Boeing 2015 Annual Report Download - page 76

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Environmental Remediation
We are subject to federal and state requirements for protection of the environment, including those for
discharge of hazardous materials and remediation of contaminated sites. We routinely assess, based on
in-depth studies, expert analyses and legal reviews, our contingencies, obligations, and commitments for
remediation of contaminated sites, including assessments of ranges and probabilities of recoveries from
other responsible parties and/or insurance carriers. Our policy is to accrue and charge to current expense
identified exposures related to environmental remediation sites when it is probable that a liability has been
incurred and the amount can be reasonably estimated. The amount of the liability is based on our best
estimate or the low end of a range of reasonably possible exposure for investigation, cleanup, and
monitoring costs to be incurred. Estimated remediation costs are not discounted to present value as the
timing of payments cannot be reasonably estimated. We may be able to recover a portion of the remediation
costs from insurers or other third parties. Such recoveries are recorded when realization of the claim for
recovery is deemed probable.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits,
and other money market instruments, which have original maturities of three months or less. We aggregate
our cash balances by bank where conditions for right of set-off are met, and reclassify any negative
balances, consisting mainly of uncleared checks, to Accounts payable. Negative balances reclassified to
Accounts payable were $163 and $241 at December 31, 2015 and 2014.
Inventories
Inventoried costs on commercial aircraft programs and long-term contracts include direct engineering,
production and tooling and other non-recurring costs, and applicable overhead, which includes fringe
benefits, production related indirect and plant management salaries and plant services, not in excess of
estimated net realizable value. To the extent a material amount of such costs are related to an abnormal
event or are fixed costs not appropriately attributable to our programs or contracts, they are expensed in
the current period rather than inventoried. Inventoried costs include amounts relating to programs and
contracts with long-term production cycles, a portion of which is not expected to be realized within one
year. Included in inventory for federal government contracts is an allocation of allowable costs related to
manufacturing process reengineering.
Commercial aircraft programs inventory includes deferred production costs and supplier advances.
Deferred production costs represent actual costs incurred for production of early units that exceed the
estimated average cost of all units in the program accounting quantity. Higher production costs are
experienced at the beginning of a new or derivative airplane program. Units produced early in a program
require substantially more effort (labor and other resources) than units produced later in a program because
of volume efficiencies and the effects of learning. We expect that these deferred costs will be fully recovered
when all units included in the accounting quantity are delivered as the expected unit cost for later deliveries
is below the estimated average cost of all units in the program. Supplier advances represent payments
for parts we have contracted to receive from suppliers in the future. As parts are received, supplier advances
are amortized to work in process.
The determination of net realizable value of long-term contract costs is based upon quarterly reviews that
estimate costs to be incurred to complete all contract requirements. When actual contract costs and the
estimate to complete exceed total estimated contract revenues, a loss provision is recorded. The
determination of net realizable value of commercial aircraft program costs is based upon quarterly program
reviews that estimate revenue and cost to be incurred to complete the program accounting quantity. When
estimated costs to complete exceed estimated program revenues to go, a program loss provision is
recorded in the current period for the estimated loss on all undelivered units in the accounting quantity.