American Express 2015 Annual Report Download - page 120

Premises and Equipment
Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation.
Costs incurred during construction are capitalized and are depreciated once an asset is placed in service. Depreciation
is generally computed using the straight-line method over the estimated useful lives of the assets, which range from 3
to 10 years for equipment, furniture and building improvements. Premises are depreciated based upon their estimated
useful life at the acquisition date, which generally ranges from 40 to 50 years.
Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining term of
the leased facility or the economic life of the improvement, which ranges from 5 to 10 years. The Company maintains
operating leases worldwide for facilities and equipment. Rent expense for facility leases is recognized ratably over the
lease term, and includes adjustments for rent concessions, rent escalations and leasehold improvement allowances.
The Company recognizes lease restoration obligations at the fair value of the restoration liabilities when incurred, and
amortizes the restoration assets over the lease term.
Certain costs associated with the acquisition or development of internal-use software are also recorded in
Premises and equipment. Once the software is ready for its intended use, these costs are amortized on a straight-line
basis over the software’s estimated useful life, generally 5 years.
OTHER SIGNIFICANT ACCOUNTING POLICIES
The following table identifies the Company’s other significant accounting policies, the Note and page where the
Note can be found.
Significant Accounting Policy Note Number Note Title Page
Accounts Receivable ................................. Note 3 Accounts Receivable and Loans ...................... Page 111
Loans .............................................. Note 3 Accounts Receivable and Loans ...................... Page 111
Reserves for Losses . ................................. Note 4 Reserves for Losses ................................ Page 118
Investment Securities ................................ Note 5 Investment Securities ............................... Page 120
Asset Securitizations ................................. Note 6 Asset Securitizations ............................... Page 122
Membership Rewards ................................ Note 10 Other Liabilities .................................... Page 129
Stock-based Compensation ........................... Note 11 Stock Plans ........................................ Page 130
Retirement Plans . . . ................................. Note 12 Retirement Plans ................................... Page 132
Legal Contingencies . ................................. Note 13 Commitments and Contingencies .................... Page 132
Derivative Financial Instruments and Hedging Activities . . . Note 14 Derivatives and Hedging Activities .................... Page 134
Fair Value Measurements ............................. Note 15 Fair Values ........................................ Page 138
Income Taxes ....................................... Note 21 Income Taxes ...................................... Page 148
Regulatory Matters and Capital Adequacy ............... Note 23 Regulatory Matters and Capital Adequacy ............. Page 151
Reportable Operating Segments ....................... Note 25 Reportable Operating Segments and Geographic
Operations ...................................... Page 154
RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2014, the Financial Accounting Standards Board (FASB) issued new accounting guidance on revenue
recognition. The guidance establishes the principles to apply to determine the amount and timing of revenue
recognition, specifying the accounting for certain costs related to revenue, and requiring additional disclosures about
the nature, amount, timing and uncertainty of revenues and related cash flows. The guidance, as amended,
supersedes most of the current revenue recognition requirements, and is effective January 1, 2018, with early adoption
as of January 1, 2017, permitted. The Company does not intend to adopt the new standard early and continues to
evaluate the impact this guidance, including the method of implementation, will have on its financial position, results of
operations and cash flows, among other items.
In January 2016, the FASB issued new accounting guidance on the recognition and measurement of financial
assets and financial liabilities. The standard, which is effective January 1, 2018, makes targeted changes to current
GAAP, specifically to the classification and measurement of equity securities, and to certain disclosure requirements
associated with the fair value of financial instruments. The Company is currently evaluating the impact this guidance
will have on its financial position, results of operations and cash flows, among other items.
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