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Alternative�Fh<Statement Of Cash Flows Indirec�FIIStatement Of Shareholders Equit�FNT2_Statement Of Shareholders Equ�FGVStatement Of Other Comprehensiv�Fh]Summary of Significant Accounti�:7_Earnings (Loss) Per Share�6aSupplemental Cash Flows��b Fair Value�2�dInvestment Securities�(sfPrepaid Expenses� BhOther Assets�BjProperty, Plant and Equipment��kGoodwill�6�mOther Intangible Assets�(~oAccrued Expenses�FMqPension, Savings Plan and Other�FsPostemployment and Postretireme��tDebt�F�vConsolidation of Variable Inter�0�xStockholders' Equity�FXzShare Based Payment and Other B�'|Commitments�F�}Obligations Under Litigation Se�� Income Tax�F��Legal and Regulatory Proceeding�Fc�Settlement and Travelers Cheque�F2�Foreign Exchange Risk Managemen�*�Segment Reporting� ЈOther Income�0��Document Information�,ҌEntity Information��T�� 2Statement Of Financial Position Classified (USD $)In ThousandsDec. 31, 2009 Dec. 31, 2008 ASSETSCash and cash equivalents%Investment securities, at fair value:Available-for-sale Municipal bonds held-to-maturityAccounts receivableIncome taxes receivableSettlement due from customers/Restricted security deposits held for customersPrepaid expensesDeferred income taxesOther current assetsTotal Current Assets_Property, plant and equipment, at cost (less accumulated depreciation of $303,759 and $278,269)GoodwillPOther intangible assets (less accumulated amortization of $422,338 and $377,570)9Auction rate securities available-for-sale, at fair value&Investment securities held-to-maturityOther assetsTotal AssetsLIABILITIES AND EQUITYAccounts payableSettlement due to customers2Obligations under litigation settlements (Note 19)Accrued expensesShort-term debtOther current liabilitiesTotal Current LiabilitiesLong-term debtOther liabilitiesTotal LiabilitiesStockholders' EquityAdditional paid-in-capital?Class A treasury stock, at cost, 6,740,590 shares, respectively'Retained earnings (accumulated deficit)'Accumulated other comprehensive income:3Cumulative foreign currency translation adjustmentsBDefined benefit pension and other postretirement plans, net of tax4Investment securities available-for-sale, net of tax,Total accumulated other comprehensive incomeTotal Stockholders' EquityNon-controlling interestsTotal EquityTotal Liabilities and EquityClass M common stockCommon stockBStatement Of Financial Position Classified (Parenthetical) (USD $)In Thousands, except Share data7Property, plant and equipment, accumulated depreciation1Other intangible assets, accumulated amortizationClass A treasury stock, sharesCommon stock, par valueCommon stock, authorizedCommon stock, issuedCommon stock, outstanding'Statement Of Income Alternative (USD $)#In Thousands, except Per Share data 12 Months Ended Dec. 31, 2009 12 Months Ended Dec. 31, 2008 12 Months Ended Dec. 31, 2007 Revenues, netOperating ExpensesGeneral and administrativeAdvertising and marketingLitigation settlementsDepreciation and amortizationTotal operating expensesOperating income (loss)Other Income (Expense)Investment income, netInterest expenseOther income (expense), netTotal other income (expense)!Income (loss) before income taxesIncome tax expense (benefit)Net income (loss)0Income attributable to non-controlling interests,Net Income (Loss) Attributable to MasterCard(Basic Earnings (Loss) per Share (Note 2)2Basic Weighted Average Shares Outstanding (Note 2)*Diluted Earnings (Loss) per Share (Note 2)4Diluted Weighted Average Shares Outstanding (Note 2)(Statement Of Cash Flows Indirect (USD $)Operating ActivitiesXAdjustments to reconcile net income (loss) to net cash provided by operating activities:;Gain on sale of Redecard S.A. available-for-sale securitiesShare based payments (Note 17)Stock units withheld for taxes(Tax benefit for share based compensationImpairment of assets7Accretion of imputed interest on litigation settlementsOther,Changes in operating assets and liabilities:Trading securities'Obligations under litigation settlement*Net change in other assets and liabilities)Net cash provided by operating activitiesInvesting Activities*Purchases of property, plant and equipmentCapitalized software5Purchases of investment securities available-for-sale3Purchases of investment securities held-to-maturityNProceeds from sales and maturities of investment securities available-for-sale-Acquisition of business, net of cash acquiredInvestment in affiliatesOther investing activities3Net cash provided by (used in) investing activitiesFinancing ActivitiesPurchase of treasury stockPayment of debtDividends paidExercise of stock options&Redemption of non-controlling interest%Net cash used in financing activities<Effect of exchange rate changes on cash and cash equivalents4Net increase (decrease) in cash and cash equivalents/Cash and cash equivalents - beginning of p< eriod)Cash and cash equivalents - end of periodGStatement Of Shareholders Equity And Other Comprehensive Income (USD $)2Retained Earnings (Accumulated Deficit) [Member] 4Accumulated Other Comprehensive Income, net of tax Additional Paid-In Capital Class A common stock Class B common stock Treasury Stock Non- Controlling Interests Total "Beginning Balance at Dec. 31, 2006-Other comprehensive income (loss), net of tax'Adoption of new tax accounting standardLCash dividends declared on Class A and Class B common stock, $0.60 per shareShare based paymentsPurchases of treasury stock-Conversion of Class B to Class A common stockEnding Balance at Dec. 31, 2007Ending Balance at Dec. 31, 2008#Investment in majority owned entityEnding Balance at Dec. 31, 2009WStatement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $)FCash dividends declared on Class A and Class B common stock, per share/Statement Of Other Comprehensive Income (USD $)"Other comprehensive income (loss):(Foreign currency translation adjustments0Defined benefit pension and postretirement plansIncome tax effectOOther Comprehensive Income, Defined Benefit Plans Adjustment, Net of Tax, Total(Investment securities available-for-saleqOther Comprehensive Income, Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax, TotalHReclassification adjustment for investment securities available-for-saleqOther Comprehensive Income, Reclassification Adjustment for Sale of Securities Included in Net Income, Net of Tax#Derivatives accounted for as hedgesOOther Comprehensive Income, Derivatives Qualifying as Hedges, Net of Tax, TotalCReclassification adjustment for derivatives accounted for as hedgesiOther Comprehensive Income, Reclassification Adjustment on Derivatives Included in Net Income, Net of TaxComprehensive Income (Loss)6Comprehensive Income (Loss) Attributable to MasterCard*Summary of Significant Accounting Policies.12 Months Ended Dec. 31, 2009 USD / shares � Note 1. Summary of Significant Accounting Policies OrganizationMasterCard Incorporated and its consolidated subsidiaries, including MasterCard International Incorporated (MasterCard International) and MasterCard Europe sprl (MasterCard Europe) (together, MasterCard or the Company), provide payment solutions, including transaction processing and related services to customers principally in support of their credit, deposit access (debit), electronic cash and Automated Teller Machine (ATM) payment card programs, and travelers cheque programs. Our financial institution customers are generally either principal members (principal members) of MasterCard International, which participate directly in MasterCard Internationals business, or affiliate members (affiliate members) of MasterCard International, which