Inventories and Contracts in Progress

3 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Inventories and Contracts in Progress [Text Block]

Inventories and Contracts in Progress

(Dollars in millions)	March 31, 2017			December 31, 2016
Raw materials	$	2,154		$	2,040
Work-in-process	3,075			2,787
Finished goods	3,528			3,305
Contracts in progress	9,592			9,395
	18,349			17,527
Less:
Progress payments, secured by lien, on U.S. Government contracts	(131		)	(130		)
Billings on contracts in progress	(8,832		)	(8,693		)
	$	9,386		$	8,704

Inventories include capitalized contract development costs related to certain aerospace programs at UTC Aerospace Systems. As of March 31, 2017 and December 31, 2016, these capitalized costs were $127 million and $140 million, respectively, which will be liquidated as production units are delivered to the customer. Within commercial aerospace, inventory costs attributable to new engine offerings are recognized based on the average cost per unit expected over the life of each contract using the units-of-delivery method of percentage of completion accounting. Under this method, costs of initial engine deliveries in excess of the projected contract per unit average cost are capitalized, and these capitalized amounts are subsequently expensed as additional engine deliveries occur for engines with costs below the projected contract per unit average cost over the life of the contract. As of March 31, 2017 and December 31, 2016, inventory included $275 million and $233 million, respectively, of such capitalized amounts.