Airbus 2015 Annual Report Download - page 255

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 73 l
Notes to the IFRSConsolidatedFinancialStatements
2.
2.7 Capital Structure and Financial Instruments
Financial Liabilities Classified as Level3
The financial liabilities measured at fair value that are classified as
Level3 consist of several written put options on non-controlling
interest (“NCI puts”) of Group subsidiaries. The fair values of
these NCI puts (i.e. the net present value of their redemption
amount on exercise) are derived from a discounted cash flow
analysis of the latest operating planning figures of the respective
entities.
The fair value measurements are performed on an annual basis
in line with the operative planning cycle. Apart from the detailed
five-year operating planning figures, there are two unobservable
inputs that significantly affect the values of the NCI puts: the
WACC used to discount the forecasted cash flows and the
growth rate used to determine the terminal value. WACC and
growth rates as well as operating planning figures that were
used for the determination of the Level3 fair values are derived
from the input perimeters as applied for the impairment test as
disclosed in Note17 “Intangible assets – Goodwill impairment
tests”. An increase (decrease) of the discount rates by 50 basis
points results in a decrease (increase) of the NCI put values by
€ 5million (€ 11million). An increase (decrease) in the growth
rates by 50 basis points increases (decreases) the NCI put
values by € 5million (€ 11million) respectively.
Another element of financial liabilities measured at fair value
classified as Level3 are earn-out payments that have been
agreed with former shareholders of entities acquired by the
Group in business combinations. Fair value measurement is
based on the expectation regarding the achievement of defined
target figures by the acquired entity or its ability to close identified
customer contracts.
Financial Assets Designated at Fair Value through Profit or Loss
The following types of financial assets held at 31December 2015 and 2014, respectively, are designated at fair value through
profit or loss:
(In € million)
Nominal amount at
initial recognition as
of 31December 2015
Fair value as of
31December 2015
Nominal amount at
initial recognition as of
31December 2014 Fair value as of 31December 2014
Designated at fair value through profit or
loss at recognition:    
 Money market funds (accumulating) 3,220 3,220 3,261 3,261
 Foreign currency funds of hedge funds 8 3 8 4
Total 3,228 3,223 3,269 3,265
The Group manages these assets and measures their performance on a fair value basis.
In addition, the Group invests in non-accumulating money market funds, which pay interest on a monthly basis. The fair value
of those funds corresponds to their nominal amount at initial recognition date amounting to € 720million (2014: € 302million).
Fair Value Measurement Method
The methods the Group uses to measure fair values are as
follows:
Equity instruments — The fair values of listed equity instruments
reflect quoted market prices. The fair values of unlisted equity
instruments may not be reliably measured because the range of
reasonable fair value estimates is significant and the probabilities
of the various estimates within the range cannot be reasonably
assessed. Those instruments are measured at cost, and their
carrying amounts used as a proxy for fair value.
Customer financing assets and other loans — The carrying
amounts reflected in the annual accounts are used as a proxy
for fair value.
Trade receivables and other receivables — The carrying
amounts reflected in the annual accounts are used as reasonable
estimates of fair value because of the relatively short period
between the receivables’ origination and their maturity.
Securities — The fair values of securities reflect their quoted
market price at the end of the reporting period.
Cash and cash equivalents include cash in hand, cash in
banks, checks, fixed deposits as well as commercial papers
and money market funds. The carrying amounts reflected in the
annual accounts are used as reasonable estimates of fair value
because of the relatively short period between the origination
of the instrument and its maturity or due date. The fair value
of commercial papers is determined based on Level2 input
by discounting future cash flows using appropriate interest
rates. The fair values of money market funds are determined
by reference to their quoted market price.
Derivatives — The fair values of derivative instruments reflect
quoted market prices, where available, but in most cases are
determined using recognised valuation techniques such as
option-pricing models and discounted cash flow models. The
valuation is based on observable market data such as currency
rates, currency forward rates, interest rates and yield curves,
Financial Statements 2015
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