Note 16—Share-based Compensation

2007 Equity Incentive Compensation Plan

The Company’s 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the compensation committee of the board of directors to grant non-qualified stock options ("options"), restricted stock awards ("RSAs"), restricted stock units ("RSUs") and performance-based shares to its employees and non-employee directors, for up to 236 million shares of class A common stock. Shares available for award may be either authorized and unissued or previously issued shares subsequently acquired by the Company. The EIP will continue to be in effect until all of the common stock available under the EIP is delivered and all restrictions on those shares have lapsed, unless the EIP is terminated earlier by the Company’s board of directors. No awards may be granted under the plan on or after 10 years from its effective date.

Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis for awards with service conditions only, and on a graded-vesting basis for awards with service, performance and market conditions. The Company’s estimated forfeiture rate is based on an evaluation of historical, actual and trended forfeiture data. For fiscal 2015, 2014 and 2013, the Company recorded share-based compensation cost of $184 million, $172 million and $179 million, respectively, in personnel on its consolidated statements of operations. The related tax benefits were $54 million, $51 million and $53 million for fiscal 2015, 2014 and 2013, respectively. The amount of capitalized share-based compensation cost was immaterial during fiscal 2015, 2014 and 2013.

All per share amounts and number of shares outstanding presented below reflect the four-for-one stock split that was effected in the second quarter of fiscal 2015. See Note 14—Stockholders' Equity.

Options

Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably over 3 years from the date of grant, subject to earlier vesting in full under certain conditions.

During fiscal 2015, 2014 and 2013, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:



	2015			2014			2013
Expected term (in years)⁽¹⁾	4.55			4.80			6.08
Risk-free rate of return⁽²⁾	1.5		%	1.3		%	0.8		%
Expected volatility⁽³⁾	22.0		%	25.2		%	29.3		%
Expected dividend yield⁽⁴⁾	0.8		%	0.8		%	0.9		%
Fair value per option granted	$	12.04		$	11.03		$	9.76

⁽¹⁾

Beginning in fiscal 2014, assumption is based on the Company's historical option exercises and those of a set of peer companies that management believes is generally comparable to Visa. The Company's data is weighted based on the number of years between the measurement date and Visa's initial public offering as a percentage of the options' contractual term. The relative weighting placed on Visa's data and peer data in fiscal 2015 was approximately 67% and 33%, respectively, and the relative weighting in fiscal 2014 was 58% and 42%, respectively. In fiscal 2013, assumption was fully based on peer companies' data.


⁽²⁾	Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.

⁽³⁾

Based on the Company’s implied and historical volatility. The expected volatilities ranged from 21% to 23% in fiscal 2015. In fiscal 2013, historical volatility was a blend of Visa's historical volatility and those of comparable peer companies. The relative weighting between Visa historical volatility and the historical volatility of the peer companies was based on the percentage of years Visa stock price information is available since its initial public offering compared to the expected term.


⁽⁴⁾	Based on the Company’s annual dividend rate on the date of grant.

The following table summarizes the Company’s option activity for fiscal 2015:



	Options		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value ⁽¹⁾ (in millions)
Outstanding at October 1, 2014	11,649,704		$	22.52
Granted	1,444,376		$	62.87
Forfeited	(379,662	)	$	50.53
Exercised	(3,036,701	)	$	20.53
Outstanding at September 30, 2015	9,677,717		$	28.07	5.0	$402
Options exercisable at September 30, 2015	7,083,305		$	18.26	3.7	$364
Options exercisable and expected to vest at September 30, 2015⁽²⁾	9,392,332		$	27.26	4.9	$398


⁽¹⁾	Calculated using the closing stock price on the last trading day of fiscal 2015 of $69.66, less the option exercise price, multiplied by the number of instruments.


⁽²⁾	Applies a forfeiture rate to unvested options outstanding at September 30, 2015 to estimate the options expected to vest in the future.

For the options exercised during fiscal 2015, 2014 and 2013, the total intrinsic value was $134 million, $187 million and $176 million, respectively, and the tax benefit realized was $86 million, $65 million and $59 million, respectively. As of September 30, 2015, there was $17 million of total unrecognized compensation cost related to unvested options, which is expected to be recognized over a weighted-average period of approximately 1.4 years.

Restricted Stock Awards and Restricted Stock Units

RSAs and RSUs issued under the EIP primarily vest ratably over 3 years from the date of grant, subject to earlier vesting in full under certain conditions.

