Job Title American Express Revision 24 Serial Date / Time Saturday, February 28, 2009 2:32 AM Job Title American Express Revision 24 Serial Date / Time Saturday, February 28, 2009 2:32 AM Job Number 174761 Type Current Page No. 68 Operator PM2 Job Number 174761 Type Current Page No. 69 Operator PM2

notes to consolidated financial statements american express company

notes to consolidated and to have the same status and regulator as a majority of the Company’s peers. Taking this action allowed the Company to financial statements participate more fully in some government programs, which provides greater flexibility during uncertain economic times. note 1 The Company converting to a bank holding company will not summary of significant change its payments focused model, nor its core businesses. accounting policies As a result of converting to a bank holding company, the company the Company has made certain changes to its Consolidated Statements of Income and Consolidated Balance Sheets and American Express Company (the Company), a bank holding reclassified certain prior period amounts in order to conform to company, is a leading global payments and travel company. the current presentation of its financials in accordance with the The Company’s principal products and services are charge and Securities and Exchange Commission’s regulations applicable to credit payment card products and travel-related services offered bank holding companies. These changes and reclassifications to consumers and businesses around the world. The Company’s within the Consolidated Statements of Income include (i) new businesses are organized into two customer-focused groups, the categories of interest income and interest expense, and changes Global Consumer Group and the Global Business-to-Business to the component classifications thereof, (ii) the reclassification Group. The Global Consumer Group’s range of products and of card fees on lending products from net card fees to interest services include charge and credit card products for consumers and fees on loans, (iii) separate disclosure of certain financial and small businesses worldwide primarily through its U.S. statement line items, which are presented in Note 23, and (iv) bank subsidiaries and affiliates; consumer travel services; certain other placement and line title changes. The changes and stored value products such as Travelers Cheques and and reclassifications within the Consolidated Balance Sheets prepaid products. The Global Business-to-Business Group include (i) the breakout of interest and non-interest bearing cash offers business travel, corporate cards and other expense accounts into separate lines, (ii) the reclassification of unearned management products and services; network services for the income on loans from other liabilities to a contra-asset, and (iii) Company’s network partners; and merchant acquisition and certain other line title changes. These reclassifications had no merchant processing, point-of-sale, servicing and settlement impact on the Company’s consolidated net income. and marketing products and services for merchants. The Company’s various products and services are sold globally to principles of consolidation diverse customer groups, including consumers, small businesses, The Consolidated Financial Statements of the Company are middle-market companies, and large corporations. These prepared in conformity with U.S. generally accepted accounting products and services are sold through various channels principles (GAAP). All significant intercompany transactions including direct mail, on-line applications, targeted sales forces, are eliminated. and direct response advertising. The Company consolidates all voting interest entities in reportable operating segments which the Company holds a greater than 50 percent voting interest. Entities in which the Company’s voting interest is The Company is principally engaged in two customer focused 20 percent or more but 50 percent or less are accounted for groups, the Global Consumer Group and the Global Business- under the equity method. All other investments are accounted to-Business Group. The U.S. Card Services (USCS) and for under the cost method unless the Company determines that International Card Services (ICS) segments are aligned within it exercises significant influence over an entity by means other the Global Consumer Group, and the Global Commercial than voting rights, in which case the entity is accounted for Services (GCS) and the Global Network & Merchant Services under the equity method. (GNMS) segments are aligned within the Global Business-to- Investments with Variable Interest Entities (VIEs) are Business Group. Refer to Note 24 for additional information. limited. The Company generally utilizes VIEs in connection bank holding company with its cardmember receivable securitizations within the USCS During the fourth quarter of 2008, the Company became a segment. The Company consolidates any VIEs for which it is bank holding company under the Bank Holding Company considered to be the primary beneficiary. The determination Act of 1956, and the Federal Reserve Board (Federal Reserve) of whether an entity is a VIE is based on the amount and became the Company’s primary federal regulator. As such, characteristics of the entity’s equity. An enterprise is required the Company is subject to the Federal Reserve’s regulations, to consolidate a VIE when it has a variable interest for which policies and minimum capital standards. it is deemed to be the primary beneficiary, that is, it will absorb The primary reasons for the Company converting to a bank a majority of the VIE’s expected losses or receive a majority of holding company were to become a Federal Reserve member the VIE’s expected residual returns.

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