GE 2011 Annual Report Download - page 143

GE 2011 ANNUAL REPORT 141
OPTION The right, not the obligation, to execute a transaction at a
designated price, generally involving equity interests, interest rates,
currencies or commodities. See “Hedge.”
OTHER COMPREHENSIVE INCOME Changes in assets and liabilities
that do not result from transactions with shareowners and are not
included in net income but are recognized in a separate component
of shareowners’ equity. Other Comprehensive Income includes the
following components:
• INVESTMENT SECURITIES—Unrealized gains and losses on securi-
ties classifi ed as available-for-sale
• CURRENCY TRANSLATION ADJUSTMENTS—The result of translating
into U.S. dollars those amounts denominated or measured in a
different currency
• CASH FLOW HEDGES—The effective portion of the fair value of
cash fl ow hedges. Such hedges relate to an exposure to vari-
ability in the cash fl ows of recognized assets, liabilities or
forecasted transactions that are attributable to a specifi c risk
• BENEFIT PLANS—Unamortized prior service costs and net actu-
arial losses (gains) related to pension and retiree health and
life benefi ts
• RECLASSIFICATION ADJUSTMENTS—Amounts previously recog-
nized in Other Comprehensive Income that are included in net
income in the current period
PRODUCT SERVICES For purposes of the fi nancial statement display
of sales and costs of sales in our Statement of Earnings, “goods” is
required by U.S. Securities and Exchange Commission regulations to
include all sales of tangible products, and “services” must include all
other sales, including broadcasting and other services activities. In
our Management’s Discussion and Analysis of Operations we refer
to sales under product service agreements and sales of both goods
(such as spare parts and equipment upgrades) and related services
(such as monitoring, maintenance and repairs) as sales of “product
services,” which is an important part of our operations.
PRODUCT SERVICES AGREEMENTS Contractual commitments, with
multiple-year terms, to provide specifi ed services for products in
our Energy Infrastructure, Aviation and Transportation installed
base—for example, monitoring, maintenance, service and spare
parts for a gas turbine/generator set installed in a customer’s
power plant.
PRODUCTIVITY The rate of increased output for a given level of
input, with both output and input measured in constant currency.
PROGRESS COLLECTIONS Payments received from customers as
deposits before the associated work is performed or product
is delivered.
QUALIFIED SPECIAL PURPOSE ENTITIES (QSPEs) A type of variable
interest entity whose activities are signifi cantly limited and entirely
specifi ed in the legal documents that established it. There also are
signifi cant limitations on the types of assets and derivative instru-
ments such entities may hold and the types and extent of activities
and decision-making they may engage in.
RETAINED INTEREST A portion of a transferred fi nancial asset
retained by the transferor that provides rights to receive portions
of the cash infl ows from that asset.
RETURN ON AVERAGE GE SHAREOWNERS’ EQUITY Earnings from
continuing operations before accounting changes divided by
average GE shareowners’ equity, excluding effects of discontinued
operations (on an annual basis, calculated using a fi ve-point aver-
age). Average GE shareowners’ equity, excluding effects of
discontinued operations, as of the end of each of the years in the
fi ve-year period ended December 31, 2011, is described in the
Supplemental Information section.
RETURN ON AVERAGE TOTAL CAPITAL INVESTED For GE, earnings
from continuing operations before accounting changes plus the
sum of after-tax interest and other fi nancial charges and noncon-
trolling interests, divided by the sum of the averages of total
shareowners’ equity (excluding effects of discontinued operations),
borrowings, mandatorily redeemable preferred stock and noncon-
trolling interests (on an annual basis, calculated using a fi ve-point
average). Average total shareowners’ equity, excluding effects of
discontinued operations as of the end of each of the years in the
fi ve-year period ended December 31, 2011, is described in the
Supplemental Information section.
SECURITIZATION A process whereby loans or other receivables are
packaged, underwritten and sold to investors. In a typical trans-
action, assets are sold to a special purpose entity, which
purchases the assets with cash raised through issuance of ben-
efi cial interests (usually debt instruments) to third-party investors.
Whether or not credit risk associated with the securitized assets
is retained by the seller depends on the structure of the securiti-
zation. See “Monetization” and “Variable Interest Entity.”
SUBPRIME For purposes of Consumer related discussion, sub-
prime includes consumer fi nance products like mortgage, auto,
cards, sales fi nance and personal loans to U.S. and global borrow-
ers whose credit score implies a higher probability of default
based upon GECC’s proprietary scoring models and defi nitions,
which add various qualitative and quantitative factors to a base
credit score such as a FICO score or global bureau score. Although
FICO and global bureau credit scores are a widely accepted rating
of individual consumer creditworthiness, the internally modeled
scores are more refl ective of the behavior and default risks in the
portfolio compared to stand-alone generic bureau scores.
TURNOVER Broadly based on the number of times that working
capital is replaced during a year. Current receivables turnover is
total sales divided by the fi ve-point average balance of GE current
receivables. Inventory turnover is total sales divided by a fi ve-
point average balance of inventories. See “Working Capital.”
VARIABLE INTEREST ENTITY An entity that must be consolidated by
its primary benefi ciary, the party that holds a controlling fi nancial
interest. A variable interest entity has one or both of the following
characteristics: (1) its equity at risk is not suffi cient to permit the
entity to fi nance its activities without additional subordinated
fi nancial support from other parties, or (2) as a group, the equity
investors lack one or more of the following characteristics: (a) the
power to direct the activities that most signifi cantly affect the
economic performance of the entity, (b) obligation to absorb
expected losses, or (c) right to receive expected residual returns.
WORKING CAPITAL Represents GE current receivables and inven-
tories, less GE accounts payable and progress collections.
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