{ "documentInfo": { "documentType": "https://xbrl.org/2021/xbrl-json", "features": { "xbrl:canonicalValues": true }, "namespaces": { "baesystemsplc": "http://baesystemsplc.com/xbrl/2022", "ifrs-full": "http://xbrl.ifrs.org/taxonomy/2021-03-24/ifrs-full", "iso4217": "http://www.xbrl.org/2003/iso4217", "scheme": "http://standards.iso.org/iso/17442", "xbrl": "https://xbrl.org/2021", "xbrli": "http://www.xbrl.org/2003/instance" }, "taxonomy": [ "http://baesystemsplc.com/xbrl/2022/8SVCSVKSGDWMW2QHOH83-2022-12-31.xsd" ] }, "facts": { "fact-1": { "value": "Going concern statement Accounting standards require that directors satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare financial statements on a going concern basis and the Code requires that, if appropriate, this report includes a statement to that effect. Following review, the directors have concluded that it is appropriate to adopt the going concern basis for these financial statements and have not identified any material uncertainties concerning the Group\u2019s ability to do so in the 12-month period from the date of approving them. For this reason, they continue to adopt the going concern basis in preparing the accounts.The consolidated financial statements of BAE Systems plc have been prepared on a going concern basis, as discussed in the Directors\u2019 report on page 127, and in accordance with UK-adopted international accounting standards and the Companies Act 2006 applicable to companies reporting under IFRS. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-434": { "value": "Preparation of the consolidated financial statements Basis of preparation The consolidated financial statements of BAE Systems plc have been prepared on a going concern basis, as discussed in the Directors\u2019 report on page 127, and in accordance with UK-adopted international accounting standards and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest million. They have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments). Transactions in foreign currencies are translated at the exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date, with the resulting exchange differences recognised in the income statement. Significant accounting policies The significant accounting policies applied in the preparation of these consolidated financial statements are set out in the relevant notes. These policies have been applied consistently to all the years presented, unless otherwise stated. The directors believe that the consolidated financial statements reflect appropriate judgements and estimates, and provide a true and fair view of the Group\u2019s financial performance and position. Key sources of estimation uncertainty The application of the Group\u2019s accounting policies requires the use of estimates. In response to the potential impact of risks and uncertainties, the Group undertakes risk assessments and scenario planning in order to be able to respond to potential rapid changes in circumstances. The Group therefore considers a range of estimates and assumptions in the application of its accounting policies and management\u2019s assessment of the carrying value of assets and liabilities. In the event that these estimates or assumptions prove to be incorrect, there may be an adjustment to the carrying values of assets and liabilities within the next year. Potential areas of the Group\u2019s financial statements which could be materially impacted may include, but are not limited to: Accounting policy Description Notes Revenue and profit recognition The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers and finance and commercial professionals. Material changes in these estimates could affect the profitability of individual contracts. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events or circumstances. The long-term nature of many of the Group\u2019s contracts means that judgements are made in estimating future costs on a contract, as well as when risks will be mitigated or retired. The impact of global supply chain issues, volatility in global gas and energy prices, and the ongoing response to climate change, have increased uncertainty in relation to these judgements and estimates. The Group continues to work closely and collaboratively with its key customers to continue to deliver effectively on its contracts and commitments. However, the volume, scale, complexity and long-term nature of its programmes mean that a range of calculated potential sensitivities would be wide-ranging and not practicable to calculate. Owing to the ongoing uncertainty regarding the potential future impact of the current uncertainties, the Group\u2019s estimates and assumptions related to revenue recognition could be impacted by issues such as reduced productivity as a result of operation disruption, production delays and increased costs as a result of disruption to the supply chain, changing working practices to move towards net zero, or where there is uncertainty as to the recovery from customers of programme costs incurred. As shown in note 1, the Group has recognised \u00a30.3bn of revenue in respect of performance obligations satisfied or partially satisfied in previous years (2021 \u00a30.3bn). This continues to provide an approximation of the potential revenue sensitivity arising as a result of management\u2019s estimates and assumptions for variable consideration, future costs, and technical and other risks, however it may not reflect the full potential impact on the contract receivables and contract liabilities balances.
Post-employment
benefit obligations
A number of actuarial assumptions are made in assessing the value of post-employment benefit
obligations, including discount rate, inflation rate and mortality assumptions. For each of the actuarial
assumptions used there is a wide range of possible values and management estimates a point within
that range that most appropriately reflects the Group\u2019s circumstances.
If estimates relating to these actuarial assumptions are no longer valid or change due to changing
economic and social conditions, then the potential obligations due under these schemes could
change significantly.
Discount and inflation rates could change significantly as a result of a prolonged economic downturn,
monetary policy decisions and interventions or other macroeconomic issues. The impact of estimates
made with regard to mortality projections may also change.
Similarly, the values of many assets are subject to estimates and assumptions, in particular those which
are held in unquoted pooled investment vehicles. The associated fair value of these unquoted pooled
investments is estimated with consideration of the most recently available valuations provided by the
investment or fund managers. These valuations inherently incorporate a number of assumptions
including the impact of climate change on the underlying investments. The overall level of estimation
uncertainty in valuing these assets could therefore give rise to a material change in valuation within
the next 12 months.
Furthermore, estimates are required around the Group\u2019s ability to access its defined benefit surpluses,
and on what basis, which then determines the associated rate of tax to apply. Depending on the outcome,
judgement is then required to determine the presentation of any tax payable in recovering a surplus.
Note 25 provides information on the key assumptions and analysis of their sensitivities.
25
In preparing the consolidated financial statements management has considered the potential impact of climate change, in the context of
the disclosures included in the Strategic report this year and the impact of the Group\u2019s net zero ambitions. Estimates and judgement are
required in establishing how the Group will pursue its net zero targets, as well as further mitigating actions identified as part of the detailed
review of climate risks and opportunities. These have been factored in to the future business plans of the Group, through the IBP process, and
are not considered to have a material impact on the financial reporting estimates and judgements. The following additional areas of estimation
were considered in reaching this conclusion:
\u2013 estimates of future cash flows to support impairment assessments of the carrying value of non-current assets and the assessment of going
concern and the longer-term viability of the Group;
\u2013 an assessment of the useful economic lives of assets; and
\u2013 potential climate-related impacts on the Group\u2019s environmental provisions, in particular with regard to legislative changes.
Critical judgements made in applying accounting policies
In the course of preparing the financial statements and when applying its accounting policies, the Group has been required to make judgements
with regard to the actions required to enable the business to continue to meet customers\u2019 requirements, in an operating environment still dominated
by uncertainties arising from global economic uncertainties. No critical judgements have been made in the process of applying the Group\u2019s
accounting policies, other than those involving estimates, that have had a significant effect on the amounts recognised in the financial statements.
Changes in accounting policies
The following standards, interpretations and amendments to existing standards became effective on 1 January 2022 and have not had
a material impact on the Group:
\u2013 Amendments to IFRS 3 Business Combinations, effective from 1 January 2022;
\u2013 Amendments to IAS 16 Property, Plant and Equipment \u2013 Proceeds before Intended Use effective from 1 January 2022;
\u2013 Amendments to IAS 37 Onerous Contracts \u2013 Cost of Fulfilling a Contract effective from 1 January 2022; and
\u2013 Annual Improvements to IFRS Accounting Standards 2018\u20132020 Cycle effective from 1 January 2022.
The following other standards, interpretations and amendments to existing standards have been issued but were not mandatory for accounting
periods beginning on 1 January 2022. These either have been, or are expected to be endorsed by the UK Endorsement Board and are not
expected to have a material impact on the Group:
\u2013 IFRS 17 Insurance Contracts, effective from 1 January 2023;
\u2013 Amendments to IAS 1: Presentation of Financial Statements, effective from 1 January 2023;
\u2013 Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies, effective from 1 January 2023;
\u2013 Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, effective from 1 January 2023;
\u2013 Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; and
\u2013 Amendments to IAS 12: Income Taxes, effective from 1 January 2023.
Consolidation
The financial statements of the Group consolidate the results of the Company and its subsidiary entities, and include its share of its equity
accounted investments\u2019 results accounted for under the equity method.
A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable returns from
its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries
are included in the income statement from the date of acquisition.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Joint ventures are accounted for under the equity method where the Consolidated income statement includes the Group\u2019s share of their profits
and losses, and the Consolidated balance sheet includes its share of their net assets within equity accounted investments.
