Boeing 2012 Annual Report Download - page 33

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21
The following table summarizes our research and development expense:
Years ended December 31, 2012 2011 2010
Commercial Airplanes $2,049 $2,715 $2,975
Defense, Space & Security 1,189 1,138 1,136
Other 60 65 10
Total $3,298 $3,918 $4,121
Our Research and development expense decreased by $620 million and $203 million in 2012 and 2011.
These decreases were primarily due to lower spending at BCA on the 747-8 and 787-8 programs.
The most significant items included in Unallocated items and eliminations are shown in the following table:
(Dollars in millions)
Years ended December 31, 2012 2011 2010
Share-based plans ($81) ($83) ($136)
Deferred compensation (75) (61) (112)
Pension (787) (269) 54
Postretirement (112) (248) (59)
Eliminations and other (336) (327) (482)
Total ($1,391) ($988) ($735)
Share-based plans expense decreased by $53 million in 2011 primarily due to the expiration of the
ShareValue trust at June 30, 2010.
Deferred compensation expense increased by $14 million in 2012 and decreased by $51 million in 2011.
The year over year changes in deferred compensation expense are primarily driven by changes in our
stock price and broad stock market conditions.
Eliminations and other unallocated items expense increased by $9 million in 2012 and decreased by $155
million in 2011. The fluctuations in 2012 and 2011 were due to the timing of intercompany expense
allocations and elimination of profit on intercompany items. The 2012 expense includes a $121 million
benefit related to a favorable court judgment on satellite litigation and the 2010 expense includes a $55
million charitable contribution.
Unallocated pension and other postretirement expense represents the difference between costs
recognized under Generally Accepted Accounting Principles in the United States of America (GAAP) in
the consolidated financial statements and federal cost accounting standards required to be utilized by our
business segments for U.S. government contracting purposes. We recorded net periodic benefit cost
related to pensions and other postretirement benefits of $3,383 million, $3,127 million and $1,864 million
in 2012, 2011 and 2010, respectively. The increase in net periodic benefit costs related to pensions and
other postretirement benefits is primarily due to higher amortization of actuarial losses and higher service
costs driven by lower discount rates. Not all net periodic benefit cost is recognized in earnings in the period
incurred because it is allocated to production as product costs and a portion remains in inventory at the
end of the reporting period. A portion of pension and other postretirement expense is recorded in the
business segments and the remainder is included in unallocated pension and other postretirement
expense. The unallocated expense in 2011 includes $161 million of additional expense recorded during
the third quarter due to an adjustment primarily related to prior years’ accumulated postretirement benefit
obligations. See the discussion of the postretirement liabilities in Note 15 to our Consolidated Financial
Statements. Earnings from operations included the following amounts allocated to business segments
and Other unallocated items and eliminations.