Customer Financing

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



	2017			2016
Financing receivables:
Investment in sales-type/finance leases		$1,364			$1,482
Notes	677			807
Total financing receivables	2,041			2,289
Operating lease equipment, at cost, less accumulated depreciation of $320 and $359	1,020			1,922
Gross customer financing	3,061			4,211
Less allowance for losses on receivables	(12		)	(10		)
Total		$3,049			$4,201

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



	2017			2016
Minimum lease payments receivable		$1,159			$1,321
Estimated residual value of leased assets	495			505
Unearned income	(290		)	(344		)
Total		$1,364			$1,482

Operating lease equipment primarily includes large commercial jet aircraft.

Financing receivable balances evaluated for impairment at December 31 were as follows:



	2017		2016
Individually evaluated for impairment		$77		$55
Collectively evaluated for impairment	1,964		2,234
Total financing receivables		$2,041		$2,289

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, 2017 and 2016, we individually evaluated for impairment customer financing receivables of $77 and $55, of which $66 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.

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, 2017 was $46 and the related interest income was insignificant.

The change in the allowance for losses on financing receivables for the years ended December 31, 2017, 2016 and 2015, consisted of the following:



	2017			2016			2015
Beginning balance - January 1		($10	)		($16	)		($21	)
Customer financing valuation (cost)/benefit	(2		)	6			5
Ending balance - December 31		($12	)		($10	)		($16	)
Collectively evaluated for impairment		($12	)		($10	)		($16	)

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 at December 31 by internal credit rating category are shown below:



Rating categories	2017		2016
BBB		$1,170		$1,324
BB	627		538
B	177		383
CCC	67		44
Total carrying value of financing receivables		$2,041		$2,289

At December 31, 2017, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 22.6%, 4.7% and 0.9% 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 at December 31:



	2017		2016
717 Aircraft ($269 and $301 accounted for as operating leases)		$1,081		$1,282
747-8 Aircraft ($467 and $1,086 accounted for as operating leases)	467		1,111
MD-80 Aircraft (Accounted for as sales-type finance leases)	231		259
757 Aircraft ($27 and $43 accounted for as operating leases)	217		246
747-400 Aircraft ($88 and $149 Accounted for as operating leases)	170		149
737 Aircraft ($127 and $103 Accounted for as operating leases)	161		103
767 Aircraft ($25 and $85 accounted for as operating leases)	98		170
777 Aircraft (Accounted for as notes)	14		165

Charges related to customer financing asset impairment for the years ended December 31 were as follows:



	2017		2016		2015
Boeing Capital		$13		$45		$162
Other Boeing	30		21
Total		$43		$66		$162

Scheduled receipts on customer financing are as follows:



Year	2018		2019		2020		2021		2022		Beyond 2022
Principal payments on notes receivable		$149		$167		$132		$175		$37		$17
Sales-type/finance lease payments receivable	236		223		185		120		107		288
Operating lease equipment payments receivable	417		86		69		53		40		62