The assets and liabilities of overseas subsidiaries and equity accounted investments are translated at the exchange rates ruling at the balance
sheet date. The income statements of such entities are translated at average rates of exchange during the year. All resulting exchange
differences are recognised directly in a separate component of equity. Translation differences that arose before the transition date to IFRS
(1 January 2004) are presented in equity, but not as a separate component. When a foreign operation is sold, the cumulative exchange
differences recognised in equity since 1 January 2004 are recognised in the income statement as part of the profit or loss on sale.
1. Segmental analysis and revenue recognition Revenue and profit recognition Revenue represents income derived from contracts for the provision of goods and services, over time or at a point in time, by the Group to customers in exchange for consideration in the ordinary course of the Group\u2019s activities. The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers, and finance and commercial professionals. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events and circumstances. The Group typically enters into the following types of contracts with customers: \u2013 to design, build or create assets uniquely available to the customer such as ships and aircraft; \u2013 to service or maintain assets over a period of time; \u2013 to give access to software and licences; and \u2013 to offer bespoke services to customers, for example through training or the offering of cyber, intelligence and security capabilities. Revenue is recognised against each of these types of contracts in line with the following accounting policies. Performance obligations Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance obligations in the contract if the customer can benefit from them either on their own or together with other resources that are readily available to the customer and they are separately identifiable in the contract. In some cases, the Group provides warranties to its customers to give them assurance that its products and services will function in line with agreed-upon specifications. Warranties are not provided separately and, therefore, do not represent separate performance obligations. A provision for warranties is recognised when the underlying products and services are sold (see note 26 for further detail). Transaction price At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as variable price mechanisms, is included based on the expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of cumulative revenue recognised. The transaction price does not include estimates of consideration resulting from contract modifications, such as change orders, until they have been approved by the parties to the contract. The total transaction price is allocated to the performance obligations identified in the contract in proportion to their relative stand-alone selling prices. Given the bespoke nature of many of the Group\u2019s products and services, which are designed and/or manufactured under contract to the customer\u2019s individual specifications, there are typically no observable stand-alone selling prices. Instead, stand-alone selling prices are typically estimated based on expected costs plus contract margin consistent with the Group\u2019s pricing principles. Whilst payment terms vary from contract to contract, on many of the Group\u2019s contracts, an element of the transaction price is received in advance of delivery. When cash is received in advance of goods or services being delivered, a contract liability is recognised. The Group therefore has significant contract liabilities (note 23). The Group\u2019s contracts are not considered to include significant financing components on the basis that there is no difference between the consideration and the cash selling price. UK Ministry of Defence contracting rules prohibit the inclusion of financing in the sales price. Negotiations on competitive international export contracts do not make allowance for the cash payment profile. Revenue and profit recognition Revenue is recognised as performance obligations are satisfied as control of the goods and services is transferred to the customer. For each performance obligation within a contract, the Group determines whether it is satisfied over time or at a point in time. Performance obligations are satisfied over time if one of the following criteria is satisfied: \u2013 the customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance as it performs; \u2013 the Group\u2019s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or \u2013 the Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date. The Group has determined that most of its contracts satisfy the over-time criteria, either because the customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance as it is performed (typically services or support contracts, for example in the case of ongoing maintenance and support of aircraft and flying capability), or the Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date (typically development or production contracts, such as in the production of ships or aircraft to customers\u2019 unique specifications). For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for technical and other risks including the impact of global economic uncertainties and climate change. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s performance in transferring control of the goods and services to the customer. Notes to the Group accounts Strategicreport Governance Financialstatements 1. Segmental analysis and revenue recognition continued If the over-time criteria for revenue recognition are not met, revenue is recognised at the point in time that control is transferred to the customer, which is usually when legal title passes to the customer and the business has the right to payment, for example, on delivery. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense. Software licences The Group sells software licences either separately or together with other goods and services, including computer hardware and implementation, hosting and support. Revenue recognition in respect of software licences sold as part of a bundle of goods and services is considered separately when the licence is determined to be a separate performance obligation. Software licences either represent a right to access the Group\u2019s intellectual property as it exists throughout the licence period or a right to use the Group\u2019s intellectual property as it exists at the point in time at which the licence is granted. Revenue in respect of right to access licences is recognised over the licence term or, in relation to perpetual licences, over the related customer relationship and revenue in respect of right to use licences is recognised on delivery of the software to the customer or, if the customer chooses not to access and take delivery of the software, on expiry of the licence arrangement. A software licence is considered to be a right to access the Group\u2019s intellectual property as it exists throughout the licence period if all of the following criteria are satisfied: \u2013 the contract requires, or the customer reasonably expects, that the Group will undertake activities that significantly affect the intellectual property; and \u2013 the licence directly exposes the customer to the effects of those activities; and \u2013 those activities do not result in the transfer of a good or service to the customer. Contract modifications The Group\u2019s contracts are often amended for changes in customers\u2019 requirements and specifications. A contract modification exists when the parties to the contract approve a modification that either changes existing or creates new enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group\u2019s measure of progress towards the satisfaction of the performance obligation to which it relates is recognised in one of the following ways: 1. prospectively, as an additional, separate contract; 2. prospectively, as a termination of the existing contract and creation of a new contract; or 3. as part of the original contract using a cumulative catch-up. The majority of the Group\u2019s contract modifications are treated under either 1 (for example, the requirement for additional distinct goods or services) or 3 (for example, a change in the specification of the distinct goods or services for a partially completed contract), although the facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract-by-contract and may result in different accounting outcomes. Costs to obtain a contract The Group expenses pre-contract bidding costs which are incurred regardless of whether a contract is awarded. The Group does not typically incur costs to obtain contracts that it would not have incurred had the contracts not been awarded, such as sales commission. Costs to fulfil a contract Contract fulfilment costs in respect of over-time contracts are expensed as incurred. Contract fulfilment costs in respect of point in time contracts are accounted for under IAS 2 Inventories. Reporting segments The Group has five sectors which, together with HQ, make its six reporting segments as defined by IFRS 8 Operating Segments: \u2013 Electronic Systems comprises the US- and UK-based electronics activities, including electronic warfare systems, navigation systems, electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, next-generation military communications systems and data links, persistent surveillance capabilities, space electronics and electric drive propulsion systems; \u2013 Platforms & Services has operations in the US, UK and Sweden. It manufactures and upgrades combat vehicles, weapons and munitions, and delivers services and sustainment activities, including naval ship repair, and the management and operation of government-owned munitions facilities; \u2013 Air comprises the Group\u2019s UK-based air activities for European and International Markets, US Programmes and development of future combat air systems alongside its businesses in the Kingdom of Saudi Arabia, together with its 37.5% interest in the European MBDA joint venture; \u2013 Maritime comprises the Group\u2019s UK-based maritime and land activities, as well as its Australia business; \u2013 Cyber & Intelligence comprises the US-based Intelligence & Security business and UK-headquartered Digital Intelligence business, which have been aggregated together due to the similarities of the services offered. Together, they cover the Group\u2019s cyber security and secure government activities; and \u2013 HQ comprises the Group\u2019s head office and UK-based shared services activities, together with a 49% interest in Air Astana. The Board (the chief operating decision maker as defined by IFRS 8 Operating Segments) monitors the results of these reporting segments to assess performance and make decisions about the allocation of resources. Segmental performance is evaluated based on Key Performance 1 1 Indicators \u2013 sales (see page 232) and underlying EBIT (see page 233). Finance costs and taxation expense are managed on a Group basis. 1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302 . BAE Systems plc Annual Report 2022 231
1. Segmental analysis and revenue recognition continued
Sales
1
and revenue by reporting segment
Sales
1
Deduct
Share of revenue
of equity accounted
investments
Add
Subsidiaries\u2019 revenue
from equity accounted
investments Revenue
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
Electronic Systems 5,057 4,491 (73) (54) 73 54 5,057 4,491
Platforms & Services 3,688 3,395 (90) (79) \u2013 2 3,598 3,318
Air 7,698 7,4 49 (2,651) (2,505) 1,239 1,097 6,286 6,041
Maritime 4,598 4,169 (119) (79) 5 3 4,484 4,093
Cyber & Intelligence 2,205 1,923 \u2013 \u2013 \u2013 \u2013 2,205 1,923
HQ 420 281 (410) (271) \u2013 \u2013 10 10
23,666 21,708 (3,343) (2,988) 1,317 1,156 21,640 19,876
Intra-group sales/revenue (410) (398) 1 9 27 34 (382) (355)
23,256 21,310 (3,342) (2,979) 1,344 1,190 21,258 19,521
Intra-group revenue
Revenue from
external customers
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
Electronic Systems 115 101 4,942 4,390
Platforms & Services 43 34 3,555 3,284
Air 29 19 6,257 6,022
Maritime 71 80 4,413 4,013
Cyber & Intelligence 114 111 2,091 1,812
HQ 10 10 \u2013 \u2013
382 355 21,258 19,521
1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide
additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how
we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our
BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented
in this report to reflect the new business structure.
