Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2019

Summary Of Significant Accounting Policies [Line Items]

Basis of Presentation

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These accounting estimates reflect the best judgment of management, but actual results could differ.

Recently Adopted Accounting Standards

Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance for the recognition of credit losses on financial instruments, effective January 1, 2020. The guidance introduces a new credit reserving methodology known as the Current Expected Credit Loss (CECL) methodology, which differs significantly from the incurred loss approach used today and will alter the estimation process, inputs and assumptions used in estimating credit losses. The CECL methodology requires measurement of expected credit losses for the estimated life of the financial instrument, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. At the date of adoption, the change in reserves will be recorded in retained earnings as a cumulative-effect adjustment.

Credco continues to evaluate the impact the new guidance will have on its financial position and results of operations. As part of Credco’s evaluation of the estimated impacts of CECL, it has run multiple simulations based on its portfolio composition and current expectations of future economic conditions. Credco expects a net decrease in total reserves for credit losses based on the comparison of preliminary CECL estimates as compared to the incurred loss model applied today, primarily due to the lifetime loss requirement of CECL and the relatively short estimated average life of Card Member receivables. The actual impact at adoption will depend on the outstanding balances, characteristics of Credco’s receivable and loan portfolios, macroeconomic conditions and forecasted information at the date of adoption.

Credco, along with American Express, continues its cross-functional implementation efforts and has substantially completed development of its CECL models. Model validation, user acceptance testing and parallel runs will continue through the remainder of 2019.

Recently Adopted Accounting Standards

In February 2018, as a result of the enactment of the Tax Cuts and Jobs Act (the Tax Act), the FASB issued new accounting guidance on the reclassification of certain tax effects from accumulated other comprehensive income (AOCI) to retained earnings. Credco adopted the new guidance effective January 1, 2019 and did not elect the optional reclassification.

Derivatives

Credco uses derivative financial instruments to manage exposures to various market risks. These instruments derive their value from an underlying variable or multiple variables, including interest rates and foreign exchange rates, and are carried at fair value on the Consolidated Balance Sheets.

Not Designated as Hedging Instrument [Member]

Summary Of Significant Accounting Policies [Line Items]

Derivatives

The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign exchange gains or losses of the underlying foreign currency exposures.