American Express 2008 Annual Report Download - page 102

notes to consolidated financial statements
american express company
100
The Company also has contingent obligations to make
payments under contractual agreements entered into as part
of the ongoing operation of the Company’s business, primarily
with co-brand partners. The contingent obligations under
such arrangements were approximately $6.1 billion as of
December 31, 2008.
The Company leases certain facilities and equipment under
noncancelable and cancelable agreements. Total rental expense
amounted to $337 million, $300 million, and $297 million in
2008, 2007, and 2006, respectively. At December 31, 2008, the
minimum aggregate rental commitment under all noncancelable
operating leases (net of subleases of $15 million) was:
(Millions)
2009 $ 254
2010 233
2011 191
2012 166
2013 152
Thereafter 1,526
Total $2,522
At December 31, 2008, the Company’s future minimum lease
payments under capital leases or other similar arrangements is
approximately $11 million per annum from 2009 through 2013
and $62 million thereafter.
note 17
fair values of financial
instruments
SFAS No. 107, “Disclosures About Fair Value of Financial
Instruments” (SFAS No. 107), requires the disclosure of the
estimated fair value of financial instruments. A financial
instrument is defined as cash, evidence of an ownership in an
e n t i t y, o r a c o n t r a c t be t we e n t w o e n t i t i e s t o d e l i v e r c a sh o r a n o t h e r
financial instrument or to exchange other financial instruments.
The disclosure requirements of SFAS No. 107 exclude leases,
affiliate investments, pension and benefit obligations, insurance
contracts, and all non-financial instruments.
The following table discloses fair value information for the
Company’s financial instrument assets and liabilities, included
in the scope of SFAS No. 107, as of December 31:
(Rounded to nearest billion) 2008 2007
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Financial Instrument Assets:
Assets for which carrying values
equal or approximate fair value $73 $73 $65 $ 66
Loans $41 $41 $53 $ 54
Financial Instrument Liabilities:
Liabilities for which carrying
values equal or approximate fair
value $45 $44 $53 $ 53
Long-term debt $60 $56 $55 $ 54
The fair values of these financial instruments are estimates
based upon market conditions and perceived risks as of
December 31, 2008 and 2007, and require management
judgment. These figures may not be indicative of their future
fair values. The fair value of the Company cannot be estimated
by aggregating the amounts presented.
The following methods were used to determine estimated
fair values.
financial instrument assets for which
carrying values equal or approximate
fair value
Financial assets for which carrying values equal or approximate
fair values include cash and cash equivalents, cardmember
receivables, accrued interest, and certain other assets. For these
assets, the carrying values approximate fair value because these
are short-term in duration or variable rate in nature.
Investments
Investments are recorded at fair value on the Consolidated
Balance Sheets with unrealized gains and losses recorded in
accumulative other comprehensive income (loss) or earnings
depending upon the classification of securities as available-for-
sale or trading. The recognized gains and losses are recognized
in the Consolidated Statements of Income upon disposition of
the securities or when management determines that a decline
in value is other-than-temporary. Refer to Note 5 for carrying
and fair value information regarding investments.
Derivative Financial Instruments
Derivative financial instruments are recorded at fair value on the
Consolidated Balance Sheets, with gains and losses recognized
in the Consolidated Statements of Income or Consolidated
Balance Sheets based upon the nature of the derivative. Refer
to Note 14 for fair value information regarding derivative
financial instruments.