| Inventory |
Inventory
Inventory consists of raw materials used in the production process, work-in-process, which is direct material, direct labor, overhead and purchases, and capitalized preproduction costs. Raw materials are stated at lower of cost (principally on an actual or average cost basis) or market. Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically amortized over a period that is consistent with the satisfaction of the underlying performance obligations to which these relate. See Note 3, Summary of Significant Accounting Policies - Inventory. For 2017, deferred production includes costs for the excess of production costs over the estimated average cost per shipset, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per shipset for units delivered under the current production blocks. Recovery of excess-over-average deferred production costs is dependent on the number of shipsets ultimately sold and the ultimate selling prices and lower production costs associated with future production under these contract blocks. The Company believes these amounts, net of forward loss provisions, will be fully recovered over the contract block quantities. Forward loss reserves on contract blocks are recorded in the period in which they become evident and are included as a reduction to inventory with remaining amounts, if any, reflected in accrued deferred revenue. Inventories are summarized as follows:
| | | | | | | | | | March 29,
2018 | | December 31,
2017 | Raw materials | $ | 309.3 |
| | $ | 321.0 |
| Work-in-process(1) | 559.2 |
| | 854.4 |
| Finished goods | 17.3 |
| | 35.8 |
| Product inventory | 885.8 |
| | 1,211.2 |
| Capitalized pre-production(2) | 43.7 |
| | 78.9 |
| Deferred production(3) | — |
| | 640.3 |
| Forward loss provision(4) | — |
| | (480.5 | ) | Total inventory, net | $ | 929.5 |
| | $ | 1,449.9 |
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| | (1) | For the period ended March 29, 2018, work-in-process inventory includes direct labor, direct material, overhead and purchases on contracts for which revenue is recognized at a point in time as well as sub-assembly parts that have not been issued to production on contracts for which revenue is recognized using the input method. For the period ended December 31, 2017, work-in-process included direct labor, direct material, overhead and purchases on all contracts that were accounted for using the units of delivery method. For the period ended March 29, 2018, work-in-process inventory includes $97.7 of costs incurred in anticipation of specific contracts and no impairments were recorded in the period. |
| | (2) | As part of the Transition Adjustment, $43.0 (pretax) of pre-production costs on the A350 XWB were eliminated. |
| | (3) | As part of the Transition Adjustment, $640.3 (pretax) of deferred production was eliminated. For the period ended December 31, 2017, balance contained $632.8 and $129.3 on the A350 XWB and Rolls-Royce BR725 programs, respectively. |
| | (4) | For the period ended March 29, 2018, forward loss reserves of $317.0 have been classified as a liability in the condensed consolidated balance sheet. For the period ended December 31, 2017, the forward loss reserve for the B787 program exceeded the program's inventory balance. This excess was classified as a liability and reported in other current liabilities on the balance sheet in the amount of $254.5 as of December 31, 2017. |
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