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92 GE 2011 ANNUAL REPORT
    
Note 6.
GECS Financing Receivables and Allowance for Losses
on Financing Receivables
December 31 (In millions) 2011 2010
Loans, net of deferred income (a) $257,515 $275,877
Investment in financing leases, net of
deferred income 38,142 44,390
295,657 320,267
Less allowance for losses (6,350) (8,033)
Financing receivables—net (b) $289,307 $312,234
(a) Deferred income was $2,319 million and $2,351 million at December 31, 2011 and
December 31, 2010, respectively.
(b) Financing receivables at December 31, 2011 and December 31, 2010 included
$1,062 million and $1,503 million, respectively, relating to loans that had been
acquired in a transfer but have been subject to credit deterioration since
origination per ASC 310, Receivables.
GECS fi nancing receivables include both loans and fi nancing
leases. Loans represent transactions in a variety of forms, includ-
ing revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business
assets. The portfolio includes loans carried at the principal
amount on which fi nance charges are billed periodically, and
loans carried at gross book value, which includes fi nance charges.
Investment in fi nancing leases consists of direct fi nancing and
leveraged leases of aircraft, railroad rolling stock, autos, other
transportation equipment, data processing equipment, medi-
cal equipment, commercial real estate and other manufacturing,
power generation, and commercial equipment and facilities.
For federal income tax purposes, the leveraged leases and the
majority of the direct fi nancing leases are leases in which GECS
depreciates the leased assets and is taxed upon the accrual of rental
income. Certain direct fi nancing leases are loans for federal income
tax purposes. For these transactions, GECS is taxed only on the por-
tion of each payment that constitutes interest, unless the interest is
tax-exempt (e.g., certain obligations of state governments).
Investment in direct fi nancing and leveraged leases represents
net unpaid rentals and estimated unguaranteed residual values
of leased equipment, less related deferred income. GECS has no
general obligation for principal and interest on notes and other
instruments representing third-party participation related to lev-
eraged leases; such notes and other instruments have not been
included in liabilities but have been offset against the related rent-
als receivable. The GECS share of rentals receivable on leveraged
leases is subordinate to the share of other participants who also
have security interests in the leased equipment. For federal income
tax purposes, GECS is entitled to deduct the interest expense
accruing on non-recourse fi nancing related to leveraged leases.
NET INVESTMENT IN FINANCING LEASES
Total financing leases Direct financing leases (a) Leveraged leases (b)
December 31 (In millions) 2011 2010 2011 2010 2011 2010
Total minimum lease payments receivable $44,157 $52,180 $33,667 $40,037 $10,490 $12,143
Less principal and interest on third-party non-recourse debt (6,812) (8,110) ——(6,812) (8,110)
Net rentals receivables 37,345 44,070 33,667 40,037 3,678 4,033
Estimated unguaranteed residual value of leased assets 7,592 8,495 5,140 5,991 2,452 2,504
Less deferred income (6,795) (8,175) (5,219) (6,438) (1,576) (1,737)
Investment in financing leases, net of deferred income 38,142 44,390 33,588 39,590 4,554 4,800
Less amounts to arrive at net investment
Allowance for losses (294) (396) (281) (378) (13) (18)
Deferred taxes (6,718) (6,168) (2,938) (2,266) (3,780) (3,902)
Net investment in financing leases $31,130 $37,826 $30,369 $36,946 $ 761 $ 880
(a) Included $413 million and $452 million of initial direct costs on direct financing leases at December 31, 2011 and 2010, respectively.
(b) Included pre-tax income of $116 million and $133 million and income tax of $35 million and $51 million during 2011 and 2010, respectively. Net investment credits
recognized on leveraged leases during 2011 and 2010 were insignificant.