Boeing 2007 Annual Report Download - page 62

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Notes to Consolidated Financial Statements
Note 11 – Accounts Payable and Other Liabilities
Accounts payable and other liabilities at December 31 consisted
of the following:
2007 2006
Accounts payable $÷5,714 $÷5,643
Accrued compensation and
employee benefit costs 4,996 4,852
Product warranties (a) 962 761
Environmental (b) 679 582
Forward loss recognition (c) 607 532
Other 3,718 3,831
$16,676 $16,201
(a) See Note 12.
(b) See Note 13.
(c) Forward loss recognition relates primarily to Airborne Early Warning & Control.
Payments associated with these liabilities may occur in periods
significantly beyond the next twelve months. Accounts payable
included $265 and $335 at December 31, 2007 and 2006,
attributable to checks written but not yet cleared by the bank.
Note 12 – Arrangements with Off-Balance Sheet Risk
We enter into arrangements with off-balance sheet risk in the
normal course of business, as discussed below. These
arrangements are primarily in the form of product warranties
and guarantees.
Product Warranties
We provide product warranties in conjunction with certain
product sales. The majority of our warranties are issued by our
Commercial Airplanes segment. Generally, aircraft sales are
accompanied by a three- to four-year standard warranty for
systems, accessories, equipment, parts, and software manu-
factured by us or manufactured to certain standards under our
authorization. These warranties are included in the programs’
estimate at completion (EAC). Additionally, on occasion we
have made commitments beyond the standard warranty obli-
gation to correct fleet wide major warranty issues of a parti-
cular model. These costs are expensed as incurred. These
warranties cover factors such as non-conformance to specifi-
cations and defects in material and design. Warranties issued
by our IDS segments principally relate to sales of military
aircraft and weapons hardware. These sales are generally
accompanied by a six to twelve-month warranty period and
cover systems, accessories, equipment, parts, and software
manufactured by us to certain contractual specifications.
These warranties cover factors such as non-conformance to
specifications and defects in material and workmanship.
Estimated costs related to standard warranties are recorded in
the period in which the related product sales occur. The war-
ranty liability recorded at each balance sheet date reflects the
estimated number of months of warranty coverage outstanding
for products delivered times the average of historical monthly
warranty payments, as well as additional amounts for certain
major warranty issues that exceed a normal claims level.
Estimated costs of these additional warranty issues are con-
sidered changes to the initial liability estimate. The following
table summarizes product warranty activity recorded during
2007 and 2006.
Product Warranty
Liabilities*
Beginning balance – January 1, 2006 $781
Additions for 2006 deliveries 171
Reductions for payments made (206)
Changes in estimates 15
Ending balance – December 31, 2006 761
Additions for 2007 deliveries 186
Reductions for payments made (220)
Changes in estimates 235
Ending balance – December 31, 2007 $962
*Amounts included in Accounts payable and other liabilities
Third-Party Guarantees
The following tables provide quantitative data regarding our
third-party guarantees. The maximum potential payments rep-
resent a “worst-case scenario,” and do not necessarily reflect
our expected results. Estimated proceeds from collateral and
recourse represent the anticipated values of assets we could
liquidate or receive from other parties to offset our payments
under guarantees. The carrying amount of liabilities recorded
on the Consolidated Statements of Financial Position reflects
our best estimate of future payments we may incur as part of
fulfilling our guarantee obligations.
As of December 31, 2007
Maximum
Potential
Payments
Estimated
Proceeds
from
Collateral/
Recourse
Carrying
Amount of
Liabilities*
Contingent repurchase commitments $4,284 $4,275 $7
Indemnifications to ULA** 1,221 7
Residual value guarantees 103 96 16
Credit guarantees related to
the Sea Launch venture 457 274 183
Other credit guarantees 43 14 1
Performance guarantees 48 20
Estimated
Proceeds
Maximum from Carrying
Potential Collateral/ Amount of
As of December 31, 2006 Payments Recourse Liabilities*
Contingent repurchase commitments $4,164 $4,155 $7
Indemnifications to ULA** 1,664 7
Residual value guarantees 252 215 15
Credit guarantees related to
the Sea Launch venture 471 283 188
Other credit guarantees 31 17
Performance guarantees 47 20
*Amounts included in Accounts payable and other liabilities
**Amount includes indemnification payments related to contributed Delta launch
program inventory of $917 and $1,375 plus indemnification payments of $289
related to the pricing of certain contracts at December 31, 2007 and 2006, and
$15 related to miscellaneous Delta vendor contracts at December 31, 2007.
The Boeing Company and Subsidiaries