2012 ANNUAL REPORT 93 Notes to Consolidated Financial Statements of service and product warranties and product performance guaran- tees for the years ended December 31, 2012 and 2011 are as follows: (DOLLARS IN MILLIONS) 2012 2011 Balance as of January 1 $ 1,468 $ 1,136 Warranties and performance guarantees issued 325 475 Settlements made (277) (440) Other (184) 297 Balance as of December 31 $ 1,332 $ 1,468 The decrease in the above table in “Other” during the year ended December 31, 2012 primarily reflects a decrease for Clipper warranty reserves as a result of the sale of the company, partially offset by an increase from the Goodrich acquisition. See Note 3 and Note 2, respectively, for further discussion. The increase reflected in “Other” during the year ended December 31, 2011 primarily reflected the impact of finalizing purchase accounting on the original acquisition of Clipper. closing with additional payments due to Rolls-Royce conditional upon each hour flown by V2500-powered aircraft in service at the closing date of the purchase from Rolls-Royce during the fifteen year period following closing of the purchase. The collaboration interest and intellectual property licenses are reflected as intangible assets and will be amortized in relation to the economic benefits received over the remaining estimated 30 year life of the V2500 program. Rolls-Royce will continue to support the program as a strategic supplier for the V2500 engine and continue to manu- facture parts and assemble engines. Pratt & Whitney entered into a collaboration arrangement with MTU with respect to a portion of the acquired collaboration interest in IAE for consideration of approx- imately $233 million with additional payments due to Pratt & Whit- ney in the future. As a result of these transactions, Pratt & Whitney holds a 61% net interest in the collaboration and a 49.5% owner- ship interest in IAE. Please see Note 2 for further discussion of changes in the IAE collaboration arrangement. The following table illustrates the income statement classi- fication and amounts attributable to transactions arising from the collaborative arrangements between participants for each period presented: NOTE 17: COLLABORATIVE ARRANGEMENTS In view of the risks and costs associated with developing new engines, Pratt & Whitney has entered into certain collaboration arrangements in which sales, costs and risks are shared. Sales generated from engine programs, spare parts, and aftermarket business under collaboration arrangements are recorded as earned in our financial statements. Amounts attributable to our collabo- rators for their share of sales are recorded as an expense in our financial statements based upon the terms and nature of the arrangement. Costs associated with engine programs under collaborative arrangements are expensed as incurred. Under these arrangements, collaborators contribute their program share of engine parts, incur their own production costs and make certain payments to Pratt & Whitney for shared or joint program costs. The reimbursement of the collaborators’ share of program costs is recorded as a reduction of the related expense item at that time. As of December 31, 2012, the collaborators’ interests in all commercial engine programs ranged from 14% to 48%, inclusive of a portion of Pratt & Whitney’s interests held by other participants. Pratt & Whit- ney is the principal participant in all existing collaborative arrange- ments. There are no individually significant collaborative arrangements and none of the collaborators exceed a 31% share in an individual program. On June 29, 2012, Pratt & Whitney, Rolls-Royce, MTU, and JAEC, participants in the IAE collaboration, completed a restructur- ing of their interests in IAE. Under the terms of the agreement, Rolls-Royce sold its ownership and collaboration interests in IAE to Pratt & Whitney, while also entering into an agreement to license its V2500 intellectual property to Pratt & Whitney. In exchange for the increased ownership and collaboration interests and intellectual property license, Pratt & Whitney paid Rolls-Royce $1.5 billion at (DOLLARS IN MILLIONS) 2012 2011 2010 Collaborator share of sales: Cost of products sold $ 1,295 $ 963 $ 850 Cost of services sold 216 36 38 Collaborator share of program costs (reimbursement of expenses incurred): Cost of products sold (97) (88) (83) Research and development (203) (220) (135) Selling, general and administrative (7) (4) (5) NOTE 18: CONTINGENT LIABILITIES Leases. We occupy space and use certain equipment under lease arrangements. Rental commitments of $2,486 million at December 31, 2012 under long-term non-cancelable operating leases are payable as follows: $646 million in 2013, $510 million in 2014, $378 million in 2015, $255 million in 2016, $158 million in 2017 and $539 million thereafter. Rent expense was $457 million in 2012, $453 million in 2011 and $445 million in 2010. Additional information pertaining to commercial aerospace rental commitments is included in Note 5 to the Consolidated Financial Statements. Environmental. Our operations are subject to environ- mental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. As described in Note 1 to the Consolidated Financial Statements, we have accrued for the costs of environmental remediation activities and periodically reassess these amounts. We believe that the likelihood of incurring losses materially in excess of amounts accrued is remote. At December 31, 2012, we had $847