Customer Financing

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



	March 31 2016			December 31 2015
Financing receivables:
Investment in sales-type/finance leases		$1,576			$1,620
Notes	293			256
Total financing receivables	1,869			1,876
Operating lease equipment, at cost, less accumulated depreciation of $328 and $338	1,383			1,710
Gross customer financing	3,252			3,586
Less allowance for losses on receivables	(14		)	(16		)
Total		$3,238			$3,570

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, 2016 and December 31, 2015, we individually evaluated for impairment customer financing receivables of $88 and $86. At March 31, 2016 and December 31, 2015, $49 and $0 was 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 2016		December 31 2015
BBB		$938		$973
BB	533		536
B	238		258
CCC	72		23
Other	88		86
Total carrying value of financing receivables		$1,869		$1,876

At March 31, 2016, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 13%, 10% and 2%, 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 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 2016		December 31 2015
717 Aircraft ($365 and $372 accounted for as operating leases)		$1,379		$1,415
747 Aircraft (Accounted for as operating leases)	721		1,038
MD-80 Aircraft (Accounted for as sales-type finance leases)	317		314
757 Aircraft ($46 and $48 accounted for as operating leases)	263		270
767 Aircraft ($90 and $84 accounted for as operating leases)	183		185
737 Aircraft (Accounted for as operating leases)	112		115
MD-11 Aircraft (Accounted for as operating leases)	28		35