Airbus 2015 Annual Report Download - page 226

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 44 l
Notes to the IFRSConsolidatedFinancialStatements
2.5 Operational Assets andLiabilities
Off-balance sheet commitments — Financing commitments
are provided to the customer either as backstop commitments
before delivery, asset value guarantees at delivery, operating
head-lease commitments or counter guarantees:
(i) Backstop commitments are guarantees by Airbus, made
when a customer-order is placed, to provide financing to
the customer in the event that the customer fails to secure
sufficient funding when payment becomes due under the
order. Such commitments are not considered to be part of
gross customer financing exposure as (i) thefinancing is not
in place, (ii) commitments may be transferred in full or part to
third parties prior to delivery, (iii)past experience suggests
it is unlikely that all such proposed financings actually will
be implemented and, (iv)the Group retains the asset until
the aircraft is delivered and does not incur an unusual risk
in relation thereto. In order to mitigate customer credit risks
for the Group, such commitments typically contain financial
conditions which guaranteed parties must satisfy in order
to benefit therefrom.
(ii) Asset value guarantees are guarantees whereby the Group
guarantees a portion of the value of an aircraft at a specific
date after its delivery. Airbus considers the financial risks
associated with such guarantees to be acceptable, because
(i)the guarantee only covers a tranche of the estimated
future value of the aircraft, and its level is considered
prudent in comparison to the estimated future value of each
aircraft, and (ii)the exercise dates of outstanding asset value
guarantees are distributed through 2025. It is management
policy that the present value of the guarantee given does
not exceed 10% of the sales price of the aircraft.
As of 31December 2015, the nominal value of asset
value guarantees provided to beneficiaries amounts to
€ 781million (2014: € 861million), excluding € 97million
(2014: € 146million) where the risk is considered to be
remote. The present value of the risk inherent in asset
value guarantees where a settlement is being considered
probable is fully provided for and included in the total of
provisions recognised for asset value risks of € 550million
(2014: € 618million) (see Note22 “Provisions, contingent
assets and contingent liabilities”).
(iii) Operating head-lease commitments – The Group has
entered into head-lease sub-lease transactions in which
it acts as a lessee under an operating head-lease and
lessor under the sub-lease. The Group’s gross customer
financing exposure to operating head-lease commitments,
determined as the present value of the future head-lease
payments, was € 92million in 2015 (2014: € 135million).
Exposure — In terms of risk management, the Group
manages its gross exposure arising from its sales financing
activities (“gross customer financing exposure”) separately for
(i) customer’s credit risk and (ii) asset value risk.
Gross customer financing exposure is the sum of
(i) thebook value of operating leases before impairment,
(ii)the outstanding principal amount of finance leases or loans
due before impairment, (iii) the guaranteed amounts under
financial guarantees and the net present value of head-lease
commitments, (iv) the book value of second hand aircraft for
resale before impairment, and (v) the outstanding value of any
other investment in sales financing SEs before impairment.
This gross customer financing exposure may differ from the
value of related assets on the Group’s statement of financial
position and related off balance sheet contingent commitments,
mainly because (i) assets are recorded in compliance with IFRS,
but may relate to transactions that are financed on a limited
recourse basis and (ii) the carrying amount of the assets on the
Consolidated Statement of Financial Position may have been
adjusted for impairment losses.
Gross customer financing exposure amounts to US$1.5billion
(€ 1.4billion) (2014: US$1.3billion (€ 1.1billion)).
Net exposure is the difference between gross customer
financing exposure and the collateral value. Collateral value
is assessed using a dynamic model based on the net present
value of expected future receivables, expected proceeds from
resale and potential cost of default. This valuation model yields
results that are typically lower than residual value estimates by
independent sources in order to allow for what management
believes is its conservative assessment of market conditions and
for repossession and transformation costs. The net exposure
is fully provided for by way of impairment losses and other
provisions.
Impairment losses and provisions — For the purposes of
measuring an impairment loss, each transaction is tested
individually. Impairment losses relating to aircraft under operating
lease and second hand aircraft for resale (included in inventory)
are recognised for any excess of the aircraft’s carrying amount
over the higher of the aircraft’s value in use and its fair value
less cost to sell. Impairment allowances are recognised for
finance leases and loans when their carrying amounts exceed
the present value of estimated future cash flows (including cash
flows expected to be derived from a sale of the aircraft). Under
its provisioning policy for sales financing risk, the Group records
provisions as liabilities for estimated risk relating to off-balance
sheet commitments.
Security — Sales financing transactions, including those
that are structured through SE, are generally collateralised by
the underlying aircraft. Additionally the Group benefits from
protective covenants and from security packages tailored
according to the perceived risk and the legal environment.
The Group endeavours to limit its sales financing exposure by
sharing its risk with third parties usually involving the creation
of an SE. Apart from investor interest protection, interposing
an SE offers advantages such as flexibility, bankruptcy
Financial Statements 2015
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QRegistration Document 2015
Annual Report 2015 Financial Statements 2015