Boeing 2014 Annual Report Download - page 85

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73
Income recognition is generally suspended for financing receivables at the date full recovery of income
and principal becomes not probable. Income is recognized when financing receivables become
contractually current and performance is demonstrated by the customer. For the years ended December
31, 2013 and 2012, interest income recognized on such receivables was $30 and $6, and the average
recorded investment in impaired financing receivables was $376 and $466.
The change in the allowance for losses on financing receivables for the years ended December 31, 2014,
2013 and 2012, consisted of the following:
2014 2013 2012
Beginning balance - January 1 ($49) ($60) ($70)
Customer financing valuation benefit 28 11 10
Ending balance - December 31 ($21) ($49) ($60)
Collectively evaluated for impairment ($21) ($49) ($60)
The adequacy of the allowance for losses is assessed quarterly. Three primary factors influencing the level
of our allowance for losses on customer financing receivables are customer credit ratings, default rates
and collateral values. We assign internal credit ratings for all customers and determine the creditworthiness
of each customer based upon publicly available information and information obtained directly from our
customers. Our rating categories are comparable to those used by the major credit rating agencies.
Our financing receivable balances at December 31 by internal credit rating category are shown below:
Rating categories 2014 2013
BBB $1,055 $1,091
BB 58
B633 585
CCC 131 457
Other 86 95
Total carrying value of financing receivables $1,905 $2,286
At December 31, 2014, our allowance related to receivables with ratings of B and BBB. We applied default
rates that averaged 16% and 2% to the exposure associated with those receivables.
Customer Financing Exposure
Customer financing is collateralized by security in the related asset. The value of the collateral is closely
tied to commercial airline performance and overall market conditions and may be subject to reduced
valuation with market decline. Declines in collateral values are also a significant driver of our allowance
for losses. Generally, out-of-production aircraft have experienced greater collateral value declines than in-
production aircraft.