Sales
1
and revenue by customer location
Sales
1
Revenue
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
UK 4,608 4,201 4,324 3,935
Rest of Europe 3,021 2,435 1,824 1,502
US 10,166 9,109 10,157 9,108
Canada 125 141 125 141
Kingdom of Saudi Arabia 2,539 2,497 2,540 2,476
Qatar 1,156 1,267 885 1,014
Rest of Middle East 263 326 225 275
Australia 854 763 853 762
Rest of Asia and Pacific 420 449 283 285
Africa, and Central and South America 104 122 42 23
23,256 21,310 21,258 19,521
1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide
additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
232 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
1. Segmental analysis and revenue recognition continued
Revenue from external customers by domain
2022 2021
1
Air
\u00a3m
Maritime
\u00a3m
Land
\u00a3m
Cyber
\u00a3m
Total
\u00a3m
Air
\u00a3m
Maritime
\u00a3m
Land
\u00a3m
Cyber
\u00a3m
Total
\u00a3m
Electronic Systems 4,404 145 393 \u2013 4,942 3,846 87 457 \u2013 4,390
Platforms & Services 41 1,043 2,471 \u2013 3,555 37 1,061 2,186 \u2013 3,284
Air 6,223 34 \u2013 \u2013 6,257 5,987 33 2 \u2013 6,022
Maritime 268 3,778 367 \u2013 4,413 255 3,417 341 \u2013 4,013
Cyber & Intelligence 250 274 127 1,440 2,091 264 411 136 1,001 1,812
HQ \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
11,186 5,274 3,358 1,440 21,258 10,389 5,009 3,122 1,001 19,521
1. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how
we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our
BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented
in this report to reflect the new business structure.
Revenue by major customer
Revenue from the Group\u2019s three principal customers, which individually represent over 10% of total revenue, is as follows:
2022
\u00a3m
2021
\u00a3m
US Department of Defense 7,439 7,0 08
UK Ministry of Defence 4,721 4,185
Kingdom of Saudi Arabia Ministry of Defence and Aviation 2,425 2,380
Revenue from the UK Ministry of Defence and the US Department of Defense was generated by the five reporting segments, excluding HQ.
Revenue from the Kingdom of Saudi Arabia Ministry of Defence and Aviation was generated by the Air and Maritime segments.
Operating profit/(loss) by reporting segment
Underlying EBIT
1
Adjusting items
3
Amortisation of
programme, customer-
related and other intangible
assets, and impairment
of intangibles
Financial and
taxation expense of equity
accounted investments
Operating
profit/(loss)
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
2022
\u00a3m
2021
2
\u00a3m
Electronic Systems 838 766 \u2013 33 (91) (84) \u2013 \u2013 747 715
Platforms & Services 326 259 \u2013 \u2013 \u2013 (1) (4) (6) 322 252
Air 849 772 (1) 132 (1) (10) (38) (45) 809 849
Maritime 356 351 \u2013 \u2013 \u2013 (1) (4) (3) 352 347
Cyber & Intelligence 232 179 78 3 (19) (5) \u2013 \u2013 291 177
HQ (122) (122) 14 182 \u2013 \u2013 (29) (11) (137) 49
2,479 2,205 91 350 (111) (101) (75) (65) 2,384 2,389
Net finance costs (395) (279)
Profit before taxation 1,989 2,110
Taxation expense (315) (198)
Profit for the year 1,674 1,912
1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance,
to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how
we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our
BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented
in this report to reflect the new business structure.
3. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed
to reflect that some items could be considered recurring in nature.
BAE Systems plc Annual Report 2022 233
Governance Financial statementsStrategic report
1. Segmental analysis and revenue recognition continued
Share of results of equity accounted investments within reporting segments
Underlying EBIT
1
Adjusting items
2
Amortisation of
programme, customer-
related and other intangible
assets, and impairment
of intangibles
Financial and
taxation expense
Share of results of equity
accounted investments
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Electronic Systems 4 4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4 4
Platforms & Services 11 9 \u2013 \u2013 \u2013 \u2013 (4) (6) 7 3
Air 164 151 \u2013 \u2013 \u2013 \u2013 (38) (45) 126 106
Maritime 11 11 \u2013 \u2013 \u2013 \u2013 (4) (3) 7 8
HQ 65 29 \u2013 \u2013 \u2013 \u2013 (29) (11) 36 18
255 204 \u2013 \u2013 \u2013 \u2013 (75) (65) 180 139
1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance,
to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
2. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed
to reflect that some categories of items could be considered recurring in nature.
Adjusting items
2022
Adjusting items in 2022 comprises a \u00a394m gain on the disposal of the Financial Services business in Digital Intelligence, \u00a316m costs related
to current and historical business transactions, and a \u00a313m gain related to past service on the pension schemes.
2021
Adjusting items in 2021 reflect a gain of \u00a3350m, comprising a gain in HQ on the sale of the Filton and Broughton sites (\u00a3182m), gains on
disposal of Advanced Electronics Company in the Air segment (\u00a3132m, of which \u00a363m is attributable to non-controlling interests \u2013 see note 20),
and on disposal of a business in our Electronic Systems segment (\u00a326m), and a net \u00a310m gain relating to historical and current year acquisitions.
Performance obligations
The Group\u2019s order book
1
, reconciled to order backlog as defined by the Group, is shown below.
2022
\u00a3bn
2021
\u00a3bn
Order backlog
2
as defined by the Group 58.9 44.0
Deduct Unfunded order backlog (2.3) (2.3)
Deduct Share of order backlog
2
of equity accounted investments (12.0) (10.1)
Add Order backlog
2
in respect of orders from equity accounted investments 4.3 3.9
Order book
1
48.9 35.5
1. Order book represents the transaction price allocated to unsatisfied and partially satisfied performance obligations as defined by IFRS 15 Revenue from Contracts
with Customers.
2. Order backlog is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance,
to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
The Group expects that approximately 33% (2021 41%) of the order book will be recognised as revenue during the next year, with the
remainder largely recognised over the following four (2021 four) years.
For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred
in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected
costs, after making suitable allowances for technical and other risks. Revenue and associated margin are therefore recognised progressively
as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s
performance in transferring control of the goods and services to the customer. Accordingly, revenue of \u00a30.3bn (2021 \u00a30.3bn) was recognised
during the year in respect of performance obligations satisfied or partially satisfied in previous years.
234 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
1. Segmental analysis and revenue recognition continued
Prior year re-presentation
With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities
to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within
the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment.
Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structures. The below
table outlines the impact on the key reported line items:
2021
Sales
1
Revenue
As reported
\u00a3m
Adjustment
\u00a3m
Re-presented
\u00a3m
As reported
\u00a3m
Adjustment
\u00a3m
Re-presented
\u00a3m
Electronic Systems 4,491 \u2013 4,491 4,491 \u2013 4,491
Platforms & Services 3,395 \u2013 3,395 3,318 \u2013 3,318
Air 8,321 (872) 7, 449 6,913 (872) 6,041
Maritime 3,416 753 4,169 3,340 753 4,093
Cyber & Intelligence 1,752 171 1,923 1,752 171 1,923
HQ 307 (26) 281 36 (26) 10
21,682 26 21,708 19,850 26 19,876
Intra-group sales/revenue (372) (26) (398) (329) (26) (355)
21,310 \u2013 21,310 19,521 \u2013 19,521
Underlying EBIT
1
Operating profit
As reported
\u00a3m
Adjustment
\u00a3m
Re-presented
\u00a3m
As reported
\u00a3m
Adjustment
\u00a3m
Re-presented
\u00a3m
Electronic Systems 766 \u2013 766 715 \u2013 715
Platforms & Services 259 \u2013 259 252 \u2013 252
Air 856 (84) 772 930 (81) 849
Maritime 288 63 351 289 58 347
Cyber & Intelligence 156 23 179 152 25 177
HQ (120) (2) (122) 51 (2) 49
2,205 \u2013 2,205 2,389 \u2013 2,389
1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302. They are presented here as our internal measure of segmenta l
performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
BAE Systems plc Annual Report 2022 235
Governance Financial statementsStrategic report
2. Operating costs
Research and development
The Group undertakes research and development activities either on its own behalf or on behalf of customers.
