GE 2013 Annual Report Download - page 147

GE 2013 ANNUAL REPORT 145
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OPTION The right, not the obligation, to execute a transaction at
a designated price, generally involving equity interests, interest
rates, currencies or commodities. See “Hedge.”
OTHER COMPREHENSIVE INCOME Changes in assets and liabilities
that do not result from transactions with shareowners and are
not included in net income but are recognized in a separate com-
ponent of shareowners’ equity. Other Comprehensive Income
includes the following components:
• INVESTMENT SECURITIES—Unrealized gains and losses on
securities classifi ed as available-for-sale.
• CURRENCY TRANSLATION ADJUSTMENTS—The result of
translating into U.S. dollars those amounts denominated or
measured in a different currency.
• CASH FLOW HEDGES—The effective portion of the fair value
of cash fl ow hedges. Such hedges relate to an exposure to
variability in the cash fl ows of recognized assets, liabilities or
forecasted transactions that are attributable to a specifi c risk.
• BENEFIT PLANS—Unamortized prior service costs and net
actuarial losses (gains) related to pension and retiree health
and life benefi ts.
• RECLASSIFICATION ADJUSTMENTS—Amounts previously recog-
nized in Other Comprehensive Income that are included in net
income in the current period.
PRODUCT SERVICES For purposes of the fi nancial statement display
of sales and costs of sales in our Statement of Earnings, “goods”
is required by U.S. Securities and Exchange Commission regula-
tions to include all sales of tangible products, and “services” must
include all other sales, including other services activities. In our
Management’s Discussion and Analysis of Operations, we refer to
sales under product services agreements and sales of both goods
(such as spare parts and equipment upgrades) and related services
(such as monitoring, maintenance and repairs) as sales of “product
services,” which is an important part of our operations.
PRODUCT SERVICES AGREEMENTS Contractual commitments, with
multiple-year terms, to provide specifi ed services for products in
our Power & Water, Oil & Gas, Aviation and Transportation installed
base—for example, monitoring, maintenance, service and spare
parts for a gas turbine/generator set installed in a customer’s
power plant.
PRODUCTIVITY The rate of increased output for a given level of
input, with both output and input measured in constant currency.
PROGRESS COLLECTIONS Billings and payments received on cus-
tomer contracts before the related revenue is recognized.
QUALIFIED SPECIAL PURPOSE ENTITIES (QSPEs) A type of variable
interest entity whose activities are signifi cantly limited and entirely
specifi ed in the legal documents that established it. There also
are signifi cant limitations on the types of assets and derivative
instruments such entities may hold and the types and extent of
activities and decision-making they may engage in.
RETAINED INTEREST A portion of a transferred fi nancial asset
retained by the transferor that provides rights to receive portions
of the cash infl ows from that asset.
RETURN ON AVERAGE GE SHAREOWNERS’ EQUITY Earnings from
continuing operations before accounting changes divided by
average GE shareowners’ equity, excluding effects of discontin-
ued operations (on an annual basis, calculated using a fi ve-point
average). Average GE shareowners’ equity, excluding effects of
discontinued operations, as of the end of each of the years in the
fi ve-year period ended December 31 of the year for which the ratio
is calculated is described in the Supplemental Information section.
RETURN ON AVERAGE TOTAL CAPITAL INVESTED For GE, earnings
from continuing operations before accounting changes plus
the sum of after-tax interest and other fi nancial charges and
noncontrolling interests, divided by the sum of the averages of
total shareowners’ equity (excluding effects of discontinued opera-
tions), borrowings, mandatorily redeemable preferred stock and
noncontrolling interests (on an annual basis, calculated using a
fi ve-point average). Average total shareowners’ equity, exclud-
ing effects of discontinued operations as of the end of each of
the years in the fi ve-year period ended December 31 of the year
for which the ratio is calculated is described in the Supplemental
Information section.
SECURITIZATION A process whereby loans or other receivables are
packaged, underwritten and sold to investors. In a typical transac-
tion, assets are sold to a special purpose entity, which purchases
the assets with cash raised through issuance of benefi cial interests
(usually debt instruments) to third-party investors. Whether or
not credit risk associated with the securitized assets is retained
by the seller depends on the structure of the securitization. See
“Monetization” and “Variable Interest Entity.”
SUBPRIME For purposes of Consumer-related discussion, subprime
includes consumer fi nance products like mortgage, auto, cards,
sales fi nance and personal loans to U.S. and global borrowers
whose credit score implies a higher probability of default based
upon GECC’s proprietary scoring models and defi nitions, which add
various qualitative and quantitative factors to a base credit score
such as a FICO score or global bureau score. Although FICO and
global bureau credit scores are a widely accepted rating of indi-
vidual consumer creditworthiness, the internally modeled scores
are more refl ective of the behavior and default risks in the portfolio
compared with stand-alone generic bureau scores.
TURNOVER Broadly based on the number of times that working
capital is replaced during a year. Current receivables turnover is
total sales divided by the fi ve-point average balance of GE current
receivables. Inventory turnover is total sales divided by a fi ve-point
average balance of inventories. See “Working Capital.”
VARIABLE INTEREST ENTITY An entity that must be consolidated by
its primary benefi ciary, the party that holds a controlling fi nancial
interest. A variable interest entity has one or both of the follow-
ing characteristics: (1) its equity at risk is not suffi cient to permit
the entity to fi nance its activities without additional subordinated
fi nancial support from other parties, or (2) as a group, the equity
investors lack one or more of the following characteristics: (a) the
power to direct the activities that most signifi cantly affect the eco-
nomic performance of the entity, (b) obligation to absorb expected
losses, or (c) right to receive expected residual returns.
WORKING CAPITAL Represents GE current receivables and invento-
ries, less GE accounts payable and progress collections.