Financial Statements 2008

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Financial Statements 2008

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Financial Statements 2008
1 EADS N.V. Consolidated Financial Statements (IFRS)
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2 Notes to the Consolidated Financial Statements (IFRS)
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3 Auditors' Report on the Consolidated Financial Statements (IFRS) 101
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4 Company Financial Statements
5 Notes to the Company Financial Statements(including Auditors' Report as supplementary information)

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EADS N.V. Consolidated
Financial Statements (IFRS)EADS N.V. CONSOLIDATED INCOME
STATEMENTS (IFRS)

6EADS N.V. CONSOLIDATED BALANCE SHEETS(IFRS)

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EADS N.V. CONSOLIDATED STATEMENTS
OF CASH FLOWS (IFRS)

8EADS N.V. CONSOLIDATED STATEMENTS
OF RECOGNISED INCOME AND EXPENSE (IFRS)

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EADS N.V. CONSOLIDATED FINANCIAL STATEMENTS (IFRS)

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EADS N.V. CONSOLIDATED INCOME STATEMENTS (IFRS) FOR THE YEARS ENDED 31 DECEMBER 2008,2007 AND 2006
(in €m)Note

Revenues

6, 7

43,265

39,12339,434

Cost of sales

8(35,907)(34,802)(34,722)

7,358

4,321

4,712

Gross margin
Selling expenses
Administrative expenses

2008

2007

2006

(933)

(864)

(914)

(1,253)(1,314)(1,360)(2,458)

Research and development expenses

9(2,669)(2,608)Other income

10

189

233

297

(131)

(97)

(188)
152

Other expenses
Share of profit from associates accounted for under the equity method

11

188

210

Other income from investments

11

23

86

37

Profit (loss) before finance costs and income taxes

6

2,772

(33)

278

Interest income

617

502

454

Interest expense

(581)

(701)

(575)

Other financial result

(508)

(538)

(123)
(244)

Total finance costs

12

(472)

(737)

Income taxes

13

(703)

333

81

1,597

(437)

115

1,572

(446)

99

25

9

16

Profit (loss) for the period
Attributable to:Equity holders of the parent (Net income (loss))
Minority interests
Earnings per share

€

€

€

Basic

39

1.95

(0.56)

0.12

Diluted39

1.95(0.55)

0.12

The accompanying notes are an integral part of these Consolidated Financial Statements (IFRS).

6 EADS FIN ANCIAL S TATEMENTS 2008

EADS N.V. CONSOLIDATED FINANCIAL STATEMENTS (IFRS)

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EADS N.V. CONSOLIDATED BALANCE SHEETS (IFRS) AT 31 DECEMBER 2008 AND 2007(in €m)AssetsNon-current assets
Intangible assets
Property, plant and equipment
Investment property
Investments in associates accounted for under the equity method
Other investments and other long-term financial assets
Non-current other financial assets
Non-current other assets
Deferred tax assets
Non-current securities
Current assets
Inventories
Trade receivables
Current portion of other long-term financial assets
Current other financial assets
Current other assets
Current tax assets
Current securities
Cash and cash equivalents
Non-current assets / disposal groups classified as held for sale

Note

2008

2007(1)

14
15
16
17
17
20
21
13
22

11,171
12,156
87
2,356
1,712
1,612
1,034
2,756
3,040
35,924

10,832
13,393
96
2,238
1,553
2,510
1,033
2,705
2,691
37,051

18
19
17
20
21

19,452
5,267
177
2,495
1,466
452
3,912
6,745
263
40,22976,15318,906
4,639
166
3,855
1,317
375
1,598
7,549
0
38,40575,456

815
8,558
1,758
(109)
11,022
104
11,126

814
7,406
5,076
(206)
13,09085
13,175

26
27
28
29
13
31

7,479
3,046
7,499
8,907
953
418
28,302

8,055
3,090
5,653
8,474
2,188
753
28,213

26
27
30
28
29

4,583
1,458
7,824
1,714
19,968201822
155
36,72565,02776,153

4,378
1,724
7,398
1,514
18,169179706
034,06862,28175,45622
32
23

Total assets

Equity and liabilities
Equity attributable to equity holders of the parent
Capital stockReserves
Accumulated other comprehensive income
Treasury shares
Minority interests
Total equity
Non-current liabilities
Non-current provisions
Long-term financing liabilities
Non-current other financial liabilities
Non-current other liabilities
Deferred tax liabilities
Non-current deferred income
Current liabilities
Current provisions
Short-term financing liabilities
Trade liabilities
Current other financial liabilities
Current other liabilities
Current tax liabilities
Current deferred income
Liabilities directly associated with non-current assets classified as held for sale

24

31
23

Total liabilities
Total equity and liabilities(1) Regarding the retrospective change in presentation of “current / non-current other (financial) assets” as well as “current / non-current other (financial) liabilities” please refer to - Note 2“Summary of significant accounting policies”.

The accompanying notes are an integral part of these Consolidated Financial Statements (IFRS).

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EADS N.V. CONSOLIDATED STATEMENTS OF CASH FLOWS (IFRS) FOR THE YEARS ENDED
31 DECEMBER 2008, 2007 AND 2006
(in €m)Note

Profit (loss) for the period attributable to equity holders of the parent (Net income (loss))
Profit for the period attributable to minority interests
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Interest income
Interest expense
Interest received
Interest paid
Income taxes
Income taxes received (paid)
Depreciation and amortisation
Valuation adjustments
Results on disposal of non-current assets
Results of companies accounted for by the equity method
Change in current and non-current provisions
Change in other operating assets and liabilities:> Inventories> Trade receivables> Trade liabilities> Advance payments received> Other assets and liabilities> Customer financing assets> Customer financing liabilities
Cash provided by operating activities

2008

2007

2006

1,572
25

(446)
9

99
16

(617)
581
657
(471)
703
(252)
1,667
924
(31)
(188)
1
(172)
(1,210)
(845)
757
2,435
(982)
(208)
(119)
4,399

(502)
701
480
(370)
(333)
36
1,772
582
(125)
(210)
2,268
1,236
(2,998)
(148)
44
4,817
(540)
194
(133)
5,098

(454)
575
380
(271)
(81)
(239)
1,691
163
(336)
(152)
2,150
1,017
(1,942)
(7)
686
1,564
(444)
1,221
(61)
4,558

(1,837)
35
(265)
2
(122)
180
50

(2,028)
162
0
29
(132)
186
39

(2,708)
76
(82)
86
(194)
116
46

117
(2,676)(436)
0(4,952)
471
(628)
(97)
(10)
0
24
39
(201)
(50)
(804)
7,549
6,745

0
(2,641)(303)(249)(4,937)
206
(792)
(97)
(1)
0
46
0
(638)
(117)
(594)
8,143
7,549

70
3,357
0
0
767
1,170
(325)
(520)
(16)
(2,879)94(35)(2,511)
(57)
2,757
5,386
8,143

Investments:> Purchase of intangible assets, Property, plant and equipment> Proceeds from disposals of intangible assets, Property, plant and equipment> Acquisitions of subsidiaries and joint ventures (net of cash)> Proceeds from disposals of subsidiaries (net of cash)

32
32> Payments for investments in associates, other investments and other long-term financial assets> Proceeds from disposals of associates, other investments and other long-term financial assets> Dividends paid by companies valued at equity
Disposals of non-current assets / disposal groups classified as held for sale and liabilities directly associatedwith non-current assets classified as held for sale
Change of securities
Contribution to plan assets
Change in cash from changes in consolidation
Cash (used for) provided by investing activities
Increase in financing liabilities
Repayment of financing liabilities
Cash distribution to EADS N.V. shareholders
Dividends paid to minorities
Payments related to liability for puttable instruments
Capital increase
Change in treasury shares
Cash used for financing activities
Effect of foreign exchange rate changes and other valuation adjustments on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

For details, see Note 32, “Consolidated Statement of Cash Flows”.
The accompanying notes are an integral part of these Consolidated Financial Statements (IFRS).

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EADS N.V. CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE (IFRS)FOR THE YEARS ENDED 31 DECEMBER 2008, 2007 AND 2006(1)(in €m)Currency translation adjustments for foreign operations

2008

2007

2006

417

(196)

(324)

Effective portion of changes in fair value of cash flow hedges(2,971)

2,124

3,326

Net change in fair value of cash flow hedges transferred to profit or loss

(2,456)(1,884)(1,463)

Net change in fair value of available-for-sale financial assets

6

4

76

Net change in fair value of available-for-sale financial assets transferred to profit or loss

(6)

(54)

0

Actuarial gains (losses) on defined benefit plans

(346)

608

(690)

Tax on income and expense recognised directly in equity

1,722

(46)

(662)

Income and expense recognised directly in equity(3,634)

556

263

Profit (loss) for the period

1,597

(437)

115

Total recognised income and expense of the period(2,037)119378(2,056)

78

382

19

41

(4)

(2,037)

119

378

Attributable to:Equity holders of the parent
Minority interests
Total recognised income and expense of the period(1) For other information regarding changes in equity, please refer to Note 24 “Total equity”.

The accompanying notes are an integral part of these Consolidated Financial Statements (IFRS).

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Notes to the Consolidated
Financial Statements (IFRS)
2.1

BASIS OF PRESENTATION

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2.2

NOTES TO THE CONSOLIDATED INCOME
STATEMENTS (IFRS)33NOTES TO THE CONSOLIDATEDBALANCE SHEETS (IFRS)43

NOTES TO THE CONSOLIDATEDSTATEMENTS OF CASH FLOWS (IFRS)64

OTHER NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS (IFRS)66

APPENDIX “INFORMATIONON PRINCIPAL INVESTMENTS” –CONSOLIDATION SCOPE

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2.3

2.4

2.5

2.6

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2.1

BASIS OF PRESENTATION

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1.
2.
3.
4.
5.

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The company
Summary of signiﬁcant accounting policies
Accounting for the A400M programme
Scope of consolidation
Acquisitions and disposals

2.2 NOTES TO THE CONSOLIDATED INCOME STATEMENTS (IFRS)
6. Segment Reporting
7. Revenues
8. Functional costs
9. Research and development expenses
10. Other income
11. Share of proﬁt from associates accounted for under the equity method and other income from investments
12. Total ﬁnance costs
13. Income taxes

2.3 NOTES TO THE CONSOLIDATED BALANCE SHEETS (IFRS)
14. Intangible assets
15. Property, plant and equipment
16. Investment property
17. Investments in associates accounted for under the equity method, other investments and other long-term ﬁnancial assets
18. Inventories
19. Trade receivables
20. Other ﬁnancial assets
21. Other assets
22. Securities
23. Non-current assets / disposal groups classiﬁed as held for sale
24. Total equity
25. Capital Management
26. Provisions
27. Financing liabilities
28. Other ﬁnancial liabilities
29. Other liabilities
30. Trade liabilities
31. Deferred income

2.4 NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS (IFRS)
32. Consolidated Statement of Cash Flows

2.5 OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)
33. Litigation and claims
34. Commitments and contingencies
35. Information about ﬁnancial instruments
36. Share-based Payment
37. Related party transactions
38. Interest in Joint Ventures
39. Earnings per Share
40. Number of Employees
41. Events after the balance sheet date

2.6 APPENDIX “INFORMATION ON PRINCIPAL INVESTMENTS” – CONSOLIDATION SCOPE

12 EADS FIN ANCIAL S TATEMENTS 2008

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BASIS OF PRESENTATION

1. The company
The accompanying Consolidated Financial Statements present
the financial position and the result of the operations ofEuropean Aeronautic Defence and Space Company
EADS N.V. and its subsidiaries (“EADS” or the “Group”), a
Dutch public limited liability company (Naamloze
Vennootschap) legally seated in Amsterdam (current registeredoffice at Mendelweg 30, 2333 CS Leiden, The Netherlands;
previously: Le Carré, Beechavenue 130-132, 1119 PR,
Schiphol-Rijk, The Netherlands). EADS’ core business is the
manufacturing of commercial aircraft, civil and militaryhelicopters, commercial space launch vehicles, missiles,
military aircraft, satellites, defence systems and defence
electronics and rendering of services related to these activities.
EADS has its listings at the European Stock Exchanges in
Paris, Frankfurt, Madrid, Barcelona, Valencia and Bilbao. The
Consolidated Financial Statements were authorised for issue
by EADS’ Board of Directors on 9 March 2009, are preparedand reported in Euro (“€”), and all values are rounded to thenearest million appropriately, unless otherwise stated.

2. Summary of signiﬁcant accounting policies
Basis of preparation — EADS’ Consolidated Financial
Statements are prepared in accordance with International
Financial Reporting Standards (“IFRS”), issued by theInternational Accounting Standards Board (“IASB”) and asendorsed by the European Union (“EU”) and with Part 9 ofBook 2 of the Netherlands Civil Code. They comprise (i) IFRS,(ii) International Accounting Standards (“IAS”) and(iii) Interpretations originated by the International Financial
Reporting Interpretations Committee (“IFRIC”) or former
Standing Interpretations Committee (“SIC”). The Consolidated
Financial Statements have been prepared on a historical costbasis, except for the following items that have been measured
at fair value: (i) derivative financial instruments, (ii) availablefor-sale financial assets, (iii) accumulating Money Market
Funds, uncapped Structured Notes and foreign currency Funds
of Hedge Funds that have been designated as financial assets atfair value through profit or loss (“Fair Value Option”, see
below) and (iv) assets and liabilities being hedged items in fairvalue hedges that are otherwise carried at cost and whosecarrying values are adjusted to changes in the fair values
attributable to the risks that are being hedged.
In accordance with article 402 Book 2 of the Netherlands Civil
Code the Statement of Income of the EADS N.V. company
financial statements is presented in abbreviated form.

NEW STANDARDS, AMENDMENTS TO EXISTING
STANDARDS AND NEW INTERPRETATIONSThe IFRS rules applied by EADS for preparing 2008 year end
Consolidated Financial Statements are the same as for theprevious financial year except for those following theapplication of amended Standards or Interpretations
respectively and changes in accounting policies as detailed
below.

a) Amended Standards
The application of the following amended standards is
mandatory for EADS as of 31 December 2008.
The amendments “Reclassification of Financial Assets:
Amendments to IAS 39 ‘Financial Instruments: Recognition
and Measurement’” and IFRS 7 “Financial Instruments:
Disclosures” (both Standards amended and endorsed in
October 2008) allow an entity to reclassify non-derivative
financial assets, other than those designated at fair value
through profit or loss upon initial recognition, out of the
trading category in certain circumstances. These amendments
also permit an entity to reclassify from the available-for-salecategory to the loans and receivables category a financial asset
that otherwise would have met the definition of loans andreceivables, if the entity has the intention and ability to holdthat financial asset for the foreseeable future or until maturity.
Such reclassifications trigger additional disclosure
requirements to permit users of the financial statements todetermine what would have been the accounting result had
the reclassification not been made.
As EADS did not reclassify such financial instruments, theseamendments did not have any impact on the classification orvaluation of EADS’ financial instruments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.1 | Basis of Presentation

1

In May 2008 the IASB issued its omnibus of amendments to
its standards (endorsed in January 2009), primarily with aview to removing inconsistencies and clarifying wording.
There are separate transition rules for each amended standard.
EADS has early adopted the amendment to IAS 16 “Property,
Plant and Equipment” and the consequential amendments to
IAS 7 “Statement of Cash Flows” regarding the presentationof the sales proceeds from assets previously used for renting
activities. Following the amendment, proceeds received fromthe subsequent sale of such assets are presented as revenues in
the income statement, whereas cash flows arising from thepurchase, rental or sale of those assets are classified as cash
flows from operating activities (please refer to Note 32“Consolidated Statement of Cash Flows”). EADS anticipated
the adoption of this amendment in its 2008 Consolidated
Financial Statements.

b) New Interpretations
The following Interpretation became effective as of
1 January 2008:
IFRIC 11 “IFRS 2 – Group and Treasury Share Transactions”(issued 2006) requires arrangements whereby an employee isgranted rights to an entity´s equity instruments to beaccounted for as an equity-settled scheme, even if the entity
buys the instruments from another party or the shareholders
provide the equity instruments needed. As EADS has notissued instruments covered by this interpretation, theapplication of this interpretation did not have an impact on theConsolidated Financial Statements.

NEW OR AMENDED IFRS STANDARDS AND
INTERPRETATIONS ISSUED BUT NOT YET APPLIED
A number of new standards, amendments and improvements
to standards as well as interpretations are not yet effective forthe year ended 31 December 2008, and have not been appliedin preparing these Consolidated Financial Statements:
IFRS 2 “Share-based Payments – Vesting Conditions andCancellations” was amended in January 2008 and endorsed in
December 2008. This amendment will become effective for
EADS on 1 January 2009 and restricts the definition of“vesting condition” to a condition that includes an explicit or
implicit requirement to provide services. Any other conditions
are non-vesting conditions, which have to be taken into
account to determine the fair value of the equity instruments
granted. In the case that the award does not vest as the resultof a failure to meet a non-vesting condition that is within thecontrol of either the entity or the counterparty, this must be
accounted for as a cancellation. The adoption of the amended
IFRS 2 is not expected to have a material impact on EADS’
Consolidated Financial Statements.
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IFRS 3R “Business Combinations” and IAS 27 (amend.)“Consolidated and Separate Financial Statements” (not yet
endorsed) were revised and issued in January 2008 and will
become mandatory for EADS on or after 1 January 2010.
IFRS 3R introduces a number of changes in the accounting forbusiness combinations that are likely to be relevant to EADS’operations: The definition of a business has been broadened,
which is likely to result in more acquisitions being treated asbusiness combinations. Contingent consideration will bemeasured at fair value, with subsequent changes therein
recognised in profit or loss. Transaction costs, other than shareand debt issue costs, will be expensed as incurred. Any preexisting interest in the acquiree will be measured at fair value
with the gain or loss recognised in profit or loss. Any noncontrolling interest will be measured at either fair value, or atits proportionate interest in the identifiable assets andliabilities of the acquiree, on a transaction-by-transaction basis.
Further, IAS 27 (amend.) requires that a change in theownership interest of a subsidiary without gaining or losing
control is accounted for as an equity transaction. Therefore
such transactions regarding changes in non-controlling interest
will no longer give rise to goodwill, nor will it give rise to
gain/loss. The changes introduced by IFRS 3R and IAS 27(amend.) have to be applied prospectively and will affect futureacquisitions as well as transactions with shareholders holding a
non-controlling interest in subsidiaries.
IFRS 8 “Operating Segments” (issued in November 2006 andendorsed in November 2007) will replace IAS 14 “Segment
Reporting” for accounting periods beginning on or after
1 January 2009. IFRS 8 will require the presentation anddisclosure of segment information to be based on the internalmanagement reports regularly reviewed by EADS´ Chief
Operating Decision Maker in order to assess each segment’s
performance and to allocate resources to them. EADS´ future
segment reporting will take into consideration the newrequirements of IFRS 8 as well as its new management
structure from 2009 onwards. EADS is currently investigating
the potential impact from both changes.
The Amendment to IAS 23 “Borrowing Costs” removes theoption of recognising borrowing costs that are directly
attributable to the acquisition, construction or production of aqualifying asset as an expense and therefore requires
capitalising such borrowing costs as part of the cost of theasset prospectively. A qualifying asset is an asset thatnecessarily takes a substantial period of time to get ready for
its intended use or sale. This amendment was released in
April 2007, has been endorsed in December 2008 and becomesmandatory to EADS as of 1 January 2009. The application of
the amended IAS 23 will result in the mandatory
capitalisation of borrowing costs related to qualifying assets

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.1 | Basis of Presentation1

and will thus increase the amount of total costs capitalised andthus the basis of depreciations of such qualifying assets.
The Amendment to IAS 1 “Presentation of Financial
Statements: A revised presentation” (issued in September 2007
and endorsed in December 2008) will become effective for
EADS as of 1 January 2009 and introduces the term total
comprehensive income, which represents changes in equity
during a period other than those changes resulting fromtransactions with owners in their capacity as owners. Total
comprehensive income may be presented either according toa single statement approach (effectively combining both
the Consolidated Income Statement and all non-ownerchanges in equity in a single statement), or according to a
two statement approach in an Consolidated Income Statement
and a separate statement of comprehensive income.
EADS plans to provide such information according to
the two statement approach in an income statement as wellas in a statement of comprehensive income for its
2009 Consolidated Financial Statements.
The Amendments to IAS 32 and IAS 1 “Puttable Financial
Instruments” (issued in February 2008, endorsed in
January 2009) will become effective for EADS as of 1 January
2009. The amendment to IAS 32 requires certain puttablefinancial instruments and obligations arising on liquidation to
be classified as equity if certain criteria are met. The
corresponding amendment to IAS 1 requires disclosure ofcertain information relating to such puttable instruments
classified as equity. These amendments of IAS 32 and IAS 1
are not expected to have a material impact on EADS’
Consolidated Financial Statements.
The Amendments to IFRS 1 “First Time Adoption of IFRS”,
and IAS 27 “Consolidated and Separate Financial Statements”(issued in May 2008, endorsed in January 2009) will beeffective from of 1 January 2009 onwards. The amended
standard allows first-time adopters to use a deemed cost ofeither fair value or the carrying amount under previous
accounting practice to measure the initial cost of investments
in subsidiaries, jointly controlled entities and associates in theseparate financial statements. The amendment also removes
the definition of the cost method from IAS 27 and replaces itwith a requirement to present dividends as income in theseparate financial statements of the investor. The amendment
will not have a material impact on the Group’s Consolidated
Financial Statements.
In order to prevent diversity in practice developing as a resultof the amendments made to IAS 39 “Financial Instruments” in
October 2008 regarding the reclassification of particularfinancial assets, the IASB published the amendments“Embedded Derivatives: Amendments to IFRIC 9

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when the entity reclassifies a hybrid financial asset. This
assessment has to be made on the basis of the circumstancesthat existed when the entity first became a party to thecontract. However, if the fair value of such an embedded
derivative that would have to be separated cannot be reliably
measured, the entire hybrid financial instrument must remainin the fair value through profit or loss category.
The objective of the Amendment “Eligible Hedged Items –Amendment to IAS 39 ‘Financial Instruments: Recognition
and Measurement’” (issued in July 2008, not endorsed yet) is
to propose rules-based amendments to IAS 39 to simplify thehedge accounting requirements by clarifying the risks that
may be designated as hedged risks and the portion of cash
flows of a financial instrument that may be designated as ahedged item. The amendment will be applied by EADS for
annual periods beginning on 1 January 2010. EADS iscurrently investigating potential impacts from the applicationof this amendment.

IMPROVEMENTS TO IFRSIn May 2008 the Board issued its omnibus of amendments to
its standards (endorsed in January 2009) primarily with a viewto removing inconsistencies and clarifying wording. There are
separate transition rules for each amended standard. Except for
the amendments regarding IAS 16 and IAS 7 explained before,
the majority of these amendments, being effective from of
1 January 2009 onwards, are not expected to have a material
impact on EADS’ Consolidated Financial Statements.
The following IFRIC-interpretations will become mandatory
for EADS for annual periods beginning on 1 January 2009.
IFRIC 12 “Service Concession Arrangements” (issued 2006,
not endorsed yet)
IFRIC 13 “Customer Loyalty Programmes” (issued 2007,
endorsed in December 2008)
IFRIC 14 “IAS 19 – The Limit of a Defined Benefit Asset
Minimum Funding Requirements and their Interaction”(issued 2007, endorsed in December 2008 resulting in an
effective date as of 1 January 2009)
IFRIC 15 “Agreements for Construction of Real Estates”(issued 2008, not endorsed yet)

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IFRIC 16 “Hedges of a Net Investment in a Foreign
Operation” (issued 2008, not endorsed yet)
IFRIC 17 “Distributions of Non-Cash Assets to Owners”(issued 2008, not endorsed yet)
IFRIC 18 “Transfer of Assets from Customers” (issued 2009,
not endorsed yet)
Most of the new IFRICs (IFRIC 13 – IFRIC 18) are notexpected to have a material impact on EADS’ Consolidated
Financial Statements. The potential impacts from theapplication of IFRIC 12 are under investigation.

SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation ofthese Consolidated Financial Statements are set out below.
These policies have been consistently applied to all financial
years presented, unless otherwise stated.

Consolidation — The Consolidated Financial Statements
include the subsidiaries of EADS. Subsidiaries are all entities
controlled by the Group, i.e. over which it has the power togovern financial and operating policies. An entity is presumed
to be controlled by EADS when EADS owns more than 50%of the voting power of the entity which is generallyaccompanied with a respective shareholding. Potential voting
rights currently exercisable or convertible are also consideredwhen assessing control over an entity.
Special purpose entities (“SPEs”) are consolidated as any
subsidiary, when the relationship between the Group and the
SPE indicates that the SPE is in substance controlled by theGroup. SPEs are entities which are created to accomplish anarrow and well-defined objective. Subsidiaries are fully
consolidated from the date control has been transferred to
EADS and de-consolidated from the date control ceases.
Business combinations are accounted for under the purchasemethod of accounting; all identifiable assets acquired,liabilities and contingent liabilities incurred or assumed arerecorded at fair value at the date control is transferred to
EADS (acquisition date), irrespective of the existence of any
minority interest. The cost of a business combination ismeasured at the fair value of assets given, equity instruments
issued and liabilities incurred or assumed at the date ofexchange, plus costs directly attributable to the acquisition.
Any excess of the cost of the business combination over theGroup’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised is capitalised as
goodwill and tested for impairment in the fourth quarter of
each financial year and whenever there is an indication for

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impairment. After initial recognition goodwill is measured atcost less accumulated impairment losses. For impairment
testing purpose, goodwill is allocated to those Cash Generating
Units (“CGUs”) or group of CGUs - within EADS on
Business Unit (“BU”) level - that are expected to benefit fromthe synergies arising from the business combination. If thecost of an acquisition is less than the fair value of the net
assets of the subsidiary acquired, the identification andmeasurement of the identifiable assets, liabilities andcontingent liabilities is reassessed as well as the measurementof the cost of the combination. Any remaining difference isimmediately recognised in the Consolidated Income Statement.
EADS subsidiaries prepare their financial statements at thesame reporting date as EADS Group Consolidated Financial
Statements and apply the same accounting policies for similartransactions.
For investments EADS jointly controls (“joint ventures”) with
one or more other parties (“venturers”), EADS recognises its
interest by using the proportionate method of consolidation.
Joint control is contractually established and requires
unanimous decisions regarding the financial and operating
strategy of an entity.
Investments in which EADS has significant influence(“investments in associates”) are accounted for using the equity
method and are initially recognised at cost. Significant
influence in an entity is presumed to exist when EADS owns
20% to 50% of the entity’s voting rights. The investments inassociates include goodwill as recognised at the acquisition
date net of any accumulated impairment loss. EADS’ share of
the recognised income and expenses of investments inassociates is included in the Consolidated Financial Statementsfrom the date significant influence has been achieved until thedate it ceases to exist. The investments’ carrying amount isadjusted by the cumulative movements in recognised income
and expense. When EADS’ share in losses equals or exceeds
its interest in an associate, including any other unsecured
receivables, no further losses are recognised, unless the Grouphas incurred obligations or made payments on behalf of theassociate.
The effects of intercompany transactions are eliminated.
Acquisitions (disposals) of interest in entities that arecontrolled by EADS without gaining (ceasing) control,
irrespective of whether sole or joint control, are treated astransactions with parties external to the Group in accordancewith the Parent Company Approach. Consequently, gains orlosses on purchases from minority shareholders or otherventurers respectively are recorded in goodwill, whereas

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disposals to minority shareholders or other venturers arerecorded within the Consolidated Income Statement.
The financial statements of EADS’ investments in associates
and joint ventures are generally prepared for the same
reporting date as for the parent company. Adjustments are
made where necessary to bring the accounting policies andaccounting periods in line with those of the Group.

Foreign Currency Translation — The Consolidated
Financial Statements are presented in Euro, EADS’ functional
and presentation currency. The assets and liabilities of foreign
entities, where the reporting currency is other than Euro, aretranslated using period-end exchange rates, whilst thestatements of income are translated using average exchange
rates during the period, approximating the foreign exchange
rate at the dates of the transactions. All resulting translationdifferences are included as a separate component of total
equity (“Accumulated other comprehensive income”
or “AOCI”).
Transactions in foreign currencies are translated into Euro at
the foreign exchange rate prevailing at transaction date.
Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated into Euro at
the exchange rate in effect at that date. These foreign exchange
gains and losses arising from translation are recognised in theConsolidated Income Statement except when deferred inequity as qualifying cash flow hedges. Changes in the fairvalue of securities denominated in a foreign currency that areclassified as available-for-sale financial assets are to be analysed
whether they are due to i) changes in the amortised cost of the
security or due to ii) other changes in the security. Translationdifferences related to changes in i) amortised cost arerecognised in the Consolidated Income Statement whilstii) other changes are recognised in AOCI.
Non-monetary assets and liabilities denominated in foreign
currencies, which are stated at historical cost, are translated
into Euro at the foreign exchange rate in effect at the date of
the transaction. Translation differences on non-monetaryfinancial assets and liabilities are reported as part of the fairvalue gain or loss. Translation differences of non-monetaryfinancial assets such as equity securities classified as available
for sale are included in AOCI.
Goodwill and fair value adjustments arising on the acquisitionof a foreign entity occurring after 31 December 2004 aretreated as assets and liabilities of the acquired company and aretranslated at the closing rate. Regarding transactions prior tothat date, goodwill, assets and liabilities acquired are treated as
those of the acquirer.

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The accumulated amount of translation differences recognised
in AOCI is released to profit or loss when the associatedforeign currency entity is disposed of or liquidated or the
associated asset or liability is disposed of respectively.

Current and non-current assets and liabilities — The
classification of an asset or liability as a current or non-current
asset or liability in general depends on whether the item isrelated to serial production or subject to long term production.
In case of serial production, an asset or liability is classified asa non-current asset or liability when the item is realised or
settled respectively after twelve months after the balance sheet
date, and as current asset or liability when the item is realised
or settled respectively within twelve months after the balance
sheet date. In case of construction contracts, an asset or
liability is classified as non-current when the item is realised
or settled respectively beyond EADS’ normal operating cycle;
and as a current asset or liability when the item is realised or
settled in EADS’ normal operating cycle. However, current
assets include assets - such as inventories, trade receivables andreceivables from PoC - that are sold, consumed and realised aspart of the normal operating cycle even when they are notexpected to be realised within 12 months after the balance
sheet. Trade payables are equally part of the normal operating
cycle and are therefore classified as current liabilities.
Revenue Recognition — Revenue is recognised to the extent
that it is probable that the economic benefit arising from theordinary activities of the Group will flow to EADS, thatrevenue can be measured reliably and that recognition criteria
as stated below have been met. Revenue is measured at the fairvalue of the consideration received or receivable after
deducting any discounts, rebates, liquidated damages and value
added tax. For the preparation of the Consolidated Income
Statement intercompany sales are eliminated.
Revenues from the sale of goods are recognised upon thetransfer of risks and rewards of ownership to the buyer whichis generally on delivery of the goods.
Revenues from services rendered are recognised in proportion
to the stage of completion of the transaction at the balance
sheet date.
For construction contracts, when the outcome can be estimatedreliably, revenues are recognised by reference to the percentage
of completion (“PoC”) of the contract activity by applying theestimate at completion method. The stage of completion of acontract may be determined by a variety of ways. Dependingon the nature of the contract, revenue is recognised ascontractually agreed technical milestones are reached, as units
are delivered or as the work progresses. Whenever theoutcome of a construction contract cannot be estimated

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reliably - for example during the early stages of a contract orwhen this outcome can no longer be estimated reliably during
the course of a contract’s completion - all related contract costs
that are incurred are immediately expensed and revenues arerecognised only to the extent of those costs being recoverable(“early stage method of accounting”). In such specificsituations, as soon as the outcome can (again) be estimatedreliably, revenue is from that point in time onwards accounted
for according to the estimate at completion method, without
restating the revenues previously recorded under the earlystage method of accounting. Changes in profit rates arereflected in current earnings as identified. Contracts arereviewed regularly and in case of probable losses, loss-atcompletion provisions are recorded. These loss-at-completion
provisions in connection with construction contracts are notdiscounted.
Sales of aircraft that include asset value guarantee
commitments are accounted for as operating leases when thesecommitments are considered substantial compared to the fairvalue of the related aircraft. Revenues then comprise lease
income from such operating leases.
Interest income is recognised as interest accrues, using theeffective interest rate method.
Dividend income is recognised when the right to receive
payment is established.

Leasing — The determination of whether an arrangement isor contains a lease is based on the substance of thearrangement and requires an assessment of (i) whether thefulfilment of the arrangement is dependent on the use of a
specific asset or assets, and (ii) the arrangement conveys a rightto use the asset.
The Group is a lessor and a lessee of assets, primarily inconnection with commercial aircraft sales financing. Leasetransactions where substantially all risks and rewards incident
to ownership are transferred from the lessor to the lessee areaccounted for as finance leases. All other leases are accounted
for as operating leases.
Assets held for leasing out under operating leases are included
in property, plant and equipment at cost less accumulated
depreciation (see Note 15 “Property, plant and equipment”).
Rental income from operating leases (eg aircraft) is recorded asrevenue on a straight-line basis over the term of the lease.
Assets leased out under finance leases cease to be recognisedin the Consolidated Balance Sheet after the inception of thelease. Instead, a finance lease receivable representing thediscounted future lease payments to be received from thelessee plus any discounted unguaranteed residual value is

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recorded as other long-term financial assets (see Note 17“Investments in associates accounted for under the equity
method, other investments and other long-term financial
assets”). Unearned finance income is recorded over time in“Interest result”. Revenues and the related cost of sales arerecognised at the inception of the finance lease.
Assets obtained under finance leases are included in property,
plant and equipment at cost less accumulated depreciation andimpairment if any (see Note 15 “Property, plant andequipment”), unless such assets have been further leased out
to customers. In such a case, the respective asset is either
qualified as an operating lease or as finance lease with EADS
being the lessor (headlease-sublease-transactions) and isrecorded accordingly. For the relating liability from financeleases see Note 27 “Financing liabilities”. When EADS is thelessee under an operating lease contract, rental payments arerecognised on a straight line basis over the leased term (seeNote 34 “Commitments and contingencies” for future
operating lease commitments). Such leases often form part ofcommercial aircraft customer financing transactions with therelated sublease being an operating lease (headlease-subleasetransactions).
EADS considers headlease-sublease-transactions which are set
up for the predominant purpose of tax advantages and which
are secured by bank deposits (defeased deposits) that
correspond with the contractual headlease liability to be linked
and accounts for such arrangements as one transaction inaccordance with SIC 27 “Evaluating the Substance ofTransactions Involving the Legal Form of a Lease”. To reflect
the substance of the transaction, the Group consequently
offsets (head) finance lease obligations with the matchingamount of defeased deposits.

