What are the main changes American Express is making to its financial reporting?

American Express is changing how it presents its Consolidated Statements of Income and certain credit statistics. Key changes include reporting interest income and expense on a gross basis (instead of net), separating provisions for losses and benefits into their own section, and revising how credit metrics for the charge card business are calculated to better reflect internal risk management practices.

Do these reporting changes affect American Express's financial performance or overall financial health?

No, the company explicitly states that these presentation and disclosure changes have no impact on its previously reported consolidated pretax income, net income, total assets, total liabilities, or total shareholders' equity. The changes are primarily about how information is displayed and calculated, not about fundamental changes to performance or financial position. Similarly, the new method for reporting credit statistics does not indicate a change in the company's underlying credit quality or reserve adequacy.

Why is American Express making these changes?

These revisions are being made in connection with discussions the company has had with the staff of the U.S. Securities and Exchange Commission (SEC) related to a review of its prior filings. The changes aim to improve transparency and align reporting with SEC guidance and internal management practices.

Will these changes affect the company's long-term revenue growth rate target?

No, the company stated that the presentation changes do not affect its long-term revenue growth rate target of at least 8 percent on average and over time. The 'Revenues net of interest expense' will remain the key metric for this target.

AXP 8-K: Regulation FD — Mar 30, 2007

Summary

This 8-K filing from American Express Company (AXP), dated March 30, 2007, primarily announces changes to the presentation of its Consolidated Statements of Income and the reporting of certain credit statistics, effective for the first quarter of 2007. These changes, made in consultation with the SEC staff, involve presenting interest income and expense on a gross basis rather than net, separating provisions for losses and benefits, and revising how certain credit metrics for the charge card business are calculated and reported. Importantly, the company states these presentation changes do not impact previously reported consolidated pretax income, net income, assets, liabilities, or shareholders' equity, nor do they alter management's view of underlying credit quality or the adequacy of reserves. The filing also notes that the calculation of the ratio of earnings to fixed charges will be adjusted to reflect the gross interest expense presentation. Additionally, a computational error correction in the ratio of net finance charge revenue to average loans has been made, which is stated to have a minimal impact on historical trends. Discussions with the SEC regarding segment data aggregation are ongoing and may lead to future reporting changes, though consolidated results will remain unaffected. Investors should note that these are primarily presentation and disclosure adjustments, not fundamental changes to the company's financial performance or risk management practices.

Key Highlights

1American Express will revise its Consolidated Statements of Income presentation starting Q1 2007, moving from net to gross reporting of interest income and expense.
2Provisions for losses and benefits will now be presented in a separate section, previously included within expenses.
3Changes in income statement presentation do not affect consolidated pretax income, net income, total assets, liabilities, or shareholders' equity.
4Credit statistics for the charge card business will be reported using a method more aligned with internal credit risk management and reserve practices.
5The company clarified that the new credit statistic reporting does not indicate a change in credit quality, risk profile, or reserve adequacy.
6The calculation for the ratio of earnings to fixed charges will be updated to align with the new gross interest expense presentation.
7An ongoing discussion with the SEC regarding segment data aggregation may lead to future changes in how operating segments are reported, but will not impact consolidated results.

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Mar 30, 2007)

Summary

Key Highlights

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