Boeing 2010 Annual Report Download - page 75

using the first-in, first-out method. Realized gains and losses on all other available-for-sale securities
are recognized based on specific identification. Available-for-sale securities are assessed for
impairment quarterly.
The equity method of accounting is used to account for investments for which we have the ability to
exercise significant influence, but not control, over an investee. Significant influence is generally
deemed to exist if we have an ownership interest in the voting stock of an investee of between 20%
and 50%.
We classify investment income and loss on our Consolidated Statements of Operations based on
whether the investment is operating or non-operating in nature. Operating investments align
strategically and are integrated with our operations. Earnings from operating investments, including our
share of income or loss from equity method investments, dividend income from certain cost method
investments, and any impairments or gain/loss on the disposition of these investments, are recorded in
Income from operating investments, net. Non-operating investments are those we hold for
non-strategic purposes. Earnings from non-operating investments, including interest and dividends on
marketable securities, and any impairments or gain/loss on the disposition of these investments are
recorded in Other income/(expense), net.
Derivatives
All derivative instruments are recognized in the financial statements and measured at fair value
regardless of the purpose or intent of holding them. We use derivative instruments to principally
manage a variety of market risks. For derivatives designated as hedges of the exposure to changes in
fair value of the recognized asset or liability or a firm commitment (referred to as fair value hedges), the
gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain
on the hedged item attributable to the risk being hedged. The effect of that accounting is to include in
earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For
our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in
Shareholders’ equity (as a component of Accumulated other comprehensive loss) and is subsequently
reclassified into earnings in the same period or periods during which the hedged forecasted transaction
affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings
immediately. We also hold certain instruments for economic purposes that are not designated for
hedge accounting treatment. For these derivative instruments, the changes in their fair value are also
recorded in earnings immediately.
Aircraft Valuation
Used aircraft under trade-in commitments and aircraft under repurchase commitments In
conjunction with signing a definitive agreement for the sale of new aircraft (Sale Aircraft), we have
entered into specified-price trade-in commitments with certain customers that give them the right to
trade in used aircraft upon the purchase of Sale Aircraft. Additionally, we have entered into contingent
repurchase commitments with certain customers wherein we agree to repurchase the Sale Aircraft at a
specified price, generally 10 to 15 years after delivery of the Sale Aircraft. Our repurchase of the Sale
Aircraft is contingent upon a future, mutually acceptable agreement for the sale of additional new
aircraft. If we execute an agreement for the sale of additional new aircraft, and if the customer
exercises its right to sell the Sale Aircraft to us, a contingent repurchase commitment would become a
trade-in commitment. Our historical experience is that no contingent repurchase agreements have
become trade-in commitments.
63