Income Tax Accounting Policy

Provisions for federal, state, and non-U.S. income taxes are calculated on reported Earnings before income taxes based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income tax provisions and evaluating tax positions.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Boeing records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on tax return. To the extent that Boeing's assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Tax-related interest and penalties are classified as a component of Income tax expense.

Source: Boeing Co., Annual Report

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Income Tax Expense (Benefit)

Boeing Co., income tax expense (benefit), continuing operations

USD $ in millions

 
12 months ended Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
U.S. federal (82) 657  (605) 13  (132)
Non-U.S. 76  52  93  80  69 
U.S. state 11  19  (22) (137) 145 
Current tax expense (benefit) 728  (534) (44) 82 
U.S. federal 1,531  1,209  1,856  969  457 
Non-U.S. 41  (13) (8) (13) (55)
U.S. state 69  83  68  284  (88)
Deferred tax expense 1,641  1,279  1,916  1,240  314 
Income tax expense 1,646  2,007  1,382  1,196  396 

Source: Based on data from Boeing Co. Annual Reports

Item Description The company
Current tax expense (benefit) The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. Boeing Co.'s current tax expense (benefit) increased from 2011 to 2012 but then slightly declined from 2012 to 2013 not reaching 2011 level.
Deferred tax expense The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. Boeing Co.'s deferred tax expense declined from 2011 to 2012 but then increased from 2012 to 2013 not reaching 2011 level.
Income tax expense The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. Boeing Co.'s income tax expense increased from 2011 to 2012 but then slightly declined from 2012 to 2013 not reaching 2011 level.

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Effective Income Tax Rate (EITR)

Boeing Co., effective income tax rate (EITR) reconciliation

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
U.S. federal statutory tax 35.00% 35.00% 35.00% 35.00% 35.00%
Research and development credits -4.90% 0.80% -2.70% -3.50% -10.10%
Proposed amendments to the R&E regulations -3.40% –% –% –% –%
Tax on international activities -0.10% -1.20% -0.60% -1.20% -2.40%
Tax deductible dividends -0.60% -0.70% -0.80% -0.90% -2.20%
State income tax provision, net of effect on U.S. federal tax 0.40% 0.80% 0.70% 1.80% 2.20%
Medicare Part D law change –% –% –% 3.30% –%
Federal audit settlement –% –% -7.40% -8.20% –%
Other provision adjustments –% -0.70% 1.40% 0.20% 0.40%
Effective income tax rate 26.40% 34.00% 25.60% 26.50% 22.90%

Source: Based on data from Boeing Co. Annual Reports

Item Description The company
Effective income tax rate A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. Boeing Co.'s effective income tax rate increased from 2011 to 2012 but then slightly declined from 2012 to 2013 not reaching 2011 level.

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Components of Deferred Tax Assets and Liabilities

Boeing Co., components of deferred tax assets and liabilities

USD $ in millions

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Retiree health care accruals 2,458  2,867  2,820  3,061  2,930 
Inventory and long-term contract methods of income recognition, fixed assets and other, net of valuation allowance (9,948) (7,151) (5,189) (2,644) (994)
Partnerships and joint ventures (62) (162) (228) (263) (528)
Other employee benefits accruals 1,773  1,427  1,352  1,272  1,411 
In-process research and development related to acquisitions 23  37  51  65  79 
Net operating loss, credit and capital loss carryovers, net of valuation allowance 362  307  488  300  477 
Pension asset 3,099  6,232  5,315  3,443  2,345 
Customer and commercial financing (990) (1,078) (1,471) (1,645) (1,703)
Unremitted earnings of non-U.S. subsidiaries (44) (49) (66) (60) (55)
Other net unrealized losses (gains) 26  (17) 69  13  66 
Net deferred tax assets (liabilities) (3,303) 2,413  3,141  3,542  4,028 

Source: Based on data from Boeing Co. Annual Reports

Item Description The company
Net deferred tax assets (liabilities) For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. Boeing Co.'s net deferred tax assets (liabilities) declined from 2011 to 2012 and from 2012 to 2013.

