American Express 2005 Annual Report Download - page 96

(Millions) 2005 2004
Deferred tax assets:
Reserves not yet deducted for
tax purposes $ 2,583 $ 2,204
Deferred compensation 156 49
Deferred cardmember fees 38 30
Net unrealized derivatives
losses —62
Other 105 148
Gross deferred tax assets $ 2,882 $ 2,493
Deferred tax liabilities:
Depreciation and amortization $ 533 $ 415
Deferred revenue 345 264
Asset securitizations 310 319
Net unrealized securities gains 88 191
Net unrealized derivatives gains 77 —
Deferred acquisition costs 43 41
Other 216 249
Gross deferred tax liabilities $ 1,612 $ 1,479
Net deferred tax assets $ 1,270 $ 1,014
The gross deferred tax assets are shown net of a valua-
tion allowance of $55 million and $28 million at
December 31, 2005 and 2004, respectively. The valua-
tion allowance relates to deferred tax assets associated
with non-U.S. operations.
Net income taxes paid by the Company (including
amounts related to discontinued operations) during
2005, 2004 and 2003 were $1.7 billion, $1.1 billion and
$1.2 billion, respectively, and include estimated tax pay-
ments and cash settlements relating to prior tax years.
The actual tax benefit realized for tax deductions from
stock option exercises which are recorded in additional
paid-in capital totaled $234 million, $158 million
and $60 million, respectively, for the years ended
December 31, 2005, 2004 and 2003.
Comprehensive income in the Consolidated Statements
of Shareholders’ Equity is presented net of the following
income tax provision (benefit) amounts:
Comprehensive Income Components
(Millions) 2005 2004 2003
Net unrealized securities losses $ (103) $ (92) $ (91)
Net unrealized derivative gains 139 152 60
Foreign currency translation
gains (losses) 29 11 (5)
Minimum pension liability (2) —18
Net income tax (benefit)
provision $63 $ 71 $ (18)
The table above excludes 2005 activity associated with
discontinued operations. Income tax provision (benefit)
amounts in 2005 on net unrealized securities gains, net
unrealized derivative losses and foreign currency trans-
lation adjustments included in accumulated other
comprehensive income associated with discontinued
operations were ($218) million, $15 million and
($8) million, respectively.
NOTE 18 Earnings Per Common Share
Basic EPS is computed using the average actual shares
outstanding during the period. Diluted EPS is basic EPS
adjusted for the dilutive effect of stock options, RSAs
and other financial instruments that may be converted
into common shares. The basic and diluted EPS
computations for the years ended December 31, are
as follows:
(Millions, except per share amounts) 2005 2004 2003
Numerator:
Income from continuing
operations $ 3,221 $ 2,686 $ 2,335
Income from discontinued
operations 513 830 665
Cumulative effect of
accounting change,
net of tax —(71) (13)
Net income $ 3,734 $ 3,445 $ 2,987
Denominator:
Basic: Weighted-average
shares outstanding
during the period 1,233 1,259 1,284
Add: Dilutive effect of
stock options, restricted
stock awards and other
dilutive securities 25 26 14
Diluted 1,258 1,285 1,298
Basic EPS:
Income from continuing
operations $ 2.61 $ 2.13 $ 1.82
Income from discontinued
operations 0.42 0.66 0.52
Cumulative effect of
accounting change,
net of tax —(0.05) (0.01)
Net income $ 3.03 $ 2.74 $ 2.33
Diluted EPS:
Income from continuing
operations $ 2.56 $ 2.09 $ 1.80
Income from discontinued
operations 0.41 0.65 0.51
Cumulative effect of
accounting change, net
of tax —(0.06) (0.01)
Net income $ 2.97 $ 2.68 $ 2.30
Notes to Consolidated
Financial Statements
AXP / AR.2005
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