Boeing 2008 Annual Report Download - page 78

Investments
We classify investment securities as either held-to-maturity or available-for-sale. Held-to-maturity
securities include commercial paper and are carried at amortized cost.
Available-for-sale securities include marketable debt and equity securities and an Enhanced
Equipment Trust Certificate (EETC) and are recorded at their fair values, with unrealized gains and
losses reported as part of Accumulated other comprehensive loss on the Consolidated Statements of
Financial Position. Realized gains and losses on marketable securities are recognized based on the
cost of securities 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 and held-to-maturity securities are assessed for impairment quarterly. To determine
if an impairment is other-than-temporary, we consider the duration and severity of the loss position, the
strength of the underlying collateral, the term to maturity, and credit rating. For investments that are
deemed other-than-temporarily impaired, losses are recorded in Cost of products or Cost of services
and payments received on these investments are recorded using the cost recovery method.
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 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,
are recorded in Other income, 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 as Other income, net.
64