Inventory

12 Months Ended

Dec. 31, 2020

InventoryInventory 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 net realizable value. 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.


	December 31, 2020		December 31, 2019
Raw materials	$	337.3	$	253.1
Work-in-process(1)	1,000.6		822.8
Finished goods	58.1		14.5
Product inventory	1,396.0		1,090.4
Capitalized pre-production	26.3		28.4
Total inventory, net	$	1,422.3	$	1,118.8

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Product inventory, summarized in the table above, is shown net of valuation reserves of $56.8 and $39.0 as of December 31, 2020 and December 31, 2019, respectively. The valuation reserve increase is primarily due to the Bombardier Acquisition. (as defined below)

(1)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, 2020, and December 31, 2019, work-in-process inventory includes $351.2 and $157.2, respectively, of costs incurred in anticipation of specific contracts and no impairments were recorded in the period.

Excess capacity and abnormal production costs are excluded from inventory and recognized as expense in the period incurred. Cost of sales for the twelve months ended December 31, 2020 includes $278.9 of excess capacity production costs related to temporary B737 MAX, A220, and A320 production schedule changes. Cost of sales also includes costs of $33.7 related to temporary workforce adjustments as a result of COVID-19 production pause, net of the U.S. employee retention credit and U.K. government subsidies of approximately $21.4 for the twelve months ended December 31, 2020.