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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7
OTHER ASSETS
The following is a summary of other assets as of December 31:
(Millions) 2014 2013
Goodwill $3,024$3,198
Deferred tax assets, net(a) 2,110 2,443
Prepaid expenses(b) 1,626 1,998
Other intangible assets, at amortized cost 854 817
Derivative assets(a) 711 329
Restricted cash(c) 384 486
Other 2,633 1,957
Total $ 11,342 $ 11,228
(a) Refer to Notes 21 and 14 for a discussion of deferred tax assets, net and derivative assets, respectively, as of December 31, 2014 and 2013. Derivative assets
reflect the impact of master netting agreements. For 2014, $96 million of foreign deferred tax liabilities is reflected in Other Liabilities.
(b) Includes prepaid miles and reward points acquired primarily from airline partners of approximately $1.1 billion and $1.5 billion as of December 31, 2014 and
2013, respectively, including approximately $0.6 billion and $0.9 billion, respectively, from Delta.
(c) Includes restricted cash of approximately $64 million and $58 million as of December 31, 2014 and 2013, respectively, which is primarily held for coupon and
certain asset-backed securitization maturities.
GOODWILL
Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. The
Company assigns goodwill to its reporting units for the purpose of impairment testing. A reporting unit is defined as an operating segment,
or a business that is one level below an operating segment for which discrete financial information is regularly reviewed by the operating
segment manager. The Company evaluates goodwill for impairment annually as of June 30 and between annual tests if events occur or
circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The goodwill
impairment test utilizes a two-step approach. The first step in the impairment test identifies whether there is potential impairment by
comparing the fair value of a reporting unit to the carrying amount, including goodwill. If the fair value of a reporting unit is less than its
carrying amount, the second step of the impairment test is required to measure the amount of any impairment loss. As of December 31, 2014
and 2013, goodwill was not impaired and there were no accumulated impairment losses.
Goodwill impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting unit
can be supported by its fair value using widely accepted valuation techniques. The Company uses a combination of the income approach
(discounted cash flows) and market approach (market multiples).
When preparing discounted cash flow models under the income approach, the Company uses internal forecasts to estimate future cash
flows expected to be generated by the reporting units. Actual results may differ from forecasted results. The Company calculates discount
rates based on the expected cost of equity financing, estimated using a capital asset pricing model, to discount future cash flows for each
reporting unit. The Company believes the discount rates used appropriately reflect the risks and uncertainties in the financial markets
generally and specifically in the Company’s internally developed forecasts. When using market multiples under the market approach, the
Company applies comparable publically traded companies’ multiples (e.g. earnings, revenues) to its reporting units’ actual results.
The changes in the carrying amount of goodwill reported in the Company’s reportable operating segments and Corporate & Other were as
follows:
(Millions) USCS ICS GCS GNMS
Corporate &
Other Total
Balance as of January 1, 2013 $ 175 $ 1,031 $ 1,544 $ 160 $ 271 $ 3,181
Acquisitions ————— —
Dispositions ————— —
Other, including foreign currency translation (1) 21 (1) — (2) 17
Balance as of December 31, 2013 $ 174 $ 1,052 $ 1,543 $ 160 $ 269 $ 3,198
Acquisitions ————— —
Dispositions ——(102)——(102)
Other, including foreign currency translation — (70) — — (2) (72)
Balance as of December 31, 2014 $ 174 $ 982 $ 1,441 $ 160 $ 267 $ 3,024
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