Customer Financing

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



	March 31 2014			December 31 2013
Financing receivables:
Investment in sales-type/finance leases		$1,655			$1,699
Notes	482			587
Operating lease equipment, at cost, less accumulated depreciation of $559 and $564	1,425			1,734
Gross customer financing	3,562			4,020
Less allowance for losses on receivables	(26		)	(49		)
Total		$3,536			$3,971

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, 2014 and December 31, 2013, we individually evaluated for impairment customer financing receivables of $97 and $95 and determined that none of these were impaired. We recorded no allowance for losses on these receivables as the collateral values exceed 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 2014		December 31 2013
BBB		$1,065		$1,091
BB	50		58
B	727		585
CCC	198		457
Other	97		95
Total carrying value of financing receivables		$2,137		$2,286

At March 31, 2014, our allowance related to receivables with ratings of B and BBB to which we applied default rates that averaged 18% and 2% 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 are also a significant driver of our allowance for losses. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft. Our customer financing portfolio is primarily collateralized by out-of-production aircraft. The majority of customer financing carrying values are concentrated in the following aircraft models:



	March 31 2014		December 31 2013
717 Aircraft ($438 and $444 accounted for as operating leases) ⁽¹⁾		$1,647		$1,674
757 Aircraft ($396 and $402 accounted for as operating leases) ⁽¹⁾	436		453
MD-80 Aircraft (Accounted for as sales-type finance leases)⁽¹⁾	403		411
MD-11 Aircraft (Accounted for as operating leases) ⁽¹⁾	212		220
767 Aircraft ($54 and $60 accounted for as operating leases)	206		207
737 Aircraft ($133 and $138 accounted for as operating leases)	202		210
747 Aircraft ($177 and $183 accounted for as operating leases)	177		286
787 Aircraft (Accounted for as operating leases)			273


⁽¹⁾	Out-of-production aircraft.