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92 GE 2013 ANNUAL REPORT
    
Note 6.
GECC Financing Receivables, Allowance for Losses on
Financing Receivables and Supplemental Information
on Credit Quality
December 31 (In millions) 2013 2012
Loans, net of deferred income (a) $ 231,268 $ 240,634
Investment in financing leases, net of
deferred income 26,939 32,471
258,207 273,105
Less allowance for losses (5,178) (4,944)
Financing receivables—net (b) $ 253,029 $ 268,161
(a) Deferred income was $2,013 million and $2,184 million at December 31, 2013 and
2012, respectively.
(b) Financing receivables at December 31, 2013 and 2012 included $544 million and
$750 million, respectively, relating to loans that had been acquired in a transfer
but have been subject to credit deterioration since origination.
GECC fi nancing receivables include both loans and fi nancing
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 busi-
ness assets. The portfolio includes loans carried at the principal
amount on which fi nance charges are billed periodically, and
loans carried at gross book value, which includes fi nance charges.
Investment in fi nancing leases consists of direct fi nancing and
leveraged leases of aircraft, railroad rolling stock, autos, other
transportation equipment, data processing equipment, medi-
cal 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 fi nancing leases are leases in which GECC
depreciates the leased assets and is taxed upon the accrual of
rental income. Certain direct fi nancing leases are loans for fed-
eral income tax purposes. For these transactions, GECC is taxed
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 fi nancing and leveraged leases repre-
sents net unpaid rentals and estimated unguaranteed residual
values of leased equipment, less related deferred income. GECC
has no general obligation for principal and interest on notes and
other instruments representing third-party participation related
to leveraged leases; such notes and other instruments have
not been included in liabilities but have been offset against the
related rentals receivable. The GECC share of rentals receivable
on leveraged leases is subordinate to the share of other partici-
pants who also have security interests in the leased equipment.
For federal income tax purposes, GECC is entitled to deduct the
interest expense accruing on non-recourse fi nancing related to
leveraged leases.
NET INVESTMENT IN FINANCING LEASES
Total financing leases Direct financing leases (a) Leveraged leases (b)
December 31 (In millions) 2013 2012 2013 2012 2013 2012
Total minimum lease payments receivable $ 29,970 $ 36,451 $ 24,571 $ 29,416 $ 5,399 $ 7,035
Less principal and interest on third-party non-recourse debt (3,480) (4,662) — — (3,480) (4,662)
Net rentals receivables 26,490 31,789 24,571 29,416 1,919 2,373
Estimated unguaranteed residual value of leased assets 5,073 6,346 3,067 4,272 2,006 2,074
Less deferred income (4,624) (5,664) (3,560) (4,453) (1,064) (1,211)
Investment in financing leases, net of deferred income 26,939 32,471 24,078 29,235 2,861 3,236
Less amounts to arrive at net investment
Allowance for losses (202) (198) (192) (193) (10) (5)
Deferred taxes (4,075) (4,506) (1,783) (2,245) (2,292) (2,261)
Net investment in financing leases $ 22,662 $ 27,767 $ 22,103 $ 26,797 $ 559 $ 970
(a) Included $317 million and $330 million of initial direct costs on direct financing leases at December 31, 2013 and 2012, respectively.
(b) Included pre-tax income of $31 million and $81 million and income tax of $11 million and $32 million during 2013 and 2012, respectively. Net investment credits recognized
on leveraged leases during 2013 and 2012 were insignificant.