| Note 1 – Summary of Significant
Accounting Policies |
| Principles of Consolidation
The consolidated financial statements of The Boeing Company,
together with its subsidiaries (herein referred to as
the “Company”) include the accounts of all majority-owned
subsidiaries. Investments in joint ventures for which
the Company does not have control, but has the ability
to exercise significant influence over the operating and
financial policies, are accounted for under the equity
method. Accordingly, the Company’s share of net earnings
and losses from these ventures is included in the Consolidated
Statements of Operations. Intercompany profits, transactions
and balances have been eliminated in consolidation. Certain
reclassifications have been made to prior periods to conform
with current reporting. |
| Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make assumptions and estimates that directly
affect the amounts reported in the consolidated financial
statements. Significant estimates for which changes in
the near term are considered reasonably possible and that
may have a material impact on the financial statements
are addressed in these notes to the consolidated financial
statements. |
| Sales and Other Operating
Revenues Commercial aircraft sales are recorded
as deliveries are made unless transfer of risk and rewards
of ownership is not sufficient. |
| Sales under fixed-price-type contracts are generally
recognized as deliveries are made or at the completion
of
scheduled performance milestones. For certain fixed-price
contracts that require substantial performance over
an extended period before deliveries begin, sales are
recorded based upon attainment of either internally identified
or external performance milestones. Sales under cost-reimbursement
contracts are recorded as costs are
incurred. Certain contracts contain profit incentives
based upon performance relative to predetermined targets
that may occur during or subsequent to delivery of the
product. Incentives, of which amounts can be reasonably
estimated, are recorded over the performance period of
the contract. Incentives and fee awards, of which
amounts cannot be reasonably estimated, are recorded when
awarded. Certain contracts contain provisions for
the redetermination of price based upon future economic
conditions. |
| Income associated with customer financing activities
is included in sales and other operating revenues. |
| Contract and Program
Accounting In the Military Aircraft and Missile
Systems segment and Space and Communications segment,
operations principally consist of performing work under
contract, predominantly for the U.S. Government and foreign
governments. Cost of sales for such contracts is determined
based on the estimated average total contract cost and
revenue. Estimates of each contract’s revenue and
cost are reviewed and reassessed quarterly. Changes in
estimates result in cumulative revisions to the contract
profit recognized. |
| Commercial aircraft programs are planned, committed
and facilitized based on long-term delivery forecasts,
normally for quantities in excess of contractually firm
orders. Cost of sales for the 717, 737, 747, 757, 767
and
777 commercial aircraft programs is determined under the
program method of accounting based on estimated
average total cost and revenue for the current program
quantity. The program method of accounting effectively
averages tooling and special equipment costs, as well
as unit production costs, over the program quantity.
Because of the higher unit production costs experienced
at the beginning of a new program and the substantial
investment required for initial tooling and special equipment,
new commercial jet aircraft programs normally have
lower operating profit margins than established programs.
In 2001, the initial program quantity for the 717 program
was revised from 200 to 135 units. The estimated program
average costs and revenues are reviewed and
reassessed quarterly, and changes in estimates are recognized
over current and future deliveries constituting the
program quantity. |
| To the extent that inventoriable costs are expected
to exceed the total estimated sales price, charges are
made
to current earnings to reduce inventoried costs to estimated
net realizable value. |
| Inventories
Inventoried costs on commercial aircraft programs and
long-term contracts include direct engineering, production
and tooling costs, and applicable overhead, not in excess
of estimated net realizable value. In accordance with
industry practice, inventoried costs include amounts relating
to programs and contracts with long production cycles,
a portion of which is not expected to be realized within
one year. Commercial spare parts and general stock materials
are stated at average cost not in excess of net realizable
value. |
| Share-Based Plans
The Company has adopted the expense recognition provisions
of Statement of Financial Accounting Standards (SFAS)
No.123, Accounting for Stock-Based Compensation.
The Company values stock options issued based upon an
option-pricing model and recognizes this value as an expense
over the period in which the options vest. Potential distribution
from the ShareValue Trust described in Note 22 have been
valued based upon an option-pricing model, with the related
expense recognized over the life of the trust. Share-based
expense associated with Performance Shares described in
Note 22 is determined based on the market value of the
Company’s stock at the time of the award applied
to the maximum number of shares contingently issuable
based on stock price and is amortized over a five-year
period. |
