GE 2005 Annual Report Download - page 106

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(106)
GECS financing receivables include both loans and financing leases. Loans represent transactions in a variety of
forms, including revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving
loans secured by business assets. The portfolio includes loans carried at the principal amount on which finance
charges are billed periodically, and loans carried at gross book value, which includes finance charges.
Investment in financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling
stock, autos, other transportation equipment, data processing equipment, medical equipment, commercial real estate
and other manufacturing, power generation, and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and as the equity participant in leveraged leases,
GECS is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased assets
and tax deductions for interest paid to third-party participants. GECS is generally entitled to any residual value of
leased assets.
Investment in direct financing and leveraged leases represents net unpaid rentals and estimated
unguaranteed residual values of leased equipment, less related deferred income. GECS has no general obligation for
principal and interest on notes and other instruments representing third-party participation related to leveraged
leases; such notes and other instruments have not been included in liabilities but have been offset against the related
rentals receivable. The GECS share of rentals receivable on leveraged leases is subordinate to the share of other
participants who also have security interests in the leased equipment.
NET INVESTMENT IN FINANCING LEASES
Total
financing leases
Direct
financing leases (a)
Leveraged
leases (b)
December 31 (In millions) 2005 2004 2005 2004 2005
2004
Total minimum lease payments receivable $86,436 $ 91,840 $60,594 $ 63,733 $ 25,842
$ 28,107
Less principal and interest on third-party
nonrecourse debt (19,061) (20,992) – – (19,061 ) (20,992)
Net rentals receivable 67,375 70,848 60,594 63,733 6,781
7,115
Estimated unguaranteed residual value
of leased assets 9,379 10,323 6,260 6,898 3,119
3,425
Less deferred income (12,445) (13,417) (9,305) (9,966 ) (3,140 ) (3,451)
Investment in financing leases, net of
deferred income 64,309 67,754 57,549 60,665 6,760
7,089
Less amounts to arrive at net investment
Allowance for losses (525) (1,090) (380 ) (903 ) (145 ) (187)
Deferred taxes (8,037 ) (9,767)
(3,495) (5,099 ) (4,542 ) (4,668)
Net investment in financing leases $55,747 $ 56,897 $53,674 $ 54,663 $ 2,073
$ 2,234
(a) Included $475 million and $489 million of initial direct costs on direct financing leases at December 31, 2005 and 2004, respectively.
(b) Included pre-tax income of $248 million and $340 million and income tax of $96 million and $131 million during 2005 and 2004,
respectively. Net investment credits recognized during 2005 and 2004 were inconsequential.