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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2015
Disclosure Text Block Abstract |
Basis of Presentation | NOTE 1 Summary of Significant Accounting Policies The Company American Express Company (the Company) is a global service s company that provides customers with access to products, insights and experiences that enrich lives and build business success. The Company’s principal products and services are charge and credit payment card products and travel-related services offered t o consumers and businesses around the world. Business travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel (GBT JV). Prior to July 1, 2014, these business travel operations were wholly own ed. The Company’s various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various chan nels, including direct mail, on li ne applications, in-house and third-party sales forces a nd direct response advertising. Principles of Consolidation The Consolidated Financial Statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Significant intercompany transactions are eliminated. The Company consolidates entities in which it holds a “controlling financial interest.” For voting interest entities, the Company is considered to hold a controll ing financial interest when it is able to exercise control over the investees’ operating and financial decisions. For variable interest entities (VIEs), the Company is considered to hold a controlling financial interest when it is determined to be the prim ary beneficiary. A primary beneficiary is the party that has both: (1) the power to direct the activities that most significantly impact that entity’s economic performance, and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The determination of whether an entity is a VIE is based on the amount and characteristics of the entity’s equity. Entities in which the Company’s voting interest in common equity does not provide i t with control, but allows the Company to exert significant influence over the operating and financial decisions, are accounted for under the equity method. All other investments in equity securities, to the extent they are not considered marketable securi ties, are accounted for under the cost method. Foreign Currency Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of the reporting period. The resulting translation adjustments, along with any related qualifying hedge and tax effects, are included in accumulated other comprehensive income (loss) (AOCI), a component of shareholders’ equity. Translation adjustments, including qualifying hedge and tax effects, are reclas sified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other tha n the functional currency are reported net in the Company’s Consolidated Statements of Income, in other non-interest revenue, interest income, interest expense, or other expenses, depending on the nature of the activity. Net foreign currency transaction ga ins amounted to approximately $68 million, $44 million and $108 million in 2015, 2014 and 2013, respectively. Amounts Based on Estimates and Assumptions Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on management’s assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for Card Member losses on loans and receivables, the proprietary point liability for Membership Rewards costs, fair value measurement, goodwill and income taxes. These accounting estimates reflect the best judgment of management, but actual results could differ. Income statement Discount Revenue Discount revenue represents the amount earned by the Company on transactions occurring at merchants with which the Company, or a Global Network Services (GNS) partner, has entered into a card acceptance agreement for facilitating transactions between the merchants and the Company’s Card Members. The discount fee generally is deducted from the payment to the merchant and recorded as discount revenue at the time the charge is captured. Net Card Fees Card fees, net of deferred acquisition costs and a reserve for projected r efunds for Card Member cancellation, are deferred and recognized on a straight-line basis over the 12-month card membership period as Net Card Fees in the Consolidated Statements of Income. The unamortized net card fee balance is reported in Other Liabilit ies on the Consolidated Balance Sheets (refer to Note 10). Travel Commissions and Fees The Company earns travel commissions and fees by charging clients transaction or management fees for selling and arranging travel. Client transaction fee revenue is recognized at the time the client books the travel arrangements. The Company’s travel suppliers (e.g., airlines, hotels and car rental companies) pay commissions and fees on tickets issued, sales and other services based o n contractual agreements. Commissions and fees from travel suppliers are generally recognized at the time a ticket is purchased or over the term of the contract, if not transaction specific. Commissions and fees that are based on services rendered (e.g., h otel stays and car rentals) are recognized based on usage. Other Commissions and Fees Other commissions and fees include foreign currency conversion fees, Card Member delinquency fees, service fees and other card-related assessments, which are recognize d primarily in the period in which they are charged to the Card Member (refer to Note 19). In addition, service fees are also earned