GE 2009 Annual Report Download - page 60

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58 GE 2009 ANNUAL REPORT
Other Information
New Accounting Standards
In 2009, the FASB issued ASU 2009-16 and ASU 2009-17, which
amended ASC 860, Transfers and Servicing, and ASC 810,
Consolidation, respectively, and are effective for us on January 1,
2010. ASU 2009-16 will eliminate the QSPE concept, and ASU
2009-17 will require that all such entities be evaluated for
consolidation as VIEs, which will result in our consolidating
substantially all of our former QSPEs.
Among other changes, the amendments to ASC 810 replace
the existing quantitative approach for identifying the party that
should consolidate a VIE, which was based on exposure to a
majority of the risks and rewards, with a qualitative approach,
based on determination of which party has the power to direct
the most economically significant activities of the entity. The
revised guidance will sometimes change the composition of
entities that meet the definition of a VIE and the determination
about which party should consolidate a VIE, as well as requiring
the latter to be evaluated continuously.
We have evaluated all entities that fall within the scope of the
amended ASC 810 to determine whether we will be required to
consolidate or deconsolidate these entities on January 1, 2010.
In addition to the former QSPEs described above, we will consoli-
date assets of VIEs related to direct investments in entities that
hold loans and fixed income securities, a media joint venture and
a small number of companies to which we have extended loans
in the ordinary course of business and have subsequently been
subject to a troubled debt restructuring.
Upon adoption of the amendments on January 1, 2010, we
will consolidate the assets and liabilities of these entities at the
amount they would have been reported in our financial statements
had we always consolidated them. We will also deconsolidate
certain entities where we do not meet the definition of the primary
beneficiary under the revised guidance, the effect of which will
be insignificant. The incremental effect of consolidation on total
assets and liabilities, net of our investment in these entities, will be
an increase of approximately $32 billion and $34 billion, respec-
tively. There also will be a net reduction of equity of approximately
$2 billion, principally related to the reversal of previously recog-
nized securitization gains as a cumulative effect adjustment
to retained earnings, which will be earned back over the life of
the assets.
The assets of QSPEs that we will be required to consolidate
will be approximately $29 billion, net of our existing retained
interests of approximately $9 billion, and liabilities will be
$31 billion at January 1, 2010. Significant assets of the QSPEs
will include net financing receivables and trade receivables of
approximately $39 billion and investment securities of approxi-
mately $1 billion. Significant liabilities will include short-term
and long-term borrowings of $19 billion each. The assets and
liabilities of other VIEs we will consolidate will be approximately
$2 billion each.
The amended guidance on ASC 860 also modifies existing
derecognition criteria in a manner that will significantly narrow
the types of transactions that will qualify as sales. The revised
criteria will apply prospectively to transfers of financial assets
occurring after December 31, 2009.
On September 23, 2009, the FASB issued amendments to
existing standards for revenue arrangements with multiple
components. The amendments generally require the allocation
of consideration to separate components based on the relative
selling price of each component in a revenue arrangement.
The amendments also require certain software-enabled products
to be accounted for under the general accounting standards
for multiple component arrangements as opposed to accounting
standards specifically applicable to software arrangements. The
amendments are effective prospectively for revenue arrange-
ments entered into or materially modified after January 1, 2011.
The financial statement impact of adopting these amendments
is expected to be insignificant to our financial statements.
Research and Development
GE-funded research and development expenditures were
$3.3 billion, $3.1 billion and $3.0 billion in 2009, 2008 and 2007,
respectively. In addition, research and development funding from
customers, principally the U.S. government, totaled $1.1 billion,
$1.3 billion and $1.1 billion in 2009, 2008 and 2007, respectively.
Technology Infrastructure’s Aviation business accounts for the
largest share of GE’s research and development expenditures with
funding from both GE and customer funds. Energy Infrastructure’s
Energy business and Technology Infrastructure’s Healthcare
business also made significant expenditures funded primarily by GE.
Expenditures reported above reflect the definition of research
and development required by U.S. generally accepted accounting
principles. For operating and management purposes, we also
measure amounts spent on product and services technology.
These technology expenditures were $5.2 billion in 2009 and
included our reported research and development expenditures as
well as the amount spent to improve our existing products and
services, and to improve productivity of our plants, equipment
and processes.
Orders Backlog
GE’s total backlog of firm unfilled orders at the end of 2009 was
$67.3 billion, a decrease of 4% from year-end 2008, reflecting
decreased demand at Energy Infrastructure, partially offset by
increased demand at Technology Infrastructure. Of this backlog,
$46.3 billion related to products, of which 61% was scheduled for
delivery in 2010. Product services orders, included in this reported
backlog for only the succeeding 12 months, were $21.0 billion at
the end of 2009. Product services orders beyond the succeeding
12 months were approximately $108 billion, which combined with
the firm unfilled orders described above resulted in a total back-
log of approximately $175 billion at December 31, 2009. Orders
constituting backlog may be cancelled or deferred by customers,
subject in certain cases to penalties. See the Segment Operations
section for further information.