Date
of Report (Date of earliest event reported) May
5, 2005 | ||||||||
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General
Electric Capital Corporation |
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(Exact
name of registrant as specified in its charter) |
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Delaware
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1-6461 |
13-1500700 | ||||||
(State
or other jurisdiction
of
incorporation) |
(Commission
File
Number) |
(IRS
Employer
Identification
No.) | ||||||
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260
Long Ridge Road, Stamford Connecticut |
06927-1600 | |||||||
(Address
of principal executive offices) |
(Zip
Code) | |||||||
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Registrant’s
telephone number, including area code (203)
357-4000 | ||||||||
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(Former
name or former address, if changed since last
report.) |
¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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· |
The
first errors were in accounting for interest rate and currency swaps at
GECC that included fees paid or received at inception. These swaps related
to about 14% of our overall borrowings at January 1, 2001, and about 6% of
our overall borrowings at December 31, 2004. Our initial accounting viewed
these fees as immaterial. KPMG LLP, our registered public accounting firm,
reviewed this initial accounting in connection with their 2001 audit. In
2003, we discontinued use of such swaps, except for one immaterial
transaction, but continued the previous accounting for those already in
place. Because of the swap fees, however, the fair value of the swaps was
not zero at inception as required by SFAS 133 and, accordingly, we were
required to, but did not, test periodically for
effectiveness. |
· |
The
second errors arose from a hedge accounting position related to a
portfolio of assets consolidated by GECC in July 2003 at the
implementation of FIN 46, Consolidation of Variable Interest Entities.
This portfolio included assets equal to 2% and 1% of GECC’s total assets
at consolidation and at December 31, 2004, respectively. We entered into
interest rate swaps in 2003 to adjust the economic yield on these
newly-consolidated fixed-rate assets from a fixed to a floating rate.
Adhering to our hedge documentation at the 2003 inception of these swaps,
we did not perform subsequent periodic testing of their effectiveness. We
determined as a result of the internal audit that the prepayment penalties
in the underlying assets, which penalties had not been identified by us or
KPMG LLP at implementation, were not appropriately mirrored in the
associated swaps, as required in order to avoid periodic testing of
effectiveness under SFAS 133. Accordingly, periodic effectiveness testing
was required under SFAS 133 for these swaps. |
· |
In
the course of the internal audit, GE’s internal audit staff also
identified other errors under SFAS 133 with respect to other aspects of
certain swaps and other derivative instruments. Adjustments to correct the
accounting for these transactions also are included in our restated
results of operations. We do not believe these other adjustments are
material, individually or in the aggregate, to our financial position or
our results of operations for any reported period.
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General
Electric Capital Corporation |
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(Registrant) |
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Date:
May 6, 2005 |
/s/
Philip D. Ameen |
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Philip
D. Ameen |
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Senior
Vice President and Controller |
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Duly
Authorized Officer and Principal Accounting Officer |