605		)	618			(1,987		)
Tangible assets and liabilities	$	(621	)	$	533		$	(88	)
Intangible assets — customer relationships and reacquired rights⁽²⁾	16,137			(232		)	15,905
Goodwill⁽⁴⁾	3,268			(301		)	2,967
Fair value of net assets acquired	$	18,784		$	—		$	18,784


⁽¹⁾	Current assets are largely comprised of cash and cash equivalents and settlement receivable.

⁽²⁾

Intangible assets consist of customer relationships and reacquired rights, which have been valued as a single composite intangible asset as they are inextricably linked. These intangibles are considered indefinite-lived assets as the associated customer relationships have historically not experienced significant attrition, and the reacquired rights are based on the Framework Agreement, which has a perpetual term. Non-current assets and liabilities include deferred tax assets and liabilities that result in net deferred tax liabilities of $1.7 billion based on the updated valuation. In February 2017, the Company completed a legal entity reorganization, resulting in the elimination of most of these deferred tax assets and liabilities. See Note 12—Income Taxes.


⁽³⁾	Current liabilities assumed mainly include settlement payable, client incentives liabilities and accrued liabilities.


⁽⁴⁾	The excess of purchase consideration over net assets acquired was recorded as goodwill, which represents the value that is expected from increased scale and synergies as a result of the integration of both businesses.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Actual and pro forma impact of acquisition.

The following table presents unaudited supplemental pro forma information for the three and six months ended March 31, 2016, as if the acquisition and related issuance of senior notes had occurred on October 1, 2014. The pro forma financial information is not necessarily indicative of the Company's consolidated results of operations that would have been realized had the acquisition been completed on October 1, 2014, nor does it purport to project the future results of operations of the combined company or reflect any reorganizations, or cost or other operating synergies that may occur subsequent to the Closing. The actual results of operations of the combined company may differ significantly from the pro forma results presented here due to many factors.



	Consolidated Actual Results		Unaudited Pro Forma Consolidated Results		Consolidated Actual Results		Unaudited Pro Forma Consolidated Results
	Three Months Ended March 31,				Six Months Ended March 31,
	2017		2016		2017		2016
	(in millions, except per share data)
Net operating revenues	$	4,477	$	3,935	$	8,938	$	7,899
Net income	$	430	$	1,679	$	2,500	$	3,456
Diluted earnings per share	$	0.18	$	0.68	$	1.04	$	1.39

The unaudited pro forma financial information for the three and six months ended March 31, 2016 reflects the following material pro forma adjustments:

conversion of Visa Europe's historical results of operations from euro to U.S. dollar, and from International Financial Reporting Standards to U.S. GAAP;

elimination of transactions between Visa and Visa Europe upon consolidation, primarily related to annual license and various other fees paid by Visa Europe to Visa in accordance with the Framework Agreement;

an increase in non-operating expense for the six months ended March 31, 2016 for additional interest expense and amortization of debt issuance costs resulting from the issuance of the $16.0 billion senior notes;


•	exclusion of a $255 million gain related to the revaluation of the Visa Europe put option from the six months ended March 31, 2016⁽¹⁾; and

elimination of acquisition-related costs incurred by Visa Europe.


⁽¹⁾	For purposes of preparing this pro forma financial information, the fair value of the Visa Europe put option is presumed to have been reduced to zero prior to October 1, 2014. Therefore, the Company did not include any gains associated with a write-down in the fair value of the Visa Europe put option liability in the unaudited pro forma net income for the six months ended March 31, 2016.

The pro forma results also reflect the applicable tax impact of the pro forma adjustments. The taxes associated with the adjustments reflect the statutory tax rate in effect during the respective periods.

Note 3—U.S. and Europe Retrospective Responsibility ~~Plan and Potential Visa Europe Liabilities~~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, 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 on the consolidated balance sheets. The balance of the escrow account was ~~$1.1~~$1.0 billion at March 31, ~~2016~~2017 and September 30, ~~2015.~~2016. The Company ~~paid $11 million~~did not make any payments to opt-out merchants from the litigation escrow account during the six months ended March 31, ~~2016 to settle their claims associated with the interchange multidistrict litigation.~~2017. See Note 13—Legal Matters.

The accrual related to the covered litigation could be either higher or lower than the litigation escrow account balance. The Company did not record an additional accrual for the covered litigation during the six months ended March 31, ~~2016.~~2017. See Note 13—Legal Matters.

~~Potential Visa~~

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Europe ~~Liabilities~~Retrospective Responsibility Plan

~~On November 2, 2015,~~Under the terms of the Europe retrospective responsibility plan, the Company ~~and Visa Europe entered into the Transaction Agreement pursuant~~is entitled to which the Company agreed to acquire Visa Europe. On April 21, 2016, the two parties reached the Preliminary Agreement, which would impact only transaction consideration. The transaction remains subjectrecover VE territory covered losses through a periodic adjustment to the negotiation of definitive documentation of the amendment and to regulatory approval. While the parties continue to work toward closing as soon as possible, closing could extend beyond the end of the Company's fiscal third quarter. Visa Inc., Visa Europe or their affiliates are, or may become, a party to certain existing and potential litigation relatingclass A common stock conversion rates applicable to the ~~setting~~U.K.&I. and Europe preferred stock. VE territory covered losses are recorded in "right to recover for covered losses" within 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 ~~multilateral interchange fee rates in the Visa Europe territory. The Company has obtained certain protection in respect of losses resulting from existing and potential litigation through~~ the preferred stock ~~and~~within stockholders' equity.

During the six months ended March 31, 2017, the Company recovered $120 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the U.K. ~~loss sharing agreement,~~&I and ~~has agreed~~Europe preferred stock, from 13.952 at September 30, 2016 to ~~certain terms regarding~~13.388 and 13.948, respectively, at March 31, 2017.

The following table sets forth the ~~conduct of such litigation, all of which is conditioned on~~activities related to VE territory covered losses in preferred stock and "right to recover for covered losses" within equity during the ~~closing of the acquisition of Visa Europe by the Company.~~six months ended March 31, 2017. VE territory covered losses incurred reflect settlements with merchants and additional legal costs. See Note ~~2—Visa Europe.~~13—Legal Matters.



	Preferred Stock						Right to Recover for Covered Losses
	U.K.&I			Europe			Right to Recover for Covered Losses
	(in millions)
Balance as of September 30, 2016	$	2,516		$	3,201		$	(34	)
VE territory covered losses incurred	$	—		$	—		$	(163	)
Recovery through conversion rate adjustment	(119		)	(1		)	120
Balance as of March 31, 2017	$	2,397		$	3,200		$	(77	)

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 shares recorded in stockholders' equity within the Company's unaudited consolidated balance sheet as of March 31, 2017.⁽¹⁾



	March 31, 2017
	As-Converted Value of Preferred Stock⁽²⁾			Book Value of Preferred Stock
	(in millions)
U.K.&I preferred stock	$	2,951		$	2,397
Europe preferred stock	3,913			3,200
Total	$	6,864		$	5,597
Less: Right to recover for covered losses	(77		)	(77		)
Total recovery for covered losses available	$	6,787		$	5,520


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

⁽²⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the U.K.&I and Europe preferred stock outstanding, respectively, as of March 31, 2017; (b)13.388 and 13.948, the class A common stock conversion rate applicable to the U.K.&I and Europe preferred stock as of March 31, 2017, respectively; and (c) $88.87, Visa's class A common stock closing stock price as of March 31, 2017.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—Fair Value Measurements and Investments

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	Fair Value Measurements Using Inputs Considered as												Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2				Level 3				Level 1				Level 2
	March 31, 2016		September 30, 2015		March 31, 2016		September 30, 2015		March 31, 2016		September 30, 2015		March 31, 2017		September 30, 2016		March 31, 2017		September 30, 2016
	(in millions)												(in millions)
Assets
Cash equivalents and restricted cash:
Money market funds	$	6,765	$	3,051									$	4,594	$	4,537
U.S. Treasury securities	5,099		—
U.S. government-sponsored debt securities					$	3,328	$	280									$	132	$	196
Investment securities, trading:
Equity securities	69		66										78		71
Investment securities, available-for-sale:
U.S. government-sponsored debt securities																	3,039		4,699
U.S. Treasury securities	3,079		2,656										1,102		2,178
U.S. government-sponsored debt securities					4,043		2,615
Equity securities	67		4										78		53
Corporate debt securities					273		533										80		249
Auction rate securities									$	—	$	7
Prepaid and other current assets:
Foreign exchange derivative instruments																	52		50
Other assets:
Foreign exchange derivative instruments					188		76										—		6
Total	$	15,079	$	5,777	$	7,832	$	3,504	$	—	$	7	$	5,852	$	6,839	$	3,303	$	5,200
Liabilities
Accrued liabilities:
Visa Europe put option									$	—	$	255
Foreign exchange derivative instruments																	$	83	$	116
Other liabilities:
Foreign exchange derivative instruments					$	114	$	13									—		20
Total	$	—	$	—	$	114	$	13	$	—	$	255	$	—	$	—	$	83	$	136

There were no transfers between Level 1 and Level 2 assets during the six months ended March 31, ~~2016 and 2015.~~2017.

Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.

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~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S. government-sponsored debt securities and corporate debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the six months ended March 31, ~~2016.~~2017.

~~Level 3 assets and liabilities measured at fair value on a recurring basis.~~ ~~Auction rate securities are classified as Level 3 due to a lack~~

Table of trading in active markets and a lack of observable inputs in measuring fair value. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the six months ended March 31, 2016.Contents

~~Visa Europe put option agreement.~~ On November 2, 2015, the Company and Visa Europe entered into the Put Option Amendment to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa’s purchase of all of Visa Europe’s share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form. On April 21, 2016, the Company and Visa Europe agreed that the Amended Put Option will be further amended as needed to reflect the changes in transaction consideration under the Preliminary Agreement. The terms of the Amended Put Option will otherwise remain unchanged.VISA INC.

Exercise of the Amended Put Option by the Visa Europe board of directors is mandatory, subject to the satisfaction of the terms and conditions of the Transaction Agreement. As such, for accounting purposes, it is not treated as a written put option and is not required to be recorded at fair value. At March 31, 2016, Visa expected to complete the transaction through exercise of the Amended Put Option. Therefore, management concluded that it does not expect the Put to revert to its original, unamended form or to be unilaterally exercised by Visa Europe in the future. As a result, the value of the Put was estimated to be zero at March 31, 2016 and December 31, 2015. During the first quarter of fiscal 2016, the Company recorded a $255 million non-cash decrease in the fair value of the Put as non-operating income in the Company's consolidated statements of operations.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. There were no

significant impairments during the six months ended March 31, ~~2016~~2017 or ~~2015.~~2016. These investments totaled ~~$45~~$49 million and $46 million at March 31, ~~2016~~2017 and September 30, ~~2015~~2016, respectively, and are classified in other assets on the consolidated balance sheets.

Due to the completion of an initial public offering by one of the Company's investees during fiscal 2016, the Company reclassified equity securities previously accounted for as a cost method investment, with a carrying value of $4 million, to short-term available-for-sale investment securities. The fair value of this investment at March 31, 2016 was $64 million, resulting in the recognition of a pre-tax unrealized gain of $60 million in other comprehensive income.

Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade names and reseller relationships, all of which were obtained through acquisitions.

If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach. As the assumptions employed to measure these assets on a non-recurring basis are based on management's judgment

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~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, ~~2016,~~2017, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at March 31, ~~2016~~.2017.

Other Fair Value Disclosures

Long-term debt. ~~In December 2015, the Company issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. See~~ ~~Note 5—Debt.~~ ~~These debt~~Debt instruments are measured at amortized cost on the Company's unaudited consolidated balance sheet at March 31, ~~2016.~~2017. The fair value of ~~these notes,~~the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.

The following table presents the carrying amount and estimated fair value of the Company’s debt in order of maturity:


	March 31, 2016				March 31, 2017				September 30, 2016
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in millions)				(in millions)
1.20% Senior Notes due December 2017	$	1,745	$	1,760	$	1,748	$	1,748	$	1,746	$	1,754
2.20% Senior Notes due December 2020	2,986		3,075		2,989		3,009		2,988		3,077
2.80% Senior Notes due December 2022	2,237		2,346		2,239		2,270		2,238		2,359
3.15% Senior Notes due December 2025	3,962		4,176		3,966		4,014		3,964		4,225
4.15% Senior Notes due December 2035	1,485		1,612		1,485		1,569		1,485		1,698
4.30% Senior Notes due December 2045	3,461		3,829		3,461		3,673		3,461		4,045
	$	15,876	$	16,798
Total					$	15,888	$	16,283	$	15,882	$	17,158

Other financial instruments not measured at fair value. The following financial instruments are not measured at fair value on the Company's unaudited consolidated balance sheet at March 31, ~~2016~~,2017, but ~~require~~ disclosure of their fair ~~values:~~values is required: time deposits recorded in prepaid expenses and other current assets, settlement receivable and payable, commercial paper, and customer collateral. The estimated fair value of such instruments at March 31, ~~2016~~2017 approximates their carrying value due to their generally short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments

Available-for-sale investment securities. The Company had ~~$65~~$78 million in gross unrealized gains and $2$7 million in gross unrealized losses at March 31, ~~2016. The unrealized gains were primarily related to the Company's reclassified equity investment discussed above.~~2017. There were $7$55 million gross unrealized gains and no gross unrealized losses at September 30, ~~2015.~~2016. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to two years.

Note 5—Intangible Assets and Goodwill

Goodwill and intangible assets at March 31, 2017 decreased from September 30, 2016 primarily due to measurement period adjustments as the Company updated the purchase price allocation during the second quarter of fiscal 2017. See Note 2—Visa Europe. Goodwill and intangible assets also decreased due to foreign currency translation, which is recorded as a component of accumulated other comprehensive loss in the consolidated balance sheet.

In February 2017, the Company acquired a business for a total purchase consideration net of cash received of approximately $302 million, paid primarily with cash on hand. Total purchase consideration has been allocated to the tangible and identifiable intangible assets acquired, and to liabilities assumed based on their respective fair values on the acquisition date. Related finite-lived intangible assets recorded totaled $104 million with a weighted-average useful life of eight years. Goodwill of $181 million was recorded to reflect the excess purchase consideration over net assets acquired. The consolidated financial statements include the operating results of the acquired business from the date of acquisition. Pro forma information related to the acquisition has not been presented as the impact is not material to the Company's financial results.

