Customer Financing

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



	2016			2015
Financing receivables:
Investment in sales-type/finance leases		$1,482			$1,620
Notes	807			256
Total financing receivables	2,289			1,876
Operating lease equipment, at cost, less accumulated depreciation of $359 and $338	1,922			1,710
Gross customer financing	4,211			3,586
Less allowance for losses on receivables	(10		)	(16		)
Total		$4,201			$3,570

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



	2016			2015
Minimum lease payments receivable		$1,321			$1,537
Estimated residual value of leased assets	505			530
Unearned income	(344		)	(447		)
Total		$1,482			$1,620

Operating lease equipment primarily includes large commercial jet aircraft and regional jet aircraft. At December 31, 2016 and 2015, operating lease equipment included $6 and $49 available for sale or re-lease. At December 31, 2016 and 2015, we had firm lease commitments for $0 and $15 of this equipment.

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



	2016		2015
Individually evaluated for impairment		$55		$86
Collectively evaluated for impairment	2,234		1,790
Total financing receivables		$2,289		$1,876

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, 2016 and December 31, 2015, we individually evaluated for impairment customer financing receivables of $55 and $86, of which $44 and $0 were determined to be impaired. We recorded no allowance for losses on these impaired receivables as the collateral values exceeded the carrying values of the receivables.

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. The average recorded investment in impaired financing receivables for the year ended December 31, 2016 was $41 and the related interest income was insignificant.

The change in the allowance for losses on financing receivables for the years ended December 31, 2016, 2015 and 2014, consisted of the following:



	2016			2015			2014
Beginning balance - January 1		($16	)		($21	)		($49	)
Customer financing valuation benefit	6			5			28
Ending balance - December 31		($10	)		($16	)		($21	)
Collectively evaluated for impairment		($10	)		($16	)		($21	)

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	2016		2015
BBB		$1,324		$973
BB	538		536
B	383		258
CCC	44		23
Other			86
Total carrying value of financing receivables		$2,289		$1,876

At December 31, 2016, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 12.7%, 8.8% and 1.1% 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 could result in asset impairments, reduced finance lease income, and an increase in the allowance for losses. Our customer financing collateral is concentrated in 747-8 and out-of-production aircraft. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft.

The majority of customer financing carrying values are concentrated in the following aircraft models at December 31:



	2016		2015
717 Aircraft ($301 and $372 accounted for as operating leases)		$1,282		$1,415
747-8 Aircraft ($1,086 and $916 accounted for as operating leases)	1,111		916
MD-80 Aircraft (Accounted for as sales-type finance leases)	259		314
757 Aircraft ($43 and $48 accounted for as operating leases)	246		270
767 Aircraft ($85 and $84 accounted for as operating leases)	170		185
777 Aircraft (Accounted for as notes)	165		23
747-400 Aircraft (Accounted for as operating leases)	149		122
737 Aircraft (Accounted for as operating leases)	103		115

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



	2016		2015		2014
Boeing Capital		$45		$162		$139
Other Boeing	21				45
Total		$66		$162		$184

Scheduled receipts on customer financing are as follows:



Year	2017		2018		2019		2020		2021		Beyond 2021
Principal payments on notes receivable		$242		$105		$159		$125		$176
Sales-type/finance lease payments receivable	272		220		207		174		114			$334
Operating lease equipment payments receivable	463		162		147		129		110		587