participate indirectly in MasterCard Internationals business through a principal member. Codification of accounting pronouncementsOn July1, 2009, the Financial Accounting Standards Board (the FASB) implemented the FASB accounting standards codification and hierarchy of generally accepted accounting principles as the sole source of authoritative accounting principles generally accepted in the United States of America (GAAP). Pursuant to these provisions, the Company has eliminated its references to the former GAAP authoritative pronouncements in its consolidated financial statements issued as of, for the period ended, and for periods subsequent to September30, 2009. As the FASBs codification was not intended to change existing authoritative guidance, this referencing methodology has not had and will not have any impact on the Companys financial position or results of operations. Consolidation and basis of presentationThe consolidated financial statements include the accounts of MasterCard and its majority-owned and controlled entities, including any consolidated variable interest entities. See Note 15 (Consolidation of Variable Interest Entity) for further discussion. Intercompany transactions and balances are eliminated in consolid< ation. The Company follows GAAP. Effective January1, 2009, the Company adopted the new accounting standard for business combinations. The new standard establishes principles and requirements for how an acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; how the acquirer recognizes and measures the goodwill acquired in a business combination; and how the acquirer determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The adoption did not have a material impact on the Companys financial position or results of operations as of or for the year ended December31, 2009. Non-controlling interest, previously referred to as minority interest, represents the equity interest not owned by the Company and is recorded for consolidated entities in which the Company owns less than 100% of the interests. In December 2007, an accounting and reporting standard was established that requires no!Earnings (Loss) Per Share ("EPS"): Note 2. Earnings (Loss) Per Share (EPS) On January1, 2009, a new accounting standard related to the EPS effects of instruments granted in share-based payment transactions became effective for the Company resulting in the retrospective adjustment of EPS for prior periods. In accordance with this new accounting standard, unvested share-based payment awards which receive non-forfeitable dividend rights, or dividend equivalents, are considered participating securities and are required to be included in computing EPS under the two-class method.The Company declared non-forfeitable dividends on unvested restricted stock units and contingently issuable performance stock units (Unvested Units) which were granted prior to 2009. The Company has therefore calculated EPS under the two-class method pursuant to this new accounting standard. The components of basic and diluted EPS for common shares under the two-class method for each of the years ended December31: 2009 2008 2007 Numerator: Net income (loss) attributable to MasterCard $ 1,462,532 $ (253,915 ) $ 1,085,886 Less: Net income (loss) allocated to Unvested Units 9,083 (1,304 ) 9,892 Net income (loss) attributable to MasterCard allocated to common shares $ 1,453,449 $ (252,611 ) $ 1,075,994 Denominator: Basic EPS weighted average shares outstanding 129,838 130,148 134,887 Dilutive stock options and restricted stock units 394 266 Diluted EPS weighted-average shares outstanding 130,232 130,148 135,153 Earnings (Loss) per Share: Basic $ 11.19 $ (1.94 ) $ 7.98 Diluted $ 11.16 $ (1.94 ) $ 7.96 The calculation of diluted earnings per share for the year ended December31, 2009 excluded approximately 251 stock options because the effect would be antidilutive. The calculation of diluted loss per share for the year ended December31, 2008 excluded approximately 705 stock options because the effect would be antidilutive. The calculation of diluted earnings per share for the year ended December31, 2007 excluded approximately 10 stock options because the effect would be antidilutive. The following table compares EPS as originally reported and EPS under the two-class method, to quantify the impact of the new standard on EPS for each of the years ended December31: 2008 2007 Earnings (Loss) per Share: Basicas originally reported $ (1.95 ) $ 8.05 Basicpursuant to the two-class method (1.94 ) 7.98 Impact of new accounting standard on basic EPS $ 0.01 $ (0.07 ) Dilutedas originally reported $ (1.95 ) $ 8.00 < Dilutedpursuant to the two-class method (1.94 ) 7.96 Impact of new accounting standard on diluted EPS $ 0.01 $ (0.04 ) Supplemental Cash Flows_ Note 3. Supplemental Cash Flows The following table includes supplemental cash flow disclosures for each of the years ended December31: 2009 2008 2007 Cash paid for income taxes1 $ 457,285 $ 493,199 1 $ 561,860 Cash paid for interest 10,569 14,058 17,094 Cash paid for legal settlements (Notes 19 and 21) 945,530 1,263,185 113,925 Non-cash investing and financing activities: Dividend declared but not yet paid 19,712 19,690 19,969 Municipal bonds cancelled 154,000 2 Revenue bonds received (154,000 )3 Building and land assets recorded pursuant to capital lease (154,000 )3 Capital lease obligation 154,000 3 Fair value of assets acquired, net of original investment, cash paid and cash acquired 16,970 124,275 Fair value of liabilities assumed related to investments in affiliates 14,792 4 43,234 5 Fair value of non-controlling interest acquired 8,015 1 $198,308 of these payments were recorded as an income tax receivable as of December31, 2008. 2 See Note 15 (Consolidation of Variable Interest Entity) for further details. 3 See Note 8 (Property, Plant, and Equipment) for further details. 4 Includes $8,750 to be extinguished in 2013 and 2016 for future benefits to be provided by MasterCard in the establishment of a joint venture. 5 Includes $20,432 due in 2011 relating to the MasterCard France acquisition. Fair Value� Note 4. Fair Value Financial InstrumentsRecurring Measurements In accordance with accounting requirements for financial instruments, the Company is disclosing the estimated fair values as of December31, 2009 and 2008 of the financial instruments that are within the scope of the accounting guidance, as well as the method(s) and significant assumptions used to estimate the fair value of those financial instruments. Furthermore, the Company classifies its fair value measurements in the Valuation Hierarchy. The distribution of the fair values of the Companys financial instruments which are measured at fair value on a recurring basis within the Valuation Hierarchy is as follows: QuotedPrices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at December31, 2009 Municipal bonds1 $ $ 514,330 $ $ 514,330 Taxable short-term bond funds 309,972 309,972 Auction rate securities 179,987 179,987 Foreign currency forward contracts (1,274 ) (1,274 ) Other 43 43 Total $ 310,015 $ 513,056 $ 179,987 $ 1,003,058 QuotedPrices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at December31, 2008 Municipal bonds1 $ $ 485,490 $ $ 485,490 Taxable short-term bond funds 102,588 102,588 Auction rate securities 191,760 191,760 Foreign currency forward contracts 33,731 33,731 Other 17 17 Total $ 102,605 $ 519,221 $ 191,760 $ 813,586 1 Available-for-sale municipal bonds are carried at fair value and are included in the above tables. However, held-to-maturity municipal bonds are carried