Customer Financing

Customer financing primarily relates to the Boeing Capital (BCC) segment and consisted of the following at December 31:



	2014			2013
Financing receivables:
Investment in sales-type/finance leases		$1,535			$1,699
Notes	370			587
Total financing receivables	1,905			2,286
Operating lease equipment, at cost, less accumulated depreciation of $571 and $564	1,677			1,734
Gross customer financing	3,582			4,020
Less allowance for losses on receivables	(21		)	(49		)
Total		$3,561			$3,971

The components of investment in sales-type/finance leases at December 31 were as follows:



	2014			2013
Minimum lease payments receivable		$1,475			$1,731
Estimated residual value of leased assets	521			543
Unearned income	(461		)	(575		)
Total		$1,535			$1,699

Operating lease equipment primarily includes large commercial jet aircraft and regional jet aircraft. At December 31, 2014 and 2013, operating lease equipment included $48 and $83 of BCC equipment available for sale or re-lease. At December 31, 2014 and 2013, we had firm lease commitments for $0 and $57 of this equipment.

Financing receivable balances evaluated for impairment at December 31 were as follows:



	2014		2013
Individually evaluated for impairment		$86		$95
Collectively evaluated for impairment	1,819		2,191
Total financing receivables		$1,905		$2,286

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 December 31, 2014 and 2013, we individually evaluated for impairment customer financing receivables of $86 and $95 and determined that none of these were impaired. As of December 31, 2014 and 2013, we had no material receivables that were greater than 30 days past due and we had no impaired customer financing receivables during 2014.

Income recognition is generally suspended for financing receivables at the date full recovery of income and principal becomes not probable. Income is recognized when financing receivables become contractually current and performance is demonstrated by the customer. For the years ended December 31, 2013 and 2012, interest income recognized on such receivables was $30 and $6, and the average recorded investment in impaired financing receivables was $376 and $466.

The change in the allowance for losses on financing receivables for the years ended December 31, 2014, 2013 and 2012, consisted of the following:



	2014			2013			2012
Beginning balance - January 1		($49	)		($60	)		($70	)
Customer financing valuation benefit	28			11			10
Ending balance - December 31		($21	)		($49	)		($60	)
Collectively evaluated for impairment		($21	)		($49	)		($60	)

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 at December 31 by internal credit rating category are shown below:



Rating categories	2014		2013
BBB		$1,055		$1,091
BB			58
B	633		585
CCC	131		457
Other	86		95
Total carrying value of financing receivables		$1,905		$2,286

At December 31, 2014, our allowance related to receivables with ratings of B and BBB. 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 at December 31:



	2014		2013
717 Aircraft ($421 and $444 accounted for as operating leases)		$1,562		$1,674
747 Aircraft ($601 and $183 accounted for as operating leases)	601		286
757 Aircraft ($349 and $402 accounted for as operating leases)	370		453
MD-80 Aircraft (Accounted for as sales-type finance leases)	358		411
767 Aircraft ($47 and $60 accounted for as operating leases)	158		207
737 Aircraft ($127 and $138 accounted for as operating leases)	156		210
MD-11 Aircraft (Accounted for as operating leases)	114		220
787 Aircraft (Accounted for as operating leases)			273

Charges related to customer financing asset impairment for the years ended December 31 were as follows:



	2014		2013		2012
Boeing Capital		$139		$67		$73
Other Boeing	45		14		(15		)
Total		$184		$81		$58

Scheduled receipts on customer financing are as follows:



Year	2015		2016		2017		2018		2019		Beyond 2019
Principal payments on notes receivable		$55		$41		$42		$120		$69		$43
Sales-type/finance lease payments receivable	228		225		206		195		182		439
Operating lease equipment payments receivable	505		130		92		70		54		143