Bloomberg news says S.E.C. investigating Boeings Accounting on 787 and 747-8 airliners

According to Bloomberg news the United States Securities and Exchange Commission is investigating Boeing’s programme accounting methods on the 787 and 747-8 airliners.

Boeing uses a programme accounting method to book revenues and costs on major commercial aircraft development . The 787 programme has an accounting block spread over a production run of 1,300 aircraft. Boeing estimates costs and revenues over the entire block, and assigns an average operating margin for each aircraft that rolls out the factory.

But the 787 programme has not followed the usual pattern of Boeing’s historic development programmes. The first 370 787s delivered to date have cost Boeing nearly $30 billion more to produce than the sale price. By contrast, the 777 developed an inflation-adjusted $3 billion in production losses before the programme turned profitable.

Boeing expects actual 787 production costs to break-even on a unit basis later this year, meaning the sale price roughly matches the amount it takes to build each aircraft.

Boeing will have about 700 aircraft remaining in the accounting block. To recover the $30 billion already spent, Boeing must build each of the next 700 787s for an average cost of about $91 million.