at amortized cost and excluded from the above tables. The fair value of the Companys available-for-sale municipal bonds are based on quoted prices for similar assets i< n active markets and are therefore included in Level 2 of the Valuation Hierarchy. The fair value of the Companys short-term bond funds are based on quoted prices and are therefore included in Level 1 of the Valuation Hierarchy. The Companys auction rate securities (ARS) investments have been classified within Level 3 of the Valuation Hierarchy as their valuation requires substantial judgment and estimation of factors that are not currently observable in the market due to the lack of trading in the securities. This valuation may be revised in future periods as market conditions evolve. The Company has considered the lack of liquidity in the ARS market and the lack of comparable, orderly transactions when estimating the fair value of its ARS portfolio. Therefore, the Company uses the income approach, which includes a discounted cash flow analysis of the estimated future cash flows adjusted by a risk premium, to estimate the Investment Securities� Note 5. Investment Securities Amortized Costs and Fair ValuesAvailable-for-Sale Investment Securities: The major categories of the Companys available-for-sale investment securities, for which unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statements of comprehensive income (loss), and their respective cost bases and fair values are as follows: Amortized Cost Gross Unrealized Gain Gross Unrealized Loss1 Fair Value at December31, 2009 Municipal bonds $ 492,245 $ 22,281 $ (196 ) $ 514,330 Taxable short-term bond funds 305,574 4,474 (76 ) 309,972 Auction rate securities 211,750 (31,763 ) 179,987 Other 89 (46 ) 43 Total $ 1,009,658 $ 26,755 $ (32,081 ) $ 1,004,332 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss1 Fair Value at December31, 2008 Municipal bonds $ 473,746 $ 12,771 $ (1,027 ) $ 485,490 Taxable short-term bond funds 102,588 102,588 Auction rate securities 239,700 (47,940 ) 191,760 Other 127 (110 ) 17 Total $ 816,161 $ 12,771 $ (49,077 ) $ 779,855 1 The majority of the unrealized losses relate to ARS, which have been in an unrealized loss position longer than 12 months, but have not been deemed other-than-temporarily impaired. The municipal bond portfolio is comprised of tax exempt bonds and is diversified across states and sectors. The portfolio has an average credit quality of double-A. Municipal bonds in a gross unrealized loss position are not considered other-than temporarily impaired, considering factors including their high credit quality. The short-term bond funds invest in fixed income securities, including corporate bonds, mortgage-backed securities, and asset-backed securities. The Company holds investments in ARS. Interest on these securities is exempt from U.S. federal income tax and the interest rate on the securities typically resets every 35 days. The securities are fully collateralized by student loans with guarantees, ranging from approximately 95% to 98% of principal and interest, by the U.S. government via the Department of Education. Beginning on February11, 2008, the auction mechanism that normally provided liquidity to the ARS investments began to fail. Since mid-February 2008, all 38 investment positions in the Companys ARS investment portfolio have experienced failed auctions. The securities for which auctions have failed have continued to pay interest in accordance with the contractual terms of such instruments and will continue to accrue interest and be auctioned at each respective reset date until the auction succeeds, the issuer redeems the securities or they mature. During 2008, ARS were reclassified as Level 3 from Level 2. As of December31, 2009, the ARS market remained illiquid, but < issuer call and redemption activity in the ARS student loaPrepaid Expenses� Note 6. Prepaid Expenses Prepaid expenses consisted of the following at December31: 2009 2008 Customer and merchant incentives $ 444,692 $ 397,563 Advertising 56,324 45,608 Income taxes 93,140 30,080 Data processing 28,896 24,455 Other 18,085 18,001 Total prepaid expenses 641,137 515,707 Prepaid expenses, current (313,253 ) (213,612 ) Prepaid expenses, long-term $ 327,884 $ 302,095 Prepaid customer and merchant incentives represent payments made to customers and merchants under business agreements. Other Assets� Note 7. Other Assets Other assets consisted of the following at December31: 2009 2008 Customer and merchant incentives $ 215,542 $ 46,608 Cash surrender value of keyman life insurance 22,790 18,552 Cost and equity method investments 34,977 12,500 Other 35,907 21,356 Total other assets 309,216 99,016 Other assets, current (124,915 ) (32,619 ) Other assets, long-term $ 184,301 $ 66,397 Certain customer and merchant business agreements provide incentives upon entering into the agreement. As of December31, 2009 and 2008, other assets included amounts to be paid for these incentives and the related liability was included in accrued expenses and other liabilities. Once the payment is made, the liability is relieved and the other asset is reclassified to a prepaid expense. Property, Plant and Equipment3 Note 8. Property, Plant and Equipment Property, plant and equipment consist of the following at December31: 2009 2008 Building and land $ 391,946 $ 216,670 Equipment 254,830 250,395 Furniture and fixtures 52,101 51,124 Leasehold improvements 53,876 66,878 752,753 585,067 Less accumulated depreciation and amortization (303,759 ) (278,269 ) $ 448,994 $ 306,798 Effective March1, 2009, MasterCard executed a new ten-year lease between MasterCard, as tenant, and the Missouri Development Finance Board (MDFB), as landlord, for MasterCards global technology and operations center located in OFallon, Missouri, called Winghaven (see Note 15 (Consolidation of Variable Interest Entity)). The lease includes a bargain purchase option and is thus classified as a capital lease. The building and land assets and capital lease obligation have been recorded at $154,000, which represents the lesser of the present value of the minimum lease payments and the fair value of the building and land assets. The Company received refunding revenue bonds issued by MDFB in the exact amount, $154,000, and with the same payment terms as the capital lease and which contain the legal right of setoff with the capital lease. The Company has netted its investment in the MDFB refunding revenue bonds and the corresponding capital lease obligation in the consolidated balance sheet. The related leasehold improvements for Winghaven will continue to be amortized over the economic life of the improvements. As of December31, 2009 and 2008, capital leases of $13,565 and $46,794, respectively, were included in equipment. Accumulated amortization of capital leases was $6,181 and $36,180 as of December31, 2009 and 2008, respectively. Depreciation expense for the above property, plant and equipment, including amortization for capital leases was $76,121, $59,097 and $49,311 for the years ended December31, 2009, 2008 and 2007, respectively. 