AIRBUSIFRS 15 Update

15 February 2018

Harald Wilhelm
Chief
FinancialOfficerTheactual IFRS
15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

SAFE HARBOUR STATEMENT

2DISCLAIMER
This presentation includes forward-looking statements. Words such as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “plans”, “projects”, “may” and similar
expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements made about strategy, ramp-up anddelivery schedules, introduction of new products and services and market expectations, as well as statements regarding future performance and outlook.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could
cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.
These factors include but are not limited to:Changes in general economic, political or market conditions, including the cyclical nature of some of Airbus’ businesses;
Significant disruptions in air travel (including as a result of terrorist attacks);
Currency exchange rate fluctuations, in particular between the Euro and the U.S. dollar;
The successful execution of internal performance plans, including cost reduction and productivity efforts;
Product performance risks, as well as programme development and management risks;
Customer, supplier and subcontractor performance or contract negotiations, including financing issues;Competition and consolidation in the aerospace and defence industry;
Significant collective bargaining labour disputes;
The outcome of political and legal processes including the availability of government financing for certain programmes and the size of defence and spaceprocurement budgets;
Research and development costs in connection with new products;
Legal, financial and governmental risks related to international transactions;
Legal and investigatory proceedings and other economic, political and technological risks and uncertainties.
As a result, Airbus’ actual results may differ materially from the plans, goals and expectations set forth in such forward-looking statements.
For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Airbus “Registration Document” dated 4 April 2017,including the Risk Factors section.
Any forward-looking statement contained in this presentation speaks as of the date of this presentation. Airbus undertakes no obligation to publicly revise or update
any forward-looking statements in light of new information, future events or otherwise.
Rounding disclaimer:
Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
IFRS 15 Estimate Disclaimer:
The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1st January 2018. The Company has not finalised the re-run of the IFRS
15 changes on IT systems. The new accounting policies are subject to change until the Company presents its first consolidated financial statements that include thedate of initial application.
The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

INTRODUCING IFRS 15 “REVENUE FROM CONTRACTS WITH
CUSTOMERS”▪ IFRS 15 effective from January 1st 2018, now the standard for revenue
recognition, measurement, and disclosure▪ IFRS 15 will not impact cumulative profit or cash over the lifetime of a contract▪ FY 2018 will be prepared under full application of IFRS 15, with FY 2017 restated▪ Airbus has chosen the full retrospective method of implementation. Cumulative
estimated catch-up adjustment to opening equity balance as of 1st January 2017 of€ -2.1 bn▪ Revenues now recorded net of engine concessions for all Commercial Aircraft
programmes, resulting in an estimated reduction in 2017 revenues and cost of salesof ~ € -7 bn, with no impact to EBIT
▪ 2018 Earnings guidance is issued under IFRS 15; the application of IFRS 15
is expected to bring an increase of ~ € 0.1 bn to 2018 EBIT Adjusted

The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

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IFRS 15 REPLACES IAS 11 “CONSTRUCTION CONTRACTS” AND
IAS 18 “REVENUE”
IFRS 15

Current Principles

One model for revenue recognition for all types ofcontracts

Several models for revenue recognition▪ IAS 18: Sale of goods and delivery of services▪ IAS 11: Construction contracts▪ Specific interpretations (IFRIC13, IFRIC15, IFRIC18)▪

▪
▪

Revenue recognition is based on satisfying
performance obligations in a given contract according
to the transfer of control of goods or services

Higher probability threshold for variable revenue▪ Variable revenues recognised only when ‘highly
probable’ that benefits will flow to seller and thatsignificant reversal will not occur▪
▪

IAS 18: Recognition based on risks and rewards
IAS 11: Contractual margin reflected

Lower probability threshold for variable revenue▪ Variable revenues recognised when ‘probable’ thatbenefits will flow to the seller

No impact on cumulative profit or cash recognised over contract lifecycle
Some impact on revenue recognition and profit phasing

The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

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IFRS 15: KEY AIRBUS CONSIDERATIONS
1.

Separation of contracts into
performance obligations (POs)

Each performance obligation will reflect an individual
margin; several POs possible for one contract
Point in time:▪ Revenue recognition at delivery is the primary method
for most contracts.

2.

Timing of Recognition

Over time:

Alignment of revenue& order book value▪ Revenues and margins are recognised as costs areincurred, i.e. cost-to-cost instead of milestones

3.

Variable Consideration

Variable revenues will be measured to reflect “highlyprobable” instead of “probable” criteria

4.

Engine concessions

All commercial aircraft revenues will reflect price net ofengine concessions based on estimates

5.

Order bookThe order book will reflect the minimum future revenues
to be recognised on the contracts rather than the listprice

Key programme considerations: A350 launch customer contracts, A400M, NH90 and Tiger
The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

5A350 LAUNCH CONTRACTS: IFRS 15 KEY CONSIDERATIONSIFRS 15Current Standard

Recognise average contractual margin
instead of individual margin. Costs capitalised
to WIP and released to cost of sales based onaverage contract margin

Revenues recognised at delivery

1.

Multiple POs

Each aircraft forms a distinct PO with anindividual margin. Learning curve effects
reflected in P&L upon delivery

2.

Timing ofrecognition

Revenues recognised at delivery (unchanged)

Assessment of provision for onerous contracts remains on a per contract basis

Scope▪ Limited number of aircraft impacted: consideration only applies to launch
contracts

Revenues▪ Limited impact. Revenues already recognised net of engine concessions

KeyElements
EBIT Adjusted▪ 2017: Decrease from A350 launch customer contracts from lower unit margin vs.
average contract margin▪ 2018: Increase expected reflecting progress along the learning curve

The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

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A400M: IFRS 15 KEY CONSIDERATIONSIFRS 157Current Standard

1.

Multiple POs

Individual margin for development,
aircraft production, retrofit andservices

Recognise average contractual
margin instead of individual margin forwhole launch contract

2.

Timing ofrecognition

Development revenues recognised ascosts are incurred, production, retrofit
and services recognised at respective
deliveryContract revenues recognised overtime (technical milestones)

3.

Variablerevenue

Updated to reflect “highly probably” vs.
“probable” recovery

Considered upon “probable” criteria

Assessment of IFRS 15 implications on-going

The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

IFRS 15 EXPECTED CONSOLIDATED RESTATEMENTS
IN € BILLION

EquityAs reported 31December 2016

Estimatedadjustments due
to adoption ofIFRS 15

Estimated
opening balanceat 1 January 2017

3.7(2.1)

1.6Equity

IFRS 15 will not impact the overall profitability over the lifetime of contracts and the cash
flows. As such IFRS 15 quantitative impacts on equity are phasing differences

2017: Decrease mainly from net engine concessions (~ € -7 bn) on all Commercial Aircraft

Revenues
2018: Negative effect expected to reduce

EBITAdjusted

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2017: Decrease mainly from A350 as lower unit margin vs. average contract margin
2018: Increase mainly from A350 as higher unit margin vs. average contract margin

No impact on cumulative cash or profit recognised over contract lifecycle

The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

KEY MESSAGES▪ IFRS 15, the standard for revenue recognition, measurement, anddisclosure, effective from 1st January 2018
▪ No impact on cumulative profit and cash recognised over contractlifecycle▪ FY 2018 will be prepared under application of IFRS 15 with FY 2017
restated▪ 2018 Earnings guidance is issued under IFRS 15; the application ofIFRS 15 is expected to bring an increase of ~ € 0.1 bn to 2018 EBIT
Adjusted

The actual IFRS 15 impacts may differ from the estimates when adopting the standard as of 1 st January 2018.

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