Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2015

Disclosure Text Block Abstract

Acquisitions

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.