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Analyst Adjustments: Removal of Deferred Taxes

Boeing Co., adjustments to financial data

USD $ in millions

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Adjustment to Current Assets
Current assets (as reported) 65,074  57,309  49,810  40,572  35,275 
Less: Current deferred tax assets, net 14  28  29  31  966 
Current assets (adjusted) 65,060  57,281  49,781  40,541  34,309 
Adjustment to Total Assets
Total assets (as reported) 92,663  88,896  79,986  68,565  62,053 
Less: Current deferred tax assets, net 14  28  29  31  966 
Less: Noncurrent deferred tax assets, net 2,939  6,753  5,892  4,031  3,062 
Total assets (adjusted) 89,710  82,115  74,065  64,503  58,025 
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) 14,875  5,867  3,515  2,766  2,128 
Less: Net deferred tax assets (liabilities) (3,303) 2,413  3,141  3,542  4,028 
Shareholders’ equity (adjusted) 18,178  3,454  374  (776) (1,900)
Adjustment to Net Earnings Related To Parent
Net earnings related to parent (as reported) 4,585  3,900  4,018  3,307  1,312 
Add: Deferred income tax expense (benefit) 1,641  1,279  1,916  1,240  314 
Net earnings related to parent (adjusted) 6,226  5,179  5,934  4,547  1,626 

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Adjusted Ratios: Removal of Deferred Taxes (Summary)

Boeing Co., adjusted ratios

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Current Ratio
Reported current ratio 1.26 1.27 1.21 1.15 1.07
Adjusted current ratio 1.26 1.27 1.21 1.15 1.04
Net Profit Margin
Reported net profit margin 5.29% 4.77% 5.85% 5.14% 1.92%
Adjusted net profit margin 7.19% 6.34% 8.63% 7.07% 2.38%
Total Asset Turnover
Reported total asset turnover 0.93 0.92 0.86 0.94 1.10
Adjusted total asset turnover 0.97 0.99 0.93 1.00 1.18
Financial Leverage
Reported financial leverage 6.23 15.15 22.76 24.79 29.16
Adjusted financial leverage 4.94 23.77 198.03
Return on Equity (ROE)
Reported ROE 30.82% 66.47% 114.31% 119.56% 61.65%
Adjusted ROE 34.25% 149.94% 1,586.63% –% –%
Return on Assets (ROA)
Reported ROA 4.95% 4.39% 5.02% 4.82% 2.11%
Adjusted ROA 6.94% 6.31% 8.01% 7.05% 2.80%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Boeing Co.'s adjusted current ratio improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Boeing Co.'s adjusted net profit margin deteriorated from 2011 to 2012 but then slightly improved from 2012 to 2013.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Boeing Co.'s adjusted total asset turnover improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Boeing Co.'s adjusted financial leverage declined from 2011 to 2012 and from 2012 to 2013.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Boeing Co.'s adjusted ROE deteriorated from 2011 to 2012 and from 2012 to 2013.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Boeing Co.'s adjusted ROA deteriorated from 2011 to 2012 but then slightly improved from 2012 to 2013.

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Adjusted Current Ratio

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
As Reported
Current assets (USD $ in millions) 65,074  57,309  49,810  40,572  35,275 
Current liabilities (USD $ in millions) 51,486  44,982  41,274  35,395  32,883 
Current ratio1 1.26 1.27 1.21 1.15 1.07
Adjusted for Deferred Taxes
Adjusted current assets (USD $ in millions) 65,060  57,281  49,781  40,541  34,309 
Adjusted current ratio2 1.26 1.27 1.21 1.15 1.04

2013 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 65,074 ÷ 51,486 = 1.26

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 65,060 ÷ 51,486 = 1.26

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Boeing Co.'s adjusted current ratio improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013.

