American Express 2015 Annual Report Download - page 153

NONRECURRING FAIR VALUE MEASUREMENTS
The Company has certain assets that are subject to measurement at fair value on a nonrecurring basis. For these
assets, measurement at fair value in periods subsequent to their initial recognition is applicable if determined to be
impaired. During the fourth quarter of 2015, the Company recorded a $384 million impairment charge, consisting of 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, which was insignificant for the year ended December 31, 2015. Refer
to Note 2 for a description of the Company’s 2015 impairment charges. During the year ended December 31, 2014, the
Company did not have any material assets that were measured at fair value due to impairment.
NOTE 16
GUARANTEES
The Company provides Card Member protection plans that cover losses associated with purchased products, as
well as certain other guarantees and indemnifications in the ordinary course of business. For the Company, guarantees
primarily consist of card and travel protection programs, including:
• Return Protection — refunds the price of qualifying purchases made with the eligible cards where the merchant
will not accept the return for up to 90 days from the date of purchase; and
• Merchant Protection — protects Card Members primarily against non-delivery of goods and services, usually in
the event of bankruptcy or liquidation of a merchant. When this occurs, the Card Member may dispute the
transaction for which the Company will generally credit the Card Member’s account. If the Company is unable to
collect the amount from the merchant, it will bear the loss for the amount credited to the Card Member. The
largest component of the maximum potential future payments relates to Card Member transactions associated
with travel-related merchants, primarily through business arrangements where the Company has remitted
payment to such merchants for a Card Member travel purchase that has not yet been used or “flown.”
In relation to its maximum potential undiscounted future payments as shown in the table that follows, to date the
Company has not experienced any significant losses related to guarantees or indemnifications. The Company’s initial
recognition of these instruments is at fair value. In addition, the Company establishes reserves when a loss is probable
and the amount can be reasonably estimated.
The following table provides information related to such guarantees and indemnifications as of December 31:
Maximum potential
undiscounted future
payments (a)
(Billions) Related liability (b) (Millions)
Type of Guarantee 2015 2014 2015 2014
Return and Merchant Protection .......................................... $42 $37 $49 $44
Other (c) ................................................................ 6837 67
Total .................................................................. $48 $45 $86 $111
(a) Represents the notional amounts that could be lost under the guarantees and indemnifications if there were a total default by the guaranteed or
indemnified parties. The maximum potential undiscounted future payments for Merchant Protection are measured using management’s best
estimate of maximum exposure, which is based on all eligible claims in relation to annual billed business volumes.
(b) Included in Other liabilities on the Company’s Consolidated Balance Sheets.
(c) Primarily includes guarantees related to the Company’s purchase protection, real estate and business dispositions.
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