Note 1 Significant Accounting policies
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 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 realizable value.
Note 7 Inventory
Inventories at December 31 consisted of the following:
As of December 31, 1998, there were no significant excess deferred production costs (inventory costs incurred on in-process and delivered units in excess of the estimated average cost of units determined as described in Note 1) or unamortized tooling costs not recoverable from firm orders for commercial programs other than the 777 and the Next-Generation 737 programs.
The program quantity for the 777 and the Next-Generation 737 programs for determining cost of sales on estimated average total cost (including inventory production costs and tooling) and revenue initially established at 400 units. In 1998 the accounting quantity for the Next-Generation 737 was extended beyond the initial program quantity. The current accounting quantity for the -Generation 737 program is 1,200 units.
Inventory costs at December 31, 1998, included unamortized tooling of $2,022 and $760 relating to the and Next-Generation 737 programs, and excess deferred production costs of $1,654 and $329 to the 777 and Next-Generation 737 programs. Inventory costs at December 31, 1997, included tooling of $2,678 and $809 relating to the 777 and Next-Generation 737 programs, and deferred production costs of $2,384 relating to the 777 program. Firm backlog for both the 777 Next-Generation 737 programs is sufficient to recover all significant amounts of excess deferred
costs as of December 31, 1998; however, such deferred costs are recognized over the program accounting quantity in effect at the date of reporting.Interest capitalized as construction-period tooling costs amounted to $20, $33 and $30 in 1998, 1997 1996, respectively.
As of December 31, 1998 and 1997, inventory balances included $231 subject to claims or other primarily relating to the A-12 program. See Note 21.
The estimates underlying the average costs of deliveries reflected in the inventory valuations may differ materially from amounts eventually realized for the reasons outlined in Note 22.
Source: Boeing annual Report, 1998 notes 1 and 7: http://www.boeing.com/companyoffices/financial/finreports/annual/98annualreport/notesto1.htm