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Adjusted Net Profit Margin

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
As Reported
Net earnings related to parent (USD $ in millions) 4,585  3,900  4,018  3,307  1,312 
Revenues (USD $ in millions) 86,623  81,698  68,735  64,306  68,281 
Net profit margin1 5.29% 4.77% 5.85% 5.14% 1.92%
Adjusted for Deferred Taxes
Adjusted net earnings related to parent (USD $ in millions) 6,226  5,179  5,934  4,547  1,626 
Adjusted net profit margin2 7.19% 6.34% 8.63% 7.07% 2.38%

2013 Calculations

1 Net profit margin = 100 × Net earnings related to parent ÷ Revenues
= 100 × 4,585 ÷ 86,623 = 5.29%

2 Adjusted net profit margin = 100 × Adjusted net earnings related to parent ÷ Revenues
= 100 × 6,226 ÷ 86,623 = 7.19%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Boeing Co.'s adjusted net profit margin deteriorated from 2011 to 2012 but then slightly improved from 2012 to 2013.

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Adjusted Total Asset Turnover

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
As Reported
Revenues (USD $ in millions) 86,623  81,698  68,735  64,306  68,281 
Total assets (USD $ in millions) 92,663  88,896  79,986  68,565  62,053 
Total asset turnover1 0.93 0.92 0.86 0.94 1.10
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions) 89,710  82,115  74,065  64,503  58,025 
Adjusted total asset turnover2 0.97 0.99 0.93 1.00 1.18

2013 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 86,623 ÷ 92,663 = 0.93

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 86,623 ÷ 89,710 = 0.97

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Boeing Co.'s adjusted total asset turnover improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013.

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Adjusted Financial Leverage

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
As Reported
Total assets (USD $ in millions) 92,663  88,896  79,986  68,565  62,053 
Shareholders’ equity (USD $ in millions) 14,875  5,867  3,515  2,766  2,128 
Financial leverage1 6.23 15.15 22.76 24.79 29.16
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions) 89,710  82,115  74,065  64,503  58,025 
Adjusted shareholders’ equity (USD $ in millions) 18,178  3,454  374  (776) (1,900)
Adjusted financial leverage2 4.94 23.77 198.03

2013 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= 92,663 ÷ 14,875 = 6.23

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 89,710 ÷ 18,178 = 4.94

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Boeing Co.'s adjusted financial leverage declined from 2011 to 2012 and from 2012 to 2013.

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Adjusted Return On Equity (ROE)

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
As Reported
Net earnings related to parent (USD $ in millions) 4,585  3,900  4,018  3,307  1,312 
Shareholders’ equity (USD $ in millions) 14,875  5,867  3,515  2,766  2,128 
ROE1 30.82% 66.47% 114.31% 119.56% 61.65%
Adjusted for Deferred Taxes
Adjusted net earnings related to parent (USD $ in millions) 6,226  5,179  5,934  4,547  1,626 
Adjusted shareholders’ equity (USD $ in millions) 18,178  3,454  374  (776) (1,900)
Adjusted ROE2 34.25% 149.94% 1,586.63% –% –%

2013 Calculations

1 ROE = 100 × Net earnings related to parent ÷ Shareholders’ equity
= 100 × 4,585 ÷ 14,875 = 30.82%

2 Adjusted ROE = 100 × Adjusted net earnings related to parent ÷ Adjusted shareholders’ equity
= 100 × 6,226 ÷ 18,178 = 34.25%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Boeing Co.'s adjusted ROE deteriorated from 2011 to 2012 and from 2012 to 2013.

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Adjusted Return On Assets (ROA)

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
As Reported
Net earnings related to parent (USD $ in millions) 4,585  3,900  4,018  3,307  1,312 
Total assets (USD $ in millions) 92,663  88,896  79,986  68,565  62,053 
ROA1 4.95% 4.39% 5.02% 4.82% 2.11%
Adjusted for Deferred Taxes
Adjusted net earnings related to parent (USD $ in millions) 6,226  5,179  5,934  4,547  1,626 
Adjusted total assets (USD $ in millions) 89,710  82,115  74,065  64,503  58,025 
Adjusted ROA2 6.94% 6.31% 8.01% 7.05% 2.80%

2013 Calculations

1 ROA = 100 × Net earnings related to parent ÷ Total assets
= 100 × 4,585 ÷ 92,663 = 4.95%

2 Adjusted ROA = 100 × Adjusted net earnings related to parent ÷ Adjusted total assets
= 100 × 6,226 ÷ 89,710 = 6.94%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Boeing Co.'s adjusted ROA deteriorated from 2011 to 2012 but then slightly improved from 2012 to 2013.

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