GE 2014 Annual Report Download - page 82

62 GE 2014 FORM 10-K
MD&A OTHER CONSOLIDATED INFORMATION
OTHER CONSOLIDATED INFORMATION
INTEREST AND OTHER FINANCIAL CHARGES
Interest on borrowings and other financial charges amounted to $9.5 billion, $10.1 billion and $12.4 billion in 2014, 2013 and
2012, respectively. Substantially all of our borrowings are in financial services, where interest expense was $8.4 billion, $9.3
billion and $11.6 billion in 2014, 2013 and 2012, respectively. GECC average borrowings declined from 2013 to 2014 and from
2012 to 2013, in line with changes in average GECC assets. Interest rates have decreased over the three-year period
primarily attributable to declining global benchmark interest rates. GECC average borrowings were $364.4 billion, $379.5
billion and $420.0 billion in 2014, 2013 and 2012, respectively. The GECC average composite effective interest rate was 2.3%
in 2014, 2.4% in 2013 and 2.8% in 2012. In 2014, GECC average assets of $507.2 billion were 3.0% lower than in 2013, which
in turn were 7% lower than in 2012. See the “Liquidity and Borrowings” section within the MD&A of this Form 10-K for a
discussion of liquidity, borrowings and interest rate risk management.
POSTRETIREMENT BENEFIT PLANS
Postretirement benefit plans costs were $4.8 billion, $6.0 billion and $5.5 billion in 2014, 2013 and 2012, respectively. Costs
decreased in 2014 primarily due to the effects of higher discount rates (principal pension plans’ discount rate increased from
3.96% at December 31, 2012 to 4.85% at December 31, 2013) and lower loss amortization related to our principal pension
plans, partially offset by lower expected investment return on pension plan assets. Costs increased in 2013 primarily due to
the continued amortization of 2008 investment losses and the effects of lower discount rates (principal pension plans’ discount
rate decreased from 4.21% at December 31, 2011 to 3.96% at December 31, 2012).
Postretirement benefit actuarial assumptions are significant inputs to the actuarial models that measure benefit obligations and
their related effects on operations:
x Our discount rate for our principal pension plans at December 31, 2014 was 4.02%, which reflected current interest rates.
x The Society of Actuaries recently issued new mortality tables projecting longer life expectancies that will result in higher
postretirement benefit obligations for U.S. companies. We updated our mortality assumptions at December 31, 2014. The
new mortality assumptions increased principal postretirement benefit obligations by approximately $4.6 billion at year end.
x Considering the current and target asset allocations, as well as historical and expected returns on various categories of
assets in which our plans are invested, we have assumed that the long-term return on our principal pension plan assets will
be 7.5% for cost recognition in 2015, compared to 7.5% in 2014 and 8.0% in both 2013 and 2012.
GAAP provides for recognition of differences between assumed and actual experience over a period no longer than the
average future service of employees. See the “Critical Accounting Estimates” section within the MD&A of this Form 10-K for
additional information.
We expect the costs of our postretirement benefits to increase in 2015 by approximately $0.6 billion as compared to 2014,
primarily because of the effects of lower discount rates and new mortality assumptions, which are partially offset by lower loss
amortization related to our principal pension plans.
GAAP AND NON-GAAP PENSION COSTS
(In billions) 2014 2013 2012
GAAP principal pension plans' cost $ 3.6 $ 4.4 $ 3.8
Non-GAAP operating pension costs* 1.5 1.8 1.7
*Non-GAAP Financial Measure