GE 2015 Annual Report Download - page 170

FINANCIAL STATEMENTS PRESENTATION & POLICIES
142 GE 2015 FORM 10-K
³'HOLQTXHQW´UHFHLYDEOHVDUHWKRVHWKDWDUHGD\VRUPRUHSDVWGXHEDVHGRQWKHLUFRQWUDFWXDO terms. 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.
Our commercial loan and lease portfolio consists of a variety of loans and leases, including both larger-balance, non-homogeneous
loans and leases and smaller-balance homogeneous loans and leases. Losses on such loans and leases are recorded when probable
and estimable. We routinely evaluate our entire portfolio for potential specific credit or collection issues that might indicate an
impairment.
For larger-balance, non-homogeneous loans and leases, we consider the financial status, payment history, collateral value, industry
conditions and guarantor support related to specific customers. Any delinquencies or bankruptcies are indications of potential
impairment requiring further assessment of collectability. We routinely receive financial as well as rating agency reports on our
customers, and we elevate for further attention those customers whose operations we judge to be marginal or deteriorating. We also
elevate customers for further attention when we observe a decline in collateral values for asset-based loans. While collateral values are
not always available, when we observe such a decline, we evaluate relevant markets to assess recovery alternatives.
Measurement of the loss on our impaired commercial loans is based on the present value of expected future cash flows discounted at
WKHORDQ¶VHIIHFWLYHLQWHUHVWUDWHRUWKHIDLUYDOXHRIFROODWHUDOQHWRIH[SHFWHGVHOOLQJFRVWVLIWKHORDQLVGHWHUPLQHGto be collateral
dependent. We determine whether a loan is collateral dependent if the repayment of the loan is expected to be provided solely by the
underlying collateral. After providing for specific incurred losses, we then determine an allowance for losses that have been incurred in
the balance of the portfolio but cannot yet be identified to a specific loan or lease. This estimate is based upon various statistical
analyses considering historical and projected default rates and loss severity and aging, as well as our view on current market and
economic conditions. It is prepared by each respective line of business.
When we repossess collateral in satisfaction of a loan, we write down the receivable against the allowance for losses. Repossessed
collateral is included in the caSWLRQ³$OORWKHUDVVHWV´LQWKH6WDWHPHQWRI)LQDQFLDO3RVLWLRQDQGFDUULHGDWWKHORZHURIFRVWRUHVWLPDWHG
fair value less costs to sell.
Write-offs on larger-balance impaired commercial loans are based on amounts deemed uncollectible and are reviewed quarterly. Write-
offs are determined based on the consideration of many factors, such as expectations of the workout plan or restructuring of the loan,
valuation of the collateral and the prioritization of our claim in bankruptcy. Write-offs are recognized against the allowance for losses
primarily in the reporting period in which management has deemed all or a portion of the financing receivable to be uncollectible. If
foreclosure is probable, the write-off is determined based on the fair value of the collateral less costs to sell. Smaller-balance,
homogeneous commercial loans are written off at the earlier of when deemed uncollectible or at 180 days past due.
PARTIAL SALES OF BUSINESS INTERESTS
Gains or losses on sales of affiliate shares where we retain a controlling financial interest are recorded in equity. Gains or losses on
sales that result in our loss of a controlling financial interest are recorded in earnings along with remeasurement gains or losses on any
investments in the entity that we retained.
CASH AND EQUIVALENTS
Debt securities and money market instruments with original maturities of three months or less are included in cash equivalents unless
designated as available-for-sale and classified as investment securities.
142 GE 2015 FORM 10-K