Airbus - 2022 Universal Registration Document

2. Management’s Discussion and Analysis of Financial Condition and Results of Operations / 2.1 Operating and Financial Review

performance; (d) no material change in the ability or willingness of our customers to meet their contractual obligations, including payment obligations to the Company; (e) no changes in the legislative or regulatory environment which could have a material effect on the Company; and (f) no adverse outcome to any material litigation or investigation.

This guidance has been prepared on a basis consistent with the accounting policies adopted by the Company and is comparable with the Company’s historical financial information.

2.1.2 Significant Accounting Considerations, Policies and Estimates The Company’s significant accounting considerations, policies and estimates are described in the Notes to the IFRS Consolidated Financial Statements. Please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 4: Significant Accounting Policies”, “– Note 5: Key Estimates and Judgements” and “– Note 6: Change in Accounting Policies and Disclosures”. 2.1.2.4 Accounting for Hedged Foreign Exchange Transactions in the Financial Statements

In 2022, more than 70% of the Company’s revenues are denominated in US dollars, with around 60% of such currency exposure “naturally hedged” by US dollar-denominated costs. The remainder of costs are incurred primarily in euros, and to a lesser extent, in pounds sterling. Consequently, to the extent that the Company does not cover its net current and future exchange rate exposure from the time of a customer order to the time of delivery, its profits will be affected by market changes in the exchange rate of the US dollar against these currencies, and to a lesser extent, by market changes in the exchange rate of pound sterling against the euro. The Company uses hedging strategies to manage and minimise the impact of exchange rate fluctuations on its profits, including foreign exchange derivative contracts and other non-derivative financial assets or liabilities denominated in a foreign currency. As the Company intends to generate profits only from its operations and not through speculation on foreign currency exchange rate movements, the Company uses hedging strategies solely to mitigate the impact of exchange rate fluctuations on its EBIT. Moreover, to further mitigate the impact of exchange rate fluctuations on its profits, the Company enters into euro conversion agreements with its customers to convert fully or partially the payment from US dollar into euro based on an agreed conversion rate. Such agreements are implemented on an exceptional basis and at the specific request of the customer. For further information on the Company’s coverage strategies in response to its particular exposures, see “– 2.1.3.3. EBIT by Business Segment”. 2.1.2.5 Foreign Currency Translation For information on transactions in currencies other than the functional currency of the Company and translation differences for other assets and liabilities of the Company denominated in foreign currencies, please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 4: Significant Accounting Policies”. Currency Translation Mismatch Customer advances (and the corresponding revenues recorded when sales recognition occurs) are translated at the exchange rate prevailing on the date they are received (historical rates of customer advances). US dollar-denominated costs are converted at the exchange rate prevailing on the date they are incurred (historical rates of US dollar-denominated costs). To the extent

2.1.2.1 Scope of and Changes in Consolidation

For further information on the scope of and changes in consolidation as well as acquisitions and disposals of interests in business, please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 8: Scope of Consolidation” and “– Note 9: Acquisitions and Disposals”. 2.1.2.2 Capitalised Development Costs Pursuant to the application of IAS 38 “Intangible Assets”, the Company assesses whether product-related development costs qualify for capitalisation as internally generated intangible assets. Criteria for capitalisation are strictly applied. All research and development costs not meeting the IAS 38 criteria are expensed as incurred in the consolidated income statement. Please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 4: Significant Accounting Policies” and “– Note 20: Intangible Assets”. 2.1.2.3 Impairment of Long-Life Assets, Work in Progress and Finished Aircraft In testing long-life assets such as jigs and tools and capitalised development costs for impairment, the Company makes estimates on the number and timing of aircraft units to be delivered in the future, the margin of these aircraft, and the discount rate associated with the aircraft programme. For aircraft that may need to be remarketed, the impairment of working progress and finished aircraft is assessed based on an estimation of the future selling price and associated remarketing costs. Please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 4: Significant Accounting Policies”, “– Note 20: Intangible Assets” and “– Note 24: Inventories”.

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Airbus / Universal Registration Document 2022