Product-Related Expenses — Expenses for advertising, sales
promotion and other sales-related expenses are charged to
expense as incurred. Provisions for estimated warranty costs
are recorded at the time the related sale is recorded.
Research and Development Expenses — Research anddevelopment activities can be (i) contracted or (ii) self-initiated.
i) Costs for contracted research and development activities,
carried out in the scope of externally financed research anddevelopment contracts, are expensed when the related
revenues are recorded.
ii) Costs for self-initiated research and development activities
are assessed whether they qualify for recognition asinternally generated intangible assets. Apart fromcomplying with the general requirements for and initial
measurement of an intangible asset, qualification criteria are

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.1 | Basis of Presentation1

met only when technical as well as commercial feasibility
can be demonstrated and cost can be measured reliably. It
must also be probable that the intangible asset will generate
future economic benefits and that it is clearly identifiable
and allocable to a specific product.
Further to meeting these criteria, only such costs that relatesolely to the development phase of a self-initiated project arecapitalised. Any costs that are classified as part of the researchphase of a self-initiated project are expensed as incurred. If theresearch phase cannot be clearly distinguished from thedevelopment phase, the respective project related costs aretreated as if they were incurred in the research phase only.
Capitalised development costs are generally amortised over theestimated number of units produced. In case the number ofunits produced cannot be estimated reliably capitalised
development cost are amortised over the estimated useful lifeof the internally generated intangible asset. Amortisation ofcapitalised development costs is recognised in cost of sales.
Internally generated intangible assets are reviewed for
impairment annually when the asset is not yet in use andfurther on whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable.
Income tax credits granted for research and development
activities are deducted from corresponding expenses or from
capitalised amounts when earned.

Intangible Assets — Intangible assets comprise (i) internallygenerated intangible assets, i.e. internally developed softwareand other internally generated intangible assets (see above:“Research and development expenses”), (ii) acquired intangible
assets, and (iii) goodwill (see above: “Consolidation”).
Separately acquired intangible assets are initially recognised atcost. Intangible assets acquired in a business combination arerecognised at their fair value at acquisition date. Acquired
intangible assets are generally amortised over their respective
estimated useful lives (3 to 10 years) on a straight line basis,less accumulated impairment if necessary. The amortisation
expense on intangible assets with finite lives is recognised in
the Consolidated Income Statement within the expense
category consistent with the function of the related intangible
asset. The amortisation method and the estimate of the useful
lives of the separately acquired intangible asset is reviewed atleast annually and changed if appropriate.
Intangible assets having an indefinite useful life are notamortised but tested for impairment at the end of eachfinancial year as well as whenever there is an indication thatthe carrying amount exceeds the recoverable amount of therespective asset (see below “Impairment of non-financial

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assets”). For such intangible assets the assessment for theindefinite useful life is reviewed annually on whether it
remains supportable. A change from indefinite to finite life
assessment is accounted for as change in estimate.
Gains or losses arising from the derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and arerecognised in the Consolidated Income Statement when theasset is derecognised.

Property, Plant and Equipment — Property, plant andequipment is valued at acquisition or manufacturing costs lessany accumulated depreciation and any accumulated impairment
losses. Such costs include the estimated cost of replacing,
servicing and restoring part of such property, plant andequipment. Items of property, plant and equipment are
generally depreciated on a straight-line basis. The costs ofinternally produced equipment and facilities include directmaterial and labour costs and applicable manufacturing
overheads, including depreciation charges. Borrowing costs are
not capitalised. The following useful lives are assumed:buildings 10 to 50 years; site improvements 6 to 20 years;
technical equipment and machinery 3 to 20 years; and otherequipment, factory and office equipment 2 to 10 years. The
useful lives, depreciation methods and residual values applying
to property, plant and equipment are reviewed at least annuallyand in case they change significantly, depreciation charges for
current and future periods are adjusted accordingly. If thecarrying amount of an asset exceeds its recoverable amount an
impairment loss is recognised immediately in profit or loss. At
each reporting date, it is assessed whether there is any indicationthat an item of property, plant and equipment may be impaired(see also below “Impairment of non-financial assets”).
When a major inspection is performed, its cost is recognised in
the carrying amount of the plant and/or equipment as areplacement if the recognition criteria are satisfied. The
carrying amount of the replaced part is derecognised. All otherrepairs and maintenance are recognised as an expense in theConsolidated Income Statement of the period in which they
are incurred. Cost of an item of property, plant and equipment
initially recognised comprise the initial estimate of costs of
dismantling and removing the item and restoring the site on
which it is located at the end of the useful life of the item ona present value basis. A provision presenting the asset
retirement obligation is recognised in the same amount at thesame date in accordance with IAS 37 “Provisions, Contingent
Liabilities and Contingent Assets”.
Property, plant and equipment also includes capitalised
development costs for tangible developments of specialised
tooling for production such as jigs and tools, design,

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construction and testing of prototypes and models. In caserecognition criteria are met, these costs are capitalised andgenerally depreciated using the straight-line method over 5
years or, if more appropriate, using the number of production
or similar units expected to be obtained from the tools (sumof-the-units method). Especially for aircraft production
programmes such as the Airbus A380 with an estimatednumber of aircraft to be produced using such tools, the sumof-the-units method effectively allocates the diminution ofvalue of specialised tools to the units produced. Property,
plant and equipment is derecognised when it has been
disposed of or when the asset is permanently withdrawn fromuse. The difference between the net disposal proceeds and thecarrying amount of such assets is recognised in theConsolidated Income Statement in the period of derecognition.

Investment Property — Investment property is property,
i.e. land or buildings, held to earn rentals or for capital
appreciation or both. The Group accounts for investment
property using the cost model. Investment property is initiallyrecognised at cost and subsequently measured at cost less any
accumulated depreciation and any accumulated impairment
losses. Buildings held as investment property are depreciatedon a straight-line basis over their useful lives. The fair value ofinvestment property is reviewed annually by using cash-flow
models or by determinations from market prices.
Investment properties are derecognised when either they havebeen disposed of or when the investment property ispermanently withdrawn from use and no future economic
benefit is expected from its disposal. The difference between
the net disposal proceeds and the carrying amount of theassets is recognised in the Consolidated Income Statement in
the period of derecognition. Transfers are made to or frominvestment properties only when there is a change in use.

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fourth quarter of each financial year irrespective of whether
there is any indication for impairment. An impairment loss isrecognised in the amount by which the asset’s carrying
amount exceeds its recoverable amount.
The recoverable amount of an asset or a Cash Generating Unit(“CGU”) is the higher of its fair value less costs to sell or its
value in use. The recoverable amount is determined for anindividual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets
or group of assets. In such a case the recoverable amount isdetermined for the CGU the asset belongs to. Where therecoverable amount of a CGU to which goodwill has been
allocated is lower than the CGU’s carrying amount, firstly the
related goodwill is impaired. Any exceeding amount of
impairment is recognised on a pro rata basis of the carrying
amount of each asset in the respective CGU.
The value in use is assessed by the present value of the future
cash flows expected to be derived from an asset or a CGU.
Cash flows are projected based on a detailed forecast approvedby management over a period reflecting the operating cycle ofthe specific business. The discount rate used for determining
an asset’s value in use is the pre-tax rate reflecting current
market assessment of (i) the time value of money and (ii) therisk specific to the asset for which the future cash flow
estimates have not been adjusted.
An asset’s fair value less costs to sell reflects the amount anentity could obtain at balance sheet date from the asset’s
disposal in an arm’s length transaction between
knowledgeable, willing parties, after deducting the costs ofdisposal. If there is no binding sales agreement or active
market for the asset, its fair value is assessed by the use of
appropriate valuation models dependent on the nature of theasset, such as by the use of discounted cash flow models.

Inventories — Inventories are measured at the lower ofacquisition cost (generally the average cost) or manufacturing
cost and net realisable value. Manufacturing costs comprise allcosts that are directly attributable to the manufacturing
process, such as direct material and labour, and production
related overheads (based on normal operating capacity andnormal consumption of material, labour and other production
costs), including depreciation charges. Borrowing costs are notcapitalised. Net realisable value is the estimated selling price inthe ordinary course of the business less applicable variable
selling expenses.

Impairment losses recognised for goodwill are not reversed infuture periods. For any other non-financial asset an
impairment loss recognised in prior periods is reversed
through profit or loss up to its recoverable amount provided
that there has been a change in estimates used to determine
the asset’s recoverable amount since the last impairment loss
has been recognised. The respective asset’s carrying amount isincreased to its recoverable amount, taking into account any
amortisation or depreciation that would have been chargeable
on the asset’s carrying amount since the last impairment loss.

Impairment of non-financial assets — The Group assesses
at each reporting date whether there is an indication that a
non-financial asset may be impaired. In addition, intangible
assets with an indefinite useful life, intangible assets not yet
available for use and goodwill are tested for impairment in the

Financial Instruments — A financial instrument is any
contract that gives rise to a financial asset of one entity and afinancial liability or equity instrument of another entity.
EADS’ financial assets comprise mainly cash and short-term
deposits, trade and loan receivables, finance lease receivables,

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1other quoted and unquoted financial instruments andderivatives with a positive fair value. The Group’s financial
liabilities mainly include obligations towards financial
institutions, bonds, loans, refundable advances, tradeliabilities, finance lease liabilities as well as derivatives with anegative fair value. EADS recognises a financial instrument on
its balance sheet when it becomes party to the contractual
provision of the instrument. All purchases and sales offinancial assets are recognised on settlement date according tomarket conventions. The settlement date is the date an asset isdelivered to or by an entity. Financial instruments are initiallyrecognised at fair value plus, in the case the financial
instruments are not measured at fair value through profit orloss, directly attributable transaction costs. Financial
instruments at fair value through profit or loss are initiallyrecognised at fair value, transaction costs are recognised in theConsolidated Income Statement. Finance lease receivables arerecognised at an amount equal to the net investment in thelease. Subsequent measurement of financial instruments
depends on their classification into the relevant category. The
Group assesses at each balance sheet date whether there is any
objective evidence that a financial asset or a group of financial
assets may be impaired. EADS derecognises a financial asset
only when the contractual rights to the asset’s cash flows
expire or the financial asset has been transferred and thetransfer qualifies for derecognition under IAS 39. EADS
derecognises a financial liability only when the obligation
specified in the contract is discharged, cancelled or expired.

Investments and other financial assets — EADS’
investments comprise investments in associates accounted forunder the equity method, other investments and other longterm financial assets as well as current and non current
securities and cash equivalents. The Group classifies its
financial assets in the following three categories: i) at fair value
through profit or loss, ii) loans and receivables andiii) available-for-sale financial assets. Their classification isdetermined by management when first recognised and depends
on the purpose for their acquisition.
Within EADS, all investments in entities for which
consolidation criteria are not fulfilled are classified as noncurrent available-for-sale financial assets. They are included in
the line other investments and other long-term financial
assets in the Consolidated Balance Sheet.
The majority of the Group’s securities are debt securities andclassified as available-for-sale financial assets.

Available for sale financial assets — Financial assets
classified as available-for-sale are accounted for at fair value.
Changes in the fair value subsequent to the recognition ofavailable-for-sale financial assets – other than impairment

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losses and foreign exchange gains and losses on monetary
items classified as available-for-sale – are recognised directly
within AOCI, a separate component of total equity, net of
applicable deferred income taxes. As soon as such financial
assets are sold or otherwise disposed of, or are determined to
be impaired, the cumulative gain or loss previously recognisedin equity is recorded as part of “other income (expense) frominvestments” in the Consolidated Income Statement for theperiod. Interest earned on the investment is presented asinterest income in the Consolidated Income Statement using
the effective interest method. Dividends earned on investment
are recognised as “Other income (expense) from investments”
in the Consolidated Income Statement when the right to thepayment has been established.
The fair value of quoted investments is based on current
market prices. If the market for a financial asset is not active(and for unlisted securities), the Group establishes fair value
by using generally accepted valuation techniques on the basisof market information available at the reporting date.
Available-for-sale equity investments that do not have a quoted
market price in an active market and whose fair value cannot
be reliably estimated by alternative valuation methods, such as
discounted cash flow model, are measured at cost, less any
accumulated impairment losses.
Equity investments classified as available-for-sale areconsidered for impairment in case of a significant or prolonged
decline of their fair value below their cost. If any such
evidence exists for available-for-sale financial assets, thecumulative loss – measured as the difference between theacquisition cost and the current fair value, less any impairment
loss on that financial asset previously recognised in profit orloss – is removed from equity and recognised in theConsolidated Income Statement. Impairment losses recognisedin the Consolidated Income Statement on equity instruments
are not reversed through the Consolidated Income Statement;
increases in their fair value are recognised directly in equity.
In the case of debt instruments classified as available-for-sale,
impairment is assessed based on the same criteria as financial
assets carried at amortised cost. Interest continues to be
accrued at the original effective interest rate on the reduced
carrying amount of the asset and is recorded in financial
result. If, in a subsequent year, the fair value of a debt
instrument increases and the increase can be objectively related
to an event occurring after the impairment loss was recognisedin the Consolidated Income Statement, the impairment loss isreversed through the Consolidated Income Statement.

Financial assets at fair value through profit or loss —Financial assets at fair value through profit or loss include
financial assets held for trading and financial assets designated

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at initial recognition at fair value through profit or loss.
Within EADS, only derivatives not designated as hedges are
categorised as held for trading. Further, financial assets may bedesignated at initial recognition at fair value through profit orloss if any of the following criteria is met: (i) the financial
asset contains one or more embedded derivatives that
otherwise had to be accounted for separately; or (ii) the
designation eliminated or significantly reduces a measurement
or recognition inconsistency that would otherwise arise frommeasuring the assets or recognising the gains and losses onthem on a different basis (sometimes referred to as “natural
hedge”); or (iii) the financial assets are part of a group offinancial assets that is managed and its performance isevaluated on a fair value basis, in accordance with adocumented risk management or investment strategy. Within
EADS, uncapped Structured Notes are designated “at fairvalue through profit or loss” in accordance with criterion (i),foreign currency funds of a hedge funds structure also
comprising foreign currency derivatives are designated “at fairvalue through profit or loss” in accordance with criterion(ii) and investments in accumulating Money Market Funds aredesignated at “fair value through profit or loss” in accordancewith above criterion (iii).

Loans and receivables — Loans and receivables are nonderivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. They arise when theGroup provides money, goods or services directly to a debtor
with no intention of trading the receivable. Loans andreceivables are classified as trade receivables and otherinvestments and other long-term financial assets. Afterinitial recognition loans and receivables are measured atamortised cost using the effective interest rate method less any
allowance for impairment. Gains and losses are recognised in
the Consolidated Income Statement at disposal of the loans
and receivables, through the amortisation process as well as incase of any impairment.
Trade receivables — Trade receivables include claims arisingfrom revenue recognition that are not yet settled by the debtor
as well as receivables relating to construction contracts. Trade
receivables are initially recognised at fair value and, provided
they are not expected to be realised within one year, aresubsequently measured at amortised cost using the effective
interest method less any allowance for impairment. Gains andlosses are recognised in the Consolidated Income Statement
when the receivables are derecognised or impaired as well as
through the amortisation process. If it is probable that theGroup is not able to collect all amounts due according to theoriginal terms of receivables, an impairment charge has to berecognised. The amount of the impairment loss is equal to thedifference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the
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original effective interest rate, i.e. the rate that exactly
discounts the expected stream of future cash payments
through maturity to the current net carrying amount of thefinancial asset. The carrying amount of the trade receivable isreduced through use of an allowance account. The loss isrecognised in the Consolidated Income Statement. If in a
subsequent period, the amount of impairment decreases andthe decrease is objectively related to an event occurring after
the impairment was recognised, the recognised impairment
loss is reversed through profit or loss.

Current / non-current other financial assets — Current /non-current other financial assets mainly include derivatives
with positive fair values, receivables from related companies,
loans and are presented separately from current / non-current
other assets from 2008 onwards. Prior period information isadjusted accordingly.
Cash and cash equivalents — Cash and cash equivalents
consist of cash on hand, cash in bank, checks, fixed deposits
and securities having maturities of three months or less fromthe date of acquisition, that are readily convertible to known
amounts of cash and which are subject to an insignificant riskof changes in value.
Non-current assets / disposal groups classified as held
for sale — Non-current assets / disposal groups classified asassets held for sale and stated at the lower of carrying amountand fair value less costs to sell if their carrying amount isrecovered principally through a sale transaction rather than
through a continuing use. Whilst classified as held for sale orpart of a disposal group, EADS does not depreciate or amortisea non-current asset. Liabilities directly associated with noncurrent assets held for sale in a disposal group are presented
separately on the face of the Consolidated Balance Sheet.
Interest and other expenses attributable to the liabilities of adisposal group classified as held for sale is continued to berecognised.
To be classified as held for sale the non-current assets (ordisposal group) must be available for immediate sale in its
present condition subject only to terms that are usual andcustomary for sales of such assets (or disposal group) and its
sale must be highly probable. For a sale to be highly probable– among other criteria that have to be fulfilled – theappropriate level of EADS management must be committed tothe plan to sell, an active programme to complete the plan
must have been initiated and actions required to complete theplan to sell the assets (or disposal group) should indicate that
it is unlikely that significant changes to the plan will be madeor that the plan will be withdrawn.

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If a component of EADS has either been disposed of or isclassified as held for sale and i) represents a separate major lineof business or geographical area of operations, ii) is part of asingle co-ordinated plan to dispose of a separate major line ofbusiness or geographical area of operations or iii) is a
subsidiary acquired exclusively with a view to resale thecomponent is a discontinued operation.

Derivative Financial Instruments — Within EADS
derivative financial instruments are (a) used for hedging
purposes in micro-hedging strategies to offset the Group’s
exposure to identifiable transactions and are (b) a componentof hybrid financial instruments that include both thederivative and host contract (“Embedded Derivatives”).
In accordance with IAS 39 “Financial Instruments:
Recognition and Measurement”, derivative financial
instruments are recognised and subsequently measured at fairvalue. The method of recognising resulting gains or losses
depends on whether the derivative financial instrument has
been designated as hedging instrument, and if so, on thenature of the item being hedged. While derivative financial
instruments with positive fair values are recorded in“current / non-current other financial assets”, such derivative
financial instruments with negative fair values are recorded as“current / non-current other financial liabilities”.
a) Hedging: The Group seeks to apply hedge accounting to all
its hedging activities. Hedge accounting recognises
symmetrically the offsetting effects on net profit or loss ofchanges in the fair values of the hedging instrument andthe related hedged item. The conditions for such a hedging
relationship to qualify for hedge accounting include: The
hedge transaction is expected to be highly effective inachieving offsetting changes in fair value or cash flows
attributable to the hedged risk, the effectiveness of thehedge can be reliably measured and there is formal
designation and documentation of the hedging relationships
and EADS’ risk management objective and strategy forundertaking the hedge at the inception of the hedge. The
Group further documents prospectively at the inception of
the hedge as well as at each closing retrospectively andprospectively its assessment of whether the derivatives usedin hedging transactions are highly effective in offsettingchanges in fair values or cash flows of hedged items withregard to the hedged risk.
Depending on the nature of the item being hedged, EADS
classifies hedging relationships that qualify for hedge
accounting as either (i) hedges of the fair value of recognised
assets or liabilities or unrecognised firm commitments (“Fair
Value Hedges”), (ii) hedges of the variability of cash flows

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attributable to recognised assets or liabilities, highly
probable forecast transactions (“Cash Flow Hedges”) or(iii) hedges of a net investment in a foreign entity.
i) Fair Value Hedge: Fair value hedge accounting is mainly
applied to certain interest rate swaps hedging the exposure
to changes in the fair value of recognised assets andliabilities. For derivative financial instruments designatedas fair value hedges, changes in the fair value of thehedging instrument and changes in the fair value of thehedged asset or liability attributable to the hedged risk aresimultaneously recognised in the Consolidated Income
Statement.
ii) Cash Flow Hedge: The Group applies cash flow hedge
accounting generally to foreign currency derivative
contracts on future sales as well as to certain interest rate
swaps hedging the variability of cash flows attributable torecognised assets and liabilities. Changes in fair value ofthe hedging instruments related to the effective part of thehedge are reported in AOCI, a separate component of total
equity, net of applicable income taxes and recognised in theConsolidated Income Statement in conjunction with theresult of the underlying hedged transaction, when realised.
The ineffective portion is immediately recorded in “Profit
for the period”. Amounts accumulated in equity arerecognised in profit or loss in the periods when the hedgedtransaction affects the Consolidated Income Statement,such as when the forecast sale occurs or when the financeincome or finance expense is recognised in theConsolidated Income Statement. If hedged transactions arecancelled, gains and losses on the hedging instrument thatwere previously recorded in equity are generally recognised
in “Profit for the period”. Apart from derivative financial
instruments, the Group also uses financial liabilities
denominated in a foreign currency to hedge foreign
currency risk inherent in forecast transactions. If thehedging instrument expires or is sold, terminated or
exercised, or if its designation as hedging instrument isrevoked, amounts previously recognised in equity remain
in equity until the forecasted transaction or firm
commitment occurs.
iii) Net investment Hedge: Hedges of net investments inforeign entities are accounted for similarly to cash flow
hedges. Any gain or loss on the hedging instrument
relating to the effective portion of the hedge is recognised
in AOCI; the gain or loss relating to the ineffective portionis recognised immediately in the Consolidated Income
Statement. Gains and losses accumulated in AOCI are
included in the Consolidated Income Statement when theforeign entity is disposed of.

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In case certain derivative transactions, while providing
effective economic hedges under the Group’s risk management
policies, do not qualify for hedge accounting under the
specific rules of IAS 39 “Financial Instruments: Recognition
and Measurement”, changes in fair value of such derivative
financial instruments are recognised immediately as part of thefinancial result.
The fair values of various derivative financial instruments usedas hedging instruments are disclosed in Note 35 “Information
about financial instruments”. Periodical movements in the
AOCI, the separate component of total equity in which theeffective portion of cash flow hedges are recognised, are also
disclosed in Note 35 “Information about financial
instruments”.
b) Embedded derivatives: Derivative components embedded
in a non-derivative-host contract are separately recognised
and measured at fair value if they meet the definition of a
derivative and their economic risks and characteristics are
not clearly and closely related to those of the host contract.
Changes in the fair value of the derivative component ofthese instruments are recorded in “Other financial result”.
See Note 35 “Information about financial instruments” for a
description of the Group’s financial risk management
strategies, the fair values of the Group’s derivative financial
instruments as well as the methods used to determine suchfair values.

Income Taxes — Tax expense (tax income) is the aggregate
amount included in the determination of net profit or loss forthe period in respect of (i) Current tax and (ii) Deferred tax.
i) Current tax is the amount of income taxes payable orrecoverable in a period. Current income taxes are calculated
applying respective tax rates on the periodic taxable profit
or tax loss that is determined in accordance with rules
established by the competent taxation authorities. Current
tax liabilities are recognised for current tax to the extent
unpaid for current and prior periods. A current tax asset isrecognised in case the tax amount paid exceeds the amountdue to current and prior periods. The benefit of a tax loss
that can be carried back to recover current taxes of aprevious period is recognised as an asset provided that therelated benefit is probable and can be measured reliably.
ii) Deferred tax assets and liabilities reflect lower or higher
future tax consequences that result from temporary
valuation differences on certain assets and liabilities
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losses and tax credit carry forwards. Deferred tax assets andliabilities are measured using enacted tax rates to be applied
to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax
rates is recognised in the period the new rates are enacted or
substantially enacted. As deferred tax assets anticipate
potential future tax benefits, they are recorded in theConsolidated Financial Statements of EADS only to theextent that it is probable that future taxable profits will beavailable against which deferred tax assets will be utilised.
The carrying amount of deferred tax assets is reviewed ateach financial year end.
Deferred income tax assets and deferred income tax
liabilities are offset, if a legally enforceable right exists to
set off current tax assets against current income tax
liabilities and the deferred income taxes relate to the same
taxable entity and the same taxation authority.

Share Capital — Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of newshares or options are shown directly in equity - as a deduction net of any tax effects. Own equity instruments which arereacquired are deducted from total equity and remain
recognised as treasury shares until they are either cancelled orreissued. Any gains or losses net of taxes which are associatedwith the purchase, sale, issue or cancellation of EADS own
shares are recognised within equity.
Provisions — Provisions are recognised when the Group has apresent obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation anda reliable estimate of the obligation’s amount can be made.
When the effect of the time value of money is material,
provisions are measured at the present value of theexpenditure expected to be required to settle the Group’s
present obligation. As discount factor, a pre-tax rate is usedthat reflects current market assessments of the time value ofmoney and the risks specific to the obligation. The provision’s
increase in each period reflecting the passage of time isrecognised as finance cost.
Provisions are reviewed at each closing and adjusted as
appropriate to reflect the respective current best estimate. Thechange in the measurement of a provision for an asset retirement
obligation (see above “Property, plant and equipment”) is added
or deducted from the cost of the respective asset that has to be
dismantled and removed at the end of its useful life and the siteon which it is located restored.

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Provisions for guarantees corresponding to aircraft sales arerecorded to reflect the underlying risk to the Group in respectof guarantees given when it is probable that an outflow ofresources embodying economic benefits will be required tosettle the obligation and reliable estimates can be made of theamount of the obligation. The amount of these provisions is
calculated to cover the difference between the Group’s
exposure and the estimated value of the collateral.

earnings and presents them in its Consolidated Statements ofRecognised Income and Expense (SORIE).

Outstanding costs are provided for at the best estimateof future cash outflows. Provision for other risks
and charges relate to identifiable risks representing amounts
expected to be realised.

When sufficient information is available to apply defined
benefit accounting in conjunction with a defined benefit
multi-employer plan, the Group proportionally accounts forthe plan according to its share in the related defined benefit
plan.

Provisions for contract losses are recorded when it becomesprobable that estimated contract costs based on a total cost
approach will exceed total contract revenues. Contractual
penalties are included in the contractual margin calculation.
Provisions for loss making contracts are recorded as writedowns of work-in-process for that portion of the work which
has already been completed, and as provisions for theremainder. Losses are determined on the basis of estimatedresults on completion of contracts and are updated regularly.
Provisions for i) constructive obligations and liquidated
damages caused by delays in delivery and for ii) terminating
existing customer orders are based on best estimates of future
cash outflows for anticipated payments to customers.
Provisions for litigation and claims are set in case legal
actions, governmental investigations, proceedings and otherclaims are pending or may be instituted or asserted in the
future against the Group which are a result of past events,
where it is probable that an outflow of resources embodying
economic benefits will be required for the settlement and a
reliable estimate of the obligation’s amount can be made.
Restructuring provisions are only recognised when a detailed
formal plan for the restructuring - including the concernedbusiness or part of the business, the principal locations
affected, details regarding the employees affected, therestructuring’s timing and expenditures that will have to beundertaken - has been developed and the restructuring haseither commenced or the plan’s main features have alreadybeen publicly announced to those affected by it.

Employee Benefits — The valuation of pension andpost-retirement benefits classified as defined benefit plans
is based upon the projected unit credit method in accordancewith IAS 19 “Employee Benefits”.
EADS recognises periodical actuarial gains and losses in full
for all its defined benefit plans immediately in retained

Past Service Costs are recognised as an expense in EADS
Consolidated Income Statements on a straight-line basis over
the average period until the benefits become vested. Past
service costs relating to benefits already vested are expensed
immediately.

Contributions to defined contribution plans are recognised as
expenses in profit or loss when they are due.
Several German Group companies provide life time working
account models, being employee benefit plans with a promised
return on contributions or notional contributions that qualify
as other long-term employee benefits under IAS 19. The
employees’ periodical contributions into their life timeworking accounts leads to according personnel expense in that
period in the Consolidated Income Statement but to norecognition of plan assets or provision in the balance sheet.
Termination benefits are payable whenever an employee’s
employment is terminated before the normal retirement dateor whenever an employee accepts voluntary redundancy inexchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either
terminate the employment of current employees according to adetailed formal plan without possibility of withdrawal or toprovide termination benefits as a result of an offer made toencourage voluntary redundancy.
Stock options are accounted for in accordance with IFRS 2“Share-based Payment” and qualify as equity settled
share-based payments. In 2007, EADS also introduced aperformance and restricted unit plan which qualifies as cash
settled share-based payment plan under IFRS 2. For bothtypes, associated services received are measured at fair value
and are calculated by multiplying the number of options (orunits) expected to vest with the fair value of one option (orunit) as of grant date (balance sheet date). The fair value of theoption (or unit) is determined by applying the Black Scholes
Option Pricing Model.
The fair value of the services is recognised as personnel
expense. In case of equity settled share based payment plans
the personnel expense results in a corresponding increase inconsolidated retained earnings over the vesting period of the

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respective plan. For cash settled share based payment plans acorresponding liability is recognised. Until the liability issettled its fair value is remeasured at each balance sheet datethrough the Consolidated Income Statement.

Trade Liabilities — Trade liabilities are initially recorded atfair value. Trade liabilities having a maturity of more thantwelve months are subsequently measured at amortised costusing the effective interest rate method.

Part of the grant of both types of share-base payment plans isconditional upon the achievement of non-market performance
objectives and will only vest provided that the performance
conditions are met. If it becomes obvious during the vesting
period of an equity settled share-based payment plan thatsome of the performance objectives will not be met and,hence, the number of equity instruments expected to vestdiffers from that originally expected, the expense is adjusted
accordingly.

Financing liabilities — Financing liabilities comprise
obligations towards financial institutions, issued corporate
bonds, loans, loans to affiliated non-consolidated companies aswell as finance lease liabilities. Financing liabilities qualify as
financial liabilities and are recorded initially at the fair value ofthe proceeds received, net of transaction costs incurred.
Subsequently, financing liabilities other than finance leaseliabilities are measured at amortised cost using the effective
interest rate method with any difference between proceeds (netof transaction costs) and redemption amount being recognised
in “Total finance income (cost)” over the period of thefinancing liability.

EADS offers to its employees to buy under the employee
stock ownership plan (ESOP) EADS shares at a certain
discount. The difference between the exercise price and thecorresponding share price is recognised as personnel expense in
EADS’ Consolidated Income Statements at grant date.

Emission Rights and Provisions for in-excess-emission— Under the EU Emission Allowance Trading Scheme (EATS)
national authorities have issued on 1 January 2005 permits(emission rights), free of charge, that entitle participatingcompanies to emit a certain amount of greenhouse gas over thecompliance period.
The participating companies are permitted to trade thoseemission rights. To avoid a penalty a participant is required todeliver emission rights at the end of the compliance period
equal to its emission incurred.
EADS recognises a provision for emission in case it has caused
emissions in excess of emission rights granted. The provision
is measured at the fair value (market price) of emission rights
necessary to compensate for that shortfall at each balance
sheet date.
Emission rights held by EADS are generally accounted for as
intangible assets, wherebyi) Emission rights allocated for free by national authorities areaccounted for as a non-monetary government grant at its
nominal value of nil.
ii) Emission rights purchased from other participants areaccounted for at cost or the lower recoverable amount; if
they are dedicated to offset a provision for in excess
emission, they are deemed to be a reimbursement right andare accounted for at fair value.

26 EADS FIN ANCIAL S TATEMENTS 2008

Current / non-current other financial liabilities —Current / non-current other financial liabilities mainly include
refundable advances and derivatives with a negative market
value. Refundable advances from European Governments areprovided to the Group to finance research and development
activities for certain projects on a risk-sharing basis, i.e. they
have to be repaid to the European Governments subject to thesuccess of the project. Current / non-current other financial
liabilities are presented separately on the face of theConsolidated Balance Sheet from 2008 onwards. Prior period
information is adjusted accordingly.
Further, EADS designates certain financial liabilities
representing payment obligations towards airlines denominatedin USD as hedging instruments to hedge the foreign currency
risk inherent in future aircraft sales under a cash flow hedge.

Current / non-current other liabilities — Current / noncurrent other liabilities mainly consist of advance payments
received from customers.
Liability for puttable instruments — Under certain
circumstances, EADS records a financial liability rather thanan equity instrument for the exercise price of a written put
option on an entity’s equity.
Litigation and Claims — Various legal actions, governmental
investigations, proceedings and other claims are pending or
may be instituted or asserted in the future against the Group.
Litigation is subject to many uncertainties, and the outcome ofindividual matters is not predictable with assurance. EADS
believes that it has made adequate provisions to cover current
or contemplated litigation risks. It is reasonably possible thatthe final resolution of some of these matters may require theGroup to make expenditures, in excess of established reserves,

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over an extended period of time and in a range of amounts
that cannot be reasonably estimated. The term “reasonably
possible” is used herein to mean that the chance of a futuretransaction or event occurring is more than remote but lessthan likely. Although the final resolution of any such matters
could have an effect on the Group’s profit for the period forthe particular reporting period in which an adjustment of theestimated reserve would be recorded, the Group believes thatany such potential adjustment should not materially affect its
Consolidated Financial Statements. For further details pleaserefer to Note 33 “Litigation and claims”.

USE OF ACCOUNTING ESTIMATES
EADS’ Consolidated Financial Statements are prepared inaccordance with IFRS. EADS’ significant accounting policies,
as described in Note 2 are essential to understanding theGroup’s results of operations, financial positions and cash
flows. Certain of these accounting policies require criticalaccounting estimates that involve complex and subjective
judgments and the use of assumptions, some of which may be
for matters that are inherently uncertain and susceptible tochange. Such critical accounting estimates could change fromperiod to period and might have a material impact on theGroup’s results of operations, financial positions and cash
flows. The assumptions and estimates used by EADS’management are based on parameters which are derived fromthe knowledge at the time of preparing the Consolidated
Financial Statements. In particular, the circumstancesprevailing at this time and assumptions as to the expected
future development of the global and industry specificenvironment were used to estimate the Company’s futurebusiness performance. Where these conditions develop
differently than assumed, and beyond the control of thecompany, the actual figures may differ from those anticipated.
In such cases, the assumptions, and if necessary, the carrying
amounts of the assets and liabilities concerned, are adjusted
accordingly.
These estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised if therevision affects only that period, or in the period of therevision and future periods if the revision affects both current
and future periods.
Subjects that involve critical assumptions and estimates
and that have a significant influence on the amounts
recognised in EADS’ Consolidated Financial Statements arefurther described or are disclosed in the respective Notes
mentioned below.

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Business combinations — In a business combination, allidentifiable assets, liabilities and contingent liabilities acquired
are recorded at the date of acquisition at their respective fairvalue. One of the most significant estimates relates to thedetermination of the fair value of these asset and liabilities.
Land, buildings and equipment are usually independently
appraised while marketable securities are valued at market
prices. If any intangible assets are identified, depending on thetype of intangible asset and the complexity of determining its
fair value, EADS either consults with an independent externalvaluation expert or develops the fair value internally, using
appropriate valuation techniques which are generally based ona forecast of the total expected future net cash flows. Theseevaluations are linked closely to the assumptions made bymanagement regarding the future performance of the assets
concerned and any changes in the discount rate applied.
Goodwill impairment test and recoverability of assets —EADS tests at least annually whether goodwill has suffered
any impairment, in accordance with its accounting policies.
The determination of the recoverable amount of a CGU towhich goodwill is allocated involves the use of estimates bymanagement. EADS generally uses discounted cash flow based
methods to determine these values. These discounted cash
flow calculations basically use five-year projections that are
based on the operative plans approved by management. Cashflow projections take into account past experience andrepresent management’s best estimate about future
developments. Cash flows after the planning period are
extrapolated using estimated growth rates. Key assumptions on
which management has based its determination of fair valueless costs to sell and value in use include estimated growth
rates, weighted average cost of capital and tax rates. Theseestimates, including the methodology used, can have amaterial impact on the respective values and ultimately theamount of any goodwill impairment. Likewise, wheneverproperty, plant and equipment and other intangible assets aretested for impairment, the determination of the assets’recoverable amount involves the use of estimates bymanagement and can have a material impact on the respective
values and ultimately the amount of any impairment.
Revenue recognition on construction contracts – EADS
conducts a significant portion of its business underconstruction contracts with customers. The Group generally
accounts for construction projects using the percentage-ofcompletion method, recognising revenue as performance on acontract progresses. This method places considerable
importance on accurate estimates at completion as well as on
the extent of progress towards completion. For thedetermination of the progress of the construction contract
significant estimates include total contract costs, remaining
costs to completion, total contract revenues, contract risks and
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1other judgements. Management of the operating divisions
continually review all estimates involved in such construction
contracts and adjusts them as necessary.