2 Note 9. Goodwill The changes in the carrying amount of goodwill for the years ended December31, 2009 and 2008 are as follows: 2009 2008 Beginning balance $ 297,993 $ 239,626 Goodwill acqu< ired during the year 13,518 67,066 Foreign currency translation 9,020 (8,699 ) Impairment losses (11,303 ) Ending balance $ 309,228 $ 297,993 The Company had no accumulated impairment losses for goodwill at December31, 2009, 2008 and 2007. Other Intangible Assetsj Note 10. Other Intangible Assets The following table sets forth net intangible assets, other than goodwill, at December31: 2009 2008 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized intangible assets: Capitalized software $ 581,874 $ (397,284 ) $ 184,590 $ 513,587 $ (348,022 ) $ 165,565 Trademarks and tradenames 22,311 (22,263 ) 48 24,761 (23,314 ) 1,447 Customer relationships 22,125 (1,988 ) 20,137 20,910 (620 ) 20,290 Other 1,803 (803 ) 1,000 6,304 (5,614 ) 690 Total 628,113 (422,338 ) 205,775 565,562 (377,570 ) 187,992 Unamortized intangible assets: Customer relationships 208,929 208,929 206,290 206,290 Total $ 837,042 $ (422,338 ) $ 414,704 $ 771,852 $ (377,570 ) $ 394,282 Additions to capitalized software primarily relate to projects associated with system enhancements or infrastructure improvements. Amortizable customer relationships were added in 2009 and 2008 due to the acquisition of businesses. Certain intangible assets, including amortizable and unamortizable customer relationships and trademarks and tradenames, are denominated in foreign currencies. As such, the change in intangible assets includes a component attributable to foreign currency translation. Amortization and impairment expense on the assets above amounted to the following for the years ended December31: 2009 2008 2007 Amortization $ 65,256 $ 52,909 $ 48,331 Capitalized software impairments $ 3,183 $ 1,011 $ 298 Intangible asset impairments (other than capitalized software) $ 1,944 $ $ The following table sets forth the estimated future amortization expense on amortizable intangible assets for the years ending December31: 2010 $ 68,763 2011 52,251 2012 36,436 2013 13,554 2014 and thereafter 34,771 $ 205,775 Accrued Expenses� Note 11. Accrued Expenses Accrued expenses consisted of the following at December31: 2009 2008 Customer and merchant incentives $ 597,742 $ 526,722 Personnel costs 367,321 296,497 Advertising 130,582 89,567 Income taxes 31,597 20,685 Other 97,749 98,590 Total accrued expenses $ 1,224,991 $ 1,032,061 (Pension, Savings Plan and Other Benefits� Note 12. Pension, Savings Plan and Other Benefits The Company maintains a non-contributory, qualified, defined benefit pension plan (the Qualified Plan) with a cash balance feature covering substantially all of its U.S. employees hired before July1, 2007. In 2008, the Qualified Plan experienced a steep decline in the fair value of plan assets which resulted in significant increases in the Companys pension liability and contributed to other comprehensive loss as of December31, 2008 and increased net periodic pension cost in 2009. During 2009, Company contributions and favorable investment returns increased the Qualified Plans fair value of assets and resulted in significant decreases in the Companys pension liability and contributed to other comprehensive income as of December31, 2009. The Company also has an unfunded non-qualifi< ed supplemental executive retirement plan (the Non-qualified Plan) that provides certain key employees with supplemental retirement benefits in excess of limits imposed on qualified plans by U.S. tax laws. The Non-qualified Plan had settlement gains in 2009 and 2008 resulting from payments to participants. The term Pension Plans includes both the Qualified Plan and the Non-qualified Plan. The Company uses a December31 measurement date for its Pension Plans. The following table sets forth the Pension Plans funded status, key assumptions and amounts recognized in the Companys consolidated balance sheets at December31. 2009 2008 Change in benefit obligation Benefit obligation at beginning of year $ 217,035 $ 214,805 Service cost 17,570 19,980 Interest cost 13,525 13,638 Voluntary plan participants contributions 331 989 Actuarial (gain)/loss (704 ) (18,990 ) Benefits paid (13,044 ) (13,387 ) Plan amendments 367 Projected benefit obligation at end of year $ 235,080 $ 217,035 Change in plan assets Fair value of plan assets at beginning of year $ 148,846 $ 195,966 Actual return on plan assets 44,084 (59,347 ) Employer contribution 33,396 24,625 Voluntary plan participants contributions 331 989 Benefits paid (13,044 ) (13,387 ) Fair value of plan assets at end of year $ 213,613 $ 148,846 Funded status Fair value of plan assets at end of year $ 213,613 $ 148,846 Projected benefit obligation at end of year 235,080 217,035 Funded status at end of year $ (21,467 ) $ (68,189 ) Amounts recognized on the consolidated balance sheets consist of: Accrued expenses $ $ (2,332 ) Other liabilities, long term (21,467 ) (65,857 ) $ (21,467 ) $ (68,189 ) Amounts recognized in accumulated other comprehensive income consist of: Net actuarial loss $ 48,060 $ 88,108 Prior service credit (12,285 ) (14,938 ) *Postemployment and Postretirement Benefits� Note 13. Postemployment and Postretirement Benefits The Company maintains a postretirement plan (the Postretirement Plan) providing health coverage and life insurance benefits for substantially all of its U.S. employees hired before July1, 2007. The Company amended the life insurance benefits under the Postretirement Plan effective January1, 2007. The impact, net of taxes, of this amendment was an increase of $1,715 to accumulated other comprehensive income in 2007. In 2009, the Company recorded a $3,944 benefit expense as a result of enhanced postretirement medical benefits under the Postretirement Plan provided to employees that chose to participate in a voluntary transition program. The Company uses a December31 measurement date for its Postretirement Plan. The following table presents the status of the Companys Postretirement Plan recognized in the Companys consolidated balance sheets at December31, 2009 and 2008. 2009 2008 Change in benefit obligation Benefit obligation at beginning of year $ 59,949 $ 51,598 Service cost 1,734 1,951 Interest cost 3,625 3,288 Plan participants contributions 149 74 Actuarial (gain) loss (7,634 ) 4,564 Gross benefits paid (2,133 ) (1,582 ) Less federal subsidy on benefits paid 2 56 Enhanced termination benefits 3,944 Projected benefit obligation at end of year $ 59,636 $ 59,949 Change in plan assets Employer contributions $ 1,982 $ 1,452 Plan participants contributions 149 74 Net benefits paid (2,< 131 ) (1,526 ) Fair value of plan assets at end of year $ $ Funded status Projected benefit obligation $ (59,636 ) $ (59,949 ) Funded status at end of year $ (59,636 ) $ (59,949 ) Amounts recognized on the consolidated balance sheets consist of: Accrued expenses $ (2,644 ) $ (2,564 ) Other liabilities, long-term (56,992 ) (57,385 ) $ (59,636 ) $ (59,949 ) Amounts recognized in accumulated other comprehensive income consist of: Net actuarial gain $ (13,509 ) $ (5,874 ) Transition obligation 642 856 $ (12,867 ) $ (5,018 ) Weighted-average assumptions used to determine end of year benefit obligation Discount rate 5.75 % 6.00 % Rate of compensation increase 5.37 % 5.37 % The assumed health care cost trend rates at December31 for the Postretirement Plan were as follows: 2009 2008 Health care cost trend rate assumed for next year 7.50 % 8.00 % Rate to which the cost trend rate is expected to decline (the ultimate trend rate) 5.00 % 5.00 % Year that the rate reaches the ultimate trend rate 2015 2015 Components of net periodic benefit costs recorded in general and adminDebt� Note 14. Debt On April28, 2008, the Company extended its committed unsecured revolving credit facility, dated as of April28, 2006 (the Credit Facility), for an additional year. The new expiration date of the Credit Facility is April26, 2011. The available funding under the Credit Facility will remain