Inventories and Contracts in Progress

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Inventories and Contracts in Progress [Text Block]

Inventories and Contracts in Progress

(dollars in millions)	June 30, 2018		December 31, 2017
Raw materials	$	2,298	$	2,038
Work-in-process	2,306		3,366
Finished goods	4,375		3,845
Contracts in progress	—		10,205
	8,979		19,454
Less:
Progress payments, secured by lien, on U.S. Government contracts	—		(236		)
Billings on contracts in progress	—		(9,337		)
	$	8,979	$	9,881

Inventories as of December 31, 2017 include capitalized contract development costs of $127 million related to certain aerospace programs at UTC Aerospace Systems. Upon adoption of the New Revenue Standard, these costs are recorded as contract fulfillment costs included in Other assets.

Prior to the adoption of the New Revenue Standard, within our commercial aerospace business, inventory costs attributable to new engine offerings were 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 were capitalized and these capitalized amounts were subsequently expensed as additional engines are delivered for engines with costs below the projected contract per unit average cost over the life of the contract. As of December 31, 2017, inventory included $438 million of such capitalized amounts. Upon adoption of the New Revenue Standard, these amounts are no longer included in inventory. In addition, amounts previously reported as Contracts in progress have been reclassified as contract assets in accordance with the New Revenue Standard.