The company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are subjective, based on the status of such legal or regulatory proceedings, the merit of the Company's defenses, and consultation with corporate and external legal counsel. Actual outcomes of these legal and regulatory proceedings may differ materially from the Company's estimates. Litigation accruals associated with the corresponding accretion charge include interest expense on the consolidated statement of operations. The company recorded litigation provisions of $4.1 billion and $7 million in fiscal 2012 and 2011, respectively. The litigation accrual is an estimate and is based on management 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 at the balance sheet date.

question 1:

Why does VISA inc sometimes record litigation accrual at the present value rather than the full amount to be paid? Explain the accounting purpose behind the $11 million items labeled "interest accretion on settled matter" recorded in 2011.

question 2:

Explain why Visa Inc increased its accrual litigation liability from $425 million to $4.386 billion in 2012?

Answer rating: 100% (QA)

question 1 There are a number of potential reasons why a company might choose to record a litigation ... View the full answer