Trade and other receivables — The allowance for doubtful
accounts involves significant management judgment andreview of individual receivables based on individual customer
creditworthiness, current economic trends and analysis ofhistorical bad debts.
EADS also selectively assists customers through arranging
financing from various third-party sources, including export
credit agencies, in order to be awarded supply contracts. In
addition, EADS provides direct vendor financing and grants
guarantees to banks in support of loans to EADS’ customers
when necessary and deemed appropriate.

Income taxes – EADS operates and earns income innumerous countries and is subject to changing tax laws in
multiple jurisdictions within these countries. Significant
judgements are necessary in determining the worldwide
income tax liabilities. Although management believes that it
has made reasonable estimates about the final outcome of tax
uncertainties, no assurance can be given that the final tax
outcome of these matters will be consistent with what isreflected in the historical income tax provisions. Such
differences could have an effect on the income tax liabilities
and deferred tax liabilities in the period in which suchdeterminations are made. At each balance sheet date, EADS
assesses whether the realisation of future tax benefits issufficiently probable to recognise deferred tax assets. This
assessment requires the exercise of judgement on the part ofmanagement with respect to, among other things, benefits that
could be realised from available tax strategies and futuretaxable income, as well as other positive and negative factors.
The recorded amount of total deferred tax assets could be
reduced if estimates of projected future taxable income andbenefits from available tax strategies are lowered, or if changes
in current tax regulations are enacted that impose restrictions
on the timing or extent of the Group’s ability to utilise future
tax benefits.

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Employee benefits – The Group accounts for pension andother postretirement benefits in accordance with actuarial
valuations. These valuations rely on statistical and otherfactors in order to anticipate future events. These factors
include key actuarial assumptions including the discount rate,
expected return on plan assets, expected salary increases andmortality rates. These actuarial assumptions may differ
materially from actual developments due to changing market
and economic conditions and therefore result in a significant
change in postretirement employee benefit obligations and therelated future expense.
Provisions — The determination of provisions, for example
for onerous contracts, warranty costs and legal proceedings isbased on best available estimates. EADS records a provision for
onerous sales contracts when current estimates of total cost
approach exceed expected contract revenue. Such estimates are
subject to change based on new information as projects
progress toward completion. Onerous sales contracts are
identified by monitoring the progress of the project andupdating the estimate of contract costs which also requires
significant judgment relating to achieving certain performancestandards as well as estimates involving warranty costs.
Legal contingencies — EADS companies are parties tolitigations related to a number of matters as described in
Note 33 “Litigation and Claims”. The outcome of thesematters may have a material effect on the financial position,
results of operations or cash flows. Management regularly
analyses current information about these matters and provides
provisions for probable contingent losses including theestimate of legal expense to resolve the matters. Internal andexternal lawyers are used for these assessments. In making thedecision regarding the need for provisions, management
considers the degree of probability of an unfavourable
outcome and the ability to make a sufficiently reliable estimateof the amount of loss. The filing of a suit or formal assertionof a claim against EADS companies or the disclosure of any
such suit or assertions, does not automatically indicate that aprovision may be appropriate.

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3. Accounting for the A400M programmeA) THE A400M PROGRAMMEThe Airbus A400M airlifter is a cost-effective, high-speed
turboprop aircraft specifically designed to meet theharmonised needs of European NATO nations and to fulfill
the requirements of international air forces. Sales
commitments for the A400M total 192 as of 31 December
2008. These orders were mainly initiated from the European
launch customers (Belgium, France, Germany, Luxembourg,
Spain, Turkey and the United Kingdom), and more recently
also from Malaysia and South Africa.
As the prime contractor for the A400M programme and thecustomer interface, Airbus Military S.L. (“AMSL”), a
subsidiary of EADS, is responsible for the commercial,financial and administrative activities as well as procurement
activities including the engines, power plant, the coordination
for systems; and the overall development programmemanagement.
On 25 September 2008, EADS announced an undefined delayof the first flight of the A400M, mainly due to theunavailability of the propulsion system, which is to be
developed by subcontractors – an engine manufacturers’
consortium – of AMSL. This undefined delay was primarily
due to an official notice by these subcontractors, as to theirinability to specify a new delivery date for the A400M
engines and beyond that – but not first flight critical – due tothe fact that other major suppliers of mission critical systems
and of system integration were severely struggling with thechallenging technical requirements of this aircraft.
Consequently, from that date onwards and up to the date ofthese financial statements, a revised technical timetable of the
A400M programme and the related financial implications of
this delay could no longer be reliably assessed.
Further, on 9 January 2009, AMSL and EADS announced thatthey have proposed a new programme approach for the
A400M to the Launch Nations, through OCCAR(Organisation Conjointe de Coopération en matièred’ARmement; Organisation for joint armament cooperation),with the aim to find an appropriate way forward for thisprogramme. AMSL and EADS wanted to initiate discussions
around the programme schedule along with changes to otherareas of the contract including in particular certain technicalcharacteristics of this military aircraft. In line with complex
military development programmes, AMSL suggested toresume series production only once adequate maturity isreached based on flight test results. With such new approach,the first delivery of the A400M would then occur three years
after its first flight. Further, AMSL and EADS will only beable to update all of the financial consequences of a revised
industrial plan, once the availability of the engines andmission critical systems is firmly determined and once
OCCAR´s position on the proposal is known.
EADS and AMSL continue to address all technical challenges
associated with the assembly of the first A400M aircraft andalso continue to work with the customers and suppliers toensure an appropriate consideration of the current challenges
regarding their impacts on the delivery schedule of thisaircraft. As a number of these customers have contractual
remedies that may be implicated by any revision of thedelivery plan, EADS continues to address these customer
claims and requests for other contractual relief as they arise.
However, as long as certain subcontractors cannot commit todelivery dates, EADS is currently not able to update its own
delivery schedule.
Under the Launch Contract between AMSL and OCCAR,AMSL was required to manage the A400M first flight withina timeframe until 31 January 2008 and the grace period will
expire on 31 March 2009. This first flight date was not met.
Given that the first flight will not occur before 31 March
2009, OCCAR has the contractual right with unanimous
mandate of all Launch Nations to claim termination of thewhole A400M Launch Contract as of 1 April 2009. In case ofvalid termination AMSL would be obliged to repay to
OCCAR all initial payments, pre-delivery payments and anyother payments received from OCCAR. Separately, each of theLaunch Nations may claim cancellation of those individual
aircraft ordered which would be substantially delayed. This
would trigger reimbursement of the initial payments andpre-delivery payments received from OCCAR in respect ofsuch aircraft.

B) RISKS AND UNCERTAINTIES ARISINGFROM THE A400M PROGRAMMEAND ACCOUNTING CONSEQUENCES
As a result of the undefined delays and the uncertain technicalenvironment which eventually led to the proposed new
programme approach as described above, EADS applied theearly stage method of accounting from 25 September 2008
onwards. Under this method, all A400M related work-inprogress, which would have been expensed upon thecompletion of technical milestones according to the estimate atcompletion method of accounting (see Note 18 “Inventories”)
have since then been expensed as incurred (see Note 8“Functional costs”), with related revenues recognised up to therecoverable part of these costs (see Note 7 “Revenues”) as per

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the A400M contract. At the same time, the A400M contract
loss provision (“the A400M provision”) was updated in lightof the excess-contract-costs-over-remaining-contract-revenues(see Note 26C. “Other provisions”), based on the probableremaining contract costs that could be estimated. On thecontrary, additional potential contract costs not estimable as ofthe date of these financial statements have been considered ascontingent liabilities (see Note 34 “Commitments andcontingencies”).
The early stage method of accounting has to be applied until
future triggering events allow the resumption of the estimate
at completion method. Such triggering events would mainly be
the earliest of – among other elements – a valid committed
time table of the engine subcontractors, mission critical system
suppliers and overall system integration, or an updated
contractual agreement with OCCAR and the representative
nations establishing an appropriate revised framework for the
A400M programme, such as the one which was proposed in
the new programme approach described above. In this respect,
EADS is still in relation with this engine manufacturers’
consortium to determine a reliable engine availability and afirst flight date for the A400M. Consequently, the year-end
status of EADS’ validation of the committed time table of theengine subcontractors and other suppliers did not enable a
resumption of the estimate at completion method of
accounting according to IAS 11 in the EADS Consolidated
Financial Statements.
Even though the financial consequences of the extended timeframe of three years between the first delivery of the A400M
and its first flight on the ultimate level of development costs
to be incurred can not be determined precisely as long as acomplete revised industrial plan is not agreed upon withengines’ and major critical systems’ suppliers, the related risks
have been reflected in the A400M provision to the extent that
EADS was able to estimate their probable financial impacts.
Total expected production costs to be incurred could not bereassessed since the beginning of 2008, as EADS believes thatany revision of the programme costs will only be possible oncethe suppliers commit to delivery dates.
Claims received from suppliers are considered by EADS on acase by case basis and challenged until they are accepted by
EADS and reflected in contract costs.
In case of a potential, but considered to date unlikely by
EADS, cancellation of the A400M contract by OCCAR,AMSL would have to reimburse all initial payments, pre-30 EADS FIN ANCIAL S TATEMENTS 2008

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delivery payments and any other payments received fromOCCAR which would represent a total amount of cash of
approximately € 5.7 billion. In addition, EADS would have todetermine the further utilisation of specific tangible assets
currently used for the A400M programme.
Under the current scenario of a continuation of the A400M
programme, significant penalties based on contractual clauses
could be notified for a cumulative amount of € 1.4 billion, due
in case each aircraft delivery would be delayed by more than
10 months from the original contractual timetable. Based upon
the current probable minimum delivery delays, this penalty
clause would apply at least to a significant number of aircraft,
but would be subject to future discussion with customers. The
A400M provision as of 31 December 2008 includes EADS’
current assessment of the prorate amount of penalties to be
finally paid.
The A400M provision related to the excess-of-contract-costsover-remaining-contract-revenues (amounting to€ 1,349 million as at 31 December 2008) has been determinedon the basis of the probable excess contract costs that could be
estimated at year-end 2008 taking into consideration thetechnical and industrial uncertainties attached to theprogramme. As they cannot currently be estimated, various
potential additional costs linked to the unquantifiable financial
consequences of the shift in the delivery schedule have notbeen taken into account when reassessing the A400M
provision in the 2008 Financial Statements. Therefore,
significant negative income statement’s impacts may still haveto be accounted for in future periods when such costs become
estimable or triggering events lead to a return to the estimate
at completion method of accounting. Potential benefits fromfuture discussions with customers, if any, might reduce suchimpacts, but would only be taken into account once agreed
upon by OCCAR and the Launch Nations.
In conclusion, while EADS believes the cost and revenue
estimates currently incorporated in the Financial Statements
under the early stage method of accounting reflect its mostappropriate judgments under the current circumstances, thetechnical complexity of the A400M programme and theuncertainty about the outcome of on-going technicaldevelopments imply that further financial risks may arise,such as significant additional delays in delivery schedule,
additional contract completion costs as well as the ultimate
amount of liquidated damages to be paid. Materialisation ofthese risks could also trigger an additional significant financial
exposure to potential order cancellations or even a potential
termination of the whole A400M programme.

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The following tables summarise the major accounting data specifically related to the A400M programme regarding certainbalance sheet- and income statement-balances:
As at 31 December
2008(in €m)Accumulated revenues

4,543

Accumulated cost of sales(6,739)

Accumulated EBIT* -impact(2,196)As at 31 December
2008(in €m)Accumulated revenues

4,543

Accumulated advance payments received(5,712)

Net advance payments received (shown in liabilities)(1,169)Year ended December 2008

Year ended December 2008

Early stage accounting

Estimated at completion
before early stage

Total impactof the A400M programme

Revenues

1,107

419

1.526

Expensed work in progress(1,449)(489)(1.938)Subtotal

(342)

(70)

(412)

334

70

404

(in €m)Consumption of provision
Additional costs (including increase in provision)

(696)

0

(696)

Total EBIT* impact

(704)

0

(704)

(in €m)Property, plant and equipment (mainly buildings and jigs and tools)
Current assets (mainly advance payments made)As at 31 December
2008

722
953

Net advance payments received (shown in liabilities)(1,169)

A400M provision(1,349)

4. Scope of consolidation
Perimeter of consolidation (31 December 2008) —The Consolidated Financial Statements include, in addition
to EADS N.V.:> 2008: 27 (2007: 24) companies which are investments inassociates and are accounted for using the equity method.

> 2008: 185 (2007: 193) companies which are fully
consolidated;Significant subsidiaries, associates, and joint ventures
are listed in the Appendix entitled “Information on principal
investments”.

> 2008: 36 (2007: 34) companies which are proportionately
consolidated;

The percentage of the proportional consolidation of MBDA
has changed from 50% to 37.5% as of 1 January 2007.

* EBIT: earnings before interest and taxes, pre-goodwill impairment and exceptionals.

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5. Acquisitions and disposals
A) ACQUISITIONS
On 22 April 2008, EADS acquired Plant CML based in
California / USA, a leading provider of emergency response
solutions, which is fully consolidated from that date in the
Defence & Security Division. The difference between thepurchase price and the acquired net assets (not yet finallydetermined) led to the recognition of a preliminary goodwillof US$ 302 million. The goodwill represents the value of
expected synergies arising from the acquisition. Plant CML
will primarily serve as a strong contributor in advancing
EADS’ Professional Mobile Radio (PMR) solutions into therapidly expanding US market, while using EADS’ strong
international operations will allow Plant CML to accelerate its
development in Europe and the rest of the world.

The fair value of the identifiable assets and liabilities of Plant CML as at the date of acquisition and the corresponding carrying
amounts immediately before the acquisition were:(in €m)Intangible Assets
Property, plant and equipment
Inventories
Trade receivables and other assets
Cash and cash equivalents
Provisions
Trade liabilities
Other liabilities
Net assets
Goodwill arising on acquisition (see Note 14 “Intangible Assets”)
Total consideration

On 28 July 2008, EADS acquired an additional 41% of Spot
Image based in Toulouse / France, a world leader in theprovision of satellite imagery and geo-information value-added
services. EADS hereby increased its stake in Spot Image to 81%
but had been consolidating it fully in the Astrium Division
since 1 January 2008 based on effective control since that date.
This additional purchase led to the recognition of an additional
goodwill of € 4 million (not yet finally determined).

Fair value recognised on acquisition

Previous carrying value

67
4
6
29
15
121
(2)
(6)
(60)
(68)
53
195
248

46
4
6
29
15
100
(2)
(6)
(50)
(58)
42

On 7 April 2008, EADS, acquired Surrey Satellite Technology
Limited (SSTL) based in the UK, which is specialised in thedesign and manufacture of small and micro satellites. The
acquisition was approved by the European Commission in
December 2008 leading to consolidation of the SSTL balance
sheet as at 31 December 2008 in the Astrium Division. This
purchase led to the recognition of goodwill of £ 43 million(not yet finally determined).

The following table summarises the major preliminary accounting data regarding these two acquisitions:(in €m)Intangible assets
Property, plant and equipment
Inventories
Trade receivables and other assets
Cash and cash equivalents
Provisions
Trade liabilities
Financing liabilities
Other liabilities
Net assets
Goodwill arising on acquisition (see Note 14 “Intangible Assets”)
Total consideration

32 EADS FIN ANCIAL S TATEMENTS 2008

Fair value recognised on acquisition

Previous carrying value

9
10
10
30
54
113
(5)
(22)
(7)
(32)
(66)
47
54
101

9
10
10
30
54
113
(2)
(22)
(7)
(32)
(63)
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1

In January 2007, EADS increased its share in the Atlas
Elektronik group from 40% to 49% in connection with thecontribution in kind of the EADS naval business into Atlas
Elektronik. Atlas Elektronik is proportionately consolidated
and the final allocation of the purchase price to the acquired
assets and liabilities led to a goodwill of € 42 million.
Apart from those mentioned, other acquisitions by the Group
were not significant.

B) DISPOSALSIn 2007, following an agreement dated 10 January 2007, EADS
sold the remaining 60% shares of Sogerma Services as well as
all shares of its subsidiaries Sogerma America Barfield B.C.
(100%) and EADS Sogerma Tunisie (50.1%).
Apart from those mentioned, other disposals by the Group
were not significant.

2.2

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CLASSIFIED AS HELD FOR SALE
Following the progress of the negotiations between Airbus andDiehl/Thales as well as GKN with respect to the plan to sell
the Airbus sites in Laupheim (Germany) and Filton (UK), therespective assets and liabilities had been classified as disposalgroup held for sale in EADS’ interim Consolidated Financial
Statements of 2008. On 1 August 2008, for the site in
Laupheim and for the one in Filton on 15 September 2008,
Airbus signed the agreements for disposal with respective legaltransfer of titles for Laupheim on 1 October 2008 and on
5 January 2009 for Filton. Consequently, the assets andliabilities of the Filton site are classified as disposal group held
for sale in the Consolidated Financial Statements as of
31 December 2008. For further details please refer to Note 23“Non-current assets / disposal groups classified as held forsale”.

NOTES TO THE CONSOLIDATED INCOME STATEMENTS (IFRS)

6. Segment Reporting
Through the end of 2008, the Group operated in five
Divisions (segments) which reflect the internal organisationaland management structure according to the nature of the
products and services provided.
> Airbus — Development, manufacturing, marketing and saleof commercial jet aircraft of more than 100 seats and thedevelopment and manufacturing of aircraft for military use.
> Military Transport Aircraft — Development,
manufacturing, marketing and sale of military transport
aircraft and special mission aircraft.

> Astrium — Development, manufacturing, marketing andsale of satellites, orbital infrastructures and launchers andprovision of space services.
> Eurocopter — Development, manufacturing, marketingand sale of civil and military helicopters and provision ofmaintenance services.
> Defence & Security — Development, manufacturing,marketing and sale of missiles systems, military combat
aircraft and training aircraft; provision of defence electronics
and defence-related telecommunications solutions andlogistics; training, testing, engineering and other related
services.

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The following tables present information with respect to theGroup’s business segments. Consolidation effects, the holding
function of EADS Headquarters and other activities notallocable to the divisions are disclosed in the column“HQ / Conso.”. “Other Businesses” mainly comprises

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5

the development, manufacturing, marketing and sale ofregional turboprop aircraft, light commercial aircraft andaircraft components, as well as civil and military aircraft
conversion and maintenance services.

A) BUSINESS SEGMENT INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008(in €m)AirbusMilitary
Transport
AircraftEurocopter

Defence &Security

Astrium

Other
Businesses

HQ/Conso.

Consolidated

Total revenues

27,453

2,759

4,486

5,668

4,289

1,528

22

46,205Internal revenues(1,432)

(205)

(287)

(638)

(14)

(364)

0

(2,940)

Revenues

26,021

2,554

4,199

5,030

4,275

1,164

22

43,265

Segment result
thereof impairment charge
for intangible assets and property,
plant and equipment
thereof additions to other provisions(see Note 26C)
Share of profit from associates
accounted for under the equity method
Profit (loss) before finance costs
and income taxes

1,763

(27)

292

389

230

80

(143)

2,584

(17)

0

0

0

0

0

0

(17)

(823)

(18)

(426)

(657)

(152)

(43)

(162)

(2,281)

0

9

0

10

1

0

168

188

1,763

(18)

292

399

231

80

25

2,772

27

2

1

9

3

0

16

58

1,790

(16)

293

408

234

80

41

2,830

Exceptional depreciation / disposal
EBIT pre-goodwill impairment
and exceptionals(see definition in Note 6C)
Total finance costs(472)

Income tax expense(703)

Profit for the period
Attributable to:Equity holders of the parent (Net income)

1,597
1,572

Minority interests
OTHER INFORMATION
Identifiable segment assets(incl. goodwill)(1)thereof goodwill
Investments in associates
Segment liabilities(2)2530,913

2,922

5,964

9,675

6,278

1,354

(214)

6,374

12

111

2,559

619

59

26

56,892
9,760

0

9

3

98

3

0

2,243

2,356

29,925

2,624

5,098

10,291

6,129

1,226

(509)

54,784

thereof provisions (see Note 26)

6,077

32

1,339

2,782

696

197

939

12,062

Capital expenditures (incl. leased assets)

936

107

190

188

244

55

117

1,837

Depreciation, amortisation
Research and development expenses

1,052
2,209

55
9

85
134

149
174

188
69

49
10

89
64

1,667
2,669

(1) Segment assets exclude investments in associates, current and deferred tax assets as well as cash and cash equivalents and securities as segment result does not include share of profit
from associates, total finance costs and income taxes.
(2) Segment liabilities exclude current and deferred tax liabilities and interest bearing liabilities.

34 EADS FIN ANCIAL S TATEMENTS 2008

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5B) BUSINESS SEGMENT INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2007(in €m)AirbusMilitary
Transport
Aircraft

Total revenues

25,216

1,140Internal revenues

Eurocopter

Defence &Security(3)Astrium

Other
Businesses(3)

4,172

5,392

3,550

1,407

HQ/Conso.

Consolidated

18

40,895

(526)

(193)

(146)

(517)

(12)

(378)

0

(1,772)

24,690

947

4,026

4,875

3,538

1,029

18

39,123

(904)

(156)

210

312

165

84

46

(243)

0

0

0

0

0

0

0

0

(3,084)

(27)

(325)

(622)

(103)

(56)

(226)

(4,443)

0

0

0

11

5

0

194

210

(904)

(156)

210

323

170

84

240

(33)

Disposal of goodwill

0

0

0

12

0

0

0

12

Exceptional depreciation / disposal

23

1

1

10

4

0

34

73

EBIT pre-goodwill impairment
and exceptionals(see definition in Note 6C)

(881)

(155)

211

345

174

84

274

52

Revenues
Segment result
thereof impairment charge
for intangible assets and property,
plant and equipment
thereof additions to other provisions(see Note 26C)
Share of profit from associates
accounted for under the equity method
Profit (loss) before finance costs
and income taxes

Total finance costs(737)

Income tax benefit

333

Loss for the period(437)

Attributable to:Equity holders of the parent (Net loss)
Minority interests

(446)
9

OTHER INFORMATION
Identifiable segment assets(incl. goodwill)(1)34,162

2,523

5,233

9,350

6,059

1,268

6,374

12

111

2,376

574

0

0

3

89

15

(2)

27,189

2,213

4,335

9,982

thereof provisions (see Note 26)

6,642

40

1,079

2,918

Capital expenditures (incl. leased assets)

946

102

206

Depreciation, amortisation
Research and development expenses

1,238
2,175

28
16

76
93

thereof goodwill
Investments in associates
Segment liabilities(295)

58,300

56

16

9,519

9

2,122

2,238

6,037

1,037

(594)

50,199

688

237

829

12,433

233

446

57

68

2,058

140
168

166
78

42
8

82
70

1,772
2,608

(1) Segment assets exclude investments in associates, current and deferred tax assets as well as cash and cash equivalents and securities as segment result does not include share of profit
from associates, total finance costs and income taxes.
(2) Segment liabilities exclude current and deferred tax liabilities and interest bearing liabilities.
(3) Business activities at EADS North America have been retrospectively reclassified from Defence & Security to Other Businesses and are not material.

As a rule, inter-segment transfers are carried out on an arm´slength basis. Inter-segment sales predominantly take place
between Eurocopter, Defence & Security and Airbus as theEurocopter and Defence & Security Divisions act as suppliersfor Airbus aircraft. It has to be noted that the Airbus Division,acting as the main supplier for the A400M programme, whichis led by the Military Transport Aircraft Division, is reporting
most of the results of the programme to date.

Capital expenditures represent the additions to property, plantand equipment and to intangible assets (excluding additions /changes in consolidation scope with regards to goodwill of€ 269 million in 2008 and € 9 million in 2007; for further
details see Note 6E “Capital expenditures”).

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5C) EBIT(1) PRE-GOODWILL IMPAIRMENT AND EXCEPTIONALSEADS uses EBIT pre-goodwill impairment and exceptionals as a key indicator of its economic performance. The term
“exceptionals” refers to such items as depreciation expenses of fair value adjustments relating to the EADS merger, the Airbus
Combination and the formation of MBDA, as well as impairment charges thereon. EBIT pre-goodwill impairment andexceptionals is treated by management as a key indicator to measure the segments’ economic performances.
(in €m)

2008

2007

2006

Profit (loss) before finance costs and income taxes

2,772

(33)

278

Disposal of goodwill / subsequent adjustment to goodwill

0

12

64

Exceptional depreciation / disposal

58

73

57

2,830

52

399

(in €m)

2008

2007

2006

Germany

5,330

4,332

4,126

France

3,697

3,450

4,271

United Kingdom

2,654

1,991

2,953

Spain

1,456

1,173

1,361

Other European Countries

5,741

6,436

4,465

Asia/Pacific

10,747

8,826

7,857

EBIT pre-goodwill impairment and exceptionals

D) REVENUES BY DESTINATIONNorth America

7,799

7,923

9,425

Latin America

2,708

2,054

1,213

Middle East

2,497

2,507

3,334

Other Countries

636

431

429

Consolidated

43,265

39,12339,434

Revenues are allocated to geographical areas based on the location of the customer.

E)

CAPITAL EXPENDITURES(in €m)

2008

2007

2006

France

792

819

968

Germany

566

477

789

United Kingdom

279

512

715

Spain

165

161

187

Other Countries
Capital expenditures excluding leased assets
Leased assets
Capital expenditures(1) EBIT: earnings before interest and taxes .

36 EADS FIN ANCIAL S TATEMENTS 2008

35

59

49

1,837

2,028

2,708

0

30

147

1,837

2,058

2,855

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.2 | Notes to the Consolidated Income Statements (IFRS)

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5

PROPERTY, PLANT AND EQUIPMENT BY GEOGRAPHICAL AREA

(in €m)

2008

2007

2006

France

4,154

3,908

3,548

Germany

3,576

3,715

3,909

United Kingdom

2,198

3,028

3,177

Spain

1,012

976

937

338

447

615

11,27812,074

12,186

Other Countries
Property, plant and equipment by geographical area

Property, plant and equipment split by geographical area excludes leased assets (2008: € 878 million, 2007: € 1,319 million and2006: € 1,992 million).

7. Revenues
Revenues in 2008 reached € 43,265 million compared to€ 39,123 million in 2007 and € 39,434 million in 2006.
Revenues are mainly comprised of sales of goods and services,
as well as of revenues associated with construction contracts
accounted for under the percentage-of-completion method,
contracted research and development and customer financing

revenues. In 2008, the revenues from the delivery of goods& services comprise revenues from services including the saleof spare parts of € 4,234 million.
For a breakdown of revenues by business segment andgeographical area, refer to Note 6 “Segment Reporting”.

Detail of Revenues:(in €m)

2008

2007

2006

43,265

39,12339,434

Thereof revenues from the delivery of goods & services

33,951

31,81331,487

Thereof revenues from construction contracts

8,852

6,241

7,001

Total revenues

Revenues of € 43,265 million (2007: € 39,123 million) increaseby 11% despite an unfavourable US Dollar impact, supported
by higher activities in all Divisions. Airbus delivered morecommercial aircraft (483 versus 453 in the previous year) andAstrium, Military Transport Aircraft, Eurocopter andDefence & Security also record increased volumes. The
increase also includes € 1,107 million, resulting from theapplication of the early stage accounting method for the
A400M contract (see Note 3 “Accounting for the A400M
programme”).

8. Functional costs
Inventories recognised as an expense during the period amountto € 30,267 million (2007: € 25,259 million; 2006:€ 26,267 million).
Thereof, € 1,449 million of contract costs which would havebeen capitalised in work in progress under the estimate atcompletion method of PoC accounting, are expensed as cost of

sales according to the early stage method of accounting(see Note 3 “Accounting for the A400M programme”).
Further included in cost of sales are amortisation expenses offair value adjustments of non-current assets in the amount of€ 52 million (2007: € 49 million; 2006: € 57 million); these are
related to the EADS merger, the Airbus Combination and theformation of MBDA.

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Personnel expenses are:(in €m)

2008

2007

2006

Wages, salaries and social contributions

9,030

8,696

8,397

Net periodic pension cost (see Note 26B)

366

385

334

9,396

9,081

8,731

Total

The Gross Margin increases by € 3,037 million to€ 7,358 million compared to € 4,321 million in 2007. This
improvement is mainly related to Airbus in particular
benefiting in 2008 from foreign exchange effects (GBP and
USD) on onerous contracts provisions and due to the higher

impact in 2007 regarding A350 XWB burdens, higher charges
related to the A400M and accrued Power8 restructuring
charges. In 2008, strong operational performance with delivery
ramp-up, Power8 savings and improvements in all Divisions
further contribute to the increase in the gross margin.

9. Research and development expenses
Research and development expenses in 2008 amount to€ 2,669 million compared to € 2,608 million in 2007 and€ 2,458 million in 2006, primarily reflecting R&D activities atAirbus. Most of the increase was attributable to higher

expenses at Airbus and Eurocopter, due to development on theA350 XWB programme and various helicopter programmes,
partly compensated by a decrease for the A380 programme.

10. Other income(in €m)

2008

2007

2006

Other income

189

233

297

Thereof rental income

26

37

47

Thereof income from sale of fixed assets

21

92

23

Thereof release of allowances

13

11

3

Other income in 2007 included among others the gain fromthe sale of property in Vélizy, Villepreux and Montigny leBretonneux in the amount of € 50 million as well as the gainfrom the disposal of investment properties in Neuaubing andNabern amounting to € 20 million.

11. Share of profit from associates accounted for under the equity method and other income
from investments(in €m)

2008

2007

2006

Share of profit from associates

188

210

152

Other income from investments

23

86

37

211

296

189

Total

The share of profit from associates accounted for underthe equity method in 2008 is mainly derived from the resultof the equity investment in Dassault Aviation of € 169 million(2007: € 194 million; 2006: € 130 million). Since for the second
half-year 2008 no financial information is available yet from38 EADS FIN ANCIAL S TATEMENTS 2008

Dassault Aviation, the net income of the second half year
2007 of Dassault Aviation has been used as the second half
year’s net income for 2008 in the amount of € 92 million. For
the first semester 2008, Dassault Aviation published a net
income of € 167 million which has been recognised by EADSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.2 | Notes to the Consolidated Income Statements (IFRS)

1with its share of 46.3% amounting to € 77 million. Dassault
Aviation reported in 2007 a net income of € 382 million ofwhich EADS recognised an amount of € 177 million according
to its share of 46.3%. In 2007, the equity investment income
from Dassault Aviation included positive IFRS catch-up
adjustments of € 17 million (2008 and 2006: € 0 million).

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3

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5

Other income from investments comprises in 2008 thedividend payment from the Eurofighter Jagdflugzeug GmbHof € 12 million (2007: € 13 million; 2006: € 0 million).
Furthermore, other income from investments included in 2007
the capital gain of € 46 million from the disposal of the 2.13%
interest in Embraer.

12. Total finance costs
Interest result in 2008 comprises interest income of€ 617 million (2007: € 502 million; 2006: € 454 million) andinterest expense of € -581 million (2007: € -701 million; 2006:€ -575 million). Included in interest income is the return on
cash and cash equivalents, securities and financial assets suchas loans and finance leases. Interest expense includes interests
on European Government refundable advances of€ 255 million (2007: € 289 million; 2006: € 266 million) and on
financing liabilities.

(negative impact in 2007: € -274 million and in
2006: € -136 million), charges from the unwinding of
discounted provisions amounting to € -230 million(2007: € -202 million; 2006: € -22 million) and a burden fromthe fair value measurement of embedded derivatives not usedin hedging relationships in the amount of € -121 million(negative impact in 2007: € -5 million; positive impact in 2006:€ 46 million). Included in 2008 is the negative impact of thereassessment of counterparty risk in the amount of€ -49 million.

Other financial result in 2008 includes among others
negative foreign exchange rate effects of Airbus € -28 million

13. Income taxes
The benefit from (expense for) income taxes is comprised of the following:(in €m)

2008

2007

2006

Current tax expense

(354)

(64)

(112)

Deferred tax (expense) / benefit

(349)

397

193

Total

(703)

333

81

The Group’s parent company, EADS N.V., legally seated in
Amsterdam, the Netherlands, applies Dutch tax law using an
income tax rate of 25.5% for 31 December 2008 (for 2007:
25.5% and for 2006: 29.6%). In 2006, a new tax law wasenacted reducing the income tax rates from 2007 onwards
to 25.5%.
Deferred tax assets and liabilities for the Group’s French
subsidiaries were calculated at 31 December 2008, 2007 and2006 using the enacted tax rate of 34.43% for temporary
differences. The French corporate tax rate in effect was
33 1/3% plus a surcharge of 3.3% (“contribution sociale”).
Accordingly, the applied tax rate for 2008, 2007 and 2006 in
France is 34.43%.
In 2007, the German government enacted new tax legislation(“Unternehmensteuerreformgesetz 2008”) which decreased thefederal corporate tax rate from 25% to 15%, being effective asof 1 January 2008. In addition there is a surcharge(“Solidaritätszuschlag”) of 5.5% on the amount of federal
corporate taxes. For trade taxes, the basic measurement rate has
been reduced from 5% to 3.5%, but the tax deductibility oftrade tax has been abolished. In aggregate, the enacted tax rate
which has been applied to German deferred taxes as of
1 January 2007 and onwards amounts to 30% (2006: 38.5%).
With respect to the Spanish subsidiaries, the Spanish
government enacted on 28 November 2006 a change in thecorporate income tax rate for the years 2007 and 2008. As of
1 January 2007, the corporate income tax rate in Spaindecreased from 35% to 32.5% and from 2008 onwards
decreased to 30%. Accordingly, deferred tax assets andliabilities of the Group’s Spanish entities were calculated using
the enacted tax rate of 30%.

EADS FIN ANCIAL S TATEMENTS 2008

39

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.2 | Notes to the Consolidated Income Statements (IFRS)

1

All other foreign subsidiaries apply their national tax rates,
among others United Kingdom from 2007 onwards with 28%(in 2006: 30%).
The following table shows a reconciliation from the theoreticalincome tax (expense) benefit – using the Dutch corporate tax
rate of 25.5% as at 31 December 2008 and 2007, and 29.6% as(in €m)2

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5

at 31 December 2006 – to the reported tax (expense) benefit.
The reconciling items represent, besides the impact of tax rate
differentials and tax rate changes, non-taxable benefits or
non-deductible expenses arising from permanent differences
between the local tax base and the reported financial
statements according to IFRS rules.

2008

2007

2006

Profit (loss) before income taxes

2,300

(770)

34

* Corporate income tax rate

25.5%

25.5%

29.6%

Expected (expense) benefit for income taxes

(587)

196

(10)

Effects from tax rate differentials

(125)

133

65

Income from investments/ associates

81

109

103

Tax credit for R&D expenses

51

20

34

Change of tax rate

0

(106)

85

Change in valuation allowances

(113)

(3)

(198)

Non-deductible expenses and tax-free income

(14)

(19)

(30)

Other
Reported tax (expense) benefit

The change in valuation allowances reflects the updated
assessment regarding the recoverability of the deferred tax
assets for a tax paying entity in the foreseeable future. In
2008, the change in valuation allowance is mainly due toAirbus and Headquarters. In 2006, valuation allowances haveincreased for Airbus while some were partly released in
Astrium. Furthermore in 2006, a tax audit of DASA for theyears 1994 until 1999 was finalised. According to the EADS
shareholders agreement the related tax expense was reimbursed

40 EADS FIN ANCIAL S TATEMENTS 2008

4

3

32

(703)

333

81

by Daimler AG. Thus deferred tax assets have been adjusted
resulting in a reconciling item of € 39 million and included in“other”.
Deferred income taxes are the result of temporary differences
between the carrying amounts of certain assets and liabilities
in the financial statements and their tax bases. Future tax
impacts from net operating losses and tax credit carry forwards
are also considered in the deferred income tax calculation.

