GE 2014 Annual Report Download - page 226

206 GE 2014 FORM 10-K
FINANCIAL STATEMENTS VARIABLE INTEREST ENTITIES
Additionally, our master agreements typically contain mutual downgrade provisions that provide the ability of each party to
require termination if the long-term credit rating of the counterparty were to fall below A-/A3. In certain of these master
agreements, each party also has the ability to require termination if the short-term rating of the counterparty were to fall below
A-1/P-1. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain
other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of
these circumstances, the termination amount payable would be determined on a net basis and could also take into account
any collateral posted. The net amount of our derivative liability, after consideration of collateral posted by us and outstanding
interest payments was $514 million at December 31, 2014. This excludes embedded derivatives.
NOTE 23. VARIABLE INTEREST ENTITIES
We use variable interest entities primarily to securitize financial assets and arrange other forms of asset-backed financing in
the ordinary course of business. Except as noted below, investors in these entities only have recourse to the assets owned by
the entity and not to our general credit. We do not have implicit support arrangements with any VIE. We did not provide non-
contractual support for previously transferred financing receivables to any VIE in 2014 or 2013.
In evaluating whether we have the power to direct the activities of a VIE that most significantly impact its economic
performance, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is
engaged and our decision-making role, if any, in those activities that significantly determine the entity’s economic performance
as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant
to decision-making that affects the entity’s future performance and the exercise of professional judgment in deciding which
decision-making rights are most important.
In determining whether we have the right to receive benefits or the obligation to absorb losses that could potentially be
significant to the VIE, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and
servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity’s design,
including: the entity’s capital structure, contractual rights to earnings (losses), subordination of our interests relative to those of
other investors, contingent payments, as well as other contractual arrangements that have the potential to be economically
significant. The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic
interests is a matter that requires the exercise of professional judgment.