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What goes into the Balance Sheet of an Aircraft Manufacturing Company?
Steven Meyer • Aug 12, 2022
What goes into the Balance Sheet of an Aircraft Manufacturing Company?
During my MBA course, I had a project to project my own “fake” balance sheet for the company of my choice. Of course, my balance sheet had to balance out, and I had to explain why and how I chose values. As a current or past share- or bondholder of aircraft manufacturing companies such as Boeing, Northrop Grumman, Lockheed Martin, Airbus, Embraer, EVE Holding, and Lilium, this project was exciting to me.
In case you have never seen a balance sheet, I am adding a link to Boeing’s 2nd Quarter 2022 balance sheet. https://s2.q4cdn.com/661678649/files/doc_financials/2022/q2/360ad74f-1271-4756-a26b-36341c049389.pdf
THE BOEING COMPANY FORM 10-Q For the Quarter Ended June 30, 2022
In business school, we learned that Total Assets = Total Liabilities + Total Equity, and this equation always must balance. So far, so good. Now my question and/or concern is: how are aircraft -either in production or finished but not received- accounted for?
Let us consider as a part of the Total Assets
the aircraft inventory.
Aircraft finished inventory could be listed as:
- the actual cost of manufacturing, i.e., summing the price of the parts and manufacturing man hours?
- the price the airline is paying per aircraft?
- the list price of the aircraft without any airline “discount”?
- none of the above
Depending on which way an aircraft manufacturer includes for example aircraft inventory in their report, the way a company represents itself can change drastically. How does one know that manufacturer X is doing it the same way or differently from manufacturer Y? Maybe the value on the balance sheet for total assets is greater for company Y since that company is using the list price for their aircraft. This is a misrepresentation since no airline pays the list price.
What is your opinion? This point is valid not only for aircraft manufacturers but for all companies.
Image: Istockphoto Credit: olm26250 Foto ID: 488498310 Upload date: 24 September 2015
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