Derivative and Non-derivative Financial Instruments |
12 Months Ended |
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Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial and Non-derivative Financial Instruments | Note 12—Derivative and Non-derivative Financial Instruments Derivative Financial Instruments Designated derivative financial instrument hedges. The aggregate notional amount of the Company’s derivative contracts outstanding in its hedge program was $10.9 billion at September 30, 2019 and $2.5 billion at September 30, 2018. Cash Flow Hedges As of September 30, 2019 and 2018, the Company’s cash flow hedges in an asset position totaled $47 million and $78 million, respectively, and were classified in prepaid expenses and other current assets on the consolidated balance sheets. As of September 30, 2019 and 2018 cash flow hedges in a liability position totaled $31 million and $20 million, respectively, and were classified in accrued liabilities on the consolidated balance sheets. These amounts are subject to master netting agreements, which provide the Company with a legal right to net settle multiple payable and receivable positions with the same counterparty, in a single currency through a single payment. However, the Company presents fair values on a gross basis on the consolidated balance sheets. See Note 1—Summary of Significant Accounting Policies. The Company uses regression analysis to assess hedge effectiveness prospectively and retrospectively. The effectiveness tests are performed on foreign exchange forward contracts based on changes in the spot rate of the derivative instrument compared to changes in the spot rate of the forecasted hedged transaction. Forward points are excluded from effectiveness testing and measurement purposes. Excluded forward points are reported in earnings. For fiscal 2019, 2018 and 2017, the amounts by which earnings were reduced relating to excluded forward points from cash flow hedges were $12 million, $9 million and $18 million, respectively. The effective portion of changes in the fair value of derivative contracts designated as cash flow hedges is recorded as a component of accumulated other comprehensive income or loss on the consolidated balance sheets. When the forecasted transaction occurs and is recognized in earnings, the amount in accumulated other comprehensive income or loss related to that hedge is reclassified to operating revenue or expense. The Company expects to reclassify $22 million of pre-tax gains to earnings during fiscal 2020. Net Investment and Fair Value Hedges In fiscal 2019, the Company entered into foreign exchange forward contracts which were designated as a net investment hedge against a portion of the Company’s $18.8 billion net investment in Visa Europe as of September 30, 2019. In fiscal 2019, the Company also entered into interest rate and cross-currency swap agreements on a portion of the Company’s outstanding 3.15% Senior Notes due December 2025. The Company designated the interest rate swap as a fair value hedge and the cross-currency swap as a net investment hedge. There were no swap agreements outstanding as of September 30, 2018. As of September 30, 2019, the Company’s net investment hedges in an asset position totaled $298 million and were classified in prepaid expenses and other current assets and other assets on the consolidated balance sheets, and no net investment hedges were in a liability position. There were no derivative instruments designated as a net investment hedge outstanding as of September 30, 2018. As of September 30, 2019, the Company’s fair value hedges in an asset position totaled $89 million and were classified in other assets on the consolidated balance sheets, while fair value hedges in a liability position totaled $2 million and were classified in other liabilities on the consolidated balance sheets. There were no fair value hedges outstanding as of September 30, 2018. For fiscal 2019, the Company recorded an increase in earnings of $95 million related to forward points and interest differentials from forward contracts and swap agreements, respectively, which are excluded from effectiveness testing. Non-designated derivative financial instrument hedges The Company utilizes foreign exchange derivative contracts to hedge against foreign currency exchange rate fluctuations related to certain monetary assets and liabilities denominated in foreign currency. As of September 30, 2019 and 2018, the aggregate notional amount of these balance sheet hedges was $0.8 billion and $1.2 billion, respectively. Credit and market risks. The Company’s derivative financial instruments are subject to both credit and market risk. The Company monitors the credit-worthiness of the financial institutions that are counterparties to its derivative financial instruments and does not consider the risks of counterparty nonperformance to be significant. The Company mitigates this risk by entering into master netting agreements, and such agreements require each party to post collateral against its net liability position with the respective counterparty. As of September 30, 2019, the Company has received collateral of $34 million, from counterparties, which is included in accrued liabilities in the consolidated balance sheets, and posted collateral of $33 million, which is included in prepaid expenses and other current assets in the consolidated balance sheets. Notwithstanding the Company’s efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect against the risks associated with foreign currency fluctuations. Credit and market risks related to derivative instruments were not considered significant as of September 30, 2019. Non-derivative Financial Instrument Designated as a Net Investment Hedge As of September 30, 2018, the Company had designated $1.1 billion of its euro-denominated deferred cash consideration liability, a non-derivative financial instrument, as a hedge against a portion of the foreign currency exchange rate exposure of the Company’s euro-denominated net investment in Visa Europe. In June 2019, the Company paid the deferred consideration and therefore there were no hedged non-derivative financial instruments as of September 30, 2019.
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