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78 GE 2009 ANNUAL REPORT
    
Note 6.
GECS Financing Receivables and Allowance for
Losses on Financing Receivables
December 31 (In millions) 2009 2008
Loans, net of deferred income $290,586 $310,203
Investment in financing leases,
net of deferred income 54,445 67,578
345,031 377,781
Less allowance for losses (8,105) (5,325)
Financing receivables — net (a) $336,926 $372,456
(a) Included $3,444 million and $6,461 million primarily related to consolidated,
liquidating securitization entities at December 31, 2009 and 2008, respectively.
In addition, financing receivables at December 31, 2009 and 2008, included
$2,704 million and $2,736 million, respectively, relating to loans that had been
acquired in a transfer but have been subject to credit deterioration since
origination per ASC 310, Receivables.
Effective January 1, 2009, loans acquired in a business acquisition
are recorded at fair value, which incorporates our estimate at the
acquisition date of the credit losses over the remaining life of the
portfolio. As a result, the allowance for loan losses is not carried
over at acquisition. This may result in lower reserve coverage
ratios prospectively. Details of financing receivables — net follow.
December 31 (In millions) 2009 2008
COMMERCIAL LENDING AND LEASING (CLL) (a)
Americas $ 87,496 $105,410
Europe 39,476 37,767
Asia 13,202 16,683
Other 771 786
140,945 160,646
CONSUMER (a)
Non-U.S. residential mortgages 58,831 60,753
Non-U.S. installment and revolving credit 25,208 24,441
U.S. installment and revolving credit 23,190 27,645
Non-U.S. auto 13,485 18,168
Other 12,808 11,541
133,522 142,548
REAL ESTATE 44,841 46,735
ENERGY FINANCIAL SERVICES 7,790 8,392
GE CAPITAL AVIATION SERVICES (GECAS) (b) 15,319 15,429
OTHER (c) 2,614 4,031
345,031 377,781
Less allowance for losses (8,105) (5,325)
Total $336,926 $372,456
(a) During the first quarter of 2009, we transferred Artesia from CLL to Consumer.
Prior-period amounts were reclassified to conform to the current-period’s
presentation.
(b) Included loans and financing leases of $13,254 million and $13,078 million at
December 31, 2009 and 2008, respectively, related to commercial aircraft at
Aviation Financial Services.
(c) Consisted of loans and financing leases related to certain consolidated, liquidating
securitization entities.
GECS financing receivables include both loans and financing
leases. Loans represent transactions in a variety of forms, includ-
ing revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business
assets. The portfolio includes loans carried at the principal amount
on which finance charges are billed periodically, and loans carried
at gross book value, which includes finance charges.
Investment in financing leases consists of direct financing and
leveraged leases of aircraft, railroad rolling stock, autos, other
transportation equipment, data processing equipment, medical
equipment, commercial real estate and other manufacturing,
power generation, and commercial equipment and facilities.
For federal income tax purposes, the leveraged leases and the
majority of the direct financing leases are leases in which GECS
depreciates the leased assets and is taxed upon the accrual of
rental income. Certain direct financing leases are loans for federal
income tax purposes. For these transactions, GECS is taxable
only on the portion of each payment that constitutes interest,
unless the interest is tax-exempt (e.g., certain obligations of state
governments).
Investment in direct financing and leveraged leases represents
net unpaid rentals and estimated unguaranteed residual values
of leased equipment, less related deferred income. GECS has no
general obligation for principal and interest on notes and other
instruments representing third-party participation related to lever-
aged leases; such notes and other instruments have not been
included in liabilities but have been offset against the related
rentals receivable. The GECS share of rentals receivable on lever-
aged leases is subordinate to the share of other participants who
also have security interests in the leased equipment.
For federal income tax purposes, GECS is entitled to deduct
the interest expense accruing on nonrecourse financing related
to leveraged leases.