GE 2013 Annual Report Download - page 135

GE 2013 ANNUAL REPORT 133
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Note 24.
Commitments and Guarantees
Commitments
In our Aviation segment, we had committed to provide fi nancing
assistance on $2,669 million of future customer acquisitions
of aircraft equipped with our engines, including commitments
made to airlines in 2013 for future sales under our GE90 and GEnx
engine campaigns. The GECAS business of GE Capital had placed
multiple-year orders for various Boeing, Airbus and other aircraft
with list prices approximating $29,405 million and secondary
orders with airlines for used aircraft of approximately $816 million
at December 31, 2013.
Product Warranties
We provide for estimated product warranty expenses when we
sell the related products. Because warranty estimates are fore-
casts that are based on the best available information—mostly
historical claims experience—claims costs may differ from
amounts provided. An analysis of changes in the liability for prod-
uct warranties follows.
(In millions) 2013 2012 2011
Balance at January 1 $ 1,383 $ 1,507 $ 1,405
Current-year provisions 745 611 866
Expenditures (814) (723) (881)
Other changes 10 (12) 117
Balance at December 31 $ 1,324 $ 1,383 $ 1,507
Guarantees
Our guarantees are provided in the ordinary course of business.
We underwrite these guarantees considering economic, liquidity
and credit risk of the counterparty. We believe that the likelihood
is remote that any such arrangements could have a signifi cant
adverse effect on our fi nancial position, results of operations or
liquidity. We record liabilities for guarantees at estimated fair
value, generally the amount of the premium received, or if we do
not receive a premium, the amount based on appraisal, observed
market values or discounted cash fl ows. Any associated expected
recoveries from third parties are recorded as other receivables,
not netted against the liabilities.
At December 31, 2013, we were committed under the following
guarantee arrangements beyond those provided on behalf of VIEs.
See Note 23.
•
CREDIT SUPPORT. We have provided $2,775 million of credit
support on behalf of certain customers or associated com-
panies, predominantly joint ventures and partnerships, using
arrangements such as standby letters of credit and per-
formance guarantees. These arrangements enable these
customers and associated companies to execute transactions
or obtain desired fi nancing arrangements with third parties.
Should the customer or associated company fail to perform
under the terms of the transaction or fi nancing arrange-
ment, we would be required to perform on their behalf. Under
most such arrangements, our guarantee is secured, usually
by the asset being purchased or fi nanced, or possibly by cer-
tain other assets of the customer or associated company.
The length of these credit support arrangements parallels
the length of the related fi nancing arrangements or transac-
tions. The liability for such credit support was $36 million at
December 31, 2013.
•
INDEMNIFICATION AGREEMENTS. We have agreements that
require us to fund up to $125 million at December 31, 2013
under residual value guarantees on a variety of leased
equipment. Under most of our residual value guarantees,
our commitment is secured by the leased asset. The liabil-
ity for these indemnifi cation agreements was $21 million at
December 31, 2013.
At December 31, 2013, we also had $1,009 million of other
indemnifi cation commitments, substantially all of which relate
to representations and warranties in sales of businesses
or assets.
•
CONTINGENT CONSIDERATION. These are agreements to pro-
vide additional consideration to a buyer or seller in a business
combination if contractually specifi ed conditions related to
the acquisition or disposition are achieved.