GE 2011 Annual Report Download - page 52

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50 GE 2011 ANNUAL REPORT
associated with securities subject to Monoline credit enhance-
ment, for which there is an expected credit loss, was $0.3 billion.
Total pre-tax, other-than-temporary impairment losses dur-
ing 2011 were $0.5 billion, of which $0.4 billion was recognized
in earnings and primarily relates to credit losses on non-U.S.
government and non-U.S. corporate securities and other-than-
temporary losses on equity securities and $0.1 billion primarily
relates to non-credit related losses on RMBS and is included
within accumulated other comprehensive income.
Total pre-tax, other-than-temporary impairment losses dur-
ing 2010 were $0.5 billion, of which $0.3 billion was recognized
in earnings and primarily relates to credit losses on RMBS, non-
U.S. government securities, non-U.S. corporate securities and
other-than-temporary losses on equity securities, and $0.2 bil-
lion primarily relates to non-credit related losses on RMBS and is
included within accumulated other comprehensive income.
Our qualitative review attempts to identify issuers’ securi-
ties that are “at-risk” of other-than-temporary impairment, that
is, for securities that we do not intend to sell and it is not more
likely than not that we will be required to sell before recovery of
our amortized cost, whether there is a possibility of credit loss
that would result in an other-than-temporary impairment recog-
nition in the following 12 months. Securities we have identifi ed
as “at-risk” primarily relate to investments in RMBS and non-U.S.
corporate debt securities across a broad range of industries.
The amount of associated unrealized loss on these securities
at December 31, 2011, is $0.6 billion. Unrealized losses are not
indicative of the amount of credit loss that would be recognized
as credit losses are determined based on adverse changes in
expected cash fl ows rather than fair value. For further informa-
tion relating to how credit losses are calculated, see Note 3.
Uncertainty in the capital markets may cause increased levels of
other-than-temporary impairments.
At both December 31, 2011 and December 31, 2010, unrealized
losses on investment securities totaled $1.6 billion, including
$1.2 billion aged 12 months or longer at December 31, 2011
and $1.3 billion aged 12 months or longer at December 31, 2010.
Of the amount aged 12 months or longer at December 31, 2011,
more than 70% are debt securities that were considered to be
investment grade by the major rating agencies. In addition, of
the amount aged 12 months or longer, $0.7 billion and $0.3 billion
related to structured securities (mortgage-backed, asset-backed
and securitization retained interests) and corporate debt secu-
rities, respectively. With respect to our investment securities
that are in an unrealized loss position at December 31, 2011, the
majority relate to debt securities held to support obligations
to holders of GICs. We presently do not intend to sell the vast
majority of our debt securities and believe that it is not more likely
than not that we will be required to sell these securities that are in
an unrealized loss position before recovery of our amortized cost.
For additional information, see Note 3.
FAIR VALUE MEASUREMENTS. For fi nancial assets and liabilities
measured at fair value on a recurring basis, fair value is the price
we would receive to sell an asset or pay to transfer a liability in an
orderly transaction with a market participant at the measurement
date. In the absence of active markets for the identical assets or
liabilities, such measurements involve developing assumptions
based on market observable data and, in the absence of such
data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs
at the measurement date. Additional information about our appli-
cation of this guidance is provided in Notes 1 and 21. At
December 31, 2011, the aggregate amount of investments that
are measured at fair value through earnings totaled $5.9 billion
and consisted primarily of various assets held for sale in the
ordinary course of business, as well as equity investments.
WORKING CAPITAL, representing GE current receivables and
inventories, less GE accounts payable and progress collections,
increased $1.6 billion at December 31, 2011, compared to
December 31, 2010 due to increases in receivables and inventory,
and lower progress collections, partially offset by increased
accounts payable. As Energy Infrastructure and Aviation deliver
units out of their backlogs over the next few years, progress
collections of $11.3 billion at December 31, 2011, will be earned,
which, along with progress collections on new orders, will impact
working capital. Throughout the last fi ve years, we have executed
a signifi cant number of initiatives through our Operating Council,
such as lean cycle time projects, which have resulted in a more
effi cient use of working capital. The Operating Council meets at
least eight times per year and is led by our Chairman. We discuss
current receivables and inventories, two important elements of
working capital, in the following paragraphs.
CURRENT RECEIVABLES for GE totaled to $11.8 billion at the end of
2011 and $10.4 billion at the end of 2010, and included $9.0 billion
due from customers at the end of 2011 compared with $8.1 billion
at the end of 2010. GE current receivables turnover was 8.3 in
2011, compared with 8.6 in 2010. The overall increase in current
receivables was primarily due to the higher volume and acquisi-
tions at Energy Infrastructure ($1.1 billion).