Boeing 2008 Annual Report Download - page 74

the costs are typically based on milestones and are recognized as earned when we achieve the
milestone events and no ongoing obligation on our part exists. In the event we receive a milestone
payment prior to the completion of the milestone, the amount is classified in Accounts payable and
other liabilities until earned.
Share-Based Compensation
Our primary types of share-based compensation consist of stock options, ShareValue Trust
distributions, Performance Shares, and other stock unit awards, which we account for in accordance
with SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS No. 123R).
Income Taxes
Provisions for federal, state, and non-U.S. income taxes are calculated on reported Earnings before
income taxes based on current tax law and also include, in the current period, the cumulative effect of
any changes in tax rates from those used previously in determining deferred tax assets and liabilities.
Such provisions differ from the amounts currently receivable or payable because certain items of
income and expense are recognized in different time periods for financial reporting purposes than for
income tax purposes. Significant judgment is required in determining income tax provisions and
evaluating tax positions.
Effective January 1, 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation
No. (FIN) 48, Accounting for Uncertainty in Income Taxes (FIN 48), which requires a more-likely-
than-not threshold for financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. We record a liability for the difference between the benefit
recognized and measured pursuant to FIN 48 and the tax position taken or expected to be taken on
our tax return. To the extent that our assessment of such tax positions changes, the change in
estimate is recorded in the period in which the determination is made. Prior to 2007, we established
contingencies for income tax when, despite the belief that our tax positions were fully supportable, we
believed that it was probable that our positions would be challenged and possibly disallowed by various
authorities. The consolidated tax provision and related accruals included the impact of such reasonably
estimable losses and related interest and penalties as deemed appropriate.
With the adoption of FIN 48, we also began reporting tax-related interest and penalties as a component
of Income tax expense. Prior to 2007, income tax-related interest income was classified as Other
income, net, whereas, tax-related interest expense and penalties were reported as a component of
Income tax expense.
Postretirement Plans
We sponsor various pension plans covering substantially all employees. We also provide
postretirement benefit plans other than pensions, consisting principally of health care coverage to
eligible retirees and qualifying dependents. Benefits under the pension and other postretirement benefit
plans are generally based on age at retirement and years of service and, for some pension plans,
benefits are also based on the employee’s annual earnings. The net periodic cost of our pension and
other postretirement plans is determined using the projected unit credit method and several actuarial
assumptions, the most significant of which are the discount rate, the long-term rate of asset return, and
medical trend (rate of growth for medical costs). A portion of net periodic pension and other
postretirement income or expense is not recognized in net earnings in the year incurred because it is
allocated to production as product costs, and reflected in inventory at the end of a reporting period. If
gains and losses, which occur when actual experience differs from actuarial assumptions, exceed ten
percent of the greater of plan assets or plan liabilities we amortize them over the average future
service period of employees.
60