GE 2012 Annual Report Download - page 78

76 GE 2012 ANNUAL REPORT
Note 1.
Basis of Presentation and Summary of Significant
Accounting Policies
Accounting Principles
Our financial statements are prepared in conformity with U.S.
generally accepted accounting principles (GAAP).
Consolidation
Our financial statements consolidate all of our affiliates—entities
in which we have a controlling financial interest, most often
because we hold a majority voting interest. To determine if we
hold a controlling financial interest in an entity we first evaluate
if we are required to apply the variable interest entity (VIE) model
to the entity, otherwise the entity is evaluated under the voting
interest model.
Where we hold current or potential rights that give us the
power to direct the activities of a VIE that most significantly impact
the VIE’s economic performance combined with a variable inter-
est that gives us the right to receive potentially significant benefits
or the obligation to absorb potentially significant losses, we have
a controlling financial interest in that VIE. Rights held by others
to remove the party with power over the VIE are not considered
unless one party can exercise those rights unilaterally. When
changes occur to the design of an entity we reconsider whether it
is subject to the VIE model. We continuously evaluate whether we
have a controlling financial interest in a VIE.
We hold a controlling financial interest in other entities where
we currently hold, directly or indirectly, more than 50% of the
voting rights or where we exercise control through substantive
participating rights or as a general partner. Where we are a gen-
eral partner, we consider substantive removal rights held by other
partners in determining if we hold a controlling financial interest.
We reevaluate whether we have a controlling financial inter-
est in these entities when our voting or substantive participating
rights change.
Associated companies are unconsolidated VIEs and other enti-
ties in which we do not have a controlling financial interest, but
over which we have significant influence, most often because we
hold a voting interest of 20% to 50%. Associated companies are
accounted for as equity method investments. Results of associ-
ated companies are presented on a one-line basis. Investments
in, and advances to, associated companies are presented on a
one-line basis in the caption “All other assets” in our Statement of
Financial Position, net of allowance for losses, that represents our
best estimate of probable losses inherent in such assets.
Financial Statement Presentation
We have reclassified certain prior-year amounts to conform to
the current-year’s presentation.
Financial data and related measurements are presented in the
following categories:
Þ GE—This represents the adding together of all affiliates other
than General Electric Capital Corporation (GECC), whose con-
tinuing operations are presented on a one-line basis, giving
effect to the elimination of transactions among such affiliates.
Þ GECC—This represents the adding together of all affiliates of
GECC, giving effect to the elimination of transactions among
such affiliates.
Þ Consolidated—This represents the adding together of GE and
GECC, giving effect to the elimination of transactions between
GE and GECC.
Þ Operating Segments—These comprise our eight busi-
nesses, focused on the broad markets they serve: Power &
Water, Oil & Gas, Energy Management, Aviation, Healthcare,
Transportation, Home & Business Solutions and GE Capital.
Prior-period information has been reclassified to be consistent
with how we managed our businesses in 2012.
Unless otherwise indicated, information in these notes to con-
solidated financial statements relates to continuing operations.
Certain of our operations have been presented as discontinued.
See Note 2.
On February 22, 2012, we merged our wholly-owned subsidiary,
General Electric Capital Services, Inc. (GECS), with and into GECS’
wholly-owned subsidiary, GECC. The merger simplified our
financial services’ corporate structure by consolidating financial
services entities and assets within our organization and sim-
plifying Securities and Exchange Commission and regulatory
reporting. Upon completion of the merger, (i) all outstanding
shares of GECC common stock were cancelled, (ii) all outstand-
ing GECS common stock and all GECS preferred stock held by
the Company were converted into an aggregate of 1,000 shares
of GECC common stock, and (iii) all treasury shares of GECS and
all outstanding preferred stock of GECS held by GECC were
cancelled. As a result, GECC became the surviving corporation,
assumed all of GECS’ rights and obligations and became wholly-
owned directly by the Company.
Because we wholly-owned both GECS and GECC, the merger
was accounted for as a transfer of assets between entities under
common control. Transfers of net assets or exchanges of shares
between entities under common control are accounted for at his-
torical value, and as if the transfer occurred at the beginning of
the period.
Our financial services segment, GE Capital, comprises the con-
tinuing operations of GECC, which includes the run-off insurance
operations previously held and managed in GECS. Unless other-
wise indicated, references to GECC and the GE Capital segment
in these notes to consolidated financial statements relate to the
entity or segment as they exist subsequent to the February 22,
2012 merger.
As previously announced, effective October 1, 2012, we reor-
ganized our former Energy Infrastructure segment into three
segments—Power & Water, Oil & Gas and Energy Management. We
also reorganized our Home & Business Solutions segment by trans-
ferring our Intelligent Platforms business to Energy Management.
Results for 2012 and prior periods are reported on this basis.
The effects of translating to U.S. dollars the financial state-
ments of non-U.S. affiliates whose functional currency is the
local currency are included in shareowners’ equity. Asset and
liability accounts are translated at year-end exchange rates, while
revenues and expenses are translated at average rates for the
respective periods.
notes to consolidated financial statements