American Express 2006 Annual Report Download - page 85

[ 83 ]
notes to consolidated fi nancial statements
american express company
liabilities. SFAS No. 157 also expands disclosure
requirements regarding methods used to measure
fair value and the effects on earnings. SFAS No.
157 is effective as of the first quarter of 2008.
• SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—Including an
amendment of FASB Statement No. 115” (SFAS
No. 159), provides companies with an option to
report selected financial assets and liabilities at
fair value. SFAS No. 159 is effective as of the first
quarter of 2008.
NOTE 2 DISCONTINUED OPERATIONS
On June 30, 2006, the Company completed the sale of
its card and merchant-related activities and international
banking activities in Brazil for approximately $470
million. The international banking portion of the
transaction generated an after-tax loss of $22 million
reported in discontinued operations for banking activities
the Company exited in Brazil. These banking activities
previously were reflected in the International Card &
Global Commercial Services segment. Financial results
for these operations, prior to the second quarter of
2006, were not reclassified as discontinued operations
because such results are not material. Refer to Note 1
for a discussion of the impact of the sale of the Brazilian
card and merchant-related activities, which are included
in continuing 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 as of December 31, 2005, which included an
approximate $1.1 billion capital contribution to Ameriprise
in connection with the distribution. The Company’s
Consolidated Balance Sheet as of December 31, 2005,
reflects the non-cash dividend and a decrease in assets
and liabilities.
Also during 2005, the Company completed certain
dispositions including the sale of TBS for cash proceeds
of approximately $190 million. These dispositions
resulted in a net after-tax gain of approximately $63
million during the third quarter of 2005.
The operating results and cash flows 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 unless otherwise
noted. Summary operating results of the discontinued
operations for the years ended December 31 were:
(Millions) 2006 2005 2004
Net revenues $9$5,813 $7,161
Pretax (loss) income from
discontinued operations $(68) $ 690 $1,120
Income tax (benefit) provision (46) 177 290
(Loss) Income from discontinued
operations, net of tax $(22) $ 513 $ 830
Less than $1 million of goodwill was included in the
assets of the Brazilian banking activities that were
discontinued as of June 30, 2006. Approximately $670
million of goodwill related to Ameriprise and certain
dispositions, including TBS, was included in the assets
that were discontinued as of September 30, 2005.
NOTE 3 INVESTMENTS
The following is a summary of investments at December 31:
(Millions) 2006 2005
Available-for-Sale, at fair value:
State and municipal obligations $ 6,863 $ 7,120
U.S. Government and agencies
obligations(a) 5,077 5,033
Mortgage and other asset-backed
securities 3,791 3,838
Corporate debt securities 2,512 3,202
Foreign government bonds and
obligations 680 716
Other 1,772 1,194
Total Available-for-Sale, at fair value 20,695 21,103
Trading, at fair value 295 231
Tota l $20,990 $ 21,334
(a) U.S. Government and agencies obligations at December 31, 2006,
included $716 million of securities loaned out on an overnight
basis to financial institutions under the securities lending program
described on page 86. At December 31, 2005, there were no
securities loaned out.