Note 6—Debt

The Company had outstanding debt as follows:



	March 31, 2017							September 30, 2016
	Principal Amount		Unamortized Discounts and Debt Issuance Costs			Carrying Amount		Principal Amount		Unamortized Discounts and Debt Issuance Costs			Carrying Amount		Effective Interest Rate
	(in millions, except percentages)
1.20% Senior Notes due December 2017 (the "2017 Notes")	$	1,750	$	(2	)	$	1,748	$	—	$	—		$	—	1.37	%
Total current maturities of long-term debt	1,750		(2		)	1,748		—		—			—

1.20% Senior Notes due December 2017 (the "2017 Notes")	—		—			—		1,750		(4		)	1,746		1.37	%
2.20% Senior Notes due December 2020 (the "2020 Notes")	3,000		(11		)	2,989		3,000		(12		)	2,988		2.30	%
2.80% Senior Notes due December 2022 (the "2022 Notes")	2,250		(11		)	2,239		2,250		(12		)	2,238		2.89	%
3.15% Senior Notes due December 2025 (the "2025 Notes")	4,000		(34		)	3,966		4,000		(36		)	3,964		3.26	%
4.15% Senior Notes due December 2035 (the "2035 Notes")	1,500		(15		)	1,485		1,500		(15		)	1,485		4.23	%
4.30% Senior Notes due December 2045 (the "2045 Notes")	3,500		(39		)	3,461		3,500		(39		)	3,461		4.37	%
Total long-term debt	14,250		(110		)	14,140		16,000		(118		)	15,882

Total debt	$	16,000	$	(112	)	$	15,888	$	16,000	$	(118	)	$	15,882

1817

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~Note 5—Debt~~

~~The Company had outstanding debt as follows:~~

March 31, 2016
Principal Amount Unamortized Discounts and Debt Issuance Costs Carrying Amount Effective Interest Rate
(in millions, except percentages)
1.20% Senior Notes due December 2017 (the "2017 Notes") $ 1,750
$ (5 ) $ 1,745
1.37 %
2.20% Senior Notes due December 2020 (the "2020 Notes") 3,000
(14 ) 2,986
2.30 %
2.80% Senior Notes due December 2022 (the "2022 Notes") 2,250
(13 ) 2,237
2.89 %
3.15% Senior Notes due December 2025 (the "2025 Notes") 4,000
(38 ) 3,962
3.26 %
4.15% Senior Notes due December 2035 (the "2035 Notes") 1,500
(15 ) 1,485
4.23 %
4.30% Senior Notes due December 2045 (the "2045 Notes") 3,500
(39 ) 3,461
4.37 %
Total long-term debt $ 16,000
$ (124 ) $ 15,876

Senior Notes

~~In December 2015,~~Interest expense for the ~~Company issued fixed-rate~~ senior notes (the 2017 Notes, 2020 Notes, 2022 Notes, 2025 Notes, 2035 Notes and 2045 Notes, or collectively, the "Notes") in conjunction with the anticipated acquisition of Visa Europe, in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14 of each year, commencing June 14, 2016. The Company recognized related interest expense ofwas $125 million and ~~$149~~$250 million for the three and six months ended March 31, ~~2016,~~2017, respectively, as compared to $125 million and $149 million for the same periods in 2016. The Company recognized interest expense as non-operating ~~expense.~~ expense and paid $244 million in interest on the senior notes during the six months ended March 31, 2017.

Commercial Paper Program

The ~~net aggregate proceeds from~~Company maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. During the issuance of the Notes, after deducting discounts and debt issuance costs, were $15.9 billion. The discounts and debt issuance costs will be amortized over the respective term of each note using the effective interest method. The indenture governing the Notes contains customary event of default provisions. The Notes are senior unsecured obligations ofthree months ended March 31, 2017, the Company ~~ranking equally and ratably among themselves and with~~repaid the ~~Company's existing and future unsecured and unsubordinated debt. The Notes are not secured by any assets~~$567 million of ~~the Company and are not guaranteed by any of the Company's subsidiaries. The Company~~commercial paper that was issued in ~~compliance with all related covenants as~~December 2016. As of March 31, ~~2016.~~

~~Each series of~~2017 and September 30, 2016, the Notes may be redeemed as a whole or in part, at the Company’s option at any time, prior to, with respect to the 2017 Notes, their maturity date, and with respect to the 2020 Notes, the 2022 Notes, the 2025

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~Notes, the 2035 Notes and the 2045 Notes, the applicable par call date (as set forth in the table below), at a price equal to the greater of:~~

~~100% of the principal amount of such Notes; and~~

~~the sum of the present value of the remaining scheduled payments of principal and interest through the maturity or par call date for each of the Notes below at the treasury rate defined~~Company had no outstanding obligations under the ~~terms of the Notes, plus the applicable spread for such Notes (as set forth in the table below),~~program.

~~plus, in each case, accrued and unpaid interest to, but excluding, the date of redemption.~~



~~Series~~	~~Maturity/Par Call Date~~	~~Spread~~
~~2017 Notes~~	~~December 14, 2017~~	~~5 bps~~
~~2020 Notes~~	~~November 14, 2020~~	~~10 bps~~
~~2022 Notes~~	~~October 14, 2022~~	~~12.5 bps~~
~~2025 Notes~~	~~September 14, 2025~~	~~15 bps~~
~~2035 Notes~~	~~June 14, 2035~~	~~20 bps~~
~~2045 Notes~~	~~June 14, 2045~~	~~20 bps~~

On or after the applicable par call date, the Notes, except the 2017 Notes, may be redeemed as a whole or in part, at the Company’s option at any time, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued interest.

In the event that the Visa Europe acquisition has not been consummated on or prior to February 2, 2017 (which date may be extended in accordance with the terms of the Notes), the Company will be required to redeem all outstanding 2017 Notes, 2020 Notes, 2022 Notes and 2025 Notes on the special mandatory redemption date, as defined in the terms of the Notes, at a redemption price equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest. The 2035 Notes and 2045 Notes are not subject to the special mandatory redemption provision.

~~Future principal payments on the Company's outstanding debt are as follows:~~

Fiscal Year 2016 2017 2018 2019 2020 Thereafter Total
(in millions) $ —
$ —
$ 1,750
$ —
$ —
$ 14,250
$ 16,000

Credit Facility ~~Renewal.~~ Extension

On January 27, ~~2016,~~2017, the Company ~~Visa International Service Association and Visa U.S.A. Inc. (collectively,~~extended the ~~"Borrowers") entered into a 5-year, unsecured~~term of the $4.0 billion revolving credit facility (the "Credit Facility") with Bank of America, N.A., as administrative agent and the lenders party thereto. JP Morgan Chase Bank, N.A., acted as syndication agent in connection with the Credit Facility; Bank of China, Los Angeles Branch, Barclays Bank PLC, Citibank, N.A., HSBC Bank USA, N.A., Royal Bank of Canada, Standard Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Bank, National Association, Deutsche Bank Securities Inc. and Toronto Dominion (New York) LLC, acted as Documentation Agents; and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of China, Los Angeles Branch, Barclays Bank PLC, Citigroup Global Markets, Inc., HSBC Bank USA, N.A., RBC Capital Markets, Standard Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc. and TD Securities (USA) LLC, acted as joint lead arrangers and joint book runners. The Credit Facility, which expires on January 27, 2021, replaced the Company's prior $3.0 billion credit facility ~~which expired~~that was entered into on January 27, 2016.

The ~~Credit Facility provides the Borrowers with a borrowing capacity of up to $4.0 billion. Borrowings under the Credit Facility are available for general corporate purposes. Interest~~credit facility will now expire on the borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) or an alternative base rate, in each case plus applicable margins that fluctuate based on the applicable rating of senior unsecured long-term debt securitiesJanuary 27, 2022. No other terms were materially changed. A brief description of the

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~Company. The Borrowers have agreed to pay a commitment fee which will fluctuate based on such applicable rating~~ material terms and conditions of the ~~Company.~~

~~Other material terms are:~~

~~a financial covenant which requires the Company to maintain a Consolidated Indebtedness to Consolidated EBITDA Ratio (as defined~~credit facility are described in the ~~Credit Facility) of not greater than 3.75 to 1.00;~~

~~customary restrictive covenants, which limit~~Company's Form 10-K, as filed with the Borrowers' ability to, among other things, create certain liens, effect fundamental changes to their business, or merge or dispose of substantially all of their assets, subject in each case to customary exceptions and amounts;

customary events of default, upon the occurrence of which, after any applicable grace period, the requisite lenders will have the ability to accelerate all outstanding loans thereunder and terminate the commitments; and

~~other customary and standard terms and conditions.~~

The Borrowers currently have no borrowings under the Credit Facility. The participating lenders in the Credit Facility include certain holders of the Company's class B and class C common stock, certain of the Borrowers' customers and their affiliates.

~~Note 6—Pension and Other Postretirement Benefits~~

The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the U.S. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations, which are not presented below as they are not material.

In October 2015, the Company's board of directors approved an amendment of the qualified defined benefit pension plan such that the Company discontinued employer provided credits after December 31, 2015. Plan participants continue to earn interest creditsSEC on existing balances at the time of the freeze. As a result, a curtailment gain totaling $8 million was recognized as part of the Company's net periodic benefit cost. The Company also recorded a net unrealized actuarial gain of $56 million from the remeasurement of its pension plan in the first quarter of fiscal 2016 within other comprehensive income.

~~The components of net periodic benefit cost are as follows:~~

Pension Benefits Other Postretirement Benefits
Three Months Ended
March 31, Six Months Ended
March 31, Three Months Ended
March 31, Six Months Ended
March 31,
2016 2015 2016
2015 2016 2015 2016 2015
(in millions)
Service cost $ —
$ 11
$ 13
$ 23
$ —
$ —
$ —
$ —
Interest cost 10
10
21
20
—
—
—
—
Expected return on assets (18 ) (18 ) (35 ) (36 ) —
—
—
—
Amortization of:
Prior service credit —
(1 ) (1 ) (3 ) (1 ) (1 ) (2 ) (2 )
Actuarial loss 2
—
4
—
—
—
—
—
Curtailment gain —
—
(8 ) —
—
—
—
—
Settlement loss —
2
—
4
—
—
—
—
Total net periodic benefit cost $ (6 ) $ 4
$ (6 ) $ 8
$ (1 ) $ (1 ) $ (2 ) $ (2 )
November 15, 2016.

Note 7—Settlement Guarantee Management

The Company indemnifies its clients for settlement losses suffered due to failure of any other clients to fund its settlement obligations in accordance with the Visa Rules. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. The exposure to settlement losses through Visa's settlement indemnification is accounted for as a

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

settlement risk guarantee. The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company requires certain clients that do not meet its credit standards to post collateral to offset potential loss from their estimated unsettled transactions. The Company’s estimated maximum settlement exposure was ~~$43.8~~$68.5 billion for the quarter ended March 31, ~~2016~~,2017, compared to ~~$43.5~~$67.8 billion for the quarter ended September 30, ~~2015~~.2016. Of these amounts, ~~$2.2~~$3.1 billion and $2.9 billion were covered by collateral at March 31, ~~2016~~2017 and September 30, ~~2015~~.2016, respectively.

The Company maintained collateral as follows:


	March 31, 2016		September 30, 2015		March 31, 2017		September 30, 2016
	(in millions)				(in millions)
Cash equivalents(1)	$	1,050	$	1,023	$	1,324	$	1,295
Pledged securities at market value	151		154		154		170
Letters of credit	1,103		1,178		1,477		1,311
Guarantees	961		971		1,369		1,418
Total	$	3,265	$	3,326	$	4,324	$	4,194


⁽¹⁾	Cash collateral held by Visa Europe is not included on the Company's consolidated balance sheets as its clients retain beneficial ownership and the cash is only accessible to the Company in the event of default by the client on its settlement obligations.

The total available collateral balances presented in the table above were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.

The fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $1$3 millionand $2 million at March 31, ~~2016~~2017 and September 30, ~~2015~~.2016, respectively. These amounts are reflected in accrued liabilities on the Company's consolidated balance sheets.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In the last week of March 2017, the Company experienced delays in the processing and settlement of $1.6 billion of volume in Europe. As a result of this delay, this volume was processed and settled in the first few days of April 2017 instead of in March 2017. The settlement receivable and payable amounts recorded on the consolidated balance sheets at March 31, 2017 are elevated because they include this unsettled activity. The balances in these accounts returned to historical levels in early April 2017 following the settlement of this activity.

Note 8—~~Derivative Financial Instruments~~Pension and Other Postretirement Benefits

The Company entered into currency forward contracts during the second quarter of fiscal 2016 to mitigate a portion of the foreign currency exchange rate risk associated with the upfront cash consideration to be paidsponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the ~~anticipated~~U.S. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations. The components of net periodic benefit cost presented below include the U.S. pension plans and the non-U.S. plans, which represent Visa Europe ~~acquisition. Subsequently,~~funded and unfunded pension plans. Disclosures relating to other non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate.

In October 2015, the Company amended the U.S. qualified defined benefit pension plan and discontinued employer provided credits after December 31, 2015. Plan participants will continue to earn interest credits on existing balances at December 31, 2015. The Visa Europe pension plans had been closed to new entrants prior to the ~~end~~Visa Europe acquisition.



