Summary
This 8-K filing from American Express (AXP) on March 20, 2020, primarily discloses changes to their internal transfer pricing methodology and funding cost allocation, effective from the first quarter of 2020. These adjustments impact the presentation of revenues and expenses within their reportable operating segments (Global Consumer Services Group, Global Corporate Services, and Global Merchant and Network Services). Crucially, the company emphasizes that these changes have no effect on their consolidated net income, earnings per share, total assets, stockholders' equity, or regulatory capital. The filing provides revised historical segment data to reflect these changes, aiding investors in understanding segment performance under the new methodology without altering overall company financial results. The core of the disclosure relates to how discount revenue and certain other revenues are shared between their card issuing, network, and merchant businesses, as well as how funding costs for Card Member loans and receivables are allocated. These are accounting adjustments for internal reporting and segment performance analysis, not fundamental changes to the business or its overall financial health. Investors should note that while segment reporting will look different historically, the consolidated financial performance remains unchanged. The company has also updated a non-GAAP measure, the Net Interest Yield on Average Card Member loans, to reflect these methodological enhancements.
Key Highlights
- 1American Express has enhanced its transfer pricing methodology for revenue sharing among its card issuing, network, and merchant businesses.
- 2The company has also refined its methodology for allocating funding costs related to Card Member loan and receivable portfolios.
- 3These changes are effective for the first quarter of 2020, and prior period segment data has been revised for comparability.
- 4These adjustments have no impact on American Express's Consolidated Results of Operations, including Net Income, EPS, Total Assets, Stockholders' Equity, or regulatory capital.
- 5The changes will affect the presentation of Non-interest revenues, Interest expense, and Operating expenses within the company's reportable operating segments.
- 6A non-GAAP measure, Net Interest Yield on Average Card Member loans, has been updated to reflect these methodological enhancements.
- 7Exhibit 99.1 provides preliminary, revised historical segment financial information for Q1 2018 through Q4 2019.