American Express 1998 Annual Report Download - page 38

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36
The accompanying Consolidated Financial Statements
include the accounts of American Express Company and
its subsidiaries (the Company). All significant intercom-
pany transactions are eliminated. Some amounts are
based on estimates and assumptions, e.g., reserves for
Cardmember Receivables and Loans; Deferred Acqui-
sition Costs; and Insurance and Annuity Reserves. These
reflect the best judgment of management and actual
results could differ.
Certain amounts from prior years have been reclass-
ified to conform to the current presentation.
REVENUES
Cardmember Lending Net Finance Charge Revenue is
presented net of interest expense of $653 million,
$604 million and $507 million for the years ended
December 31, 1998, 1997 and 1996, respectively. Interest
and Dividends is presented net of interest expense related
primarily to the Company’s international banking activ-
ities of $572 million, $588 million and $536 million
for the years ended December 31, 1998, 1997 and
1996, respectively.
MARKETING AND PROMOTION
The Company expenses advertising costs in the year in
which the advertising first takes place.
CASH AND CASH EQUIVALENTS
The Company has defined cash equivalents to include
time deposits with original maturities of 90 days or less,
excluding those that are restricted by law or regulation.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
Separate account assets and liabilities are funds held for
the exclusive benefit of variable annuity and variable life
insurance contract holders. The Company receives invest-
ment management fees, mortality and expense assurance
fees, minimum death benefit guarantee fees and cost of
insurance charges from the related accounts.
ACCOUNTING CHANGES
In 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, “Reporting
Comprehensive Income.” Comprehensive income consists
of net income and other comprehensive income; the latter
includes unrealized gains and losses on available-for-sale
securities and foreign exchange translation adjustments
and is presented in the Consolidated Statements of
Shareholders’ Equity. The adoption of SFAS No. 130
had no effect on shareholders’ equity. Prior year financial
statements have been reclassified to conform to the SFAS
No. 130 requirements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 2 INVESTMENTS
The following is a summary of investments included in
the Consolidated Balance Sheets at December 31:
(millions) 1998 1997
Held to Maturity, at amortized cost $ 10,526 $ 11,871
Available-for-Sale, at fair value 26,764 23,727
Investment mortgage loans (fair value: 1998, $4,089; 1997, $4,026) 3,840 3,831
Trading 169 219
Total $ 41,299 $ 39,648