	U.S. Plans											Non-U.S. Plans
	Pension Benefits						Other Postretirement Benefits					Pension Benefits
	Three Months Ended March 31,						Three Months Ended March 31,					Three Months Ended March 31,
	2017			2016			2017		2016			2017
	(in millions)
Service cost	$	—		$	—		$	—	$	—		$	1
Interest cost	9			10			—		—			2
Expected return on assets	(17		)	(18		)	—		—			(4		)
Amortization of:
Prior service credit	—			—			—		(1		)	—
Actuarial loss	4			2			—		—			1
Curtailment gain	—			—			—		—			—
Settlement loss	11			—			—		—			—
Total net periodic benefit cost	$	7		$	(6	)	$	—	$	(1	)	$	—



	U.S. Plans												Non-U.S. Plans
	Pension Benefits						Other Postretirement Benefits						Pension Benefits
	Six Months Ended March 31,						Six Months Ended March 31,						Six Months Ended March 31,
	2017			2016			2017			2016			2017
	(in millions)
Service cost	$	—		$	13		$	—		$	—		$	3
Interest cost	18			21			—			—			5
Expected return on assets	(35		)	(35		)	—			—			(8		)
Amortization of:
Prior service credit	—			(1		)	(1		)	(2		)	—
Actuarial loss	8			4			—			—			1
Curtailment gain	—			(8		)	—			—			—
Settlement loss	13			—			—			—			—
Total net periodic benefit cost	$	4		$	(6	)	$	(1	)	$	(2	)	$	1

Table of the quarter, the Company entered into additional currency forward contracts to fully offset the original positions, eliminating its risk-mitigation position. All contracts are set to mature during the third 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 net unrealized gains of $116 million related to these contracts during the three and six months ended March 31, 2016.Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 9—Stockholders' Equity

As-Converted Class A Common Stock.The number of shares of each series and class and the number of shares of class A common stock on an as-converted basis at March 31, ~~2016,~~2017, are as follows:


(in millions, except conversion rates)	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾
Class A common stock	1,905	—		1,905
U.K.&I preferred stock					2	13.3880		33
Europe preferred stock					3	13.9480		44
Class A common stock ⁽²⁾					1,847	—		1,847
Class B common stock	245	1.6483	⁽²⁾	405	245	1.6483	⁽³⁾	405
Class C common stock	19	4.0000		75	14	4.0000		55
Total				2,385				2,384


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on unrounded numbers.


⁽²⁾	Class A common stock shares outstanding exclude repurchases traded but not yet settled on or before March 31, 2017.


⁽³⁾	The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend payments are based on a conversion rate rounded to the tenth decimal.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

During the three months ended March 31, 2017, the newly-formed Visa Foundation received all Visa Inc. shares that were previously recorded as treasury stock. See Note 12—Income Taxes.

Reduction in as-converted shares. During the six months ended March 31, 2017, total as-converted class A common ~~stock.~~stock was reduced by 43 million shares at an average price of $83.64 per share. Of the 43 million shares, 41 million were repurchased in the open market using $3.5 billion of operating cash on hand. Additionally, the Company recovered $120 million of VE territory covered losses in accordance with the Europe retrospective responsibility plan. The recovery has the same economic effect on earnings per share as repurchasing the Company's class A common stock, because it reduces the U.K.&I. and Europe preferred stock conversion rates and consequently the as-converted class A common stock share count. See Note 3—U.S. and Europe Retrospective Responsibility Plans.

The following table presents share repurchases in the open market.⁽¹⁾


(in millions, except per share data)	Three Months Ended March 31, 2016		Six Months Ended March 31, 2016		Three Months Ended March 31, 2017		Six Months Ended March 31, 2017
Shares repurchased in the open market ⁽¹⁾⁽²⁾	24		50		18		41
Average repurchase price per share ⁽²⁾⁽³⁾	$	72.23	$	75.47	$	88.45	$	83.59
Total cost	$	1,750	$	3,765	$	1,576	$	3,469


⁽¹⁾	Shares repurchased in the open market reflect repurchases settled during the three and six months ended March 31, 2017. These amounts include repurchases traded but not yet settled on or before September 30, 2016 for the six months, or December 31, 2016 for the three months, and exclude repurchases traded but not yet settled on or before March 31, 2017.


⁽²⁾	All shares repurchased in the open market have been retired and constitute authorized but unissued shares.


⁽²⁾⁽³⁾	Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers.

As of March 31, 2017, the Company's July 2016 ~~the October 2015~~share repurchase program had remaining authorized funds of ~~$4.0~~$2.3 billion for share repurchase. All share repurchase programs authorized prior to ~~October 2015~~July 2016 have been completed.

~~Dividends.~~ In April ~~2016,~~2017, the Company's board of directors authorized an additional $5.0 billion share repurchase program.

Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through a periodic adjustment to the class A common stock conversion rates applicable to the U.K.&I. and Europe preferred stock. See Note 3—U.S. and Europe Retrospective Responsibility Plans.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents as-converted U.K.&I. and Europe preferred stock, after the Company recovered VE territory covered losses through a conversion rate adjustment, for the three and six months ended March 31, 2017.



	Three and Six Months Ended March 31, 2017
(in millions, except per share and conversion rate data)	U.K.&I. Preferred Stock		Europe Preferred Stock
Reduction in equivalent number of shares of class A common stock	1		—		⁽¹⁾
Effective price per share ⁽²⁾	$	85.01	$	85.01
Recovery through conversion rate adjustment	$	119	$	1
Conversion rate of preferred stock to class A common stock after adjustment	13.388		13.948
As-converted preferred stock after recovery	33		44


⁽¹⁾	The reduction in equivalent number of shares of class A common stock was less than one million shares.


⁽²⁾	Effective price per share calculated using the volume-weighted average price of the Company's class A common stock over a pricing period in accordance with the Company's current certificates of designations for its series B and C convertible participating preferred stock.

Dividends. In April 2017, the Company’s board of directors declared a quarterly cash dividend of ~~$0.14~~$0.165 per share of class A common stock (determined in the case of class B and C common stock and U.K.&I and Europe preferred stock on an as-converted basis). The cash dividend will be paid on June ~~7, 2016,~~6, 2017, to all holders of record of the Company's common and preferred stock as of May ~~13, 2016.~~19, 2017. The Company declared and paid ~~$336~~$396 millionand ~~$676~~$795 million in dividends to holders of the Company's common stock during the three and six months ended March 31, ~~2016, respectively.~~2017.

Note 10—Earnings Per Share

Basic earnings per share is computed by dividing net income available to each class ~~and series~~ by the weighted-average number of shares of common stock outstanding and participating securities ~~in the form of unvested restricted stock awards, unvested restricted stock units and unvested earned performance-based shares~~ during the period. Net income is allocated to each class ~~and series~~ of common stock and participating securities based on its proportional ownership on an as-converted basis. The ~~weighted~~weighted-average number of shares of each class ~~and series~~ of common stock outstanding reflects changes in ownership over the periods presented. See Note 9—Stockholders' Equity.

Diluted earnings per share is computed by dividing net income available by the weighted-average number of shares of common stock outstanding, participating securities ~~in the form of unvested restricted stock awards, unvested restricted stock units and unvested earned performance-based shares~~ and, if dilutive, potential class A common stock equivalent shares outstanding during the period. Dilutive class A common stock equivalents may consist of: (1) shares of class A common stock issuable upon the conversion of U.K.&I and Europe preferred stock and class B and ~~class~~ C common stock based on the conversion ~~rate~~rates in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table presents earnings per share for the three months ended March 31, ~~2016.~~2017.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	1,360	1,909	$	0.71	$	1,707	2,401	⁽³⁾	$	0.71	$	332	1,854	$	0.18	$	430	2,406	⁽³⁾	$	0.18
Class B common stock	288		245	$	1.17	$	288	245		$	1.17	73		245	$	0.30	$	72	245		$	0.29
Class C common stock	55		19	$	2.85	$	55	19		$	2.84	10		15	$	0.72	$	10	15		$	0.72
Participating securities⁽⁴⁾	4		Not presented	Not presented		$	4	Not presented		Not presented		15		Not presented	Not presented		$	15	Not presented		Not presented
Net income	$	1,707										$	430

2321

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents earnings per share for the six months ended March 31, ~~2016.~~2017.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	2,910	1,923	$	1.51	$	3,648	2,416	⁽³⁾	$	1.51	$	1,928	1,857	$	1.04	$	2,500	2,413	⁽³⁾	$	1.04
Class B common stock	612		245	$	2.49	$	611	245		$	2.49	420		245	$	1.71	$	419	245		$	1.71
Class C common stock	118		19	$	6.05	$	117	19		$	6.04	65		16	$	4.15	$	65	16		$	4.14
Participating securities⁽⁴⁾	8		Not presented	Not presented		$	8	Not presented		Not presented		87		Not presented	Not presented		$	87	Not presented		Not presented
Net income	$	3,648										$	2,500

The following table presents earnings per share for the three months ended March 31, ~~2015~~2016.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	1,240	1,963	$	0.63	$	1,550	2,460	⁽³⁾	$	0.63	$	1,360	1,909	$	0.71	$	1,707	2,401	⁽³⁾	$	0.71
Class B common stock	255		245	$	1.04	$	255	245		$	1.04	288		245	$	1.17	$	288	245		$	1.17
Class C common stock	51		20	$	2.53	$	51	20		$	2.52	55		19	$	2.85	$	55	19		$	2.84
Participating securities⁽⁴⁾	4		Not presented	Not presented		$	4	Not presented		Not presented		4		Not presented	Not presented		$	4	Not presented		Not presented
Net income	$	1,550										$	1,707

The following table presents earnings per share for the six months ended March 31, ~~2015~~2016.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	2,492	1,969	$	1.27	$	3,119	2,469	⁽³⁾	$	1.26	$	2,910	1,923	$	1.51	$	3,648	2,416	⁽³⁾	$	1.51
Class B common stock	512		245	$	2.09	$	511	245		$	2.08	612		245	$	2.49	$	611	245		$	2.49
Class C common stock	107		21	$	5.06	$	106	21		$	5.05	118		19	$	6.05	$	117	19		$	6.04
Participating securities⁽⁴⁾	8		Not presented	Not presented		$	8	Not presented		Not presented		8		Not presented	Not presented		$	8	Not presented		Not presented
Net income	$	3,119										$	3,648


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

⁽²⁾

Net income is allocated based on proportional ownership on an as-converted basis. The weighted-average number of shares of as-converted class B common stock used in the income allocation was 405 million for the three and six months ended March 31, ~~2016~~ 2017 and ~~2015.~~2016. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 58 millionand 63 million for the three and six months ended March 31, 2017, respectively and 77 million and 78 million for the three and six months ended March 31, 2016, ~~respectively,~~respectively. The weighted-average number of shares of preferred stock, included within participating securities, was 34 million of as-converted U.K.&I preferred stock and 8144 million ~~and 84 million~~of as-converted Europe preferred stock for the three and six months ended March 31, ~~2015, respectively.~~ 2017.

⁽³⁾

Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 5 million common stock equivalents for the three and six months ended March 31, 2017 and 2016, ~~and 2015,~~ because their effect would be dilutive. The computation excludes 13 millionof common stock equivalents for the three and six months ended March 31, 2017 and 1 million of common stock equivalents for the three and six months ended March 31, 2016, ~~and 2015~~ because their effect would have been anti-dilutive.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

⁽⁴⁾

Participating securities ~~are~~include preferred stock outstanding and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company's U.K.&I and Europe preferred stock, restricted stock awards, restricted stock units and ~~unvested~~ earned performance-based shares. Participating securities' income is allocated based on the weighted-average number of shares of as-converted stock.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 11—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan during the six months ended March 31, ~~2016~~2017:


	Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price		Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price
Non-qualified stock options	1,393,565	$	15.06	$	80.02	1,671,344	$	13.90	$	80.82
Restricted stock units ("RSUs")	2,449,389	$	79.91			3,122,624	$	80.96
Performance-based shares⁽¹⁾	604,219	$	92.71			634,651	$	86.37


⁽¹⁾	Represents the maximum number of performance-based shares which could be earned.

The Company’s non-qualified stock options and RSUs are equity awards with service-only conditions and are accordingly expensed on a straight-line basis over the vesting period. The Company's performance-based shares are equity awards with service, market and performance conditions that are accounted for using the graded-vesting method. ~~Compensation~~The Company recorded share-based compensation cost ~~is recorded~~of $116 million for the six months ended March 31, 2017, net of estimated forfeitures, which are adjusted as appropriate.

Note 12—Income Taxes

In February 2017, the Company completed a reorganization of Visa Europe and certain other legal entities ("legal entity reorganization" or "reorganization") to align the Company's corporate structure to the geographic jurisdictions in which it conducts business operations. As a result of the reorganization, during the three months ended March 31, 2017, the Company recorded a non-recurring, non-cash income tax provision of $1.5 billion primarily related to the elimination of deferred tax balances originally recognized upon the acquisition of Visa Europe. Associated with this reorganization, the newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe, which were previously recorded as treasury stock.

The effective income tax rates were 84% and 56% for the three and six months ended March 31, 2017, respectively, and 30% and 28% for the three and six months ended March 31, 2016, ~~respectively, and 32% and 31%~~respectively. The effective tax rate for the three and six months ended March 31, ~~2015, respectively. The~~2017 differs from the effective tax ~~rates for~~rate in the same periods in the prior fiscal year primarily due to:

the aforementioned $1.5 billion non-recurring, non-cash income tax provision related to the legal entity reorganization recorded in the quarter ended March 31, 2017;

$71 million tax benefit related to Visa Foundation's receipt of Visa Inc. shares mentioned above;

$20 million and $46 million of excess tax benefits related to share-based payments recorded during the three and six months ended March 31, ~~2016 differ from the effective tax rates in the same periods in fiscal 2015 primarily due to:~~

~~the reversal of prior years' accrued taxes on undistributed intercompany dividends in the quarter ended March 31, 2016,~~2017, respectively, as a result of ~~revised intercompany dividend strategies between international subsidiaries;~~early adoption of Accounting Standards Update 2016-09. See Note 1—Summary of Significant Accounting Policies;

the restrictions on U.S. foreign tax credits that can be claimed for Visa Europe's foreign taxes prior to the aforesaid legal entity reorganization; and

the absence of the non-taxable $255 million revaluation of the Visa Europe put option recorded in the quarter ended December 31, ~~2015;~~

~~foreign tax credit benefits related to prior fiscal years recognized during the quarter ended December 31, 2015; and~~

~~the absence of the reversal of previously established state tax reserves in the quarter ended December 31, 2014.~~2015.

During the three and six months ended March 31, ~~2016,~~2017, the Company's gross unrecognized tax benefits increased by ~~$31~~$23 million and ~~$51~~$56 million, ~~respectively, which~~respectively. The Company's unrecognized tax benefits that would favorably impact the effective tax rate, if ~~recognized.~~recognized, increased by $69 million and $97 million for the three and six months ended March 31, 2017, respectively. The increase in ~~gross~~ unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three and six months ended March 31, 2017 and 2016, there were no significant changes in interest and penalties related to uncertain tax positions.

During fiscal 2013, the Canada Revenue Agency ("CRA") completed its examination of the Company's fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments. Based on the findings of its examination, the CRA also proposed certain assessments to the Company's fiscal 2010 through 2014 Canadian tax returns. The Company filed notices of objection against these assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the CRA. In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA's assessments. The Company continues to believe that its income tax provision adequately reflects its obligations to the CRA.

