Boeing 2010 Annual Report Download - page 73

quantity. When estimated costs to complete exceed estimated program revenues to go, a program loss
provision is recorded in the current period for the estimated loss on all undelivered units in the
accounting quantity.
Used aircraft purchased by the Commercial Airplanes segment and general stock materials are stated
at cost not in excess of net realizable value. See ‘Aircraft Valuation’ within this Note for a discussion of
our valuation of used aircraft. Spare parts inventory is stated at lower of average unit cost or market.
We review our commercial spare parts and general stock materials quarterly to identify impaired
inventory, including excess or obsolete inventory, based on historical sales trends, expected
production usage, and the size and age of the aircraft fleet using the part. Impaired inventories are
charged to Cost of products in the period the impairment occurs.
Included in inventory for commercial aircraft programs are amounts paid or credited in cash, or other
consideration to certain airline customers, that are referred to as early issue sales consideration. Early
issue sales consideration is recognized as a reduction to revenue when the delivery of the aircraft
under contract occurs. If an airline customer does not perform and take delivery of the contracted
aircraft, we believe that we would have the ability to recover amounts paid. However, to the extent
early issue sales consideration exceeds advances and is not considered to be otherwise recoverable, it
would be written off in the current period.
We net advances and progress billings on long-term contracts against inventory in the Consolidated
Statements of Financial Position. Advances and progress billings in excess of related inventory are
reported in Advances and billings in excess of related costs.
Precontract Costs
We may, from time to time, incur costs to begin fulfilling the statement of work under a specific
anticipated contract that we are still negotiating with a customer. If we determine it is probable that we
will be awarded the specific anticipated contract, then we capitalize the precontract costs we incur,
excluding start-up costs which are expensed as incurred. Capitalized precontract costs of $527 and
$183 at December 31, 2010 and 2009, are included in Inventories, net of advances and progress
billings, in the accompanying Consolidated Statements of Financial Position.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, including applicable construction-period interest,
less accumulated depreciation and are depreciated principally over the following estimated useful lives:
new buildings and land improvements, from 10 to 40 years; and new machinery and equipment, from
3 to 20 years. The principal methods of depreciation are as follows: buildings and land improvements,
150% declining balance; and machinery and equipment, sum-of-the-years’ digits. Capitalized internal
use software is included in Other assets and amortized using the straight line method over five years.
We periodically evaluate the appropriateness of remaining depreciable lives assigned to long-lived
assets, including assets that may be subject to a management plan for disposition.
Long-lived assets held for sale are stated at the lower of cost or fair value less cost to sell. Long-lived
assets held for use are subject to an impairment assessment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no
longer recoverable based upon the undiscounted future cash flows of the asset, the amount of the
impairment is the difference between the carrying amount and the fair value of the asset.
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