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AMERICAN EXPRESS COMPANY
2014 FINANCIAL REVIEW
BUSINESS SEGMENT RESULTS OVERVIEW
We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed
by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution
channels, geographic considerations (primarily U.S. versus non-U.S.) and regulatory considerations. Refer to Note 25 of the Consolidated
Financial Statements for additional discussion of the products and services by segment.
Results of the business segments essentially treat each segment as a stand-alone business. The management reporting process that derives
these results allocates revenue and expense using various methodologies as described below.
Refer to the “Glossary of Selected Terminology” for the definitions of certain key terms and related information appearing in this section.
TOTAL REVENUES NET OF INTEREST EXPENSE
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the USCS, ICS and
GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card
Members; within the GNMS segment, discount revenue generally reflects the network and acquirer component of the overall discount
revenue. Net card fees and travel commissions and fees are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense
represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.
PROVISIONS FOR LOSSES
The provisions for losses are directly attributable to the segment in which they are reported.
EXPENSES
Marketing and promotion expenses are included in each segment based on actual expenses incurred, with the exception of brand advertising,
which is primarily reflected in the GNMS and USCS segments. Rewards and Card Member services expenses are included in each segment
based on actual expenses incurred within each segment.
Salaries and employee benefits and other operating expenses reflect expenses such as professional services, occupancy and equipment and
communications incurred directly within each segment. In addition, expenses related to support services, such as technology costs, are
allocated to each segment primarily based on support service activities directly attributable to the segment. Other overhead expenses, such as
staff group support functions, are allocated from Corporate & Other to the other segments based on a mix of each segment’s direct
consumption of services and relative level of pretax income.
CAPITAL
Each business segment is allocated capital based on established business model operating requirements, risk measures and regulatory capital
requirements. Business model operating requirements reflect capital needed to support operations and specific balance sheet items. The risk
measures reflect considerations for credit, market and operational risk.
INCOME TAXES
An income tax provision (benefit) is allocated to each business segment based on the effective tax rates applicable to various businesses that
comprise the segment.
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