Boeing 2015 Annual Report Download - page 77

61
Used aircraft purchased by the Commercial Airplanes segment and general stock materials are stated at
cost not in excess of net realizable value. See ‘Aircraft Valuation’ within this Note for a discussion of our
valuation of used aircraft. Spare parts inventory is stated at lower of average unit cost or net realizable
value. We review our commercial spare parts and general stock materials quarterly to identify impaired
inventory, including excess or obsolete inventory, based on historical sales trends, expected production
usage, and the size and age of the aircraft fleet using the part. Impaired inventories are charged to Cost
of products in the period the impairment occurs.
Included in inventory for commercial aircraft programs are amounts paid or credited in cash, or other
consideration to certain airline customers, that are referred to as early issue sales consideration. Early
issue sales consideration is recognized as a reduction to revenue when the delivery of the aircraft under
contract occurs. If an airline customer does not perform and take delivery of the contracted aircraft, we
believe that we would have the ability to recover amounts paid. However, to the extent early issue sales
consideration exceeds advances and is not considered to be otherwise recoverable, it would be written
off in the current period.
We net advances and progress billings on long-term contracts against inventory in the Consolidated
Statements of Financial Position. Advances and progress billings in excess of related inventory are reported
in Advances and billings in excess of related costs.
Precontract Costs
We may, from time to time, incur costs in excess of the amounts required for existing contracts. If we
determine the costs are probable of recovery from future orders, then we capitalize the precontract costs
we incur, excluding start-up costs which are expensed as incurred. Capitalized precontract costs are
included in Inventories, net of advances and progress billings, in the accompanying Consolidated
Statements of Financial Position. Should future orders not materialize or we determine the costs are no
longer probable of recovery, the capitalized costs would be written off.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, including applicable construction-period interest, less
accumulated depreciation and are depreciated principally over the following estimated useful lives: new
buildings and land improvements, from 10 to 40 years; and new machinery and equipment, from 4 to 20
years. The principal methods of depreciation are as follows: buildings and land improvements, 150%
declining balance; and machinery and equipment, sum-of-the-years’ digits. Capitalized internal use
software is included in Other assets and amortized using the straight line method over 5 years. We
periodically evaluate the appropriateness of remaining depreciable lives assigned to long-lived assets,
including assets that may be subject to a management plan for disposition.
Long-lived assets held for sale are stated at the lower of cost or fair value less cost to sell. Long-lived
assets held for use are subject to an impairment assessment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the carrying value is no longer recoverable
based upon the undiscounted future cash flows of the asset, the amount of the impairment is the difference
between the carrying amount and the fair value of the asset.
Asset Retirement Obligations
We record all known asset retirement obligations for which the liability’s fair value can be reasonably
estimated, including certain asbestos removal, asset decommissioning and contractual lease restoration
obligations. Recorded amounts are not material.