Financial Statements 2023

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

Capitalised development costs , are recognised either as intangible assets or when the related development activities lead to the construction of specialised tooling for production (“jigs and tools”), or involve the design, construction and testing of prototypes and models, as property, plant and equipment. Capitalised development costs are generally amortised over the estimated number of units produced. If the number of units produced cannot be estimated reliably, they are amortised over the estimated useful life of the internally generated intangible asset. Amortisation of capitalised development costs is recognised in cost of sales. 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. 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. 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. 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 financial result and income taxes if the substance of the transaction is commercial (including sales financing transactions); and – – in financial result 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 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”. Leases — The Company assesses whether a contract is, or contains, a lease, at inception of the contract. The Company recognises a right ‑ of ‑ use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short ‑ term leases and leases of low value assets. The Company recognises right ‑ of ‑ use assets at the commencement date of the lease, when the underlying asset is available for use. The right ‑ of ‑ use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate. The Company presents right ‑ of ‑ use assets within “Property, plant and equipment” and lease liabilities within “Financing liabilities” and classifies the principal portion of lease payments within financing activities and the interest portion within operating activities. When the Company is the lessor, assets under operating leases are also included in “Property, plant and equipment”. Lease income from operating leases is recognised on a straight ‑ line basis over the term of the lease (see “– Note 20: Property, Plant and Equipment” “– Note 36.3: Financing Liabilities”).

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Airbus

Financial Statements 2023