GE 2012 Annual Report Download - page 65

management’s discussion and analsis
GE 2012 ANNUAL REPORT 63
Contractual Obligations
As defined by reporting regulations, our contractual obligations for future payments as of December 31, 2012, follow.
Payments due by period
(In billions) Total 2013 2014–2015 2016–2017
2018 and
thereafter
Borrowings and bank deposits (Note 10) $414.1 $139.2 $103.2 $60.9 $110.8
Interest on borrowings and bank deposits 92.8 9.7 14.2 10.1 58.8
Purchase obligations (a) (b) 65.8 33.8 13.5 5.8 12.7
Insurance liabilities (Note 11) (c) 14.0 1.6 2.9 2.0 7.5
Operating lease obligations (Note 19) 4.1 0.9 1.3 0.9 1.0
Other liabilities (d) 83.7 19.3 10.0 8.3 46.1
Contractual obligations of discontinued operations (e) 1.9 1.9 — — —
(a) Included all take-or-pay arrangements, capital expenditures, contractual commitments to purchase equipment that will be leased to others, contractual commitments
related to factoring agreements, software acquisition/license commitments, contractual minimum programming commitments and any contractually required cash
payments for acquisitions.
(b) Excluded funding commitments entered into in the ordinary course of business by our financial services businesses. Further information on these commitments and other
guarantees is provided in Note 25.
(c) Included contracts with reasonably determinable cash flows such as structured settlements, guaranteed investment contracts, and certain property and casualty
contracts, and excluded long-term care, variable annuity and other life insurance contracts.
(d) Included an estimate of future expected funding requirements related to our pension and postretirement benefit plans and included liabilities for unrecognized tax
benefits. Because their future cash outflows are uncertain, the following non-current liabilities are excluded from the table above: deferred taxes, derivatives, deferred
revenue and other sundry items. For further information on certain of these items, see Notes 14 and 22.
(e) Included payments for other liabilities.
Variable Interest Entities (VIEs)
We securitize financial assets and arrange other forms of asset-
backed financing in the ordinary course of business as an
alternative source of funding. The securitization transactions we
engage in are similar to those used by many financial institutions.
The assets we currently securitize include: receivables secured
by equipment, credit card receivables, floorplan inventory receiv-
ables, GE trade receivables and other assets originated and
underwritten by us in the ordinary course of business. The securi-
tizations are funded with variable funding notes and term debt.
Substantially all of our securitization VIEs are consolidated
because we are considered to be the primary beneficiary of the
entity. Our interests in other VIEs for which we are not the pri-
mary beneficiary are accounted for as investment securities,
financing receivables or equity method investments depending
on the nature of our involvement.
At December 31, 2012, consolidated variable interest entity
assets and liabilities were $48.4 billion and $32.9 billion, respec-
tively, an increase of $1.7 billion and a decrease of $2.3 billion
from 2011, respectively. Assets held by these entities are of
equivalent credit quality to our other assets. We monitor the
underlying credit quality in accordance with our role as servicer
and apply rigorous controls to the execution of securitization
transactions. With the exception of credit and liquidity support
discussed below, investors in these entities have recourse only to
the underlying assets.
At December 31, 2012, investments in unconsolidated VIEs,
including our noncontrolling interest in PTL, were $12.6 billion, a
decrease of $3.9 billion from 2011, primarily related to a decrease
of $5.0 billion in PTL, partially offset by an increase of $1.0 billion
in an investment in asset-backed securities issued by a senior
secured loan fund. In addition to our existing investments, we
have contractual obligations to fund additional investments
in the unconsolidated VIEs to fund new asset originations. At
December 31, 2012, these contractual obligations were $2.7 bil-
lion, a decrease of $1.6 billion from 2011.
We do not have implicit support arrangements with any VIE.
We did not provide non-contractual support for previously trans-
ferred financing receivables to any VIE in either 2012 or 2011.
Critical Accounting Estimates
Accounting estimates and assumptions discussed in this section
are those that we consider to be the most critical to an under-
standing of our financial statements because they involve
significant judgments and uncertainties. Many of these estimates
include determining fair value. All of these estimates reflect our
best judgment about current, and for some estimates future,
economic and market conditions and their effects based on
information available as of the date of these financial statements.
If these conditions change from those expected, it is reasonably
possible that the judgments and estimates described below
could change, which may result in future impairments of invest-
ment securities, goodwill, intangibles and long-lived assets,
incremental losses on financing receivables, increases in reserves
for contingencies, establishment of valuation allowances on
deferred tax assets and increased tax liabilities, among other
effects. Also see Note 1, which discusses the significant account-
ing policies that we have selected from acceptable alternatives.