Since 2003, with the application of IAS 38 “Intangible Assets”, EADS has assessed whether product-related development costs qualify for capitalisation as internally generated intangible assets. Criteria for capitalisation recognition are strictly applied. Consequently, all research and development costs not meeting the IAS 38 criteria are expensed as incurred in the consolidated statement of income.

For 2004, €169 million of product-related development costs were capitalised in accordance with IAS 38 (including €152 million relating to the Airbus A380 programme), with an additional €293 million and €411 million capitalised in 2005 and 2006, respectively (including an additional €259 million and €335 million relating to the Airbus A380 programme, respectively).

Capitalised development costs are generally amortised over the estimated number of units produced if no other procedure reflects the consumption pattern more appropriately, such as for development costs that have been capitalised during the development phase of a new aircraft. These are generally amortised over the estimated useful life of the internally generated intangible asset commencing once type certification has been achieved. Amortisation of capitalised development costs is recognised in cost of sales. Internally generated intangible assets are reviewed for impairment annually when the asset is not yet in use and subsequently whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.