statement of cash flows 2006 GE 2005 2004 2006 GECS 2005 2004 $ 20,829 — $ 16,711 — $ 17,160 — $ 10,658 (163) $ 7,577 1,950 $ 8,728 (559) 2,624 (811) 842 813 (1,756) 392 926 — 768 24,627 — 24,627 2,501 239 (287) (266) (608) 983 510 — 1,826 21,609 — 21,609 2,533 (5,623) (175) (908) (459) 1,888 (464) — 1,252 15,204 — 15,204 6,534 — 1,108 — (23) (1) — 3,839 (41) 21,911 (2,373) 19,538 6,036 — (653) — 30 (397) — 3,841 1,403 19,787 5,027 24,814 5,815 — 226 — (9) 2,593 — 3,888 (167) 20,515 5,621 26,136 (3,637) — — — 3,484 (4,353) (11) (4,517) — (4,517) (2,812) — — — 272 (4,331) 430 (6,441) — (6,441) (2,427) — — — 707 (4,815) (75) (6,610) — (6,610) (13,184) 6,799 (41,046) 9,022 386 (7,299) (5,555) (50,877) (383) (51,260) (11,629) 6,027 (16,954) 8,106 209 (7,167) (2,706) (24,114) (5,733) (29,847) (10,665) 5,839 (15,280) 3,437 472 (13,888) 4,156 (25,929) (7,651) (33,580) 1,292 130 (93) (8,554) (10,420) — (17,645) — (17,645) (392) 1,704 (3,424) (4,844) (9,352) — (16,308) — (16,308) (1,690) 434 (1,568) 3,993 (8,278) — (7,109) — (7,109) 6,461 88,278 (49,253) — (9,847) (1,174) 34,465 (220) 34,245 (4,044) 65,054 (49,709) — (7,816) (1,128) 2,357 415 2,772 33 58,143 (45,538) — (3,105) (3,304) 6,229 2,309 8,538 2,465 2,015 4,480 — $ 4,480 (1,140) 3,155 2,015 — $ 2,015 1,485 1,670 3,155 — $ 3,155 2,523 10,106 12,629 — $ 12,629 (2,261) 12,367 10,106 2,976 $ 7,130 1,094 11,273 12,367 3,267 $ 9,100 $ (1,159) (2,203) $ (928) (1,829) $ (603) (2,261) $(17,095) (666) $(15,518) (1,425) $(11,304) 922 In the consolidating data on this page, “GE” means the basis of consolidation as described in note 1 to the consolidated financial statements “GECS” means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the “General Electric Company and consolidated affiliates” columns. ge 2006 annual report 73

notes to consolidated financial statements Note 1 Summary of Significant Accounting Policies Accounting principles Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Consolidation Our financial statements consolidate all of our affi liates — companies that we control and in which we hold a majority voting interest. Associated companies are companies that we do not control but over which we have signifi cant infl uence, most often because we hold a shareholder voting position of 20% to 50%. Results of associated companies are presented on a one-line basis. Investments in and advances to associated companies are presented on a one-line basis in the caption “All other assets” in our Statement of Financial Position, net of allowance for losses that represents our best estimate of prob- able losses inherent in such assets. Financial statement presentation We have reclassified certain prior-year amounts to conform to the current year’s presentation. Financial data and related measurements are presented in the following categories: • GE This represents the adding together of all affi liates other than General Electric Capital Services, Inc. (GECS), whose operations are presented on a one-line basis. • GECS This affiliate owns all of the common stock of General Electric Capital Corporation (GE Capital). GE Capital and its respective affiliates are consolidated in the accompanying GECS columns and constitute the majority of its business. In 2005, most of GE Insurance Solutions Corporation (GE Insurance Solutions), formerly an affiliate of GECS, was classified as part of our discontinued insurance operations. See note 2. • CONSOLIDATED This represents the adding together of GE and GECS. • OPERATING SEGMENTS These comprise our six businesses focused on the broad markets they serve: Infrastructure, Commercial Finance, GE Money (formerly Consumer Finance), Healthcare, NBC Universal and Industrial. For segment reporting purposes, certain GECS businesses are included in the industrial operating segments that actively manage such businesses and report their results for internal performance measurement purposes. These include Aviation Financial Services, Energy Financial Services and Transportation Finance reported in the Infrastructure segment, and Equipment Services reported in the Industrial segment. Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations. The effects of translating to U.S. dollars the fi nancial statements of non-U.S. affiliates whose functional currency is the local currency are included in shareowners’ equity. Asset and liability accounts are translated at year-end exchange rates, while revenues and expenses are translated at average rates for the respective periods. Effects of transactions between related companies are elimi- nated. Transactions between GE and GECS are immaterial and consist primarily of GECS services for material procurement and trade receivables management buildings and equipment leased by GE from GECS information technology (IT) and other services sold to GECS by GE aircraft engines manufactured by GE that are installed on aircraft purchased by GECS from third-party producers for lease to others medical equipment manufactured by GE that is leased by GECS to others and various investments, loans and allocations of GE corporate overhead costs. Preparing financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. Sales of goods and services We record sales when a firm sales agreement is in place, delivery has occurred or services have been rendered, and collectibility of the fixed or determinable sales price is reasonably assured. If customer acceptance of products is not assured, we record sales only upon formal customer acceptance. We expense costs to acquire or originate sales agreements as incurred. Sales of goods in the Industrial businesses typically do not include multiple product and/or services elements. In contrast, sales of goods in the Infrastructure and Healthcare businesses sometimes include multiple components and sometimes include a service component such as installation. In such contracts, amounts assigned to each component are based on that compo- nent’s objectively determined fair value, such as the sales price for the component when it is sold separately or competitor prices for similar components. We recognize sales of our delivered components only when such delivered components have value to the customer on a standalone basis, we have delivered all components essential to functionality and each of our undeliv- ered components has an objectively determined fair value. When undelivered performance obligations are inconsequential or per- functory and not essential to the functionality of the delivered components (like certain training commitments), we recognize sales on the total contract and make a provision for the cost of the unperformed obligations. We record sales of product services, certain power generation and turbo-machinery equipment, military aircraft engines, infor- mation technology projects and water treatment equipment in accordance with their respective contracts. For long-term product services agreements, we use estimated contract profit rates to record sales as work is performed. For other contracts, we use estimated contract profit rates to record sales as major compo- nents are completed and delivered to customers. Estimates are subject to revisions. Revisions that affect an agreement’s total estimated profitability result in an immediate adjustment of earnings. We provide for any loss when that loss is probable. 74 ge 2006 annual report