American Express 2012 Annual Report Download - page 74

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4
ACCOUNTS RECEIVABLE AND LOANS
As described below, the Company’s charge and lending payment
card products result in the generation of cardmember receivables
and cardmember loans, respectively.
CARDMEMBER AND OTHER RECEIVABLES
Cardmember receivables, representing amounts due from charge
payment card product customers, are recorded at the time a
cardmember enters into a point-of-sale transaction with a
merchant. Each charge card transaction is authorized based on
its likely economics reflecting a cardmember’s most recent credit
information and spend patterns. Additionally, global spend
limits are established to limit the maximum exposure for the
Company.
Charge card customers generally must pay the full amount
billed each month.
Cardmember receivable balances are presented on the
Consolidated Balance Sheets net of reserves for losses (refer to
Note 5), and include principal and any related accrued fees.
Accounts receivable as of December 31, 2012 and 2011 were as
follows:
(Millions) 2012 2011
U.S. Card Services(a) $ 21,124 $ 20,645
International Card Services 7,778 7,222
Global Commercial Services(b) 13,671 12,829
Global Network & Merchant Services(c) 193 194
Cardmember receivables(d) 42,766 40,890
Less: Reserve for losses 428 438
Cardmember receivables, net $ 42,338 $ 40,452
Other receivables, net(e) $ 3,576 $ 3,657
(a) Includes $7.5 billion of gross cardmember receivables available to settle
obligations of a consolidated VIE as of both December 31, 2012 and 2011.
(b) Includes $476 million and $459 million of gross cardmember receivables
available to settle obligations of a consolidated VIE as of December 31, 2012
and 2011, respectively. Also includes $913 million and $563 million due
from airlines, of which Delta Air Lines (Delta) comprises $676 million and
$340 million as of December 31, 2012 and 2011, respectively.
(c) Includes receivables primarily related to the Company’s International
Currency Card portfolios.
(d) Includes approximately $12.9 billion and $12.8 billion of cardmember
receivables outside the United States as of December 31, 2012 and 2011,
respectively.
(e) Other receivables primarily represent amounts related to (i) purchased joint
venture receivables, (ii) certain merchants for billed discount revenue,
(iii) the Company’s travel customers and suppliers, and (iv) other
receivables due to the Company in the ordinary course of business. As of
December 31, 2011, other receivables also included investments that
matured on December 31, 2011, but which did not settle until January 3,
2012. Other receivables are presented net of reserves for losses of $86 million
and $102 million as of December 31, 2012 and 2011, respectively.
CARDMEMBER AND OTHER LOANS
Cardmember loans, representing amounts due from lending
payment card product customers, are recorded at the time a
cardmember enters into a point-of-sale transaction with a
merchant or when a charge card customer enters into an
extended payment arrangement with the Company. The
Company’s lending portfolios primarily include revolving loans
to cardmembers obtained through either their credit card
accounts or the lending on charge feature of their charge card
accounts. These loans have a range of terms such as credit limits,
interest rates, fees and payment structures, which can be revised
over time based on new information about cardmembers and in
accordance with applicable regulations and the respective
product’s terms and conditions. Cardmembers holding revolving
loans are typically required to make monthly payments based on
pre-established amounts. The amounts that cardmembers choose
to revolve are subject to finance charges.
Cardmember loans are presented on the Consolidated Balance
Sheets net of reserves for losses (refer to Note 5), and include
principal, accrued interest and fees receivable. The Company’s
policy generally is to cease accruing interest on a cardmember
loan at the time the account is written off, and establish reserves
for interest that the Company believes will not be collected.
Loans as of December 31, 2012 and 2011 consisted of:
(Millions) 2012 2011
U.S. Card Services(a) $ 55,953 $ 53,686
International Card Services 9,236 8,901
Global Commercial Services 40 34
Cardmember loans 65,229 62,621
Less: Reserve for losses 1,471 1,874
Cardmember loans, net $ 63,758 $ 60,747
Other loans, net(b) $ 551 $ 419
(a) Includes approximately $32.7 billion and $33.8 billion of gross cardmember
loans available to settle obligations of a consolidated VIE as of December 31,
2012 and 2011, respectively.
(b) Other loans primarily represent loans to merchants and a store card loan
portfolio whose billed business is not processed on the Company’s network.
Other loans are presented net of reserves for losses of $20 million and $18
million as of December 31, 2012 and 2011, respectively.
72