Group-funded expenditure on research, and on development activities not meeting the conditions for capitalisation, is written off as
incurred and charged to the income statement.
Customer-funded expenditure on research and development activities is recognised in the income statement in accordance with the
Group\u2019s revenue recognition policy (note 1) .
2022
\u00a3m
2021
\u00a3m
Raw materials, subcontracts and other bought-in items used 7,088 6,934
Change in inventories of finished goods and work-in-progress 6 27
Staff costs (note 3) 7,495 6,667
Depreciation 549 513
Amortisation 215 188
Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4
Impairment \u2013 intangible assets (note 8) 1 15
Current and historical business transaction costs 16 3
Loss on disposal of property, plant and equipment, and investment property 2 2
Other operating charges 3,895 3,390
Operating costs 19,269 17,743
Operating costs includes research and development expenditure of \u00a3276m (2021 \u00a3251m) funded by the Group. Development investment
of \u00a311m (2021 \u00a34m) was capitalised during the year (see note 8).
Fees payable to the Company\u2019s auditor and its associates included in operating costs
2022 2021
UK
\u00a3\u2019000
Overseas
\u00a3\u2019000
Total
\u00a3\u2019000
UK
\u00a3\u2019000
Overseas
\u00a3\u2019000
Total
\u00a3\u2019000
Fees payable to the Company\u2019s auditor for the audit of the
Company\u2019s annual accounts 2,963 \u2013 2,963 2,349 \u2013 2,349
Fees payable to the Company\u2019s auditor and its associates
for other services to the Group:
The audit of the Company\u2019s subsidiaries 5,184 7,413 12,597 4,154 5,561 9,715
Total audit fees 8,147 7,413 15,560 6,503 5,561 12,064
Audit-related assurance services
1
805 3 808 632 3 635
Other non-audit services 1 \u2013 1 \u2013 \u2013 \u2013
Total non-audit fees
2
806 3 809 632 3 635
Total fees payable to the Company\u2019s auditor and its associates 8,953 7,416 16,369 7,135 5,564 12,699
1. Audit-related assurance services principally comprises fees in respect of the review of the Group\u2019s Half-yearly Report and, in 2022, ESG assurance work.
2. In addition to the amounts shown above, the auditor received fees of \u00a3446k (2021 \u00a3nil) for the audit of the BAE Systems UK pension schemes and \u00a3534k (2021 \u00a3453k)
for the audit of BAE Systems pension schemes in the US.
236 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
3. Employees
The average and year-end numbers of employees, excluding those in equity accounted investments, were as follows:
Average At year end
2022
Number
\u2019000
2021
1
Number
\u2019000
2022
Number
\u2019000
2021
1
Number
\u2019000
Electronic Systems 16 16 16 16
Platforms & Services 12 12 12 12
Air 19 20 19 19
Maritime 23 22 24 22
Cyber & Intelligence 11 10 11 11
HQ 2 2 2 2
83 82 84 82
The aggregate staff costs of Group employees, excluding employees of equity accounted investments, were as follows:
2022
\u00a3m
2021
\u00a3m
Wages and salaries 6,350 5,643
Social security costs 485 428
Share-based payments (note 32) 101 92
Pension costs \u2013 defined contribution plans (note 25) 299 246
Pension costs \u2013 defined benefit plans (note 25) 230 233
Other post-employment benefit costs (note 25) 30 25
7,495 6,667
1. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how
we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our
BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented
in this report to reflect the new business structure.
4. Other income
Leases
Lease income under operating leases is recognised in the income statement on a straight-line basis over the lease term.
2022
\u00a3m
2021
\u00a3m
Research and development expenditure credits 35 16
Operating lease income from investment property (note 10) 3 9
Operating lease income from subleasing right-of-use assets (note 10) 1 1
Profit on disposal of businesses 94 158
Profit on disposal of non-current investment 7 \u2013
Gain on sale of property, plant and equipment 1 \u2013
Profit on disposal of investment property 4 194
Management recharges to equity accounted investments (note 33) 8 19
Royalties 30 17
Gain on historical acquisition \u2013 13
Other 32 45
Other income 215 472
BAE Systems plc Annual Report 2022 237
Governance Financial statementsStrategic report
5. Net finance costs
Interest income and borrowing costs
Interest income and borrowing costs are recognised in the income statement in the period in which they are incurred.
2022
\u00a3m
2021
\u00a3m
Interest income on cash and other financial instruments 34 29
Interest income on finance lease receivables (note 10) 1 1
Net present value adjustments 12 2
Financial income 47 32
Interest expense on bonds and other financial instruments (221) (206)
Facility fees (4) (3)
Interest expense on lease liabilities (note 10) (48) (43)
Net present value adjustments on provisions and other payables (4) \u2013
Net interest expense on post-employment benefit obligations (note 25) (37) (65)
Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss
1,2
396 (29)
Foreign exchange (losses)/gains
2,3
(524) 35
Financial expense (442) (311)
Net finance costs (395) (279)
1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external
borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments.
2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within
finance costs as the gains and losses relate to the same underlying transactions.
3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings.
Additional analysis
2022
\u00a3m
2021
\u00a3m
Net finance costs:
Group (395) (279)
Share of equity accounted investments (25) (27)
Total of Group and equity accounted investments\u2019 finance costs (420) (306)
Analysed as:
Underlying net interest expense
1
:
Group (230) (220)
Share of equity accounted investments (16) (21)
(246) (241)
Other:
Group:
Net interest expense on post-employment benefit obligations (37) (65)
Fair value and foreign exchange adjustments on financial instruments and investments (128) 6
Share of equity accounted investments:
Net interest expense on post-employment benefit obligations (1) (2)
Fair value and foreign exchange adjustments on financial instruments and investments (8) (4)
Total of Group and equity accounted investments\u2019 finance costs (420) (306)
1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information
on performance to the user, and to reconcile to the equivalent IFRS measure .
238 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
6. Taxation expense
Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss, except to the extent that it
relates to a business combination or items recognised directly in equity or other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences:
\u2013 on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit or loss;
\u2013 related to investments in subsidiaries and equity accounted investments to the extent that it is probable that they will not reverse in the
foreseeable future; and
\u2013 arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.
Taxation expense
2022
\u00a3m
2021
\u00a3m
Current taxation
UK:
Current year (115) (114)
Adjustments in respect of prior years (1) 96
(116) (18)
Overseas:
Current year (354) (204)
Adjustments in respect of prior years (15) 5
(369) (199)
Total current taxation (485) (217)
Deferred taxation
UK:
Origination and reversal of temporary differences 11 24
Adjustments in respect of prior years (3) \u2013
Tax rate adjustment 4 10
12 34
Overseas:
Origination and reversal of temporary differences 132 (23)
Adjustments in respect of prior years 27 8
Tax rate adjustment (1) \u2013
158 (15)
Total deferred taxation 170 19
Taxation expense (315) (198)
UK (104) 16
Overseas (211) (214)
Taxation expense (315) (198)
BAE Systems plc Annual Report 2022 239
Governance Financial statementsStrategic report
6. Taxation expense continued
Reconciliation of taxation expense
The following table reconciles the theoretical income tax expense, using the UK corporation tax rate, to the reported tax expense. The
reconciling items represent, besides the impact of tax rate differentials and changes, non-taxable benefits or non-deductible expenses arising from
differences between the local tax base and the reported financial statements.
2022
\u00a3m
2021
\u00a3m
Profit before taxation 1,989 2,110
UK corporation tax rate 19% 19%
Expected income tax expense (378) (401)
Effect of tax rates in foreign jurisdictions, including US state taxes (54) (56)
Expenses not tax effected (19) (5)
Income not subject to tax 68 70
Research and development tax credits 15 23
Adjusting items 17 48
Chargeable gains \u2013 (3)
Utilisation of previously unrecognised tax losses \u2013 2
Adjustments in respect of prior years 8 109
Adjustments in respect of equity accounted investments 34 26
Tax rate adjustment 3 10
Other (9) (21)
Taxation expense (315) (198)
Calculation of the underlying effective tax rate
2022
\u00a3m
2021
\u00a3m
Profit before taxation 1,989 2,110
Add back: Taxation expense of equity accounted investments 50 38
Add back/(deduct): Taxable adjusting items 1 (347)
Deduct: Non-taxable adjusting items (92) (3)
Adjusted profit before taxation 1,948 1,798
Taxation expense (315) (198)
Taxation expense of equity accounted investments (50) (38)
Exclude: One-off tax benefit
2
\u2013 (94)
Exclude: Taxation adjustments in respect of taxable adjusting items \u2013 19
Exclude: Tax rate adjustment (3) (10)
Adjusted taxation expense (including equity accounted investments) (368) (321)
Underlying effective tax rate
1
19% 18%
1. Underlying effective tax rate is an alternative performance measure defined in the Financial glossary on page 302.
2. The one-off tax benefit of \u00a394m in 2021 was in respect of agreements reached regarding the exposure arising from the April 2019 European Commission decision
regarding the UK\u2019s Controlled Foreign Company regime.
