American Express 2015 Annual Report Download - page 121

CLASSIFICATION OF VARIOUS ITEMS
In the first quarter of 2015, the Company changed the classification related to certain payments to partners,
reducing both discount revenue and marketing and promotion expense. Prior period amounts have been reclassified
to conform to the current period presentation. None of the prior period financial statements were materially misstated
from these misclassifications. Certain other insignificant reclassifications of prior period amounts have been made to
conform to the current period presentation.
NOTE 2
BUSINESS EVENTS
GLOBAL BUSINESS TRAVEL TRANSACTION
On June 30, 2014, the Company completed a transaction to establish a non-consolidated joint venture comprising
the former Global Business Travel (GBT) operations of the Company and an external cash investment. As a result of
this transaction, the Company deconsolidated the GBT net assets, effective June 30, 2014, and began accounting for
the GBT JV as an equity method investment reported in Other assets within the Consolidated Balance Sheets. Prior to
the deconsolidation, the carrying amount of GBT’s assets and liabilities were not material to the Company’s financial
position and its operations were reported within the Global Commercial Services (GCS) segment.
LOANS AND RECEIVABLES HELD FOR SALE
During the fourth quarter of 2015, it was determined the Company would sell the Card Member loans and
receivables related to its cobrand partnerships with Costco Wholesale Corporation (Costco) in the United States and
JetBlue Airways Corporation (JetBlue) (the HFS portfolios). The sale of the JetBlue portfolio is subject to customary
closing conditions, and is expected to be consummated in the first quarter of 2016. The sale of the Costco portfolio is
subject to the outcome of ongoing discussions, and is expected to be consummated around mid-year 2016. The gains
on the sales of the two portfolios will be recognized upon consummation of the sales.
As a result of the determination, the HFS portfolios are presented as held for sale (HFS) on the Consolidated
Balance Sheets within Card Member loans and receivables HFS. The HFS portfolios were transferred at the net
carrying amount, inclusive of the related reserves for losses of $0.2 billion, which approximates the lower of cost or fair
value in the aggregate, and which will also be the measurement basis applied until consummation of the sales. Card
Member loans and receivables HFS at December 31, 2015, totaled $15.0 billion, of which $13.9 billion relates to the
Costco portfolio and $1.1 billion relates to the JetBlue portfolio. Changes in the valuation of the HFS portfolios are
recognized in Other expenses beginning on December 1, 2015. The Company will continue to recognize discount
revenue, interest income, and other revenues and expenses related to the portfolios in the respective income
statement line items while the portfolios are HFS.
GOODWILL AND TECHNOLOGY IMPAIRMENT
As discussed in Note 1, the Company evaluates goodwill for impairment annually, or more frequently if events
occur or circumstances change that would more likely than not reduce the fair value of one or more of the Company’s
reporting units below its carrying value. Based on its annual assessment, the Company determined that goodwill was
not impaired. During the fourth quarter of 2015, the Company announced changes to its management organizational
structure under which reconsideration of the Company’s Prepaid Services business (a reporting unit within Enterprise
Growth (EG), which is included in Corporate and Other), occurred. As a result, the Company determined that sufficient
indicators of potential impairment of goodwill existed and performed an impairment evaluation. In performing the two-
step impairment evaluation, it was determined the carrying value of the Prepaid Services business’ goodwill exceeded
its implied fair value and the Company recognized an impairment loss. The fair value of the Prepaid Services business
asset group was measured based on an income approach (discounted cash flow valuation methodology), with the
assistance of a third-party valuation firm. Prior to completing the assessment of goodwill for impairment, the
Company performed a recoverability test of certain long-lived assets in the Prepaid Services business and determined
that certain long-lived assets, primarily technology assets, were not recoverable. As a result, during the fourth quarter
of 2015, the Company recorded a $384 million impairment charge, comprising a $219 million write-down of the entire
balance of goodwill in the Prepaid Services business and a $165 million write-down of technology and other assets to
fair value. These charges are reported in Other expenses.
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