American Express 2012 Annual Report Download - page 97

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s restructuring charges, net of revisions, by reportable operating segment and
Corporate & Other for the year ended December 31, 2012, and the cumulative amounts relating to the restructuring programs that were
in progress during 2012 and initiated at various dates between 2009 and 2012.
2012
Cumulative Restructuring Expense Incurred To Date On
In-Progress Restructuring Programs
(Millions)
Total Restructuring
Charges, net of
revisions Severance Other Total
USCS $26$ 83$ 6$ 89
ICS 54 128 1 129
GCS 156 272 17 289
GNMS 25 50 — 50
Corporate & Other 142 106 75 181(a)
Total $ 403 $ 639 $ 99 $ 738(b)
(a) Corporate & Other includes certain severance and other charges of $166 million related to Company-wide support functions which were not allocatedtothe
Company’s reportable operating segments, as these were corporate initiatives, which is consistent with how such charges were reported internally.
(b) As of December 31, 2012, the total expenses to be incurred for previously approved restructuring activities that were in progress are not expected to be materially
different than the cumulative expenses incurred to date for these programs.
NOTE 17
INCOME TAXES
The components of income tax expense for the years ended
December 31 included in the Consolidated Statements of Income
were as follows:
(Millions) 2012 2011 2010
Current income tax expense:
U.S. federal $ 982 $ 958 $ 532
U.S. state and local 189 156 110
Non-U.S. 445 434 508
Total current income tax expense 1,616 1,548 1,150
Deferred income tax expense (benefit):
U.S. federal 359 464 782
U.S. state and local 39 68 78
Non-U.S. (45) (23) (103)
Total deferred income tax expense 353 509 757
Total income tax expense on continuing
operations $ 1,969 $ 2,057 $ 1,907
Income tax benefit from discontinued
operations $—$ (36) $ —
A reconciliation of the U.S. federal statutory rate of 35 percent to
the Company’s actual income tax rate for the years ended
December 31 on continuing operations was as follows:
2012 2011 2010
U.S. statutory federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
Tax-exempt income (1.6) (1.5) (1.9)
State and local income taxes, net of
federal benefit 2.5 2.6 2.7
Non-U.S. subsidiaries earnings(a) (5.2) (4.4) (3.1)
Tax settlements(b) (0.2) (1.9) (1.3)
All other —(0.2) 0.6
Actual tax rates(a) 30.5% 29.6% 32.0%
(a) Results for all years primarily included tax benefits associated with the
undistributed earnings of certain non-U.S. subsidiaries that were deemed to be
reinvested indefinitely. In addition, 2012 and 2011 included tax benefits of $146
million and $77 million, which decreased the actual tax rates by 2.3 percent and
1.1 percent, respectively, related to the realization of certain foreign tax credits.
(b) Relates to the resolution of tax matters in various jurisdictions.
The Company records a deferred income tax (benefit) provision
when there are differences between assets and liabilities
measured for financial reporting and for income tax return
purposes. These temporary differences result in taxable or
deductible amounts in future years and are measured using the
tax rates and laws that will be in effect when such differences are
expected to reverse.
The significant components of deferred tax assets and liabilities
as of December 31 are reflected in the following table:
(Millions) 2012 2011
Deferred tax assets:
Reserves not yet deducted for tax purposes $ 3,828 $ 3,435
Employee compensation and benefits 761 760
Other 556 626
Gross deferred tax assets 5,145 4,821
Valuation allowance (162) (112)
Deferred tax assets after valuation allowance 4,983 4,709
Deferred tax liabilities:
Intangibles and fixed assets 1,218 1,013
Deferred revenue 403 382
Deferred interest 378 —
Other 526 439
Gross deferred tax liabilities 2,525 1,834
Net deferred tax assets $ 2,458 $ 2,875
A valuation allowance is established when management
determines that it is more likely than not that all or some portion
of the benefit of the deferred tax assets will not be realized. The
valuation allowances as of December 31, 2012 and 2011 are
associated with net operating losses and other deferred tax assets
in certain non-U.S. operations of the Company.
Accumulated earnings of certain non-U.S. subsidiaries, which
totaled approximately $8.5 billion as of December 31, 2012, are
intended to be permanently reinvested outside the United States.
The Company does not provide for federal income taxes on
foreign earnings intended to be permanently reinvested outside
the United States. Accordingly, federal taxes, which would have
aggregated approximately $2.6 billion as of December 31, 2012,
have not been provided on those earnings.
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