GE 2009 Annual Report Download - page 69

GE 2009 ANNUAL REPORT 67
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and production contract accounting. We estimate total long-term
contract revenue net of price concessions as well as total contract
costs. For goods sold under power generation unit and uprate
contracts, nuclear fuel assemblies, aeroderivative unit contracts
and military development contracts, we recognize sales as we
complete major contract-specified deliverables, most often when
customers receive title to the goods or accept the services as
performed. For larger oil drilling equipment projects and long-term
construction projects, we recognize sales based on our progress
towards contract completion measured by actual costs incurred
in relation to our estimate of total expected costs. We measure
long-term contract revenues by applying our contract-specific
estimated margin rates to incurred costs. We routinely update our
estimates of future costs for agreements in process and report
any cumulative effects of such adjustments in current operations.
We provide for any loss that we expect to incur on these agree-
ments when that loss is probable.
We recognize revenue upon delivery for sales of aircraft
engines, military propulsion equipment and related spare parts
not sold under long-term product services agreements. Delivery
of commercial engines, non-U.S. military equipment and all related
spare parts occurs on shipment; delivery of military propulsion
equipment sold to the U.S. Government or agencies thereof
occurs upon receipt of a Material Inspection and Receiving Report,
DD Form 250 or Memorandum of Shipment. Commercial aircraft
engines are complex aerospace equipment manufactured to
customer order under a variety of sometimes-complex, long-term
agreements. We measure sales of commercial aircraft engines by
applying our contract-specific estimated margin rates to incurred
costs. We routinely update our estimates of future costs for
commercial aircraft engine agreements in process and report any
cumulative effects of such adjustments in current operations.
We measure revenue for military propulsion equipment and
spare parts not subject to long-term product services agreements
based on the specific contract on a specifically measured output
basis. We provide for any loss that we expect to incur on these
agreements when that loss is probable; consistent with industry
practice, for commercial aircraft engines, we make such provision
only if such losses are not recoverable from future highly probable
sales of spare parts for those engines.
We sell product services under long-term product maintenance
or extended warranty agreements in our Technology Infrastructure
and Energy Infrastructure segments, principally in Aviation, Energy
and Transportation, where costs of performing services are
incurred on other than a straight-line basis. We also sell product
services in Healthcare, where such costs generally are expected
to be on a straight-line basis. For the Aviation, Energy and
Transportation agreements, we recognize related sales based on
the extent of our progress towards completion measured by actual
costs incurred in relation to total expected costs. We routinely
update our estimates of future costs for agreements in process
and report any cumulative effects of such adjustments in current
operations. For the Healthcare agreements, we recognize revenues
on a straight-line basis and expense related costs as incurred.
We provide for any loss that we expect to incur on any of these
agreements when that loss is probable.
NBC Universal records broadcast and cable television and
Internet advertising sales when advertisements are aired, net of
provision for any viewer shortfalls (make goods). We record sales
from theatrical distribution of films as the films are exhibited;
sales of home videos, net of a return provision, when the videos
are delivered to and available for sale by retailers; fees from
cable/satellite operators when services are provided; and licensing
of film and television programming when we make the material
available for airing.
GECS Revenues from Services (Earned Income)
We use the interest method to recognize income on all loans.
Interest on loans includes origination, commitment and other
non-refundable fees related to funding (recorded in earned
income on the interest method). We stop accruing interest at the
earlier of the time at which collection of an account becomes
doubtful or the account becomes 90 days past due. We recognize
interest income on nonearning loans either as cash is collected
or on a cost-recovery basis as conditions warrant. We resume
accruing interest on nonearning, non-restructured commercial
loans only when (a) payments are brought current according to
the loan’s original terms and (b) future payments are reasonably
assured. When we agree to restructured terms with the borrower,
we resume accruing interest only when reasonably assured that
we will recover full contractual payments, and such loans pass
underwriting reviews equivalent to those applied to new loans.
We resume accruing interest on nonearning consumer loans
when the customer’s account is less than 90 days past due.
We recognize financing lease income on the interest method
to produce a level yield on funds not yet recovered. Estimated
unguaranteed residual values are based upon management’s
best estimates of the value of the leased asset at the end of the
lease term. We use various sources of data in determining this
estimate, including information obtained from third parties, which
is adjusted for the attributes of the specific asset under lease.
Guarantees of residual values by unrelated third parties are
considered part of minimum lease payments. Significant assump-
tions 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.