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Fair Value Measurements

3 Months Ended

Mar. 31, 2017

NOTE 15. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

Our assets and liabilities measured at fair value on a recurring basis include investment securities mainly supporting obligations to annuitants and policyholders in our run-off insurance operations and derivatives.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

										Netting
(In millions)	Level 1		(a)	Level 2		(a)	Level 3		(b)	adjustment		Net balance (c)
March 31, 2017
Assets
Investment securities	$	241		$	37,740		$	3,967		$	-	$	41,949
Derivatives		-			4,311			21			(3,869)		463
Total	$	241		$	42,051		$	3,988		$	(3,869)	$	42,412

Liabilities
Derivatives	$	-		$	3,713		$	4		$	(2,935)	$	782
Other(d)		-			1,179			-			-		1,179
Total	$	-		$	4,892		$	4		$	(2,935)	$	1,961

December 31, 2016
Assets
Investment securities	$	188		$	39,719		$	4,406		$	-	$	44,313
Derivatives		-			5,444			23			(5,121)		345
Total	$	188		$	45,163		$	4,429		$	(5,121)	$	44,658
Liabilities
Derivatives	$	-		$	4,880		$	2		$	(4,449)	$	434
Other(d)		-			1,143			-			-		1,143
Total	$	-		$	6,024		$	2		$	(4,449)	$	1,577

(a) There were no significant transfers between Level 1 and Level 2 for the three months ended March 31, 2017 and 2016.

(b) Includes debt securities classified within Level 3 of $3,407 million of U.S. corporate and $240 million of Non-U.S. corporate at March 31, 2017, and $3,399 million of U.S. corporate and $688 million of Non-U.S. corporate. securities at December 31, 2016.

(c) See Notes 3, 16 and 21 for additional information on the composition of our investment securities and derivative portfolios.

(d) Primarily represents the liabilities associated with certain of our deferred incentive compensation plans.

Level 3 Instruments

The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowners’ equity.

CHANGES IN LEVEL 3 INSTRUMENTS FOR THE THREE MONTHS ENDED


			Net realized/			Net realized/
			unrealized		unrealized
			gains			gains
			(losses)			(losses)							Transfers		Transfers
	Balance at		included in			included							into		out of		Balance at
(In millions)	January 1		earnings(a)			in AOCI	Purchases(b)		Sales		Settlements		Level 3		Level 3		March 31
2017
Investment securities	$	4,406	$	9	$	6	$	92	$	-	$	(88)	$	11	$	(470)	$	3,967
Derivatives		21		1		(1)		(1)		-		(2)		-		(1)		17
Other		-		-		-		-		-		-		-		-		-
Total	$	4,427	$	10	$	5	$	91	$	-	$	(90)	$	12	$	(471)	$	3,985
2016
Investment securities	$	3,695	$	(12)	$	64	$	60	$	(5)	$	(9)	$	-	$	(15)	$	3,777
Derivatives		88		4		-		-		-		1		(11)		(1)		82
Other		259		-		-		-		-		-		-		(259)		-
Total	$	4,042	$	(8)	$	63	$	60	$	(5)	$	(8)	$	(11)	$	(275)	$	3,859

Earnings effects are primarily included in the “GE Capital revenues from services” and “Interest and other financial charges” captions in the Statement of Earnings.
Includes $91 million of U.S. corporate for the three months ended March 31, 2017.

The following table represents non-recurring fair value amounts (as measured at the time of the adjustment) for those assets remeasured to fair value on a non-recurring basis during the fiscal year and still held at March 31, 2017 and December 31, 2016.

	Remeasured during the three months ended March 31, 2017					Remeasured during the year ended December 31, 2016
(In millions)	Level 2		Level 3		Level 2		Level 3

Financing receivables and financing receivables held for sale	$	-	$	-	$	-	$	30
Cost and equity method investments		-		-		-		103
Long-lived assets		-		358		17		1,055
Total	$	-	$	358	$	17	$	1,189

The following table represents the fair value adjustments to assets measured at fair value on a non-recurring basis and still held at March 31, 2017 and 2016.

	Three months ended March 31
(In millions)	2017		2016

Financing receivables and financing receivables held for sale	$	-	$	(23)
Cost and equity method investments		(9)		(115)
Long-lived assets		(35)		(58)
Total	$	(44)	$	(197)

LEVEL 3 MEASUREMENTS - SIGNIFICANT UNOBSERVABLE INPUTS

					Range
(Dollars in millions)	Fair value		Valuation technique	Unobservable inputs	(weighted-average)

March 31, 2017
Recurring fair value measurements
Investment securities (b)	$	974	Income approach	Discount rate(a)	1.8%-24.2% (7.4%)

Non-recurring fair value measurements
Long-lived assets		57	Income approach	Discount rate(a)	2.5%-12.1% (6.5%)


December 31, 2016
Recurring fair value measurements
Investment securities (b)	$	830	Income approach	Discount rate(a)	1.4%-17.4% (7.9%)

Non-recurring fair value measurements
Financing receivables and
financing receivables held for sale	$	30	Income approach	Discount rate(a)	2.5%-30.0% (20.3%)

Cost and equity method investments		94	Income approach	Discount rate(a)	9.0%-30.0% (11.8%)

Long-lived assets		683	Income approach	Discount rate(a)	2.5%-20.0% (10.4%)

Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value.
Comprises substantially all of U.S. corporate securities.

At March 31, 2017 and December 31, 2016, other Level 3 recurring fair value measurements of $3,011 million and $3,598 million, respectively, and non-recurring measurements of $301 million and $379 million, respectively, are valued using non-binding broker quotes or other third-party sources. At March 31, 2017 and December 31, 2016, other recurring and non-recurring fair value measurements were individually insignificant and utilize a number of different unobservable inputs not subject to meaningful aggregation.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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