Boeing 2010 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2010 Boeing annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

to four-year standard warranty for systems, accessories, equipment, parts, and software manufactured
by us or manufactured to certain standards under our authorization. These warranties are included in
the programs’ estimate at completion. On occasion we have made commitments beyond the standard
warranty obligation to correct fleet-wide major issues of a particular model, resulting in additional
accrued warranty expense. Warranties issued by our BDS segments principally relate to sales of
military aircraft and weapons hardware and are included in the contract cost estimates. These sales
are generally accompanied by a six to twelve-month warranty period and cover systems, accessories,
equipment, parts, and software manufactured by us to certain contractual specifications. Estimated
costs related to standard warranties are recorded in the period in which the related product sales
occur. The warranty liability recorded at each balance sheet date reflects the estimated number of
months of warranty coverage outstanding for products delivered times the average of historical monthly
warranty payments, as well as additional amounts for certain major warranty issues that exceed a
normal claims level. Estimated costs of these additional warranty issues are considered changes to the
initial liability estimate.
Supplier Penalties
We record an accrual for supplier penalties when an event occurs that makes it probable that a
supplier penalty will be incurred and the amount is reasonably estimable. Until an event occurs, we
fully anticipate accepting all products procured under production-related contracts.
Guarantees
We record a liability in Other accrued liabilities for the fair value of guarantees that are issued or
modified after December 31, 2002. For a residual value guarantee where we received a cash premium,
the liability is equal to the cash premium received at the guarantee’s inception. For credit and
performance guarantees, the liability is equal to the present value of the expected loss. We determine
the expected loss by multiplying the creditor’s default rate by the guarantee amount reduced by the
expected recovery, if applicable, for each future period the credit or performance guarantee will be
outstanding. If at inception of a guarantee, we determine there is a probable related contingent loss,
we will recognize a liability for the greater of (a) the fair value of the guarantee as described above or
(b) the probable contingent loss amount.
Note 2 – Acquisitions
Argon ST, Inc.
On August 5, 2010, we acquired Argon ST, Inc. (Argon) for $782, net of cash acquired. Argon develops
command, control, communications, computers, intelligence, surveillance, and reconnaissance
(C4ISR) and, combat systems. The acquisition is part of our strategy to expand our capabilities to
address the C4ISR, cyber and intelligence markets. Argon’s results of operations from the acquisition
date are included in the Network & Space Systems (N&SS) segment. We also expect to generate
synergies associated with the acquisition in other Boeing Defense, Space & Security business units.
Goodwill has been recorded in N&SS, Global Services & Support (GS&S) and Boeing Military Aircraft
(BMA) segments.
66