AIRBUS - 2019 Financial Statements

Other Supplementary Information Including the Independent Auditor’s Report/

Revenue recognition (Reference is made to the disclosures on Note 2 “Significant Accounting Policies”, Note 3 “Key Estimates and Judgements”, Note 10 “Segment Information” and Note 11 “Revenue and Gross Margin” of the financial statements) The Group revenue recognition is complex due to its wide range of activities (sale of commercial aircraft and helicopters, sale of military aircraft and helicopters, sale of space systems and services), its various types of contracts including non-standard clauses and the duration of some contracts including long-term development activities. Recognition of revenue includes significant judgement and estimates including whether the contracts contain multiple performance obligations which should be accounted for separately and including the determination of the most appropriate method for revenue recognition of these performance obligations. This comprises the identification of potential variable considerations reducing the consideration received, allocation of this consideration to the different performance obligation and assessing if the performance obligations are satisfied over time or at a point in time. In particular the amount of revenue and profit recognised in a year for performance obligations satisfied at a point in time is dependent on the transfer of control and for performance obligations satisfied over time on the assessment of the stage of completion of performance obligations as well as estimated total revenues and estimated total costs. Our audit procedures included, amongst others, assessing the appropriateness of the Company’s accounting policies related to revenue recognition according to IFRS 15 “Revenue from contracts with customers”. In addition we evaluated the design and implementation and where considered appropriate tested the operating effectiveness of internal controls related to the completeness, accuracy and timing of the revenue recognised. We selected individual revenue transactions to assess proper identification of the performance obligations in the contracts and allocation of the consideration amongst the performance obligation (such as the A400M contract and space contracts), the completeness and valuation of the variable considerations (including constraints applied, if applicable) included in the transaction price (notably for A400M contract and residual value guarantee in the sale of some commercial aircrafts) and the timing of transfer of control. In order to evaluate the significant judgements and estimates made by management, we read supporting contractual agreements, met with sales representatives and programme teams to understand the nature of the various obligations to be rendered under the contract and discuss specific clauses that could prevent transfer of control (mostly for the sales of commercial aircrafts), obtained evidence of transfer of control such as proof of delivery, examined computation of for progression of costs and assessed the reasonableness of the actual and estimated cost to complete included in the cost-to-cost method for performance obligation recognised over time (notably for A400M development, Tiger and Eurofighter contracts and some border security and space contracts). Finally we determined that the appropriate disclosures were made in the financial statements. Estimations with respect to the contract margin for the accounting of onerous contracts and the assessment of the contract margin recognised for the significant over-time contracts. (Reference is made to the disclosure on Note 2 “Significant Accounting Policies”, Note 3 “Key Estimates and Judgements”, Note 11 “Revenue and Gross Margin” and Note 24 “Provisions, Contingent Assets and Contingent Liabilities” of the financial statements) The Group owns a large portfolio of long-term contracts for which it needs to assess the contract margin in order to record a provision for onerous contract if the margin at completion is expected to be negative and the margin for each performance obligation satisfied over time to record the associated revenue and costs. Provisions for onerous contracts such as for the A400M are recognised when it becomes probable that the present value of unavoidable costs of fulfilling the obligations under the contract exceeds the present value of economic benefits expected to be received under the contract. The determination of these contract margins and provisions for onerous contracts is based on available best estimates and requires management’s significant judgement and assumptions associated with estimated revue and costs at completion of the programme, the technical development achievement and certification schedules, production plan (including assumptions on ramp up), performance guarantees as well as key risks such expected outcome from ongoing negotiations with customers, penalties for delay or non-compliance. We evaluated the design and implementation and where considered appropriate tested the operating effectiveness of internal controls for accounting for onerous contracts and for the assessment of the contract margin. We also performed substantive procedures on individually significant programmes, including discussions with the programme team including the Head of Programme. Furthermore we evaluated management’s assumptions in the determination of amongst others the stage of completion of a project, estimates to complete for both revenue and costs and any provisions for onerous contracts. We focused on management’s assessment of key contract risks and opportunities to determine whether these are appropriately reflected in the cost to complete forecasts, paid specific attention to technical and market developments, including export opportunities, delivery plan and certification schedules. We challenged management’s assumptions by discussing and reviewing correspondence with customers, considered the accuracy and consistency of similar estimates made in previous years and corroborated the assumptions with the latest contractual information. For over-time contracts and performance obligations we performed detailed testing of cost incurred and audited the correct application of margin at completion. Finally we determined that the appropriate disclosures were made in the financial statements. Risk Our audit approach Our audit approach Risk

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Airbus / Financial Statements 2019