GE 2014 Annual Report Download - page 141

GE 2014 FORM 10-K 121
GLOSSARY
Fair value hedge Qualifying derivative instruments that we use to reduce the risk of changes in the fair value of assets,
liabilities or certain types of firm commitments. Changes in the fair values of derivative instruments that are designated and
effective as fair value hedges are recorded in earnings, but are offset by corresponding changes in the fair values of the
hedged items. See “Hedge.”
Financing receivables Investment in contractual loans and leases due from customers (not investment securities).
Forward contract Fixed price contract for purchase or sale of a specified quantity of a commodity, security, currency or other
financial instrument with delivery and settlement at a specified future date. Commonly used as a hedging tool. See “Hedge.”
Goodwill The premium paid for acquisition of a business. Calculated as the purchase price less the fair value of net assets
acquired (net assets are identified tangible and intangible assets, less liabilities assumed).
Guaranteed investment contracts (GICs) Deposit-type products that guarantee a minimum rate of return, which may be
fixed or floating.
Hedge A technique designed to eliminate risk. Often refers to the use of derivative financial instruments to offset changes in
interest rates, currency exchange rates or commodity prices, although many business positions are “naturally hedged” – for
example, funding a U.S. fixed-rate investment with U.S. fixed-rate borrowings is a natural interest rate hedge.
Intangible asset A non-financial asset lacking physical substance, such as goodwill, patents, licenses, trademarks and
customer relationships.
Interest rate swap Agreement under which two counterparties agree to exchange one type of interest rate cash flow for
another. In a typical arrangement, one party periodically will pay a fixed amount of interest, in exchange for which that party
will receive variable payments computed using a published index. See “Hedge.”
Investment securities Generally, an instrument that provides an ownership position in a corporation (a stock), a creditor
relationship with a corporation or governmental body (a bond), rights to contractual cash flows backed by pools of financial
assets or rights to ownership such as those represented by options, subscription rights and subscription warrants.
Match funding A risk control policy that provides funding for a particular financial asset having the same currency, maturity
and interest rate characteristics as that asset. Match funding is executed directly, by issuing debt, or synthetically, through a
combination of debt and derivative financial instruments. For example, when we lend at a fixed interest rate in the U.S., we can
borrow those U.S. dollars either at a fixed rate of interest or at a floating rate executed concurrently with a pay-fixed interest
rate swap. See “Hedge.”
Monetization Sale of financial assets to a third party for cash. For example, we sell certain loans, credit card receivables and
trade receivables to third-party financial buyers, typically providing at least some credit protection and often agreeing to
provide collection and processing services for a fee. Monetization normally results in gains on interest-bearing assets and
losses on non-interest-bearing assets. See “Securitization” and “Variable interest entity.”
Net Interest Margin A measure of the yield on interest earning assets relative to total interest expense. It is the amount of
interest income less interest expense, divided by average interest earning assets.
Noncontrolling interest Portion of shareowner’s equity in a subsidiary that is not attributable to GE.
Operating profit GE earnings from continuing operations before interest and other financial charges, income taxes and
effects of accounting changes.