This excerpt taken from the AXP 10-K filed Mar 6, 2006.
Effective July 1, 2005, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)), using the modified prospective application. SFAS No. 123(R) requires entities to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and applies to (i) new awards, (ii) awards modified, repurchased, or cancelled after the adoption date, and (iii) any outstanding awards accounted for under APB Opinion No. 25, Accounting for Stock Issued to Employees, for which all requisite service has not yet been rendered. The adoption of SFAS No. 123(R) did not have a material impact on the Companys financial statements since the Company has been expensing share based awards granted after January 1, 2003 under the provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). The Company recognizes the cost of these awards on a straight line basis over their vesting periods. Also, SFAS No. 123(R) requires companies to calculate the pool of income tax benefits that were previously recorded in additional paid-in capital and are available to absorb future income tax benefit deficiencies that can result from the exercise or maturity of stock awards. The Company has calculated its pool based on the actual income tax benefits received from exercises and maturities of stock awards granted after the effective date of SFAS No. 123, January 1, 1995.
The following table illustrates the effect on net income and earnings per common share (EPS) assuming the Company had followed the fair value recognition provisions of SFAS No. 123(R) for all outstanding and unvested stock options and other stock-based compensation for the three years ended December 31, 2005: