GE 2014 Annual Report Download - page 230

210 GE 2014 FORM 10-K
FINANCIAL STATEMENTS COMMITMENTS, PRODUCT WARRANTIES AND GUARANTEES
PRODUCT WARRANTIES
We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are
forecasts that are based on the best available information – mostly historical claims experience – claims costs may differ from
amounts provided. An analysis of changes in the liability for product warranties follows.
(
In millions
)
2014 2013 2012
Balance at January 1
$
1,370
$
1,429
$
1,553
Current-year provisions 593 798 645
Expenditures (714) (867) (757)
Other changes (50) 10 (12)
Balance at December 31
$
1,199
$
1,370
$
1,429
GUARANTEES
Our guarantees are provided in the ordinary course of business. We underwrite these guarantees considering economic,
liquidity and credit risk of the counterparty. We believe that the likelihood is remote that any such arrangements could have a
significant adverse effect on our financial position, results of operations or liquidity. We record liabilities for guarantees at
estimated fair value, generally the amount of the premium received, or if we do not receive a premium, the amount based on
appraisal, observed market values or discounted cash flows. Any associated expected recoveries from third parties are
recorded as other receivables, not netted against the liabilities.
At December 31, 2014, we were committed under the following guarantee arrangements beyond those provided on behalf of
VIEs. See Note 23.
Credit Support. We have provided $2,531 million of credit support on behalf of certain customers or associated companies,
predominantly joint ventures and partnerships, using arrangements such as standby letters of credit and performance
guarantees. These arrangements enable these customers and associated companies to execute transactions or obtain
desired financing arrangements with third parties. Should the customer or associated company fail to perform under the terms
of the transaction or financing arrangement, we would be required to perform on their behalf. Under most such arrangements,
our guarantee is secured, usually by the asset being purchased or financed, or possibly by certain other assets of the
customer or associated company. The length of these credit support arrangements parallels the length of the related financing
arrangements or transactions. The liability for such credit support was $38 million at December 31, 2014.
Indemnification Agreements. We have agreements that require us to fund up to $28 million at December 31, 2014 under
residual value guarantees on a variety of leased equipment. Under most of our residual value guarantees, our commitment is
secured by the leased asset. The liability for these indemnification agreements was $10 million at December 31, 2014.
At December 31, 2014, we also had $923 million of other indemnification commitments, substantially all of which relate to
representations and warranties in sales of businesses or assets.
Contingent Consideration. These are agreements to provide additional consideration to a buyer or seller in a business
combination if contractually specified conditions related to the acquisition or disposition are achieved.