American Express 2014 Annual Report Download - page 115

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents changes in unrecognized tax benefits:
(Millions) 2014 2013 2012
Balance, January 1 $1,044$ 1,230 $ 1,223
Increases:
Current year tax positions 4124 51
Tax positions related to prior years 111 176 64
Decreases:
Tax positions related to prior years (181) (371) (44)
Settlements with tax authorities (67) (94) (25)
Lapse of statute of limitations (1) (21) (37)
Effects of foreign currency translations (1) —(2)
Balance, December 31 $909$ 1,044 $ 1,230
Included in the unrecognized tax benefits of $0.9 billion, $1.0 billion and $1.2 billion for December 31, 2014, 2013 and 2012 are
approximately $412 million, $427 million and $452 million, respectively that, if recognized, would favorably affect the effective tax rate in a
future period.
The Company believes it is reasonably possible that its unrecognized tax benefits could decrease within the next 12 months by as much as
$489 million principally as a result of potential resolutions of prior years’ tax items with various taxing authorities. The prior years’ tax items
include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution of taxable income to a
particular jurisdiction or jurisdictions. Of the $489 million of unrecognized tax benefits, approximately $369 million relates to amounts that
if recognized would be recorded to shareholders’ equity and would not impact the Company’s results of operations or the effective tax rate.
Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision. During the years ended
December 31, 2014, 2013 and 2012, the Company recognized benefits of approximately $19 million, $31 million and $8 million, respectively,
of interest and penalties. The Company has approximately $126 million and $144 million accrued for the payment of interest and penalties as
of December 31, 2014 and 2013, respectively.
NOTE 22
EARNINGS PER COMMON SHARE (EPS)
The computations of basic and diluted EPS for the years ended December 31 were as follows:
(Millions, except per share amounts) 2014 2013 2012
Numerator:
Basic and diluted:
Net income $ 5,885 $ 5,359 $ 4,482
Earnings allocated to participating share awards(a) (46) (47) (49)
Net income attributable to common shareholders $5,839$ 5,312 $ 4,433
Denominator:(a)
Basic: Weighted-average common stock 1,045 1,082 1,135
Add: Weighted-average stock options(b) 676
Diluted 1,051 1,089 1,141
Basic EPS $5.58$4.91$ 3.91
Diluted EPS $5.56$4.88$ 3.89
(a) The Company’s unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered
participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on participating securities and
any undistributed earnings considered to be attributable to participating securities. The related participating securities are similarly excluded from the
denominator.
(b) The dilutive effect of unexercised stock options excludes 0.2 million, 0.1 million and 7.6 million options from the computation of EPS for the yearsended
December 31, 2014, 2013 and 2012, respectively, because inclusion of the options would have been anti-dilutive.
For the years ended December 31, 2014, 2013 and 2012, the Company met specified performance measures related to the Subordinated
Debentures of $750 million issued in 2006, and maturing in 2036. If the performance measures were not achieved in any given quarter, the
Company would be required to issue common shares and apply the proceeds to make interest payments.
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