GE 2005 Annual Report Download - page 136

Download and view the complete annual report

Please find page 136 of the 2005 GE annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

(136)
Assets in consolidated, liquidating securitization entities are shown in the following captions in the
Statement of Financial Position.
December 31 (In millions) 2005 2004
Financing receivables – net (note 13) $ 16,615 $ 22,848
Other assets 1,235 2,384
Other, principally investment securities 54 761
Total $ 17,904 $ 25,993
Off-balance sheet arrangements
We engage in off-balance sheet securitization transactions with third-party entities and use public market term
securitizations. As discussed above, assets in off-balance sheet securitization entities amounted to $43.8 billion and
$32.2 billion at December 31, 2005 and 2004, respectively. Gross securitization gains amounted to $939 million in
2005 compared with $1,195 million in 2004 and $1,351 million in 2003.
Amounts recognized in our financial statements related to sales to off-balance sheet securitization entities
are as follows:
December 31 (In millions) 2005 2004
Retained interests $4,515
$3,671
Servicing assets 29 33
Recourse liability (93) (64)
Total $4,451
$3,640
• RETAINED INTERESTS. When we securitize receivables, we determine fair value of retained interests based
on discounted cash flow models that incorporate, among other things, assumptions about loan pool credit losses,
prepayment speeds and discount rates. These assumptions are based on our experience, market trends and
anticipated performance related to the particular assets securitized. We classify retained interests in securitized
receivables as investment securities and mark them to fair value each reporting period, updating our models for
current assumptions. These assets decrease as cash is received in payment. When the carrying amounts exceed
fair value, we evaluate whether the unrealized loss is other than temporary and, if so, record any indicated loss
in earnings currently.
• SERVICING ASSETS. Following a securitization transaction, we also may provide servicing for a market-
based fee based on remaining outstanding principal balances. Servicing assets are primarily associated with
residential mortgage loans. Their value is subject to credit, prepayment and interest rate risk.
• RECOURSE LIABILITY. Certain transactions involve credit support agreements. As a result, we provide for
expected credit losses at amounts that approximate fair value.