GE 2010 Annual Report Download - page 93

GE 2010 ANNUAL REPORT 91
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On June 25, 2009, we increased our ownership in BAC from
49.99% to 75% for a purchase price of $623 million following the
terms of our 2006 investment agreement (BAC Investment
Agreement) with the then controlling shareholder. At that time,
we remeasured our previously held equity investment to fair
value, resulting in a pre-tax gain of $343 million. This transaction
required us to consolidate BAC, which was previously accounted
for under the equity method.
In accordance with our stated plan to reduce GE Capital end-
ing net investment, we exited this business during 2010, and
completed the sale of BAC for $1,920 million in December 2010. In
accordance with the terms of the BAC Investment Agreement and
prior to completing the sale, we acquired the remaining 25%
interest in BAC for a purchase price of $633 million. As a result of
the sale of our 100% ownership interest in BAC, we recognized an
after-tax gain of $780 million in 2010, which was recorded in
discontinued operations. Goodwill related to new acquisitions in
2009 includes $1,083 million related to BAC, which represents the
difference between the amount of goodwill initially recorded in
2009 upon BAC consolidation ($1,605 million), and the amount of
goodwill reclassified to discontinued operations based on a
relative fair value allocation ($522 million), as required under
ASC 350-20-35.
On March 20, 2009, we increased our ownership in ATI-
Singapore from 49% to 100% and concurrently acquired from the
same seller a controlling financial interest in certain affiliates. We
remeasured our previous equity interests to fair value, resulting in
a pre-tax gain of $254 million, which is reported in other income.
We test goodwill for impairment annually and more frequently
if circumstances warrant. We determine fair values for each of the
reporting units using an income approach. When available and
appropriate, we use comparative market multiples to corroborate
discounted cash flow results. For purposes of the income
approach, fair value is determined based on the present value of
estimated future cash flows, discounted at an appropriate risk-
adjusted rate. We use our internal forecasts to estimate future
cash flows and include an estimate of long-term future growth
rates based on our most recent views of the long-term outlook for
Upon closing an acquisition, we estimate the fair values of assets
and liabilities acquired and consolidate the acquisition as quickly
as possible. Given the time it takes to obtain pertinent information
to finalize the acquired company’s balance sheet, then to adjust
the acquired company’s accounting policies, procedures, and
books and records to our standards, it is often several quarters
before we are able to finalize those initial fair value estimates.
Accordingly, it is not uncommon for our initial estimates to be
subsequently revised.
Goodwill related to new acquisitions in 2010 was $507 million
and included the acquisition of Clarient, Inc. ($425 million) at
Technology Infrastructure. Goodwill balances decreased
$603 million during 2010, primarily as a result of the deconsoli-
dation of Regency Energy Partners L.P. (Regency) at GE Capital
($557 million) and the stronger U.S. dollar ($260 million).
Goodwill related to new acquisitions in 2009 was $3,418 million
and included acquisitions of Interbanca S.p.A. ($1,394 million) and
BAC ($1,083 million) at GE Capital and Airfoils Technologies
International—Singapore Pte. Ltd. (ATI-Singapore) ($342 million) at
Technology Infrastructure. During 2009, the goodwill balance
increased by $128 million related to acquisition accounting adjust-
ments for prior-year acquisitions. The most significant of these
adjustments was an increase of $180 million associated with the
2008 acquisition of CitiCapital at GE Capital, partially offset by a
decrease of $141 million associated with the 2008 acquisition of
Hydril Pressure Control by Energy Infrastructure. Also during 2009,
goodwill balances decreased $20,094 million, primarily as a result
of NBCU and our Security business being classified as held for sale
($19,001 million) and ($1,077 million), respectively, by the decon-
solidation of Penske Truck Leasing Co., L.P. (PTL) ($634 million) at
GE Capital and the disposition of 81% of GE Homeland Protection,
Inc. ($423 million), partially offset by the weaker U.S. dollar
($1,666 million).
On May 26, 2010, we sold our general partnership interest in
Regency, a midstream natural gas services provider, and retained
a 21% limited partnership interest. This resulted in the deconsoli-
dation of Regency and the remeasurement of our limited
partner ship interest to fair value. We recorded a pre-tax gain of
$119 million, which is reported in GECS revenues from services.
Changes in goodwill balances follow.
2010 2009
Dispositions, Dispositions,
currency currency
Balance at exchange Balance at Balance at exchange Balance at
(In millions) January 1 Acquisitions and other December 31 January 1 Acquisitions and other December 31
Energy Infrastructure $12,777 $ 53 $ 63 $12,893 $12,563 $ 3 $ 211 $12,777
Technology Infrastructure 22,648 435 (118) 22,965 22,215 384 49 22,648
NBC Universal — — — — 18,973 26 (18,999) —
GE Capital 28,463 19 (889) 27,593 25,358 3,004 101 28,463
Home & Business Solutions 1,188 — (166) 1,022 1,166 1 21 1,188
Corporate Items and Eliminations — — — — 1,477 — (1,477) —
Total $65,076 $507 $(1,110) $64,473 $81,752 $3,418 $(20,094) $65,076