The Company’s tax filings are subject to examination by the U.S. federal, state and foreign taxing authorities. The timing and outcome of the final resolutions of the various ongoing income tax examinations are highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.

2523

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In November 2015, the FASB issued Accounting Standards Update 2015-17, which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current on the Company's consolidated balance sheets. All prior period amounts have been reclassified to conform with the current period presentation.

Note 13—Legal Matters

The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows. From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.

The litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss as of the balance sheet date.

The following table summarizes the activity related to accrued ~~litigation.~~litigation:


	Fiscal 2016			Fiscal 2015			Fiscal 2017			Fiscal 2016
	(in millions)						(in millions)
Balance at October 1	$	1,024		$	1,456		$	981		$	1,024
Provision for legal matters	1			3
Provision for uncovered legal matters							17			1
Accrual of VE territory covered litigation							142			—
Payments on legal matters	(12		)	(324		)	(144		)	(12		)
Balance at March 31	$	1,013		$	1,135		$	996		$	1,013

Accrual Summary—U.S. Covered Litigation

Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. See Note 3—U.S. and Europe Retrospective Responsibility ~~Plan and Potential Visa Europe Liabilities.~~Plans. An accrual for the U.S. covered litigation and a charge to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The total accrual related to the U.S. covered litigation could be either higher or lower than the escrow account balance.

The following table summarizes the activity related to U.S. covered ~~litigation.~~litigation:


	Fiscal 2016			Fiscal 2015			Fiscal 2017		Fiscal 2016
	(in millions)						(in millions)
Balance at October 1	$	1,023		$	1,449		$	978	$	1,023
Payments on covered litigation	(11		)	(321		)
Payments on U.S. covered litigation							—		(11		)
Balance at March 31	$	1,012		$	1,128		$	978	$	1,012

Accrual Summary—VE Territory Covered Litigation

Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory covered losses through a periodic adjustment to the conversion rates applicable to the U.K.&I preferred stock and Europe preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders' equity will be recorded when the loss is deemed to be probable and reasonably estimable. See further discussion below under VE Territory Covered Litigation and Note 3—U.S. and Europe Retrospective Responsibility Plans.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the activity related to VE territory covered litigation:



	Fiscal 2017
	(in millions)
Balance at October 1	$	2
Accrual for VE territory covered litigation	142
Payments on VE territory covered litigation	(144		)
Balance at March 31	$	—

U.S. Covered Litigation

Interchange Multidistrict Litigation (MDL)

Putative Class Actions. On November 23, 2016, class plaintiffs that signed the 2012 Settlement Agreement filed a petition for writ of certiorari with the U.S. Supreme Court seeking review of the Second Circuit’s decision that vacated the district court’s certification of the merchant class and reversed the approval of the settlement. The Supreme Court denied the petition on March 27, 2017.

On November 30, 2016, the district court entered an order appointing interim counsel for two putative classes of plaintiffs, a “Damages Class” and an “Injunctive Relief Class.” Following the district court’s order, on February 8, 2017, plaintiffs purporting to act on behalf of the putative Damages Class sought leave to file an amended complaint and plaintiffs purporting to act on behalf of the putative Injunctive Relief Class filed a new class complaint, as described below.

The plaintiffs that signed the 2012 Settlement Agreement, acting on behalf of the putative Damages Class, filed a motion requesting leave to file a Third Consolidated Amended Class Action Complaint. The complaint seeks money damages alleged to range in the tens of billions of dollars (subject to trebling), as well as attorneys' fees and injunctive relief, and names as defendants Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated and MasterCard International Incorporated, and certain U.S. financial institutions. The plaintiffs assert that the proposed complaint updates, among other things, claims for damages and accounts for industry developments. Defendants opposed the Damages Class plaintiffs’ motion on March 10, 2017.

A new group of purported class plaintiffs, acting on behalf of the putative Injunctive Relief Class, filed a class action complaint seeking declaratory and injunctive relief, as well as attorneys’ fees. That complaint seeks, among other things, an injunction against: the setting of default interchange rates; certain Visa Rules relating to merchants, including the honor-all-cards rule; and various transaction fees, including the fixed acquirer network fee. The complaint names as defendants Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated and MasterCard International Incorporated, and certain U.S. financial institutions.

Individual Merchant Actions. On February 8, 2017, the same day that the putative Damages Class plaintiffs sought leave to file an amended complaint and the putative Injunctive Relief Class plaintiffs filed a new class action complaint, certain other individual merchants filed motions in existing actions in MDL 1720 requesting leave to amend their complaints. Merchants requesting leave to amend assert, among other things, that their proposed complaints add claims for injunctive relief and update claims for damages. Defendants opposed the various merchants’ motions on March 10, 2017. In addition, on February 8, 2017, certain individual merchants filed a new action in federal court which was subsequently included in MDL 1720.

A number of individual merchant actions previously filed have been settled and remain settled, but the settlement agreement with Wal-Mart Stores Inc. automatically terminated upon the exhaustion of appeals concerning the reversal of approval of the 2012 Settlement Agreement. The termination results in a decrease of the “settled” percentage of Visa-branded payment card sales volume of merchants who opted out of the 2012 Settlement Agreement. Consequently, as of the filing date, Visa has reached settlement agreements with individual merchants representing approximately 34% of the Visa-branded payment card sales volume of merchants who opted out of the 2012 Settlement Agreement.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Unlike the matters above, all of which were filed in federal court or are pending in MDL 1720, one merchant filed a case on February 17, 2017, in Texas state court. The Texas merchant generally pursues claims on allegations similar to those raised in MDL 1720. Based on currently available information, the Company believes this matter may be covered by the U.S. retrospective responsibility plan.

Consumer Interchange Litigation

On December 9, 2016, the Second Circuit denied plaintiffs’ petition for rehearing. On March 9, 2017, plaintiffs filed a petition for writ of certiorari with the U.S. Supreme Court.

VE Territory Covered Litigation

U.K. Merchant Litigation

Since July 2013, in excess of 150 Merchants (the capitalized term "Merchant," when used in this section, means a merchant together with subsidiary/affiliate companies who have issued claims jointly) have commenced proceedings against Visa Europe, Visa Inc. and Visa International relating to interchange rates in Europe, and seek damages for alleged anti-competitive conduct primarily in relation to U.K. domestic and/or Irish domestic and/or intra-EEA interchange fees for credit and debit cards. As of the date of this report, Visa Europe, Visa Inc. and Visa International have settled the claims asserted by 15 Merchants, leaving more than 130 Merchants with outstanding claims.

The trial in relation to claims filed in 2013 by a number of Merchants began in November 2016. Of the 15 settling Merchants, three Merchants settled before the trial commenced and the remaining 12 settled during trial. The trial concluded in March 2017, and a decision is pending with respect to one remaining Merchant.

In addition, over 30 additional Merchants have threatened to commence similar proceedings. Standstill agreements have been entered into with respect to some of those Merchants' claims.

Other Litigation

"Indirect Purchaser" Actions

On January 12, 2017, the appeals court affirmed the trial court's order denying the objector's motion for attorneys' fees and costs. The objector subsequently agreed not to seek any further appeal.

Canadian Competition Proceedings

On March 8, 2017, Visa entered into an agreement in principle with merchant class plaintiffs to settle, on a national basis, the active class actions filed in Quebec, British Columbia, Ontario, Saskatchewan and Alberta. The settlement remains subject to execution of a final settlement agreement and court approval.

Data Pass Litigation

On December 20, 2016, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal as to certain claims against Gamestop Corporation, Webloyalty.com, Inc. and Visa, vacated the dismissal as to certain claims against Webloyalty and Gamestop, and remanded the case to the district court for further proceedings on the remaining claims.

U.S. ATM Access Fee Litigation

On November 17, 2016, the U.S. Supreme Court ordered that the writs of certiorari be dismissed as improvidently granted. On February 13, 2017, plaintiffs in the National ATM Council action filed a renewed application for a preliminary injunction to prohibit Visa and MasterCard from continuing to enforce non-discrimination ATM access fee rules. The application is pending.

Federal Trade Commission

Notice Regarding EMV Chip Debit Cards. On November 22, 2016, the FTC's Bureau of Competition informed Visa that the Bureau had closed its investigation.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On February 24, 2016, the MDL court denied plaintiffs' motion for reconsideration of the dismissal of plaintiffs' federal claim and dismissed plaintiffs' state law claim based on defendants' cross-motion for reconsideration. EMV Chip Liability Shift

On March ~~4, 2016,~~10, 2017, the plaintiffs filed a ~~notice~~motion for class certification. On March 20, 2017, Visa and MasterCard filed a motion to transfer the action to the U.S. District Court for the Eastern District of ~~appeal.~~New York, or, in the alternative, to stay the action. The motion is pending.

~~Interchange Opt-out Litigation~~Walmart Acceptance Agreement

~~Beginning in May 2013, more than 60 opt-out cases have been~~On February 27, 2017, the Court granted Walmart’s motion to dismiss Visa’s counterclaim for fraudulent inducement. Walmart’s claims and Visa’s remaining counterclaims remain pending.

Broadway Grill

On February 21, 2017, Visa filed ~~by hundreds~~a motion to stay the litigation pending the outcome of ~~merchants in various~~the federal ~~district courts, generally pursuing damages claims on allegations similar to those raised~~class actions in MDL 1720. A number of the cases also include allegations that Visa has monopolized, attempted to monopolize, and/or conspired to monopolize debit card-related market segments, and one of the cases seeks an injunction against the fixed acquirer network fee. The cases name as defendants Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, and MasterCard International Incorporated, although some also include certain U.S. financial institutions as defendants. Wal-Mart Stores Inc. and its subsidiaries filed an opt-out complaint that also adds Visa Europe Limited and Visa Europe Services Inc. as defendants.

A settlement agreement regarding all claims was reached with Wal-Mart Stores Inc. and its subsidiaries, which will terminate if, following all appeals, the MDL class settlement is reversed or vacated with respect to certification of the Rule 23~~(b)~~(2) settlement class or the consideration provided to or release provided by that class. Including this settlement with Wal-Mart, as of the date of filing, Visa has reached settlement agreements with a number of merchants representing approximately 51% of the Visa-branded payment card sales volume of merchants who opted out.

~~European Competition Proceedings~~

~~U.K. Merchant Litigation~~. A total of approximately 50 merchants (together with subsidiary/affiliate companies) have now commenced proceedings against Visa Europe, Visa Inc. and Visa International relating to interchange rates in Europe.

~~Other Litigation~~

~~"Indirect Purchaser" Actions~~

On ~~December 1, 2015, the objector's appeal from the trial court's order regarding the distribution of certain settlement funds was dismissed~~.

~~Canadian Competition Proceedings~~

~~Merchant Litigation.~~ The court approved the settlement agreements entered into by the three named financial institutions, which are not significant Canadian issuers. A settlement with another financial institution is pending court approval.

~~U.S. ATM Access Fee Litigation~~

~~On January 27, 2016, defendants filed petitions for writ of certiorari with the U.S. Supreme Court seeking review of the decisions of~~March 20, 2017, the U.S. Court of Appeals for the ~~District of Columbia Circuit. On February 18, 2016,~~Ninth Circuit granted Visa permission to appeal the ~~National ATM Council moved for a preliminary injunction~~district court’s order remanding the case to ~~prohibit Visa and MasterCard from imposing ATM access fee non-discrimination rules.~~

~~Pulse Network~~California state court.

On ~~December 17, 2015,~~April 5, 2017, plaintiff Nuts for Candy, a California merchant represented by the ~~court denied Visa's motion to dismiss the complaint.~~

~~EMV Chip Liability Shift~~

~~On March 8, 2016, B&R Supermarket, Inc., d/b/a Milam’s Market, and Grove Liquors LLC~~same counsel that represents Broadway Grill, filed a ~~purported class action lawsuit against Visa Inc., Visa U.S.A., MasterCard, Discover, American Express, EMVCo, JCB, UnionPay, and~~complaint in California state court containing allegations similar to those raised by Broadway Grill.

Korea Fair Trade Commission

Following complaints lodged by certain financial institutions in Korea, in November 2016, the ~~U.S. District Court for~~Korea Fair Trade Commission (KFTC) initiated an investigation into certain pricing changes applicable to Visa financial institutions in Korea. Visa is cooperating with the ~~Northern District~~KFTC.

Ohio Attorney General Civil Investigative Demand

On January 19, 2017, the State of ~~California. The complaint asserts that defendants, through EMVCo, conspired~~Ohio Office of the Attorney General issued an investigative demand to ~~shift liability for fraudulent, faulty or otherwise rejected consumer credit card transactions from defendants~~Visa seeking documents and information focusing on Visa's rules related to the ~~purported class~~acceptance of ~~merchants. Plaintiffs allege that~~Visa debit cards, as well as cardholder verification methods and the ~~class consists~~routing of ~~merchants thatpurchased EMV-chip-compliant point-of-sale card readers, and otherwise~~

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~complied~~Visa debit transactions. Visa is cooperating with the defendants’ directives from October 1, 2015 to present. Plaintiffs claim that the so-called “Liability Shift” violates Section 1 and 3 of the Sherman Act and certain state laws, and seek treble damages, injunctive relief, and attorneys’ fees. On April 18, 2016, defendants filed motions to dismiss the complaint.

Attorney General.



ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis provides a review of the results of operations, financial condition and the liquidity and capital resources of Visa Inc. and its subsidiaries (“Visa,” “we,” “our” or 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 our unaudited consolidated financial statements and related notes included elsewhere in this report.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of ~~1995.~~1995 that relate to, among other things, our future operations, prospects, developments, strategies, growth of our business, expectations regarding client incentives, anticipated expansion of our products in certain countries, industry developments, expectations regarding litigation, timing and amount of stock repurchases, sufficiency of sources of liquidity and funding, effectiveness of our risk management programs and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as "believes," "estimates," "expects," "intends," "may," ~~"projected,~~"projects," ~~"could,~~“could," "should," "will," ~~"will continue"~~"continue" and other similar expressions. ~~Examples~~All statements other than statements of historical fact could be forward-looking statements, ~~include, but are not limited to, statements we make about our revenue, client incentives, operating margin, tax rate, earnings per share, free cash flow, and the growth of those items.~~

~~By their nature, forward-looking statements: (i)~~which speak only as of the date they are ~~made; (ii)~~made, are not ~~statements of historical fact or~~ guarantees of future ~~performance;~~performance and ~~(iii)~~ are subject to certain risks, uncertainties ~~assumptions or changes in circumstances that~~and other factors, many of which are beyond our control and are difficult to ~~predict or quantify. Therefore,~~predict. We describe risks and uncertainties that could cause actual results ~~could~~to differ materially ~~and adversely~~ from ~~our~~those expressed in, or implied by, any of these forward-looking statements ~~due to a variety of factors, including the following:~~

~~the impact of laws, regulations and marketplace barriers, including:~~

increased regulation of fees, transaction routing, payment card practices or other aspects of the payments industry in the U.S., including new or revised regulations issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act;

~~increased regulation in jurisdictions outside of the U.S.;~~

~~increased government support of national payments networks outside the U.S.; and~~

~~increased regulation of consumer privacy, data use and security;~~

~~developments in litigation and government enforcement, including those affecting interchange reimbursement fees, antitrust and tax;~~

~~new lawsuits, investigations or proceedings, or changes to our potential exposure in connection with pending lawsuits, investigations or proceedings;~~

~~economic factors, such as:~~

~~economic fragility in the Eurozone, the U.S. and in other advanced and emerging markets;~~

~~general economic, political and social conditions in mature and emerging markets globally;~~

~~general stock market fluctuations which may impact consumer spending;~~

~~material changes in cross-border activity, foreign exchange controls and fluctuations in currency exchange rates; and~~

~~material changes~~ in our ~~financial institution clients' performance compared to our estimates;~~

~~industry developments, such as competitive pressure, rapid technological developments and disintermediation from our payments network;~~

~~system developments, such as:~~

~~disruption of our transaction processing systems or the inability to process transactions efficiently;~~

~~account data breaches or increased fraudulent or other illegal activities involving Visa-branded cards or payment products; and~~

~~failure to maintain systems interoperability with Visa Europe;~~

~~the transaction with Visa Europe may not be consummated on the terms currently contemplated or at all;~~

~~Visa Europe's business may not be successfully integrated with our business or we may not achieve the anticipated benefits of the transaction;~~

~~the costs and risks associated with the transaction with Visa Europe;~~

~~matters arising in connection with Visa Europe's or our efforts to comply with and satisfy applicable regulatory approvals and closing conditions relating to the transaction;~~

~~the loss of organizational effectiveness or key employees;~~

~~the failure to integrate acquisitions successfully or to effectively develop new products and businesses;~~

~~natural disasters, terrorist attacks, military or political conflicts, and public health emergencies; and~~

~~various other factors, including those more fully described in our~~SEC filings, ~~with the SEC,~~ including our Annual Report on Form 10-K for the year ended September 30, ~~2015,~~2016, and our subsequent reports on Forms 10-Q and 8-K.

~~You should not place undue reliance on such statements.~~ Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future ~~developments~~events or otherwise.

Overview

Visa is a global payments technology company that connects consumers, ~~businesses,~~merchants, financial institutions, businesses, strategic partners and ~~governments around the world~~government entities in more than 200 countries and territories to fast, secure and reliable electronic payments. We provide our financial institution clients with a global payments infrastructure and support services for the delivery of Visa-branded payment products, including credit, debit, and prepaid. We facilitateenable global commerce through the transfer of value and information among ~~financial institutions, merchants, consumers, businesses~~these participants. Our advanced transaction processing network facilitates authorization, clearing and ~~government entities. Each of these constituencies has played a key role in the ongoing worldwide migration from paper-based to electronic forms~~settlement of payment transactions and ~~we believe that this transformation continues~~enables us to ~~yield significant growth opportunities, particularly outside the U.S. We continue to explore additional opportunities to enhance~~provide our ~~competitive position by expanding the scope~~financial institution and merchant clients a wide range of ~~payment solutions we provide.~~products, platforms and value-added services.

Overall economic conditions. Our business is affected by overall economic conditions and consumer spending. Our business performance during the ~~first half of fiscal 2016~~six months ended March 31, 2017 reflects ~~the impacts of~~ continued uneven ~~and tepid~~ economic ~~growth.~~growth around the world.

~~Visa Europe acquisition.~~ Legal entity reorganization.~~On November 2, 2015,~~ In February 2017, we ~~entered into~~completed a ~~Transaction Agreement with Visa Europe, pursuant to which we agreed to acquire 100%~~reorganization of the share capital of Visa Europe for a total purchase price of up to €21.2 billion. As originally agreed, the purchase price consisted of: (a) at the closing of the transaction, up-front cash consideration of €11.5 billion and preferred stock convertible upon certain conditions into class A common stock or class A equivalent preferred stock, valued at approximately €5.0 billion, and (b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up to €4.0 billion (plus up to an additional €0.7 billion in interest), determined based on the achievement of specified net revenue levels during such post-closing period. In connection with the execution of the Transaction Agreement, the Company and Visa Europe entered into the Put Option Amendment to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa's purchase of all of Visa Europe's share capital. The preferred stock conversion rates may be reduced from time to time to offset certain liabilities, if any, which may be incurred by us, Visa Europe or its affiliates as a result of certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory. As part of the acquisition, we also entered into the U.K. loss sharing agreement with Visa Europe and certain ~~of Visa Europe’s members located~~other legal entities to align our corporate structure to the geographic jurisdictions in ~~the United Kingdom to compensate us for certain losses~~ which ~~may be incurred by us or Visa Europe as~~we conduct business operations. As a result of ~~certain existing and potential litigation relating to~~ the ~~setting and implementation of domestic multilateral interchange fee rates in the United Kingdom.~~

On April 21, 2016, the Company and Visa Europe reached preliminary agreement to amend the Transaction Agreement to eliminate the Earn-out portion of the transaction consideration. Instead of an earn-out, the cash consideration payable in the transaction would be increased by €1.75 billion: €750 million payable upon closing, and €1.0 billion, plus 4% compound annual interest, payable on the third anniversary of closing. The terms of the transaction otherwise remain unchanged. The transaction remains subject to the negotiation of definitive documentation of this amendment and to regulatory approval. While the parties continue to work toward closing as soon as possible, closing could extend beyond the end of the Company’s fiscal third quarter. See ~~Note 2—Visa Europe, Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities~~ ~~and~~ ~~Note 13—Legal Mattersto our unaudited consolidated financial statements.~~

~~Debt issuance.~~ In December 2015, we issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Interest on these notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14, commencing June 14, 2016. The net aggregate proceeds of $15.9 billion, after deducting discounts and debt issuance costs, will be used to fund a portion of the purchase price for the anticipated acquisition of Visa Europe, and the remainder will be used for general corporate purposes including share repurchases. See ~~Note 4—Fair Value Measurements and Investmentsand~~ ~~Note 5—Debt~~ ~~to our unaudited consolidated financial statements.~~

~~Financial highlights.~~ ~~During~~reorganization, during the three months ended March 31, ~~2016,~~2017, we recorded ~~net~~a non-recurring, non-cash income tax provision of ~~$1.7~~$1.5 billion ~~or diluted class A earnings per share~~primarily related to the elimination of ~~$0.71, an increase~~deferred tax balances originally recognized upon the acquisition of ~~10% and 13%, respectively, over~~Visa Europe. Associated with this reorganization, the ~~prior year comparable period. During the six months ended March 31, 2016, we~~newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe, which were previously recorded ~~net income of $3.6 billion or diluted class A earnings per share of $1.51, an increase of 17% and 20%, respectively, over the prior year comparable period.~~ as treasury stock.

Financial highlights. Our ~~non-GAAP adjusted net income and diluted earnings per share~~financial results for the three and six months ended March 31, 2017 and 2016 reflect the impact of certain significant items that we believe are not indicative of our operating performance in these or future periods, as they were either non-recurring or had no cash impact. Our as-reported U.S. GAAP and ~~2015~~adjusted non-GAAP net income and diluted earnings per share for these periods are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2016		2015		% Change⁽¹⁾		2016		2015		% Change⁽¹⁾
	(in millions, except percentages and per share data)
(in millions, except percentages and per share data)													2017		2016		% Change⁽¹⁾		2017		2016		% Change⁽¹⁾
Net income, as reported													$	430	$	1,707	(75	)%	$	2,500	$	3,648	(31	)%
Diluted earnings per share, as reported													$	0.18	$	0.71	(75	)%	$	1.04	$	1.51	(31	)%
Net income, as adjusted⁽²⁾	$	1,626	$	1,550	5	%	$	3,312	$	3,119	6	%	$	2,066	$	1,626	27	%	$	4,136	$	3,312	25	%
Diluted earnings per share, as adjusted⁽²⁾	$	0.68	$	0.63	7	%	$	1.37	$	1.26	9	%	$	0.86	$	0.68	27	%	$	1.71	$	1.37	25	%


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


⁽²⁾	~~There were no comparable adjustments recorded during the three or six months ended March 31, 2015.~~ For a full reconciliation of our adjusted financial results, see tables in Adjusted financial results below.

We recorded net operating revenues of $4.5 billion and $8.9 billion for the three and six months ended March 31, 2017, respectively, an increase of 23% and 24%, respectively, over the prior year comparable periods, reflecting the operating revenues of Visa Europe and continued growth in nominal payments volume, nominal cross-border volume and processed transactions. The effect of exchange rate movements in the three and six months ended March 31, 2017, as partially mitigated by our hedging program, resulted in approximately negative two-and-a-half and three percentage point impacts to our net operating revenue growth, respectively.

Total operating expenses for the three and six months ended March 31, 2017 were $1.7 billion and $3.0 billion, respectively, an increase of 40% and 28%, respectively, over prior year comparable periods. Adjusted operating expenses, which excludes the non-recurring, non-cash operating expense related to Visa Inc. shares received by the newly-formed Visa Foundation, were $1.5 billion and $2.8 billion, respectively, an increase of 24% and 20%, respectively, over prior year comparable periods. The increase in both periods was mainly from the inclusion of Visa Europe's operating expenses following the acquisition.

Adjusted financial results. Our financial results ~~during~~for the ~~first half of fiscal~~three and six months ended March 31, 2017 and 2016 reflect the impact of certain significant ~~non-operating~~ items that we do not believe are indicative of our ongoing operating performance in these or future periods as they are either non-recurring or have no cash impact. As such, we believe the presentation of adjusted financial results excluding the following ~~two~~ items provides a clearer understanding of our operating performance for the periods presented.

Elimination of deferred tax balances. During the second quarter of fiscal 2017, in connection with our legal entity reorganization, we eliminated deferred tax balances originally recognized upon the acquisition of Visa Europe, resulting in the recognition of a non-recurring, non-cash income tax provision of $1.5 billion.

Charitable contribution. During the second quarter of fiscal 2017, associated with our legal entity reorganization, we recognized a non-recurring, non-cash general and administrative expense of $192 million, before tax, related to the charitable donation of Visa Inc. shares that were acquired as part of the Visa Europe acquisition and held as treasury stock. Net of the related cash tax benefit of $71 million, determined by applying applicable tax rates, adjusted net income increased by $121 million.

Revaluation of Visa Europe put option. During the first quarter of fiscal 2016, we recorded a decrease of $255 million in the fair value of the Visa Europe put option, resulting in the recognition of non-cash income in other non-operating income. This amount is not subject to income tax and therefore has no impact on our reported income tax provision.

Net unrealized gains on currency forward contracts.During the second quarter of fiscal 2016, we entered into currency forward contracts to mitigate a portion of our foreign currency exchange rate risk associated with the upfront cash consideration ~~to be~~ paid in the ~~anticipated~~ Visa Europe acquisition. As a result, we recorded non-recurring, net unrealized gains of $116 million, before tax, in non-operating income. Net of related tax expense of $35 million, determined by applying applicable federal and state tax rates, the impact to net income was $81 million. ~~See~~ ~~Note 8—Derivative Financial Instruments~~ ~~to our unaudited consolidated financial statements.~~

~~Revaluation of Visa Europe put option.~~ ~~During the first quarter of fiscal 2016, we recorded a decrease of $255 million in the fair value of the Put, resulting in the recognition of non-cash, non-operating income in our~~Adjusted financial ~~results. This amount is not subject to income tax and therefore has no impact on our reported income tax provision. See~~ ~~Note 2—Visa Europe~~ ~~and~~ ~~Note 4—Fair Value Measurements and Investments~~ ~~to our unaudited consolidated financial statements.~~

~~Adjusted net income, effective income tax rate and diluted earnings per share~~results are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with U.S. GAAP. The following ~~table reconciles~~tables reconcile our as-reported ~~net income, effective income tax rate and diluted earnings per share, which are~~financial measures calculated in accordance with U.S. GAAP, to our respective non-GAAP adjusted financial measures for the three and six months ended March 31, ~~2016:~~2017 and 2016.


	Three Months Ended March 31, 2016								Six Months Ended March 31, 2016								Three Months Ended March 31, 2017
(in millions, except percentages and per share data)	Net Income			Effective Income Tax Rate ₍₁₎		Diluted Earnings Per Share ₍₁₎			Net Income			Effective Income Tax Rate ₍₁₎		Diluted Earnings Per Share ₍₁₎			Operating Expenses			Operating Margin _(1),(2)		Non-operating Income (Expense)			Income Tax Provision			Net Income		Diluted Earnings Per Share⁽¹⁾
As reported	$	1,707		30	%	$	0.71		$	3,648		28	%	$	1.51		$	1,669		63	%	$	(106	)	$	2,272		$	430	$	0.18
Net unrealized gains on currency forward contracts	(81		)	—	%	(0.03		)	(81		)	—	%	(0.03		)
Revaluation of Visa Europe put option	—			—	%	—			(255		)	2	%	(0.11		)
Elimination of deferred tax balances																	—			—	%	—			(1,515		)	1,515		0.63
Charitable contribution																	(192		)	4	%	—			71			121		0.05
As adjusted	$	1,626		30	%	$	0.68		$	3,312		30	%	$	1.37		$	1,477		67	%	$	(106	)	$	828		$	2,066	$	0.86
Diluted weighted-average shares outstanding, as reported						2,401								2,416



	Six Months Ended March 31, 2017
(in millions, except percentages and per share data)	Operating Expenses			Operating Margin _(1),(2)		Non-operating Income (Expense)			Income Tax Provision			Net Income		Diluted Earnings Per Share⁽¹⁾
As reported	$	3,030		66	%	$	(227	)	$	3,181		$	2,500	$	1.04
Elimination of deferred tax balances	—			—	%	—			(1,515		)	1,515		0.63
Charitable contribution	(192		)	2	%	—			71			121		0.05
As adjusted	$	2,838		68	%	$	(227	)	$	1,737		$	4,136	$	1.71



	Three Months Ended March 31, 2016
(in millions, except percentages and per share data)	Operating Expenses		Operating Margin _(1),(2)		Non-operating Income (Expense)			Income Tax Provision			Net Income			Diluted Earnings Per Share⁽¹⁾
As reported	$	1,192	67	%	$	7		$	734		$	1,707		$	0.71
Net unrealized gains on currency forward contracts	—		—	%	(116		)	(35		)	(81		)	(0.03		)
As adjusted	$	1,192	67	%	$	(109	)	$	699		$	1,626		$	0.68



	Six Months Ended March 31, 2016
(in millions, except percentages and per share data)	Operating Expenses		Operating Margin _(1),(2)		Non-operating Income (Expense)			Income Tax Provision			Net Income			Diluted Earnings Per Share⁽¹⁾
As reported	$	2,361	67	%	$	250		$	1,432		$	3,648		$	1.51
Net unrealized gains on currency forward contracts	—		—	%	(116		)	(35		)	(81		)	(0.03		)
Revaluation of Visa Europe put option	—		—	%	(255		)	—			(255		)	(0.11		)
As adjusted	$	2,361	67	%	$	(121	)	$	1,397		$	3,312		$	1.37


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. ~~Effective income tax rate and~~Operating margin, diluted earnings per share ~~figures~~and their respective totals are calculated based on unrounded numbers.