2

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.2 | Notes to the Consolidated Income Statements (IFRS)

1

2

3

4

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5

Deferred income taxes as of 31 December 2008 are related to the following assets and liabilities:
Movement
through equity

31 December 2007(in €m)Intangible assets

Movement throughincome statement

31 December 2008

tax assets

tax liabilities

OCI /IAS 19Others(1)R&D
tax credits

Deferredtax benefit(expense)

tax assets

tax liabilities

22

(193)

0

(44)

0

29

14

(200)

Property, plant and equipment

152(1,147)

0

28

0

121

137

(983)

Investments and other long-term financial assets

131

(36)

(3)

0

0

174

274

(8)

Inventories

895

(430)

0

(1)

0

268

830

(98)

Receivables and other assets

84(2,230)

1,318

(8)

0

(246)

171

(1,253)

Prepaid expenses

1

(16)

0

0

0

1

1

(15)

Provision for retirement plans
Other provisions
Liabilities
Deferred income

642

0

33

(8)

0

(214)

453

0

1,752

(160)

0

(42)

0

(272)

1,409

(131)

690

(654)

374

(26)

0

(111)

1,037

(764)

486

(24)

0

(19)

0

(126)

341

(24)

Net operating loss and tax credit carry forwards

1,148

0

0

(159)

45

140

1,174

0

Deferred tax assets / (liabilities) before
offsetting

6,003(4,890)

1,722

(279)

45

(236)

5,841

(3,476)

Valuation allowances on deferred tax assets

(596)

0

0

147

0

(113)

(562)

0

Set-off(2,702)

2,702

0

0

0

0

(2,523)

2,523

Net Deferred tax assets / (liabilities)

2,705(2,188)

1,722

(132)

45

(349)

2,756

(953)

(1) “Others” mainly comprises foreign exchange rate effects and changes in consolidation.

Deferred income taxes as of 31 December 2007 are related to the following assets and liabilities:
Movement
through equity

31 December 2006

(in €m)tax assets

tax liabilities

Movement throughincome statement

OCI /IAS 19Others(1)R&D
tax credits

31 December 2007

Deferredtax benefit(expense)

tax assets

tax liabilities

Intangible assets

14

(209)

0

(24)

0

48

22

(193)

Property, plant and equipment

106(1,224)

0

20

0

103

152

(1,147)

Investments and other long-term financial assets

51

(97)

4

0

0

137

131

(36)

Inventories

669

(227)

0

(10)

0

33

895

(430)

Receivables and other assets

87(2,445)

(6)

0

0

218

84

(2,230)(16)Prepaid expenses

1

(23)

0

15

0

(8)

1

1,043

0

(173)

(3)

0

(225)

642

0

944

(71)

0

(3)

0

722

1,752

(160)

Liabilities

782

(508)

129

(8)

0

(359)

690

(654)

Deferred income

529

(24)

0

(7)

0

(36)

486

(24)

Net operating loss and tax credit carry forwards

1,425

0

0

(26)

45

(296)

1,148

0

Deferred tax assets / (liabilities) before
offsetting

5,651(4,828)

(46)

(46)

45

337

6,003

(4,890)

Valuation allowances on deferred tax assets

(664)

0

0

8

0

60

(596)

0

Set-off(2,363)

2,363

0

0

0

0

(2,702)

2,702

Net Deferred tax assets / (liabilities)

2,624(2,465)

(46)

(38)

45

397

2,705

(2,188)Provision for retirement plans
Other provisions(1) “Others” mainly comprises foreign exchange rate effect and changes in consolidation.

EADS FIN ANCIAL S TATEMENTS 2008

41

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.2 | Notes to the Consolidated Income Statements (IFRS)

1

The amount of the Group’s deferred tax assets’ allowances isbased upon management’s estimate of the level of deferred tax
assets that will be realised in the foreseeable future. In future
periods, depending upon the Group’s financial results,
management’s estimate of the amount of the deferred tax
assets considered realisable may change, and hence the writedown of deferred tax assets may increase or decrease. The
Group has various unresolved issues concerning open income
tax years with the tax authorities in a number of jurisdictions.
EADS believes that it has recorded adequate provisions for

2

3

4

5

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future income taxes that may be owed for all open tax years.
Companies in deficit situations in two or more subsequent
years recorded a total deferred tax asset balance of € 50 million(in 2007: € 35 million). Assessments show that these deferred
tax assets will be recovered in future through either (i) own
projected profits, or (ii) profits of other companies integrated
in the same fiscal group (“regime integration fiscal” in France,“steuerliche Organschaft” in Germany) or (iii) via the “losssurrender-agreement” in Great Britain.

Deferred taxes on Net Operating Losses and Tax Credit carry forwards:
FranceGermany

Spain

UK

Netherlands

Othercountries

31 December
2008

31 December
2007

689

640

40

1,330

249

17

2,965

2,865

Trade tax loss carry forwards

0

560

0

0

0

0

560

586

Tax credit carry forwards

0

0

296

0

20

0

316

305

Tax effect

237

181

309

372

69

6

1,174

1,148

Valuation allowances

(25)

(57)

(20)

(333)

(68)

(5)

(508)

(508)

Deferred tax assets on NOL’s
and tax credit carry forwards

212

124

289

39

1

1

666

640

(in €m)Net Operating Losses (NOL)

NOLs, capital losses and trade tax loss carry forwards are indefinitely usable in France, Germany and in Great Britain. In Spain,
NOLs and tax credit carry forwards expire after 15 years. The first tranche of tax credit carry forwards (€ 2 million) will expire in
2014. In the Netherlands, NOLs and tax credit carry forwards expire after 9 years.
Roll forward of deferred taxes:(in €m)

2008

2007

Net deferred tax asset beginning of the year

517

159

Deferred tax (expense) benefit in income statement

(349)

397

Deferred tax recognised directly in AOCI (IAS 39)

1,689

127

Variation of Defined benefit plan actuarial gains

33

(173)

Others

(87)

7

1,803

517

2008

2007

Net deferred tax asset at year end

Details of deferred taxes recognised in equity are as follows:(in €m)Available-for-sale investments

(5)

(2)

Cash flow hedges

110(1,582)

Defined benefit plan actuarial losses

259

226

Total

364

(1,358)42 EADS FIN ANCIAL S TATEMENTS 2008

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1

2.3

2

3

4

5

2

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NOTES TO THE CONSOLIDATED BALANCE SHEETS (IFRS)

14. Intangible assets
A schedule detailing gross values, accumulated depreciation and net values of intangible assets as of 31 December 2008 is asfollows:

Cost(in €m)Balance at
1 January
2008

Exchangedifferences

Additions

Changes in
consolidation
scope

Goodwill

10,649

(55)

10

958

(46)

87

Capitalised development costs
Other intangible assets

Reclassification

Disposals

Balance at
31 December
2008

259

0

0

10,863

0

(11)

0

988

1,303

(9)

233

79

(6)

(78)

1,522

12,910

(110)

330

338

(17)

(78)

13,373(in €m)Balance at
1 January
2008

Exchangedifferences

Amortisation
chargeChanges in
consolidation
scope

Reclassification

Disposals

Balance at
31 December
2008

Goodwill(1,130)

27

0

0

0

0

(1,103)

Capitalised development costs

(58)

3

(56)

0

4

0

(107)

Other intangible assets

(890)

9

(180)

0

6

63

(992)

(2,078)

39

(236)

0

10

63

(2,202)

Total

Amortisation

Total

Net book value(in €m)Goodwill
Capitalised development costs
Other intangible assets
Total

Balance at
1 January
2008

Balance at
31 December
2008

9,519

9,760

900

881

413

530

10,832

11,171

Within the current year’s additions to other intangible assets,
EADS proceeded in December 2008 to the payment of a grossamount of € 86 million to acquire the intangible rights

previously embodied under a Service Provider Agreement.
This intangible asset has been depreciated by € 22 million in2008 according to its economic nature.

EADS FIN ANCIAL S TATEMENTS 2008

43

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1

2

3

4

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5

A schedule detailing gross values, accumulated depreciation and net values of intangible assets as of 31 December 2007 is
as follows:Cost(in €m)Balance at
1 January
2007

Exchangedifferences

Goodwill

10,710885

Additions

Changes in
consolidation
scope

Reclassification

Disposals

Balance at
31 December
2007

(29)

9

(29)

0

(12)

10,649

(18)

93

(2)

2

(2)

958

1,140

(7)

163

7

0

0

1,303

12,735

(54)

265

(24)

2

(14)

12,910(in €m)Balance at
1 January
2007

Exchangedifferences

Amortisation
chargeChanges in
consolidation
scope

Reclassification

Disposals

Balance at
31 December
2007

Goodwill(1,145)

9

0

6

0

0

(1,130)

(12)

0

(46)

0

(2)

2

(58)

Capitalised development costs
Other intangible assets
Total

Amortisation

Capitalised development costs
Other intangible assets
Total

(723)

7

(181)

7

0

0

(890)

(1,880)

16

(227)

13

(2)

2

(2,078)Net book value(in €m)Goodwill

Balance at
1 January
2007

Balance at
31 December
2007

9,565

9,519

Capitalised development costs

873

900

Other intangible assets

417

413

10,855

10,832Total

GOODWILL IMPAIRMENT TESTSEADS performed goodwill impairment tests in the fourth quarter of the financial year on Cash Generating Unit (CGU) level
where goodwill is allocated to.
As of 31 December 2008 and 2007, goodwill was allocated to CGUs, which is summarised in the following schedule on segmentlevel:(in €m)AirbusMilitary
Transport
Aircraft

Goodwill as of 31 December 2008

6,374

12

111

2,559

619

59

26

9,760

Goodwill as of 31 December 2007(1)

6,374

12

111

2,376

574

56

16

9,519

Eurocopter

Defence &Security

Astrium

Other
Businesses

HQ/Conso.

Consolidated(1) Business activities at EADS North America have been retrospectively reclassified from Defence & Security to Other Businesses and are not material.

44 EADS FIN ANCIAL S TATEMENTS 2008

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1

The discounted cash flow method has been applied as a
primary valuation approach to determine the value in use of
the CGUs. Generally, cash flow projections used for EADS
impairment testing are based on operative planning.

2

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4

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The main assumptions and the total of the recoverable
amounts obtained have been compared for reasonableness tomarket data.

AIRBUS SEGMENT
GENERAL ASSUMPTIONS APPLIED
IN THE PLANNING PROCESSThe operative planning which was approved by the Board of
Directors on 12 December 2008, takes into account general
economic data derived from external macroeconomic andfinancial studies. The operative planning assumptions reflect
for the periods under review specific inflation rates and future
labour expenses in the European countries where the major
production facilities are located. Regarding the expected future
labour expenses, an increase of 3 to 4% was implied. In
addition, future interest rates are also projected per geographicalmarket, for the European Monetary Union, Great Britain andthe USA. With regard to the A400M programme no otherspecific assumptions have been taken different from those used
for the preparation of these Consolidated Financial Statements(see Note 3 “Accounting for the A400M programme”).
EADS follows an active policy of foreign exchange risk
hedging. As of 31 December 2008, the total hedge portfoliowith maturities up to 2016 amounts to US$ 68 billion andcovers a major portion of the foreign exchange exposure
expected over the period of the operative planning (2009 to2013). The average US$/€ hedge rate of the US$/€ hedge
portfolio until 2016 amounts to US$/€ 1.38 and for
the US$/GBP hedge portfolio until 2016 amounts
to US$/GBP 1.68. For the determination of the operativeplanning in the CGUs management assumed future exchange
rates of US$/€ 1.45 for 2009 onwards to convert in Euro the
portion of future US dollar which are not hedged. Foreignexchange exposure arises mostly from Airbus and to a lesser
extent from the other EADS Divisions.
The assumption for the perpetuity growth rate used to
calculate the terminal values as of 31 December 2008 has been
determined with 1% (previous years: 2%). This assumption islower than experienced in past economic cycles in order toreflect current uncertainty regarding market developments inthe long term.
The recoverable amounts used for the impairment tests for all
CGUs have been determined according to the value in use
methodology (in 2007 for Airbus the higher recoverable
amount was based on a fair value less cost to sellmethodology).

For the purpose of impairment testing, Airbus segment is
considered as a single CGU. The goodwill allocated to Airbus
relates to the contributions of Airbus UK, Airbus Germany
and Airbus Spain.
The assessment was based on the following key specificassumptions, which represent management current best
assessment as of the date of these Consolidated Financial
Statements:> Projected cash flows for the next five years are based on the“flat scenario” presented by Airbus to EADS Board of
Directors as an intermediate variant of the operative plan.
This planning scenario takes into account the pause inproduction ramp-up as publicly disclosed on 15 October
2008. In the absence of long-term financial reference,
expected cash flows generated beyond the planning horizon
are considered through a Terminal Value. The Terminal
Value (TV) reflects Airbus’ assessment of a normative
operating year based on an outlook of a full aeronautic cycle
over the next decade. Thanks to the progress of A350 XWB
development the Long Range segment is included in thegeneral methodology.
> Because of the unavailability of updated General Market
forecast, 2008 Airbus forecast developed has been kept as areference for long term market development with sustainingof current market share per segment. Current market
uncertainties are considered through sensitivities. Cashflow projections include all of the estimated cost savings of
the Power8 programme as well as expected benefits frominitiatives already launched in the frame of Power8 Plus.
> Cash flows are discounted using a Euro weighted average
cost of capital pre-tax (WACC) of 13%.
> Carrying values as well as planned cash flows include
impacts from the existing hedge portfolio as per end
December 2008.
With regard to the assessment of the value in use for the
CGU Airbus, EADS management believes that the likelihoodof a change in the above key assumptions to an extent thatwould cause the recoverable amount to fall below the carrying
value is remote.

EADS FIN ANCIAL S TATEMENTS 2008

45

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1

The recoverable amount is particularly sensitive to thefollowing areas:> A change of the Euro against the US dollar by 5 centswould lead to a change of the recoverable amount by€ +3.1 billion (if 5 cents in decrease), € -3.6 billion (if 5cents in addition).
> A reduction in the Long Term market demand by 50 Single
Aisle aircraft per year deteriorates the value in use of
Airbus by € -3.6 billion, a reduction in the Long termmarket demand by 10 Long Range aircraft per year
deteriorates the value in use of Airbus by € -1.6 billion.
> A shortfall of 250 aircraft deliveries in the short term
(planning period) would deteriorate the recoverable amountby € -2.7 billion. This includes a first set of internal
mitigating measures the Company would launch on the
short term; this does not include any benefit from external
support the Company would claim for.
> An increase of 50 basis points in the WACC would change
the recoverable amount by € -1.3 billion, a decrease of
50 basis points in the WACC by € +1.4 billion.
> 50% shortfall on the cash savings of Power8 to be achieved
after 2008 would change the recoverable amount by€ -3.1 billion. Such a shortfall would trigger additional
structural measures that cannot be sized at this stage. Fullcompletion of Power8 Plus target would increase therecoverable amount by € +0.5 billion.
The current positive difference between the recoverable value
and the book value of Airbus’ net assets indicates that
individually each of the assessed (negative) impacts ofsensitivities would not imply an impairment charge in the
EADS accounts.

OTHER EADS SEGMENTS
In order to reflect the different underlying business risks, asegment specific WACC factor has been applied. For
Eurocopter and Military Transport Aircraft the cash flows werediscounted using a weighted average cost of capital pre-tax

46 EADS FIN ANCIAL S TATEMENTS 2008

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Back to Contents(WACC) of 11.8%, while the calculation for the more defence
related CGUs like Defence & Security and Astrium applied a
pre-tax WACC of 11.2% (in 2007 all other EADS segments
applied a pre-tax WACC of 12.1%). Cash flow projections are
based on operative planning covering a five-year planning
period.
For the Defence & Security Division, a sustainable growth inrevenues is assumed in the operative planning. This is driven
by a strong order backlog and further key orders expected in
the next years, as for example Eurofighter 3rd tranche andexport contracts, ramp up in Unmanned Aerial Vehicles(“UAV”), Missile export orders and for Secure Networks,
Electronic Warfare and Radar business. The operating marginof the Division is expected to increase over the operativeplanning period thanks to the constantly volume growth andbenefiting from initiated cost saving programmes.
The order book of the Astrium Division as of 31 December
2008 (including satellites, launchers, ballistic missiles andmilitary telecom services) supports the strong revenue increase
which is assumed for this Division over the operative planning
period. Based on key achievements in 2008, like the successful
launch of Skynet 5C and TerraSarX as well as the successful
3rd qualification flight of the M51, the planning period is alsocharacterised by business development in telecom and earth
observation services and further order intake in established
key areas (e.g. M51 production, Ariane 5). The operating
margin and the Free Cash Flow are planned to increase
continuously supported by existing improvement programmes.
The recoverable amounts of all CGUs have exceeded theircarrying amounts, indicating no goodwill impairment for 2008
and 2007.

DEVELOPMENT COSTSEADS has capitalised development costs in the amount of€ 881 million as of 31 December 2008 (€ 900 million as of
31 December 2007) as internally generated intangible assets mainly
for the Airbus A380 programme. The amortisation for the A380
programme development costs has started when the aircraft
entered the final assembly line, on a unit of production basis.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

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3

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15. Property, plant and equipment
Schedules detailing gross values, accumulated depreciation and net values of property, plant and equipment show the following
as of 31 December 2008:

Cost(in €m)Land, leasehold improvements andbuildings including buildings on land
owned by others

Balance at
1 January
2008

Exchangedifferences

Additions

Change inconsolidation
scope

Reclassification

Disposals

Balance at
31 December
2008

6,472

(108)

148

(17)

150

(19)

6,626

Technical equipment and machinery
Other equipment, factory and officeequipment
Advance payments relating to plantand equipment as well as
construction in progress

11,134

(857)

283

(18)

430

(188)

10,784

3,856

(4)

146

10

(16)

(644)

3,348

2,474

(222)

940

0

(1,450)

(13)

1,729

Total

23,936(1,191)

1,517

(25)

(886)

(864)

22,487

Balance at
1 January
2008

Exchangedifferences

Additions

Change inconsolidation
scope

Disposals

Balance at
31 December
2008(2,424)

21

(265)

13

35

0

(2,620)(6,192)

462

(832)

15

492

188

(5,867)(1,882)

4

(242)

0

16

299

(1,805)

Depreciation(in €m)Land, leasehold improvements andbuildings including buildings on land
owned by others
Technical equipment and machinery
Other equipment, factory and officeequipment
Advance payments relating to plantand equipment as well as
construction in progress
Total

Reclassification

(45)

0

0

0

6

0

(39)

(10,543)487(1,339)

28

549

487

(10,331)

Net book value(in €m)Land, leasehold improvements andbuildings including buildings on land
owned by others
Technical equipment and machinery
Other equipment, factory and officeequipment
Advance payments relating to plantand equipment as well as
construction in progress
Total

Balance at
1 January
2008

Balance at
31 December
2008

4,048

4,006

4,942

4,917

1,974

1,543

2,429

1,690

13,393

12,156

EADS FIN ANCIAL S TATEMENTS 2008

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Schedules detailing gross values, accumulated depreciation and net values of property, plant and equipment show the following
as of 31 December 2007:

Cost
Balance at
1 January
2007

Exchangedifferences

6,142

Technical equipment and machinery
Other equipment, factory and officeequipment
Advance payments relating to plantand equipment as well as
construction in progress

3,618

(137)

Total

24,890(670)

Balance at
1 January
2007

Exchangedifferences

Additions

Change inconsolidation
scope(1)(2,319)10(259)(5,886)

191(2,462)77(in €m)Land, leasehold improvements andbuildings including buildings on land
owned by others

Additions

Change inconsolidation
scope(1)

Reclassification

Disposals

Balance at
31 December
2007

(49)

135

(49)

419

(126)

6,472

10,063

(314)

402

(59)

1,355

(313)

11,134

5,067

(170)

203

(37)

(12)

(1,195)

3,856

1,066

(1)

(2,059)

(13)

2,474

1,806

(146)

(297)

(1,647)23,936

Reclassification

Disposals

Balance at
31 December
2007

22

34

88

(2,424)

(967)

44

122

304

(6,192)

(263)

33

68

665

(1,882)

Depreciation(in €m)Land, leasehold improvements andbuildings including buildings on land
owned by others
Technical equipment and machinery
Other equipment, factory and officeequipment
Advance payments relating to plantand equipment as well as
construction in progress
Total

(45)

1

(2)

0

0

1

(45)

(10,712)279(1,491)

99

224

1,058

(10,543)

Net book value(in €m)Land, leasehold improvements andbuildings including buildings on land
owned by others
Technical equipment and machinery
Other equipment, factory and officeequipment
Advance payments relating to plantand equipment as well as
construction in progress
Total

Balance at
1 January
2007

Balance at
31 December
2007

3,823

4,048

4,177

4,942

2,605

1,974

3,573

2,429

14,17813,393(1) The percentage of the proportional consolidation of MBDA has been changed from 50% to 37.5% as of 1 January 2007 leading to an impact of € - 64 million in 2007.

48 EADS FIN ANCIAL S TATEMENTS 2008

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1

Property, plant and equipment include at 31 December
2008 and 2007, buildings, technical equipment and otherequipment accounted for in fixed assets under finance leaseagreements for net amounts of € 131 million and € 121 million,
net of accumulated depreciation of € 105 million and€ 128 million. The related depreciation expense for 2008 was€ 10 million (2007: € 12 million; 2006: € 35 million). Property,
plant and equipment used for the A400M programmeamounting to € 722 million were not subject to an impairment
charge, as they are expected to be recoverable through thefurther progress of the A400M programme (see Note 3“Accounting for the A400M programme”). For investment
property please refer to Note 16 “Investment property”.
Other equipment, factory and office equipment include
the net book value of “aircraft under operating lease” for

2

3

4

5

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Back to Contents€ 878 million and € 1,319 million as of 31 December 2008 and2007, respectively; related accumulated depreciation is€ 733 million and € 891 million. Depreciation expense for 2008
amounts to € 71 million (2007: € 105 million; 2006:€ 137 million).
The “aircraft under operating lease” include:i) Group’s sales finance activity in the form of aircraft whichhave been leased out to customers and are classified as
operating leases: They are reported net of the accumulated
impairments. These sales financing transactions are
generally secured by the underlying aircraft used ascollateral (see Note 34 “Commitments and contingencies”
for details on sales financing transactions).

The corresponding non-cancellable future operating lease payments (not discounted) due from customers to be included inrevenues, at 31 December 2008 are as follows:(in €m)not later than 200959

later than 2009 and not later than 2013130

later than 2013

37

Total

ii) Aircraft which have been accounted as “operating lease”
because they were sold under terms that include asset value
guarantee commitments with the present value of theguarantee being more than 10% of the aircraft’s sales price(assumed to be the fair value). Upon the initial sale of theseaircraft to the customer, their total cost previously

226

recognised in inventory is transferred to “Other equipment,
factory and office equipment” and depreciated over its
estimated useful economic life, with the proceeds received
from the customer being recorded as deferred income (seeNote 31 “Deferred income”).

The total net book values of aircraft under operating lease are as follows:
31 December
2008

31 December
2007

433

600

Accumulated impairment

(52)

(102)

Net book value of aircraft under operating lease

381

498

(ii) Aircraft under operating lease with the present value of the guarantee being more than 10%

497

821

Total Net Book value of aircraft under operating lease

878

1,319

(in €m)(i) Net book value of aircraft under operating lease before impairment charge

For details please refer to Note 34 “Commitment and contingencies”.

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16. Investment property
The Group owns investment property that is leased to third parties. Buildings held as investment property are depreciated on alinear basis over their useful life up to 20 years. The values assigned to investment property are as follows:(in €m)Historical cost

Accumulated
depreciation
31 December
2007

Book value
31 December
2007

Disposals
Historical cost

213

(117)

96

(1)

Book value of Investment
Property

As of 31 December 2008, the fair value of the Group’s
investment property amounts to € 88 million (in 2007:€ 100 million). For the purposes of IAS 40 “Investment
property”, the fair values have been determined by using

Depreciation
Amortisation

Accumulated
depreciation
31 December
2008Book value
31 December
2008

(8)

(125)

87

market based multipliers for estimated rental income or using
available market prices. Related rental income in 2008 is€ 8 million (in 2007: € 13 million) with direct operating
expenses amounting to € 3 million (in 2007: € 5 million).

17. Investments in associates accounted for under the equity method, other investments andother long-term financial assets
The following table sets forth the composition of investments in associates accounted for under the equity method, otherinvestments and other long-term financial assets:(in €m)Investments in associates accounted for under the equity method

31 December
2008

31 December
2007

2,356

2,238

Non-current other investments and other long-term financial assets
320

404

Other long-term financial assets

Other investments

1,392

1,149

Total

1,712

1,553

177

166

Current portion of other long-term financial assets

Investments in associates accounted for under the equity
method as of 31 December 2008 and 2007, mainly comprise
EADS’ interest in Dassault Aviation (46.32% at 31 December
2008 and 46.30% at 31 December 2007) of € 2,243 million and€ 2,121 million. Since for the second half-year 2008 no
financial information is available yet from Dassault Aviation,
the net income of the second half year 2007 of Dassault
Aviation has been used to report the current second half year’s
net income for 2008 and the 30 June 2008 equity components
have been used to estimate the 2008 year-end consolidated
equity position of Dassault Aviation. For the first semester
2008 Dassault Aviation published a net income of€ 167 million which has been recognised by EADS in
accordance with its share of 46.3%, amounting to € 77 million.

50 EADS FIN ANCIAL S TATEMENTS 2008

Dassault Aviation reported in 2007 a net income of€ 382 million of which EADS recognised an amount of€ 177 million according to its share of 46.3%. In 2008, theequity investment income from Dassault Aviation does notinclude any IFRS catch-up adjustments (2007: € 17 million)
because of the unavailability of such information. In addition,
as at 31 December 2008, € 2 million (in 2007: € -6 million)
were recognised directly in equity (AOCI).
EADS’ 46.3% interest in Dassault Aviation’s market
capitalisation, derived from an observable free float of 3.5%,
fell below its at-equity value during the 4th quarter 2008 andamounts to € 1,886 million as of 31 December 2008.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

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The following table illustrates summarised financial information of the EADS investment of 46.3% in Dassault Aviation:
30 June2008

31 December
2007

Non-current assets

1,968

1,949

Current assets

2,715

2,487

(in €m)Share of the associate’s balance sheet:

Non-current liabilities

151

145

Current liabilities

2,765

2,554

Total equity

1,767

1,737

Share of the associate’s revenues and profit:

6 months

12 months

Revenues

715

1,891

Net Income

77

177

31 December
2008

31 December
2007

2,243

2,121

Carrying amount of the investment at 31 December

A list of major investments in associates and the proportion ofownership is included in Appendix “Information on principal
investments”.
Other investments comprise EADS’ investments in various
non-consolidated entities, the most significant being at
31 December 2008, the participations in OnAir B.V.
amounting to € 24 million (2007: € 14 million), in AviChina
amounting to € 23 million (2007: € 41 million) and in Hua-Ou
Aviation Support Center and Hua-Ou Aviation Training
Center amounting to € 20 million (2007: € 19 million).
The participation of 10% in Irkut was sold in June 2008(2007: € 62 million).

Other long-term financial assets of € 1,392 million (2007:€ 1,149 million) and the current portion of other long-term
financial assets of € 177 million (in 2007: € 166 million)
encompass mainly the Group’s sales finance activities in theform of finance lease receivables and loans from aircraft
financing. They are reported net of accumulated impairments.
These sales financing transactions are generally secured by theunderlying aircraft used as collateral (see Note 34“Commitments and contingencies” for details on sales
financing transactions).

Loans from aircraft financing are provided to customers to finance the sale of aircraft. These loans are long-term and normally
have a maturity which is linked to the use of the aircraft by the customer. The calculation of the net book value is:(in €m)31 December
2008

31 December
2007

Outstanding gross amount of loans to customers

504

346

Accumulated impairment

(98)

(79)

Total net book value of loans

406

267

31 December
2008

31 December
2007

Finance lease receivables from aircraft financing are as follows:(in €m)Minimum lease payments receivables

863

795

Unearned finance income

(15)

(105)

Accumulated impairment

(146)

(112)

Total net book value of finance lease receivables

702

578

EADS FIN ANCIAL S TATEMENTS 2008

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Future minimum lease payments from investments in finance leases to be received are as follows (not discounted):(in €m)not later than 200977

later than 2009 and not later than 2013

500

later than 2013

286

Total

863

Additionally included are € 461 million and € 470 million ofother loans as of 31 December 2008 and 2007, e.g. loans toemployees.

Defeased bank deposits of € 373 million and € 677 million asof 31 December 2008 and 2007, respectively have been offset
against financing liabilities.

18. Inventories
Inventories at 31 December 2008 and 2007 consist of the following:
31 December
2008

31 December2007

Raw materials and manufacturing supplies

1,706

1,596

Work in progress

12,253

12,253Finished goods and parts accounted for at lower of cost and net realizable value

1,829

1,217

Advance payments to suppliers

3,664

3,840

19,452

18,906(in €m)Total

The application of the early stage method of accounting
resulted in a decrease of work in progress at Airbus for the
A400M programme of € 1,449 million (see Note 3“Accounting for the A400M programme”). However, thisdecrease was compensated by the increase at Eurocopter, due tothe ramp-up of governmental and commercial programmes at
Astrium and at Defence & Security. Finished goods and parts
increased by € 612 million, mainly relating to more aircraft on
stock at Airbus. The decrease of advance payments provided tosuppliers mainly reflects activities in Defence & Security forEurofighter Series Production Equipment.

The finished goods and parts for resale before write-down to
net realisable value amount to € 2,181 million in 2008 (2007:€ 1,565 million) and work in progress before write-down to net
realisable value amounts to € 13,656 million (2007:€ 13,632 million). Write downs for finished goods and services
are recorded when it becomes probable that total estimatedcontract costs will exceed total contract revenues. The
impairment charges in 2008 and 2007 for work in progress
mainly relate to the A380 programme.

19. Trade receivables
Trade receivables at 31 December 2008 and 2007 consist of the following:(in €m)Receivables from sales of goods and services

31 December
2008

31 December
2007

5,624

5,026

Allowance for doubtful accounts

(357)

(387)

Total

5,267

4,639

52 EADS FIN ANCIAL S TATEMENTS 2008

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Trade receivables are classified as current assets. As of
31 December 2008 and 2007, respectively, € 108 million and€ 175 million of trade receivables are not expected to becollected within one year.

The gross amount due from customers for construction
work amounts to € 3,832 million and relates to construction
contracts where incurred contract costs plus recognised profits
less the sum of recognised losses exceed progress billings.

In application of the percentage of completion (PoC)
method, as of 31 December 2008 an amount of € 1,731 million(in 2007: € 1,488 million) for construction contracts is includedin the trade receivables net of related advance payments
received.

The gross amount due to customer amounts to€ 1,451 million and corresponds to the construction contracts
whose total of incurred contract costs plus recognised profits
less the sum of recognised losses and progress billings isnegative.

The aggregate amount of costs incurred and recognised
profits (less recognised losses) to date amount to€ 24,696 million compared to € 21,128 million at year-end 2007.
The respective movement in the allowance for doubtful accounts in respect of trade receivables during the year was as follows:(in €m)

2008

2007

Allowance balance at 1 January

(387)

(375)

Utilizations / disposals

31

18

Additions / release

(2)

(33)

Foreign exchange rate differences

1

3

(357)

(387)

31 December

Based on historic default rates, the Group believes that no allowance for doubtful accounts is necessary in respect of tradereceivables not past due in the amount of € 4,098 million (in 2007: € 3,403 million).

20. Other financial assets
Other financial assets at 31 December 2008 and 2007 consist of the following:(in €m)31 December
2008

31 December
2007

1,101

2,440

323

0

Non current other financial assets
Positive fair values of derivative financial instruments
Option premiums
Others

188

70

Total

1,612

2,510

Current other financial assets
Positive fair values of derivative financial instruments

1,482

2,955

Receivables from related companies

533

363

Loans

70

101

Others

410

436

Total

2,495

3,855

EADS FIN ANCIAL S TATEMENTS 2008

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21. Other assets
Other assets at 31 December 2008 and 2007 consist of the following:
31 December
2008

31 December
2007

Prepaid expenses

849

808

Capitalised settlement payments to German Government

133

166

(in €m)Non current other assets

Others

52

59

Total

1,034

1,033

Value Added Tax claims

695

627

Prepaid expenses

463

401

Current other assets

Others

308

289

Total

1,466

1,317

The capitalised settlement payments to the German Government are related to refundable advances which are amortised throughthe income statement (in cost of sales) at the delivery pace of the corresponding aircraft.

22. Securities
The Group’s security portfolio amounts to € 6,952 million and€ 4,289 million as of 31 December 2008 and 2007,
respectively. The security portfolio contains a non-current
portion of available-for-sale-securities of € 2,759 million (in2007: € 2,406 million) and securities designated at fair value
through profit and loss of € 281 million (in 2007:€ 285 million) as well as a current portion of available-forsale-securities of € 3,461 million (in 2007: € 1,598 million) andsecurities designated at fair value through profit and loss of€ 451 million.

Included in the securities portfolio as of 31 December 2008
and 2007, respectively are corporate bonds bearing either fixed
rate coupons (€ 2,039 million nominal value; 2007:€ 827 million) or floating rate coupons (€ 3,896 million
nominal value; 2007: € 2,854 million) as well as Structured
Rate Notes (€ 365 million nominal value; 2007: € 365 million),
Money Market Funds (€ 451 million nominal value, 2007:€ 0 million) and Notes of Hedgefunds (€ 275 million nominal
value; 2007: € 275 million).

23. Non-current assets / disposal groups classified as held for saleAt 31 December 2008 EADS Group accounted for
non-current assets / disposal groups classified as held forsale in the amount of € 263 million (2007: € 0 million). The
disposal group in 2008 includes liabilities directly
associated with non-current assets classified as held forsale amounting to € 155 million (2007: € 0 million).
On 3 November 2008, EADS and DAHER announced theconclusion of the agreement for DAHER to acquire a 70%
majority share in EADS Socata and Socata Aircraft (USA)which were sold on 7 January 2009. The assets and liabilitiesof these companies are thus presented as held for sale as of
31 December 2008 and presented in Other Businesses.
54 EADS FIN ANCIAL S TATEMENTS 2008

In 2008, EADS had continuing negotiations with GKN todivest its Airbus site in Filton (UK). The closing of the sale iseffective since 5 January 2009. The respective assets andliabilities of Filton factory are therefore shown as held for saleas of 31 December 2008.
The non-current assets / disposal groups classified as held forsale comprise as of 31 December 2008 intangible assets of€ 7 million, property, plant and equipment of € 42 million,
other non-current assets of € 11 million, other current assetsof € 107 million and cash and securities in the amount of€ 2 million for the Socata business. Included are also Airbus
assets relating to Filton site of € 94 million concerning

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1

property, plant and equipment of € 57 million and inventoriesof € 37 million.
As of 31 December 2008, the corresponding liabilities for the
Socata business accounted for as Liabilities directly
associated with non-current assets classified as held for

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5sale amount to € 154 million and comprise non-current
provisions (€ 27 million), non-current other liabilities(€ 16 million), current provisions (€ 3 million) and current
other liabilities (€ 108 million). Additionally included are
non-current other liabilities (€ 1 million) for the Airbus site in
Filton.

