Financial Statements 2021

2. Notes to the IFRS Consolidated Financial Statements / 2.1 Basis of Preparation

4. The preparation of the Company’s Consolidated Financial Statements requires the use of estimates and assumptions. In preparing these Financial Statements, management exercises its best judgement based upon its experience and the circumstances prevailing at that time. The estimates and assumptions are based on available information and conditions at the end of the financial period presented and are reviewed on an ongoing basis. Key estimates and judgements that have a significant influence on the amounts recognised in the Company’s Consolidated Financial Statements are mentioned below: 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. Revenue recogni tion for per formance obl igations transferred over time — The PoC method is used to recognise revenue for performance obligations transferred over time. This method places considerable importance on accurate estimates at completion as well as on the extent of progress the estimated useful life of the internally generated intangible asset. Amor tisation of capital ised development costs is recognised in cost of sales. Inventories are measured at the lower of acquisition cost (generally the average cost) or manufacturing cost and net realisable value. Manufacturing costs comprise all costs that are directly attributable to the manufacturing process, such as direct material and labour, and production related overheads (based on normal operating capacity and normal consumption of material, labour and other production costs), including depreciation charges. Net realisable value is the estimated selling price in the ordinary course of the business less the estimated costs to complete the sale. Transactions in foreign currency , i.e. transactions in currencies other than the functional currency of an entity of the Company, are translated into the functional currency at the foreign exchange rate prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are remeasured into the functional currency at the exchange rate in effect at that date. Except when deferred in equity as qualifying cash flow hedges (see “– Note 37: Financial Instruments”), these foreign exchange remeasurement gains and losses are recognised, in line with the underlying item: – in profit before finance costs and income taxes if the substance of the transaction is commercial (including sales financing transactions); and – in finance costs for financial transactions. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost are translated into functional currency at the foreign exchange rate in effect at the date of the transaction. Translation differences on non-monetary financial assets and liabilities that are measured at fair value are

towards completion. For the determination of the progress of the performance obligations, significant estimates include total contract costs, remaining costs to completion, total contract revenue, contract risks and other judgements. The management of the segments continually review all estimates involved in such performance obligations and adjusts them as necessary (see “– Note 22: Contract Assets and Contract Liabilities, Trade Receivables and Trade Liabilities”). Provisions — The evaluation of provisions, such as onerous contracts, programme-related provisions and restructuring measures are based on best estimates. Onerous contracts are identified by monitoring the progress of the contract and the underlying programme performance. The associated estimates of the relevant contract costs require significant judgement related to performance achievements. Depending on the size and nature of the Company’s contracts and related programmes, the extent of assumptions, judgements and estimates in these monitoring processes differs. In particular, the introduction of commercial or military aircraft programmes ( e.g. A400M) or major derivative aircraft programmes involves an increased level of estimates and judgements associated with the expected development, production and certification schedules and expected cost components (see “– Note 24: Provisions, Contingent Assets and Contingent Liabilities”). reported as part of the fair value gain or loss. However, translation differences of non-monetary financial assets measured at fair value and classified as fair value through other comprehensive income (“OCI”) are included in accumulated other comprehensive income (“AOCI”). Hedge accounting — Most of the Company’s revenue is denominated in US dollar (“US$”), while a major portion of its costs are incurred in euro. The Company is significantly exposed to the risk of currency changes, mainly resulting from US$/€ exchange rates. Furthermore, the Company is exposed, though to a much lesser extent, to foreign exchange risk arising from costs incurred in currencies other than the euro and to other market risks such as interest rate risk, commodity price and equity price risk. In order to manage and mitigate those risks, the Company enters into derivative contracts. The Company applies hedge accounting to its derivative contracts whenever the relevant IFRS criteria can be met. Hedge accounting ensures that derivative gains or losses are recognised in profit or loss (mainly in revenue) in the same period that the hedged items or transactions affect profit or loss. The major portion of the Company’s derivative contracts is accounted for under the cash flow hedge model. The fair value hedge model is used only for certain interest rate derivatives. Derivative contracts which do not qualify for hedge accounting are accounted for at fair value through profit or loss; any related gains or losses being recognised in financial result. The Company’s hedging strategies and hedge accounting policies are described in more detail in “– Note 37: Financial Instruments”.

Key Estimates and Judgements

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Airbus / Financial Statements 2021