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## NOTE 6. INVENTORIES (CONT ’ D) 

## Aerospace programs 

Aerospace program inventories included the following excess over-average production costs (EOAPC) as at January 31: 

<img src='content_image/35531.jpg'>

The EOAPC recoverable from existing firm orders amounted to $440 million as at January 31, 2004 ($515 million as at January 31, 2003). Management expects to recover the balance of EOAPC from future customer orders. 

Anticipated proceeds from future sales of aircraft for each program exceeded the related costs in inventories as at January 31, 2004 and 2003, plus the estimated additional production costs to be incurred for each program. However, substantial amounts of EOAPC costs may eventually be charged to expense in a given year if fewer than the aircraft program quantity are sold, the proceeds from future sales of aircraft are lower than those anticipated, or the costs to be incurred to complete the programs exceed current estimates. 

## Advances and progress billings 

Under certain contracts, title to inventories is vested in the customer as the work is performed, in accordance with contractual arrangements and industry practice. In addition, in the normal conduct of its operations, the Corporation provides performance bonds, bank guarantees and other forms of guarantees to customers, mainly in the transportation segment, as security for advances received from customers pending performance under certain contracts. In accordance with industry practice, the Corporation remains liable to the purchasers for the usual contractor’s obligations relating to contract completion in accordance with predetermined specifications, timely delivery and product performance. 

Costs incurred and recorded margins related to long-term contracts and costs incurred related to ongoing aerospace programs amounted to $5,510 million and $2,922 million respectively, as at January 31, 2004 ($5,212 million and $3,275 million respectively, as at January 31, 2003). Advances received and progress billings on long-term contracts and ongoing aerospace programs amounted to $5,836 million and $1,571 million, respectively, as at January 31, 2004 ($6,542 million and $1,866 million respectively, as at January 31, 2003), $2,764 million and $799 million of which represent a liability disclosed as advances and progress billings in excess of related costs as at January 31, 2004 ($3,041 million and $775 million respectively, as at January 31, 2003). 

