Customer Financing

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



	September 30 2017			December 31 2016
Financing receivables:
Investment in sales-type/finance leases		$1,400			$1,482
Notes	762			807
Total financing receivables	2,162			2,289
Operating lease equipment, at cost, less accumulated depreciation of $361 and $359	1,327			1,922
Gross customer financing	3,489			4,211
Less allowance for losses on receivables	(14		)	(10		)
Total		$3,475			$4,201

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 September 30, 2017 and December 31, 2016, we individually evaluated for impairment customer financing receivables of $50 and $55, of which $39 and $44 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.

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	September 30 2017		December 31 2016
BBB		$1,200		$1,324
BB	508		538
B	405		383
CCC	49		44
Total carrying value of financing receivables		$2,162		$2,289

At September 30, 2017, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 16.8%, 8.1% and 1.0%, 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:



	September 30 2017		December 31 2016
717 Aircraft ($274 and $301 accounted for as operating leases)		$1,114		$1,282
747-8 Aircraft ($769 and $1,086 accounted for as operating leases)	769		1,111
MD-80 Aircraft (accounted for as sales-type finance leases)	236		259
757 Aircraft ($39 and $43 accounted for as operating leases)	233		246
747-400 Aircraft ($94 and $149 accounted for as operating leases)	178		149
777 Aircraft ($13 and $0 accounted for as operating leases)	166		165
767 Aircraft ($27 and $85 accounted for as operating leases)	103		170
737 Aircraft ($94 and $103 accounted for as operating leases)	99		103