American Express 2001 Annual Report Download - page 48

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axp_46
FINANCIAL REVIEW
AEB had approximately $5.3 billion outstanding in worldwide loans at December 31,2001 and 2000. Current year activities included
a $900 million decrease in corporate banking loans, as AEB continued to focus on reducing exposure in this activity while empha-
sizing consumer and private banking loans, which rose by $800 million ($1.0 billion excluding the effect of asset sales and securi-
tizations in the consumer loan portfolio). In addition,financial institution loans decreased by $100 million. Other banking activities,
such as securities, unrealized gains on foreign exchange and derivatives contracts, various contingencies and market placements
added approximately $7.3 billion and $7.4 billion to AEB’s credit exposures at December 31, 2001 and 2000, respectively. In Decem-
ber 2001 and January 2002,the Argentine government mandated the conversion of dollar denominated assets into pesos and simul-
taneously devalued the peso. AEB’s credit exposures to Argentina at December 31, 2001 were $56 million, which includes loans of
$25 million.
CORPORATE AND OTHER
Corporate and Other reported net expenses of $187 million, $180 million and $174 million in 2001, 2000 and 1999, respectively.
2001 results include $14 million pretax ($9 million after-tax) of the restructuring charges noted earlier.
Results for 2001, 2000 and 1999 include a $46 million pretax ($39 million after-tax) preferred stock dividend based on earnings
from Lehman Brothers. The dividend was offset by business building initiatives in each year, and costs related to the Y2K issue
in 1999.
OTHER REPORTING MATTERS
ACCOUNTING DEVELOPMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 142,“Goodwill and Other Intangible Assets,”effective for fiscal years beginning after December 15,2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impair-
ment tests. The company adopted the new rules as of January 1, 2002. As a result, goodwill is no longer being amortized. The
impact on the company’s net income in 2001 and 2000 from goodwill amortization was $106 million ($82 million after-tax) and
$98 million ($77 million after-tax), respectively. While the company is currently evaluating the provisions of the new rules related
to impairment testing, it does not expect that such tests will result in any material effect on the company’s results of operations
or financial position.
In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This Statement addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retire-
ment costs. The company is required to adopt SFAS No. 143 as of January 1, 2003. The adoption of this Statement is not expected
to have a material impact on the company’s financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which
supercedes FASB No. 121,“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” This
new Statement also supercedes certain aspects of Accounting Principles Board Opinion No. 30, “Reporting the Results of Opera-
tions
—
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions,” with regard to reporting the effects of a disposal of a segment of a business. The new rule requires oper-
ating losses from discontinued operations to be reported in future periods, as incurred. In addition, businesses below the operat-
ing segment level may qualify for discontinued operations treatment. The company adopted the provisions of the Statement as of
January 1, 2002, which will primarily affect the company if and when qualifying future business dispositions occur.