GE 2010 Annual Report Download - page 127

GE 2010 ANNUAL REPORT 125
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substantially all of which relate to standard representations
and warranties in sales of businesses or assets.
• CONTINGENT CONSIDERATION. These are agreements to provide
additional consideration to a buyer or seller in a business
combination if contractually specified conditions related to
the acquisition or disposition are achieved. Adjustments to the
proceeds from our sale of GE Money Japan are further dis-
cussed in Note 2. All other potential payments related to
contingent consideration are insignificant.
Our guarantees are provided in the ordinary course of business.
We underwrite these guarantees considering economic, liquidity
and credit risk of the counterparty. We believe that the likelihood
is remote that any such arrangements could have a significant
adverse effect on our financial position, results of operations or
liquidity. We record liabilities for guarantees at estimated fair
value, generally the amount of the premium received, or if we do
not receive a premium, the amount based on appraisal, observed
market values or discounted cash flows. Any associated expected
recoveries from third parties are recorded as other receivables,
not netted against the liabilities.
Note 26.
Supplemental Cash Flows Information
Changes in operating assets and liabilities are net of acquisitions
and dispositions of principal businesses.
Amounts reported in the “Payments for principal businesses
purchased” line in the Statement of Cash Flows is net of cash
acquired and included debt assumed and immediately repaid
in acquisitions.
Amounts reported in the “All other operating activities” line
in the Statement of Cash Flows consists primarily of adjustments
to current and noncurrent accruals and deferrals of costs and
expenses, adjustments for gains and losses on assets and adjust-
ments to assets. GECS had non-cash transactions related to
foreclosed properties and repossessed assets totaling $1,915 mil-
lion and $1,364 million in 2010 and 2009, respectively. In 2008,
GE received $300 million (12.7 million shares) worth of its shares in
connection with the disposition of NBC Universal’s 57% interest
in the Sundance Channel.
Product Warranties
We provide for estimated product warranty expenses when we
sell the related products. Because warranty estimates are fore-
casts that are based on the best available information—mostly
historical claims experience—claims costs may differ from
amounts provided. An analysis of changes in the liability for
product warranties follows.
(In millions) 2010 2009 2008
Balance at January 1 $1,641 $1,675 $1,541
Current-year provisions 583 780 1,038
Expenditures (a) (710) (794) (917)
Other changes (17) (20) 13
Balance at December 31 $1,497 $1,641 $1,675
(a) Primarily related to Technology Infrastructure and Energy Infrastructure.
Guarantees
At December 31, 2010, we were committed under the following
guarantee arrangements beyond those provided on behalf of
QSPEs and VIEs. See Note 24.
• CREDIT SUPPORT. We have provided $8,327 million of credit
support on behalf of certain customers or associated compa-
nies, predominantly joint ventures and partnerships, using
arrangements such as standby letters of credit and perfor-
mance guarantees. These arrangements enable these
customers and associated companies to execute transactions
or obtain desired financing arrangements with third parties.
Should the customer or associated company fail to perform
under the terms of the transaction or financing arrangement,
we would be required to perform on their behalf. Under most
such arrangements, our guarantee is secured, usually by the
asset being purchased or financed, or possibly by certain
other assets of the customer or associated company. The length
of these credit support arrangements parallels the length of the
related financing arrangements or transactions. The liability
for such credit support was $53 million at December 31, 2010.
• INDEMNIFICATION AGREEMENTS. These are agreements that require
us to fund up to $228 million at December 31, 2010 under
residual value guarantees on a variety of leased equipment.
Under most of our residual value guarantees, our commitment
is secured by the leased asset. The liability for these indemnifi-
cation agreements was $47 million at December 31, 2010. We
also had $2,502 million of other indemnification commitments,