The Group\u2019s underlying effective tax rate is sensitive to the geographic mix of profits and may be impacted when multiple territories implement
the Organisation for Economic Co-operation and Development\u2019s Global Anti-Base Erosion Model Rules (Pillar Two). Management is closely
monitoring the progress of the tax legislation process in each jurisdiction in which the Group operates. As at the balance sheet date, none of
the jurisdictions in which the Group operates had enacted or substantively enacted tax legislation related to Pillar Two. The Group does not
have sufficient information at this stage to determine the potential quantitative impact.
240 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
6. Taxation expense continued
Tax recognised in other comprehensive income
2022 2021
Before
tax
\u00a3m
Tax
(expense)/
benefit
\u00a3m
Net of tax
\u00a3m
Before
tax
\u00a3m
Tax
(expense)/
benefit
\u00a3m
Net of tax
\u00a3m
Items that will not be reclassified to the income statement:
Consolidated:
Remeasurements on post-employment benefit schemes and
other investments 2,851 (285) 2,566 2,451 (482) 1,969
Tax rate adjustment \u2013 (72) (72) \u2013 88 88
Share of the other comprehensive income of associates and joint ventures
accounted for using the equity method 140 (24) 116 85 (21) 64
Items that may be reclassified to the income statement:
Consolidated:
Currency translation on foreign currency net investments 1,172 \u2013 1,172 32 \u2013 32
Reclassification of cumulative currency translation reserve on disposal
of subsidiary (17) \u2013 (17) (9) \u2013 (9)
Fair value (loss)/gain arising on hedging instruments during the year (102) 25 (77) 11 (2) 9
Cumulative fair value loss/(gain) on hedging instruments reclassified
to the income statement 5 (1) 4 (32) 6 (26)
Share of the other comprehensive income of associates and joint ventures
accounted for using the equity method (9) 1 (8) (1) (3) (4)
4,040 (356) 3,684 2,537 (414) 2,123
2022 2021
Other
reserves
\u00a3m
Retained
earnings
\u00a3m
Total
\u00a3m
Other
reserves
\u00a3m
Retained
earnings
\u00a3m
Total
\u00a3m
Current tax
Consolidated:
Remeasurements on post-employment benefit schemes
and other investments \u2013 57 57 \u2013 61 61
\u2013 57 57 \u2013 61 61
Deferred tax
Consolidated:
Remeasurements on post-employment benefit schemes
and other investments \u2013 (342) (342) \u2013 (543) (543)
Tax rate adjustment \u2013 (72) (72) \u2013 88 88
Fair value tax loss/(gain) arising on hedging instruments during the year 25 \u2013 25 (2) \u2013 (2)
Cumulative fair value tax (loss)/gain on hedging instruments reclassified
to the income statement (1) \u2013 (1) 6 \u2013 6
Share of the other comprehensive income of associates and joint ventures
accounted for using the equity method 1 (24) (23) (3) (21) (24)
25 (438) (413) 1 (476) (475)
Tax on other comprehensive income 25 (381) (356) 1 (415) (414)
BAE Systems plc Annual Report 2022 241
Governance Financial statementsStrategic report
7. Earnings per share
The weighted average number of ordinary shares used for the purpose of calculating earnings per share is calculated by taking the number
of ordinary shares outstanding at the start of the year less the weighted average number of shares repurchased, plus the weighted average
number of shares issued within the year (including those issued from treasury), and those shares held in trust that are no longer contingently
returnable (i.e. all performance conditions attached to them are met, excluding the passage of time). The number of ordinary shares
outstanding at the start of the year is calculated by taking the total number of ordinary shares in issue, less treasury shares and shares held
in trust which are contingently returnable (i.e. where the performance conditions attached to those shares have not been met, excluding
the passage of time). The weighted average number of ordinary shares purchased, issued or released is calculated by reference to the day
on which each transaction occurred.
The weighted average number of ordinary shares used in calculating diluted earnings per share is calculated by taking the weighted average
number of ordinary shares outstanding, plus the number of ordinary shares which are considered potentially dilutive ordinary shares in
respect of share incentive schemes, should the vesting conditions have been met as at the period end.
2022 2021
\u00a3m
Basic
pence
per share
Diluted
pence
per share \u00a3m
Basic
pence
per share
Diluted
pence
per share
Profit for the year attributable to equity shareholders 1,591 51.1 50.5 1,758 55.2 54.7
Add back/(deduct):
Amortisation of programme, customer-related and other intangible
assets, and impairment of intangibles, post tax
1
90 84
Net interest expense on post-employment benefit obligations, post tax
1
31 55
Fair value and foreign exchange adjustments on financial instruments
and investments, post tax
1
110 (1)
Adjusting items attributable to shareholders, post tax
2
(94) (279)
Underlying earnings
3
, post tax 1,728 55.5 54.8 1,617 50.7 50.4
One-off tax benefit
4
\u2013 (94)
Underlying earnings
3
, excluding one-off tax benefit 1,728 55.5 54.8 1,523 47.8 47.4
Millions Millions Millions Millions
Ordinary shares in issue as at 1 January 3,404 3,467
Less:
Treasury shares as at 1 January (237) (249)
Shares held in trust which were contingently returnable as at 1 January (23) (23)
Number of ordinary shares outstanding as at 1 January 3,14 4 3,195
Net weighted average number of ordinary shares repurchased in year (32) (8)
Weighted average number of ordinary shares used in calculating
basic earnings per share 3,112 3,112 3,187 3,187
Incremental ordinary shares in respect of employee share schemes 41 24
Weighted average number of ordinary shares used in calculating
diluted earnings per share 3,153 3,211
1. The tax impact is calculated using the underlying effective tax rate of 19% (2021 18%). The calculation of the underlying effective tax rate is shown in note 6.
2. In 2021, \u00a363m of the gain on disposal of AEC was attributable to non-controlling interest. Therefore, only the gain attributable to shareholders has been removed
in calculating the underlying earnings attributable to shareholders. See note 20 for more details. The tax on adjusting items has been determined using the actual
tax due on those items, see note 6 for details.
3. Underlying earnings per share is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information
on performance to the user, and to reconcile to the equivalent IFRS measure.
4. The one-off tax benefit of \u00a394m in 2021 was in respect of agreements reached regarding the exposure arising from the April 2019 European Commission decision
regarding the UK\u2019s Controlled Foreign Company regime.
242 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
8. Intangible assets
Intangible assets are carried at cost or valuation, less accumulated amortisation and impairment losses.
Cost or valuation
Goodwill
Under the acquisition method for business combinations, goodwill is the acquisition-date fair value of the consideration transferred, less the net
of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill on acquisitions of subsidiaries is
included in intangible assets. Goodwill on acquisitions of joint ventures and associates is included in the carrying value of equity accounted
investments. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Software
Software includes:
\u2013 Computer software licences acquired for use within the Group are capitalised as an intangible asset on the basis of the costs incurred
to acquire and bring to use the specific software; and
\u2013 Software development costs that are directly associated with the production of identifiable and unique software products controlled
by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.
Group-funded expenditure associated with enhancing or maintaining computer software programs for sale is recognised as an expense
as incurred.
Development costs
Development costs funded by the Group on activities applied to a plan or design for the production of new or substantially improved
products are capitalised as an internally generated intangible asset if certain conditions are met. The costs capitalised include materials,
direct labour and related overheads.
Programme and customer-related
Intangible assets recognised by the Group include those relating to ongoing programmes within businesses acquired, mainly in respect
of customer relationships and order backlog. These assets are initially recognised at their fair value at the acquisition date.
Other
Other intangible assets includes patents, trademarks and licences.
