Boeing 2009 Annual Report Download - page 77

than the related assets’ carrying values. Differences between carrying values and fair values of finance
leases and notes and other receivables, as determined by collateral value, are considered in
determining the allowance for losses on receivables.
We use a median calculated from published collateral values from multiple third-party aircraft value
publications based on the type and age of the aircraft to determine the fair value of aircraft. Under
certain circumstances, we apply judgment based on the attributes of the specific aircraft or equipment,
usually when the features or use of the aircraft vary significantly from the more generic aircraft
attributes covered by outside publications.
Impairment review for assets under operating leases and held for sale or re-lease We evaluate
for impairment assets under operating lease or assets held for sale or re-lease when events or
changes in circumstances indicate that the expected undiscounted cash flow from the asset may be
less than the carrying value. We use various assumptions when determining the expected
undiscounted cash flow including our intentions for how long we will hold an asset subject to operating
lease before it is sold, the expected future lease rates, lease terms, residual value of the asset, periods
in which the asset may be held in preparation for a follow-on lease, maintenance costs, remarketing
costs and the remaining economic life of the asset. We state assets held for sale at the lower of
carrying value or fair value less costs to sell.
When we determine that impairment is indicated for an asset, the amount of impairment expense
recorded is the excess of the carrying value over the fair value of the asset.
Allowance for losses on customer financing receivables We record the potential impairment of
customer financing receivables in our portfolio in a valuation account, the balance of which is an
accounting estimate of probable but unconfirmed losses in the receivables portfolio. The allowance for
losses on receivables relates to two components of receivables: (a) specifically identified receivables
that are evaluated individually for impairment and (b) all other receivables.
We determine a receivable is impaired when, based on current information and events, it is probable
that we will be unable to collect amounts due according to the original contractual terms of the
receivable agreement, without regard to any subsequent restructurings. Factors considered in
assessing collectibility include, but are not limited to, a customer’s extended delinquency, requests for
restructuring and filings for bankruptcy. We determine a specific impairment allowance based on the
difference between the carrying value of the receivable and the estimated fair value of the related
collateral.
We review the adequacy of the allowance attributable to the remaining receivables (after excluding
receivables subject to a specific impairment allowance) by assessing both the collateral exposure and
the applicable cumulative default rate. Collateral exposure for a particular receivable is the excess of
the carrying value of the receivable over the fair value of the related collateral. A receivable with an
estimated fair value in excess of the carrying value is considered to have no collateral exposure. The
applicable cumulative default rate is determined using two components: customer credit ratings and
weighted average remaining contract term. Credit ratings are determined for each customer in the
portfolio. Those ratings are updated based upon public information and information obtained directly
from our customers.
We have entered into agreements with certain customers that would entitle us to look beyond the
specific collateral underlying the receivable for purposes of determining the collateral exposure as
described above. Should the proceeds from the sale of the underlying collateral asset resulting from a
default condition be insufficient to cover the carrying value of our receivable (creating a shortfall
condition), these agreements would, for example, permit us to take the actions necessary to sell or
retain certain other assets in which the customer has an equity interest and use the proceeds to cover
the shortfall.
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