American Express 2009 Annual Report Download - page 99

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
NOTE 11
OTHER LIABILITIES
The following is a summary of other liabilities as of
December 31:
(Millions) 2009 2008
Membership Rewards liabilities $ 4,303 $ 4,643
Employee-related liabilities(a) 1,877 2,026
Rebate accruals(b) 1,309 1,255
Deferred charge card fees, net 1,034 1,041
Other(c) 5,287 5,627
Total $13,810 $14,592
(a) Employee-related liabilities include employee benefit plan
obligations and incentive compensation.
(b) Rebate accruals include payments to third-party card issuing
partners and cash-back reward costs.
(c) Other includes accruals for general operating expenses,
advertising and promotion, derivatives, restructuring and
reengineering reserves, and minority interest in subsidiaries.
Membership Rewards
The Membership Rewards program allows enrolled
cardmembers to earn points that can be redeemed for a broad
range of rewards, including travel, entertainment, retail
certificates, and merchandise. The Company establishes
balance sheet liabilities which represent the estimated cost of
points earned to date that are ultimately expected to be
redeemed. These liabilities reflect management’s best estimate
of future redemption costs. An ultimate redemption rate and
weighted average cost per point are key factors used to
approximate the Membership Reward liability. Management
uses models to estimate ultimate redemption rates based on
historical redemption data, card product type, year of
program enrollment, enrollment tenure and card spend levels.
The weighted-average cost per point is determined using
actual redemptions during the previous 12 months, adjusted
as appropriate for recent changes in redemption costs.
The provision for the cost of Membership Rewards points
is included in marketing, promotion, rewards and
cardmember services. The Company continually evaluates its
reserve methodology and assumptions based on
developments in redemption patterns, cost per point
redeemed, contract changes, and other factors.
DEFERRED CHARGE CARD FEES
The carrying amount of deferred charge card and other fees,
net of direct acquisition costs and reserves for membership
cancellations as of December 31 were as follows:
(Millions) 2009 2008
Deferred charge card and other fees(a) $1,213 $1,233
Deferred direct acquisition costs (60) (78)
Reserves for membership cancellations (119) (114)
Deferred charge card fees and other, net of direct
acquisition costs and reserves $1,034 $1,041
(a) Includes deferred fees for Membership Reward program
participants.
97