mjoelnir
in service - 2 years
Posts: 4,089
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Post by mjoelnir on Jul 11, 2017 10:01:10 GMT 1
Well - to put it simply - deferred cost is a cost you will pay sometimes in the future but ultimately you have to pay it - those are money already SPENT !!!! So for us simple people - it might be better called DEBT - it is exactly the same ! So once more they have a DEBT of close to $27 bn and they work on getting rid of it. Sorry, s543, it has NOTHING to do with a debt : all deferred costs have already been fully paid (that's a huge difference with a debt !), but not yet accounted for in Boeing's profit and loss statements. The consequences of the deferral are that Boeing's accounts in the last seven to eight years have shown much more profit than they otherwise would have, that Boeing has paid more taxes and (likely) more dividends, and that bonuses have been boosted. In the next few years, the contrary will be true : Boeing's profits will be deflated, taxes, dividends and bonuses will be reduced. In the long run, the company stands penalised by paying taxes and bonuses earlier than it should. It may also be paying out larger bonuses and (possibly) dividends than it should. More importantly, accounts presently do not show to what extent equity has been depleted. The policy of paying out dividends and buying back shares now is consensual whereas a more conservative approach might be advisable. That is the narrative our USA friends want us to believe. But financial accounts have three main statements, cash flow, profit or loss and financial position. If you hear Boeing fans, cash flow is the only relevant statement, it shows if you have the capital to do the things you are doing, but it does not make a difference were the capital originates. Profit or loss, here you get the information if a company has lost money or earned money. This statement is off at Boeing, because the 27 billion USD potential loss were not booked but deferred. Financial position, what you own and what is dept. The amount of dept is correctly shown, but what Boeing owns is off. Here the 27 billion USD appear as an inventory, that is not there. As Boeing has used up its equity with buying back shares, paying out dividends and bonuses, the equity shown is nearly zero. So in reality Boeing owns 27 billion USD less than they owe.
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philidor
in service - 6 years
Posts: 8,950
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Post by philidor on Jul 11, 2017 11:07:13 GMT 1
Somehow, I find it hard to believe the above information. TK does not need more lift in the foreseeable future. Of course, there may be some political play ...
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philidor
in service - 6 years
Posts: 8,950
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Post by philidor on Jul 11, 2017 11:28:49 GMT 1
That is the narrative our USA friends want us to believe. But financial accounts have three main statements, cash flow, profit or loss and financial position. If you hear Boeing fans, cash flow is the only relevant statement, it shows if you have the capital to do the things you are doing, but it does not make a difference were the capital originates. Profit or loss, here you get the information if a company has lost money or earned money. This statement is off at Boeing, because the 27 billion USD potential loss were not booked but deferred. Financial position, what you own and what is dept. The amount of dept is correctly shown, but what Boeing owns is off. Here the 27 billion USD appear as an inventory, that is not there. As Boeing has used up its equity with buying back shares, paying out dividends and bonuses, the equity shown is nearly zero. So in reality Boeing owns 27 billion USD less than they owe. Mjoelnir, there is no plot there, everything that happened in the past is correctly accounted for. The only unknown is to what extent Boeing will offset deferred costs with margins from future sales. You rightly point out that, if you imagine that all of these past costs are suddenly writen off, Boeing's balance sheet does not show much - if any - equity left. As a consequence, Boeing appears to be financed mainly by debt, not by equity. This view however over-simplifies the situation, making it look worse than it is, since at least part of these costs is going to be recovered on 787 sales. Boeing's financial situation nevertheless is double-edged in my opinion, and it does question the ongoing policy of buying shares back, reducing equity even more. The reason financial analysts, who are perfectly aware of deferred costs and of Boeing's equity position, keep a positive opinion on the stock probably is that a low level of equity strongly increases the rate of return on equity, so long of course as future business keeps the company going, which they have no doubt about.