24. Total equity
The reconciliation of movement in capital and reserves for the years ended 31 December 2008, 2007 and 2006 is presented asfollows:
Equity attributable to equity holders of the parent(in €m)

Note

Balance at 31 December 2005

Capital
stock

Share
premium

Other
reserves

Accumulated
othercomprehensive
income

818

8,715

(16)

3,982

(591)

973

5

89

Total recognised income and expense
Capital increase
Share-based Payment (IFRS 2)
Cash distribution to EADS N.V.
shareholders / dividends paid tominorities

36

Total

(445)

13,054153

13,207

382

(4)

378

(520)

Change in minority interests
Cancellation of treasury shares

(7)

(124)

Balance at 31 December 2006

816

8,160

Total recognised income and expense
Capital increase
Share-based Payment (IFRS 2)
Cash distribution to EADS N.V.
shareholders / dividends paid tominorities

3

(567)

4,955

(43)

121

Balance at 31 December 2007

814

7,968

Total recognised income and expense
Capital increase
Share-based Payment (IFRS 2)
Cash distribution to EADS N.V.
shareholders / dividends paid tominorities

2

(520)

(16)

0

4

(536)
4

0

0

(349)

13,015

137

13,152

78

41

119

46

2

48

48

(562)

5,076

1,262

(3,318)

48

(97)

(1)

(98)

0

(94)

(94)

143

0

(206)

13,09085

13,175(2,056)19(2,037)

24

1

25

22

36

40

131

(97)
(138)

40

(35)

Change in minority interests(1)
(5)

94

(35)

48

Cancellation of treasury shares

94

(35)

43

36

Total equity

Treasuryshares40

Change in treasury shares

Minority
interests

22

0

22

(97)

(97)

Change in minority interests

22

(10)

(107)

9

Change in treasury shares

39

Cancellation of treasury shares

(1)

(57)

Balance at 31 December 2008

815

7,836

722

1,758(2)

9

39

58

0

(109)

11,02239
0
104

11,126(1) The total amount is related to the change in the percentage of the proportional consolidation of MBDA from 50% in 2006 to 37.5%; please refer to Note 4 “Scope of Consolidation”.
(2) AOCI comprises as of 31 December 2008 an amount of € 1,521 million of Currency Translation Adjustments.

EADS FIN ANCIAL S TATEMENTS 2008

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The following table shows the development of the number of shares outstanding:Number of shares

Issued as at 1 January
Issued for ESOP
Issued for exercised options
Cancelled
Issued as at 31 December

2008

2007

814,014,473

815,931,524

2,031,820

2,037,835

14,200613,519(1,291,381)(4,568,405)

814,769,112

814,014,473

Treasury shares as at 31 December(5,259,965)(9,804,998)

Outstanding as at 31 December

809,509,147

804,209,475

EADS’ shares are exclusively ordinary shares with a par valueof € 1.00. The authorised share capital consists of
3,000,000,000 shares.
On 4 May 2007, the Shareholders’ General Meeting of EADS
renewed the authorisation given to the Board of Directors to
issue shares and to grant rights to subscribe for shares which
are part of the Company’s authorised share capital, provided
that such powers will be limited to 1% of the Company’s
authorised capital from time to time and to have powers tolimit and to exclude preferential subscription rights, in bothcases for a period expiring at the Shareholders’ General
Meeting to be held in 2009.
The Shareholders’ General Meeting on 26 May 2008, renewed
the authorisation given to the Board of Directors for a new
period of 18 months from the date of the Annual General
Meeting to repurchase shares of the Company, by any means,including derivative products, on any stock exchange orotherwise, as long as, upon such repurchase, the Company will
not hold more than 10% of the Company’s issued share capitaland at a price not less than the nominal value and not morethan the higher of the price of the last independent trade andthe highest current independent bid on the trading venues of
the regulated market of the country in which the purchase iscarried out. This authorisation supersedes and replaces theauthorisation given by the Annual General Meeting of
4 May 2007.
Furthermore, the Shareholders’ General Meeting authorised
both the Board of Directors and the Chief Executive Officer,
with powers of substitution, to cancel up to a maximum of

56 EADS FIN ANCIAL S TATEMENTS 2008

1,291,381 shares. On 30 July 2008, the Chief Executive
Officer decided to cancel 1,291,381 treasury shares.
On 26 May 2008, the Shareholders’ General Meeting alsodecided to distribute the result of the fiscal year 2007
resulting in a gross amount of € 0.12 per share, which was paid
on 4 June 2008. Relating to the fiscal year 2008 a cash
distribution of € 0.20 per share is proposed.
Capital stock comprises the nominal amount of shares
outstanding. The addition to capital stock represents thecontribution for exercised options of € 14,200 (in 2007:€ 613,519) in compliance with the implemented stock option
plans and € 2,031,820 by employees under the 2008 Employee
Stock Ownership Plan (under the 2007 Employee Stock
Ownership Plan: € 2,037,835).
Share premium mainly results from contributions in kind in
the course of the creation of EADS, cash contributions fromthe Initial Public Offering, capital increases and reductions
due to the issuance and cancellation of shares as well as cash
distributions to EADS N.V. shareholders. Other reserves
include among others retained earnings, reduced by therecognition of actuarial gains and losses of pension obligations,net of deferred taxes. Accumulated other comprehensive
income consists of all amounts recognised directly in equity
resulting from changes in fair value of financial instrumentsthat are classified as available-for-sale or that form part ofhedging relationships in effective cash-flow hedges as well asfrom currency translation adjustments of foreign entities.
Treasury shares represent the amount paid for own shares heldin treasury.

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25. Capital Management
EADS seeks to maintain a strong financial profile to safeguard
its going concern, financial flexibility as well as shareholders’and other stakeholders’ confidence in the Group.
As part of its capital management, it is one of EADS’
objectives to maintain a strong credit rating by institutional
rating agencies. This enables EADS to contain the Group’s costof capital which positively impacts its stakeholder value (entity
value). Next to other also non-financial parameters, the credit
rating is based on factors such as capital ratios, profitability
and liquidity ratios. EADS focuses on keeping them in apreferable range.
Currently, EADS’ long-term rating from Standard & Poor’s is
BBB+ (Outlook: stable) and A1 (Outlook: stable) from
Moody’s Investors Service respectively. In accordance with its
conservative financial policy it is essential for EADS to
maintain an investment grade rating.
EADS’ management implements a monitoring system whichallows benchmarking the return on capital by comparing itwith the cost of capital. EADS utilises a residual profit
approach denoted as Economic Profit. This is defined as EBIT
after taxes (NOPAT) less the cost of capital (sum ofshareholders equity, interest bearing liabilities, excluding

derivative instruments, EADS foundation goodwill and net
deferred taxes).
The Group also monitors the level of dividends paid to its
shareholders.
As mentioned above, the Group reassessed its approach tocapital management in 2008 and 2007. The focus of EADS’capital management is on total interest bearing liabilities as oneof the capital components rather than on “net liabilities”(interest bearing liabilities net of cash and cash equivalents) as
in previous years. Capital management is part of EADS’“management by objectives” which is planned to be re-alignedwith EADS’ change in capital definition.
EADS satisfies its obligations arising from share-based
payment plans by issuing new shares. In order to avoid any
dilution of its current shareholders out of these share-based
payment plans, EADS has accordingly decided to buy back andcancel its own shares following the decisions of the Board of
Directors and approval of the Annual General Meeting(AGM). Apart from this purpose, EADS generally does nottrade with treasury shares.
EADS complies with the capital requirements under applicablelaw and its articles of association.

26. Provisions
Provisions are comprised of the following:
31 December
2008

31 December
2007

4,387

4,517

159

151

Retirement plans and similar obligations

4,546

4,668

Other provisions (see Note 26C)

7,516

7,765

(in €m)Provision for retirement plans (see Note 26B)
Provision for deferred compensation (see Note 26A)

Total

12,062

12,433

Thereof non-current portion

7,479

8,055

Thereof current portion

4,583

4,378

EADS FIN ANCIAL S TATEMENTS 2008

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As of 31 December 2008 and 2007, respectively,€ 4,335 million and € 4,382 million of retirement plans andsimilar obligations and € 3,144 million and € 3,673 million ofother provisions mature after more than one year.

A) PROVISIONS FOR DEFERRED COMPENSATIONThis amount represents obligations that arise if employees
elect to convert part of their remuneration or bonus into an
equivalent commitment for deferred compensation.

B) PROVISIONS FOR RETIREMENT PLANS
When Group employees retire, they receive indemnities
as stipulated in retirement agreements, in accordancewith regulations and practices of the countries in which
the Group operates.
French law stipulates that employees are paid retirement
indemnities on the basis of the length of service.
In Germany, EADS has a pension plan (P3) for executive andnon-executive employees in place. Under this plan, theemployer makes contributions during the service period,
which are dependent on salary in the years of contribution andyears of service. These contributions are converted into
components which become part of the accrued pension
liability at the end of the year. Total benefits are calculated asa career average over the entire period of service.
Certain employees that are not covered by the new plan
receive retirement indemnities based on salary earned in thelast year or on an average of the last three years of
employment. For some executive employees, benefits are
depending on final salary at the date of retirement and thetime period as executive. In Q4 2007, EADS implemented aContractual Trust Arrangement (CTA) for EADS’ pension
obligation. The CTA structure is that of a bilateral trust
arrangement. Assets that are transferred to the CTA qualify asplan assets under IAS 19.
In the UK, EADS participates in several funded trusteeadministered pension plans for both executive and nonexecutive employees with BAE Systems being the principal
employer. These plans qualify as multi-employer defined
benefit plans under IAS 19 “Employee Benefits”. EADS’ mostsignificant investments in terms of employees participating inthese BAE Systems UK pension plans are Airbus UK and
MBDA UK. For Airbus, this remains the case even subsequent
to the acquisition of BAE Systems’ 20% minority interests on
13 October 2006. Participating Airbus UK employees havecontinued to remain members in the BAE Systems UK
pension plans due to the UK pension agreement between

58 EADS FIN ANCIAL S TATEMENTS 2008

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EADS and BAE Systems and a change in UK pensions
legislation enacted in April 2006.
Generally, based on the funding situation of the respective
pension schemes, the pension plan trustees determine thecontribution rates to be paid by the participating employers toadequately fund the schemes. The different UK pension plansin which EADS investments participate are currently
underfunded. BAE Systems has agreed with the trustees
various measures designed to make good the underfunding.
These include i) regular contribution payments for active
employees well above such which would prevail for fundedplans and ii) extra employers’ contributions.
Due to the contractual arrangements between EADS andBAE Systems, EADS’ contributions in respect of its
investments for the most significant pension scheme (Main
Scheme) are capped for a defined period of time (until
July 2011 for Airbus UK and until December 2007 for
MBDA UK). Contributions exceeding the respective cappedamounts are paid by BAE Systems. EADS is therefore neither
exposed to increased regular contribution payments resulting
from the pension plans’ underfunding nor to a participation in
extra contribution payments during the period of thecontribution caps. Even after the expiry of the contribution
caps the unique funding arrangements between BAE Systems
and EADS create a situation for EADS different from common
UK multi-employer plans with special regulations limiting
regular contributions that have to be paid by Airbus UK and
MBDA UK to rates applicable to all participating employers.
Based on detailed information about the different multiemployer pension schemes which BAE Systems has started toshare since 31 December 2006, EADS is able to appropriately
and reliably estimate the share of its participation in theschemes, i.e. its share in plan assets, defined benefit
obligations (DBO) and pension costs. The information enables
EADS to derive keys per plan to allocate for accounting
purposes an appropriate proportion in plan assets, defined
benefit obligations and pension costs to its UK investments asof 31 December 2008 and 2007, taking into account the impactof the capped contributions as well as future extra
contributions agreed by BAE Systems with the Trustees.
Therefore, EADS accounts for its participation in
BAE Systems’ UK defined benefit schemes under the defined
benefit accounting approach in accordance with IAS 19.
In 2008, the share of Airbus in BAE Systems’ main schemesamounts to 19.63% (in 2007: 19.12%). The impact of thischange is reflected in actuarial gains and losses of the period.
Actuarial assessments are regularly made to determine theamount of the Group’s commitments with regard to retirement

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indemnities. These assessments include an assumption
concerning changes in salaries, retirement ages and long-term

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5interest rates. It comprises all the expenses the Group will be
required to pay to meet these commitments.

The weighted-average assumptions used in calculating the actuarial values of the retirement plans are as follows:

Assumptions (in %)Discount rate

Euro-countries(1)EADS UK

BAE Systems UK

31 December

31 December

31 December

2008

2007

2006

2008

2007

2006

2008

2007

2006

5.6 - 5.85

5.25 - 5.35

4.5

6.5

5.8

5.1

6.3

5.8

5.2

Rate of compensation increase

3.0 - 3.5

3.0

3.0

4.1

4.2

3.8

3.9

4.3

4.0

Inflation rate

1.8 - 2.25

1.9 - 2.0

1.9 - 2.0

3.0

3.1

2.8

2.9

3.3

3.0

6.5

7.0

6.5

5.8

5.8

5.8

7.1

7.0

7.0

Expected return on plan assets(1) Euro-countries comprise Germany and France respectively.

The amount recorded as provision on the balance sheet can be derived as follows:
Change in defined benefit obligations(in €m)

2008

2007

2006

Defined benefit obligations at beginning of year

8,573

9,584

5,927

Service cost

191

213

162

Interest cost

449

429

230

0

22

2

(390)

(729)

(185)

Plan amendments
Actuarial (gains) and losses
Acquisitions, curtailments and otherBenefits paid
Foreign currency translation adjustment(1)

Change in consolidation

Defined benefit obligations at end of year

26

(42)

(15)

(352)

(383)

(228)

(720)

(298)

(5)

0

(223)

3,696

7,777

8,573

9,584

(1) Reflects the change in the percentage of the proportional consolidation of MBDA from 50% in 2006 to 37.5% in 2007 and EADS’ share in BAE Systems’ pension schemes in 2006.

Actuarial gains which are related to the BAE Systems UK pension plans amount to € -188 million (in 2007: € -426 million) andforeign currency translation adjustment amounts to € -656 million (in 2007: € -274 million).
Change in plan assets(in €m)

2008

2007

2006

Fair value of plan assets at beginning of year

799

4,031

3,833

Actual return on plan assets

(457)

119

84

Contributions

436

683

212

Acquisitions and otherBenefits paid
Foreign currency translation adjustments(1)

Change in consolidation

Fair value of plan assets at end of year

80

18

6

(200)

(223)

(72)

(555)

(242)

5

0

(157)

2,799

3,335

4,031

3,833

(1) Reflects the change in the percentage of the proportional consolidation of MBDA from 50% in 2006 to 37.5% in 2007 and EADS’ share in BAE Systems’ pension schemes in 2006.

EADS FIN ANCIAL S TATEMENTS 2008

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5

The actual return on plan assets includes among others, also
€ -280 million (in 2007: € 42 million) relating to the
BAE Systems’ UK pension plans. Furthermore, € -504 million(in 2007: € -223 million) of foreign currency translation
adjustments and € -106 million (in 2007: € -122 million) of
benefits paid result from BAE Systems’ UK pension plans.

initial funding of the CTA. In December 2008, EADS
companies contributed in cash in total € 300 million to the
CTA.

In 2007, EADS implemented a Contractual Trust Arrangement(CTA) for allocating and generating plan assets in accordancewith IAS 19. On 28 October 2007, some EADS companies
contributed in total € 500 million in cash and securities as an

In 2008, about 41% (in 2007: about 51%) of plan assets areinvested in equity securities. The remaining plan assets areinvested mainly in debt instruments.

Based on past experience, EADS expects a rate of return forplan assets of 6.5% for Euro-countries.

Recognised Provision(in €m)

2008

2007

2006

2005

2004

Funded status(1)

4,442

4,542

5,751

5,128

4,540

Unrecognised past service cost
Provision recognised in Balance Sheet

(55)

(25)

(4)

(4)

(5)

4,387

4,517

5,747

5,124

4,535

(1) Difference between the defined benefit obligations and the fair value of plan assets at the end of the year.

The defined benefit obligation at the end of the year is thepresent value, without deducting any plan assets, of expected
future payments required to settle the obligation resulting

from employee service in the current and prior periods. The
provision contains the funded status less any unrecognised
past service cost.

The components of the net periodic pension cost, included in “Profit (loss) before finance costs and income taxes”, are as follows:(in €m)

2008

2007

2006

Service cost

191

213

162

Interest cost

449

429

230

Expected return on plan assets

(278)

(260)

(58)

4

3

0

366

385

334

Prior service cost
Net periodic pension cost

The expected return on plan assets for BAE Systems’ UK pension plans amounts to € -161 million (in 2007: € -189 million).
Actuarial gains and losses are recognised net of deferred taxes in total equity and develop as follows:
Actuarial gains and losses recognised directly in total equity(in €m)

2008

2007

2006

Cumulative amount at 1 January(1,200)(1,808)(1,118)

Recognised during the period(1)

(346)

608

(690)

(1,546)(1,200)(1,808)

259

226

399

(1,287)(974)(1,409)Cumulative value at 31 December
Deferred Tax Asset at 31 December
Actuarial gains and losses recognised directly in equity, net(1) Included in 2007 is the change in the percentage of the proportional consolidation of MBDA from 50% in 2006 to 37.5% (€ 37 million) and in 2006 the allocated pension deficit from UK
pension schemes with BAE Systems as of 31 December 2006 amounting to € 897 million.

With regard to the contribution to be paid in 2009, no estimate is reasonably possible.
Contribution to state and private pension plans mainly in Germany and France are to be considered as defined contribution plans.
Contributions in 2008 amount to € 632 million.
60 EADS FIN ANCIAL S TATEMENTS 2008

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5C) OTHER PROVISIONS
Movements in provisions during the year were as follows:

Additions

Reclassification/
Change inconsolidated
group

Used

Released

Balance at
31 December
2008

Balance at
1 January
2008

Exchangedifferences

Increasefrompassageof timeContract losses

2,546

(5)

72

563

(11)

(472)

(495)

2,198

Outstanding costs

1,345

(2)

0

645

(27)

(299)

(89)

1,573

812

42

0

75

0

(24)

0

905

Restructuring measures/pre-retirement part-time work

903

(11)

31

42

(3)

(118)

(225)

619

Personnel charges

410

(1)

0

239

(8)

(167)

(43)

430

Obligation from services and maintenanceagreements

262

1

9

179

(1)

(78)

0

372

Warranties

193

2

1

97

(13)

(42)

(47)

191

Litigations and claims

177

0

0

9

0

(30)

(30)

126

Asset retirement

88

0

0

7

0

0

0

95

Other risks and charges

1,029

(12)

7

425

(58)

(156)

(228)

1,007

Total

7,765

14

120

2,281

(121)

(1,386)(1,157)

7,516(in €m)Aircraft financing risks

The addition to provisions for outstanding costs mainly relates
to Defence & Security and Eurocopter and mainly corresponds
to tasks to complete on construction contracts.
The provision for aircraft financing risks fully covers, in linewith the Group’s policy for sales financing risk, the net
exposure to aircraft financing of € 301 million (€ 311 million at
31 December 2007) and asset value risks of € 604 million(€ 501 million at 31 December 2007) related to Airbus andATR (see Note 34 “Commitments and contingencies”).
The provision for contract losses mainly relates to theDivision Airbus in conjunction with the A400M(see Note 3 “Accounting for the A400M programme”) andA350 XWB programmes.
The provisions for restructuring measures mainly relate to
Airbus’ Power8 programme for the reduction of overhead
costs. The plan was announced to the employees in 2007.
The restructuring is expected to be completed in 2010.
For the provisions for other risks and charges, parts of theprovisions for settlement charges in conjunction with theA380 and A350 XWB programmes were reclassified toliabilities.

27. Financing liabilities
In 2004, the EIB (European Investment Bank) granted a longterm loan to EADS in the amount of US$ 421 million, bearing
a fixed interest rate of 5.1% (effective interest rate 5.1%). In
2003, EADS issued two Euro denominated bonds under its
EMTN Programme (Euro Medium Term Note Programme).
The first issue of € 1 billion with expected final maturity in2010 carries a coupon of 4.625% (effective interest rate 4.686%)
which was swapped into variable rate of 3M-Euribor +1.02%.
The second issue of € 0.5 billion maturing in 2018 carries a
coupon of 5.5% (effective interest rate 5.6%) which was
swapped during 2005 into variable rate of 3M-Euribor +1.72%.
Furthermore, Airbus received in 1999 a Reinvestment Notefrom Deutsche Bank AG in the amount of US$ 800 million,
bearing a fixed interest rate of 9.88% with an outstanding debtof € 372 million (2007: € 396 million).
EADS can issue commercial paper under the so called “billet
de trésorerie” programme at floating or fixed interest rates
corresponding to the individual maturities ranging from 1 day
to 12 months. The issued volume at 31 December 2008
amounted to € 0 million (2007: € 501 million, bearing as of
31 December 2007 an average interest rate of 4.54%). The
programme has been set up in 2003 with a maximum volumeof € 2 billion.

EADS FIN ANCIAL S TATEMENTS 2008

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

1Financing liabilities include liabilities connected with sales
financing transactions amounting to € 836 million (2007:€ 960 million), mainly at variable interest rates.

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Defeased bank deposits for aircraft financing of € 373 millionand € 677 million as of 31 December 2008 and 2007
respectively have been offset against financing liabilities.

Non recourse Airbus financing liabilities (risk is supported
by external parties) amount to € 737 million(2007: € 859 million).
(in €m)31 December 2008

31 December 2007

Bonds

1,527

1,469

895

952

481

548

143

121

3,046

3,090

thereof due in more than five years: 498 (31 December 2007: 430)
Liabilities to financial institutions
thereof due in more than five years: 591 (31 December 2007: 651)
Loans
thereof due in more than five years: 312 (31 December 2007: 382)
Liabilities from finance leases
thereof due in more than five years: 97 (31 December 2007: 69)
Long-term financing liabilities
Commercial Papers / Bonds

0579

Liabilities to financial institutions

103

108

Loans

197

183

Liabilities from finance leases

19

69

Others1,139

785

Short-term financing liabilities (due within one year)

1,458

1,724

Total

4,504

4,814

Included in “Others” are financing liabilities to joint ventures. The increase mainly relates to Eurofighter Jagdflugzeug GmbH.
The aggregate amounts of financing liabilities maturing during the next five years and thereafter are as follows:(in €m)Financingliabilities

2009

1,458

2010

1,169

2011

150

2012

119

2013

110

Thereafter

1,498

Total

4,504

62 EADS FIN ANCIAL S TATEMENTS 2008

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.3 | Notes to the Consolidated Balance Sheets (IFRS)

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28. Other financial liabilities(in €m)31 December 2008

31 December 2007

Thereof European Governments refundable advances

4,563

4,854

Thereof liabilities for derivative financial instruments

2,208

258

Non-current other financial liabilities

Others
Total

728

541

7,499

5,653

Current other financial liabilities
Thereof European Governments refundable advances

357

461

Thereof liabilities to related companies

37

23

Thereof liabilities for derivative financial instruments

657

36

Others

663

994

1,714

1,514

Total

The decrease of European Governments refundable advances
relates mostly to reimbursements paid. This was partly
compensated by expenses for accrued interests. Regarding theinterest expenses on European Governments refundable
advances see Note 12 “Total finance costs”. Due to their
specific nature, namely their risk-sharing features and the factthat such advances are generally granted to EADS on the basisof significant development projects, European Governments

refundable advances are accounted for by EADS within “Noncurrent/ current other financial liabilities” on the balance sheet
including accrued interests.
Included in “Other financial liabilities” are € 1,614 million(2007: € 1,514 million) due within one year and € 3,824 million(2007: € 3,746 million) maturing after more than five years.

29. Other liabilities(in €m)31 December 2008

31 December 2007

8,843

8,420

64

54

8,907

8,474

17,802

16,214Non-current other liabilities
Thereof customer advance payments
Others
Total
Current other liabilities
Thereof customer advance payments
Thereof tax liabilities (excluding income tax)
Others
Total

Included in “Other liabilities” are € 16,255 million (2007:€ 15,249 million) due within one year and € 2,983 million(2007: € 2,914 million) maturing after more than five years.

585

557

1,581

1,398

19,96818,169Advance payments received relating to construction contracts
amount to € 5,230 million (2007: € 3,646 million) mainly
resulting from Astrium (€ 1,977 million), MTAD(€ 1,719 million) and Defence & Security (€ 1,224 million).

EADS FIN ANCIAL S TATEMENTS 2008

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30. Trade liabilities
As of 31 December 2008, trade liabilities amounting to € 29 million (€ 294 million as of 31 December 2007) mature after morethan one year.

31. Deferred income(in €m)Non-current deferred income
Current deferred income
Total

31 December 2008

31 December 2007

418

753

822

706

1,240

1,459

The main part of deferred income is related to sales of Airbus and ATR aircraft that include asset value guarantee commitments
and that are accounted for as operating leases (€ 544 million and € 955 million as of 31 December 2008 and 2007, respectively).

2.4

NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS (IFRS)

32. Consolidated Statement of Cash Flows
Following the early adoption of the consequential amendment
to IAS 7 “Statement of Cash Flows” in 2008 (please refer toNote 2 “Summary of significant accounting policies”) the cash
flows relating to customer financing activities are classified as
cash flows from operating activities. Cash flows from leased
assets and finance lease receivables formerly presented within
investing activities are included in customer financing assets
within operating activities. Cash flows in relation to customer
finance liabilities formerly presented within increase /repayment of financing liabilities, within financing activities,
are now included in customer financing liabilities within
operating activities. The presentation of comparative
information was adjusted accordingly.

64 EADS FIN ANCIAL S TATEMENTS 2008

As of 31 December 2008, EADS’ cash position (stated as cash
and cash equivalents in the Consolidated Statements of Cash
Flows) includes € 666 million (€ 602 million and € 597 million
as of 31 December 2007 and 2006, respectively) which
represent EADS’ share in MBDA’s cash and cash equivalents,
deposited at BAE Systems and Finmeccanica and which areavailable upon demand. The percentage of the proportional
consolidation of MBDA had been changed from 50% to 37.5%
as of 1 January 2007.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.4 | Notes to the Consolidated Statements of Cash Flows (IFRS)

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5

The following charts provide details on acquisitions (resulting in additional assets and liabilities acquired) of subsidiaries andjoint ventures:(in €m)Total purchase pricethereof paid in cash and cash equivalents
Cash and cash equivalents included in the acquired subsidiaries and joint ventures
Cash Flow for acquisitions, net of cash

31 December 2008

31 December 2007

31 December 2006

(335)

(12)

(108)

(335)

(12)

(108)

70

12

26

(265)

0

(82)

In 2008, the aggregate cash flow for acquisitions, net of cash of € -265 million includes mainly the acquisition of Plant CML€ -233 million, Surrey Satellite Technology Limited (SSTL) of € -55 million and additional 41% of Spot Image € +35 million.
In 2007, the aggregate cash flow for acquisitions, net of cash of € 0 million includes the acquisition of GPT Special ProjectManagement Ltd. (GPT).
In 2006, the aggregate cash flow for acquisitions, net of cash of € -82 million includes mainly the acquisition of Atlas Elektronik
Group € -43 million, Sofrelog € -12 million, IFR France € -8 million and Dynamic Process Solutions Inc. € -8 million.
(in €m)31 December 2008

31 December 2007

31 December 2006

Intangible assets; property, plant and equipment

90

0

59

Financial assets

1

0

4

Inventories

16

0

44

Trade receivables

44

3

60

Other assets

22

1

4

Cash and cash equivalents

70

12

26

243

16

197

Provisions

(7)

(8)

(91)

Trade liabilities

(34)

(1)

(46)

AssetsFinancing liabilities

(7)

0

(3)

Other liabilities

(92)

(4)

(13)

Liabilities

(140)

(13)

(153)

Fair value of net assets

103

3

44

Goodwill (preliminary) arising on acquisitions

259

9

64

Minority interests / Consolidation of investments held prior to the acquisition

(27)

0

0

Less own cash and cash equivalents of acquired subsidiaries and joint ventures

(70)

(12)

(26)

Cash Flow for acquisitions, net of cash

265

0

82

The following charts provide details on disposals (resulting in assets and liabilities disposed) of subsidiaries:(in €m)Total selling pricethereof received by cash and cash equivalents

31 December 2008

31 December 2007

31 December 2006

9

28

87

9

28

87

Cash and cash equivalents included in the (disposed) subsidiaries

(7)

1

(1)

Cash Flow from disposals, net of cash

2

29

86

The aggregate cash flow from disposals, net of cash, in 2008 of € 2 million results from the sale of Protac.

EADS FIN ANCIAL S TATEMENTS 2008

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1

The aggregate cash flow from disposals, net of cash, in 2007of € 29 million mainly includes the contribution in kind of
Naval Business (Hagenuk, businesses in Germany and in UK)
to Atlas for a cash consideration of € 28 million, whereas
EADS increased its share in Atlas Elektronik from 40% to 49%
in return. Additions and disposals of assets and liabilities
relating to that transaction are included net in the following
table. Further included in the cash flow from disposals, net of(in €m)2

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5cash, are the sale of Alkan amounting to € 10 million andBarfield for € -9 million.
The aggregate cash flow from disposals, net of cash, in 2006of € 86 million includes the sale of LFK GmbH and TDWGmbH amounting to € 81 million and Seawolf of € 2 million.
After the disposal of LFK the cash of LFK was reallocated tothe shareholders of MBDA in proportion to their interest.
31 December 2008

31 December 2007

31 December 2006

Intangible assets; property, plant and equipment

(8)

17

(18)

Financial assets

0

(3)

(4)

Inventories

(1)

(5)

(89)

Trade receivables

(3)

(19)

(17)

Other assets

0

(2)

(22)

Cash and cash equivalents

(7)

1

(1)

Assets

(19)

(11)

(151)

Provisions

4

(7)

132

Trade liabilities

2

(5)

18

Financing liabilities

0

8

1

Other liabilities

4

9

52

Liabilities

10

5

203

Book value of net assets

52

(9)

(6)

Goodwill arising from disposals

0

(12)

0

Result from disposal of subsidiaries

0

(10)

(139)

Less own cash and cash equivalents of disposed subsidiaries
Cash Flow from disposals, net of cash

7

(1)

1

(2)

(29)

(86)

The cash flow from the disposal of the Airbus site of Laupheim in 2008 amounts to € +117 million resulting in a gain of€ 1 million.

2.5

OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)

33. Litigation and claims
EADS is involved from time to time in various legal andarbitration proceedings in the ordinary course of its business,the most significant of which are described below. Other thanas described below, EADS is not aware of any governmental,
legal or arbitration proceedings (including any suchproceedings which are pending or threatened of which EADS
is aware), during a period covering at least the previous twelve
months which may have, or have had in the recent pastsignificant effects on EADS and/or the Group’s financial
position or profitability.

66 EADS FIN ANCIAL S TATEMENTS 2008

Although EADS is not a party, EADS is supporting theEuropean Commission in litigation before the WTO.
Following its unilateral withdrawal from the 1992 EU-US
Agreement on Trade in Large Civil Aircraft, the US lodged arequest on 6 October 2004 to initiate proceedings before theWorld Trade Organisation (“WTO”). On the same day, theEU launched a parallel WTO case against the US in relation toits subsidisation of Boeing. On 31 May 2005, the US and theEU each requested the establishment of a panel. At its meetingon 20 July 2005, the Dispute Settlement Body established thepanels. Between November 2005 and the present, the parties

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filed numerous written submissions and attended several oral
hearings in both cases. The parties continue to provide input
in response to the WTO’s written questions in advance of
issuance of the WTO panels’ reports. Exact timing of further
steps in the WTO litigation process is subject to ruling of thepanels and to negotiations between the US and the EU. Unlessa settlement, which is currently not under discussion, isreached between the parties, the WTO panels have indicatedthat they will issue draft reports sometime in 2009.
The French Autorité des Marchés Financiers (the “AMF”)
began investigations in 2006 for alleged breaches of market
regulations and insider trading rules with respect to, among
other things, the A380 delays announced in 2006. On 1 April
2008, the AMF announced the notification of charges against
EADS and certain of its executives for breach of such market
regulations and insider trading rules, respectively. EADS and
the individual defendants intend to vigorously exercise theirdefence rights in front of the Sanction Commission, which
will decide whether to impose fines after due hearing of theparties. EADS believes that the financial risk associated withthis procedure and its possible consequences is not material.
However, it recognises that these proceedings may havesignificant consequences on its image and reputation.
Following criminal complaints filed by a shareholders’association and by an individual shareholder (including a civil
claim for damages), French investigating judges are also
carrying out investigations on the same facts.
In Germany, the German Federal Financial Supervisory
Authority (the “BaFin”) began its own investigations in 2006
for alleged breaches of market regulations and insider trading
rules. However, the BaFin formally notified EADS on 2 March
2007 that it had discontinued its investigation for suspected
breaches of market regulations. Upon referral by the BaFin,
German criminal proceedings regarding suspected insider
trading offences are still pending against a small number ofindividuals at lower management level, while investigations
against other individuals were discontinued without charges
being brought.

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Furthermore, in Germany, several individual shareholders have
filed a few civil actions against EADS since 2006 to recover
their alleged losses in connection with the disclosure of A380
programme delays, the latest such action being filed in early
2009. A plaintiff motion for “model proceedings” is also
currently pending before the court, which would allow
common issues of fact or law in multiple individual securities
actions to be bundled together. The actions are in theirpreliminary stage and the amounts claimed are relatively small.
EADS anticipates a vigorous defence.
On 12 June 2008, two actions were initiated in the UnitedStates District Court for the Southern District of New York,
one of which has since been voluntarily withdrawn. The
remaining action purports to be a class action brought onbehalf of all persons and entities residing in the United States
who purchased or otherwise acquired EADS’ common stockduring the period from 27 July 2005 through 9 March 2007.
Named as defendants are EADS and four current or former
executives of EADS and Airbus. The action seeks damages inan unspecified amount, with interest and attorneys’ fees, foralleged violations of the US securities laws in connection withfinancial disclosures issued by EADS in 2005, 2006 and 2007
and public statements made during that same time frame
relating to A380 programme delays. On 2 January 2009,
defendants filed motions to dismiss the complaint in theaction. EADS anticipates a further vigorous defence.
EADS recognises provisions for litigation and claims when(i) it has a present obligation from legal actions, governmental
investigations, proceedings and other claims resulting frompast events that are pending or may be instituted or asserted in
the future against the Group, (ii) it is probable that an outflow
of resources embodying economic benefits will be required tosettle such obligation and (iii) a reliable estimate of the amountof such obligation can be made. EADS believes that it has
made adequate provisions to cover current or contemplated
general and specific litigation risks. For the amount ofprovisions for litigation and claims, see “Notes to Consolidated
Financial Statements (IFRS) — Note 26C.) Other provisions”.

34. Commitments and contingencies
COMMITMENTS AND CONTINGENT LIABILITIESSales financing — In relation to its Airbus and ATR
activities, EADS is committing itself in sales financing
transactions with selected customers. Sales financing
transactions are generally collateralised by the underlying
aircraft. Additionally, Airbus and ATR benefit from protective
covenants and from security packages tailored according to theperceived risk and the legal environment. EADS believes thatthe estimated fair value of the aircraft securing suchcommitments will substantially offset any potential losses
from the commitments. Any remaining difference between theamount of financing commitments given and the collateralvalue of the aircraft financed is provided for as an impairment
to the relating asset, if assignable, or as a provision for aircraft
financing risk. The basis for this write-down is a risk-pricingmodel, which is applied at every closing to closely monitor theremaining value of the aircraft.

