GE 2007 Annual Report Download - page 64

62 ge 2007 annual report
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On December 4, 2007, the FASB issued SFAS 141R, Business
Combinations, which we will adopt on January 1, 2009. This
standard will signifi cantly change the accounting for business
acquisitions both during the period of the acquisition and in
subsequent periods. Among the more signifi cant changes in the
accounting for acquisitions are the following:
• Transaction costs will generally be expensed. Certain such
costs are presently treated as costs of the acquisition.
• In-process research and development (IPR&D) will be accounted
for as an asset, with the cost recognized as the research and
development is realized or abandoned. IPR&D is presently
expensed at the time of the acquisition.
• Contingencies, including contingent consideration, will gener-
ally be recorded at fair value with subsequent adjustments
recognized in operations. Contingent consideration is presently
accounted for as an adjustment of purchase price.
• Decreases in valuation allowances on acquired deferred
tax assets will be recognized in operations. Such changes
previously were considered to be subsequent changes in
consideration and were recorded as decreases in goodwill.
Generally, the effects of SFAS 141R will depend on future
acquisitions.
On December 4, 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial Statements,
an amendment of ARB No. 51, which we will adopt on January 1,
2009. This standard will signifi cantly change the accounting and
reporting related to noncontrolling interests in a consolidated
subsidiary. After adoption, noncontrolling interests ($8.0 billion
and $7.5 billion at December 31, 2007 and 2006, respectively)
will be classifi ed as shareowners’ equity, a change from its
current classifi cation between liabilities and shareowners’ equity.
Earnings attributable to minority interests ($0.9 billion in each of
the most recent three years) will be included in net earnings,
although such earnings will continue to be deducted to measure
earnings per share. Purchases and sales of minority interests
will be reported in equity, deferring, perhaps permanently, our
recognition of the economic gain or loss on partial dispositions.
Gains on sales of minority interests that would not have been in
net earnings under SFAS 160 amounted to $0.4 billion and
$0.3 billion in 2007 and 2006, respectively.
Selected Financial Data
The facing page is divided into three sections: upper portion —
consolidated data; middle portion — GE data that refl ect various
conventional measurements for such enterprises; and lower
portion — GECS data that refl ect key information pertinent to
fi nancial services businesses.
GE’S TOTAL RESEARCH AND DEVELOPMENT expenditures were
$4.1 billion in 2007, compared with $3.5 billion and $3.2 billion in
2006 and 2005, respectively. In 2007, expenditures from GE’s
own funds were $3.0 billion compared with $2.8 billion in 2006.
Expenditures funded by customers (mainly the U.S. government)
were $1.1 billion in 2007 and $0.7 billion in 2006.
Expenditures reported above refl ect the defi nition of research
and development required by U.S. generally accepted accounting
principles. For operating and management purposes, we consider
amounts spent on product and services technology to include
our reported research and development expenditures, but also
amounts for improving our existing products and services, and
the productivity of our plant, equipment and processes. On this
basis, our technology expenditures in 2007 were $5.5 billion.
GE’S TOTAL BACKLOG of fi rm unfi lled orders at the end of 2007
was $65.6 billion, an increase of 42% from year-end 2006,
refl ecting increased demand at Infrastructure. Of the total back-
log, $49.4 billion related to products, of which 64% was scheduled
for delivery in 2008. Product services orders, included in this
reported backlog for only the succeeding 12 months, were
$16.2 billion at the end of 2007. Orders constituting this backlog
may be cancelled or deferred by customers, subject in certain
cases to penalties. See the Segment Operations section for further
information.