Publications
Publications
- August 2017 (Revised September 2018)
- HBS Case Collection
Accounting Turbulence at Boeing
By: Jonas Heese, Suraj Srinivasan, David Lane and James Barnett
Abstract
Unlike its rival Airbus, Boeing had used a practice called program accounting to record its commercial aircraft expenses since the 1980s. Program accounting allowed Boeing to expense estimated average costs instead of the actual production costs of an aircraft. This practice lowered the effect of the initially high costs of manufacturing new aircraft models on Boeing’s profitability and reflected potential learning efficiencies that could drive down manufacturing costs over time. By 2016, Boeing had deferred about $27 billion in production costs related to its 787 program. If Boeing had been forced to expense these costs, it would have shown profits of $1.4 billion between 2012 and 2016 instead of $25.2 billion, raising questions about Boeing’s true profitability.
Keywords
Asset Recognition; Program Accounting; Airline Industry; Accounting; Production; Cost; Air Transportation Industry
Citation
Heese, Jonas, Suraj Srinivasan, David Lane, and James Barnett. "Accounting Turbulence at Boeing." Harvard Business School Case 118-020, August 2017. (Revised September 2018.)