Inventories and Contracts in Progress

6 Months Ended

Jun. 30, 2014

Notes to Condensed Consolidated Financial Statements [Abstract]



(Dollars in millions)	June 30, 2014			December 31, 2013
Raw materials	$	2,039		$	1,983
Work-in-process	3,788			4,600
Finished goods	3,824			3,360
Contracts in progress	8,572			7,929
	18,223			17,872
Less:
Progress payments, secured by lien, on U.S. Government contracts	(507		)	(279		)
Billings on contracts in progress	(7,820		)	(7,263		)
	$	9,896		$	10,330

As of June 30, 2014 and December 31, 2013, inventory also includes capitalized contract development costs of $155 million and $159 million, respectively, primarily related to certain aerospace programs at UTC Aerospace Systems. These capitalized costs are liquidated as production units are delivered to the customer.

During the quarter ended June 30, 2014, Sikorsky and the Canadian Government signed amendments to their existing contracts for development, production and support of the CH-148 helicopter. These amendments include significant changes in program scope, governance and delivery methodology. Accordingly, in the quarter ended June 30, 2014, we recognized a change in estimate on this program resulting in the liquidation of approximately $1.3 billion of inventory, including all capitalized contract development costs related to this program. As of December 31, 2013, inventory included approximately $740 million of capitalized contract development costs related to this program.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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