Amortisation
Goodwill is not amortised, but is tested annually for impairment, and carried at cost less accumulated impairment losses. Amortisation
on intangible assets, excluding goodwill, is charged to the income statement on a straight-line basis over their estimated useful lives.
For programme-related intangibles, amortisation is set on a programme-by-programme basis over the life of the individual programme.
Amortisation for customer-related intangibles is also set on an individual basis.
The estimated useful lives are as follows:
Software up to 5 years
Development costs up to 10 years
Programme and customer-related up to 15 years
Other up to 20 years
The Group has no indefinite-life intangible assets other than goodwill.
Impairment of intangible assets, property, plant and equipment, right-of-use assets, investment property and equity
accounted investments
The carrying amounts of the Group\u2019s intangible assets (excluding goodwill), property, plant and equipment, right-of-use assets, investment
property and equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of
impairment, as required by IAS 36 Impairment of Assets. If any such indication exists, the asset\u2019s recoverable amount is estimated. For
goodwill and intangible assets that are not yet available for use, impairment testing is performed annually.
Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs),
or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash-
generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount
rate used in discounting these projected cash flows.
An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher
of its value in use, and its fair value less cost of disposal.
The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely
independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs.
Impairment losses are recognised in the income statement.
An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of other intangible assets, property, plant and
equipment, investment property and equity accounted investments is reversed if the subsequent increase in recoverable amount can be
related objectively to an event occurring after the impairment loss was recognised or if there has been a change in the estimate used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
BAE Systems plc Annual Report 2022 243
Governance Financial statementsStrategic report
8. Intangible assets continued
Goodwill
\u00a3m
Software
\u00a3m
Development
costs
\u00a3m
Programme and
customer-related
\u00a3m
Other
\u00a3m
Total
\u00a3m
Cost or valuation
At 1 January 2021 15,555 837 111 542 99 17,14 4
Additions:
Acquired separately \u2013 90 \u2013 \u2013 \u2013 90
Internally developed \u2013 3 4 \u2013 \u2013 7
Business acquisitions (note 35) 20 2 \u2013 6 9 37
Disposals
1
\u2013 (38) \u2013 \u2013 \u2013 (38)
Transfer from property, plant and equipment \u2013 1 \u2013 \u2013 \u2013 1
Foreign exchange adjustments 49 (2) 1 3 2 53
At 31 December 2021 15,624 893 116 551 110 17, 29 4
Additions:
Acquired separately \u2013 76 \u2013 \u2013 \u2013 76
Internally developed \u2013 6 11 \u2013 \u2013 17
Business acquisitions (note 35) 91 \u2013 \u2013 66 5 162
Disposals
1
\u2013 (34) \u2013 \u2013 \u2013 (34)
Business disposals (191) \u2013 \u2013 \u2013 \u2013 (191)
Transfer from property, plant and equipment \u2013 5 \u2013 \u2013 \u2013 5
Foreign exchange adjustments 1,069 27 14 71 15 1,196
At 31 December 2022 16,593 973 141 688 130 18,525
Amortisation and impairment
At 1 January 2021 4,709 487 75 94 34 5,399
Amortisation
2
\u2013 104 3 75 11 193
Impairment charge \u2013 15 \u2013 \u2013 \u2013 15
Disposals
1
\u2013 (38) \u2013 \u2013 \u2013 (38)
Foreign exchange adjustments 5 1 1 1 1 9
At 31 December 2021 4,714 569 79 170 46 5,578
Amortisation
2
\u2013 106 2 95 15 218
Impairment charge \u2013 1 \u2013 \u2013 \u2013 1
Disposals
1
\u2013 (34) \u2013 \u2013 \u2013 (34)
Business disposals (168) \u2013 \u2013 \u2013 \u2013 (168)
Foreign exchange adjustments 228 21 10 21 6 286
At 31 December 2022 4,774 663 91 286 67 5,881
Net book value
At 31 December 2022 11,819 310 50 402 63 12,644
At 31 December 2021 10,910 324 37 381 64 11,716
At 1 January 2021 10,846 350 36 448 65 11,745
1. Includes intangible assets with \u00a3nil net book value no longer used by the Group.
2. Amortisation of \u00a3218m (2021 \u00a3193m) includes \u00a3215m (2021 \u00a3188m) charged to the income statement as an amortisation expense and \u00a33m (2021 \u00a35m) recoverable
on customer contracts.
244 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
8. Intangible assets continued
Impairment testing
The recoverable amount of the Group\u2019s goodwill is based on value in use estimated using risk-adjusted future cash flow projections from
the five-year Integrated Business Plan (IBP) and a terminal value based on the projections for the final year of that plan, with growth rate
assumptions of 2% applied for each significant group of Cash-Generating Units (CGUs). The IBP process includes the use of historical
experience, available government spending data and the Group\u2019s order backlog, as well as the impact of evolving issues such as global
economic uncertainty and climate change. Pre-tax discount rates, derived from the Group\u2019s post-tax weighted average cost of capital and
adjusted for factors specific to the market in which the CGU operates, have been used in discounting these projected risk-adjusted cash flows.
Significant CGUs
Within the year, the Group restructured its operations (see note 1 for details) and changed elements of how it operates. As a result, the
level at which goodwill is monitored has changed, resulting in goodwill being allocated to the group of CGUs within the Maritime segment
(the \u2018Maritime CGU\u2019), which is now identified as a significant CGU. Prior to the reallocation of goodwill, an impairment assessment was
performed based on the previous allocation, and no impairment was identified.
A summary of the significant groups of CGUs is presented below.
Allocated goodwill Pre-tax discount rate
Cash-Generating Unit Key assumptions
2022
\u00a3bn
2021
\u00a3bn
2022
%
2021
%
Electronic Systems Continued demand from the US government for
electronic warfare systems (where the business has
a leadership position), other technology-based solutions
and growth in the commercial avionics market
5.2 4.9 9 9
Platforms & Services Continued demand in the Group\u2019s principal markets for
existing and successor military tracked vehicles, naval guns,
missile launchers, artillery systems, munitions, upgrade
programmes and support, and in the US for complex
infrastructure, maritime and aviation services
3.8 3.3 9 9
Maritime Continued demand, primarily from the UK and Australian
governments, for existing and successor programmes for
submarines, complex warships and munitions. This includes
upgrade and sustainment programmes in these areas as
well as in the field of air, electronic systems and wide-
area surveillance
1.5 1.5 10 8
The headroom, calculated as the difference between net assets including allocated goodwill as at 31 December 2022 and the value in use
calculations, for the CGUs listed above, is shown below. The table also shows the headroom assuming a 1% reduction in the terminal value
growth rate assumption, a 2% increase in the discount rate and a 1% reduction in the operating margin used in the value in use calculations,
considered to be reasonable worst-case scenarios in the current economic climate.
Headroom as at
31 December
Headroom assuming
a 1% reduction in the
terminal value growth
rate assumption
Headroom assuming
a 2% increase in the
discount rate
Headroom assuming
a 1% reduction in
operating margin
Cash-Generating Unit
2022
\u00a3bn
2021
\u00a3bn
2022
\u00a3bn
2021
\u00a3bn
2022
\u00a3bn
2021
\u00a3bn
2022
\u00a3bn
2021
\u00a3bn
Electronic Systems 5.4 4.3 3.8 2.8 2.0 1.3 4.5 3.6
Platforms & Services 2.1 1.5 1.3 0.7 0.3 (0.1) 1.5 0.9
Maritime 4.2 5.1 3.5 4.1 1.7 3.1 3.5 4.3
Other CGUs
The remaining goodwill balance of \u00a31.3bn (2021 \u00a31.2bn) is allocated across multiple CGUs. No individual CGU exceeds 10% of the Group\u2019s
total goodwill balance. The majority of the projected cash flows within these CGUs are primarily underpinned by expected levels of government
spending on defence, aerospace and security, and the Group\u2019s ability to capture a broadly consistent market share.
Capital commitments
At 31 December 2022, capital expenditure of \u00a341m (2021 \u00a325m) in respect of intangible assets was contracted for but not provided
for in the accounts.
BAE Systems plc Annual Report 2022 245
Governance Financial statementsStrategic report
9. Property, plant and equipment
Cost
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of self-constructed
assets includes the cost of materials, direct labour and an appropriate proportion of production overheads. The cost of demonstration
assets is written off as incurred. The reimbursement of the cost of an item of property, plant and equipment by way of a government grant
is presented as deferred income and recognised in the income statement on a basis consistent with the depreciation of the asset over its
estimated useful life.
