When a triggering event, such as an adverse material market event or a significant change in forecasts or assumptions, occurs, EADS performs an impairment test on the assets, group of assets, subsidiaries, joint ventures or associates likely to be affected. In addition, EADS tests goodwill for impairment in the fourth quarter of each financial year, whether or not there is any indication of impairment. An impairment loss is recognised in the amount by which the asset’s carrying amount exceeds its recoverable amount.

Generally, the discounted cash flow method is used to determine the value of the assets. The discounted cash flow method is sensitive to the selected discount rate and estimates of future cash flows by EADS’ management (“Management”).

Consequently, slight changes to these elements can materially affect the resulting asset valuation and therefore the amount of the potential impairment charge.

The discount rate used by EADS is derived from the Group’s weighted average cost of capital, adjusted to reflect the riskiness of the business concerned. See “Notes to Consolidated Financial Statements (IFRS) — Note 2: Significant accounting policies — Impairment of non-financial assets” and “Note 12: Intangible assets”.

The impairment of goodwill has an effect on profitability, as it is recorded in the line item “Other expenses” on EADS’ consolidated statement of income. No goodwill was impaired in 2006, 2005 or 2004. However, in 2006, non-goodwill asset impairment charges were recorded at EADS Sogerma (€(84) million in respect of its subsidiaries Sogerma Services, Sogerma Tunisia and Barfield, which were sold to the TAT Group on 10 January 2007, and €33 million relating to the remaining Sogerma subsidiaries, Seca and Revima), and at Airbus (€250 million) related primarily to impairment of inventory and fixed assets on the A380 programme. These charges in turn had a negative effect on EBIT* for 2006. See “Notes to Consolidated Financial Statements (IFRS) — Note 12: Intangible assets” and “Note 13: Property, plant and equipment”.