at $2,500,000 through April27, 2010 and then decrease to $2,000,000 during the final year of the Credit Facility agreement. Other terms and conditions in the Credit Facility remain unchanged. The Companys option to request that each lender under the Credit Facility extend its commitment was provided pursuant to the original terms of the Credit Facility agreement. Borrowings under the facility are available to provide liquidity in the event of one or more settlement failures by MasterCard International customers and, subject to a limit of $500,000, for general corporate purposes. The facility fee and borrowing cost are contingent upon the Companys credit rating. At December31, 2009, the facility fee was 7 basis points on the total commitment, or approximately $1,774 annually. Interest on borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) plus an applicable margin of 28 basis points or an alternative base rate, and a utilization fee of 10 basis points would be charged if outstanding borrowings under the facility exceed 50% of commitments. At the inception of the Credit Facility, the Company also agreed to pay upfront fees of $1,250 and administrative fees of $325, which are being amortized over five years. Facility and other fees associated with the Credit Facility totaled $2,222, $2,353 and $2,477 for each of the years ended December31, 2009, 2008 and 2007, respectively. MasterCard was in compliance with the covenants of the Credit Facility and had no borrowings under the Credit Facility at December31, 2009 or December31, 2008. The majority of Credit Facility lenders are members or affiliates of members of MasterCard International. In June 1998, MasterCard International issued ten-year unsecured, subordinated notes (the Notes) paying a fixed interest rate of 6.67%per annum. MasterCard repaid the entire principal amount of $80,000 on June30, 2008 pursuant to the terms of the Notes. The interest expense on the Notes was $2,668 and $5,336 for each of the years ended December31, 2008 and 2007, respectively. At December31, 2008, the Companys consolidated balance sheet included $149,380 in short-term debt relating to the Companys Variable Interest Entity. See Note 15 (Consolidation of Variable Interest Entity) for more info< rmation. On March2, 2009, the Company repaid this short-term debt. On January5, 2009, HSBC Bank plc (HSBC) notified the Company that, effective December31, 2008, it had terminated an uncommitted credit agreement totaling 100million euros between HSBC and MasterCard Europe. There were no borrowings under this agreement at December31, 2008. )Consolidation of Variable Interest Entity� Note 15. Consolidation of Variable Interest Entity As discussed in Note 8 (Property, Plant and Equipment), the Company executed a new lease agreement for Winghaven, effective March1, 2009. In conjunction with entering into the new lease agreement, the Company terminated the original synthetic lease agreement for Winghaven, which included a ten-year term with MCI OFallon 1999 Trust (the Trust) as the lessor. The Trust, which was a variable interest entity, was established for a single discrete purpose, was not an operating entity, had a limited life and had no employees. The Trust had financed Winghaven through a combination of a third party equity investment in the amount of $4,620 and the issuance of 7.36 percent Series A Senior Secured Notes (the Secured Notes) with an aggregate principal amount of $149,380 and a maturity date of September1, 2009. MasterCard International executed a guarantee of 85.15 percent of the aggregate principal amount of the Secured Notes outstanding, for a total of $127,197. Additionally, upon the occurrence of specific events of default, MasterCard International guaranteed the repayment of the total outstanding principal and interest on the Secured Notes and agreed to take ownership of the facility. During 2004, MasterCard Incorporated became party to the guarantee and assumed certain covenant compliance obligations, including financial reporting and maintenance of a certain level of consolidated net worth. As the primary beneficiary of the Trust, the Company had consolidated the assets and liabilities of the Trust in its consolidated financial statements. Effective March1, 2009, the aggregate outstanding principal and accrued interest on the Secured Notes was repaid, the investor equity was redeemed, and the guarantee obligations of MasterCard International and MasterCard Incorporated were terminated. The aggregate principal amount and interest plus a make-whole amount repaid to the holders of Secured Notes and the equity investor was $164,572. The make-whole amount of $4,874 included in the repayment represented the discounted value of the remaining principal and interest on the Secured Notes, less the outstanding principal balance and an equity investor premium. Also as a result of the transaction, $154,000 of short-term municipal bonds classified as held-to-maturity investments were cancelled. The Trust is no longer considered a variable interest entity and is no longer consolidated by the Company. During the period when the Trust was a consolidated entity within the years ended December31, 2009, 2008 and 2007, its operations had no impact on net income. However, interest income and interest expense were increased by $6,773, $11,390 and $11,390 in 2009, 2008 and 2007, respectively. The Company did not provide any financial or other support that it was not contractually required to provide during each of the years ended December31, 2009, 2008 and 2007. %1/1/2009 - 12/31/2009 USD / shares � Note 16. Stockholders Equity Initial Public Offering (IPO) On May31, 2006, MasterCard transitioned to a new ownership and governance structure upon the closing of its IPO and issuance of a new class of the Companys common stock. Prior to the IPO, the Companys capital stock was privately held by certain of its customers that were principal members of MasterCard International. All stockholders held shares of ClassA redeemable common stock. Immediately prior to the closing of the IPO, MasterCard Incorporated filed an amended and restated certificate of incorporation (the certificate of incorporation). The certificate of incorporation authorized 4,501,000 shares, consisting of the following new classes of capital sto< ck: Class Par Value Authorized Shares (inmillions) Dividend and Voting Rights A $.0001pershare 3,000 One vote per share Dividend rights B $.0001 per share 1,200 Non-voting Dividend rights M $.0001 per share 1 Generally non-voting, but can elect up to three, but not more than one-quarter, of the members of the Companys Board of Directors and approve specified significant corporate actions (e.g., the sale of all of the assets of the Company) No dividend rights Preferred $.0001 per share 300 No shares issued or outstanding. Dividend and voting rights are to be determined by the Board of Directors of the Company upon issuance. The certificate of incorporation also provided for the immediate reclassification of all of the Companys 99,978 outstanding shares of existing ClassA redeemable common stock, causing each of its existing stockholders to receive 1.35 shares of the Companys newly issued Class B common stock for each share of common stock that they held prior to the reclassification as well as a single share of Class M common stock. The Company paid stockholders an aggregate of $27 in lieu of issuing fractional shares that resulted from the reclassification. This resulted in the issuance of 134,969 shares of Class B common stock and 2 shares