We recorded total operating revenues of $3.6 billion and $7.2 billion, an increase of 6% over the prior year comparable periods, for the three and six months ended March 31, 2016, respectively. Increases in total operating revenues were driven by continued growth in processed transactions and nominal payments volume. The effect of exchange rate movements in the three and six months ended March 31, 2016, as partially mitigated by our hedging program, resulted in a negative three percentage point impact to our total operating revenue growth.

Total operating expenses for the three and six months ended March 31, 2016 were $1.2 billion and $2.4 billion, a 6% and 4% increase over prior year comparable periods, primarily due to increases in personnel, general and administrative, and network and processing expenses.


⁽²⁾	Operating margin is calculated as operating income divided by net operating revenues.

~~Reduction in as-converted class A common stock.~~Common stock repurchases. During the three months ended March 31, ~~2016,~~2017, we repurchased 2418 million shares of our class A common stock in the open market using ~~$1.8~~$1.6 billion of cash on hand. As of March 31, ~~2016,~~2017, we had remaining authorized funds of ~~$4.0~~$2.3 billion for share repurchase. ~~All~~In April 2017, our board of directors authorized an additional $5.0 billion share repurchase ~~programs authorized prior to October 2015 have been completed.~~program. See Note 9—Stockholders' Equity to our unaudited consolidated financial statements.

Nominal payments volume and transaction counts. 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. Nominal payments volume over the prior year posted double-digit growth in the U.S., driven mainly by consumer ~~debit and~~ credit. Nominal international payments volume growth was ~~negatively~~positively impacted ~~by movements in U.S. dollar exchange rates. On~~due to the inclusion of nominal payments volume related to Visa Europe for the three and six months ended December 31, 2016⁽¹⁾. Growth on a constant-dollar basis, which excludes the impact of exchange rate movements, ~~our international payments volume~~was not significantly different from growth ~~rate~~on a nominal-dollar basis for the three and six months ended December 31, ~~2015~~2016⁽¹⁾ ~~was 14%~~. Growth in processed transactions ~~reflect~~reflects the ~~ongoing worldwide shift to electronic payments.~~inclusion of Visa Europe's processed transactions for the three and six months ended March 31, 2017.

The following ~~tables present~~table presents nominal payments volume.⁽²⁾

United States International Visa Inc.

3 Months Ended December 31,⁽¹⁾

3 Months Ended December 31,⁽¹⁾

3 Months Ended December 31,⁽¹⁾
2015 2014
%
Change
2015 2014
%
Change
2015 2014
%
Change
(in billions, except percentages)
Nominal payments volume
Consumer credit $ 276
$ 253
9 % $ 438
$ 433
1 % $ 713
$ 686
4 %
Consumer debit⁽³⁾
327
296
10 % 116
121
(4 )% 443
417
6 %
Commercial⁽⁴⁾
111
102
9 % 37
39
(5 )% 149
142
5 %
Total nominal payments volume $ 714
$ 651
10 % $ 591
$ 593
— % $ 1,305
$ 1,244
5 %
Cash volume 128
121
6 % 456
533
(14 )% 584
654
(11 )%
Total nominal volume⁽⁵⁾
$ 842
$ 772
9 % $ 1,048
$ 1,126
(7 )% $ 1,890
$ 1,898
— %


	United States						International						Visa Inc.						United States						International						Visa Inc.
	6 Months Ended December 31,⁽¹⁾						6 Months Ended December 31,⁽¹⁾						6 Months Ended December 31,⁽¹⁾						Three Months Ended December 31,⁽¹⁾						Three Months Ended December 31,⁽¹⁾						Three Months Ended December 31,⁽¹⁾
	2015		2014		% Change		2015		2014		% Change		2015		2014		% Change		2016		2015		% Change		2016		2015		% Change		2016		2015		% Change
	(in billions, except percentages)																		(in billions, except percentages)
Nominal payments volume
Consumer credit	$	539	$	491	10	%	$	862	$	856	1	%	$	1,400	$	1,348	4	%	$	336	$	275	22	%	$	545	$	438	24	%	$	881	$	713	23	%
Consumer debit⁽³⁾	646		587		10	%	227		243		(7	)%	873		830		5	%	343		327		5	%	379		116		226	%	722		444		63	%
Commercial⁽⁴⁾	222		205		9	%	74		79		(6	)%	296		283		5	%	125		111		12	%	75		37		100	%	200		149		34	%
Total nominal payments volume	$	1,407	$	1,283	10	%	$	1,163	$	1,178	(1	)%	$	2,570	$	2,461	4	%	$	804	$	714	13	%	$	999	$	591	69	%	$	1,802	$	1,306	38	%
Cash volume	257		245		5	%	912		1,075		(15	)%	1,169		1,320		(11	)%	134		128		4	%	588		456		29	%	722		584		24	%
Total nominal volume⁽⁵⁾	$	1,664	$	1,528	9	%	$	2,075	$	2,254	(8	)%	$	3,739	$	3,781	(1	)%	$	937	$	842	11	%	$	1,587	$	1,048	51	%	$	2,524	$	1,890	34	%



	United States						International						Visa Inc.
	Six Months Ended December 31,⁽¹⁾						Six Months Ended December 31,⁽¹⁾						Six Months Ended December 31,⁽¹⁾
	2016		2015		% Change		2016		2015		% Change		2016		2015		% Change
	(in billions, except percentages)
Nominal payments volume
Consumer credit	$	651	$	539	21	%	$	1,146	$	862	33	%	$	1,797	$	1,401	28	%
Consumer debit⁽³⁾	670		646		4	%	790		227		248	%	1,460		873		67	%
Commercial⁽⁴⁾	250		222		12	%	154		74		108	%	404		296		36	%
Total nominal payments volume	$	1,572	$	1,407	12	%	$	2,090	$	1,163	80	%	$	3,661	$	2,570	42	%
Cash volume	269		257		5	%	1,214		912		33	%	1,483		1,169		27	%
Total nominal volume⁽⁵⁾	$	1,840	$	1,664	11	%	$	3,303	$	2,075	59	%	$	5,144	$	3,739	38	%

The following table presents nominal and constant payments volume growth.⁽²⁾


	International				Visa Inc.				International				Visa Inc.				International				Visa Inc.				International				Visa Inc.
	3 Months Ended December 31, 2015 vs. 2014⁽¹⁾				3 Months Ended December 31, 2015 vs. 2014⁽¹⁾				6 Months Ended December 31, 2015 vs. 2014⁽¹⁾				6 Months Ended December 31, 2015 vs. 2014⁽¹⁾				Three Months Ended December 31, 2016 vs. 2015⁽¹⁾				Three Months Ended December 31, 2016 vs. 2015⁽¹⁾				Six Months Ended December 31, 2016 vs. 2015⁽¹⁾				Six Months Ended December 31, 2016 vs. 2015⁽¹⁾
	Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾
Payments volume growth
Consumer credit	1	%	14	%	4	%	12	%	1	%	15	%	4	%	13	%	24	%	26	%	23	%	24	%	33	%	34	%	28	%	29	%
Consumer debit⁽³⁾	(4	)%	15	%	6	%	12	%	(7	)%	13	%	5	%	11	%	226	%	230	%	63	%	63	%	248	%	255	%	67	%	68	%
Commercial⁽⁴⁾	(5	)%	12	%	5	%	9	%	(6	)%	12	%	5	%	10	%	100	%	97	%	34	%	34	%	108	%	104	%	36	%	36	%
Total payments volume growth	—	%	14	%	5	%	12	%	(1	)%	14	%	4	%	12	%	69	%	71	%	38	%	39	%	80	%	81	%	42	%	43	%
Cash volume growth	(14	)%	3	%	(11	)%	4	%	(15	)%	4	%	(11	)%	4	%	29	%	31	%	24	%	25	%	33	%	37	%	27	%	29	%
Total volume growth	(7	)%	9	%	—	%	9	%	(8	)%	10	%	(1	)%	9	%	51	%	53	%	34	%	34	%	59	%	62	%	38	%	39	%


⁽¹⁾	Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore, service revenues reported for the three and six months ended March 31, ~~2016~~2017 and ~~2015,~~2016 were based on nominal payments volume reported by our financial institution clients for the three and six months ended December 31, 2016 and 2015, ~~and 2014,~~ respectively.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


⁽³⁾	Includes consumer prepaid volume and Interlink volume.


⁽⁴⁾	Includes large, middle and small business credit and debit, as well as commercial prepaid volume.

⁽⁵⁾

Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the total monetary value of transactions for goods and services that are purchased on cards carrying the Visa, Visa Electron, Interlink and ~~Interlink~~V PAY brands. Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to review by Visa. On occasion, previously presented volume information may be updated. Prior period updates are not material.


⁽⁶⁾	Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.

The following table provides the number of transactions processed by our VisaNet system, including transactions involving Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa's networks.⁽¹⁾


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended March 31,				Six Months Ended March 31,
	2016	2015	% Change		2016	2015	% Change		2017	2016	% Change⁽²⁾		2017	2016	% Change⁽²⁾
	(in millions, except percentages)
Visa processed transactions	18,475	16,980	9	%	37,461	34,579	8	%	26,256	18,475	42	%	53,585	37,461	43	%


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


⁽²⁾	Visa processed transactions for the three and six months ended March 31, 2017 include transactions processed by Visa Europe.

Results of Operations

Operating Revenues

The following table sets forth our operating revenues earned in the U.S., internationally and ~~from Visa Europe. Revenues earned from~~in accordance with the Framework Agreement prior to the Visa Europe ~~are a result of our contractual arrangement with~~acquisition on June 21, 2016. Visa Europe ~~as governed by~~revenue earned for the ~~framework agreement that provides for trademark~~three and ~~technology licenses and bilateral services.~~

six months ended March 31, 2017 is included in International.

Three Months Ended March 31, 2016 vs. 2015 Six Months Ended
March 31, 2016 vs. 2015
2016 2015
$
Change

%
Change⁽¹⁾
2016 2015 $
Change
%
Change⁽¹⁾
(in millions, except percentages)
United States $ 1,924
$ 1,782
$ 142
8 % $ 3,865
$ 3,566
$ 299
8 %
International 1,640
1,572
68
4 % 3,199
3,115
84
3 %
Visa Europe 62
55
7
12 % 127
110
17
16 %
Total operating revenues $ 3,626
$ 3,409
$ 217
6 % $ 7,191
$ 6,791
$ 400
6 %



	Three Months Ended March 31,				2017 vs. 2016					Six Months Ended March 31,				2017 vs. 2016
	2017		2016		$ Change			% Change⁽¹⁾		2017		2016		$ Change			% Change⁽¹⁾
	(in millions, except percentages)
U.S.	$	2,156	$	1,924	$	232		12	%	$	4,277	$	3,865	$	412		11	%
International	2,321		1,640		681			42	%	4,661		3,199		1,462			46	%
Revenues earned under the Framework Agreement⁽²⁾	—		62		(62		)	(100	)%	—		127		(127		)	(100	)%
Net operating revenues	$	4,477	$	3,626	$	851		23	%	$	8,938	$	7,191	$	1,747		24	%


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


⁽²⁾	Reflects revenues earned from Visa Europe prior to the acquisition, in accordance with the Framework Agreement that provided for trademark and technology licenses and bilateral services. The Framework Agreement was effectively settled upon the closing of the acquisition. See Note 2—Visa Europe to our unaudited consolidated financial statements.

The increase in operating revenues ~~primarily~~ reflects the operating revenues of Visa Europe and continued growth in processed transactions and nominal payments volume. These benefits were partially offset by increases in client incentives.

Our operating revenues, primarily service revenues, international transaction revenues and client incentives, 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. The effect of exchange rate movements in the three and six months ended March 31, ~~2016,~~2017, as partially mitigated by our hedging program, resulted in aapproximately negative two-and-a-half and three percentage point ~~impact~~impacts to our ~~total~~net operating revenue ~~growth.~~growth, respectively.

The following table sets forth the components of our ~~total~~net operating ~~revenues.~~revenues, including operating revenues earned by Visa Europe for the three and six months ended March 31, 2017. Other revenues for the three and six months ended March 31, 2016 also includes revenue earned from Visa Europe in accordance with the Framework Agreement prior to its acquisition on June 21, 2016.


