Boeing 2010 Annual Report Download - page 71

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 Other accrued liabilities until earned.
Share-Based Compensation
We provide various forms of share-based compensation to our employees. For awards settled in
shares, we measure compensation expense based on the grant-date fair value net of estimated
forfeitures. For awards settled in cash, or that may be settled in cash, we measure compensation
expense based on the fair value at each reporting date net of estimated forfeitures. The expense is
recognized over the requisite service period, which is generally the vesting period of the award.
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.
The accounting for uncertainty in income taxes 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 for financial
statement purposes 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. Tax-related interest and penalties are classified as a component of
Income tax expense.
Postretirement Plans
Almost all of our employees are covered by defined benefit pension plans with the exception of all
nonunion and some union employees hired after December 31, 2008. 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.
The funded status of our pension and postretirement plans is reflected on the Consolidated Statements
of Financial Position. Effective December 31, 2008, accounting standards required us to measure our
plan assets and benefit obligations at December 31, the date of our year end. We previously performed
this measurement at September 30 of each year.
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