Airbus 2015 Annual Report Download - page 298

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 116 l
Other Supplementary Information Including the Independent Auditor’s Report
Goodwill impairment
Description
Goodwill amounts to EUR 9.9billion (2014: 10billion) and represents 9% (2014:10%) of the balance sheet total and 166% (2014: 141%) oftotal
equity. There is a risk of irrecoverability of the Group’s significant goodwill balance due to weak demand in certain markets and aircraft market
cyclicality. The Company used assumptions such as growth rates, weighted average cost of capital and underlying foreign exchange rates. Due
to the inherent uncertainty involved in forecasting and discounting future cash flows, which are the basis of the assessment ofrecoverability, this
is one of the key judgemental areas.
Reference is made to the disclosure on Note17 “Intangible assets” of the financial statements.
Our response
In this area our audit procedures included, among others, testing of the Group’s budgeting procedures upon which the forecasts are based
and the principles and integrity of the Group’s discounted cash flow model. We used our own valuation specialist to assist us in evaluating
the assumptions and methodologies used by the Group, in particular relating to the discount rate used. We also evaluated management’s
sensitivity analyses on the assumptions for each cash generating unit. We compared the sum of the discounted cash flows to the Group’s market
capitalisation to assess the reasonableness of those cash flows. We also assessed whether the Group’s disclosures about the sensitivity of the
outcome of the impairment assessment to changes in key assumptions reflected the risks inherent in the cash flow model.
Derivative financial instruments, including impact on capitalisation of AirbusGroup
Description
AirbusGroup operates in a business environment that is exposed to currency and interest rate volatility. A significant portion of the Group’s
revenue is denominated inUSdollars, while a major part of its costs is incurred in Euro and, to a lesser extent, in pounds Sterling. In response to
these risks the Group uses financial instruments (mainly currency forwards) to mitigate the exposure to changes in market rates. There is a high
inherent risk of error in the Group financial statements, both in the valuation of the financial instruments and in the presentation and disclosure
in the financial statements.
The magnitude of the Group’s hedge portfolio and potential significant changes in the exchange rate of the US dollar versus the Euro could have
a negative impact on the equity of the Group via the “mark to market” valuation of the hedge portfolio. It therefore also has a major impact on the
capitalisation of AirbusGroup, with net equity (as percentage of total assets) amounting to 5.6% per 31December 2015 (2014: 7.4%).
Reference is made to Note35 “Information about financial instruments” of the financial statements.
Our response
For the audit of financial instruments we used specialists who tested the controls around the Group’s central treasury system, independently
calculated the valuation of the treasury portfolio and tested the application of hedge accounting rules and the resulting accounting treatment.
We also obtained counterparty confirmation of the outstanding financial instruments to verify the existence and ownership. Finallyweevaluated
whether appropriate disclosures relating to financial instruments were made in the financial statements.
Financial Statements 2015
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QRegistration Document 2015
Annual Report 2015 Financial Statements 2015