Customer Financing

Customer financing primarily relates to the Boeing Capital (BCC) segment. Prior period amounts have been adjusted to conform with the current year presentation as a result of the adoption of Topic 606. Customer financing consisted of the following:



	March 31 2018			December 31 2017
Financing receivables:
Investment in sales-type/finance leases		$1,265			$1,364
Notes	934			1,022
Total financing receivables	2,199			2,386
Operating lease equipment, at cost, less accumulated depreciation of $286 and $305	808			691
Gross customer financing	3,007			3,077
Less allowance for losses on receivables	(10		)	(12		)
Total		$2,997			$3,065

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 March 31, 2018 and December 31, 2017, we individually evaluated for impairment customer financing receivables of $417 and $422, of which $406 and $411 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.

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	March 31 2018		December 31 2017
BBB		$1,130		$1,170
BB	490		627
B	173		177
CCC	406		412
Total carrying value of financing receivables		$2,199		$2,386

At March 31, 2018, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 22.9%, 7.4% and 0.8%, respectively, 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 out-of-production aircraft and 747-8. 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:



	March 31 2018		December 31 2017
717 Aircraft ($256 and $269 accounted for as operating leases)		$1,039		$1,081
747-8 Aircraft ($136 and $138 accounted for as operating leases)	481		483
737 Aircraft ($257 and $127 accounted for as operating leases)	289		161
MD-80 Aircraft (accounted for as sales-type finance leases)	235		231
757 Aircraft ($26 and $27 accounted for as operating leases)	213		217
747-400 Aircraft ($83 and $88 accounted for as operating leases)	162		170
767 Aircraft ($0 and $25 accounted for as operating leases)	16		98
777 Aircraft ($17 and $0 accounted for as operating leases)	30		14