GE 2005 Annual Report Download - page 86

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(86)
For short-duration insurance contracts, including accident and health insurance, we report premiums as
earned income over the terms of the related agreements, generally on a pro-rata basis. For traditional long-duration
insurance contracts including term, whole life and annuities payable for the life of the annuitant, we report premiums
as earned income when due.
Premiums received on investment contracts (including annuities without significant mortality risk) and
universal life contracts are not reported as revenues but rather as deposit liabilities. We recognize revenues for
charges and assessments on these contracts, mostly for mortality, contract initiation, administration and surrender.
Amounts credited to policyholder accounts are charged to expense.
Liabilities for traditional long-duration insurance contracts represent the present value of such benefits less
the present value of future net premiums based on mortality, morbidity, interest and other assumptions at the time
the policies were issued or acquired. Liabilities for investment contracts and universal life policies equal the account
value, that is, the amount that accrues to the benefit of the contract or policyholder including credited interest and
assessments through the financial statement date.
Liabilities for unpaid claims and claims adjustment expenses represent our best estimate of the ultimate
obligations for reported and incurred-but-not-reported claims and the related estimated claim settlement expenses.
Liabilities for unpaid claims and claims adjustment expenses are continually reviewed and adjusted through current
operations.
Accounting changes
On July 1, 2003, we adopted FIN 46, Consolidation of Variable Interest Entities, and, on January 1, 2004, the
related subsequent amendment (FIN 46R). Consequently, in 2003 we recorded a $372 million ($0.04 per share)
after-tax charge related to the first-time consolidation of certain SPEs, reported in the caption “Cumulative effect of
accounting changes.” There was no earnings effect arising from our adoption of FIN 46R. Additional
information about entities consolidated under these rules is provided in note 28.
Statement of Financial Accounting Standards (SFAS) 143, Accounting for Asset Retirement Obligations,
became effective for us on January 1, 2003. Under SFAS 143, obligations associated with the retirement of long-
lived assets are recorded when there is a legal obligation to incur such costs and the fair value of the liability can be
reasonably estimated. This amount is accounted for like an additional element of cost, and, like other cost elements,
is depreciated over the corresponding asset’ s useful life. On January 1, 2003, we recorded a one-time, non-cash
transition charge of $330 million ($215 million after tax, or $0.02 per share), which is reported in the caption
“Cumulative effect of accounting changes.” SFAS 143 primarily affects our accounting for costs associated with the
future retirement of facilities used for storage and production of nuclear fuel and, with our acquisition of Amersham
plc (Amersham) in April 2004, radio-pharmaceuticals and special radio-labeled chemicals.