GE 2013 Annual Report Download - page 78

76 GE 2013 ANNUAL REPORT
Note 1.
Basis of Presentation and Summary of Significant
Accounting Policies
Accounting Principles
Our fi nancial statements are prepared in conformity with U.S.
generally accepted accounting principles (GAAP).
Consolidation
Our fi nancial statements consolidate all of our affi liates—
entities in which we have a controlling fi nancial interest, most
often because we hold a majority voting interest. To determine if
we hold a controlling fi nancial interest in an entity, we fi rst evalu-
ate 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 signifi cantly
impact the VIE’s economic performance combined with a variable
interest that gives us the right to receive potentially signifi cant
benefi ts or the obligation to absorb potentially signifi cant losses,
we have a controlling fi nancial interest in that VIE. Rights held by
others to remove the party with power over the VIE are not con-
sidered 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 fi nancial interest in a VIE.
We hold a controlling fi nancial 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 participat-
ing rights or as a general partner. Where we are a general partner,
we consider substantive removal rights held by other partners in
determining if we hold a controlling fi nancial interest. We reevalu-
ate whether we have a controlling fi nancial interest 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 fi nancial interest, but
over which we have signifi cant infl uence, 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 reclassifi ed certain prior-year amounts to conform to
the current-year’s presentation.
Financial data and related measurements are presented in the
following categories:
• GE—This represents the adding together of all affi liates 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 affi liates.
• GECC—This represents the adding together of all affi liates of
GECC, giving effect to the elimination of transactions among
such affi liates.
• Consolidated—This represents the adding together of GE and
GECC, giving effect to the elimination of transactions between
GE and GECC.
• Operating Segments—These comprise our eight busi-
nesses, focused on the broad markets they serve: Power &
Water, Oil & Gas, Energy Management, Aviation, Healthcare,
Transportation, Appliances & Lighting (formerly Home &
Business Solutions) and GE Capital. Prior-period information
has been reclassifi ed to be consistent with how we managed
our businesses in 2013.
Unless otherwise indicated, information in these notes to con-
solidated fi nancial statements relates to continuing operations.
Certain of our operations have been presented as discontinued.
See Note 2.
The effects of translating to U.S. dollars the fi nancial state-
ments of non-U.S. affi liates 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.
Preparing fi nancial statements in conformity with U.S. GAAP
requires us to make estimates based on assumptions about
current, and for some estimates future, economic and market
conditions (for example, unemployment, market liquidity, the real
estate market, etc.), which affect reported amounts and related
disclosures in our fi nancial statements. Although our current esti-
mates contemplate current conditions and how we expect them
to change in the future, as appropriate, it is reasonably possible
that in 2014 actual conditions could be worse than anticipated in
those estimates, which could materially affect our results of oper-
ations and fi nancial position. Among other effects, such changes
could result in future impairments of investment securities,
goodwill, intangibles and long-lived assets, incremental losses on
fi nancing receivables, establishment of valuation allowances on
deferred tax assets and increased tax liabilities.
Sales of Goods and Services
We record all sales of goods and services only when a fi rm sales
agreement is in place, delivery has occurred or services have
been rendered and collectibility of the fi xed or determinable sales
price is reasonably assured.
Arrangements for the sale of goods and services sometimes
include multiple components. Most of our multiple component
arrangements involve the sale of goods and services in the
Healthcare segment. Our arrangements with multiple compo-
nents usually involve an upfront deliverable of large machinery
or equipment and future service deliverables such as installa-
tion, commissioning, training or the future delivery of ancillary
products. In most cases, the relative values of the undelivered
components are not signifi cant to the overall arrangement and
are typically delivered within three to six months after the core
product has been delivered. In such agreements, selling price is
determined for each component and any difference between the
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