Assets held for leasing out under operating leases are included in property, plant and equipment at cost less accumulated depreciation and
impairment losses.
Depreciation
Depreciation is provided, normally on a straight-line basis, to write off the cost of items of property, plant and equipment over their
estimated useful lives to any estimated residual value, using the following rates:
Buildings up to 50 years, or the lease term if shorter
Plant and machinery:
Computing equipment and motor vehicles 4 to 5 years
Other equipment 10 to 20 years, or the project life if shorter
No depreciation is provided on freehold land and assets in the course of construction.
The assets\u2019 residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
Impairment
The carrying amounts of the Group\u2019s property, plant and equipment are reviewed at each balance sheet date to determine whether there
is any indication of impairment in accordance with the policy shown in note 8.
246 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
9. Property, plant and equipment continued
Land and
buildings
\u00a3m
Plant and
machinery
\u00a3m
Total
\u00a3m
Cost
At 1 January 2021 2,531 3,610 6,141
Additions
1
239 262 501
Business acquisitions (note 35) \u2013 1 1
Transfer to intangible assets \u2013 (1) (1)
Reclassification between categories 7 (7) \u2013
Disposals (23) (115) (138)
Foreign exchange adjustments \u2013 6 6
At 31 December 2021 2,754 3,756 6,510
Additions
1
302 289 591
Business acquisitions (note 35) \u2013 1 1
Transfer to intangible assets \u2013 (5) (5)
Reclassification between categories 16 (16) \u2013
Disposals (45) (131) (176)
Foreign exchange adjustments 143 227 370
At 31 December 2022 3,170 4,121 7,291
Depreciation and impairment
At 1 January 2021 1,113 2,373 3,486
Depreciation charge for the year 94 202 296
Impairment charge \u2013 4 4
Reclassification between categories 4 (4) \u2013
Disposals (22) (112) (134)
Foreign exchange adjustments 2 4 6
At 31 December 2021 1,191 2,467 3,658
Depreciation charge for the year 109 218 327
Impairment charge \u2013 2 2
Disposals (40) (125) (165)
Business disposals \u2013 \u2013 \u2013
Foreign exchange adjustments 79 155 234
At 31 December 2022 1,339 2,717 4,056
Net book value
At 31 December 2022 1,831 1,404 3,235
At 31 December 2021 1,563 1,289 2,852
At 1 January 2021 1,418 1,237 2,655
1. Includes \u00a3160m (2021 \u00a3149m) of land and buildings at Barrow-in-Furness, UK, funded by the UK government.
Assets in the course of construction
Land and
buildings
\u00a3m
Plant and
machinery
\u00a3m
Total
1
\u00a3m
At 31 December 2022 547 292 839
At 31 December 2021 398 274 672
1. Includes \u00a3464m (2021 \u00a3262m) at Barrow-in-Furness, UK, funded by the UK government.
Capital commitments
At 31 December 2022, capital expenditure of \u00a3403m (2021 \u00a3210m) in respect of property, plant and equipment was contracted for but not
provided for in the accounts.
BAE Systems plc Annual Report 2022 247
Governance Financial statementsStrategic report
10. Leases
The Group as lessee
All leases in which the Group is lessee (except as noted below) are recognised as a right-of-use asset and a corresponding lease liability
at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between repayment of the lease
liability and finance cost. The finance cost is charged to the income statement over the lease term to produce a constant periodic rate
of interest on the lease liability. The right-of-use asset is depreciated over the shorter of the asset\u2019s useful life and the lease term on
a straight-line basis.
The lease liability is initially measured as the present value of future lease payments, discounted using the interest rate implicit in the lease.
Where this rate is not determinable, the Group\u2019s incremental borrowing rate is used, which is the interest rate the Group would have to pay
to borrow the amount necessary to obtain an asset of similar value, in a similar economic environment with similar terms and conditions.
The right-of-use asset is initially measured at cost, comprising the initial value of the lease liability, any lease payments made (net of any
incentives received from the lessor) before the commencement of the lease, any initial direct costs and any restoration costs.
The carrying amounts of the Group\u2019s right-of-use assets are reviewed at each balance sheet date to determine whether there is any
indication of impairment in accordance with the policy shown in note 8.
Payments in respect of short-term leases, low-value leases and leases of intangible assets are charged to the income statement on
a straight-line basis over the lease term.
The Group as lessor
Leases in which the Group is lessor are classified as finance leases or operating leases. If the lease transfers substantially all of the risks
and rewards of ownership to the lessee, the lease is classified as a finance lease. All other leases are classified as operating leases.
A sublease where the Group is an intermediate lessor is classified as a finance lease when it transfers substantially all of the risks and
rewards of the right-of-use asset arising from the head lease.
Lease income under operating leases is recognised in the income statement on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as a receivable discounted at the interest rate implicit in the lease. Finance
lease income is recognised in the income statement over the lease term to produce a constant periodic rate of interest on the receivable.
The Group leases land, buildings, vehicles and equipment under non-cancellable lease arrangements. The leases have varying terms, including
escalation clauses, renewal rights and purchase options. None of these terms represent unusual arrangements or create material onerous or
beneficial rights or obligations.
Right-of-use assets
2022 2021
Land and
buildings
\u00a3m
Plant and
machinery
\u00a3m
Total
\u00a3m
Land and
buildings
\u00a3m
Plant and
machinery
\u00a3m
Total
\u00a3m
Net book value at 1 January 1,075 16 1,091 1,037 16 1,053
Additions during the year 397 20 417 117 9 126
Business acquisitions (note 35) 1 \u2013 1 \u2013 \u2013 \u2013
Lease modifications during the year 50 1 51 125 (1) 124
Depreciation charge for the year (205) (12) (217) (206) (8) (214)
Business disposals (note 20) (3) \u2013 (3) \u2013 \u2013 \u2013
Foreign exchange adjustments 85 \u2013 85 2 \u2013 2
Net book value at 31 December 1,400 25 1,425 1,075 16 1,091
248 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
10. Leases continued
Lease liabilities
A maturity analysis of the future undiscounted lease payments in respect of the Group\u2019s lease liabilities is presented in the table below:
2022
\u00a3m
2021
\u00a3m
Payments due:
Within one year 290 240
Between one and five years 632 586
Later than five years 1,227 683
Total undiscounted gross payments 2,149 1,509
Deduct: Impact of discounting (533) (214)
Lease liabilities 1,616 1,295
The Group is also committed to future undiscounted lease payments of \u00a35m in respect of leases which had not yet commenced at 31 December
2022 (2021 \u00a3214m).
The total cash outflow for leases in the year ended 31 December 2022, including short-term leases and low-value leases, amounted to \u00a3314m
(2021 \u00a3281m).
Amounts recognised in the income statement
2022
\u00a3m
2021
\u00a3m
Included in operating costs:
Depreciation on right-of-use assets (217) (214)
Short-term lease expense (25) (19)
Low-value lease expense (5) (4)
(247) (237)
Included in other income:
Operating lease income from investment property 3 9
Operating lease income from subleasing right-of-use assets 1 1
4 10
Included in net finance costs:
Interest income on finance lease receivables 1 1
Interest expense on lease liabilities (48) (43)
(47) (42)
BAE Systems plc Annual Report 2022 249
Governance Financial statementsStrategic report
10. Leases continued
Operating leases
The Group is party to operating leases in which it is the lessor, primarily relating to investment property. Under the terms of the lease agreements,
no contingent rents are receivable. The leases have varying terms including escalation clauses and renewal rights. None of these terms represent
unusual arrangements or create material onerous or beneficial rights or obligations.
A maturity analysis of the future undiscounted lease receipts from operating leases, in which the Group is lessor, is presented in the table below:
2022
\u00a3m
2021
\u00a3m
Receipts due:
Within one year 3 2
Between one and two years 3 1
Between two and three years 2 1
Between three and four years 2 1
Between four and five years 2 1
Later than five years 6 2
18 8
Finance lease receivables
A sublease is classified as a finance lease when it transfers substantially all of the risks and rewards of the right-of-use asset arising from the
head lease.
A maturity analysis of the future undiscounted lease receipts from finance leases, in which the Group is lessor, is presented in the table below:
2022
\u00a3m
2021
\u00a3m
Receipts due:
Within one year 11 11
Between one and two years 10 11
Between two and three years 5 10
Between three and four years 4 5
Between four and five years 4 4
Later than five years 2 7
Total undiscounted gross receipts 36 48
Deduct: Impact of discounting (2) (4)
Finance lease receivables (note 14) 34 44
250 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
11. Investment property
Cost
Land and buildings that are leased to non-Group entities are classified as investment property. The Group measures investment property at
its cost less accumulated depreciation and impairment losses.
