GE 2009 Annual Report Download - page 121

GE 2009 ANNUAL REPORT 119
NONCONTROLLING INTEREST Portion of shareowner’s equity in a
subsidiary that is not attributable to GE. In prior financial state-
ments, this was labeled minority interest and was presented
outside of shareowners’ equity.
OPERATING PROFIT GE earnings from continuing operations
before interest and other financial charges, income taxes and
effects of accounting changes.
OPTION The right, not the obligation, to execute a transaction at
a designated price, generally involving equity interests, interest
rates, currencies or commodities. See “Hedge.”
PRODUCT SERVICES For purposes of the financial statement
display of sales and costs of sales in our Statement of Earnings,
“goods” is required by U.S. Securities and Exchange Commission
regulations to include all sales of tangible products, and “services”
must include all other sales, including broadcasting and other
services activities. In our Management’s Discussion and Analysis
of Operations we refer to sales under product service agreements
and sales of both goods (such as spare parts and equipment
upgrades) and related services (such as monitoring, maintenance
and repairs) as sales of “product services,” which is an important
part of our operations.
PRODUCT SERVICES AGREEMENTS Contractual commitments, with
multiple-year terms, to provide specified services for products in
our Energy Infrastructure and Technology Infrastructure installed
base — for example, monitoring, maintenance, service and spare
parts for a gas turbine/generator set installed in a customer’s
power plant.
PRODUCTIVITY The rate of increased output for a given level of
input, with both output and input measured in constant currency.
PROGRESS COLLECTIONS Payments received from customers as
deposits before the associated work is performed or product is
delivered.
QUALIFYING SPEs (QSPEs) These entities are a specific type of
Variable Interest Entity defined in ASC 860, Transfers and Servicing.
The activities of QSPEs are significantly limited and entirely
specified in the legal documents that established the entity.
There also are significant limitations on the types of assets and
derivative instruments they may hold and the types and extent
of activities and decision-making they may engage in.
RETAINED INTEREST A portion of a transferred financial asset
retained by the transferor that provides rights to receive portions
of the cash inflows from that asset.
RETURN ON AVERAGE GE SHAREOWNERS’ EQUITY Earnings from
continuing operations before accounting changes divided by
average GE shareowners’ equity, excluding effects of discontin-
ued operations (on an annual basis, calculated using a five-point
average). Average GE shareowners’ equity, excluding effects of
discontinued operations, as of the end of each of the years in
the five-year period ended December 31, 2009, is described in
the Supplemental Information section.
RETURN ON AVERAGE TOTAL CAPITAL INVESTED For GE, earnings
from continuing operations before accounting changes plus the
sum of after-tax interest and other financial charges and non-
controlling interests, divided by the sum of the averages of total
shareowners’ equity (excluding effects of discontinued operations),
borrowings, mandatorily redeemable preferred stock and non-
controlling interests (on an annual basis, calculated using a
five-point average). Average total shareowners’ equity, excluding
effects of discontinued operations as of the end of each of the years
in the five-year period ended December 31, 2009, is described in
the Supplemental Information section.
SECURITIZATION A process whereby loans or other receivables are
packaged, underwritten and sold to investors. In a typical trans-
action, assets are sold to a special purpose entity, which purchases
the assets with cash raised through issuance of beneficial interests
(usually debt instruments) to third-party investors. Whether or
not credit risk associated with the securitized assets is retained
by the seller depends on the structure of the securitization. See
“Monetization” and “Variable interest entity.”
SUBPRIME For purposes of Consumer related discussion, subprime
includes consumer finance products like residential mortgage,
auto loans, credit cards, sales finance and personal loans to U.S.
and global borrowers whose credit score implies a higher prob-
ability of default based upon GE Capital’s proprietary scoring
models and definitions, which add various qualitative and quanti-
tative factors to a base credit score such as a FICO score or global
bureau score. Although FICO and global bureau credit scores are
a widely accepted rating of individual consumer creditworthiness,
the internally modeled scores are more reflective of the behavior
and default risks in the portfolio compared to stand-alone generic
bureau scores.
TURNOVER Broadly based on the number of times that working
capital is replaced during a year. Current receivables turnover
is total sales divided by the five-point average balance of GE
current receivables. Inventory turnover is total sales divided by a
five-point average balance of inventories. See “Working capital.”
UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES Claims
reserves for events that have occurred, including both reported
and incurred-but-not-reported (IBNR) reserves, and the expenses
of settling such claims.
VARIABLE INTEREST ENTITY Entity defined by ASC 810,
Consolidation, and that must be consolidated by its primary
beneficiary. A variable interest entity has one or both of the
following characteristics: (1) its equity at risk is not sufficient
to permit the entity to finance its activities without additional
subordinated financial support from other parties, or (2) as a
group, the equity investors lack one or more of the following
characteristics: (a) direct or indirect ability to make decisions,
(b) obligation to absorb expected losses, or (c) right to receive
expected residual returns.
WORKING CAPITAL Represents GE current receivables and inven-
tories, less GE accounts payable and progress collections.
