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SUPPLEMENTAL INFORMATION
 9 Months Ended
Sep. 30, 2017
Other Income and Expenses [Abstract]  
SUPPLEMENTAL INFORMATION
SUPPLEMENTAL INFORMATION

CASH FLOWS INFORMATION

Amounts reported in the "All other operating activities" line in the Statement of Cash Flows reflect cash sources and uses as well as non-cash adjustments to net income including those related to taxes, interest, pension, contract assets and gains (losses) on principal business dispositions. Certain supplemental information related to our cash flows is shown below.
 
Nine months ended September 30
(In millions)
2017

2016

 
 
 
GE
 
 
All other operating activities
 
 
(Gains) losses on purchases and sales of business interests(a)
$
(1,968
)
$
(3,471
)
Contract assets (net)(b)
(4,009
)
(3,035
)
Income taxes(c)
(1,107
)
(1,318
)
Interest charges(d)
327

323

Principal pension plans(e)
1,179

2,520

Other(f)
1,636

169

 
$
(3,942
)
$
(4,812
)
Net dispositions (purchases) of GE shares for treasury
 
 
Open market purchases under share repurchase program
$
(3,394
)
$
(18,708
)
Other purchases
(58
)
(430
)
Dispositions
831

1,168

 
$
(2,620
)
$
(17,969
)
(a)
Included pre-tax gains on sales of businesses reclassified to Proceeds from principal business dispositions within Cash flows from investing activities of $(1,897) million for Water in the nine months ended September 30, 2017, and $(3,130) million for Appliances and $(398) million for GE Asset Management in the nine months ended September 30, 2016.
(b)
Contract assets are presented net of related billings in excess of revenues on our long-term product service agreements. See Note 9.
(c)
Reflected the effects of current tax expense (benefit) of $699 million and $953 million and net cash paid during the year for income taxes of $(1,806) million and $(2,271) million for the nine months ended September 30, 2017 and 2016, respectively. Cash flows effects of deferred tax provisions (benefits) are shown separately within cash flows from operating activities.
(d)
Reflected the effects of interest expense of $1,918 million and $1,490 million and cash paid for interest of $(1,591) million and $(1,167) million for the nine months ended September 30, 2017 and 2016, respectively.
(e)
Reflected the effects of pension costs of $2,779 million and $2,674 million and employer contributions of $(1,600) million and $(154) million for the nine months ended September 30, 2017 and 2016, respectively. See Note 12.
(f)
Included a $512 million correction of investing cash flows used for the settlement of derivative instruments classified as operating during the the six months ended June 30, 2017. Therefore, operating cash flows were understated and investing cash flows were overstated during the the six months ended June 30, 2017.
DERIVATIVES AND HEDGING

See Note 16 for the primary information related to our derivatives and hedging activity. This section provides certain supplemental information about this topic.

Changes in the fair value of derivatives are recorded in a separate component of equity (referred to below as Accumulated Other Comprehensive Income, or AOCI) and are recorded in earnings in the period in which the hedged transaction occurs. The table below summarizes this activity by hedging instrument.

FAIR VALUE OF DERIVATIVES
 
 
 
 
 
 
 
 
September 30, 2017
 
December 31, 2016
(In millions)
Assets

Liabilities

 
Assets

Liabilities

 
 
 
 
 
 
Derivatives accounted for as hedges
 
 
 
 
 
Interest rate contracts
$
2,663

$
108

 
$
3,106

$
210

Currency exchange contracts
233

105

 
402

624

Other contracts
—

—

 
—

—

 
2,895

213

 
3,508

834

 
 
 
 
 
 
Derivatives not accounted for as hedges
 
 
 
 
 
Interest rate contracts
74

6

 
62

20

Currency exchange contracts
1,499

2,187

 
1,778

4,011

Other contracts
132

46

 
119

17

 
1,705

2,240

 
1,958

4,048

 
 
 
 
 
 
Gross derivatives recognized in statement of financial position
 
 
 
 
 
Gross derivatives
4,601

2,453

 
5,467

4,883

Gross accrued interest
491

—

 
768

(24
)
 
5,091

2,454

 
6,234

4,859

 
 
 
 
 
 
Amounts offset in statement of financial position
 
 
 
 
 
Netting adjustments(a)
(1,802
)
(1,802
)
 
(3,097
)
(3,094
)
Cash collateral(b)
(2,091
)
(276
)
 
