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Note 6: Inventories and Contracts in Progress

12 Months Ended

Dec. 31, 2012

Notes to Consolidated Financial Statements [Abstract]

Note 6: Inventories and Contracts in Progress

Note 6: Inventories & Contracts in Progress


(Dollars in millions)	2012		2011
Raw materials	$	1,861	$	1,321
Work-in-process		4,151		3,175
Finished goods		3,205		3,078
Contracts in progress		7,354		6,899
		16,571		14,473
Less:
Progress payments, secured by lien, on U.S. Government contracts		(274)		(422)
Billings on contracts in progress		(6,760)		(6,254)
	$	9,537	$	7,797

Raw materials, work-in-process and finished goods are net of valuation reserves of $866 million and $884 million as of December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011, inventory also includes capitalized contract development costs of $823 million and $776 million, respectively, related to certain aerospace programs. These capitalized costs will be liquidated as production units are delivered to the customer. The capitalized contract development costs within inventory principally relate to capitalized costs on Sikorsky's CH-148 contract with the Canadian Government. The CH-148 is a derivative of the H-92, a military variant of the S-92 helicopter.

Contracts in progress principally relate to elevator and escalator contracts and include costs of manufactured components, accumulated installation costs and estimated earnings on incomplete contracts.

Our sales contracts in many cases are long-term contracts expected to be performed over periods exceeding twelve months. At both December 31, 2012 and 2011, approximately 66% of total inventories and contracts in progress have been acquired or manufactured under such long-term contracts, a portion of which is not scheduled for delivery within the next twelve months.

- 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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