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Depending on which party assumes the risks and rewards ofownership of a financed aircraft, the assets relating to sales
financing are accounted for on the balance sheet either as(i) an operating lease (see Note 15 “Property, plant andequipment”) or (ii) a loan from aircraft financing or (iii) a
finance lease receivable (see Note 17 “Investments inassociates accounted for under the equity method, otherinvestments and other long-term financial assets”) or (iv) noncurrent assets classified as held for sale. As of 31 December
2008, related accumulated impairment amounts to€ 52 million (2007: € 102 million) for operating lease and to€ 244 million (2007: € 191 million) for loans and finance lease

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receivables. As part of provisions for aircraft financing risks€ 21 million (2007: € 25 million) are recorded (see Note 26C.)“Other provisions”).
Certain sales financing transactions include the sale and leaseback of the aircraft with a third party lessor under operatinglease. Unless the Group has sold down the relating operatinglease commitments to third parties, which assume liability forthe payments, it is exposed to future lease payments. Futurenominal operating lease payments that result from aircraft
sales financing transactions are recorded off balance sheet
and are scheduled to be paid as follows:(in €m)Not later than 2009170

Later than 2009 and not later than 2013

532

Later than 2013

383

Total

1,085

Of which commitments where the transaction has been sold to third parties(610)

Total aircraft lease commitments where EADS bears the risk (not discounted)

475

Total aircraft lease commitments of € 1,085 million as of
31 December 2008 (2007: € 1,205 million), arise from aircraft
head-leases and are typically backed by corresponding sublease
income from customers with an amount of € 767 million(2007: € 851 million). A large part of these lease commitments(€ 610 million and € 699 million as of 31 December 2008 and2007) arises from transactions that were sold down to third
parties, which assume liability for the payments. EADS

determines its gross exposure to such operating leases as thepresent value of the related payment streams. The difference
between gross exposure and the estimated value of underlying
aircraft used as collateral, the net exposure, is provided for infull with an amount of € 280 million as of 31 December 2008(2007: € 286 million), as part of the provision for aircraft
financing risk (see Note 26C.) “Other provisions”).

As of 31 December 2008 and 2007, the total consolidated – on and off balance sheet – Commercial Aviation Sales Financing
Exposure is as follows (Airbus 100% and ATR 50%):(in €m)31 December 2008

31 December 2007

Total gross exposure

1,276

1,226

Estimated fair value of collateral (aircraft)

(679)

(622)

Net exposure (fully provided for)

597

604

68 EADS FIN ANCIAL S TATEMENTS 2008

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Details of provisions / accumulated impairments are as follows:(in €m)31 December 2008

31 December 2007

Accumulated impairment on operating leases (see Note 15 “Property, plant and equipment”)

52

102

Accumulated impairment on loans from aircraft financing and finance leases (see Note 17 “Investments inassociates accounted for under the equity method, other investments and other long-term financial assets”)

244

191

Provisions for aircraft financing risk (on balance sheet) (see Note 26C.) “Other provisions”)

21

25

Provisions for aircraft financing risk (commitment off balance sheet) (see Note 26C.) “Other provisions”)

280

286

Total provisions / accumulated impairments for sales financing exposure

597

604

Asset value guarantees — Certain sales contracts may
include the obligation of an asset value guarantee whereby
Airbus or ATR guarantee a portion of the value of an aircraft
at a specific date after its delivery. Management considers thefinancial risks associated with such guarantees to be
manageable. Three factors contribute to this assessment: (i) theguarantee only covers a tranche of the estimated future valueof the aircraft, and its level is considered prudent incomparison to the estimated future value of each aircraft;(ii) the asset value guarantee related exposure is diversified
over a large number of aircraft and customers; and (iii) the
exercise dates of outstanding asset value guarantees are
distributed through 2019. If the present value of the guarantee
given exceeds 10% of the sales price of the aircraft, the sale ofthe underlying aircraft is accounted for as an operating lease(see Note 15 “Property, plant and equipment” and Note 31“Deferred income”). In addition, EADS is contingently liablein case asset value guarantees with less than 10% are provided
to customers as part of aircraft sales. Counter guarantees arenegotiated with third parties and reduce the risk to which thegroup is exposed. As of 31 December 2008, the nominal valueof asset value guarantees provided to airlines, that do not
exceed the 10% criteria, amounts to € 946 million (2007:€ 880 million), excluding € 476 million (2007: € 513 million)
where the risk is considered to be remote. In many cases therisk is limited to a specific portion of the residual value of theaircraft. The present value of the risk inherent to the given
asset value guarantees where a settlement is being considered
as probable is fully provided for and included in the total
amount of provisions for asset value risks of € 604 million(2007: € 501 million) (see Note 26C.) “Other provisions”). This
provision covers a potential expected shortfall between theestimated value of the aircraft of the date upon which theguarantee can be exercised and the value guaranteed on atransaction basis taking counter guarantees into account.
With respect to ATR, EADS and Finmeccanica are jointly andseverally liable to third parties without limitation. Amongst
the shareholders, the liability is limited to each partner’s
proportionate share.

While backstop commitments to provide financing related toorders on Airbus’ and ATR’s backlog are also given, suchcommitments are not considered to be part of gross exposure
until the financing is in place, which occurs when the aircraft
is delivered. This is due to the fact that (i) past experiencesuggests it is unlikely that all such proposed financings
actually will be implemented (although it is possible that
customers not benefiting from such commitments may
nevertheless request financing assistance ahead of aircraft
delivery), (ii) until the aircraft is delivered, Airbus or ATR
retain the asset and do not incur an unusual risk in relation
thereto, and (iii) third parties may participate in the financing.
In order to mitigate Airbus and ATR credit risks, suchcommitments typically contain financial conditions whichguaranteed parties must satisfy in order to benefit therefrom.
As explained in Note 3 “Accounting for the A400M
programme”, in case of potential termination of the LaunchContract initiated by OCCAR with unanimous mandate of all
Launch Nations after 31 March 2009, AMSL would be obliged
to repay to OCCAR all initial payments, pre-delivery
payments and any other payments received from OCCAR for
the A400M programme of approximately in total € 5.7 billion.
As of the date of these financial statements, EADS does notexpect that OCCAR will exercise its contractual terminationright, as EADS assumes, that the proposed new programmeapproach will support the process of establishing anappropriate framework for the continuation of the A400M
programme together with OCCAR.
Under the current scenario of a continuation of the A400M
programme, various potential additional costs linked to theunquantifiable financial consequences of the shift in thedelivery schedule have not been taken into account whenreassessing the A400M provision in the 2008 financial
statements. Therefore, significant negative income statement’impacts may still have to be accounted for in future periods
when such costs become estimable or triggering events lead toa return to the estimate at completion method of accounting.
Potential benefits from future discussions with customers, ifany, might reduce such impacts, but would only be taken into

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account once agreed upon by OCCAR and the Launch
Nations. Finally, each of the Launch Nations may separately
claim cancellation of individual aircraft ordered if the deliveryof any of them was to be substantially delayed. This would
trigger reimbursement of the initial payments and pre-delivery
payments received from OCCAR in respect of such aircraft.

Other commitments — Other commitments comprisecontractual guarantees and performance bonds to certain

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customers as well as commitments for future capital
expenditures.
Future nominal operating lease payments (for EADS as alessee) for rental and lease agreements (not relating to aircraft
sales financing) amount to € 843 million (2007: € 979 million)
as of 31 December 2008, and relate mainly to procurement
operations (e.g. facility leases, car rentals). Maturities are as
follows:(in €m)Not later than 2009103

Later than 2009 and not later than 2013

316

Later than 2013

424

Total

843

35. Information about financial instruments
A) FINANCIAL RISK MANAGEMENT
By the nature of the activities carried out, EADS is exposed toa variety of financial risks, as explained below: i) market risks,
especially foreign currency exchange rate risks and interest raterisks, ii) liquidity risk and iii) credit risk. EADS’ overall
financial risk management programme focuses on mitigating
unpredictable financial market risks and their potential adverse
effects on the Group’s operational and financial performance.
The Group uses derivative financial instruments and to aminor extent non-derivative financial liabilities to hedge
certain risk exposures.
The financial risk management of EADS is generally carriedout by the central treasury department at EADS Headquarters
under policies approved by the Board of Directors. The
identification, evaluation and hedging of the financial risks isin the responsibility of established treasury committees with
the Group’s Divisions and Business Units.

Market risk
Currency risk — Foreign exchange risk arises when futurecommercial transactions or firm commitments, recognised
assets and liabilities and net investments in foreign operations
are denominated in a currency that is not the entity’sfunctional currency.
EADS manages a long-term hedge portfolio with a maturityof several years covering its net exposure to US Dollar sales,
mainly from the activities of Airbus. This hedge portfolio
covers to a large extent the Group’s highly probabletransactions.

70 EADS FIN ANCIAL S TATEMENTS 2008

Significant parts of EADS’ revenues are denominated in US
Dollars, whereas a major portion of its costs is incurred inEuros and to a smaller extent in GBP. Consequently, to theextent that EADS does not use financial instruments to coverits current and future foreign currency exchange rate exposure,its profits are affected by changes in the Euro-US Dollar
exchange rate. As the Group intends to generate profits only
from its operations and not through speculation on foreign
currency exchange rate movements, EADS uses hedging
strategies to manage and minimise the impact of exchange rate
fluctuations on these profits.
For financial reporting purposes, EADS mostly designates a
portion of the total firm future cash flows as the hedged
position to cover its expected foreign currency exposure.
Therefore, as long as the actual gross foreign currency cash
inflows (per month) exceed the portion designated as being
hedged, a postponement or cancellation of sales transactions
and corresponding cash inflows have no impact on the hedging
relationship. As hedging instruments, EADS primarily uses
foreign currency forwards, foreign currency options, somesynthetic forwards and at Airbus to a minor extent nonderivative financial liabilities.
EADS endeavours to hedge the majority of its exposure basedon firm commitments and forecasted transactions. For products
such as aircraft, EADS typically hedges forecasted sales in US
Dollar. The hedged items are defined as first forecasted highly
probable future cash inflows for a given month based upon
final payments at delivery. The amount of the expected flows
to be hedged can cover up to 100% of the equivalent of the net
US Dollar exposure at inception. For EADS, a forecasted

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1transaction is regarded as highly probable if the futuredelivery is included in the internally audited order book or isvery likely to materialise in view of contractual evidence. The
coverage ratio is adjusted to take into account macroeconomic
movements affecting the spot rates and interest rates as well as
the robustness of the commercial cycle. For the non-aircraftbusiness EADS hedges in- and outflows in foreign currencies
from sales and purchase contracts following the same logic
which are typically contracted in lower volumes.
The company also has foreign currency derivative instruments
which are embedded in certain purchase and lease contracts
denominated in a currency other than the functional currencyof the significant parties to the contract, principally USD and
GBP. Gains or losses relating to such embedded foreign
currency derivatives are reported in other financial result. In
addition EADS hedges currency risk arising from financialtransactions in other currencies than EUR, such as fundingtransactions or securities.

Interest rate risk — The Group uses an asset-liability
management approach with the objective to limit its interest
rate risk. The Group undertakes to match the risk profile of its
assets with a corresponding liability structure. The remaining
net interest rate exposure is managed through several types ofinterest rate derivatives in order to minimise risks andfinancial impacts. Hedging instruments that are specificallydesignated to debt instruments have at the maximum the same
nominal amounts as well as the same maturity dates comparedto the hedged item.
The cash and cash equivalents and securities portfolio of theGroup is invested mainly in non-speculative financial
instruments, mostly highly liquid, such as certificates ofdeposits, overnight deposits, commercial papers, other money
market instruments and bonds. For this portfolio, EADS holds
on a regular basis an asset management committee which aims
at limiting the interest rate risk on a fair value basis through avalue-at-risk approach. EADS is mainly investing in short-term
instruments in order to further minimise any interest risk inthis portfolio. The remaining portion of securities is invested
in short to mid term bonds. Any related interest rate hedges
qualify for hedge accounting as either fair value hedges orcashflow hedges.

Price risk — EADS is to a small extent invested in equity
securities mainly for operational reasons. Therefore, the Groupassesses its exposure towards equity price risk as limited.
Sensitivities of Market Risks — The approach used tomeasure and control market risk exposure within EADS’

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financial instrument portfolio is amongst other key indicators
the value-at-risk (“VaR”). The VaR of a portfolio is theestimated potential loss that will not be exceeded on theportfolio over a specified period of time (holding period) froman adverse market movement with a specified confidence level.
The VaR used by EADS is based upon a 95% confidence level
and assumes a 5-day holding period. The VaR model used ismainly based on the so called “Monte-Carlo-Simulation”
method. Deriving the statistical behaviour of the markets
relevant for the portfolio out of market data from the previous
two years and observed interdependencies between different
markets and prices, the model generates a wide range ofpotential future scenarios for market price movements.
EADS VaR computation includes the Group’s financial debt,
short-term and long-term investments, foreign currency
forwards, swaps and options, finance lease receivables andliabilities, foreign currency trade payables and receivables,
including intra-group payables and receivables affecting Group
profit and loss.
Although VaR is an important tool for measuring market risk,
the assumptions on which the model is based give rise to some
limitations, including the following:> A 5-day holding period assumes that it is possible to hedge
or dispose of positions within that period. This isconsidered to be a realistic assumption in almost all cases
but may not be the case in situations in which there issevere market illiquidity for a prolonged period.
> A 95% confidence level does not reflect losses that may
occur beyond this level. Even within the model used there
is a five percent statistical probability that losses could
exceed the calculated VaR.
> The use of historical data as a basis for estimating thestatistical behavior of the relevant markets and finallydetermining the possible range of future outcomes out of
this statistical behavior may not always cover all possible
scenarios, especially those of an exceptional nature.
The Group uses VaR amongst other key figures in order todetermine the riskiness of its financial instrument portfolio
and in order to optimise the risk-return ratio of its financial
asset portfolio. Further, the Group’s investment policy definesfor P&L and OCI certain limits on total risk for the portfolioof cash, cash equivalents and securities. The total VaR as wellas the different risk-factor specific VaR figures of thisportfolio are measured and serve amongst other measures as abasis for the decisions of the asset management committee.

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A summary of the VaR position of EADS’ financial instruments portfolio at 31 December 2008 and 31 December 2007 is asfollows:(in €m)Total VaR

Equity price VaR

Currency VaRInterest rate VaR

1,888

–

1,829

279

109

32

113

42

79

–

23

69

31 December 2008
FX hedges for forecast transactions or firm commitments
Financing liabilities, cash, cash equivalents, securities andrelated hedges
Finance lease receivables and liabilities, foreign currency trade
payables and receivables
Correlation effect

(166)

–

(41)

(89)

All financial instruments

1,910

32

1,924

301

360

–

367

104

41

8

50

27

38

–

11

35

31 December 2007
FX hedges for forecast transactions or firm commitments
Financing liabilities, cash, cash equivalents, securities andrelated hedges
Finance lease receivables and liabilities, foreign currency trade
payables and receivables
Correlation effect

(48)

–

(16)

(30)

All financial instruments

391

8

412

136

The increase of total VaR compared to 31 December 2007 ismainly attributed to rising hedging volumes and sharp
increased volatilities in the foreign currency exchange rates.
EADS uses its derivative instruments almost entirely as well
as some of its non-derivative financial liabilities for hedging
purposes. As such, the respective market risks of these
hedging instruments are - depending on the hedges’ actual
effectiveness - offset by corresponding opposite market risksof the underlying forecast transactions, assets or liabilities.
Under IFRS 7 the underlying forecast transactions do not
qualify as financial instruments and are therefore not includedin the tables shown above. The VaR of the FX hedging
portfolio in the amount of € 1,888 million (2007:€ 360 million) cannot be considered as a risk indicator for theGroup in the economic sense.

Liquidity risk
The Group’s policy is to maintain sufficient cash and cash
equivalents at any time to meet its present and futurecommitments as they fall due. EADS manages its liquidity
by holding adequate volumes of liquid assets and maintains acommitted credit facility (€ 3.0 billion and € 3.0 billion asof 31 December 2008 and 2007, respectively) in addition to the
cash inflow generated by its operating business. The liquid
assets typically consist of cash and cash equivalents. In addition,
the Group maintains a set of other funding sources. Depending
on its cash needs and market conditions, EADS may issue
bonds, notes and commercial papers. In context of the financial
crisis, EADS has decided to shorten the maturities andrestructure the asset portfolio with focus on lower counterparty
risk (e.g. Government investments). Adverse changes in
the capital markets due to the global financial crisis could
increase the Group’s funding costs and limit its financial
flexibility.

Further, EADS also measures VaR of the Group-internaltransaction risk arising on Group entities contracting in acurrency different from its functional currency affecting
Group profit and loss. However, these currency risks arise
purely EADS internally and are in economic terms 100%
compensated by the corresponding currency fluctuations
recognised in a separate component of equity when translating
the foreign entity into EADS functional currency. At
31 December 2008 the related total VaR amounted to€ 263 million (2007: € 12 million).

72 EADS FIN ANCIAL S TATEMENTS 2008

Further, the management of the vast majority of the Group’s
liquidity exposure is centralised by a daily cash concentration
process. This process enables EADS to manage its liquidity surplus
as well as its liquidity requirements according to the actual needsof its subsidiaries. In addition, Management monitors the Group’s
liquidity reserve as well as the expected cash flows from its
operations based on a quarterly rolling cash forecast.

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Carrying
amountContractual
cash flows< 1 year

1 year –2 years

2 years –3 years

3 years –4 years

4 years –5 years

More than
5 years(13,756)(14,898)(9,954)(1,477)

(315)

(270)

(226)

(2,656)31 December 2008
Non derivative financial liabilities
Derivative financial liabilities
Total(2,865)(2,333)

(517)

(355)

(499)

(438)

(173)

(351)

(16,621)(17,231)(10,471)(1,832)

(814)

(708)

(399)

(3,007)(13,770)(14,866)(9,837)(831)(1,347)

(288)

(202)

(2,361)

(294)

(384)

(135)

(131)

30

0

0

(148)

(14,064)(15,250)(9,972)(962)(1,317)

(288)

(202)

(2,509)31 December, 2007(1)Non derivative financial liabilities
Derivative financial liabilities
Total(1) The presentation for 2007 is adjusted according to the presentation for 2008.

The above table analyses EADS financial liabilities by relevant
maturity groups based on the period they are remaining on
EADS balance sheet to the contractual maturity date.
The amounts disclosed are the contractual undiscounted cash
flows, comprising all outflows of a liability such as
repayments and eventual interest payments.
Non-derivative financial liabilities comprise financing
liabilities at amortised cost and finance lease liabilities aspresented in the tables of Note 35B). Due to their specificnature, namely their risk-sharing features and uncertainty
about the repayment dates, the European Governments
refundable advances are not included in the above mentioned
table with an amount of € 4,920 million (2007:€ 5,315 million).

Credit risk
EADS is exposed to credit risk to the extent of nonperformance by either its customers (e.g. airlines) or its
counterparts with regard to financial instruments. However,the Group has policies in place to avoid concentrations ofcredit risk and to ensure that credit risk is limited.
As far as central treasury activities are concerned, credit risk
resulting from financial instruments is managed on Grouplevel. Counterparts for transactions on cash, cash equivalents
and securities as well as for derivative transactions are limited
to high credit quality financial institutions, corporates orsovereigns. For such financial transactions EADS has set up acredit limit system to actively manage and limit its credit risk
exposure. This limit system assigns maximum exposure lines
to counterparts of financial transactions, based at a minimumon their credit ratings as published by Standard & Poors,
Moody’s and Fitch IBCA. The respective limits are regularly
monitored and updated. Further, EADS constantly aims formaintaining a certain level of diversification in its portfolio

between individual counterparts as well as between financial
institutions, corporates and sovereigns in order to avoid anincreased concentration of credit risk on only a few
counterparts. Additionally, the credit exposure of EADS isreviewed on a regular basis, taking into account various credit
risk indicators and fundamental counterparty data, as well as
sectoral and maturity allocations.
The Group is monitoring the performance of the individual
financial instruments and the impact of the credit markets on
their performance. EADS has procedures in place that allow tohedge, to divest from or to restructure financial instruments
having undergone a downgrade of the counterparts’ credit
rating or showing an unsatisfactory performance. These
measures aim to protect EADS to a certain extent against credit
risks from individual counterparts. Nevertheless, a potential
negative impact resulting from a market-driven increase of
systematic credit risks cannot be excluded.
Sales of products and services are made to customers after
having conducted an appropriate internal credit risk
assessment. In order to support product sales, primarily at
Airbus and ATR, EADS may agree to participate in thefinancing of customers, on a case-by-case basis, directly or
through guarantees provided to third parties. In determining
the amount and terms of the financing transaction, Airbus and
ATR take into account the airline’s credit rating as well as risk
factors specific to the intended operating environment of theaircraft and its expected future value. Market yields andcurrent banking practices also serve to benchmark thefinancing terms offered to customers, including price.
The carrying amount of financial assets represents the
maximum credit exposure. The credit quality of financial
assets that are neither past due nor impaired can be assessedby reference to external credit rating (if available) or internal
assessment of customers’ (e.g. airlines’) creditworthiness.

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2

3

4

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The maximum exposure of the current portion of other long-term financial assets, trade receivables, receivables from relatedcompanies, loans and others included in current other financial assets to credit risk at balance sheet date is the following:(in €m)

2008

2007

Receivables, neither past due nor impaired

5,002

4,353

31

43

Not past due due to negotiations and not impaired
Receivables impaired individually

13

16

Receivables not impaired and past due ≤ 3 months

795

728

Receivables not impaired and past due >3 and ≤ 6 months

173

95

Receivables not impaired and past due >6 and ≤ 9 months

118

55

Receivables not impaired and past due >9 and ≤ 12 months

48

108

Receivables not impaired and past due > 12 months

277

347

6,457

5,745

Total

B) CARRYING AMOUNTS AND FAIR VALUESOF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the price at which
one party would assume the rights and/or duties of anotherparty. Fair values of financial instruments have been
determined with reference to available market information at

74 EADS FIN ANCIAL S TATEMENTS 2008

the balance sheet date and the valuation methodologies
discussed below. Considering the variability of theirvalue-determining factors and the volume of financial
instruments, the fair values presented herein may not be
indicative of the amounts that the Group could realise in acurrent market environment.

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2

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4

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The following tables present the carrying amounts and fair values of financial instruments according to IAS 39 measurement
categories as of 31 December 2008 and 2007 respectively:
31 December 2008(in €m)AssetsOther investments andother long-term financial
assets> thereof at amortised
cost> thereof at cost

Fair Valuefor hedge
relations

Fair Value throughprofit or loss

Held fortrading

Designated

Fair
value

Loans and Receivables
and Financial liabilities
at amortised cost

Available for Sale

Other(3)

Book
value

Fair
Value

Amortised
Cost

Fair
Value

Financial
Instruments
Total

Book
Value

Fair
Value

-

-

-

-

-

646

646

634

1,280

1,280

-

-

-

296

-(1)

-

-

-

296

-(1)

-

-

-

136

136

-

-

-

136

136

-

-

-

-

-

109

109

68

177

177

649

-

2,257

-

-

1,201

1,201

-

4,107

4,107

-

-

-

-

-

5,267

5,267

-

5,267

5,267

-

729

-

6,223

6,223

-

-

-

6,952

6,952

> thereof Fair value

via OCI
Current portion of otherlong-term financial assets
Non-current and current
other financial assets
Trade receivables
Non-current and current
securities
Cash and Cash
Equivalents
Total

Liabilities
Long-term and shortterm financing liabilities
Non-current and current
other financial liabilities
Trade liabilities
Total

-

625

-

3,913

3,913

2,207

2,207

-

6,745

6,745

649

1,354

2,257

10,568

10,272

9,430

9,430

702

24,96024,664

Held fortrading

Designated

Fair
value

-

-

Amortised
Cost

Fair
Value

Book
Value

Fair
Value

-

-

-

-

-

(4,342)(4,497)(4,504)(4,659)(322)-(2,857)--(6,034)(6,034)(2)-(9,213)(9,213)

-

-

-

-

-

(7,824)(7,824)-(7,824)(7,824)(322)-(2,857)--(18,200)(18,355)(162)(21,541)(21,696)(162)(1) Fair value is not reliably measurable.
(2) The European Governments refundable advances of € 4,920 million are measured at amortised cost; a fair value can not be measured reliably due to their risk sharing nature anduncertainty about the repayment dates.
(3) This includes finance lease receivables and finance lease liabilities, which are not assigned to a measurement category according to IAS 39. The carrying amounts of thesereceivables/payables approximate their fair values.

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1

31 December 2007(in €m)AssetsOther investments
and other long-term
financial assets> thereof at amortised
cost> thereof at cost

Fair Valuefor hedge
relations

Fair Value throughprofit or loss

Held fortrading Designated

Fair
value

2

3

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5Loans and Receivables
and Financial liabilities
at amortised cost

Available for Sale

Book
value

4

Other(3)

Fair
Value

Amortised
Cost

Fair
Value

Financial
Instruments
Total

Book
Value

Fair
Value

-

-

-

-

-

582

582

472

1,054

1,054

-

-

-

293

-(1)

-

-

-

293

-(1)

-

-

-

206

206

-

-

-

206

206

-

-

-

-

-

60

60

106

166

166

201

-

5,194

-

-

970

970

-

6,365

6,365

-

-

-

-

-

4,639

4,639

-

4,639

4,639

-

285

-

4,004

4,004

-

-

-

4,289

4,289

> thereof Fair value

via OCI
Current portion of otherlong-term financial assets
Non-current and current
other financial assets(2)Trade receivables
Non-current and current
securities
Cash and Cash
Equivalents
Total

Liabilities
Long-term and shortterm financing liabilities
Non-current and current
other financial liabilities(2)Trade liabilities
Total

-

503

-

5,507

5,507

1,539

1,539

-

7,549

7,549

201

788

5,194

10,010

9,717

7,790

7,790

578

24,561

24,268

Held fortrading

Designated

Fair
value

-

-

Amortised
Cost

Fair
Value

Book
Value

Fair
Value

-

-

-

-

-

(4,624)(4,698)(190)(4,814)(4,888)(91)-(1,211)--(5,865)(5,865)(4)-(7,167)(7,167)

-

-

-

-

-

(7,398)(7,398)-(7,398)(7,398)(91)-(1,211)--(17,887)(17,961)(190)(19,379)(19,453)(1) Fair value is not reliably measurable.
(2) The presentation for 2007 is adjusted according to the presentation for 2008.
(3) This includes finance lease receivables and finance lease liabilities, which are not assigned to a measurement category according to IAS 39. The carrying amounts of thesereceivables/payables approximate their fair values.
(4) The European Governments refundable advances of € 5,315 million are measured at amortised cost; a fair value can not be measured reliably due to their risk sharing nature anduncertainty about the repayment dates.

Financial Assets and Liabilities — Generally, fair values are
determined by observable market quotations or valuation
techniques supported by observable market quotations.
By applying a valuation technique, such as present value of
future cash flows, fair values are based on estimates. However,methods and assumptions followed to disclose data presented
herein are inherently judgmental and involve various
limitations like estimates as of 31 December 2008 and 2007,
which are not necessarily indicative of the amounts that theCompany would record upon further disposal/ termination of
the financial instruments. Unquoted other investments aremeasured at cost as their fair value is not reliably determinable.

76 EADS FIN ANCIAL S TATEMENTS 2008

The methodologies used are as follows:

Short-term investments, cash, short-term loans,
suppliers — The carrying amounts reflected in the annual
accounts are reasonable estimates of fair value because of therelatively short period of time between the origination of the
instruments and its expected realisation.
Securities — The fair value of securities included in availablefor-sale investments is determined by reference to their quoted
market price at the balance sheet date. If a quoted market priceis not available, fair value is determined on the basis ofgenerally accepted valuation methods on the basis of market
information available at the reporting date.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1Currency and Interest Rate Contracts — The fair value ofthese instruments is the estimated amount that the Company
would receive or pay to settle the related agreements as of
31 December 2008 and 2007. EADS used standard valuation
methods using standard software. The valuation is based on
freely available market data from different sources using
standard cash flow discounting. For options the Black-Scholes
formula has been applied.

2

3

4

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5

The fair value of financing liabilities as of 31 December
2008 has been estimated including all future interest
payments. It also reflects the interest rate as stated in thetables above. The fair value of the EMTN bonds has beenassessed using public price quotations.

The following types of financial assets held at 31 December 2008 and 2007 respectively are recognised at fair value throughprofit or loss:(in €m)Nominal amountat initial recognition asof 31 December 2008

Fair value asof 31 December 2008

Nominal amount
Fair value as
at initial recognition asof 31 December 2007 of 31 December 2007

Designated at fair value through profit or loss at recognition:> Money Market Funds (accumulating)

1,074

1,076

504

503

> Foreign currency Funds of Hedge Funds

275

230

234

234

> Uncapped Structured Interest Rate Notes

50

48

50

51

1,399

1,354

788

788

Total

The accumulating Money Market Funds have been designatedat fair value through profit or loss as their portfolio ismanaged and their performance is measured on a fair value
basis.
In addition EADS invests in Money Market Funds paying
interest on a monthly basis. The fair value of those funds
corresponds to their nominal amount at initial recognition dateamounting to € 1,787 million (2007: € 2,941 million).

Investments in foreign currency Funds of Hedge Funds havebeen designated at fair value through profit and loss.
EADS also invests in uncapped Structured Interest Rate Notes– hybrid instruments combining a zero coupon bond and anembedded interest derivative. As the latter had to be separated
from the host contract EADS opted to designate the entire
hybrid instrument at fair value through profit or loss.

EADS FIN ANCIAL S TATEMENTS 2008

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2

3

4

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5C) NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS
The contract or notional amounts of derivative financial instruments shown below do not necessarily represent amounts
exchanged by the parties and, thus, are not necessarily a measure for the exposure of the Group through its use of derivatives.
The notional amounts of foreign exchange derivative financial instruments are as follows, specified by year of expected maturity:
Year ended 31 December 2008(in €m)Remaining period
2009

2010

2011

2012

2013

2014

2015

2016

Total

Net forward sales (purchase)contracts

9,695

9,869

6,275

4,774

3,212

1,546

1,044

(44)

36,371

Purchased USD put options

1

2,515

3,162

790

0

0

0

0

6,468

Purchased USD call options

1,504

924

1,462

1,418

0

0

0

0

5,308

Purchased USD put options

1,504

924

1,462

1,418

0

0

0

0

5,308

Written USD call options

1,504

924

1,462

1,418

0

0

0

0

5,308

4,793

0

25

35

130

225

0

0

5,208

Foreign Exchange Contracts:

Structured USD forwards:

FX swap contracts

Year ended 31 December 2007(in €m)Remaining period
2008

2009

2010

2011

2012

2013

2014

2015

Total

10,209

8,712

7,479

3,468

1,272

450

(3)

0

31,587Purchased USD call options

162

1,422

537

513

214

0

0

0

2,848

Purchased USD put options

162

1,422

537

513

214

0

0

0

2,848

162

1,422

537

513

214

0

0

0

2,848

1,838

14

0

0

34

0

189

0

2,075

Foreign Exchange Contracts:
Net forward sales (purchase)contracts
Structured USD forwards:

Written USD call options
FX swap contracts

The notional amounts of interest rate contracts are as follows, specified by year of expected maturity:
Remaining period

Year ended 31 December 2008(in €m)

2009

2010

2011

2012

2013–2017

2018

2019

Total

Interest Rate Contracts

753

1,792

277

170

0

1,235

1,224

5,451

Remaining period

Year ended 31 December 2007(in €m)

2008

2009

2010

2011

2012

2013–2017

2018

2019

Total

Interest Rate Contracts

225

536

1,655

122

90

0

1,455

1,589

5,672

78 EADS FIN ANCIAL S TATEMENTS 2008

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1

2

3

4

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5D) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING DISCLOSURE
The following interest rate curves are used in the determination of the fair value in respect of the derivative financial
instruments as of 31 December 2008 and 2007:
31 December 2008
Interest rate in %

EUR

USD

GBP

6 months

2.98

1.88

2.75

1 year

3.05

2.22

2.86

5 years

3.23

2.07

3.17

10 years

3.74

2.50

3.48

31 December 2007
Interest rate in %

EUR

USD

GBP

6 months

4.58

4.61

5.91

1 year

4.67

4.25

5.76

5 years

4.56

4.16

5.16

10 years

4.72

4.65

5.08

The development of the foreign exchange rate hedging instruments recognised in AOCI is as of 31 December 2008 and 2007
as follows:
Equity attributable
to equity holdersof the parent

Minority
interests

Total

3,189

1

3,190

Unrealised gains and losses from valuations, net of tax

1,364

1

1,365

Transferred to profit or loss for the period, net of tax(1,002)0(1,002)

362

1

363

(in €m)

1 January 2007

Changes in fair values of hedging instruments recorded in AOCI, net of tax
31 December 2007 / 1 January 2008

3,551

2

3,553

Unrealised gains and losses from valuations, net of tax(2,050)(1)(2,051)

Transferred to profit or loss for the period, net of tax(1,684)0(1,684)

Changes in fair values of hedging instruments recorded in AOCI, net of tax(3,734)(1)(3,735)31 December 2008

(183)

1

(182)

Corresponding with its carrying amounts, the fair values of each type of derivative financial instruments is as follows:
31 December 2008

31 December 2007(in €m)AssetsLiabilities

AssetsLiabilities

Foreign currency contracts – Cash Flow Hedges

2,256(2,469)

5,192

(124)

Foreign currency contracts – not designated in a hedge
relationship

323

(230)

154

(48)

Interest rate contracts – Cash Flow Hedges

0

0

2

(12)

Interest rate contracts – Fair Value Hedges

1

(74)

0

(67)

Interest rate contracts – not designated ina hedging relationship

0

(3)

27

(43)

Embedded foreign currency derivatives

3

(89)

20

0

2,583

(2,865)

5,395

(294)

Total

EADS FIN ANCIAL S TATEMENTS 2008

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3

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5

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At 31 December 2008, the group has interest swap agreements
in place with notional amounts totalling € 1,500 million (as at
31 December 2007: € 1,500 million). The swaps are used tohedge the exposure to changes in the fair value of its EMTN
bonds (see Note 27 “Financing liabilities”). The fair value profit
on the interest rate swaps of € 68 million (2007: fair value lossof € 23 million) has been recognised in financial result andoffset against an equal reduction on its EMTN bonds.

liability if the remaining maturity of the hedged item is morethan 12 months and, as a current asset or liability, if thematurity of the hedged item is less than 12 months in case ofserial production. In case of long term production, a hedging
derivative is classified as non-current when the hedged items’remaining maturity is beyond EADS’ normal operating cycle;
and as a current asset or liability when the remaining maturityof the hedged item is in EADS’ normal operating cycle.

Derivatives which are not designated for hedge accounting areclassified as a current asset or liability. The full fair value of ahedging derivative is classified as a non-current asset or

No material ineffectiveness arising from hedging relationshiphas been determined.

E)

NET GAINS OR LOSSESEADS net gains or (losses) recognised in profit or loss in 2008 and 2007 respectively were as follows:(in €m)

2008

2007

(149)

(307)

64

154

Financial assets or financial liabilities at fair value through profit and loss:> Held for trading> Designated on initial recognition

Available-for-sale-financial assets:> Result before taxes removed from OCI and recognised in profit and loss

Loans and receivables
Financial liabilities measured at amortised cost

Interest income from financial assets or financial liabilities
through profit and loss is included in net gains and losses.

6

48

(160)

(127)

79

77

Net gains and losses of loans and receivables contain among
others results from currency adjustments from foreign
operations and impairment losses.

