Guarantees

12 Months Ended

Dec. 31, 2021

GUARANTEES

We extend a variety of financial, market value and product performance guarantees to third parties. These instruments expire on various dates through 2028. Additional guarantees of project performance for which there is no stated value also remain outstanding. As of December 31, 2021 and 2020, the following financial guarantees were outstanding:


	December 31, 2021				December 31, 2020
(dollars in millions)	Maximum Potential Payment		Carrying Amount of Liability		Maximum Potential Payment		Carrying Amount of Liability
Commercial aerospace financing guarantees	$	309	$	3	$	322	$	6
Third party guarantees	511		5		386		3

We have made residual value and other guarantees related to various commercial aerospace customer financing arrangements. The estimated fair market values of the guaranteed assets equal or exceed the value of the related guarantees, net of existing reserves. Collaboration partners’ share of these financing guarantees is $141 million and $142 million at December 31, 2021 and 2020, respectively.

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 $120 million at both December 31, 2021 and 2020. For additional information regarding the environmental indemnifications, see “Note 19: 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 years ended December 31, 2021 and 2020 were as follows:


(dollars in millions)	2021		2020
Balance as of January 1	$	1,057	$	1,033
Warranties and performance guarantees issued	380		311
Settlements	(272)		(292)
Other	(8)		5
Balance as of December 31	$	1,157	$	1,057