GE 2008 Annual Report Download - page 58

56 ge 2008 annual report
notes to consolidated financial statements
Note 1.
Summary of Significant Accounting Policies
Accounting Principles
Our financial statements are prepared in conformity with U.S.
generally accepted accounting principles (GAAP).
Consolidation
Our financial statements consolidate all of our affiliates— companies
that we control and in which we hold a majority voting interest.
Associated companies are companies that we do not control but
over which we have significant influence, most often because we
hold a shareholder voting position of 20% to 50%. Results of asso-
ciated companies are presented on a one-line basis. Investments
in and advances to associated companies are presented on a
one-line basis in the caption “All other assets” in our Statement
of Financial Position, net of allowance for losses that represents
our best estimate of probable losses inherent in such assets.
Financial Statement Presentation
We have reclassified certain prior-year amounts to conform to
the current-year’s presentation.
Financial data and related measurements are presented in
the following categories:
Þ GE — This represents the adding together of all affiliates other
than General Electric Capital Services, Inc. (GECS), whose
operations are presented on a one-line basis.
Þ GECS — This affiliate owns all of the common stock of General
Electric Capital Corporation (GE Capital). GE Capital and its
respective affiliates are consolidated in the accompanying
GECS columns and constitute the majority of its business.
Þ CONSOLIDATED — This represents the adding together of GE
and GECS, giving effect to the elimination of transactions
between GE and GECS.
Þ OPERATING SEGMENTS — These comprise our five businesses,
focused on the broad markets they serve: Energy Infrastructure,
Technology Infrastructure, NBC Universal, Capital Finance and
Consumer & Industrial. Prior period information has been
reclassified to be consistent with the current organization.
Unless otherwise indicated, information in these notes to con-
solidated financial statements relates to continuing operations.
Certain of our operations have been presented as discontinued.
See Note 2.
The effects of translating to U.S. dollars the financial state-
ments of non-U.S. affiliates whose functional currency is the
local currency are included in shareowners’ equity. Asset and
liability accounts are translated at year-end exchange rates, while
revenues and expenses are translated at average rates for the
respective periods.
Preparing financial statements in conformity with U.S. GAAP
requires us to make estimates based on assumptions about current,
and for some estimates future, economic and market conditions
(for example, unemployment, market liquidity, the real estate
market, etc.), which affect reported amounts and related disclo-
sures in our financial statements. Although our current estimates
contemplate current conditions and how we expect them to
change in the future, as appropriate, it is reasonably possible
that in 2009 actual conditions could be worse than anticipated
in those estimates, which could materially affect our results of
operations and financial position. Among other effects, such
changes could result in future impairments of investment secu-
rities, goodwill, intangibles and long-lived assets, incremental
losses on financing receivables, establishment of valuation
allowances on deferred tax assets and increased tax liabilities.
Sales of Goods and Services
We record all sales of goods and services only when a firm sales
agreement is in place, delivery has occurred or services have
been rendered and collectibility of the fixed or determinable sales
price is reasonably assured.
Arrangements for the sale of goods and services sometimes
include multiple components. Most of our multiple component
arrangements involve the sale of goods and services in the
Technology Infrastructure segment. Our arrangements with
multiple components usually involve future service deliverables
such as installation, training or the future delivery of ancillary
equipment. In such agreements, the amount assigned to each
component is based on the total price and the undelivered
component’s objectively determined fair value, determined from
sources such as the separate selling price for that or a similar
component or from competitor prices for similar components.
If fair value of an undelivered component cannot be satisfactorily
determined, we defer revenue until all multiple components are
delivered.
Except for goods sold under long-term agreements, we rec-
ognize sales of goods under the provisions of U.S. Securities and
Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 104,
Revenue Recognition. We often sell consumer products, home
videos and computer hardware and software products with a right
of return. We use our accumulated experience to estimate and
provide for such returns when we record the sale. In situations
where arrangements include customer acceptance provisions
based on seller or customer-specified objective criteria, we recog-
nize revenue when formal acceptance occurs or we have reliably
demonstrated that all specified acceptance criteria have been met.
In arrangements where we provide goods for trial and evaluation
purposes, we only recognize revenue after customer acceptance
occurs. Unless otherwise noted, we do not provide for anticipated
losses before we record sales.