Boeing 2013 Annual Report Download - page 74

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Investments
Time deposits are held-to-maturity investments that are carried at cost.
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
impairments or 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, and any impairments
or gain/loss on the disposition of these investments are recorded in Other income/(expense), 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 comprehensive income 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 immediately.
Aircraft Valuation
Used aircraft under trade-in commitments and aircraft under repurchase commitments In
conjunction with signing a definitive agreement for the sale of new aircraft (Sale Aircraft), we have entered
into trade-in commitments with certain customers that give them the right to trade in used aircraft at a
specified price upon the purchase of Sale Aircraft. Additionally, we have entered into contingent repurchase
commitments with certain customers wherein we agree to repurchase the Sale Aircraft at a specified price,
generally 10 to 15 years after delivery of the Sale Aircraft. Our repurchase of the Sale Aircraft is contingent
upon a future, mutually acceptable agreement for the sale of additional new aircraft. If we execute an
agreement for the sale of additional new aircraft, and if the customer exercises its right to sell the Sale
Aircraft to us, a contingent repurchase commitment would become a trade-in commitment. Our historical
experience is that contingent repurchase commitments infrequently become trade-in commitments.