GE 2010 Annual Report Download - page 76

74 GE 2010 ANNUAL REPORT
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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
production 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 antici-
pated 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
Losses on financing receivables are recognized when they are
incurred, which requires us to make our best estimate of probable
losses inherent in the portfolio. The method for calculating the
best estimate of losses depends on the size, type and risk charac-
teristics of the related financing receivable. Such an estimate
requires consideration of historical loss experience, adjusted for
current conditions, and judgments about the probable effects of
relevant observable data, including present economic conditions
such as delinquency rates, financial health of specific customers
and market sectors, collateral values (including housing price
indices as applicable), and the present and expected future levels
of interest rates. The underlying assumptions, estimates and
assessments we use to provide for losses are updated periodi-
cally to reflect our view of current conditions. Changes in such
estimates can significantly affect the allowance and provision for
losses. It is possible that we will experience credit losses that are
different from our current estimates. Write-offs are deducted
from the allowance for losses when we judge the principal to be
uncollectible and subsequent recoveries are added to the allow-
ance at the time cash is received on a written-off account.
“Impaired” loans are defined as larger-balance or restructured
loans for which it is probable that the lender will be unable to
collect all amounts due according to the original contractual
terms of the loan agreement. TDRs are those loans for which we
have granted a concession to a borrower experiencing financial
difficulties where we do not receive adequate compensation.
Such loans are classified as impaired, and are individually
reviewed for specific reserves.
“Delinquent” receivables are those that are 30 days or more
past due based on their contractual terms; and “nonearning”
receivables are those that are 90 days or more past due (or for
which collection is otherwise doubtful). Nonearning receivables
exclude loans purchased at a discount (unless they have deterio-
rated post acquisition). Under ASC 310, Receivables, these loans
are initially recorded at fair value and accrete interest income over
the estimated life of the loan based on reasonably estimable cash
flows even if the underlying loans are contractually delinquent at
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 it is reason-
ably 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 nonaccrual con-
sumer loans when the customer’s account is less than 90 days
past due and collection of such amounts is probable. Interest
accruals on modified consumer loans that are not considered to
be troubled debt restructurings (TDRs) may return to current
status (re-aged) only after receipt of at least three consecutive
minimum monthly payments or the equivalent cumulative
amount, subject to a re-aging limitation of once a year, or twice
in a five-year period.
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 con-
sidered 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 contingen-
cies 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 for-
mula; 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 7 and 8.