Customer Financing

Customer financing primarily relates to the Boeing Capital (BCC) segment and consisted of the following:



	September 30 2014			December 31 2013
Financing receivables:
Investment in sales-type/finance leases		$1,575			$1,699
Notes	436			587
Operating lease equipment, at cost, less accumulated depreciation of $607 and $564	1,616			1,734
Gross customer financing	3,627			4,020
Less allowance for losses on receivables	(23		)	(49		)
Total		$3,604			$3,971

We determine a receivable is impaired when, based on current information and events, it is probable that we will be unable to collect amounts due according to the original contractual terms. At September 30, 2014 and December 31, 2013, we individually evaluated for impairment customer financing receivables of $92 and $95 and determined that none of these were impaired.

The adequacy of the allowance for losses is assessed quarterly. Three primary factors influencing the level of our allowance for losses on customer financing receivables are customer credit ratings, default rates and collateral values. We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon publicly available information and information obtained directly from our customers. Our rating categories are comparable to those used by the major credit rating agencies.

Our financing receivable balances by internal credit rating category are shown below.



Rating categories	September 30 2014		December 31 2013
BBB		$1,027		$1,091
BB	51		58
B	671		585
CCC	170		457
Other	92		95
Total carrying value of financing receivables		$2,011		$2,286

At September 30, 2014, our allowance related to receivables with ratings of B and BBB to which we applied default rates that averaged 16% and 2% to the exposure associated with those receivables.

Customer Financing Exposure

Customer financing is collateralized by security in the related asset. The value of the collateral is closely tied to commercial airline performance and overall market conditions and may be subject to reduced valuation with market decline. Declines in collateral values are also a significant driver of our allowance for losses. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft. Our customer financing portfolio is primarily collateralized by out-of-production 717, 757 and MD-80 aircraft. The majority of customer financing carrying values are concentrated in the following aircraft models:



	September 30 2014		December 31 2013
717 Aircraft ($426 and $444 accounted for as operating leases)		$1,591		$1,674
747 Aircraft ($461 and $183 accounted for as operating leases)	461		286
757 Aircraft ($355 and $402 accounted for as operating leases)	386		453
MD-80 Aircraft (Accounted for as sales-type finance leases)	370		411
737 Aircraft ($129 and $138 accounted for as operating leases)	193		210
MD-11 Aircraft (Accounted for as operating leases)	183		220
767 Aircraft ($47 and $60 accounted for as operating leases)	173		207
787 Aircraft (Accounted for as operating leases)			273