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reserves are adjusted when there is more information
available, a change in circumstance or when an event
occurs necessitating a change to the reserves.
Recently Issued Accounting Standards
Effective July 1, 2005, the Company adopted SFAS No.
123(R), using the modified prospective application as
discussed earlier.
In December 2004, the FASB issued FASB Staff Position
(FSP) FAS 109-2, “Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004 (the Act)” (FSP
FAS 109-2), which would allow additional time beyond
the financial reporting period of enactment to evaluate
the effect of the Act on the Company’s plan for reinvest-
ment or repatriation of foreign earnings for purposes of
calculating the income tax provision. The Company did
not repatriate any foreign earnings as a result of the Act.
Effective January 1, 2004, the Company adopted the
American Institute of Certified Public Accountants
Statement of Position 03-1, “Accounting and Reporting
by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts and for Separate Accounts”
(SOP 03-1). The adoption of SOP 03-1 as of January 1,
2004 resulted in a cumulative effect of accounting
change which related to discontinued operations, that
reduced first quarter 2004 results by $71 million ($109
million pretax).
On November 3, 2005, the FASB issued FSP FAS 115-1,
“The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments.” The Com-
pany believes its current procedures are consistent with
the requirements of FSP FAS 115-1.
In January 2003, the FASB issued FIN 46 which
addresses consolidation by business enterprises of vari-
able interest entities and was subsequently revised in
September 2003. The consolidation of FIN 46-related
entities resulted in a cumulative effect of accounting
change, related to discontinued operations, that
reduced 2003 net income through a non-cash charge of
$13 million ($20 million pretax). See Note 6 for further
discussion of variable interest entities.
NOTE 2 Discontinued Operations
On September 30, 2005, the Company completed the
distribution of Ameriprise common stock to the
Company’s shareholders in a tax-free transaction for
U.S. federal income tax purposes. The Ameriprise
distribution was treated as a non-cash dividend to
shareholders and, as such, reduced the Company’s
shareholders’ equity by $7.7 billion, which included an
approximate $1.1 billion capital contribution to
Ameriprise in connection with the distribution. Accord-
ingly, the Company’s Consolidated Balance Sheet as of
December 31, 2005 reflects the non-cash dividend and
a decrease in assets and liabilities.
In addition, during 2005, the Company completed
certain dispositions (including TBS) for cash proceeds
of approximately $190 million. These dispositions
resulted in a net after-tax gain of approximately $63 mil-
lion during the third quarter of 2005.
The operating results and assets and liabilities of
discontinued operations are presented separately in the
Company’s Consolidated Financial Statements and the
notes to the Consolidated Financial Statements have been
adjusted to exclude discontinued operations. Summary
operating results of the discontinued operations for the
years ended December 31, 2005, 2004 and 2003 were:
(Millions) 2005
(a)
2004 2003
Revenues
(b)
$ 5,813 $ 7,161 $ 6,298
Pretax income from
discontinued operations
(c)
$ 690 $ 1,120 $ 832
(a)2005 results are lower than previous periods reflecting dispositions as of
September 30, 2005.
(b)Includes revenues from certain dispositions other than Ameriprise
(principally TBS) of approximately $325 million, $398 million and
$382 million for the three years ended December 31, 2005, 2004 and
2003, respectively.
(c)Income tax provision for the years ended December 31, 2005, 2004 and
2003 was $177 million, $290 million and $167 million, respectively.
In addition to income from discontinued operations, in
2004 and 2003, the Company recognized charges from
the cumulative effects of accounting changes related to
discontinued operations (See Note 1). Included in the
assets that were discontinued as of September 30, 2005
was approximately $670 million of goodwill.
Notes to Consolidated
Financial Statements
AXP / AR.2005
[73 ]