GE 2014 Annual Report Download - page 160

140 GE 2014 FORM 10-K
FINANCIAL STATEMENTS PRESENTATION & POLICIES
The cost of individually significant customer relationships is amortized in proportion to estimated total related sales; cost of
other intangible assets is generally amortized on a straight-line basis over the asset’s estimated economic life. We review
long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may
not be recoverable. See Notes 7 and 8.
LOSSES ON FINANCING RECEIVABLES
Losses on financing receivables are recognized when they are incurred, which requires us to make our best estimate of
probable losses inherent in the portfolio. The method for calculating the best estimate of losses depends on the size, type and
risk characteristics of the related financing receivable. Such an estimate requires consideration of historical loss experience,
adjusted for current conditions, and judgments about the probable effects of relevant observable data, including present
economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values
(including housing price indices as applicable), and the present and expected future levels of interest rates. The underlying
assumptions, estimates and assessments we use to provide for losses are updated periodically to reflect our view of current
conditions and are subject to the regulatory examination process, which can result in changes to our assumptions. Changes in
such estimates can significantly affect the allowance and provision for losses. It is possible that we will experience credit
losses that are different from our current estimates. Write-offs are deducted from the allowance for losses when we judge the
principal to be uncollectible and subsequent recoveries are added to the allowance at the time cash is received on a written-off
account.
"Impaired" loans are defined as larger-balance or restructured loans for which it is probable that the lender will be unable to
collect all amounts due according to the original contractual terms of the loan agreement.
The vast majority of our Consumer and a portion of our Commercial Lending and Leasing (CLL) nonaccrual receivables are
excluded from this definition, as they represent smaller-balance homogeneous loans that we evaluate collectively by portfolio
for impairment.
Impaired loans include nonaccrual receivables on larger-balance or restructured loans, loans that are currently paying interest
under the cash basis and loans paying currently that had been previously restructured.
Specific reserves are recorded for individually impaired loans to the extent we have determined that it is probable that we will
be unable to collect all amounts due according to original contractual terms of the loan agreement. Certain loans classified as
impaired may not require a reserve because we believe that we will ultimately collect the unpaid balance (through collection or
collateral repossession).
“Troubled debt restructurings” (TDRs) are those loans for which we have granted a concession to a borrower experiencing
financial difficulties where we do not receive adequate compensation. Such loans are classified as impaired, and are
individually reviewed for specific reserves.
“Nonaccrual financing receivables” are those on which we have stopped accruing interest. 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, for which we continue to accrue interest until the accounts are written off in the
period that the account becomes 180 days past due. 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. Recently restructured financing receivables are not considered delinquent
when payments are brought current according to the restructured terms, but may remain classified as nonaccrual until there
has been a period of satisfactory payment performance by the borrower and future payments are reasonably assured of
collection.
“Delinquent” receivables are those that are 30 days or more past due based on their contractual terms.