The following net gains and losses have been recognised directly in equity in 2008 and 2007:(in €m)

2008

2007

(6)

(4)

Available-for-sale-financial assets:> Unrealised gains or losses recognised directly in OCIF)

TOTAL INTEREST INCOME AND TOTAL INTEREST EXPENSES

Total interest income for financial assets and total interest expense for financial liabilities which are not measured at fair value
through profit or loss are calculated by using the effective interest rate method:(in €m)2008

Total interest income on financial asset

501

347

Total interest expense on financial liabilities

(581)

(701)

80 EADS FIN ANCIAL S TATEMENTS 2008

2007

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1

2

3

4

5

2

Back to ContentsG) IMPAIRMENT LOSSES
The following impairment losses on financial assets are recognised in profit and loss in 2008 and 2007 respectively:(in €m)2008

Available-for-sale financial assets

(23)

2007

(13)

Loans and receivables

(114)

(120)

Other(1)

(36)

(24)

Total

(173)

(157)

(1) Concerns finance lease receivables.

36. Share-based Payment
A) STOCK OPTION PLANS AND LONG TERM
INCENTIVE PLANS (LTIP)
Based on the authorisation given to it by the shareholders’meetings (see dates below), the Group’s Board of Directors
approved (see dates below) stock option plans in 2006, 2005,
2004, 2003, 2002, 2001 and 2000. These plans provide to theMembers of the Executive Committee as well as to theGroup’s senior management the grant of options for thepurchase of EADS shares. At its 18 December 2006 meeting,the Board of Directors of the Company, using theauthorisation given to it by the shareholders’ meeting of
4 May 2006 approved the granting of performance shares andrestricted shares to eligible employees of the Company.
For the 2006 Stock Option Plan, analogous to all of EADS’
previous existing stock option plans, the granted exercise price
was exceeding the share price at grant date.

At its 7 December 2007 meeting, the Board of Directors of
the Company approved the granting of performance units andrestricted units in the Company.
At its 13 November 2008 meeting, the Board of Directors of
the Company approved the granting of performance units andrestricted units in the Company. The grant of so called “units”
will not physically be settled in shares but represents a cash
settled plan in accordance with IFRS 2.
In 2008, compensation expense for Stock Option and Long
Term Incentive Plans was recognised for an amount of€ 22 million (in 2007: € 39 million). For the 14,200 options
exercised during the year 2008, the average share price at thedate of exercise has been € 18.56.

The fair value of units granted per vesting date is as follows (LTIP plan 2008):
FV of restricted units
to be settled in cash

FV of performance
units to be settled
in cashMay 2012

11.68

11.68

November 2012

11.63

11.63

May 2013

11.59

11.59

November 2013

11.54

11.54

In € (per unit granted)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1The lifetime of the performance and restricted units (2008) is
contractually fixed (see within the description of the “tenthtranche”). The measurement is based on the share price as of

2

3

4

5

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the balance sheet date (€ 12.03 as of 31 December 2008) andalso takes into account the present value of the expected
dividend payments.

The following major input parameters where used in order to calculate the fair value of the stock options granted:
INPUT PARAMETERS FOR THE BLACK SCHOLES OPTION PRICING MODEL

Share price (€ )LTIP 2006

LTIP 2005

25.34

32.79

(1)

Exercise price (€ )

25.65

33.91

Risk-free interest rate (%)(2)

4.13

3.24

Expected volatility (%)

30.7

24.8

Estimated Life (years)

5.5

5.5

(1) The exercise price for the performance and restricted shares are € 0.
(2) The risk-free interest rate is based on a zero coupon yield curve that reflects the respective life (years) of the options.

EADS uses the historical volatilities of its share price as anindicator to estimate the volatility of its stock options granted.
To test whether those historical volatilities sufficiently
approximate expected future volatilities, they are comparedto implied volatilities of EADS options, which are traded at themarket as of grant date. Such options typically have a shorter lifeof up to two years. In case of only minor differences between
the historical volatilities and the implied volatilities, EADS uses

82 EADS FIN ANCIAL S TATEMENTS 2008

historical volatilities as input parameters to the Black Scholes
Option Pricing Model (please refer to Note 2 “Summary ofsignificant accounting policies”). For measurement purposes
performance criteria are considered to be met.
The estimated option life of 5.5 years (in 2006 and 2005) was
based on historical experience and incorporated the effect of
expected early exercises.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1

2

3

4

2

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5

The principal characteristics of the options, performance and restricted shares as well as performance and restricted units as at
31 December 2008 are summarised in the various tables below:
First tranche

Second tranche

Date of shareholders’ meeting

24 May 2000

24 May 2000

Date of Board of Directors meeting (grant date)

26 May 2000

20 October 2000

Number of options granted

5,324,884

240,000

Number of options outstanding

1,555,220

32,000850

34Total number of eligible employees

Exercise date

Expiry dateConversion right
VestedExercise price
Exercise price conditions
Number of exercised options

50% of options may be exercised after a period of two years and four weeks from the dateof grant of the options; 50% of options may be exercised as of the third anniversary of thedate of grant of the options (subject to specific provisions contained in the Insider Trading
Rules — see "Registration Document 2008 — General Description of the Company
and its Share Capital — 3.1.11 Disclosure of Holdings”).
8 July 2010

8 July 2010

One option for one share

One option for one share

100%

100%

€ 20.90€ 20.90

110% of fair market value of the shares at the date of grant
2,892,020

188,000

Third tranche

Fourth tranche

Date of shareholders’ meeting

10 May 2001

10 May 2001

Date of Board of Directors meeting (grant date)

12 July 2001

9 August 2002

Number of options granted

8,524,250

7,276,700

Number of options outstanding

3,499,919

2,547,121

1,650

1,562

Total number of eligible employees

Exercise date

Expiry date

50% of options may be exercised after a period of two years and four weeks from the dateof grant of the options; 50% of options may be exercised as of the third anniversary of thedate of grant of the options (subject to specific provisions contained in the Insider Trading
Rules — see "Registration Document 2008 — General Description of the Company
and its Share Capital — 3.1.11 Disclosure of Holdings”).
12 July 2011

Conversion right
VestedExercise price
Exercise price conditions
Number of exercised options

8 August 2012
One option for one share

100%

100%

€ 24.66€ 16.96

110% of fair market value of the shares at the date of grant
3,492,831

4,305,066

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)> 2.5 | Other Notes to the Consolidated Financial Statements (IFRS)

1

Date of shareholders’ meeting
Date of Board of Directors meeting (grant date)

2

3

4

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5

Fifth tranche

Sixth tranche

6 May 2003

6 May 2003

10 October 2003

8 October 2004

Number of options granted

7,563,980

7,777,280

Number of options outstanding

4,729,593

6,057,766

1,491

1,495

Total number of eligible employees

Exercise date

Expiry date

50% of options may be exercised after a period of two years and four weeks from the dateof grant of the options; 50% of options may be exercised as of the third anniversaryof the date of grant of the options (subject to specific provisions contained in the Insider
Trading Rules — see "Registration Document 2008 — General Description of the Company
and its Share Capital — 3.1.11 Disclosure of Holdings”).
9 October 2013

Conversion right
VestedExercise price

7 October 2014
One option for one share100%

100%(1)€ 15.65€ 24.32

Exercise price conditions

110% of fair market value of the shares at the date of grant

Number of exercised options

2,517,623

2,400(1) As regards to the sixth tranche, vesting of part of the options granted to EADS top Executives was subject to performance conditions. As a result, part of these conditional options have notvested and were therefore forfeited during the year 2007.

Seventh tranche

Date of shareholders’ meeting
Date of Board of Directors meeting (grant date)

11 May 2005
9 December 2005

Number of options granted

7,981,760

Number of options outstanding

6,294,951

Total number of eligible beneficiaries

Exercise date

Expiry dateConversion right
VestedExercise price
Exercise price conditions
Number of exercised options

1,608
50% of options may be exercised after a period of two years from the date of grantof the options; 50% of options may be exercised as of the third anniversary of the date of
grant of the options (subject to specific provisions contained in the Insider Trading Rules —see "Registration Document 2008 — General Description of the Company
and its Share Capital — 3.1.11 Disclosure of Holdings”). As regards to the seventh tranche,
part of the options granted to the top EADS Executives are performance related.
8 December 2015
One option for one share100%(1)€ 33.91
110% of fair market value of the shares at the date of grant0(1) As regards to the seventh tranche, vesting of part of the options granted to EADS top Executives was subject to performance conditions. As a result, part of these conditional options havenot vested and were therefore forfeited during the year 2008.

84 EADS FIN ANCIAL S TATEMENTS 2008

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Eighth tranche

Date of shareholders’ meeting

4 May 2006

Date of Board of Directors meeting (grant date)18 December 2006
Stock option plan

Number of options granted

1,747,500

Number of options outstanding

1,678,000

Total number of eligible beneficiaries

Date from which the options may be exercised

221
50% of options may be exercised after a period of two years from the date of grantof the options; 50% of options may be exercised as of the third anniversary of the date of
grant of the options (subject to specific provisions contained in the Insider Trading Rules —see "Registration Document 2008 — General Description of the Company
and its Share Capital — 3.1.11 Disclosure of Holdings”).

Date of expiration

16 December 2016

Conversion right

One option for one share

Vested50%

Exercise price
Exercise price conditions€ 25.65
110% of fair market value of the shares at the date of grant

Number of exercised options

0
Performance and restricted shares plan
Performance shares

Restricted shares

Number of shares granted

1,344,625

391,300

Number of shares outstanding

1,291,375

378,475

Total number of eligible beneficiaries
Vesting date
Number of vested shares

1,637
The performance and restricted shares will vest if the participant is still employed by
an EADS company and, in the case of performance shares, upon achievement of mid-termbusiness performance. The vesting period will end at the date of publication of the 2009
annual results, expected in March 2010.
1,750

0

Ninth tranche

Date of Board of Directors Meeting (grant date)

7 December 2007
Performance and restricted unit plan
Performance units

Restricted units

Number of units granted

1,693,940

506,060

Number of units outstanding

1,653,500

Total number of eligible beneficiaries

Vesting dates

496,260
1,617

The performance and restricted units will vest if the participant is still employed by an EADS
company at the respective vesting dates and, in the case of performance units,
upon achievement of mid-term business performance.
Vesting schedule is made up of 4 payments over 2 years:> 25% expected in May 2011;> 25% expected in November 2011;> 25% expected in May 2012;> 25% expected in November 2012.

EADS FIN ANCIAL S TATEMENTS 2008

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5Tenth tranche

Date of Board of Directors Meeting (grant date)

13 November 2008
Performance and restricted unit plan

Number of units granted

Performance units

Restricted units

2,192,740

801,860

Total number of eligible beneficiaries

1,684
The performance and restricted units will vest if the participant is still employed by an EADS
company at the respective vesting dates and, in the case of performance units,
upon achievement of mid-term business performance.
Vesting schedule is made up of 4 payments over 2 years:> 25% expected in May 2012;> 25% expected in November 2012;> 25% expected in May 2013;> 25% expected in November 2013.

Vesting dates

The following table summarises the development of the number of stock options, shares as well as units:
Number of OptionsFirst & Second Tranche

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

2000

5,564,884--(189,484)

5,375,400

2001-

5,375,400--

5,375,400

2002-

5,375,400--

5,375,400

2003-

5,375,400-(75,000)

5,300,400

2004-

5,300,400(90,500)(336,000)

4,873,900

2005-

4,873,900(2,208,169)(121,000)

2,544,731

2006-

2,544,731(746,242)(23,000)

1,775,489

2007-

1,775,489(35,109)(37,000)

1,703,380

2008-

1,703,380-(116,160)

1,587,220

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

Number of Options
Third Tranche

2001

8,524,250--(597,825)

7,926,425

2002-

7,926,425--

7,926,425

2003-

7,926,425-(107,700)

7,818,725

2004-

7,818,725-(328,500)

7,490,225

2005-

7,490,225(2,069,027)(132,475)

5,288,723

2006-

5,288,723(1,421,804)(10,400)

3,856,519

2007-

3,856,519(2,000)(81,350)

3,773,169

2008-

3,773,169-(273,250)

3,499,919

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Number of Options
Fourth Tranche

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

2002

7,276,700

-

-

(600)

7,276,100

2003-

7,276,100-(70,125)

7,205,975

2004-

7,205,975(262,647)(165,500)

6,777,828

2005-

6,777,828(2,409,389)(9,250)4,359,189

2006-

4,359,189(1,443,498)(3,775)2,911,916

2007-

2,911,916(189,532)(15,950)

2,706,434

2008-

2,706,434-(159,313)

2,547,121

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

Number of Options
Fifth Tranche

2003

7,563,980---

7,563,980

2004-

7,563,980(9,600)(97,940)

7,456,440

2005-

7,456,440(875,525)(87,910)

6,493,005

2006-

6,493,005(1,231,420)(31,620)

5,229,965

2007-

5,229,965(386,878)(24,214)

4,818,873

2008-

4,818,873(14,200)(75,080)

4,729,593

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

2004

7,777,280---

7,777,280

2005-

7,777,280-(78,220)

7,699,060

7,699,060(2,400)(96,960)

7,599,700

Number of Options
Sixth Tranche

2006
2007

-

7,599,700-(1,358,714)

6,240,986

2008-

6,240,986-(183,220)6,057,766

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

2005

7,981,760---

7,981,760

2006-

7,981,760-(74,160)

7,907,600

2007-

7,907,600-(142,660)

7,764,940

2008-

7,764,940-(1,469,989)

6,294,951

Options granted

Balance at
1 January

Exercised

Forfeited

Balance at
31 December

Number of Options
Seventh Tranche

Number of Options
Eighth Tranche

2006

1,747,500---

1,747,500

2007-

1,747,500-(5,500)1,742,000

2008-

1,742,000-(64,000)

1,678,000

46,436,354-(13,397,940)(6,643,844)

26,394,570

Total options for all Tranches

EADS FIN ANCIAL S TATEMENTS 2008

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Number of Shares
Performance/restricted shares plan 2006

Shares granted

Balance at
1 January

VestedForfeited

Balance at
31 December

Performance shares in 2006

1,344,625---

1,344,625

Performance shares in 2007-

1,344,625(875)(15,375)

1,328,375

Performance shares in 2008-

1,328,375(875)(36,125)

1,291,375

391,300---

391,300
386,750

Restricted shares in 2006
Restricted shares in 2007-

391,300-(4,550)Restricted shares in 2008-

386,750-(8,275)

378,475

1,735,925

1,715,125(1,750)(64,325)

1,669,850

Forfeited

Balance at
31 December

Total shares

Number of Units
Ninth Tranche

Balance at
1 January

Units granted

VestedPerformance units in 2007

1,693,940---

1,693,940

Performance units in 2008-

1,693,940(1,680)(38,760)

1,653,500

Restricted units in 2007

506,060---

506,060

Restricted units in 2008-

506,060-(9,800)496,260

2,200,000

2,200,000(1,680)(48,560)

2,149,760

Total units

Number of Units
Tenth Tranche

Units granted

Balance at
1 January

VestedForfeited

Balance at
31 December

Performance units in 2008

2,192,740---

2,192,740

Restricted units in 2008

801,860---

801,860

2,994,600---

2,994,600

Total unitsB) EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)In 2008, the Board of Directors approved an additional ESOP
following seventh ESOPs established in 2007, 2005, 2004,
2003, 2002, 2001 and in 2000. For the 2008 ESOP, eligible
employees were able to purchase a maximum of 500 shares per
employee of previously unissued shares. The offer was broken
down into two tranches which were available for all employees
to choose. The subscription price for tranche A was € 11.70.
The subscription price for tranche B was the highest of thesubscription price for tranche A or 80% of the average opening
market prices for EADS shares on the Paris stock exchangeover the twenty trading days preceding 30 May 2008,
resulting in a subscription price of € 12.79.

During a lockup period of at least one year under tranche A or
five years under tranche B, employees are restricted fromselling the shares, but have the right to receive all dividends
paid. Employees who subscribed to tranche A have in addition
the ability to vote at the annual shareholder meetings. EADS
issued and sold 2,031,820 ordinary shares with a nominal
value of € 1.00 under both tranches. Compensation expense of€ 6 million (in 2007: € 9 million) was recognised in connection
with the ESOP 2008.

37. Related party transactions
Related parties — The Group has entered into varioustransactions with related companies in 2008 and 2007 thathave all been carried out in the normal course of business. As
is the Group’s policy, related party transactions have to be
carried out at arm’s length. Transactions with related parties

88 EADS FIN ANCIAL S TATEMENTS 2008

include the French State, Daimler AG, Lagardère and SEPI
(Spanish State). Except for the transactions with the French
State and SEPI, the transactions are not considered material to
the Group either individually or in the aggregate. The
transactions with the French State include mainly sales from2

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1

2

the Eurocopter, Astrium and Defence & Security Divisions for
programmes like Tiger, M51 / M45 ballistic missiles and
SCALP naval cruise missiles. The transactions with the
Spanish State include mainly sales from the MTAD and
Defence & Security Divisions for military programmes.

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The transactions with the joint ventures mainly concern theEurofighter programme.

The following table discloses the related party transactions on a full EADS’ share as of 31 December 2008:
Purchasesof goods andservices andother expense in2008

Receivables
due as of
31 December
2008

1,085

2

198

0

Daimler AG

7

19

1

0

0

Lagardère group

0

0

0

2

15

Total transactions with shareholder

1,290

21

1,245

5

2,425

Total transactions with joint ventures

1,566

24

629

27

1,399

987

8

388

2

0

(in €m)French State
Spanish State (SEPI)

Total transactions with associates

Sales of goods
and services andother income in2008

Payablesdue as of
31 December
2008

Other
Liabilities/Loans
received as of
31 December
2008

1,195

3

2,094

49

0

316

As of 31 December 2008, EADS CASA granted guarantees to the Spanish State in the amount of € 331 million.
The following table discloses the related party transactions on a full EADS’ share as of 31 December 2007:
Sales of goods
and services andother income in
2007

Purchasesof goods andservices andother expense in
2007

1,587

17

316

0

Daimler AG

4

12

2

4

0

Lagardère group

2

0

0

2

14

Total transactions with shareholder

1,909

29

1,006

6

2,453

Total transactions with joint ventures

1,638

28

371

42

616

687

20

317

3

0

(in €m)French State
Spanish State (SEPI)

Total transactions with associates

Payablesdue as of
31 December
2007

Other
Liabilities/Loans
received as of
31 December
2007

882

0

2,087

122

0

352

Receivables
due as of
31 December
2007

In 2007, Lagardère and the French State repaid to EADS the dividends they received related to 2006 for an amountof € 29 million as an interest free loan.

EADS FIN ANCIAL S TATEMENTS 2008

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Remuneration — The annual remuneration and related compensation costs of all of key management personnel, i.e. Non
Executive Board Members, Executive Board Members and Members of the Executive Committee, can be summarised as follows:
2008

Compensation expense(in €m)Non Executive Board Members(3)PensionDefined benefit obligation(1)Pension expense(2)

-

-

0.5

(4)

Executive Board Member

2.4

1.4

0.6

Other Executive Committee Members(5)

15.4

23.1

1.9

(1) Amount of the net pension defined benefit obligation.
(2) Aggregated amount of current service and interest costs related to the defined benefit obligation accounted for during fiscal year 2008.
(3) Non Executive Board Members in office as at 31 December 2008.
(4) The Chief Executive Officer was the sole Executive Board Member in office as at 31 December 2008.
(5) Executive Board Members in office as at 31 December 2008, including specific exceptional bonus if any and EADS N.V. compensation.

2007

Compensation expense

PensionDefined benefit obligation(1)(in €m)(3)

Pension expense(2)Non Executive Board Members

0.8

-

-

Executive Board Member(4)

2.4

0.8

0.6

Other Executive Committee Members(5)

12.9

15.5

1.7

(1) Amount of the net pension defined benefit obligation.
(2) Aggregated amount of current service and interest costs related to the defined benefit obligation accounted for during fiscal year 2007.
(3) Non Executive Board Members in office as at 31 December 2007.
(4) The Chief Executive Officer was the sole Executive Board Member in office as at 31 December 2007.
(5) Including former Executive Board Members who ceased their membership with the Board in 2007 but who were still Executive Committee Members in office as at 31 December 2007;
excluding former Executive Committee Members who were no longer in office as at 31 December 2007 including specific exceptional bonus if any and EADS N.V. compensation.

Additionally, performance units granted in 2008 to theChief Executive Officer and to the other Executive Committee
Members represented 336,500 units.
The amounts detailed above do neither comprise thetermination package nor the estimated cost of Long Term
Incentives granted to Executive Committee Members.
For more information in respect of remuneration of Directors,
see “Notes to the Company Financial Statements – Note 11:
Remuneration”.
EADS has not provided any loans to/advances to/guarantees
on behalf of Directors, former Directors or Executive
Committee Members.
The Executive Committee Members are furthermore entitledto a termination package when the parting results from a

90 EADS FIN ANCIAL S TATEMENTS 2008

decision by the Company. The employment contracts for
the Executive Committee Members are concluded for anindefinite term with an indemnity of up to a maximum of
24 months of their target income.
The Board has decided to reduce the maximum terminationindemnity from 24 months to 18 months of annual total
target salary.
This new rule is applicable to the Executive Committee
Members from the renewal of their employment contracts.
The indemnity could be reduced pro rata or would even not beapplicable depending on age and date of retirement.
Executive Committee Members are also entitled to a
Company car.

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5

38. Interest in Joint Ventures
The Group’s principal investments in joint ventures and the
proportion of ownership are included in Appendix“Information on principal investments”. Joint ventures areconsolidated using the proportionate method.

The following amounts represent the Group’s proportional share of the assets, liabilities, income and expenses of the significant
joint ventures (MBDA, Atlas and ATR) in aggregate:(in €m)2008

Non current assets

2007

667

693

3,051

3,004

446

466

Current liabilities

2,702

2,670

Revenues

1,652

1,729

145

121

Current assets
Non current liabilities

Profit for the period

39. Earnings per Share
Basic earnings per share — Basic earnings per share arecalculated by dividing profit (loss) for the period attributable
to equity holders of the parent (Net income (loss)) by theProfit (loss) for the period attributable to equity holders of the parent(Net income (loss))
Weighted average number of ordinary shares
Basic earnings (losses) per share

Diluted earnings per share — For the calculation of thediluted earnings per share, the weighted average number ofordinary shares is adjusted to assume conversion of all
potential ordinary shares. The Group’s categories of dilutive
potential ordinary shares are stock options as well as
performance and restricted shares. In 2008, the average shareprice of EADS did not exceed the exercise price of stock
options under any stock option plan (in 2007: 1st, 2nd, 4th andProfit (loss) for the period attributable to equity holders of the parent(Net income (loss))
Weighted average number of ordinary shares (diluted)
Diluted earnings (losses) per shareweighted average number of issued ordinary shares during theyear, excluding ordinary shares purchased by the Group andheld as treasury shares.
2008

2007

2006

€m 1,572€m (446)€m 99

806,978,801

803,128,221

800,185,164€ 1.95€ (0.56)€ 0.12

5th stock option plan; in 2006: 1st, 2nd, 3rd, 4th, 5th and 6thstock option plans). Hence, no shares related to stock options(2007: 2,420,180 shares; 2006: 4,130,499 shares) wereconsidered in the calculation of diluted earnings per share.
Since the average price of EADS shares during 2008 exceeded
the price for performance and restricted shares, 618,141 shares
related to performance and restricted shares (in 2007 and2006: no shares) were considered in the calculation.
2008

2007

2006

€m 1,572€m (446)€m 99

807,596,942

805,548,401

804,315,663€ 1.95€ (0.55)€ 0.12EADS FIN ANCIAL S TATEMENTS 2008

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40. Number of Employees
The number of employees at 31 December 2008 is 118,349 as compared to 116,493 at 31 December 2007.

41. Events after the balance sheet dateOn 3 November 2008, EADS and DAHER announced theconclusion of the agreement for DAHER to acquire a 70%
majority share in EADS Socata which became effective on
7 January 2009. The association of DAHER and EADS Socata
will allow the creation of a European industrial leader in thearea of Aerostructures, Business Aviation and Services and thedevelopment of joint projects in these areas.
In 2008, EADS had concluded negotiations with GKN todivest its Airbus site in Filton (UK). The closing of the sale iseffective since 5 January 2009.
Up to the release of these financial statements, no events havematerialised that could be considered as triggering events
requiring a change in the accounting methodology for the
A400M programme (see Note 3 “Accounting for the A400M
programme”).
On 9 January 2009, AMSL and EADS announced that they
have proposed a new programme approach for the A400M to
the Launch Nations, through OCCAR, with the aim to find
an appropriate way forward for this programme. AMSL and
EADS wanted to initiate discussions around the programmeschedule along with changes to other areas of the contract
including in particular certain technical characteristics of thismilitary aircraft. In line with complex military development
programmes, AMSL suggested to resume series production

92 EADS FIN ANCIAL S TATEMENTS 2008

only once adequate maturity is reached based on flight test
results. With such new approach, the first delivery of the
A400M would then occur three years after its first flight.
On 10 February 2009, with reference to the report of theFrench senate finance and foreign affairs commissions
regarding their views on the current status of the A400M
programme, EADS reaffirmed its full commitment to deliveron the European A400M military transport aircraft programme
and welcomed the public support given by the French Senators
being responsible for this report.
In 2005, the liquidator of the special purpose vehicle GFAC, ajoint venture between Swissair and GATX, sued Airbus at a
court in New York to recover US$ 227 million in pre-delivery
payments, together with interest and costs. The lawsuit
followed Airbus’ termination of the Purchase Agreement with
GFAC in October 2001 for 38 SA and LR aircraft, in thecontext of Swissair’s bankruptcy. On 6 February 2009 thejudge decided in favor of GFAC. Although Airbus has asked
the court to reconsider its decision at a hearing on 18 March2009 and will also file an appeal, it cannot be excluded that
Airbus will, on that day, be ordered to pay an amount equal tothe pre-delivery payments plus legal interest.
These Consolidated Financial Statements have been authorisedfor issuance by the Board of Directors on 9 March 2009.

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4

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APPENDIX “INFORMATION ON PRINCIPAL INVESTMENTS” –CONSOLIDATION SCOPE
2008

%

2007

%

Company

Head officeF

100.00AD Grundstückgesellschaft GmbH

Pöcking (Germany)

AirbusF

100.00F

100.00F

100.00F

100.00AFS Cayman Limited

Cayman IsleAFS Cayman 11 Limited

Cayman Isle

F

100.00F

100.00

AIFS (Cayman) Ltd.

Cayman Isle

F

100.00F

100.00

AIFS Cayman Liquidity Ltd.

Cayman Isle

F

100.00F

100.00

AIFS Leasing Company Limited

IrelandF

100.00Airbus A320 Financing Limited

IrelandF

100.00F

100.00Airbus China Limited

Hong-KongF

100.00F

100.00Airbus Deutschland GmbH

Hamburg (Germany)F

100.00F

100.00Airbus España SL

Madrid (Spain)F

100.00F

100.00Airbus Finance Company Ltd

Dublin (Ireland)

F

100.00F

100.00Airbus Financial Service Unlimited

IrelandF

100.00F

100.00Airbus France S.A.S.

Toulouse (France)F

100.00F

100.00Airbus Holding S.A.

FranceToulouse (France)F

100.00F

100.00Airbus Invest

F

100.00F

100.00Airbus North America Customer Servics, Inc. (ASCO)

USA

F

100.00F

100.00Airbus North America EngineeringUSAF

100.00F

100.00Airbus North America Sales Inc.

USA

F

100.00F

100.00Airbus Americas Inc.

USA

F

100.00F

100.00Airbus S.A.S.

Toulouse (France)

P

51.00

Airbus (TIANJIN) Final Assembly Company Ltd

Tianjin (China)

P

51.00

Airbus (TIANJIN) Jigs & Tools Company Ltd

Tianjin (China)F100.00Airbus (TIANJIN) Delivery Center Ltd

Tianjin (China)F100.00F

100.00Airbus Transport International S.N.C. (ATI)

Blagnac (France)F

100.00F

100.00Airbus UK Limited

UK

F

100.00F

100.00Avaio Limited

Isle Of Man

F

100.00F

100.00Aviateur Aerospace Limited

Ireland

E

20.00

E

20.00

Aviateur Capital Limited

IrelandF

100.00F

100.00Aviateur Eastern Limited

IrelandF

100.00F

100.00Aviateur Finance Limited

IrelandF

100.00F

100.00Aviateur International Limited

IrelandF

100.00F

100.00Aviateur Leasing Limited

IrelandF

100.00CTC GmbH

Stade (Germany)F

100.00NorbusUSA

F

100.00F

100.00Star Real Estate S.A.S.

Boulogne (France)F

100.00F

100.00

Tasc aviation FZCo

United Arab Emirates

Additionally consolidated are 32 SPEs.

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

EADS FIN ANCIAL S TATEMENTS 2008

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%

2007

2

3

4

%

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5Company

Head office

Military Transport Aircraft
F

90.00

F

90.00

Airbus Military S.L.

Madrid (Spain)F

100.00F

100.00EADS CASA North America, Inc.

Chantilly, Virginia (USA)F

100.00F

100.00EADS CASA S.A.
(Unit: EADS CASA Military Transport Aircraft)

Madrid (Spain)

F

77.21

F

77.21

EADS PZL “WARSZAWA-OKECIE” S.A.

Warsaw (Poland)

E

40.00

AirTanker Holdings Ltd.

London (UK)

E

40.00

AirTanker Ltd.

London (UK)

E

40.00

AirTanker Finance Ltd.

London (UK)F

100.00F

100.00AA military maintenance Pty. Ltd.

Brisbane (Australia)

F

100.00F

100.00AA New Zealand Pty. Ltd.

Bankstown (Australia)

EurocopterF

100.00F

100.00American Eurocopter Corp.

Dallas, Texas (USA)

F

60.00

F

60.00

American Eurocopter LLC

Dallas, Texas (USA)F

100.00F

100.00Australian Aerospace Ltd.

Bankstown (Australia)

F

100.00F

100.00EIP Holding Pty. Ltd.

Bankstown (Australia)

F

75.00

F

75.00

Eurocopter South East Asia Pte. Ltd.

Singapore (Singapore)F

100.00F

100.00Eurocopter Canada Ltd.

Ontario (Canada)F

100.00F

100.00Eurocopter Deutschland GmbH

Donauwörth (Germany)F

100.00F

100.00Eurocopter España S.A.

Madrid (Spain)F

100.00F

100.00Eurocopter Holding S.A.

Paris (France)
Marignane (France)F

100.00F

100.00Eurocopter S.A.S.

F

100.00F

100.00Eurocopter Training Services S.A.S.

Marignane (France)F

100.00

Korean Helicopter Development Support

Sacheon-si (South Korea)

F

85.66

F

76.52

Helibras - Helicopteros do Brasil S.A.

Itajuba (Brazil)

E

25.00

E

25.00

HFTS Helicopter Flight Training Services GmbH

Hallbergmoos (Germany)F

100.00F

100.00Aircraft Services Lemwerder GmbH

Lemwerder (Germany)

Defence & Security
F

100.00F

100.00

Apsys

Suresnes (France)

E

16.20

E

16.20

Arbeitsgemeinschaft Marinelogistik

Bremen (Germany)

E

14.70

E

14.70

Atlas Defence Technology SDN.BHD

Kuala Lumpur (Malaysia)

P

49.00

P

49.00

Atlas Elektronik PTY Limited

St. Leonards (Australia)

P

49.00

P

49.00

Atlas Elektronik GmbH

Bremen (Germany)

P

49.00

P

49.00

Atlas Elektronik UK (Holdings) Limited

Newport, Wales (UK)

P

49.00

P

49.00

Atlas Elektronik UK Limited

Newport, Wales (UK)

P

49.00

P

49.00

Atlas Hydrographic Holdings PTY Limited

St. Leonards (Australia)

P

49.00

P

49.00

Atlas Hydrographic GmbH

Bremen (Germany)

P

49.00

P

49.00

Atlas Maridan ApS

Horsholm (Denmark)

P

49.00

P

49.00

Atlas Naval Systems Malaysia SDN.BHD.

Kuala Lumpur (Malaysia)

F

55.00

F

55.00

Aviation Defense Service S.A.

Saint-Gilles (France)

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

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1

2008

%

2007

2

3

4

5

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Company

Head office

Aschau/Inn (Germany)
Umhlanga Rocks (South Africa)

P

37.50

P

18.75

Bayern-Chemie Gesellschaft für
flugchemische Antriebe mbH

E

19.60

E

19.60

CybiCOM Atlas Defence (Proprietary) Limited

F

100.00

Defense Security Systems Solutions Inc.

San Antonio, Texas (USA)F

100.00F

100.00Dornier Consulting GmbHFriedrichshafen (Germany)F

100.00F

100.00Dornier Flugzeugwerft GmbHFriedrichshafen (Germany)F

100.00F

100.00EADS CASA S.A. (Unit: Military Aircraft)

Madrid (Spain)F

100.00F

100.00EADS Defence & Security Systems Limited

Newport, Wales (UK)F

100.00F

100.00EADS Defence & Security Systems Limited - Holding

Newport, Wales (UK)F

100.00F

100.00EADS Defence & Security Systems S.A.

Elancourt (France)F

100.00EADS Defence and Security Saudi Ltd

Riyadh Olaya District(Saudi Arabia)

F

100.00F

100.00EADS Deutschland GmbH – Defence Headquarter

Unterschleißheim (Germany)F

100.00F

100.00EADS Deutschland GmbH - Military Aircraft TB 51

Munich (Germany)

100.00F

100.00EADS Deutschland GmbH –Verteidigung und Zivile Systeme

Ulm (Germany)F

100.00EADS North America Defense Company

Arlington, Virginia (USA)F

100.00F

100.00EADS Operations & Services UK

Newport, Wales (UK)F

100.00F

100.00EADS Secure Networks Oy

Helsinki (Finland)

F

100.00F

100.00EADS Secure Networks S.A.S.

Elancourt (France)F

100.00EADS Air Services

Boulogne (France)FF

100.00F

100.00EADS System & Defence Electronics Belgium

Oostkamp (Belgium)

F

100.00F

100.00EADS Secure Networks Deutschland GmbHUlm (Germany)F

100.00EADS Telecom Deutschland GmbH

Unterschleissheim (Germany)F

100.00F

100.00EADS Defence & Secutity Solutions España S.A.U.

Madrid (Spain)F

100.00F

100.00EADS Telecom Mexico S.A. de CV

Mexico DF (Mexico)F

100.00F

100.00EADS Cognac Aviation Training Services

Paris (France)

E

30.00

E

30.00

ESG Elektroniksystem- und Logistikgesellschaft

Munich (Germany)F

100.00F

100.00Fairchild Controls Corporation

Frederick Maryland (USA)F

100.00F

100.00FmElo Elektronik- und Luftfahrtgeräte GmbHUlm (Germany)F

100.00F

100.00Gesellschaft für Flugzieldarstellung mbH

Hohn, Germany

F

100.00F

100.00Get Electronique S.A.

Castres (France)

E

45.00

Grintek Ewation (Pty) Ltd

Pretoria (South Africa)

P

49.00

P

49.00

Hagenuk Marinekommunikation GmbH

Flintbek (Germany)F

100.00F

100.00IFR France S.A.

Blagnac (France)

P

37.50

P

37.50

LFK – Lenkflugkörpersysteme GmbH

Unterschleißheim (Germany)F

100.00F

100.00

M.P. 13

Paris (France)

P

50.00

P

50.00

Maîtrise d’Oeuvre SyStème

Issy les Moulineaux (France)

P

37.50

P

37.50

Marconi Overside Ldt.

