Guarantees

9 Months Ended

Sep. 30, 2020

Service and Product Warranties and Product Performance Guarantees [Abstract]

Guarantees [Text Block]

Guarantees

We extend a variety of financial, market value and performance guarantees to third parties. These instruments expire on various dates through 2024. Additional guarantees of project performance for which there is no stated value also remain outstanding. As of September 30, 2020 and December 31, 2019, the following guarantees related to continuing operations were outstanding:

(dollars in millions)	September 30, 2020				December 31, 2019
	Maximum Potential Payment		Carrying Amount of Liability		Maximum Potential Payment		Carrying Amount of Liability
Commercial aerospace financing arrangements	$	333	$	8	$	333	$	7
Third party guarantees(1)	374		4		48		—

(1)     Increase in guarantees is primarily due to the Raytheon Merger.

We also have obligations arising from sales of certain businesses and assets, including those from representations and warranties and related indemnities for environmental, health and safety, tax and employment matters. The maximum potential payment related to these obligations is not a specified amount as a number of the obligations do not contain financial caps. The carrying amount of liabilities related to these obligations was $121 million and $166 million at September 30, 2020 and December 31, 2019, respectively. For additional information regarding the environmental indemnifications, see “Note 17: Commitments and Contingencies.”

We accrue for costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued.

We also provide service and warranty policies on our products and extend performance and operating cost guarantees beyond our normal service and warranty policies on some of our products, particularly commercial aircraft engines. In addition, we incur discretionary costs to service our products in connection with specific product performance issues. Liabilities for performance and operating cost guarantees are based upon future product performance and durability, and are largely estimated based upon historical experience. Adjustments are made to accruals as claims data and historical experience warrant. The changes in the carrying amount of service and product warranties and product performance guarantees for the nine months ended September 30, 2020 and 2019 are as follows:

(dollars in millions)	2020		2019
Balance as of January 1	$	1,033	$	929
Warranties and performance guarantees issued	206		325
Settlements	(229)		(233)
Other	(10)		(3)
Balance as of September 30	$	1,000	$	1,018