GE 2010 Annual Report Download - page 74

72 GE 2010 ANNUAL REPORT
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—entities
in which we have a controlling financial interest, most often
because we hold a majority voting interest. To determine if we
hold a controlling financial interest in an entity we first evaluate if
we are required to apply the variable interest entity (VIE) model
to the entity, otherwise the entity is evaluated under the voting
interest model.
Where we hold current or potential rights that give us the
power to direct the activities of a VIE that most significantly impact
the VIE’s economic performance combined with a variable interest
that gives us the right to receive potentially significant benefits or
the obligation to absorb potentially significant losses, we have a
controlling financial interest in that VIE. Rights held by others to
remove the party with power over the VIE are not considered
unless one party can exercise those rights unilaterally. When
changes occur to the design of an entity we reconsider whether it is
subject to the VIE model. We continuously evaluate whether we
have a controlling financial interest in a VIE.
We hold a controlling financial interest in other entities where
we currently hold, directly or indirectly, more than 50% of the
voting rights or where we exercise control through substantive
participating rights or as a general partner. Where we are a gen-
eral partner we consider substantive removal rights held by other
partners in determining if we hold a controlling financial interest.
We evaluate whether we have a controlling financial interest in
these entities when our voting or substantive participating
rights change.
Associated companies are unconsolidated VIEs and other
entities in which we do not have a controlling financial interest,
but over which we have significant influence, most often because
we hold a voting interest of 20% to 50%. Associated companies
are accounted for as equity method investments. Results of
associated companies are presented on a one-line basis. Invest-
ments 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:
• 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.
• GECS—This affiliate owns all of the common stock of General
Electric Capital Corporation (GECC). GECC and its respective
affiliates are consolidated in the accompanying GECS columns
and constitute the majority of its business.
• CONSOLIDATED—This represents the adding together of GE and
GECS, giving effect to the elimination of transactions between
GE and GECS.
• OPERATING SEGMENTS—These comprise our five businesses,
focused on the broad markets they serve: Energy Infrastructure,
Technology Infrastructure, NBC Universal (NBCU), GE Capital and
Home & Business Solutions. Prior-period information has been
reclassified to be consistent with how we managed our busi-
nesses in 2010.
Unless otherwise indicated, information in these notes to consoli-
dated 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 rev-
enues 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
disclosures 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 2011 actual conditions could be worse than antici-
pated 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 securi-
ties, goodwill, intangibles and long-lived assets, incremental
losses on financing receivables, establishment of valuation allow-
ances 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 com-
ponent’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
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