Chelmsford (UK)F

100.00F

100.00

Matra Défense

Velizy (France)

P

37.50

P

37.50

Matra Electronique

La Croix Saint-Ouen (France)

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

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2008

%

2007

%

Company

Head officeF

100.00F

100.00

Matra Holding GmbH

Frankfurt (Germany)

P

37.50

P

37.50

MBDA France

Velizy (France)

P

37.50

P

37.50

MBDA Holding

Velizy (France)

P

37.50

P

37.50

MBDA Inc.

Westlack, CA (USA)

P

37.50

P

37.50

MBDA Italy SpA

Roma (Italy)
Chatillon sur Bagneux (France)

P

37.50

P

37.50

MBDA M S.A.

P

37.50

P

37.50

MBDA S.A.S.

Velizy (France)

P

37.50

P

37.50

MBDA Services

Velizy (France)

P

37.50

P

37.50

MBDA Treasury

Jersey (UK)

P

37.50

P

37.50

MBDA UK Ltd.

Stevenage, Herts (UK)

E

26.80

E

26.80

Patria Oyj

Helsinki, Finland

F

80.00

F

80.00

Pentastar Holding

Paris (France)F

100.00

Plant CML

Temecula, CA (USA)F

100.00F

100.00

Proj2

Paris (France)

P

18.75

Propulsion Tactique S.A.

La Ferte Saint Aubin (France)F

100.00

Racal Instruments US

San Antonio, Texas (USA)100.00F

100.00

Racal Instruments Group Ltd. UK

Wimborne, Dorset (UK)

E

18.75

E

18.75

Roxel

Saint-Médard-en-Jalles (France)F

100.00F

100.00

Sofrelog S.A.

Bozons (France)

P

49.00

P

49.00

Sonartech Atlas Pty Ltd.

St. Leonards (Australia)

F

100.00F

100.00Sycomore S.A.

Boulogne-Billancourt (France)F

100.00

Talon Instruments

San Dimas, CA (USA)

P

25.13

P

25.13

TAURUS Systems GmbH

Schrobenhausen (Germany)

P

37.50

P

37.50

TDW- Ges. fürverteidigungstechnische Wirksysteme GmbH

Schrobenhausen (Germany)F

100.00F

100.00

Test & Services France

Velizy (France)F

100.00

Test & Services North America

Irvine, California (USA)F

100.00F

100.00TYX Corp.

Reston, VA (USA)

E

50.00

E

50.00

United Monolithic Semiconductors France S.A.S.

Orsay (France)

E

50.00

E

50.00

United Monolithic Semiconductors Holding

Orsay (France)

E

50.00

E

50.00

United Monolithics Semiconductor GmbHUlm (Germany)

F

90.00

F

90.00

UTE CASA A.I.S.A.

Madrid (Spain)

F

Astrium
F

100.00F

100.00Astrium GmbH - Satellites

Munich (Germany)F

100.00F

100.00Astrium GmbH - Space Transportation

Munich (Germany)F

100.00F

100.00Astrium Holding S.A.S.

Paris (France)F

100.00F

100.00Astrium Ltd. - Satellites

Stevenage (UK)F

100.00F

100.00Astrium SAS - Satellites

Toulouse (France)F

100.00F

100.00Astrium SAS - Space Transportation

Les Muraux (France)F

100.00F

100.00Astrium SAS - Services

Paris (France)F

100.00F

100.00Astrium Services GmbH

Ottobrunn (Germany)F

100.00Astrium Services S.A.S.

Paris (France)

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

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2008

%

F

70.00

Company

Head office

Axio-Net GmbHHannover (Germany)F

100.00F

100.00Computadoras, Redes e Ingenieria SA (CRISA)

Madrid (Spain)F

100.00F

100.00Dutch Space B.V.

Leiden (Netherlands)

F

100.00EADS Astrium Jersey Ltd.

Jersey (UK)F

100.00F

100.00EADS Astrium N.V.

The Hague (Netherlands)

F

100.00F

100.00EADS Astrium SL

Madrid (Spain)F

100.00F

100.00EADS CASA Espacio S.L.

Madrid (Spain)F

100.00F

100.00EADS Deutschland GmbH – Space Services

Munich (Germany)F

100.00GPT Special Project Management Limited

Riyadh (Saudi Arabia)

E

20.73

I-Cubed (I3C)

Fort Collins, USAF

100.00F

100.00F

100.00Imass Ltd

Newcastle (UK)Infoterra GmbHFriedrichshafen (Germany)F

100.00F

100.00

Infoterra Ltd

Southwood (UK)F

100.00F

100.00

Infoterra S.A.S.

Toulouse (France)F

100.00F

100.00

Matra Marconi Space UK Ltd.

Stevenage (UK)

F

74.90

F

75.00

MilSat Services GmbH

Bremen (Germany)F

100.00MMS Systems Ltd

Stevenage (UK)

E

47.40

E

47.40

Nahuelsat S.A.

Buenos Aires (Argentina)

F

100.00F

100.00Astrium Services UK Ltd

Stevenage (UK)F

100.00F

100.00

Paradigm Secure Communications Ltd

Stevenage (UK)F

100.00F

100.00

Paradigm Services Ltd

Stevenage (UK)

F

89.98

Sodern S.A.

Limeil Brevannes (France)

F

89.98

F

100.00

F

81.03

E

Space Management & Services S.A.S.

Paris (France)

Spot Image S.A.S.

Toulouse (France)

40.03

F

81.03

Spot Image Corporation Inc.

Chantilly, VA (USA)

F

81.03

Spot Imaging Services Pty Ltd

Weston Creek (Australia)

F

56.72

Spot Asia Pte Ltd

Singapore

F

44.57

Beijing Spot Image Co Ltd

Pekin (China)

F

41.30

Tokyo Spot ImageTokyo (Japan)

F

78.38

Surrey Satellite Technology Ltd

Survey (UK)F

100.00F

100.00TESAT-Spacecom Geschäftsführung GmbH

Backnang (Germany)F

100.00F

100.00TESAT-Spacecom GmbH & Co. KG

Backnang (Germany)

Other Businesses
P

50.00

P

50.00

ATR Eastern Support

Singapore (Singapore)

P

50.00

P

50.00

ATR GIE

Toulouse (France)

P

50.00

P

50.00

ATR India Customer Support

Bangalore (India)

P

50.00

P

50.00

ATR International SARL

Toulouse (France)

P

50.00

P

50.00

ATR North America Inc.

Washington D.C., (USA)

P

50.00

P

50.00

ATR Training Center SARL

Toulouse (France)

P

50.00

P

50.00

ATRiam Capital Ltd.

Dublin (Ireland)

F

50.10

F

50.10

Composites Aquitaine S.A.

Salaunes (France)

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

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5

2008

%

2007

%

Company

Head office

F

50.00

F

50.00

Composites Atlantic Ltd.

Halifax (Canada)F

100.00F

100.00EADS ATR S.A.

Toulouse (France)

E

49.99

EADS Revima APU S.A.

Caudebec en Caux (France)F

100.00EADS Revima S.A.

Tremblay en France (France)F

100.00EADS Seca S.A.

Le Bourget (France)F

100.00F

100.00F

100.00EADS Socata S.A.

Louey (France)F

100.00F

100.00EADS Sogerma S.A.

Mérignac (France)F

100.00F

100.00Elbe Flugzeugwerke GmbH

Dresden (Germany)

Airbus Freighter Conversion GmbH

Dresden (Germany)F

100.00

Maroc Aviation S.A.

Casablanca (Morocco)

P

50.00

F

100.00F

100.00F

100.00Noise Reduction Engineering B.C.

Washington, D.C. (USA)F

100.00F

100.00

Socata Aircraft Inc.

Miami, Florida (USA)F

100.00EADS North America Defense Security
Systems Solutions Inc.

San Antonio, Texas (USA)F

100.00EADS North America Defense Test and Services, Inc.

Irvine, California (USA)F

100.00EADS North America, Inc.

Arlington, Virginia (USA)

F

52.00

EADS North America Tankers, LLC

Arlington, Virginia (USA)

Additionally consolidated are 6 SPEs.
Headquarters
E

23.16

F

100.00

F

75.00

E

F

23.15

Aero Precision

Deerfield Beach (USA)AL Objekt Taufkirchen GrundstücksVerwaltungsgesellschaft mbH & Co. KG

Grünwald (Germany)

75.00

DADC Luft- und Raumfahrt Beteiligungs AG

Munich (Germany)

E

46.32

E

46.30

Dassault Aircraft Services

(USA)

E

46.32

E

46.30

Dassault Aviation

Paris (France)

E

46.32

E

46.30

Dassault Falcon Jet

Teterboro N.J. (USA)

E

46.32

E

46.30

Dassault Falcon Jet

Wilmington (USA)

E

46.32

E

46.30

Dassault Falcon Service

Bonneuil en France

E

46.32

E

46.30

Dassault Procurement Services lnc

Paramus N.J. (USA)

F

99.12

F

97.16

Dornier GmbH – Zentrale

Friedrichshafen (Germany)F

100.00F

100.00EADS Airbus Holding S.A.S.

Paris (France)F

100.00F

100.00EADS CASA France

Paris (France)F

100.00F

100.00EADS CASA S.A. (Headquarters)

Madrid (Spain)F

100.00F

100.00F

100.00F

100.00F

100.00EADS Deutschland GmbH, Innovation Work

Munich (Germany)F

100.00F

100.00EADS Deutschland GmbH, LO - Liegenschaften OTN

Munich (Germany)F

100.00EADS Deutschland GmbH,
Shared Service Center, Germany

Munich (Germany)F

100.00F

100.00EADS Finance B.V.

Amsterdam (Netherlands)

F

100.00F

100.00EADS France HQParis (France)F

100.00F

100.00EADS France - Innovation Work

Suresnes (France)

EADS CASA S.A. Shared Service Center, Spain

Madrid (Spain)

EADS Deutschland GmbH – Zentrale

Munich (Germany)

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

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%

F

100.00Company

Head office

EADS Management Service GmbH

Munich (Germany)F

100.00F

100.00EADS North America Holdings Inc.

Arlington (USA)

F

99.12

F

97.16

EADS Real Estate Dornier Grundstücke GmbH & Co. KG

Taufkirchen (Germany)F

100.00F

100.00EADS Real Estate Objekt Nabern GmbH & Co. KG

Taufkirchen (Germany)

E

23.16

E

23.15

Falcon Training CenterFranceF100.00F

100.00Manhattan Beach Holding Company

Frederick, Maryland (USA)F

100.00F

100.00

Matra Aerospace Inc.

Arlington (USA)

E

46.32

E

46.30

MidwayUSAF

100.00OBRA Grundstücks-Verwaltungsgesellschaft mbH

Grünwald (Germany)F

100.00OOO “EADS”

Moscow, Russia

E

46.13

Sogitec Industries

Suresnes (France)

E

46.16

F: Fully consolidated.
P: Proportionate.
E: Equity method.
The stated percentage of ownership is related to the respective parent company.

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3
Auditors' Reporton the Consolidated
Financial Statements (IFRS)EADS FIN ANCIAL S TATEMENTS 2008

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AUDITOR S' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS)

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To: The EADS N.V. shareholders.

Report on the Consolidated Financial Statements
We have audited the accompanying Consolidated Financial Statements 2008 which are part of the financial statements ofEuropean Aeronautic Defence and Space Company EADS N.V., Amsterdam, which comprise the consolidated balance sheet as at
31 December 2008, the profit and loss account, statement of recognised income and expenses and cash flow statement for theyear then ended and a summary of significant accounting policies and other explanatory notes.

MANAGEMENT’S RESPONSIBILITYManagement is responsible for the preparation and fair presentation of the Consolidated Financial Statements in accordance with
International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil
Code, and for the preparation of the report of the Board of Directors in accordance with Part 9 of Book 2 of the Netherlands Civil
Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fairpresentation of the Consolidated Financial Statements that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITORS' RESPONSIBILITY
Our responsibility is to express an opinion on the Consolidated Financial Statements based on our audit. We conducted our audit
in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the Consolidated Financial Statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated
Financial Statements. The procedures selected depend on the Auditors' judgment, including the assessment of the risks ofmaterial misstatement of the Consolidated Financial Statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Consolidated Financial
Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the Consolidated Financial Statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION
In our opinion, the Consolidated Financial Statements give a true and fair view of the financial position of European Aeronautic
Defence and Space Company EADS N.V. as at 31 December 2008, and of its result and its cash flows for the year then ended inaccordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of theNetherlands Civil Code.

EMPHASIS OF MATTER
Without qualifying our opinion above, we draw attention to all of the specific disclosures made by the Company in its notes to
the Consolidated Financial Statements under Note 3 “Accounting for the A400M Programme” in relation with the risks anduncertainties attached to the A400M programme.

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Report on other legal and regulatory requirements
Pursuant to the legal requirement under 2:393 sub 5 part f of the Netherlands Civil Code, we report, to the extent of ourcompetence, that the management board report is consistent with the Consolidated Financial Statements as required by 2:391 sub
4 of the Netherlands Civil Code.
Rotterdam, 9 March 2009

Amsterdam, 9 March 2009

KPMG Accountants N.V.

Ernst & Young Accountants LLP

L.A. Blok

F.A.L. van der Bruggen

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4Company
Financial Statements
BALANCE SHEET OF THE COMPANY
FINANCIAL STATEMENTS106

INCOME STATEMENT OF THE COMPANY
FINANCIAL STATEMENTS

107

EADS FIN ANCIAL S TATEMENTS 2008

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COMPANY FINANCIAL STATEMENTS

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BALANCE SHEET OF THE COMPANY FINANCIAL STATEMENTS(in €m)Note

At 31 December
2008

Goodwill

2

4,354

4,354

Financial fixed assets

2

9,575

11,303

Non-current securities

4

3,035

2,685

16,964

18,342

AssetsAt 31 December
2007

Fixed assets

Non-fixed assets
Receivables and other assets

3

5,398

5,526

Securities

4

3,909

1,595

Cash and cash equivalents

4

Total assets

5,321

6,444

14,62813,56531,592

31,907

815

814

7,836

7,968

237

3,973

3,379

2,844

Liabilities and stockholders’ equity
Stockholders’ equity(1)5Issued and paid up capital
Share premium
Revaluation reserves
Legal reserves
Treasury shares

(109)

(206)

Retained earnings(2,708)(1,857)

Result of the year

1,572

(446)

11,022

13,090332

316

Non-current liabilities
Financing liabilities

6

Other non-current liabilities

6

1,501

1,532

1,833

1,848

Current liabilities
Other current liabilities

Total liabilities and stockholders’ equity(1) The balance sheet is prepared before appropriation of the net result

106 EADS FIN ANCIAL S TATEMENTS 2008

7

18,737

16,96918,737

16,96931,592

31,907

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INCOME STATEMENT OF THE COMPANY FINANCIAL STATEMENTS(in €m)

2008

2007

Income from investments

1,763

(380)

Other results

(191)

(66)

1,572

(446)

Net result

8

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Notes to the Company
Financial Statements

2

3

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Contents
1. Basis of Presentation
2. Fixed assets
3. Receivables and other assets
4. Securities, Cash and cash equivalents
5. Stockholders’ equity
6. Non-current liabilities
7. Other current liabilities
8. Net result
9. Financial instruments
10. Commitments and contingent liabilities
11. Remuneration
12. Employees
13. Related party transactions
14. Auditors Fees

SUPPLEMENTARY INFORMATION
Auditors’ Report on the Company Financial Statements

OTHER SUPPLEMENTARY INFORMATION
1. Appropriation of result
2. Subsequent events

110 EADS FIN ANCIAL S TATEMENTS 2008

111
111
112
112
113
114
114
114
114
114
115
118
118
119

120
120

121
121
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1. Basis of Presentation
Code. As from 2005, the Netherlands Civil Code allows thatthe principles for the recognition and measurement of assets
and liabilities and determination of the result (hereinafterreferred to as principles for recognition and measurement) of
the Company Financial Statements of EADS N.V. are the sameas those applied for the consolidated EU-IFRS financial
statements. These consolidated EU-IFRS financial statements
are prepared according to the standards laid down by theInternational Accounting Standards Board and adopted by theEuropean Union (hereinafter referred to as EU-IFRS). Please
see Note 2 of the Consolidated Financial Statements for a
description of these principles.

1.1 GENERALEADS N.V., having its legal seat in Amsterdam, theNetherlands, is engaged in the holding, coordinating andmanaging of participations or other interests in and to financeand assume liabilities, provide for security and/or guarantee
debts of legal entities, partnerships, business associations andundertakings that are involved in the aeronautic, defence,
space and/or communication industry or activities that arecomplementary, supportive or ancillary thereto.
The Company Financial Statements are part of the 2008
financial statements of EADS N.V.

Participating interests including subsidiaries, over whichsignificant influence is exercised, are stated on the basis of theequity method.

The description of the company’s activities and the groupstructure, as included in the notes to the Consolidated
Financial Statements, also apply to the Company Financial
Statements. In accordance with Article 402 Book 2 of the
Dutch Civil Code the income statement is presented inabbreviated form.

1.2 PRINCIPLES FOR THE MEASUREMENT
OF ASSETS AND LIABILITIESAND THE DETERMINATION OF THE RESULTThe share in the result of participating interests consists of theshare of EADS N.V. in the result of these participatinginterests. Results on transactions, where the transfer of assets
and liabilities between EADS N.V. and its participatinginterests and mutually between participating interests
themselves, are not incorporated insofar as they can be deemed
to be unrealised.

For setting the principles for the recognition and measurementof assets and liabilities and determination of the result for its
Company Financial Statements, EADS N.V. makes use of theoption provided in section 2:362 (8) of the Netherlands Civil

Undistributed results from investments are included in theother legal reserves to the extent the company cannot enforce
dividend distribution.

2. Fixed assets
At the end of 2008, goodwill acquisition cost amounts to € 5,676 million (2007: € 5,676 million) and the cumulative amortisationand impairments to € 1,322 million (2007: € 1,322 million).
The movements in financial fixed assets are detailed as follows:(in €m)Balance at 31 December 2007
Additions

Subsidiaries

Participations

Loans

Total

10,033

94

1,176

11,303

212

322

(72)

(72)

110

Redemptions
SOP/ESOP

22

22

Net income from investments

1,754Actuarial gains/losses IAS 19

(310)

9

1,763

Dividends received

(79)

(3)

Translation differences/other changes(3,292)

(21)

(58)

(3,371)

Balance at 31 December 2008

8,238

79

1,258

9,575

(310)
(82)

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1

The investments in subsidiaries are included in the balance
sheet based on their net asset value in accordance with theaforementioned accounting principles of the Consolidated
Financial Statements. The participations include available-forsale securities, measured at fair value, and investments inassociated companies accounted for using the equity method.
The translation differences/other changes reflect mainly the
impact in the other comprehensive income related to theapplication of IAS 39.

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Significant subsidiaries, associates and joint ventures are listed
in the Appendix “Information on principal investments” to theConsolidated Financial Statements.
Loans provided to affiliated companies amount to€ 1,252 million (2007: € 1,167 million). On average, the interest
rate of the loans is 5.4%. An amount of € 545 million has amaturity between five and ten years and an amount of€ 301 million matures after ten years. The item redemptions
mainly reflects the redemption of a loan provided to Paradigm
Secure Communications.

3. Receivables and other assets(in €m)

2008

2007

Receivables from subsidiaries

4,963

5,317

435

209

5,398

5,526

Other assets
Total receivables and other assets

The receivables from subsidiaries include mainly receivables in connection with the cash pooling in EADS N.V.
The receivables and other assets are due within one year. In 2007 an amount of € 47 million was due after one year.

4. Securities, Cash and cash equivalents
The securities comprise mainly available-for-sale Securities. The
available-for-sale security portfolio contains a non-current portionof € 3,035 million (2007: € 2,685 million). For further information
please see Note 22 of the Consolidated Financial Statements.

112 EADS FIN ANCIAL S TATEMENTS 2008

EADS limits its cash equivalents to such investments having amaturity of three months or less from acquisition date.

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5. Stockholders’ equity(in €m)Balance at 31 December 2006
Capital increase

Capital
stock

Share
premiums

Revaluation
reserves

Legal
reserves

TreasurysharesRetainedearnings

Result of the
year

Total
equity

816

8,160

3,657

2,835

(349)

(2,203)99

13,015

3

43
(446)

(446)

46

Net income
48

ESOP/SOP IFRS 2
Cash distribution(97)

Transfer to legal reserves
Cancellation of shares

(204)

204
(5)

(138)

143
316

Others403(195)

Appropriation of result
Balance at 31 December 2007
Capital increase

814

7,968

2

22

3,973

2,844

(206)

(99)

(1,857)(446)

13,090

1,572

1,572

24
22

ESOP/SOP IFRS 2
Cash distribution

22

(97)

(97)

Transfer to legal reserves

(117)

117

Sale of treasury shares

39
(1)

(57)

Others
815

7,836

39

58
(3,736)

418

237

3,379

(310)

Appropriation of result
Balance at 31 December 2008

524

99

Net income

Cancellation of shares

48

(97)

(109)

(3,628)

(446)

446

(2,708)

1,572

11,022For further information to the Stockholders’ equity, please see
Note 24 of the Consolidated Financial Statements.

allocated to other legal reserves in accordance with
Article 2:389 paragraph 6 of the Dutch Civil Code.

As of 31 December 2008, the item ‘Revaluation reserves’
relates to € 420 million (2007: € 423 million) resulting fromthe fair value of Securities classified as available for sale,compensated by negative fair values of cash flow hedges,
recognised directly in equity with an amount of € 183 million(2007: € 3,550 million positive fair values).

The retained earnings include actuarial losses arising fromdefined benefit plans, recognised in equity, with an amount of€ 1,270 million (2007: € 960 million).

The legal reserves are related to EADS’ share in theundistributed results from investments for € 977 million(2007: € 841 million) internally generated capitalised
development costs of € 881 million (2007: € 900 million),€ 1,521 million (2007: € 1,103 million) resulting from currencytranslation effects of affiliated companies.

Pursuant to Dutch law, limitation exist relating to the
distribution of stockholders’ equity with an amount of€ 4,614 million (2007: € 7,631 million). The limitations relate
to capital stock of € 815 million (2007: € 814 million), torevaluation reserves of € 420 million (2007: € 3,973 million)
and to legal reserves of € 3,379 million (2007: € 2,844 million).
In general, gains related to available for sale securities, fairvalues of cash flow hedges, currency translation effects ofaffiliated companies and capitalised development costs reducethe distributable stockholders’ equity.

The internally generated development costs reflect capitalised
development costs in the consolidated subsidiaries and

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6. Non-current liabilities
The financing liabilities include a long term loan, granted by
the European Investment Bank to EADS in the amount of
US$ 421 million and a shareholder loan granted by Sogeade in
the amount of € 29 million. For further details, please see
Note 27 of the Consolidated Financial Statements.

The other non-current liabilities include mainly liabilities tosubsidiaries in connection with the cash pooling in
EADS N.V.

7. Other current liabilities(in €m)

2008

2007

Liabilities to subsidiaries

17,003

15,881

Liabilities to related companies

1,404

986

330

102

18,737

16,969Other liabilities
Total

The liabilities to subsidiaries comprise mainly liabilities in connection with the cash pooling in EADS N.V.

8. Net result
The net income in 2008 amounts to € 1,572 million (2007: loss of € 446 million).

9. Financial instruments
By the nature of the activities carried out, EADS is exposed toa variety of financial risks, especially foreign currency
exchange rate risks and interest risks. EADS uses financial
instruments in order to limit these financial risks. Information

to the terms and conditions of the financial instruments andthe respective fair values is provided in Note 35 of theConsolidated Financial Statements.

10. Commitments and contingent liabilities
EADS N.V. issues guarantees on behalf of consolidated
companies with an amount of € 120 million. The commitmentsof these companies to third parties mainly relate to theiroperating business as described in Note 34 to the Consolidated

114 EADS FIN ANCIAL S TATEMENTS 2008

Financial Statements. The company is heading a fiscal unity,
which also includes EADS Finance B.V. and therefore thecompany is several and jointly liable for income tax liabilities ofthe fiscal unity as a whole.

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11. Remuneration
The total remuneration of the Non Executive and the Executive Members of the Board of Directors and former directors in2008 and 2007 can be summarised as follows:
NON-EXECUTIVE MEMBERS OF THE BOARD(in € )

2008

2007

Fixum

263,125

240,000–

550,370

322,500

390,000

2008

2007

Bonus (related to reporting period)
Fees

EXECUTIVE MEMBERS OF THE BOARD(in € )

Fixum
Bonus (related to reporting period)

900,000

2,729,179

1,545,500

4,028,998

The remuneration of the Non-Executive Members of the Board of Directors was as follows:
SUMMARY TABLE OF THE REMUNERATION OF THE NON-EXECUTIVE DIRECTORS
Directors’ remuneration in respect of 2008***

Directors’ remuneration in respect of 2007

Fixum

Attendance Fees

Fixum

Variablecompensation (Bonus)

Current Non-Executive Board Members*(in € )(in € )(in € )(in € )(in € )

Rüdiger Grube

52,50052,50030,000109,81385,000Rolf Bartke

5,625

45,000-11,76615,000Dominique D’Hinnin

5,625

40,000-11,76615,000Juan Manuel Eguiagaray Ucelay

30,00045,00030,00062,75050,000Arnaud Lagardère

54,375

10,00060,000113,734

60,000Hermann-Josef Lamberti

5,625

40,000-11,766

10,000

-

-

-

-

-

Sir John Parker

5,625

25,000-11,76620,000Michel Pébereau

20,00025,000-41,83325,000Bodo Uebber

20,00040,000-41,833

10,000Manfred Bischoff

15,000-60,00031,37550,000François David

24,375-30,00050,98430,000Michael Rogowski

24,375-30,00050,98420,000263,125

322,500

240,000

550,370

390,000

Lakshmi N. Mittal**

Attendance Fees

Former Non-Executive Board Members*

Total
*

Prorata in accordance with their periods of membership with the Board of Directors. Most of the current Non-Executive Board Members were appointed in May or October 2007.
Fixum and variable compensation are based on their presence in the prior year.
** Remuneration waived at the Director’s request.
*** Starting 1 January 2008, Non-Executive Board Members are no longer entitled to receive variable compensation (bonus).

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The remuneration of the Executive Members of the Board of Directors was as follows:
SUMMARY TABLE OF THE REMUNERATION OF THE CURRENT AND FORMER EXECUTIVE DIRECTORS
Directors’ remuneration in respect of 2008

Directors’ remuneration in respect of 2007*

Fixum

Variablecompensation(Bonus)(in € )(in € )(in € )(in € )

900,000

1,545,500

900,000

1,515,250

Thomas Enders***--

750,000

1,214,373

Jean-Paul Gut***--

495,839

525,000

Executive Board Members
Louis Gallois

Hans Peter Ring***
Total

Variablecompensation(Bonus)**

Fixum

-

-

583,340774,375

900,000

1,545,500

2,729,179

4,028,998***

The remuneration disclosed above does not include any termination indemnities for Jean-Paul Gut related to 2007 which were disclosed in the 2007 annual report.
In previous years, the part of the Executive Board Members ’ compensation which is paid by EADS NV was disclosed within the fixum.
The EADS NV compensation is now disclosed as a component of the variable compensation related to the reporting period.
*** Prorata in accordance with their period of membership with the Board of Directors.

The bonus conditions are disclosed in the Board Report, Chapter 4.4.1.2.
The table below gives an overview of the interests of the current Executive Board Director under the various long term
incentive plans of EADS:STOCK OPTION PLANS
Number of options
year of plan

initially
granted

as at
1 Jan. 2008

granted in2008

exercisedduring 2008

as at
31 Dec. 2008

exercise price(in € )

expirydate 2008

67,50067,500--67,50025.65

16 Dec. 2016

Louis Gallois
2006

PERFORMANCE SHARE PLAN
Number of performance shares*
year of plan

initially
granted

as at
1 Jan. 2008

granted in
2008

vestedduring 2008

as at
31 Dec. 2008

vesting date

16,875

Publication of
the 2009 annual
results,
expected in
March 2010Louis Gallois

2006

*

16,875

16,875

Vesting of all performance shares granted to the Chief Executive Officer is subject to performance conditions.

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PERFORMANCE UNIT PLANS
Number of performance units**

granted in 2007

vesting date

33,700

Vesting schedule is made up of 4 payments over 2 years:> 25% expected in May 2011;> 25% expected in November 2011;> 25% expected in May 2012;> 25% expected in November 2012.

Louis Gallois**

Vesting of all performance units granted to the Chief Executive Officer is subject to performance conditions.

Number of performance units**

granted in 2008

vesting date

40,000

Vesting schedule is made up of 4 payments over 2 years:> 25% expected in May 2012;> 25% expected in November 2012;> 25% expected in May 2013;> 25% expected in November 2013.

Louis Gallois**

Vesting of all performance units granted to the Chief Executive Officer is subject to performance conditions.

STOCK OPTION PLANS
To the other current Members of the Executive Committee and to the Group’s senior management, the number of outstanding
stock options amounted to 26,327,070 at 31 December 2008.
During the year 2008, none of the Executive Committee Members, including former Executive Board Directors, have exercised
options granted under the various EADS stock option plans. Exercises of options by the EADS Executive Committee Members
are disclosed on the EADS internet website in accordance with the applicable regulations.

PERFORMANCE AND RESTRICTED SHARE PLANS
To the current Members of the Executive Committee and to the Group’s senior management, the number of outstanding
performance and restricted shares amounted to 1,652,975 at 31 December 2008.

PERFORMANCE AND RESTRICTED UNIT PLANS
To the current Members of the Executive Committee and to
the Group’s senior management, the number of outstanding
performance and restricted units amounted to 5,070,660 at
31 December 2008.
The expense accounted for in 2008 for stock options,performance shares and performance units granted to theChief Executive Officer was € 0.5 million.
For further information on these various plans, please see
Note 36 of the consolidated IFRS financial statements.

The pension benefit obligation for the Executive Committee
Members is as follows:
The Members of the Executive Committee have pension
promises as part of their employment agreements.
The general policy is to give them annual pensions of 50%of their annual base salary upon reaching 5 years of service
in the Executive Committee of EADS at the age of 60 or 65.
These rights can gradually increase to 60% after a second term,
usually after ten years of service in the EADS Executive
Committee.

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1

These pension schemes have been implemented throughcollective executive pension plans in France and Germany.
These pension promises have also separate rules e.g. forminimum length of service and other conditions to comply
with national regulations.

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For the Chief Executive Officer, the amount of the pension
defined benefit obligation amounted to € 1.4 million as of
31 December 2008, while the amount of current service andinterest cost related to his pension promise accounted for
during fiscal year 2008 represented an expense of€ 0.6 million. This obligation has been accrued for in thefinancial statements.

OTHER BENEFITS
All amounts reported above for the Executive Board Directors(current and former) are free of benefits in kind, as explained
below, they are entitled to, as well as all national social andincome tax impacts.

EADS has not provided any loans to / advances to / guarantees
on behalf of Directors.
For further information on the remuneration, please see
Note 37 of the Consolidated Financial Statements.

The Chief Executive Officer is entitled to a company car. The
value of his company car is € 23,977.

12. Employees
The number of persons employed by the company at year end 2008 was 2 (2007: 3).

13. Related party transactions
In 2007, Lagardère and the French State granted to EADS their received dividend for 2006 in the amount of € 29 million as aninterest free loan.

118 EADS FIN ANCIAL S TATEMENTS 2008

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14. Auditors FeesSERVICES OF STATUTORY AUDITORS AND MEMBERS OF THEIR NETWORK RENDERED TO THE GROUP FOR THE FINANCIALYEARS 2008 AND 2007
KPMG Accountants N.V.
2008
Amountin k€Ernst & Young Accountants
2007%

Amount
in k€

4,872

67.5

821

11.4

5,693

Legal, tax, employment

2008%

Amount
in k€

5,291

73.2

491

6.8

78.9

5,782

1,191

16.5

Information Technology

251

Other (to be specified if > 10% of the fees
for the audit)

2007%

Amount
in k€

%

4,684

84.7

4,571

86.7

548

9.9

284

5.4

80.0

5,232

94.6

4,855

92.1

897

12.4

160

2.9

333

6.3

3.5

117

1.6

0

0.0

0

0.0

82

1.1

428

6.0

138

2.5

82

1.6

Sub-total

1,524

21.1

1,442

20.0

298

5.4

415

7.9

Total

7,217

100.0

7,224

100.0

5,530

100.0

5,270

100.0

Audit
Audit process, certification,
examination of individualand consolidated accounts
Additional tasks
Sub-total
Other services as relevant

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SUPPLEMENTARY INFORMATION
Auditors’ Report on the Company Financial Statements
To: The EADS N.V. shareholders.

REPORT ON THE COMPANY FINANCIAL STATEMENTS
We have audited the accompanying Company Financial Statements 2008 which are part of the financial statements of European
Aeronautic Defence and Space Company EADS N.V., Amsterdam, which comprise the balance sheet as at 31 December 2008,
the profit and loss account for the year then ended and the notes.

Management’s responsibility
Management is responsible for the preparation and fair presentation of the Company Financial Statements and for the preparationof the management board report, both in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility
includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of theCompany Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on the Company Financial Statements based on our audit. We conducted our audit inaccordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the Company Financial Statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Company Financial
Statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material
misstatement of the Company Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the Company Financial Statements in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of theCompany Financial Statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the Company Financial Statements give a true and fair view of the financial position of European Aeronautic Defence
and Space Company EADS N.V. as at 31 December 2008, and of its result for the year then ended in accordance with Part 9 of Book 2of the Netherlands Civil Code.
Emphasis of Matter
Without qualifying our opinion above, we draw attention to all of the specific disclosures made by the Company in its notes
to the Consolidated Financial Statements under Note 3 “Accounting for the A400M Programme” in relation with the risks anduncertainties attached to the A400M programme.

120 EADS FIN ANCIAL S TATEMENTS 2008

NOTES TO THE COMPANY FINANCIAL STATEMENTS> Other Supplementary Information

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REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Pursuant to the legal requirement under 2:393 sub 5 part f of the Netherlands Civil Code, we report, to the extent
of our competence, that the management board report is consistent with the Company Financial Statements as requiredby 2:391 sub 4 of the Netherlands Civil Code.
Rotterdam, 9 March 2009

Amsterdam, 9 March 2009

KPMG Accountants N.V.
L.A. Blok

Ernst & Young Accountants LLP
F.A.L. van der Bruggen

OTHER SUPPLEMENTARY INFORMATION
1. Appropriation of result
Articles 30 and 31 of the Articles of Association provide that the Board of Directors shall determine which part of the result
shall be attributed to the reserves. The general meeting of shareholders may dispose of a reserve only upon a proposal of theBoard of Directors and to the extent it is permitted by law and the Articles of Association. Dividends may only be paid after
adoption of the annual accounts from which it appears that the shareholders’ equity of the company is more than the amountof the issued and paid-in part of the capital increased by the reserves that must be maintained by law.
It will be proposed at the Annual General Meeting of Shareholders that the profit of € 1,572 million as shown in the income
statements for the financial year 2008 is to be added to retained earnings and that a payment of a gross amount of € 0.20 per
share shall be made to the shareholders from distributable reserves.

2. Subsequent events
For further information please see Note 41 of the Consolidated Financial Statements.

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www.eads.com

European Aeronautic Defence
and Space Company EADS N.V.
P.O. Box 32008
2303 DA Leiden
The Netherlands

This document is also available
at the following addresses:
European Aeronautic
Defence and Space Company
EADS N.V.
In France
37, boulevard de Montmorency
75781 Paris cedex 16 – France
In Germany
81663 Munich – Germany
In Spain
Avenida de Aragón 404
28022 Madrid – Spain