	Three Months Ended March 31,						2016 vs. 2015					Six Months Ended March 31,						2016 vs. 2015					Three Months Ended March 31,						2017 vs. 2016					Six Months Ended March 31,						2017 vs. 2016
	2016			2015			$ Change			% Change⁽¹⁾		2016			2015			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾
	(in millions, except percentages)																						(in millions, except percentages)
Service revenues	$	1,699		$	1,577		$	122		8	%	$	3,344		$	3,115		$	229		7	%	$	1,993		$	1,699		$	294		17	%	$	3,911		$	3,344		$	567		17	%
Data processing revenues	1,473			1,340			133			10	%	2,952			2,723			229			8	%	1,843			1,473			370			25	%	3,735			2,952			783			27	%
International transaction revenues	1,045			964			81			8	%	2,076			1,934			142			7	%	1,469			1,045			424			41	%	2,958			2,076			882			42	%
Other revenues	198			204			(6		)	(3	)%	396			408			(12		)	(3	)%	203			198			5			3	%	406			396			10			2	%
Client incentives	(789		)	(676		)	(113		)	17	%	(1,577		)	(1,389		)	(188		)	14	%	(1,031		)	(789		)	(242		)	30	%	(2,072		)	(1,577		)	(495		)	31	%
Total operating revenues	$	3,626		$	3,409		$	217		6	%	$	7,191		$	6,791		$	400		6	%
Net operating revenues																							$	4,477		$	3,626		$	851		23	%	$	8,938		$	7,191		$	1,747		24	%


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

Service revenues, which include revenues earned by Visa Europe in the three and six months ended March 31, 2017, increased primarily due to 5%38% and 4%42% growth in nominal payments volume during the three and six month comparable periods, respectively. ~~Service~~The growth in service revenues ~~also benefited from select pricing modifications which became effective~~was slower than the growth in payments volume during the ~~third quarter~~three and six months ended March 31, 2017, reflecting the inclusion of ~~fiscal 2015.~~Visa Europe revenue and the resulting impact on our service revenue yield.

Data processing revenues increased mainly due to overall growth in processed transactions of 9%42% and 8%43% during the three and six month comparable periods, ~~respectively.~~respectively, which includes data processing revenues earned by Visa Europe in the three and six months ended March 31, 2017, and the resulting impact on our data processing revenue yield.

International transaction revenues increased primarily due to ~~select pricing modifications that became effective in~~nominal cross-border volume growth of 129% and 132% during the ~~third quarter~~three and six month comparable periods, respectively, which includes revenues earned by Visa Europe during the three and six months ended March 31, 2017. International transaction revenue growth also reflects the resulting impact of ~~fiscal 2015.~~Visa Europe revenues on our corresponding yield.

Client incentives increased during the three and six month comparable periods mainly due to ~~overall growth in payments volume, and~~ incentives recognized on long-term customer contracts that were initiated or renewed after the second quarter of fiscal ~~2015.~~2016, Visa Europe's incentives for the three and six months ended March 31, 2017, and overall growth in payments volume. 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

The following table sets forth components of our total operating expenses.


	Three Months Ended March 31,				2016 vs. 2015					Six Months Ended March 31,				2016 vs. 2015					Three Months Ended March 31,				2017 vs. 2016				Six Months Ended March 31,				2017 vs. 2016
	2016		2015		$ Change			% Change⁽¹⁾		2016		2015		$ Change			% Change⁽¹⁾		2017		2016		$ Change		% Change⁽¹⁾		2017		2016		$ Change		% Change⁽¹⁾
	(in millions, except percentages)																		(in millions, except percentages)
Personnel	$	528	$	483	$	45		9	%	$	1,027	$	992	$	35		4	%	$	704	$	528	$	176	33	%	$	1,275	$	1,027	$	248	24	%
Marketing	186		190		(4		)	(2	)%	380		395		(15		)	(4	)%	193		186		7		4	%	411		380		31		8	%
Network and processing	126		109		17			16	%	254		223		31			14	%	150		126		24		19	%	295		254		41		16	%
Professional fees	66		77		(11		)	(15	)%	138		147		(9		)	(7	)%	83		66		17		26	%	163		138		25		18	%
Depreciation and amortization	121		125		(4		)	(3	)%	241		245		(4		)	(2	)%	131		121		10		8	%	277		241		36		15	%
General and administrative	164		141		23			16	%	320		267		53			20	%	406		164		242		NM		592		320		272		85	%
Litigation provision	1		3		(2		)	(82	)%	1		3		(2		)	NM		2		1		1		NM		17		1		16		NM
Total operating expenses	$	1,192	$	1,128	$	64		6	%	$	2,361	$	2,272	$	89		4	%	$	1,669	$	1,192	$	477	40	%	$	3,030	$	2,361	$	669	28	%

NM — not meaningful


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

~~Personnel~~Our overall operating expenses increased ~~during~~primarily due to the inclusion of Visa Europe expenses for the first half of fiscal 2017. Additional factors impacting our operating expenses for the three and six months ended March 31, ~~2016 primarily due to an~~2017 are discussed below.

Personnel expenses increased driven by higher incentive compensation, combined with continued increase in headcount reflecting our strategy to invest for future growth, combined with higher incentive compensation. These increases were partially offset by a decrease in contractor costs and an increase in personnel costs that were invested in and capitalized as part of technology development projects.growth.

~~Network~~Marketing expenses increased to support our growth strategies and ~~processing~~ expenses increased during the three and six months ended March 31, 2016 primarily due to fees associated with the processing of Russian domestic transactions that were transitioned to the Russian National Payment Card system during the third quarter of fiscal 2015.

~~Professional fees~~ decreased during the three months ended March 31, 2016 primarily due to the absence of certain project costs incurred in fiscal 2015 as part of our effort to align resources with our strategic priorities.new product initiatives.

General and administrativeexpenses ~~expenses~~ increased ~~during the three and six months ended March 31, 2016 mainly~~primarily due to ~~net foreign exchange losses incurred~~$192 million of expense related to the Visa Inc. shares held by Visa Europe that were received by the newly-formed Visa Foundation, and increased expenses to provide product benefits to our account holders as a result of ~~changes in the U.S. dollar exchange rate against other currencies in which we transact, combined with an increase in expenses to provide product enhancements~~business growth. See Note 12—Income Taxes to our ~~cardholders in support of our business growth.~~unaudited consolidated financial statements.

Non-operating (Expense) Income

The following table sets forth components of our non-operating (expense) income.


	Three Months Ended March 31,						2016 vs. 2015				Six Months Ended March 31,						2016 vs. 2015				Three Months Ended March 31,						2017 vs. 2016					Six Months Ended March 31,						2017 vs. 2016
	2016			2015			$ Change			% Change	2016			2015			$ Change			% Change	2017			2016			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾
	(in millions, except percentages)																				(in millions, except percentages)
Interest expense	$	(132	)	$	(7	)	$	(125	)	NM	$	(161	)	$	(10	)	$	(151	)	NM	$	(135	)	$	(132	)	$	(3	)	2	%	$	(275	)	$	(161	)	$	(114	)	71	%
Other	139			8			131			NM	411			35			376			NM	29			139			(110		)	(79	)%	48			411			(363		)	(88	)%
Total non-operating income	$	7		$	1		$	6		NM	$	250		$	25		$	225		NM
Non-operating (expense) income																					$	(106	)	$	7		$	(113	)	NM		$	(227	)	$	250		$	(477	)	NM

NM — not meaningful


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

Interest expense ~~increased during the three and~~ ~~six~~ ~~month comparable periods~~increased in the six months ended March 31, 2017 primarily due to the issuance of $16.0 billion fixed-rate senior notes in December 2015. See Note 5—6—Debt to our unaudited consolidated financial statements.

Other non-operating income ~~increased during~~decreased in the three and six months ended March 31, ~~2016 primarily~~2017 due to the absence of $116 million of net unrealized gains recognized on currency forward contracts entered into during

the second quarter of fiscal 2016 to mitigate a portion of our foreign currency exchange rate risk associated with the upfront cash consideration ~~to be~~ paid in the ~~anticipated~~ Visa Europe acquisition. Subsequently, prior to the end of the quarter, the Company entered into additional currency forward contracts to fully offset the original positions, eliminating its risk-mitigation position. As these contracts are not designated in hedging relationships, related gains and losses are recorded directly in earnings as part of non-operating income. See ~~Note 8—Derivative Financial Instruments~~ ~~to our unaudited consolidated financial statements~~. Other non-operating income for the six ~~month comparable period~~months ended

March 31, 2017 was also ~~higher~~lower due to a non-cash ~~adjustment to~~reduction of the fair value of the ~~Put~~Visa Europe put option of $255 million ~~during~~recorded in the first quarter of fiscal 2016, which is not subject to tax. The change in value primarily reflects our expectation at March 31, 2016 and December 31, 2015 that we will complete the transaction through exercise of the Amended Put Option and the Put will not revert to its original, unamended form or be unilaterally exercised by Visa Europe in the future. See ~~Note 2—Visa EuropeandNote 4—Fair Value Measurements and Investments~~ ~~to our unaudited consolidated financial statements.~~2016.

Effective Income Tax Rate

In February 2017, to align our corporate structure to the geographic jurisdictions in which we conduct business operations, we completed a reorganization of Visa Europe and certain other legal entities. As a result of the reorganization, during the three months ended March 31, 2017, we recorded a non-recurring, non-cash income tax provision of $1.5 billion primarily related to the elimination of deferred tax balances originally recognized upon the acquisition of Visa Europe. Associated with this reorganization, the newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe, which were previously recorded as treasury stock.

the aforementioned $1.5 billion non-recurring, non-cash income tax provision related to the legal entity reorganization recorded in the quarter ended March 31, 2017;

$71 million tax benefit related to Visa Foundation's receipt of Visa Inc. shares mentioned above;

the restrictions on U.S. foreign tax credits that can be claimed for Visa Europe's foreign taxes prior to the aforesaid legal entity reorganization; and

the absence of the non-taxable $255 million revaluation of the Visa Europe put option recorded in the quarter ended December 31, ~~2015;~~2015.

~~foreign~~During the three and six months ended March 31, 2017, our gross unrecognized tax ~~credit~~ benefits ~~related to prior fiscal years recognized during~~increased by $23 million and $56 million, respectively. Our unrecognized tax benefits that would favorably impact the ~~quarter ended December 31, 2015; and~~

~~the absence of the reversal of previously established state tax reserves in the quarter ended December 31, 2014.~~

Excluding the non-recurring, non-operating $116 million net unrealized gains recorded in the second quarter of fiscal 2016 on currency forward contracts associated with the anticipated Visa Europe acquisition, and the non-cash, non-taxable $255 million gain recognized in the first quarter of fiscal 2016 upon the revaluation of the Visa Europe put option, the adjusted non-GAAP effective ~~income~~ tax rate, ~~was 30%~~if recognized, increased by $69 million and $97 million for the three and six months ended March 31, ~~2016. We~~2017, respectively. The increase in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions.

Adjusted effective income tax rate. Our financial results for the three and six months ended March 31, 2017 and 2016 reflect the impact of certain significant items that we believe ~~the~~are not indicative of our operating performance in these or future periods, as they were either non-recurring or had no cash impact. As such, we have presented our adjusted effective income tax rate for these periods in the tables below, which we believe provides a clearer understanding of our operating performance for the ~~current~~reported periods. See ~~Overview — Financial highlights~~Overview—Adjusted financial results within this Management's Discussion and Analysis of Financial Condition and Results of Operationsfor ~~a reconciliation to our reported GAAP effective tax rates.~~

During the three and six months ended March 31, 2016, our gross unrecognized tax benefits increased by $31 million and $51 million, respectively, which would favorably impact our effective tax rate if recognized. The increase in gross unrecognized tax benefits is primarily related to various tax positions across several jurisdictions.

~~Our tax filings are subject to examination by the U.S. federal, state and foreign taxing authorities. The timing and outcome~~descriptions of the ~~final resolutions of~~adjustments in the ~~various ongoing income tax examinations are highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.~~tables below.



	Three Months Ended March 31, 2017							Six Months Ended March 31, 2017
(in millions, except percentages)	Income Before Income Taxes		Income Tax Provision			Effective Income Tax Rate⁽¹⁾		Income Before Income Taxes		Income Tax Provision			Effective Income Tax Rate⁽¹⁾
As reported	$	2,702	$	2,272		84.1	%	$	5,681	$	3,181		56.0	%
Elimination of deferred tax balances	—		(1,515		)			—		(1,515		)
Charitable contribution	192		71					192		71
As adjusted	$	2,894	$	828		28.6	%	$	5,873	$	1,737		29.6	%



	Three Months Ended March 31, 2016								Six Months Ended March 31, 2016
(in millions, except percentages)	Income Before Income Taxes			Income Tax Provision			Effective Income Tax Rate⁽¹⁾		Income Before Income Taxes			Income Tax Provision			Effective Income Tax Rate⁽¹⁾
As reported	$	2,441		$	734		30.1	%	$	5,080		$	1,432		28.2	%
Net unrealized gains on currency forward contracts	(116		)	(35		)			(116		)	(35		)
Revaluation of Visa Europe put option	—			—					(255		)	—
As adjusted	$	2,325		$	699		30.1	%	$	4,709		$	1,397		29.7	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Effective income tax rate is calculated based on unrounded numbers.

Liquidity and Capital Resources

Cash Flow Data

The following table summarizes our cash flow activity for the periods presented:


	Six Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2017			2016
	(in millions)						(in millions)
Total cash provided by (used in):
Operating activities	$	2,819		$	2,739		$	2,904		$	2,819
Investing activities	(1,846		)	(557		)	2,268			(1,846		)
Financing activities	11,452			(2,115		)	(4,243		)	11,452
Effect of exchange rate changes on cash and cash equivalents	—			1			(121		)	—
Increase in cash and cash equivalents	$	12,425		$	68		$	808		$	12,425

Operating activities. Cash provided by operating activities for the six months ended March 31, ~~2016~~2017 was higher than the prior year comparable period, reflecting continued growth in our underlying ~~business.~~business, including Visa Europe.

Investing activities. Cash ~~used in~~provided by investing activities ~~was higher~~increased compared to the prior year comparable period as we invested a portion of the proceeds received from our debt issuance in available-for-sale ~~securities.~~securities in the prior year. See Note 6—DebtandNote 4—Fair Value Measurements and Investments~~and~~ ~~Note 5—Debt~~ to our unaudited consolidated financial statements.

Financing activities. Financing activities for the six months ended March 31, ~~2016~~2017 reflect $3.5 billion used to repurchase class A common stock in the open market and $795 million of dividend payments. Activity in the prior year comparable period primarily reflected $15.9 billion net aggregate proceeds ~~of $15.9 billion~~ received from our debt issuance completed in December 2015, $3.8 billion of cash used to repurchase class A common stock in the open market and $676 million of dividend payments. See Note 5—6—Debt and Note 9—Stockholders' Equity to our unaudited consolidated financial statements.Activity in the prior year primarily reflected $1.9 billion of cash used to repurchase class A common stock in the open market, dividend payments of $591 million, and $321 million of payments from our litigation escrow account in connection with the interchange multidistrict litigation.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, cash flow from 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 available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings, and the returns that these holdings provide. We believe that cash flow generated from operations, in conjunction with access to our other sources of liquidity, will be more than sufficient to meet our ongoing operational needs.

