AIRBUS - 2019 Financial Statements

Other Supplementary Information Including the Independent Auditor’s Report /

Settlement agreements reached with PNF, SFO, DoJ and DoS (Reference is made to the disclosures on Note 38 “Litigations and Claims” and Note 40 “Events after the Reporting Date” of the financial statements)

Risk

Since 2016, the Company was under investigation by the French Parquet National Financier (PNF), the UK Serious Fraud Office (SFO), the US Department of Justice (DoJ) and the U.S. Department of State (DoS) for, amongst others, alleged irregularities concerning third party consultants. The Company reported since then in its financial statements that the outcome of these investigations could have a material effect on the Company’s financial position. In January 2020, the Company has reached final agreements with the French Parquet National Financier (PNF), the UK Serious Fraud Office (SFO) and the US Department of Justice (DoJ) resolving the authorities’ investigations into allegations of bribery and corruption, as well as with the U.S. Department of State (DoS) and the DoJ to resolve their investigations into inaccurate and misleading filings made with the DoS pursuant to the U.S. International Traffic in Arms Regulations (ITAR). Under the Agreements, the Company agreed to pay penalties of €3,598 million, and to comply with certain obligations including monitoring of its anti-corruption and export control programmes for a period of three years. Prosecution will be discontinued if the Company complies with the terms of the agreement throughout this period, which it has committed to doing. Considering the significance of the settlements and the appropriate disclosure of rights and obligations in the financial statements regarding the settlements, we considered this as a key audit matter. We have inspected the settlement agreements between the Company, PNF, SFO, DoJ and DoS and have discussed the Agreements with management, Audit Committee and the internal and external lawyers. We assessed whether the financial consequences as set out in the settlement agreements are appropriately accounted for and disclosed in the financial statements. Litigation and claims involve amounts that are potentially significant and the estimate of the amount to be provided as a liability, if any, is inherently subjective. The outcome of these matters may have a material effect on the Company’s result and its financial position. A part of the Company’s business is characterised by competition for individually significant contracts with customers which are often directly or indirectly associated with Governments. The process associated with these activities is susceptible to the risk of non-compliance with laws and regulations. In addition, the Company operates in a number of territories where the use of commercial intermediaries is normal practice. Certain entities of the group remain under investigation by various law enforcement agencies for amongst others alleged irregularities concerning third party consultants. Breaches of laws and regulations in these areas can lead to fines, penalties, criminal prosecution, commercial litigation and restrictions on future business. We planned and designed our audit approach to this area in conjunction with our in-house forensic specialists. We evaluated the tone set by management and the Board of Directors and the Company’s approach to managing this risk. We assessed the overall control environment and evaluated and tested the Company’s policies, procedures and controls to identify and assess possible non-compliance. Furthermore we tested the selection process of intermediaries, related contractual arrangements, payments to intermediaries and the company’s responses to suspected breaches of policy and non-compliance. We made inquiries of the Board of Directors and the Audit Committee, as well as the Company’s internal and external legal advisors as to the areas of potential or suspected breaches of law and regulations relating to bribery, including the status of ongoing investigations. To corroborate the results of those inquiries we vouched information received with objective evidence, third parties and we reviewed related documentation. We maintained a high level of vigilance to possible indications of significant non-compliance with laws and regulations relating to bribery and corruption whilst carrying out our other audit procedures. Accompanied by our own legal advisors we met on several occasions with the Company’s external counsel to obtain their views about the status of ongoing investigations as well as their potential impact on the financial statements. We furthermore tested journals and other transactions with unusual characteristics using amongst other data-analytics tools. For (threatened) litigation cases and claims, we gained additional assurance by comparing management’s position to the assessment from external parties such as external lawyers in those cases where a high amount of judgement is involved. We assessed that the disclosure in the financial statements reflects the current status of the investigations regarding suspected breaches of law or regulations in accordance with accounting standards. We also assessed the appropriateness of the contingent liability disclosure in the financial statements.

Our audit approach

Litigation and claims and risk of non-compliance with laws and regulations (Reference is made to the disclosures on Note 3 “Key Estimates and Judgements”, Note 24 “Provisions, Contingent Assets and Contingent Liabilities” and Note 38 “Litigations and Claims” of the financial statements)

Risk

Our audit approach

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Airbus / Financial Statements 2019