(2,025
)
(1,355
)
 
(3,893
)
(2,078
)
 
(5,121
)
(4,449
)
 
 
 
 
 
 
Net derivatives recognized in statement of financial position
 
 
 
 
 
Net derivatives
1,198

376

 
1,113

410

 
 
 
 
 
 
Amounts not offset in statement of financial position
 
 
 
 
 
Securities held as collateral(c)
(437
)
—

 
(442
)
—

 
 
 
 
 
 
Net amount
$
761

$
376

 
$
671

$
410


Derivatives are classified in the captions "All other assets" and "All other liabilities" and the related accrued interest is classified in "Other GE Capital receivables" and "All other liabilities" in our Statement of Financial Position.

(a)
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts include fair value adjustments related to our own and counterparty non-performance risk. At September 30, 2017 and December 31, 2016, the cumulative adjustment for non-performance risk was insignificant and $(3) million, respectively.
(b)
Excluded excess cash collateral received and posted of $90 million and $151 million at September 30, 2017, respectively, and $6 million and $177 million at December 31, 2016, respectively.
(c)
Excluded excess securities collateral received of $42 million and zero at September 30, 2017 and December 31, 2016, respectively.

CASH FLOW HEDGE ACTIVITY
 
 
 
 
 
 
Gain (loss) recognized in AOCI
 
Gain (loss) reclassified
from AOCI into earnings
 
for the three months ended September 30
 
for the three months ended September 30
(In millions)
2017

2016

 
2017

2016

 
 
 
 
 
 
Interest rate contracts
$
1

$
1

 
$
(6
)
$
(12
)
Currency exchange contracts
224

—

 
110

(46
)
Commodity contracts
—

1

 
—

—

Total(a)
$
225

$
2

 
$
104

$
(57
)
 
 
 
 
 
 
CASH FLOW HEDGE ACTIVITY
 
 
 
 
 
 
Gain (loss) recognized in AOCI
 
Gain (loss) reclassified
from AOCI into earnings
 
for the nine months ended September 30
 
for the nine months ended September 30
(In millions)
2017

2016

 
2017

2016

 
 
 
 
 
 
Interest rate contracts
$
3

$
32

 
$
(21
)
$
(67
)
Currency exchange contracts
278

(76
)
 
189

(59
)
Commodity contracts
—

1

 
—

(3
)
Total(a)
$
281

$
(43
)
 
$
167

$
(128
)
(a)
Gain (loss) is recorded in "GE Capital revenues from services", "Interest and other financial charges", and "Other costs and expenses" in our Statement of Earnings when reclassified.

The total pre-tax amount in AOCI related to cash flow hedges of forecasted transactions was a $160 million gain at September 30, 2017. We expect to transfer $39 million gain to earnings as an expense in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. In both the six months ended 2017 and 2016, we recognized insignificant gains and losses related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At September 30, 2017 and 2016, the maximum term of derivative instruments that hedge forecasted transactions was 15 years and 16 years, respectively. See Note 14 for additional information about reclassifications out of AOCI.

For cash flow hedges, the amount of ineffectiveness in the hedging relationship and amount of the changes in fair value of the derivatives that are not included in the measurement of ineffectiveness were insignificant for each reporting period.

COUNTERPARTY CREDIT RISK

Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral.

As discussed above, we have provisions in certain of our master agreements that require counterparties to post collateral (typically, cash or U.S. Treasury securities) when our receivable due from the counterparties, measured at current market value, exceeds a specified limit. The fair value of such collateral was $2,529 million at September 30, 2017, of which $2,091 million was cash and $437 million was in the form of securities held by a custodian for our benefit. Under certain of these same agreements, we post collateral to our counterparties for our derivative obligations, the fair value of cash collateral posted was $276 million at September 30, 2017. At September 30, 2017, our exposure to counterparties (including accrued interest), net of collateral we hold, was $681 million. This excludes exposure related to embedded derivatives.

Additionally, our master agreements typically contain mutual downgrade provisions that provide the ability of each party to require termination if the long-term credit rating of the counterparty were to fall below A-/A3 or other ratings levels agreed upon with the counterparty. In certain of these master agreements, each party also has the ability to require termination if the short-term rating of the counterparty were to fall below A-1/P-1. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability, after consideration of collateral posted by us and outstanding interest payments was $271 million at September 30, 2017. This excludes exposure related to embedded derivatives.