from other customers (e.g., merchants) for a variety of services and are recognized when the service is performed, which is generally in the period the fee is charged. Also included are fees related to the Company’s Membership Rewards program, which are deferred and recognized over the period covered by the fee, generally one year. The unamortized Membership Rewards fee balanc e is included in Other Liabilities on the Consolidated Balance Sheets (Refer to Note 10). Contra-revenue The Company regularly makes payments through contractual arrangements with merchants, corporate payments clients, Card Members and certain other cust omers. These payments, including cash rebates and statement credits provided to Card Members, are generally classified as contra-revenue unless a specifically identifiable benefit (e.g., goods or services) is received by the Company or its Card Members in consideration for that payment, and the fair value of such benefit is determinable and measurable. If no such benefit is identified, then the entire payment is classified as contra-revenue and included in the Consolidated Statements of Income in the revenu e line item where the related transactions are recorded (e.g., Discount revenue, Travel commissions and fees, and Other commissions and fees). If such a benefit is identified, then the payment is classified as expense up to the estimated fair value of the benefit. Interest Income Interest on Card Member loans is assessed using the average daily balance method. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding, in accordance with the terms of the applicable account agreement, until the outstanding balance is paid or written off. Interest and dividends on investment securities primarily relate to the Company’s performing fixed-income securities. Interest income is recognized as earned using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so that a constant rate of return is recognized on the investment security’s outstanding balance. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be made as scheduled. Interest on deposits with banks and other is recognized as earned, and primarily relates to the placement of cash, in excess of near-term funding requirements, in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts. Interest Expense Interest expense includes interest incurred primarily to fund Card Member receivables and loans, general corporate purposes and liquidity needs, and is recognized as incurred. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily rel ates to interest expense on the Company’s long-term financing and short-term borrowings, as well as the realized impact of derivatives hedging interest rate risk on the Company’s long-term debt. Expenses Marketing and promotion expense includes advertisi ng costs, which are expensed in the year in which the advertising first takes place. Balance Sheet Cash and Cash Equivalents Cash and cash equivalents include cash and amounts due from banks, interest-bearing bank balances, including securities purchase d under resale agreements, and other highly liquid investments with original maturities of 90 days or less. Goodwill Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. The Company allocates goodwill to its reporting units for the purpose of impairment testing. A reporting unit is defined as an operating segment, or a business that is one level below an operating segment for which discrete financial information is regula rly reviewed by the operating segment manager. The Company evaluates goodwill for impairment annually as of June 30, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of one or more of the Comp any’s reporting units below its carrying value. The Company performs an impairment evaluation of goodwill using a two-step process. The first step identifies whether there is a potential impairment by comparing the fair value of a reporting unit to the car rying amount, including goodwill. If the carrying amount of a reporting unit exceeds the fair value, the second step of the impairment test is performed to determine the implied fair value of goodwill. An impairment loss is recognized based on the amount t hat the carrying amount of goodwill exceeds the implied fair value. Prior to completing the interim assessment of goodwill for impairment under the second step, the Company performs a recoverability test of certain long-lived assets by assessing the recove rability of the asset values based on the cash flows generated by the relevant assets or asset groups. If the assets are not recoverable, an impairment loss is recognized based on the amount that the carrying value of the asset or asset group exceeds its f air value. See further details in Other Intangible Assets herein. Goodwill impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting unit can be supported by its fair value using widely accepted valuation techniques. The Company uses a combination of the income approach (discounted cash flows) and market approach (market multiples). When preparing discounted cash flow models under the income approach, the Company uses internal forecasts to estim ate future cash flows expected to be generated by the reporting units. To discount these cash flows, the Company uses the expected cost of equity, determined by using a capital asset pricing model. The Company believes the discount rates used appropriately reflect the risks and uncertainties