GE 2011 Annual Report Download - page 80

78 GE 2011 ANNUAL REPORT
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GECS Revenues from Services (Earned Income)
We use the interest method to recognize income on loans. Interest
on loans includes origination, commitment and other non-refund-
able fees related to funding (recorded in earned income on the
interest method). We stop accruing interest at the earlier of the
time at which collection of an account becomes doubtful or the
account becomes 90 days past due. Previously recognized interest
income that was accrued but not collected from the borrower is
evaluated as part of the overall receivable in determining the
adequacy of the allowance for losses. Although we stop accruing
interest in advance of payments, we recognize interest income as
cash is collected when appropriate, provided the amount does not
exceed that which would have been earned at the historical effec-
tive interest rate; otherwise, payments received are applied to
reduce the principal balance of the loan.
We resume accruing interest on nonaccrual, non-restructured
commercial loans only when (a) payments are brought current
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 reasonably
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 consumer loans
when the customer’s account is less than 90 days past due and
collection of such amounts is probable. Interest accruals on modi-
fi ed 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 pay-
ments or the equivalent cumulative amount, subject to a re-aging
limitation of once a year, or twice in a fi ve-year period.
We recognize fi nancing 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 specifi c asset under lease.
Guarantees of residual values by unrelated third parties are con-
sidered part of minimum lease payments. Signifi cant assumptions
we use in estimating residual values include estimated net cash
fl ows 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 signifi cant
contingencies 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 formula;
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 signifi cant 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.
NBC Universal Film and Television Costs
Prior to our deconsolidation of NBCU in 2011, our policies were to
defer fi lm and television production costs, including direct costs,
production overhead, development costs and interest. We did not
defer costs of exploitation, which principally comprised costs of
fi lm and television program marketing and distribution. We amor-
tized deferred fi lm 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 stated such costs at the lower of amortized cost or
fair value. Estimates of total revenues and costs were based on
anticipated release patterns, public acceptance and historical
results for similar products. We deferred 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 began
and the material was available for use. We amortized acquired
broadcast material and rights when we broadcast the associated
programs; we stated such costs at the lower of amortized cost or
net realizable value.
Losses on Financing Receivables
Losses on fi nancing 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 fi nancing 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, fi nancial health of specifi c customers