Cash and cash equivalents and short-term and long-term available-for-sale investment securities held by our foreign subsidiaries, primarily attributable to undistributed earnings, totaled ~~$7.7~~$8.4 billion at March 31, ~~2016~~.2017. In the second quarter of fiscal 2017, following our legal entity reorganization, we returned net $1.3 billion of cash held by our foreign subsidiaries to the U.S. This transaction did not constitute a return of undistributed earnings and was not subject to U.S. income taxes. If it were necessary to repatriate these ~~funds~~undistributed earnings of our foreign subsidiaries for use in the U.S., we would be required to pay U.S. income taxes on most of this amount. The amount of income taxes that would have resulted had these ~~funds~~undistributed earnings been repatriated is not practicably determinable. It is our intent to indefinitely reinvest the majority of these ~~funds~~undistributed earnings outside of the U.S. As such, we have not accrued any U.S. income tax provision in our financial results related to the majority of these ~~funds.~~

~~Long-term debt and change in capital structure.~~ In conjunction with the anticipated Visa Europe acquisition, we have evolved our long-term capital structure. In December 2015, we issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Our first principal payment of $1.8 billion is due on December 14, 2017. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14 of each year, commencing June 14, 2016. The Notes may be redeemed as a whole or in part, at our option at any time prior to maturity, at a specified redemption price. In the event that the Visa Europe acquisition is not completed on or prior to February 2, 2017 (which date may be extended), we will be required to redeem all Notes except for the 2035 Notes and the 2045 Notes, at a specified redemption price. The net aggregate proceeds of $15.9 billion, after deducting underwriting discounts and debt issuance costs of $127 million will be used to fund a portion of the purchase price for the anticipated acquisition of Visa Europe, and the remainder will be used for general corporate purposes including share repurchases. We are not subject to any financial covenants and did not experience any changes to our investment credit ratings as a result of this debt issuance. See ~~Note 5—Debt~~ ~~to our unaudited consolidated financial statements.~~

earnings.

Credit ~~Facility.~~Facility Extension. On January 27, ~~2016,~~2017, we ~~entered into an unsecured~~extended the term of the $4.0 ~~billion revolving credit facility. The credit facility, which expires on January 27, 2021, replaced our previous $3.0~~ billion credit facility ~~which expired~~that was entered into on January 27, 2016. The ~~new~~ credit facility ~~contains covenants and events of default customary for facilities of this type.~~will now expire on January 27, 2022. No other material terms were changed. See Note 5—6—Debt to our unaudited consolidated financial statements.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, ~~2015~~,2016, except as discussed below. Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we believe that our 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.

Settlement. In the last week of March 2017, we experienced delays in the processing and settlement of $1.6 billion of volume in Europe. As a result of this delay, this volume was processed and settled in the first few days of April 2017 instead of in March 2017. The settlement receivable and payable amounts recorded on our consolidated balance sheets at March 31, 2017 are elevated because they include this unsettled activity. The balances in these accounts returned to historical levels in early April 2017 following the settlement of this activity.

~~Visa Europe acquisition.~~Senior Notes. ~~On November 2,~~In December 2015, we ~~entered into a transaction agreement~~issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Our first principal payment of $1.8 billion is due on December 14, 2017. However, we intend to ~~acquire Visa Europe for a total purchase price~~refinance this current portion of up to €21.2 billion. As originally agreed, the purchase price consisted of: (a) at the closing of the transaction, up-front cash consideration of €11.5 billion and preferred stock convertible upon certain conditions into class A common stock or class A equivalent preferred stock, valued at approximately €5.0 billion, and (b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up to €4.0 billion (plus up to an additional €0.7 billion in interest), determined based on the achievement of specified net revenue levels during such post-closing period.

We also entered into the Put Option Amendment with Visa Europe to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect our purchase of all Visa Europe's share capital. If the Transaction Agreement is terminated for any reasondebt prior to ~~the completion~~its maturity, market conditions permitting. An interest payment of ~~the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form.~~

On April 21, 2016, we reached preliminary agreement with Visa Europe to amend the Transaction Agreement to eliminate the Earn-out portion of the transaction consideration. Instead of an earn-out, the cash consideration payable in the transaction would be increased by €1.75 billion: €750$244 million ~~payable upon closing, and €1.0 billion, plus 4% compound annual interest, payable~~was made on the third anniversary of closing. The terms of the transaction otherwise remain unchanged. The transaction remains subject to the negotiation of definitive documentation of this amendment and to regulatory approval. While the parties continue to work toward closing as soon as possible, closing could extend beyond the end of our fiscal third quarter. We also agreed with Visa Europe that the Amended Put Option will be further amended as needed to reflect the changes in transaction consideration under the Preliminary Agreement. The terms of the Amended Put Option will otherwise remain unchanged.December 14, 2016. See Note ~~2—Visa Europe~~6—Debt to our unaudited consolidated financial statements.

~~Reduction in as-converted class A common stock.~~Common stock repurchases. ~~In October 2015, our board of directors authorized a new $5.0 billion share repurchase program, in addition to the existing October 2014 program.~~ During the six months ended March 31, ~~2016,~~2017, we repurchased 5041 million shares of our class A common stock using ~~$3.8~~$3.5 billion of cash on hand. As of March 31, 2017, the July 2016 weprogram had remaining authorized funds of ~~$4.0~~$2.3 billion for share repurchase. All share repurchase programs authorized prior to July 2016 have been completed. In April 2017, our board of directors authorized an additional $5.0 billion share repurchase program. See Note 9—Stockholders' Equity to our unaudited consolidated financial statements.

Dividends. During the six months ended March 31, ~~2016,~~2017, we declared and paid ~~$676~~$795 million in ~~dividends.~~dividends to holders of our common stock. In April ~~2016,~~2017, our board of directors declared a cash dividend in the amount of ~~$0.14~~$0.165 per share of class A common stock (determined in the case of class B and C common stock and U.K.&I and Europe preferred stock on an as-converted basis), which will be paid on June ~~7, 2016,~~6, 2017, to all holders of record of our common and preferred stock as of May ~~13, 2016.~~19, 2017. See Note 9—Stockholders' Equity to our unaudited consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors. ~~Class~~All three series of preferred stock and class B and ~~class~~ C common stock will share ratably on an as-converted basis in such future dividends.

Commercial Paper Program. We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. During the three months ended March 31, 2017, we repaid the $567 million of commercial paper that was issued in December 2016. As of March 31, 2017 and September 30, 2016, we had no outstanding obligations under the program. See Note 6—Debt to our unaudited consolidated financial statements.

Acquisitions. In February 2017, we acquired a business using $302 million of cash on hand, primarily reflecting total purchase price less cash received. The acquisition will help Visa’s clients and merchant partners accelerate digital commerce. See Note 5—Intangible Assets and Goodwill to our unaudited consolidated financial statements.

Fair Value Measurements—Financial Instruments

As of March 31, ~~2016~~,2017, our financial instruments measured at fair value on a recurring basis included ~~$22.9~~$9.2 billion of assets and ~~$114~~$83 million of liabilities. See Note 4—Fair Value Measurements and Investments to our unaudited consolidated financial statements.



ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

On November 2, 2015, we entered into the Transaction Agreement with Visa Europe. On April 21, 2016, we reached preliminary agreement with Visa Europe to amend the Transaction Agreement to eliminate the Earn-out portion of the transaction consideration. Under the terms of the Preliminary Agreement, cash consideration would total €13.25 billion: €12.25 billion payable upon closing, and €1.0 billion, plus 4% compound annual interest, payable on the third anniversary of closing. The terms of the transaction otherwise remain unchanged. See ~~Note 2—Visa Europe~~ to our unaudited consolidated financial statements. As the total purchase price includes cash consideration to be paid in euros, we are exposed to foreign currency exchange rate risk with respect to fluctuations of the U.S. dollar against the euro. A hypothetical 10% decline in the value of the U.S. dollar against the euro, compared to the exchange rate at March 31, 2016, would increase the anticipated cash consideration by $1.5 billion, including interest. See ~~Note 8—Derivative Financial Instruments~~ ~~to our unaudited consolidated financial statements.~~

~~Other than the foreign currency exchange rate risk described above, there~~There have been no significant changes to our market risks during the six months ended March 31, ~~2016~~2017, compared to September 30, ~~2015.~~2016.



ITEM 4.	Controls and Procedures

Disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) of Visa Inc. at the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures of Visa Inc. were effective at the reasonable assurance level as of the end of the period covered by this report.

Changes in internal control over financial reporting. There has been no change in the internal control over financial reporting of Visa Inc. that occurred during the fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



ITEM 1.	Legal Proceedings.

Refer to Note 13—Legal Matters to the unaudited consolidated financial statements included in this Form 10-Q for a description of the Company’s current material legal proceedings.



ITEM 1A.	Risk Factors.

For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, ~~2015~~,2016, filed with the SEC on November ~~19, 2015~~.15, 2016.



ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth ~~information with respect to~~the Company’s purchases of ~~the Company’s~~ common stock ~~made by or on behalf of the Company~~ during the quarter ended March 31, ~~2016~~2017.

Period
Total
Number of
Shares
Purchased ⁽¹⁾

Average
Price Paid
per Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs ^(2),(3)

Approximate
Dollar Value
of Shares that
May Yet Be Purchased
Under the Plans or
Programs ^(2),(3)
January 1-31, 2016 8,965,454
$ 73.46
8,963,960
$ 5,098,695,765
February 1-29, 2016 13,145,621
$ 71.11
13,089,725
$ 4,167,694,153
March 1-31, 2016 2,162,399
$ 73.97
2,162,399
$ 4,007,694,462
Total 24,273,474
$ 72.23
24,216,084



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(2),(3)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(2),(3)
January 1-31, 2017	995,917	$	79.60	995,159	$	3,810,930,933
February 1-28, 2017	3,119,429	$	87.80	3,067,047	$	3,541,495,887
March 1-31, 2017	15,067,739	$	89.24	15,067,739	$	2,196,602,697
Total	19,183,085	$	88.50	19,129,945


⁽¹⁾	Includes ~~57,390~~53,140 shares of class A common stock withheld at an average price of ~~$71.74~~$85.80 per share (per the terms of grants under our 2007 Equity Incentive Compensation Plan) to offset tax withholding obligations that occur upon vesting and release of restricted shares.


⁽²⁾	The figures in the table reflect transactions according to trade dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.

⁽³⁾

Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. In ~~October 2015,~~July 2016 and April 2017, our board of directors authorized ~~a new~~share repurchase programs for $5.0 billion ~~share repurchase program. This authorization has~~each. These authorizations have no expiration date. All share repurchase programs authorized prior to ~~October 2015~~July 2016 have been completed.



ITEM 3.	Defaults Upon Senior Securities.

None.



ITEM 4.	Mine Safety Disclosures.

Not applicable.



ITEM 5.	Other Information.

None.



ITEM 6.	Exhibits.

The list of exhibits required to be filed as exhibits to this report is listed in the “Exhibit Index,” which is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		VISA INC.

Date:	April ~~25, 2016~~21, 2017	By:	/s/ ~~Charles W. Scharf~~Alfred F. Kelly, Jr.
		Name:	~~Charles W. Scharf~~Alfred F. Kelly, Jr.
		Title:	Chief Executive Officer (Principal Executive Officer)

Date:	April ~~25, 2016~~21, 2017	By:	/s/ Vasant M. Prabhu
		Name:	Vasant M. Prabhu
		Title:	Chief Financial Officer (Principal Financial Officer)

Date:	April 21, 2017	By:	/s/ James H. Hoffmeister
		Name:	James H. Hoffmeister
		Title:	Global Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)

EXHIBIT INDEX



		Incorporated by Reference
Exhibit Number	Description of Documents	Schedule/ Form	File Number	Exhibit	Filing Date

10.1+	Five Year Revolving Credit Agreement, ~~dated~~amended and restated as of January 27, ~~2016,~~2017, by and among Visa Inc., Visa International Service Association, Visa U.S.A. Inc. Visa Europe Limited and Visa Europe Services Inc., as borrowers, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank N.A., as syndication agent, and the lenders referred to therein #

31.1+	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2+	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101.INS+	XBRL Instance Document

~~101.SCH~~101.SCH+	XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB+	XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE~~101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document



+	Filed or furnished herewith.
#	Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

4442



	Common Stock						Additional Paid-in Capital			Accumulated Income			Accumulated Other Comprehensive Loss			Total Equity
	Class A			Class B	Class C		Additional Paid-in Capital			Accumulated Income			Accumulated Other Comprehensive Loss			Total Equity
	(in millions, except per share data)
Balance as of September 30, 2015	1,950			245	20		$	18,073		$	11,843		$	(74	)	$	29,842
Net income										3,648						3,648
Other comprehensive loss, net of tax													(22		)	(22		)
Comprehensive income																3,626
Conversion of class C common stock upon sale into public market	3				(1	)										—
Issuance and vesting of restricted stock and performance-based shares	2															—
Share-based compensation, net of forfeitures (Note 11)	—		⁽¹⁾				97									97
Restricted stock and performance-based shares settled in cash for taxes	(1	)					(85		)							(85		)
Excess tax benefit for share-based compensation							43									43
Cash proceeds from issuance of common stock under employee equity plans	1						49									49
Cash dividends declared and paid, at a quarterly amount of $0.14 per as-converted share (Note 9)										(676		)				(676		)
Repurchase of class A common stock (Note 9)	(50	)					(532		)	(3,233		)				(3,765		)
Balance as of March 31, 2016	1,905			245	19		$	17,645		$	11,582		$	(96	)	$	29,131



Fiscal Year	2016		2017		2018		2019		2020		Thereafter		Total
(in millions)	$	—	$	—	$	1,750	$	—	$	—	$	14,250	$	16,000



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(2),(3)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(2),(3)
January 1-31, 2016	8,965,454	$	73.46	8,963,960	$	5,098,695,765
February 1-29, 2016	13,145,621	$	71.11	13,089,725	$	4,167,694,153
March 1-31, 2016	2,162,399	$	73.97	2,162,399	$	4,007,694,462
Total	24,273,474	$	72.23	24,216,084