AIRBUS - 2019 Registration Document

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

on relevant market forecasts; (b) no significant interruption in operational performance or programme execution; (c) no disruption in or change to the development of products or other development projects; and (d) no material change to the Company’s existing capital structure. The principal assumptions outside the Company’s control are as follows: (a) no material change in general trading conditions, economic conditions, competitive environment or levels of demand which would materially affect the Company’s business; (b) the Company’s business operations do not suffer fromexternal disruptions or interruptions to operations; (c) suppliers will meet their delivery commitments and ensure maturity, availability and in-service 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. The 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.

The Company’s significant accounting considerations, policies and estimates are described in the Notes to the IFRS Consolidated Financial Statements. On 1 January 2018, the Company has implemented the new standards IFRS 15 “Revenue from Contracts with Customers” and IFRS 9 “Financial Instruments”. As a result, the Company has changed its accounting policies for revenue recognition and for the accounting of financial instruments, please refer to the “Notes to the IFRS Consolidated Financial Statements as of and for the years ended 31 December 2018 and 2017 —Note 2: Significant Accounting Policies” and “— Note 4: Change in Accounting Policies and Disclosures”. In addition, on 1 January 2019 the Company has implemented the new standard IFRS 16 “Leases” and the new interpretation IFRIC 23 “Uncertainty over Income tax treatment”. Please refer to the “Notes to the Unaudited Condensed Interim IFRS Consolidated Financial Information for the three-month period ended 31 March 2019 and 2018 —Note 2: Accounting Policies”. 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 5: Scope of Consolidation” and “Note 6: 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 supply chain may suffer from disruptions, the nature, materiality and duration of which is impossible to predict with any level of certainty. Hence the Company is complementing its project with a crisis management plan to address and remediate foreseeable post-Brexit issues if those were to materialise. 2.1.1.4 Current Trends The Company expects the world economy and air traffic to grow in line with prevailing independent forecasts, which assume no major disruptions. The Company’s 2019 earnings and Free Cash Flow guidance is based on a constant perimeter, before M&A: Airbus targets 880 to 890 commercial aircraft deliveries in 2019. On that basis, the Company expects to deliver an increase in EBIT Adjusted of approximately +15% compared to 2018 and Free Cash Flow before M&A and Customer Financing of approximately €4 billion. This guidance has been prepared on the basis of certain assumptions, including the principal assumptions as set out below. The principal assumptions within the Company’s control are as follows: (a) underlying commercial aircraft deliveries are based on existing orders. Revenues from other activities are also based on existing orders and may include estimates based

2.1.2 Significant Accounting Considerations, Policies and Estimates

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 2: Significant Accounting Policies — Research and development expenses” and “Note 17: Intangible Assets”.

2.1.2.3 Accounting for Hedged Foreign

Exchange Transactions in the Financial Statements

More than 75% of the Company’s revenues are denominated in US dollars, whereas a substantial portion of its costs is incurred in euros and, to a smaller extent, in pounds sterling. The Company uses hedging strategies to manage and minimise the impact of exchange rate fluctuations on its profits, including foreign exchange derivative contracts, interest rate and equity swaps and other non-derivative financial assets or liabilities denominated in a foreign currency. For further information, see “— 2.1.7 Hedging Activities”, “Risk Factors — 1. Financial Market Risks — Foreign Currency Exposure” and please refer to the “Notes to the IFRSConsolidated Financial Statements —Note 2: Significant Accounting Policies” and “Note 35: Information about Financial Instruments”. 2.1.2.4 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 2: Significant Accounting Policies — Transactions in Foreign Currency”.

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Airbus / Registration Document 2018