of Class M common stock. The Company issued 66,135 newly authorized shares of ClassA common stock in the IPO, including 4,614 shares sold to the underwriters pursuant to an option to purchase additional shares, at a price of $39 per share. The Company received net proceeds from the IPO of approximately $2,449,910. The Company issues and retires one share of Class M common stock at the inception or termination, respectively, of each principal membership of MasterCard International. All outstanding Class M common stock will be transferred to the Company and retired and unavailable for issue or reissue on the day on which the outstanding shares of Class B common stock represent less than 15% of the total outstanding shares of ClassA common stock and Class B common stock. The MasterCard Foundation In connection and simultaneously with the IPO, the Company issued and donated 13,497 newly authorized shares of ClassA common stock to The MasterCard Foundation (the Foundation). The Foundation is a private charitable foundation incorporated in Canada that is controlled by directors wh&Share Based Payment and Other Benefits� Note 17. Share Based Payment and Other Benefits In May 2006, the Company implemented the MasterCard Incorporated 2006 Long-Term Incentive Plan (the LTIP). The LTIP is a shareholder-approved omnibus plan that permits the grant of various types of equity awards to employees. The Company has granted restricted stock units (RSUs), non-qualified stock options (options) and Performance Stock Units (PSUs) under the LTIP. The RSUs generally vest after three to four years. The options, which expire ten years from the date of grant, generally vest ratably over four years from the date of grant. The PSUs generally vest after three years. Additionally, the Company made a one-time grant to all non-executive management employees upon the IPO for a total of approximately 440 RSUs (the Founders Grant). The Founders Grant RSUs vested three years from the date of grant. The Company uses the straight-line method of attribution for expensing equity awards. Compensation expense is recorded net of estimated forfeitures. Estimates are adjusted as appropriate. Upon termination of employment, excluding retirement, all of a participants unvested awards are forfeited. However, when a participant terminates employment due to retirement, the participant generally retains all of their awards without providing additional service to the Company. Eligible retirement is dependent upon age and years of service, as follows: age 55 with ten years of service, age 60 with five years of service and age 65 with two years of service. Compensation expense is recognized over the shorter of the vesting peri< ods stated in the LTIP, or the date the individual becomes eligible to retire. There are 11,550 shares of ClassA common stock reserved for equity awards under the LTIP. Although the LTIP permits the issuance of shares of Class B common stock, no such shares have been reserved for issuance. Shares issued as a result of option exercises and the conversions of RSUs are expected to be funded with the issuance of new shares of ClassA common stock. Stock Options The fair value of each option is estimated on the date of grant using a Black-Scholes option pricing model. The following table presents the weighted-average assumptions used in the valuation and the resulting weighted-average fair value per option granted for the years ended December31: 2009 2008 2007 Risk-free rate of return 2.5 % 3.2 % 4.4 % Expected term (in years) 6.17 6.25 6.25 Expected volatility 41.7 % 37.9 % 30.9 % Expected dividend yield 0.4 % 0.3 % 0.6 % Weighted-average fair value per option granted $ 71.03 $ 78.54 $ 41.03 The risk-free rate of return was based on the U.S. Treasury yield curve in effect on the date of grant. The Company utilizes the simplified method for calculating the expected term of the option based on the vesting terms and the contractual life of the option. The expected volatility for options granted during 2009 was based on the average of the implied volatility of MasterCard and a blend of the historical volatility of MasterCard and the historicCommitments� Note 18. Commitments At December31, 2009, the Company had the following future minimum payments due under non-cancelable agreements: Total Capital Leases Operating Leases Sponsorship, Licensing Other 2010 $ 283,987 $ 7,260 $ 25,978 $ 250,749 2011 146,147 4,455 17,710 123,982 2012 108,377 3,221 15,358 89,798 2013 59,947 36,838 10,281 12,828 2014 13,998 8,371 5,627 Thereafter 25,579 22,859 2,720 Total $ 638,035 $ 51,774 $ 100,557 $ 485,704 Included in the table above are capital leases with imputed interest expense of $7,929 and a net present value of minimum lease payments of $43,845. In addition, at December31, 2009, $63,616 of the future minimum payments in the table above for leases, sponsorship, licensing and other agreements was accrued. Consolidated rental expense for the Companys office space, which is recognized on a straight line basis over the life of the lease, was approximately $39,586, $42,905 and $35,614 for the years ended December31, 2009, 2008 and 2007, respectively. Consolidated lease expense for automobiles, computer equipment and office equipment was $9,137, $7,694 and $7,679 for the years ended December31, 2009, 2008 and 2007, respectively. In January 2003, MasterCard purchased a building in Kansas City, Missouri for approximately $23,572. The building is a co-processing data center which replaced a back-up data center in Lake Success, New York. During 2003, MasterCard entered into agreements with the City of Kansas City for (i)the sale-leaseback of the building and related equipment which totaled $36,382 and (ii)the purchase of municipal bonds for the same amount which have been classified as investment securities held-to-maturity. The agreements enabled MasterCard to secure state and local financial benefits. No gain or loss was recorded in connection with the agreements. The leaseback has been accounted for as a capital lease as the agreement contains a bargain purchase option at the end of the ten-year lease term on April1, 2013. The building and related equipment are being depreciated over their estimated economic life in accordance with the Companys policy. Rent of $1,819 is due annually and is equal to the interest due on the municipal bonds. The future minimum lease payments are $43,962 and are in< cluded in the table above. A portion of the building was subleased to the original building owner for a five-year term with a renewal option. As of December31, 2009, the future minimum sublease rental income is $3,312. (Obligations Under Litigation Settlements� Note 19. Obligations Under Litigation Settlements On October27, 2008, MasterCard and Visa Inc. (Visa) entered into a settlement agreement (the Discover Settlement) with Discover Financial Services, Inc. (Discover) relating to the U.S. federal antitrust litigation amongst the parties. The Discover Settlement ended all litigation among the parties for a total of $2,750,000. In July 2008, MasterCard and Visa had entered into a judgment sharing agreement that allocated responsibility for any judgment or settlement of the Discover action among the parties. Accordingly, the MasterCard share of the Discover Settlement was $862,500, which was paid to Discover in November 2008. In addition, in connection with the Discover Settlement, Morgan Stanley, Discovers former parent company, paid MasterCard $35,000 in November 2008, pursuant to a separate agreement. The net impact of $827,500 