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mjoelnir
in service - 2 years
Posts: 4,089
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Post by mjoelnir on Jul 11, 2017 16:46:27 GMT 1
That is the narrative our USA friends want us to believe. But financial accounts have three main statements, cash flow, profit or loss and financial position. If you hear Boeing fans, cash flow is the only relevant statement, it shows if you have the capital to do the things you are doing, but it does not make a difference were the capital originates. Profit or loss, here you get the information if a company has lost money or earned money. This statement is off at Boeing, because the 27 billion USD potential loss were not booked but deferred. Financial position, what you own and what is dept. The amount of dept is correctly shown, but what Boeing owns is off. Here the 27 billion USD appear as an inventory, that is not there. As Boeing has used up its equity with buying back shares, paying out dividends and bonuses, the equity shown is nearly zero. So in reality Boeing owns 27 billion USD less than they owe. Mjoelnir, there is no plot there, everything that happened in the past is correctly accounted for. The only unknown is to what extent Boeing will offset deferred costs with margins from future sales. You rightly point out that, if you imagine that all of these past costs are suddenly writen off, Boeing's balance sheet does not show much - if any - equity left. As a consequence, Boeing appears to be financed mainly by debt, not by equity. This view however over-simplifies the situation, making it look worse than it is, since at least part of these costs is going to be recovered on 787 sales. Boeing's financial situation nevertheless is double-edged in my opinion, and it does question the ongoing policy of buying shares back, reducing equity even more. The reason financial analysts, who are perfectly aware of deferred costs and of Boeing's equity position, keep a positive opinion on the stock probably is that a low level of equity strongly increases the rate of return on equity, so long of course as future business keeps the company going, which they have no doubt about. You can believe in the no plot theory. To be a little bit more clear, a company in Germany with a negative equity of 27 billion USD would be on the way to the bankruptcy court, but there the rules are different. Not that Boeing will not live, but never before has a program seen so gigantic deferrals. While piling up deferred cost, the inflated declared profits were used for huge bonuses for the guys responsible for this program fuck up and to not get investors on its back high dividends were paid and share value inflated with share buy backs. If they would at least put up reserves against this not existing inventory. Some day the profits have to be used to write of the cost, I myself believe in a hefty forward loss declaration in the not so far future. Especially senseless seem to be the share buy backs, having meanwhile real negative own capital.
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philidor
in service - 6 years
Posts: 8,950
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Post by philidor on Jul 12, 2017 9:52:01 GMT 1
I think we have similar views of the situation, and yet different reactions.
Anyhow, clarification will happen soon. I remember reading somewhere that in Boeing's accounting methods cost deferments should not last more than ten years after first delivery (2021 in this case). I cannot immediately remember my source, though.
The deadline may explain why some 787 sales are not included in the accounting block (some deliveries are probably scheduled post-2021), why Boeing is pushing hard to increase short term output, and why there is no more talk of further increasing the accounting block.
So, yes, Boeing may have to start cleaning off its balance sheet soon. They already wrote off the remaining test aircraft. Future numbers are anyone's guess, though.
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mjoelnir
in service - 2 years
Posts: 4,089
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Post by mjoelnir on Jul 12, 2017 13:31:29 GMT 1
I think we have similar views of the situation, and yet different reactions. Anyhow, clarification will happen soon. I remember reading somewhere that in Boeing's accounting methods cost deferments should not last more than ten years after first delivery (2021 in this case). I cannot immediately remember my source, though. The deadline may explain why some 787 sales are not included in the accounting block (some deliveries are probably scheduled post-2021), why Boeing is pushing hard to increase short term output, and why there is no more talk of further increasing the accounting block. So, yes, Boeing may have to start cleaning off its balance sheet soon. They already wrote off the remaining test aircraft. Future numbers are anyone's guess, though. And there is one more point regarding the additional dept. Deferring the cost aloud high profits and this profits were spent. As that were not real profits providing real owned cash, the extra spending, bonuses, dividends and share buy backs, must have been financed by additional dept. The accounting block is with 1,300 still bigger than the number, 1,275, of ordered frames. So no uncounted frames. The accounting block of 1,300 frames is abnormally high for Boeing. Accounting blocks for the 747, 757, 767, 777, and 737 NG were all 400 frames and the time frame for the deliveries were 3 to 5 years. I do not thing that there is a limit for years in regards to program accounting, but Boeing has always to guaranty that there are reasonable expectations of clearing the deferred cost inside the given accounting block otherwise a forward loss has to be declared.
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spotterxfw
in service - 2 years
Hometown XFW
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Post by spotterxfw on Aug 3, 2017 3:17:55 GMT 1
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s543
in service - 2 years
Posts: 3,957
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Post by s543 on Aug 3, 2017 9:30:58 GMT 1
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Post by kevin5345179 on Aug 3, 2017 21:31:13 GMT 1
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Post by Jkkw on Aug 19, 2017 5:34:12 GMT 1
The Trent 1000TEN has received EASA certification.
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