| Aircraft on operating
lease or held for operating lease are classified with customer and commercial
financing assets. The Company reviews these operating lease assets for impairment
annually or when events or circumstances indicate that the carrying amount of
these assets may not be recoverable. An asset is considered impaired when the
expected undiscounted cash flow, based on market assessment of lease rates, over
the remaining useful life is less than the net book value. When impairment is
indicated for an asset, the amount of impairment loss is the excess of net book
value over fair value. |
| Postemployment
Benefits The Company accounts for postemployment benefits under SFAS
No.112, Employer’s Accounting for Postemployment Benefits. A liability
for postemployment benefits is recorded when termination is probable and the amount
is estimable. |
| Note 2 – Revenues and
Costs Attributable to Financing Activities |
| The years 2001,
2000 and 1999 include sales and other operating revenues of $1,036, $803 and $686
and cost of products and services of $395, $259 and $218, respectively, attributable
to financing activities primarily accounted for in the Customer and Commercial
Financing segment. Financing activities primarily relate to the financing of commercial
and private aircraft and commercial equipment. Revenues include interest on notes
receivable and sales-type leases and lease income from operating leases. Costs
of products and services includes depreciation on leased aircraft and equipment
and valuation adjustments of customer and commercial financing assets. |
| Note 3 – Gain on Dispositions, Net |
| Gains and losses resulting from the sale of businesses, along with gains
and losses resulting from the disposition of real property, are reported on a
net basis in the caption ‘Gain on dispositions, net’ on the Consolidated
Statements of Operations. Net gains of $19, $17 and $118 were recorded for sales
of businesses in 2001, 2000 and 1999, respectively. |
| Note
4 – Accounting for the Impact of the September 11, 2001 Terrorist Attacks |
| On September 11, 2001, the United States was the target of severe terrorist
attacks that involved the use of U.S. commercial aircraft manufactured by the
Company. These attacks resulted in a significant loss of life and property and
caused major disruptions in business activities and in the U.S. economy overall. |
| To address the widespread financial impact of the attacks, the Emerging
Issues Task Force (EITF) released Issue No.01-10, Accounting for the Impact
of Terrorist Attacks of September 11, 2001. This issue specifically prohibits
treating costs and losses resulting from the events of September 11, 2001, as
extraordinary items; however, it observes that any portion of these costs and
losses deemed to be unusual or infrequently occurring should be presented as a
separate line item in income from continuing operations. |
| For
the year ended December 31, 2001, the Company recorded a charge of $935 in the
caption ‘Special charges due to events of September 11, 2001.’ This
charge related to the categories listed below. Of this charge, $908 is related
to the Commercial Airplanes segment and $27 is related to the Other segment. |
| Employee Severance The Company
incurred and is expected to incur employment reductions resulting from the decrease
in aircraft demand, which directly related to the attacks of September 11, 2001.
For the year ended December 31, 2001, the Company recorded a charge of $287 attributable
to the associated employee severance obligations. |
| 717
Forward Loss In the fourth quarter of 2001, the accounting quantity
of the 717 program was revised to 135 units from 200 units. This revision resulted
from a lack of firm demand for the 717 aircraft subsequent to September 11, 2001,
and the uncertainty in estimating future revenues and costs for 200 units based
upon the revised projected delivery schedule. The forward loss of $250 represents
the amount by which, as of December 31, 2001, the inventory balance plus estimated
future inventory costs exceeds the estimated revenue for the undelivered aircraft
within the revised accounting quantity. As of December 31, 2001, the Company cumulatively
delivered 93 717 program aircraft. The estimates for the revised accounting quantity
assume that the 717 will remain an ongoing program. Although there are no plans
to do so, if the program were to be terminated after the delivery of 135 units,
the Company would be exposed to potentially material termination costs. |
| Used Aircraft Valuation
The events of September 11, 2001, resulted in a significant decrease in the market
value of used aircraft. The Company recorded a charge of $185 relating to the
decrease in market value for aircraft held for resale as well as asset purchase
obligations relating to trade-in of used aircraft. |
| Inventory
Valuation The Company recorded a charge of $96 relating to excess and
obsolete commercial airplane spares inventory. Subsequent to September 11, 2001,
commercial airline customers worldwide removed a substantial number of aircraft
from service. The ultimate realization of future sales for specific spare parts
held in inventory is highly dependent on the active aircraft fleet in which that
spare part supports. The revised projections for future demand of certain spare
parts indicate that current inventory quantities are in excess of total expected
future demand. |