Upon vesting, the RSAs are settled in class A common stock on a one-for-one basis. During the vesting period, RSA award recipients are eligible to receive dividends and participate in the same voting rights as those granted to the holders of the underlying class A common stock. Upon vesting, RSUs can be settled in class A common stock on a one-for-one basis or in cash, or a combination thereof, at the Company’s option. The Company does not currently intend to settle any RSUs in cash. During the vesting period, RSU award recipients are eligible to receive dividend equivalents, but do not participate in the voting rights granted to the holders of the underlying class A common stock.

The fair value and compensation cost before estimated forfeitures for RSAs and RSUs is calculated using the closing price of class A common stock on the date of grant. The weighted-average grant-date fair value of RSAs granted during fiscal 2015, 2014 and 2013 was $63.71, $49.98 and $36.80, respectively. The weighted-average grant-date fair value of RSUs granted during fiscal 2015, 2014 and 2013 was $62.88, $49.44 and $36.55, respectively. The total grant-date fair value of RSAs and RSUs vested during fiscal 2015, 2014 and 2013 was $132 million, $126 million and $98 million, respectively.

The following table summarizes the Company's RSA and RSU activity for fiscal 2015:



	Restricted Stock				Weighted- Average Grant Date Fair Value				Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾ (in millions)
	Awards		Units		RSA		RSU		RSA	RSU	RSA	RSU
Outstanding at October 1, 2014	5,234,184		1,866,932		$	40.00	$	39.69
Granted	2,145,439		753,733		$	63.71	$	62.88
Vested	(2,702,580	)	(1,005,707	)	$	35.50	$	35.43
Forfeited	(612,356	)	(172,436	)	$	48.32	$	47.86
Outstanding at September 30, 2015	4,064,687		1,442,522		$	54.09	$	53.80	1.5	1.4	$283	$100


⁽¹⁾	Calculated by multiplying the closing stock price on the last trading day of fiscal 2015 of $69.66 by the number of instruments.

At September 30, 2015, there was $138 million and $38 million of total unrecognized compensation cost related to unvested RSAs and RSUs, respectively, which is expected to be recognized over a weighted-average period of approximately 1.5 years for RSAs and 1.4 years for RSUs.

Performance-based Shares

The following table summarizes the maximum number of performance-based shares which could be earned and related activity for fiscal 2015:



	Shares		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value⁽¹⁾ (in millions)
Outstanding at October 1, 2014	2,075,240		$	44.32
Granted⁽²⁾	785,884		$	69.78
Vested and earned	(1,221,020	)	$	42.68
Unearned	(24,924	)	$	42.68
Forfeited	(351,218	)	$	54.25
Outstanding at September 30, 2015	1,263,962		$	57.61	0.7	$88


⁽¹⁾	Calculated by multiplying the closing stock price on the last trading day of fiscal 2015 of $69.66 by the number of instruments.


⁽²⁾	Represents the maximum number of performance-based shares which could be earned.

For the Company's performance-based shares, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of both performance and market conditions. The performance condition is based on the Company's earnings per share target. The market condition is based on the Company's total shareholder return ranked against that of other companies that are included in the Standard & Poor's 500 Index. The fair value of the performance-based shares, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model. The grant-date fair value of performance-based shares granted in fiscal 2015, 2014 and 2013 was $69.78, $56.37 and $41.04 per share, respectively. Earned performance shares granted in fiscal 2015, 2014 and 2013 vest approximately 3 years from the initial grant date. All performance awards are subject to earlier vesting in full under certain conditions.

Compensation cost for performance-based shares is initially estimated based on target performance. It is recorded net of estimated forfeitures and adjusted as appropriate throughout the performance period. At September 30, 2015, there was $11 million of total unrecognized compensation cost related to unvested performance-based shares, which is expected to be recognized over a weighted-average period of approximately 0.7 years.

Employee Stock Purchase Plan

In January 2015, the Company's class A stockholders approved the Visa Inc. Employee Stock Purchase Plan (the “ESPP”), under which substantially all employees are eligible to participate. The ESPP permits eligible employees to purchase the Company’s class A common stock at a 15% discount of the stock price on the purchase date, subject to certain restrictions. A total of 20 million shares of class A common stock have been reserved for issuance under the ESPP. The first offering date was April 1, 2015. The ESPP does not have a material impact on the consolidated financial statements.