is included in litigation settlements for the year ended December31, 2008. On June24, 2008, MasterCard entered into a settlement agreement (the American Express Settlement) with American Express Company (American Express) relating to the U.S. federal antitrust litigation between MasterCard and American Express. The American Express Settlement ended all existing litigation between MasterCard and American Express. Under the terms of the American Express Settlement, MasterCard is obligated to make 12 quarterly payments of up to $150,000 per quarter beginning in the third quarter of 2008. MasterCards maximum nominal payments will total $1,800,000. The amount of each quarterly payment is contingent on the performance of American Expresss U.S. Global Network Services business. The quarterly payments will be in an amount equal to 15% of American Expresss U.S. Global Network Services billings during the quarter, up to a maximum of $150,000 per quarter. If, however, the payment for any quarter is less than $150,000, the maximum payment for subsequent quarters will be increased by the difference between $150,000 and the lesser amount that was paid in any quarter in which there was a shortfall. MasterCard assumes American Express will achieve these financial hurdles. MasterCard recorded the present value of $1,800,000, at a 5.75% discount rate, or $1,649,345 for the year ended December31, 2008. As of December31, 2009, the Company has six quarterly payments for a total of $900,000 remaining. In 2003, MasterCard entered into a settlement agreement (the U.S. Merchant Lawsuit Settlement) related to the U.S. merchant lawsuit described under the caption U.S. Merchant and Consumer Litigations in Note 21 (Legal and Regulatory Proceedings) and contract disputes with certain customers. Under the terms of the U.S. Merchant Lawsuit Settlement, the Company was required to pay $125,000 in 2003 and $100,000 annually each December from 2004 through 2012. On July1, 2009, MasterCard entered into an agreement (the Prepayment Agreement) with plaintiffs of the U.S. Merchant Lawsuit Settlement whereby MasterCard agreed to make a prepayment of its remaining $400,000 in payment obligations at a discounted amount of $335,000 on September30, 2009. The Company made the prepayment at the discounted a Income Tax� Note 20. Income Tax The total income tax provision for the years ended December31 is comprised of the following components: 2009 2008 2007 Current Federal $ 160,883 $ 118,387 $ 371,250 State and local 17,818 13,124 36,661 Foreign 240,022 223,143 183,127 418,723 354,654 591,038 Deferred Federal 307,614 (481,783 ) (8,666 ) State and local 20,968 2,002 5,429 Foreign 8,122 (4,171 ) (2,255 ) < 336,704 (483,952 ) (5,492 ) Total income tax expense (benefit) $ 755,427 $ (129,298 ) $ 585,546 The domestic and foreign components of earnings (loss) before income taxes for the years ended December31 are as follows: 2009 2008 2007 United States $ 1,481,934 $ (986,175 ) $ 959,977 Foreign 736,117 602,962 711,455 $ 2,218,051 $ (383,213 ) $ 1,671,432 MasterCard has not provided for U.S. federal income and foreign withholding taxes on approximately $1,257,946 of undistributed earnings from non-U.S. subsidiaries as of December31, 2009 because such earnings are intended to be reinvested indefinitely outside of the United States. If these earnings were distributed, foreign tax credits may become available under current law to reduce the resulting U.S. income tax liability, however, the amount of the tax and credits is not practically determinable. The provision for income taxes differs from the amount of income tax determined by applying the appropriate statutory U.S. federal income tax rate to pretax income (loss) for the years ended December31, as a result of the following: 2009 2008 2007 Amount Percent Amount Percent Amount Percent Income (loss) before income tax expense $ 2,218,051 $ (383,213 ) $ 1,671,432 Federal statutory tax 776,318 35.0 % (134,125 ) 35.0 % 585,001 35.0 % State tax effect, net of federal benefit 25,211 1.1 11,140 (2.9 ) 27,359 1.6 Foreign tax effect, net of federal benefit (21,737 ) (1.0 ) 1,969 (0.5 ) (12,069 ) (0.7 ) Non-deductible expenses and other differences (17,866 ) (0.8 ) 2,260 (0.7 ) (2,918 ) (0.2 ) Tax exempt income (6,499 ) (0.3 ) (10,542 ) 2.8 (11,827 ) (0.7 ) Income tax expense (benefit) $ 755,427 34.1 % $ (129,298 ) 33.7 % $ 585,546 35.0 % Effective Income Tax Rate The effective income tax rates for the years ended December31, 2009, 2008 and 2007 were 34.1%, 33.7% and 35.0%, respectively. The primary cause of the changes in the effective rates was due to the litigation settlement charges recorded in 2008, which resulted in a pretax loss i Legal and Regulatory Proceedings� Note 21. Legal and Regulatory Proceedings MasterCard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Therefore, the probability of loss and an estimation of damages are not possible to ascertain at present. Accordingly, except as discussed below, MasterCard has not established reserves for any of these proceedings. MasterCard has recorded liabilities for certain legal proceedings which have been settled through contractual agreements. Except as described below, MasterCard does not believe that any legal or regulatory proceedings to which it is a party would have a material impact on its results of operations, financial position, or cash flows. Although MasterCard believes that it has strong defenses for the litigations and regulatory proceedings described below, it could in the future incur judgments and/or fines, enter into settlements of claims or be required to change its business practices in ways that could have a material adverse effect on its results of operations, financial position or cash flows. Notwithstanding MasterCards belief, in the event it were found liable in a large class-action lawsuit or on the basis of a claim entitling the plaintiff to treble damages or under which it were jointly and severally liable, charges it may be required to record could be significant and < could materially and adversely affect its results of operations, cash flow and financial condition, or, in certain circumstances, even cause MasterCard to become insolvent. Moreover, an adverse outcome in a regulatory proceeding could result in fines and/or lead to the filing of civil damage claims and possibly result in damage awards in amounts that could be significant and could materially and adversely affect the Companys results of operations, cash flows and financial condition. Department of Justice Antitrust Litigation and Related Private Litigations In October 1998, the U.S. Department of Justice (DOJ) filed suit against MasterCard International, Visa U.S.A., Inc. and Visa International Corp. in the U.S. District Court for the Southern District of New York alleging that both MasterCards and Visas governance structure and policies violated U.S. federal antitrust laws. First, the DOJ claimed that dual governancethe situation where a financial institution has a representative on the Board of Directors of MasterCard or Visa while a portion of its card portfolio is issued under the brand of the other associationwas anti-competitive and acted to limit innovation within the payment card industry. Second, the DOJ challenged MasterCards Competitive Programs Policy (CPP) and a Visa bylaw provision that prohibited financial institutions participating in the respective associations from issuing competing proprietary payment cards (such as American Express or Discover). The DOJ alleged that MasterCards CPP and Visas bylaw provision acted to restrain competition. On October9, 2001, District Court Judge Barbara Jones issued an opinion upholding the legality and pr/Settlement and Travelers Cheque Risk Management� Note 22. Settlement and Travelers Cheque Risk Management MasterCard Internationals rules generally guarantee the payment of certain MasterCard, Cirrus and Maestro branded transactions between its principal members. The term and amount of the guarantee are unlimited. Settlement risk is the exposure to members under MasterCard Internationals rules (Settlement Exposure), due to the difference in timing between the payment transaction date and subsequent settlement. Settlement Exposure is estimated using the average daily card charges during the quarter multiplied by the estimated number of days to settle. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Companys settlement risk. Member-reported transaction data and the transaction clearing data underlying the settlement risk calculation may be revised in subsequent reporting periods. In the event that MasterCard International effects a payment on behalf of a failed member, MasterCard International may seek an assignment of the underlying receivables. Subject to approval by the Board of Directors, members may be charged for the amount of any settlement loss incurred during the ordinary activities of the Company. MasterCard requires certain members that are not in compliance with the Companys risk standards in effect at the time of review to post collateral, typically in the form of cash, letters of credit, and bank guarantees. This requirement is based on management review of the individual risk circumstances for each member that is out of compliance. In addition to these amounts, MasterCard holds collateral to cover variability and future growth in member programs. The Company also holds collateral to pay merchants in the event of merchant bank/acquirer failure. Although it is not contractually obligated under MasterCard Internationals rules to effect such payments to merchants, the Company may elect to do so to protect brand integrity. MasterCard monitors its credit risk portfolio on a regular basis and the adequacy of collateral on hand. Additionally, from time to time, the Company reviews its risk management methodology and standards. As such, the amounts of estimated settlement risk are revised as necessary. Estimated Settlement Exposure, and the portion of the Companys uncolla< teralized Settlement Exposure for MasterCard-branded transactions that relates to members that are deemed not to be in compliance with, or that are under review in connection with, the Companys risk management standards, were as follows: 2009 2008 MasterCard-branded transactions: Gross Settlement Exposure $ 26,373,185 $ 21,179,044 Collateral held for Settlement Exposure (2,759,105 ) (1,813,171 ) Net uncollateralized Settlement Exposure $ 23,614,080 $ 19,365,873 Uncollateralized Settlement Exposure attributable to non-compliant members $ 210,618 $ 56,795 Cirrus and Maestro transactions: Gross Settlement Exposure $ 3,433,112 $ 3,236,175 Foreign Exchange Risk Management� Note 23. Foreign Exchange Risk Management The Company enters into foreign currency forward contracts to manage risk associated with anticipated receipts and disbursements which are either transacted in a non-functional currency or valued based on a currency other than its functional currencies. The Company also enters into foreign currency forward contracts to offset possible changes in value due to foreign exchange fluctuations of assets and liabilities denominated in foreign currencies. The objective of this activity is to reduce the Companys exposure to transaction gains and losses resulting from fluctuations of foreign currencies against its functional currencies. On January1, 2009, the Company adopted the new disclosure requirements for derivative instruments and hedging activities. This adoption had no impact on the Companys financial position or results of operations; it required additional financial statement disclosures. The Company has applied these disclosure requirements on a prospective basis. Accordingly, disclosures related to periods prior to the date of adoption have not been presented. The Company does not designate foreign currency forward contracts as hedging instruments pursuant to the accounting standards for derivative instruments and hedging activities. The Company records the change in the estimated fair value of the outstanding forward contracts at the end of the reporting period to its consolidated balance sheet and consolidated statement of operations. As of December31, 2009, all contracts to purchase and sell foreign currency had been entered into with customers of MasterCard International. MasterCards forward contracts are classified by functional currency as summarized below: U.S. Dollar Functional Currency December31, 2009 December31, 2008 Notional Estimated FairValue1 Notional Estimated FairValue1 Commitments to purchase foreign currency $ 37,998 $ (463 )1 $ 292,538 $ 21,913 1 Commitments to sell foreign currency 50,296 (776 )1 154,187 12,227 1 Balance Sheet Location: Accounts Receivable $ 628 $ 34,227 Other Current Liabilities (1,867 ) (87 ) Euro Functional Currency December31, 2009 December31, 2008 Notional Estimated FairValue1 Notional Estimated FairValue1 Commitments to purchase foreign currency $ 16,122 $ (72) 1 $ $ Commitments to sell foreign currency 45,038 $ 37 1 66,405 (409) 1 Balance Sheet Location: Accounts Receivable 81 $ 290 Other Current Liabilities (116) (699) Amount and Location of Gain (Loss) RecognizedinIncomeduringtheYearEnded December31,2009 Derivatives Not Designated As Hedging Instruments Foreign Currency Forward Contracts General andadministrative $ (11,944) Revenues (6,087) Total $ (18,031) 1 Amounts represent gross fair value amounts while these amounts may be netted for actual balanceSegment Reporting� Note 24. Segment Re<porting MasterCard has one reportable segment, Payment Solutions. All of the Companys activities are interrelated, and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based upon analyses of MasterCard as one operating segment. The Chief Executive Officer has been identified as the chief operating decision-maker. Revenue by geographic market is based on the location of the Companys customer that issued the cards which are generating the revenue. Revenue generated in the U.S. was approximately 45.5%, 47.2% and 49.7% of net revenues in 2009, 2008 and 2007, respectively. No individual country, other than the U.S., generated more than 10% of total revenues in those periods. MasterCard does not maintain or measure long-lived assets by geographic location. MasterCard did not have any one customer that generated greater than 10% of net revenues in 2009, 2008 or 2007. Other Income� Note 25. Other Income During the year ended December31, 2009, the Company recognized a gain of approximately $14,000 on the prepayment of the Companys remaining obligation on a litigation settlement. During the year ended December31, 2008, the Company recognized $75,000, pre-tax, in other income, related to the termination of a customer business agreement for a customer exiting a specific line of business. During the year ended December31, 2007, the Company recognized $90,000, pre-tax, in other income related to a settlement agreement to discontinue its relationship with the organization which operates the World Cup soccer events and not sponsor the 2010 and 2014 World Cup soccer events. 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