GE 2014 Annual Report Download - page 159

GE 2014 FORM 10-K 139
FINANCIAL STATEMENTS PRESENTATION & POLICIES
GECC REVENUES FROM SERVICES (EARNED INCOME)
We use the interest method to recognize income on loans. Interest on loans includes origination, commitment and other non-
refundable fees related to funding (recorded in earned income on the interest method). We stop accruing interest at the earlier
of the time at which collection of an account becomes doubtful or the account becomes 90 days past due, with the exception
of consumer credit card accounts. Beginning in the fourth quarter of 2013, we continue to accrue interest on consumer credit
cards until the accounts are written off in the period the account becomes 180 days past due. Previously, we stopped accruing
interest on consumer credit cards when the account became 90 days past due. Previously recognized interest income that
was accrued but not collected from the borrower is reversed, unless the terms of the loan agreement permit capitalization of
accrued interest to the principal balance. Although we stop accruing interest in advance of payments, we recognize interest
income as cash is collected when appropriate, provided the amount does not exceed that which would have been earned at
the historical effective interest rate; otherwise, payments received are applied to reduce the principal balance of the loan.
We resume accruing interest on nonaccrual, non-restructured commercial loans only when (a) payments are brought current
according to the loan’s original terms and (b) future payments are reasonably assured. When we agree to restructured terms
with the borrower, we resume accruing interest only when it is reasonably assured that we will recover full contractual
payments, and such loans pass underwriting reviews equivalent to those applied to new loans. We resume accruing interest
on nonaccrual consumer loans when the customer’s account is less than 90 days past due and collection of such amounts is
probable. Interest accruals on modified consumer loans that are not considered to be troubled debt restructurings (TDRs) may
return to current status (re-aged) only after receipt of at least three consecutive minimum monthly payments or the equivalent
cumulative amount, subject to a re-aging limitation of once a year, or twice in a five-year period.
We recognize financing lease income on the interest method to produce a level yield on funds not yet recovered. Estimated
unguaranteed residual values are based upon management's best estimates of the value of the leased asset at the end of the
lease term. We use various sources of data in determining this estimate, including information obtained from third parties,
which is adjusted for the attributes of the specific asset under lease. Guarantees of residual values by unrelated third parties
are considered part of minimum lease payments. Significant assumptions we use in estimating residual values include
estimated net cash flows over the remaining lease term, anticipated results of future remarketing, and estimated future
component part and scrap metal prices, discounted at an appropriate rate.
We recognize operating lease income on a straight-line basis over the terms of underlying leases.
Fees include commitment fees related to loans that we do not expect to fund and line-of-credit fees. We record these fees in
earned income on a straight-line basis over the period to which they relate. We record syndication fees in earned income at
the time related services are performed, unless significant contingencies exist.
DEPRECIATION AND AMORTIZATION
The cost of GE manufacturing plant and equipment is depreciated over its estimated economic life. U.S. assets are
depreciated using an accelerated method based on a sum-of-the-years digits formula; non-U.S. assets are generally
depreciated on a straight-line basis.
The cost of GECC equipment leased to others on operating leases is depreciated on a straight-line basis to estimated residual
value over the lease term or over the estimated economic life of the equipment.
The cost of GECC acquired real estate investments is depreciated on a straight-line basis to the estimated salvage value over
the expected useful life or the estimated proceeds upon sale of the investment at the end of the expected holding period if that
approach produces a higher measure of depreciation expense.