Airbus 2015 Annual Report Download - page 248

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 66 l
Notes to the IFRSConsolidatedFinancialStatements
2.7 Capital Structure and Financial Instruments
medium-term bonds. For its financial instruments portfolio,
the Group has an Asset Management Committee in place that
meets regularly and aims to limit the interest rate risk on a fair
value basis through a value-at-risk approach.
Commodity price risk — The Group is exposed to risk relating
to fluctuations in the prices of commodities used in the supply
chain. The Group manages these risks in the procurement
process and to a certain extent uses derivative instruments in
order to mitigate the risks associated with the purchase of raw
materials. To the extent that the gains or losses of the derivative
and those of the hedged item or transaction do not match
in terms of profit or loss, the Group applies cash flow hedge
accounting to the derivative instruments.
Equity price risk — The Group is to a small extent invested in
equity securities mainly for operational reasons. The Group’s
exposure to equity price risk is hence limited. Furthermore, the
Group is exposed under its LTIP to the risk of AirbusGroup share
price increases. The Group limits these risks through the use of
equity derivatives that qualify for hedge accounting and have
been designated as hedging instruments in a cash flow hedge.
Sensitivities of market risks — The approach used to measure
and control market risk exposure within the Group’s financial
instrument portfolio is, amongst other key indicators, the
value-at-risk (“VaR”). The VaR of a portfolio is the estimated
potential loss that will not be exceeded over a specified period
of time (holding period) from an adverse market movement
with a specified confidence level. The VaR used by the Group
is based upon a 95% confidence level and assumes a five-day
holding period. The VaR model used is mainly 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 of potential future scenarios for
market price movements.
The Group’s VaR computation includes the Group’s financial
debt, short-term and long-term investments, foreign currency
forwards, swaps and options, commodity contracts, finance
lease receivables and liabilities, 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 five-day holding period assumes that it is possible to hedge
or dispose of positions within that period. This is considered
to be a realistic assumption in almost all cases but may not be
the case in situations in which there is severe 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 5%
statistical probability that losses could exceed the calculated
VaR.
 The use of historical data as a basis for estimating the
statistical behaviour of the relevant markets and finally
determining the possible range of future outcomes out of
this statistical behaviour may not always cover all possible
scenarios, especially those of an exceptional nature.
The Group uses VaR amongst other key figures in order to
determine 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 defines a
VaR limit for the total portfolio of cash, cash equivalents and
securities. The total VaR as well as the different risk-factor
specific VaR figures of this portfolio are measured and serve
amongst other measures as a basis for the decisions of the
Group’s Asset Management Committee.
Financial Statements 2015
11 22 33 44 55
QRegistration Document 2015
Annual Report 2015 Financial Statements 2015