AIRBUS - 2019 Financial Statements

Other Supplementary Information Including the Independent Auditor’s Report /

Recoverability of assets related to significant programmes (Reference is made to the disclosures on Note 2 “Significant Accounting Policies”, Note 19 “Intangible Assets” and Note 20 “Property, Plant and Equipment” of the financial statements) Capitalised development costs, intangible assets and jigs and tools relate mainly to the key programmes, such as the A220, A330, A350, A380, A400M, H160 and H175. Estimates of the future cash flows and the appropriate discount rates are necessary to determine if an impairment of assets has to be recognised. In addition to the risk of contract cancellations, significant costs or loss of revenue may be incurred in connection with remedial actions required to correct any performance issue detected. Owing to the inherent uncertainty involved in forecasting future costs and interpreting contractual and commercial positions in determining impairments, this is a key audit area. Updates to these provisions can have a significant impact on the Company’s result and financial position. We evaluated the design and implementation and where considered appropriate tested the operating effectiveness of internal controls for identifying and recording impairments. We also performed substantive audit procedures including inquiry of the programme controller and Head of Programmes and corroboration with other audit evidence. We evaluated the impairment tests performed by testing the integrity of the management’s impairment model. We assessed management’s assumptions for the discount rate and the determination of the forecasted revenue to be realised, cost to be incurred (including any contractual penalties) and the expected gross margin, including performing sensitivity to evaluate the impact of changing some assumptions such as the discount rate or key business parameters (price, growth rate for instance). Finally we determined that the appropriate disclosures were made in the financial statements. Our audit approach The Company operates in a business environment that is exposed to currency volatility. A significant portion of the Company’s revenue is denominated in US dollars, while a major part of its costs is incurred in Euro and, to a lesser extent, in Pounds Sterling. In response to these risks the Company uses financial instruments (mainly currency forwards) to mitigate the exposure to changes in market rates. There is a high inherent risk of error in the Company’s Consolidated Financial Statements, both in the valuation of the financial instruments and in the presentation and disclosure in the financial statements. The magnitude of the Company’s hedge portfolio and potentially significant changes in the exchange rate of the US dollar versus the Euro could have a significant impact on the consolidated equity of the Company via the “mark to market” valuation of the hedge portfolio. For the audit of the financial instruments we used specialists who tested the controls around the Company’s central treasury system, independently calculated the valuation of the treasury portfolio (by sample) and tested the application of the hedge accounting rules and the resulting accounting treatment. In this process we also assessed the delivery profile used as a basis to the hedge accounting effectiveness test. We obtained counterparty confirmation of the outstanding financial instruments to verify the existence and ownership. Based on a sample of derivative financial instruments we assessed that the valuation of the financial instruments is within a pre-defined tolerable variance threshold and no material exceptions were noted. The results of our procedures relating to management’s accounting for derivative financial instruments in the 2019 financial statements were satisfactory and we determined that the appropriate disclosures were made in the financial statements. Our audit approach Risk Valuation of derivative financial instruments (Reference is made to Note 37 “Information about Financial Instruments” of the financial statements) Risk

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Airbus / Financial Statements 2019