GE 2008 Annual Report Download - page 60

58 ge 2008 annual report
notes to consolidated financial statements
NBC Universal Film and Television Costs
We defer film and television production costs, including direct
costs, production overhead, development costs and interest. We
do not defer costs of exploitation, which principally comprise costs
of film and television program marketing and distribution. We
amortize deferred film and television production costs, as well as
associated participation and residual costs, on an individual pro-
duction basis using the ratio of the current period’s gross revenues
to estimated total remaining gross revenues from all sources;
we state such costs at the lower of amortized cost or fair value.
Estimates of total revenues and costs are based on anticipated
release patterns, public acceptance and historical results for similar
products. We defer the costs of acquired broadcast material,
including rights to material for use on NBC Universal’s broadcast
and cable/satellite television networks, at the earlier of acquisition
or when the license period begins and the material is available
for use. We amortize acquired broadcast material and rights when
we broadcast the associated programs; we state such costs at
the lower of amortized cost or net realizable value.
Losses on Financing Receivables
Our allowance for losses on financing receivables represents our
best estimate of probable losses inherent in the portfolio. Our
method of calculating estimated losses depends on the size, type
and risk characteristics of the related receivables. Write-offs are
deducted from the allowance for losses and subsequent recoveries
are added. Impaired financing receivables are written down to
the extent that we judge principal to be uncollectible.
Our portfolio consists entirely of homogenous consumer loans
and of commercial loans and leases. The underlying assumptions,
estimates and assessments we use to provide for losses are
continually updated to reflect our view of current conditions.
Changes in such estimates can significantly affect the allowance
and provision for losses. It is possible to experience credit losses
that are different from our current estimates.
Our consumer loan portfolio consists of smaller balance,
homogenous loans including card receivables, installment loans,
auto loans and leases and residential mortgages. We collectively
evaluate each portfolio for impairment quarterly. The allowance
for losses on these receivables is established through a process
that estimates the probable losses inherent in the portfolio based
upon statistical analyses of portfolio data. These analyses include
migration analysis, in which historical delinquency and credit loss
experience is applied to the current aging of the portfolio, together
with other analyses that reflect current trends and conditions.
We also consider overall portfolio indicators including nonearning
loans, trends in loan volume and lending terms, credit policies
and other observable environmental factors.
We recognize financing lease income on the interest method
to produce a level yield on funds not yet recovered. Estimated
unguaranteed residual values at the date of lease inception
represent our initial estimates of the fair value of the leased
assets at the expiration of the lease and are based primarily on
independent appraisals, which are updated periodically. Guarantees
of residual values by unrelated third parties are considered part
of minimum lease payments. Significant assumptions we use in
estimating residual values include estimated net cash flows over
the remaining lease term, anticipated results of future remarketing,
and estimated future component part and scrap metal prices,
discounted at an appropriate rate.
We recognize operating lease income on a straight-line basis
over the terms of underlying leases.
Fees include commitment fees related to loans that we do
not expect to fund and line-of-credit fees. We record these fees
in earned income on a straight-line basis over the period to
which they relate. We record syndication fees in earned income
at the time related services are performed, unless significant
contingencies exist.
Depreciation and Amortization
The cost of GE manufacturing plant and equipment is depreciated
over its estimated economic life. U.S. assets are depreciated
using an accelerated method based on a sum-of-the-years digits
formula; non-U.S. assets are generally depreciated on a straight-
line basis.
The cost of GECS equipment leased to others on operating
leases is depreciated on a straight-line basis to estimated residual
value over the lease term or over the estimated economic life of
the equipment.
The cost of GECS acquired real estate investments is depreci-
ated on a straight-line basis to the estimated salvage value over
the expected useful life or the estimated proceeds upon sale of
the investment at the end of the expected holding period if that
approach produces a higher measure of depreciation expense.
The cost of individually significant customer relationships is
amortized in proportion to estimated total related sales; cost of
other intangible assets is generally amortized on a straight-line
basis over the asset’s estimated economic life. We review long-
lived assets for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may
not be recoverable. See Notes 14 and 15.