Airbus 2015 Annual Report Download - page 296

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 114 l
Other Supplementary Information Including the Independent Auditor’s Report
The audit of the AirbusGroup consolidation and the financial statements is performed at the Airbus headquarters in Toulouse,
France. Our involvement in the audit includes participation in risk assessment and planning discussions, setting the direction
of the Group audit work (including instructions to the divisional and entity auditors), review and discussion of the planned audit
approach, obtaining an understanding of the financial reporting process, performing procedures on the Group consolidation,
participating in the evaluation of key accounting topics, reviewing the financial statements and participating in meetings with Group
and divisional management. As part of our Group audit instructions, we also issued specific questionnaires on key programmes
(A380, A350XWB and A400M) and the risk of non-compliance with laws and regulations.
The audit of the three AirbusGroup Divisions (Airbus, Airbus Defence & Space and Airbus Helicopters) is performed jointly by
KPMG network firms and other non-KPMG audit firms. Meetings were held with the divisional auditors to discuss the findings
reported to the Group audit team, as well as file reviews.
By performing the procedures mentioned above at Group entities, together with additional procedures at Group level, we have
been able to obtain sufficient and appropriate audit evidence about the Group’s financial information to provide an opinion on
the financial statements.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements. We have communicated the key audit matters to the Board of Directors and Audit Committee. The key audit matters
are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Accounting for construction contracts, including revenue recognition and loss provisions
Description
The amount of revenue and profit recognised in a year is dependent on the assessment of the stage of completion of construction contracts as
well as estimated total revenue and estimated total cost. Significant estimates are made to assess the stage of completion based on milestones,
estimated revenue and costs for the key programmes such as A400M and A350XWB (contracts with launch customers only). Depending on
these assessments, the stage of completion is determined, revenue is recognised and loss provisions are recorded when thecontract margin
is negative.
Provisions for contract losses relate mainly to the A400M and A350 XWB launch customers and are recorded when it becomes probable
thatestimated total contract costs will exceed estimated total contract revenues. Updates to these provisions can have a significant impact
onthe Group’s result and financial position. The determination of these provisions is based on best available estimates and requires significant
management judgement and assumptions associated with the technical development achievement and certification schedules, production plan
(including assumptions on ramp up), performance guarantees as well as expected outcome from ongoing negotiations with customers.
A key risk is the A400M programme which remains in a critical phase. The A400M SOC1 and 1.5 milestones remain to be achieved and therefore
the related contractual termination rights from OCCAR/Nations became exercisable (SOC 1: as of 1November 2015; SOC 1.5 asof1January
2016). Negotiations with OCCAR/Nations on military functionality, price revision formula and commercial compensation remain ongoing and are
targeted for completion in 2016.
Reference is made to the disclosure on Note3 “Key estimates and judgements”, Note10 “Revenues, cost of sales and gross margin” and
Note22 “Provisions, contingent assets and contingent liabilities” of the financial statements.
Our response
We evaluated the design and implementation of internal controls for accounting for construction contracts. We also performed detailed
procedures on individually significant programmes, including discussions with the individual Head of Programme, and evaluated management’s
assumptions in the determination of amongst others the stage of completion of a project, estimates to complete for both revenue and costs,
and any provisions for loss making contracts. We focused on management’s assessment of key contract risks and opportunities to determine
whether these are appropriately reflected in the cost to complete forecasts, and paid specific attention for example to technical development,
delivery plan and certification schedules. We challenged management’s assumptions by discussing and reviewing correspondence with
customers, considered the accuracy and consistency of similar estimates made in previous years and corroborated theassumptions with the
latest contractual information.
We paid particular attention to the loss provision for the A400M programme, including the EUR 290million additional net charge in 2015, as well
as related disclosures. We discussed the extent to which management assessed the impact on the programme of the accident on9May 2015,
and the challenges regarding delays in military functionality and deliveries, (commercial) negotiations with OCCAR/Nations, cost reduction targets
and challenges in the industrial ramp-up and the SOC 1 and 1.5 contractual termination rights. Apart from reviewing underlying documentation,
we also visited the Final Assembly Line in Seville and Bremen, and reviewed reports from Corporate Audit related to the programme.
Financial Statements 2015
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QRegistration Document 2015
Annual Report 2015 Financial Statements 2015