GE 2012 Annual Report Download - page 136

134 GE 2012 ANNUAL REPORT
notes to consolidated financial statements
Note 25.
Commitments and Guarantees
Commitments
In our Aviation segment, we had committed to provide financ-
ing assistance on $2,116 million of future customer acquisitions
of aircraft equipped with our engines, including commitments
made to airlines in 2012 for future sales under our GE90 and GEnx
engine campaigns. The GECAS business of GE Capital had placed
multiple-year orders for various Boeing, Airbus and other aircraft
with list prices approximating $25,735 million and secondary
orders with airlines for used aircraft of approximately $1,098 mil-
lion at December 31, 2012.
Product Warranties
We provide for estimated product warranty expenses when we
sell the related products. Because warranty estimates are fore-
casts 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 prod-
uct warranties follows.
(In millions) 2012 2011 2010
Balance at January 1 $1,507 $1,405 $1,641
Current-year provisions 611 866 491
Expenditures (723) (881) (710)
Other changes (12) 117 (17)
Balance at December 31 $1,383 $1,507 $1,405
Guarantees
At December 31, 2012, we were committed under the following
guarantee arrangements beyond those provided on behalf of
VIEs. See Note 24.
Þ CREDIT SUPPORT. We have provided $3,292 million of credit sup-
port on behalf of certain customers or associated companies,
predominantly joint ventures and partnerships, using arrange-
ments 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 $41 million at December 31, 2012.
Þ INDEMNIFICATION AGREEMENTS. We have agreements that
require us to fund up to $140 million at December 31, 2012
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 liabil-
ity for these indemnification agreements was $25 million at
December 31, 2012.
In connection with the transfer of the NBCU business to
Comcast, we have provided guarantees, on behalf of NBCU
LLC, for the acquisition of sports programming that are trig-
gered only in the event NBCU LLC fails to meet its payment
commitments. At December 31, 2012, our indemnification
under these arrangements was $7,468 million. This amount
was determined based on our current ownership share of
NBCU LLC and will change proportionately based on any
future changes to our ownership share. Comcast has agreed
to indemnify us for $383 million related to their proportionate
share of pre-existing NBCU LLC guarantees. The liability for
our NBCU LLC indemnification agreements was $151 million at
December 31, 2012.
At December 31, 2012, we also had $2,771 million of other
indemnification commitments, substantially all of which relate
to standard representations and warranties in sales of other
businesses or assets.
Þ 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. Adjustments to
the proceeds from our sale of GE Money Japan are further
discussed in Note 2. All other potential payments related to
contingent consideration are insignificant.
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.