in the financial markets generally and specifically in the Company’s internally developed forecasts. When using market multiples under the market approach, the Company applies comparable publicly traded companies’ multi ples (e.g., earnings, revenues) to its reporting units’ actual results. Other Intangible Assets Intangible assets, primarily customer relationships, are amortized over their estimated useful lives of 1 to 22 years on a straight-line basis. The Company reviews long-lived assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recove rable and exceeds the asset or asset group’s fair value. Certain long-lived assets, such as capitalized software development costs, are included in Premises and equipment. The Company reviews these assets for impairment using the same impairment methodology used for intangible assets. Premises and Equipment Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation. Costs incurred during construction are capitalized and are depreciated once an asset is placed in service. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 10 years for equipment, furniture and building improvements. Premises are depreciated based upon their estimated useful life at the acquisition date, which generally ranges from 40 to 50 years. Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining term o f the leased facility or the economic life of the improvement, which ranges from 5 to 10 years. The Company maintains operating leases worldwide for facilities and equipment. Rent expense for facility leases is recognized ratably over the lease term, and includes adjustments for rent concessions, rent escalations and leasehold improvement allowances. The Company recognizes lease restoration obligations at the fair value of the restoration liabilities when incurred, and amortizes the res toration assets over the lease term. Certain costs associated with the acquisition or development of internal-use software are also recorded in Premises and equipment. Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s estimated useful life, generally 5 years. Other Significant Accounting Policies The following table identifies the Company’s other significant accounting policies, the Note and page where the Note can be found.
|  | Note |  |  |  |
Significant Accounting Policy | Number | Note Title | Page
Accounts Receivable |  | Note 3 |  | Accounts Receivable and Loans |  | Page 116
Loans |  | Note 3 |  | Accounts Receivable and Loans |  | Page 116
Reserves for Losses |  | Note 4 |  | Reserves for Losses |  | Page 124
Investment Securities |  | Note 5 |  | Investment Securities |  | Page 126
Asset Securitizations |  | Note 6 |  | Asset Securitizations |  | Page 128
Membership Rewards |  | Note 10 |  | Other Liabilities |  | Page 135
Stock-based Compensation |  | Note 11 |  | Stock Plans |  | Page 136
Retirement Plans |  | Note 12 |  | Retirement Plans |  | Page 138
Legal Contingencies |  | Note 13 |  | Commitments and Contingencies |  | Page 138
Derivative Financial Instruments and Hedging Activities |  | Note 14 |  | Derivatives and Hedging Activities |  | Page 140
Fair Value Measurements |  | Note 15 |  | Fair Values |  | Page 144
Income Taxes |  | Note 21 |  | Income Taxes |  | Page 154
Regulatory Matters and Capital Adequacy |  | Note 23 |  | Regulatory Matters and Capital Adequacy |  | Page 157
Reportable Operating Segments |  | Note 25 |  | Reportable Operating Segments and Geographic Operations |  | Page 160
Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued new accounting gu idance on revenue recognition. The guidance establishes the principles to apply to determine the amount and timing of revenue recognition, specifying the accounting for certain costs related to revenue, and requiring additional disclosures about the nature, amount, timing and uncertainty of revenues and related cash flows. The guidance, as amended, supersedes most of the current revenue recognition requirements, and is effective January 1, 2018, with early adoption as of January 1, 2017, permitted. The Company does not intend to adopt the new standard early and continues to evaluate the impact this guidance, including the method of implementation, will have on its financial position, results of operations and cash flows, among other items. In January 2016, the FASB issued new accounting guidance on the recognition and measure ment of financial assets and financial liabilities. The standard, which is effective January 1, 2018, makes targeted changes to current GAAP, specifically to the classification and measurement of equity securities, and to certain disclosure requirements as sociated with the fair value of financial instruments. The Company is currently evaluating the impact this guidance will have on its financial position, results of operations a nd cash flows, among other items. Classification of Various Items In the first quarter of 2015, the Company changed the classification related to certain payments to partners, reducing both discount revenue and marketing and promotion expense. Prior period amounts have been reclassified to conform to the current period presentation. None of the prior period financial statements were materially misstated from these misclassifications. Certain other insignificant reclassifications of prior period amounts have been made to conform to the current period presentation.

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