GE 2014 Annual Report Download - page 156

136 GE 2014 FORM 10-K
FINANCIAL STATEMENTS PRESENTATION & POLICIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 interest 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
general 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 interest in these entities when our voting or substantive
participating rights change.
Associated companies are unconsolidated VIEs and other entities 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 associated 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, which represents our best estimate of probable losses
inherent in such assets.
SYNCHRONY FINANCIAL INITIAL PUBLIC OFFERING
On August 5, 2014, we completed the initial public offering (IPO) of our North American Retail Finance business, Synchrony
Financial, as a first step in a planned, staged exit from that business. Synchrony Financial closed the IPO of 125 million shares
of common stock at a price to the public of $23.00 per share and on September 3, 2014, Synchrony Financial issued an
additional 3.5 million shares of common stock pursuant to an option granted to the underwriters in the IPO (Underwriters’
Option). We received net proceeds from the IPO and the Underwriters’ Option of $2,842 million, which remain at Synchrony
Financial. Following the closing of the IPO and the Underwriters’ Option, we currently own approximately 85% of Synchrony
Financial and as a result, GECC continues to consolidate the business. The 15% is presented as noncontrolling interests. In
addition, in August 2014, Synchrony Financial completed issuances of $3,593 million of senior unsecured debt with maturities
up to 10 years and $8,000 million of unsecured term loans maturing in 2019, and in October 2014 completed issuances of
$750 million of unsecured term loans maturing in 2019 under the New Bank Term Loan Facility with third party lenders.
Subsequent to December 31, 2014 through February 13, 2015, Synchrony Financial issued an additional $1,000 million of
senior unsecured debt maturing in 2020.