GE 2014 Annual Report Download - page 158

138 GE 2014 FORM 10-K
FINANCIAL STATEMENTS PRESENTATION & POLICIES
Except for goods sold under long-term agreements, we recognize sales of goods under the provisions of U.S. Securities and
Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 104, Revenue Recognition. We often sell consumer products
and computer hardware and software products with a right of return. We use our accumulated experience to estimate and
provide for such returns when we record the sale. In situations where arrangements include customer acceptance provisions
based on seller or customer-specified objective criteria, we recognize revenue when we have reliably demonstrated that all
specified acceptance criteria have been met or when formal acceptance occurs, respectively. In arrangements where we
provide goods for trial and evaluation purposes, we only recognize revenue after customer acceptance occurs. Unless
otherwise noted, we do not provide for anticipated losses before we record sales.
We recognize revenue on agreements for sales of goods and services under power generation unit and uprate contracts,
nuclear fuel assemblies, larger oil drilling equipment projects, aeroderivative unit contracts, military development contracts,
locomotive production contracts, and long-term construction projects, using long-term construction and production contract
accounting. We estimate total long-term contract revenue net of price concessions as well as total contract costs. For goods
sold under power generation unit and uprate contracts, nuclear fuel assemblies, aeroderivative unit contracts, military
development contracts and locomotive production contracts, we recognize sales as we complete major contract-specified
deliverables, most often when customers receive title to the goods or accept the services as performed. For larger oil drilling
equipment projects and long-term construction projects, we recognize sales based on our progress toward contract completion
measured by actual costs incurred in relation to our estimate of total expected costs. We measure long-term contract revenues
by applying our contract-specific estimated margin rates to incurred costs. We routinely update our estimates of future costs
for agreements in process and report any cumulative effects of such adjustments in current operations. We provide for any
loss that we expect to incur on these agreements when that loss is probable.
We recognize revenue upon delivery for sales of aircraft engines, military propulsion equipment and related spare parts not
sold under long-term product services agreements. Delivery of commercial engines, non-U.S. military equipment and all
related spare parts occurs on shipment; delivery of military propulsion equipment sold to the U.S. government or agencies
thereof occurs upon receipt of a Material Inspection and Receiving Report, DD Form 250 or Memorandum of Shipment.
Commercial aircraft engines are complex equipment manufactured to customer order under a variety of sometimes complex,
long-term agreements. We measure sales of commercial aircraft engines by applying our contract-specific estimated margin
rates to incurred costs. We routinely update our estimates of future revenues and costs for commercial aircraft engine
agreements in process and report any cumulative effects of such adjustments in current operations. Significant components of
our revenue and cost estimates include price concessions and performance-related guarantees as well as material, labor and
overhead costs. We measure revenue for military propulsion equipment and spare parts not subject to long-term product
services agreements based on the specific contract on a specifically measured output basis. We provide for any loss that we
expect to incur on these agreements when that loss is probable; consistent with industry practice, for commercial aircraft
engines, we make such provision only if such losses are not recoverable from future highly probable sales of spare parts and
services for those engines.
We sell product services under long-term product maintenance or extended warranty agreements in our Aviation, Power &
Water, Oil & Gas and Transportation segments, where costs of performing services are incurred on other than a straight-line
basis. We also sell product services in our Healthcare segment, where such costs generally are expected to be on a straight-
line basis. For the Aviation, Power & Water, Oil & Gas and Transportation agreements, we recognize related sales based on
the extent of our progress toward completion measured by actual costs incurred in relation to total expected costs. We
routinely update our estimates of future costs for agreements in process and report any cumulative effects of such adjustments
in current operations. For the Healthcare agreements, we recognize revenues on a straight-line basis and expense related
costs as incurred. We provide for any loss that we expect to incur on any of these agreements when that loss is probable.