Boeing 2007 Annual Report Download - page 74

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71
Notes to Consolidated Financial Statements
Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss
were as follows:
December 31, December 31,
2007 2006
Foreign currency translation adjustments
Unrealized gains/(losses) on
certain investments, net of
reclassification adjustments
Unrealized gains on derivative instruments,
net of reclassification adjustments
Pension and postretirement adjustments
Accumulated other comprehensive loss
$÷÷244
16
92
(4,948)
$(4,596)
$««««157
(3)
18
(8,389)
$(8,217)
Note 18 – Derivative Financial Instruments
Cash Flow Hedges
Our cash flow hedges include certain interest rate swaps,
cross currency swaps, foreign currency forward contracts, for-
eign currency option contracts and commodity purchase con-
tracts. Interest rate swap contracts under which we agree to
pay fixed rates of interest are designated as cash flow hedges
of variable-rate debt obligations. We use foreign currency for-
ward contracts to manage currency risk associated with cer-
tain forecasted transactions, specifically sales and purchase
commitments made in foreign currencies. Our foreign currency
forward contracts hedge forecasted transactions principally
occurring within five years in the future, with certain contracts
hedging transactions up to 2021. We use commodity deriva-
tives, such as fixed-price purchase commitments, to hedge
against potentially unfavorable price changes for items used in
production. These include commitments to purchase electricity
at fixed prices through 2011.
For the years ended December 31, 2007, 2006, and 2005,
gains of $24, $24, and $3, respectively, (net of tax) were
reclassified to cost of products and services from Accumulated
other comprehensive loss. In 2006, additional gains of $12
were reclassified from Accumulated other comprehensive loss
to Other income, net, as a result of discontinuance of cash
flow hedge designation based on the probability that the origi-
nal forecasted transactions will not occur by the end of the
originally specified time period. Such reclassifications were not
significant for the years ended December 31, 2007 and 2005.
Ineffectiveness for cash flow hedges was insignificant for the
years ended December 31, 2007, 2006 and 2005.
At December 31, 2007 and 2006, net gains of $92 and $18
(net of tax) were recorded in Accumulated other comprehen-
sive loss associated with our cash flow hedging transactions.
Based on our current portfolio of cash flow hedges, we expect
to reclassify to cost of products and services a gain of $64 (net
of tax) during 2008.
Fair Value Hedges
Interest rate swaps under which we agree to pay variable rates
of interest are designated as fair value hedges of fixed-rate
debt. The net change in fair value of the derivatives and the
hedged items is reported in Interest and debt expense.
Ineffectiveness related to the interest rate swaps was insignifi-
cant for the years ended December 31, 2007, 2006 and 2005.
For the years ended December 31, 2007, 2006 and 2005, $5,
$8, and $12 of gains related to the basis adjustment of certain
terminated interest rate swaps were amortized to earnings.
Derivative Financial Instruments Not Receiving
Hedge Accounting Treatment
We also hold certain non-hedging instruments, such as interest
exchange agreements, interest rate swaps, warrants, and for-
eign currency forward contracts. The changes in fair value of
these instruments are recorded in Other income, net. For the
years ended December 31, 2007, 2006 and 2005, these non-
hedging instruments resulted in net (losses)/gain of ($47), ($6),
and $11, respectively.
Note 19 – Significant Group Concentrations of Risk
Credit Risk
Financial instruments involving potential credit risk are predomi-
nantly with commercial aircraft customers and the U.S. govern-
ment. Of the $12,845 in Accounts receivable, net and
Customer financing, net included in the Consolidated
Statements of Financial Position as of December 31, 2007,
$6,927 related to commercial aircraft customers ($324 of
Accounts receivable and $6,603 of Customer financing) and
$2,969 related to the U.S. government. Of the $6,603 of air-
craft customer financing, $5,991 related to customers we
believe have less than investment-grade credit. AirTran
Airways, American Airlines and Midwest Airlines, Inc. were
associated with 23%, 9% and 9%, respectively, of our aircraft
financing portfolio. Financing for aircraft is collateralized by
security in the related asset. As of December 31, 2007, there
was $8,350 of financing commitments related to aircraft on
order including options and proposed as part of sales cam-
paigns described in Note 13, of which $6,074 related to cus-
tomers we believe have less than investment-grade credit.
Other Risk
As of December 31, 2007, approximately 38% of our employ-
ees were represented by collective bargaining agreements and
approximately 32% of employees were represented by agree-
ments expiring during 2008.
The Boeing Company and Subsidiaries