Customer financing primarily relates to our BCC segment. Customer financing consisted of the following at December 31:



	2019			2018
Financing receivables:
Investment in sales-type/finance leases		$1,029			$1,125
Notes	443			730
Total financing receivables	1,472			1,855
Operating lease equipment, at cost, less accumulated depreciation of $235 and $203	834			782
Operating lease incentive				250
Gross customer financing	2,306			2,887
Less allowance for losses on receivables	(8		)	(9		)
Total		$2,298			$2,878

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



	2019			2018
Minimum lease payments receivable		$799			$908
Estimated residual value of leased assets	393			425
Unearned income	(163		)	(208		)
Total		$1,029			$1,125



	2019		2018
Individually evaluated for impairment		$400		$409
Collectively evaluated for impairment	1,072		1,446
Total financing receivables		$1,472		$1,855

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, 2019 and 2018, we individually evaluated for impairment customer financing receivables of $400 and $409, of which $388 and $398 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, 2019 was $392, and the related interest income was insignificant.

The change in the allowance for losses on financing receivables for the years ended December 31, 2019, 2018 and 2017, consisted of the following:



	2019			2018			2017
Beginning balance - January 1		($9	)		($12	)		($10	)
Customer financing valuation benefit/(cost)	1			3			(2		)
Ending balance - December 31		($8	)		($9	)		($12	)
Collectively evaluated for impairment		($8	)		($9	)		($12	)

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.



Rating categories	2019		2018
BBB		$573		$883
BB	385		430
B	122		135
CCC	392		407
Total carrying value of financing receivables		$1,472		$1,855

At December 31, 2019, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 22.1%, 5.3% and 0.6%, respectively, to the exposure associated with those receivables.

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.



	2019		2018
717 Aircraft ($124 and $204 accounted for as operating leases)		$736		$918
747-8 Aircraft ($130 and $132 accounted for as operating leases)	475		477
737 Aircraft ($240 and $263 Accounted for as operating leases)	263		290
777 Aircraft ($236 and $60 accounted for as operating leases)	240		68
MD-80 Aircraft (Accounted for as sales-type finance leases)	186		204
757 Aircraft ($22 and $24 accounted for as operating leases)	182		200
747-400 Aircraft ($31 and $45 Accounted for as operating leases)	90		116

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 experienced liquidity issues. In the first quarter of 2019, we concluded that these lease incentives were impaired and recorded a charge of $250.

Lease income recorded in Revenue on the Consolidated Statements of Operations for the year ended December 31, 2019 included $62 from sales-type/finance leases and $139 from operating leases, of which $8 related to variable operating lease payments.

As of December 31, 2019, undiscounted cash flows for notes receivable, sales-type/finance and operating leases over the next five years and thereafter are as follows:



	Notes receivable		Sales-type/finance leases			Operating leases
Year 1		$382		$191			$130
Year 2	7		141			103
Year 3	37		127			89
Year 4	17		118			74
Year 5			98			58
Thereafter			124			41
Total lease receipts	443		799			495
Less imputed interest			(163		)
Estimated unguaranteed residual values			393
Total		$443		$1,029			$495