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Customer Financing
 12 Months Ended
Dec. 31, 2018
Customer Financing [Abstract]  
Customer Financing Customer Financing
Customer financing primarily relates to our 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 at December 31:
 
2018

 
2017

Financing receivables:
 
 
 
Investment in sales-type/finance leases

$1,125

 

$1,364

Notes
730

 
1,022

Total financing receivables
1,855

 
2,386

Operating lease equipment, at cost, less accumulated depreciation of $203 and $305
782

 
691

Operating lease incentive
250

 
 
Gross customer financing
2,887

 
3,077

Less allowance for losses on receivables
(9
)
 
(12
)
Total

$2,878

 

$3,065


The components of investment in sales-type/finance leases at December 31 were as follows:
 
2018

 
2017

Minimum lease payments receivable

$908

 

$1,159

Estimated residual value of leased assets
425

 
495

Unearned income
(208
)
 
(290
)
Total

$1,125

 

$1,364


Operating lease equipment primarily includes large commercial jet aircraft.
Financing receivable balances evaluated for impairment at December 31 were as follows:
 
2018

 
2017

Individually evaluated for impairment

$409

 

$422

Collectively evaluated for impairment
1,446

 
1,964

Total financing receivables

$1,855

 

$2,386


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, 2018 and 2017, we individually evaluated for impairment customer financing receivables of $409 and $422, of which $398 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.
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, 2018 was $403, and the related interest income was insignificant.
The change in the allowance for losses on financing receivables for the years ended December 31, 2018, 2017 and 2016, consisted of the following:
 
2018

 
2017

 
2016

Beginning balance - January 1

($12
)
 

($10
)
 

($16
)
Customer financing valuation benefit/(cost)
3

 
(2
)
 
6

Ending balance - December 31

($9
)
 

($12
)
 

($10
)
Collectively evaluated for impairment

($9
)
 

($12
)
 

($10
)

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
2018

 
2017

BBB

$883

 

$1,170

BB
430

 
627

B
135

 
177

CCC
407

 
412

Total carrying value of financing receivables

$1,855

 

$2,386


At December 31, 2018, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 22.8%, 6.5% and 0.7%, 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 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:
 
2018

 
2017

717 Aircraft ($204 and $269 accounted for as operating leases)

$918

 

$1,081

747-8 Aircraft ($132 and $138 accounted for as operating leases)
477

 
483

737 Aircraft ($263 and $127 Accounted for as operating leases)
290

 
161

MD-80 Aircraft (Accounted for as sales-type finance leases)
204

 
231

757 Aircraft ($24 and $27 accounted for as operating leases)
200

 
217

747-400 Aircraft ($45 and $88 Accounted for as operating leases)
116

 
170

777 Aircraft ($60 and $0 accounted for as operating leases)
68

 
14

767 Aircraft ($0 and $25 accounted for as operating leases)


 
98



Charges related to customer financing asset impairment for the years ended December 31 were as follows:
 
2018

 
2017

 
2016

Boeing Capital

$1

 

$13

 

$45

Other Boeing
38

 
30

 
21

Total

$39

 

$43

 

$66


Scheduled receipts on customer financing are as follows:
Year
2019

 
2020

 
2021

 
2022

 
2023

 
Beyond 2023
Principal payments on notes receivable

$658

 

$11

 

$7

 

$37

 

$17

 


Sales-type/finance lease payments receivable
208

 
171

 
124

 
110

 
92

 
203

Operating lease equipment payments receivable
112

 
93

 
79

 
68

 
45

 
91


As part of selected lease transactions, Boeing may provide incentives to commercial customers. At December 31, 2018 Customer Financing included $250 of lease incentives with one customer that is currently experiencing liquidity issues and is seeking additional capital. Should the customer fail to address its liquidity issues the lease incentive asset could become impaired, and we could incur charges of up to $250.