Depreciation
Depreciation is provided, on a straight-line basis, to write off the cost of investment property over its estimated useful life of up to 50 years.
The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Impairment
The carrying amounts of the Group\u2019s investment property are reviewed at each balance sheet date to determine whether there is any
indication of impairment in accordance with the policy shown in note 8.
\u00a3m
Cost
At 1 January 2021 200
Additions 17
Disposals (141)
At 31 December 2021 76
Additions 5
Disposals (4)
At 31 December 2022 77
Depreciation and impairment
At 1 January 2021 72
Depreciation charge for the year 3
Disposals (66)
At 31 December 2021 9
Depreciation charge for the year 5
Disposals \u2013
At 31 December 2022 14
Net book value
At 31 December 2022 63
At 31 December 2021 67
At 1 January 2021 128
Fair value
At 31 December 2022 76
At 31 December 2021 82
The fair values above are based on and reflect current market values as prepared by in-house professionals who have the appropriate
professional qualifications and recent experience of valuing properties in the location and of the type being valued.
Capital commitments
At 31 December 2022, capital expenditure of \u00a314m (2021 \u00a320m) in respect of investment property was contracted for but not provided
for in the accounts.
BAE Systems plc Annual Report 2022 251
Governance Financial statementsStrategic report
12. Equity accounted investments
Equity accounted investments comprises joint ventures and associates. A joint venture is a joint arrangement whereby the parties that
have joint control have rights to the net assets of the arrangement. An associate is an entity over which the Group has significant influence
but not control or joint control.
The Group recognises its share of the profit or loss and other comprehensive income of equity accounted investments as a separate line
in the Consolidated income statement and Consolidated statement of comprehensive income, respectively.
The carrying value of an equity accounted investment comprises the Group\u2019s share of net assets and purchased goodwill, and is assessed
for impairment as a single asset. The carrying amounts of the Group\u2019s equity accounted investments are reviewed at each balance sheet
date to determine whether there is any indication of impairment in accordance with the policy shown in note 8.
Principal equity accounted investments
Joint venture Principal activities Shareholding
Principally
operates in
Eurofighter Jagdflugzeug Management and control of the European Typhoon programme 33% Germany
MBDA Development and manufacture of guided weapons 37.5% Europe
The following tables summarise the financial information of the Group\u2019s principal equity accounted investments included in their own financial
statements, as adjusted for fair value adjustments at acquisition and differences in accounting policies, and reconcile this to the Group\u2019s interest
in those equity accounted investments.
2022 2021
Eurofighter
Jagdflugzeug
\u00a3m
MBDA
\u00a3m
Eurofighter
Jagdflugzeug
\u00a3m
MBDA
\u00a3m
Revenue (100%) 3,693 3,590 3,165 3,513
Underlying EBIT
1
excluding depreciation and amortisation 19 574 6 512
Depreciation and amortisation (4) (152) \u2013 (117)
Financial income 2 25 2 7
Financial expense (2) (13) (2) (12)
Taxation expense (6) (105) (3) (107)
Profit for the year (100%) 9 329 3 283
Remeasurements on post-employment benefit schemes, net of tax \u2013 310 \u2013 172
Amounts (debited)/credited to hedging reserve, net of tax \u2013 (4) \u2013 17
Foreign exchange adjustments (5) (24) \u2013 13
Total comprehensive income for the year (100%) 4 611 3 485
Group\u2019s share of total comprehensive income for the year 1 230 1 182
Non-current assets 30 2,464 32 2,280
Cash and cash equivalents 42 2,650 24 2,367
Current assets excluding cash and cash equivalents 8,591 4,697 7,630 4,210
Current assets 8,633 7,347 7,654 6,577
Non-current financial liabilities excluding trade and other payables, and provisions \u2013 (10) \u2013 (5)
Other non-current liabilities (47) (20) (62) (527)
Non-current liabilities (47) (30) (62) (532)
Current financial liabilities excluding trade and other payables, and provisions (10) \u2013 (7) \u2013
Other current liabilities (8,581) (8,416) (7,59 0) (7,424)
Current liabilities (8,591) (8,416) (7,597) (7,424)
Net assets (100%) 25 1,365 27 901
1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302.
252 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
12. Equity accounted investments continued
2022 2021
Eurofighter
Jagdflugzeug
\u00a3m
MBDA
\u00a3m
Total
\u00a3m
Eurofighter
Jagdflugzeug
\u00a3m
MBDA
\u00a3m
Total
\u00a3m
Group\u2019s share of net assets 8 512 520 9 338 347
Goodwill adjustment \u2013 8 8 \u2013 7 7
Carrying value 8 520 528 9 345 354
2022 2021
Eurofighter
Jagdflugzeug
\u00a3m
MBDA
\u00a3m
Total
\u00a3m
Eurofighter
Jagdflugzeug
\u00a3m
MBDA
\u00a3m
Total
\u00a3m
Dividends received 3 80 83 2 41 43
Group summary
The Group also has a number of individually immaterial joint ventures and associates, the carrying values of the most significant at 31 December
2022 are as follows: Rheinmetall BAE Systems Land (RBSL) (\u00a382m), FADEC International (\u00a348m), Air Astana (\u00a363m), FNSS (\u00a322m) and Panavia
Aircraft (\u00a318m). The following table shows a reconciliation of opening to closing carrying value for both the Group\u2019s principal and immaterial
joint ventures and associates in aggregate.
Principal equity
accounted
investments
\u00a3m
Other joint
ventures
\u00a3m
Other
associates
\u00a3m
Total
\u00a3m
At 1 January 2021 231 96 82 409
Group\u2019s share of profit for the year 107 28 4 139
Group\u2019s share of remeasurements on post-employment benefit schemes 85 \u2013 \u2013 85
Tax on items that will not be reclassified to the income statement (21) \u2013 \u2013 (21)
Foreign exchange adjustments 6 \u2013 (1) 5
Amounts credited to hedging reserve 8 4 \u2013 12
Tax on items that may be reclassified to the income statement (2) (1) \u2013 (3)
Group\u2019s share of total comprehensive income for the year 183 31 3 217
Equity accounted investment funding \u2013 3 \u2013 3
Dividends received from equity accounted investments (43) (14) \u2013 (57)
Foreign exchange adjustments (17) (1) \u2013 (18)
At 31 December 2021 354 115 85 554
Group\u2019s share of profit for the year 126 46 8 180
Group\u2019s share of remeasurements on post-employment benefit schemes 140 \u2013 \u2013 140
Tax on items that will not be reclassified to the income statement (24) \u2013 \u2013 (24)
Foreign exchange adjustments (10) \u2013 (1) (11)
Amounts (debited)/credited to hedging reserve (2) 4 \u2013 2
Tax on items that may be reclassified to the income statement 1 \u2013 \u2013 1
Group\u2019s share of total comprehensive income for the year 231 50 7 288
Dividends received from equity accounted investments (83) (11) \u2013 (94)
Foreign exchange adjustments 26 13 \u2013 39
At 31 December 2022 528 167 92 787
Contingent liabilities
The Group is not aware of any material contingent liabilities in respect of its equity accounted investments.
BAE Systems plc Annual Report 2022 253
Governance Financial statementsStrategic report
13. Other investments
Other investments are carried at fair value through other comprehensive income.
2022
\u00a3m
2021
\u00a3m
Fair value through other comprehensive income 99 76
14. Trade, other and contract receivables
Trade and contract receivables are measured at amortised cost under IFRS 9 Financial Instruments as they are held within a business model to
collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding.
Contract receivables represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue
recognised at the balance sheet date and comprise costs incurred plus attributable margin.
Trade receivables, contract receivables, amounts owed by equity accounted investments and finance lease receivables include a provision
for expected credit losses. The Group measures the provision at an amount equal to lifetime expected credit losses, estimated by reference
to past experience and relevant forward-looking factors.
The Group writes off a receivable when there is objective evidence that the debtor is in significant financial difficulty and there is no realistic
prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation.
US deferred compensation plan assets are measured at fair value in accordance with IAS 19 Employee Benefits.
2022
\u00a3m
2021
\u00a3m
Non-current
Contract receivables 20 21
Prepayments 201 70
Accrued income 1 1
US deferred compensation plan assets 328 376
Finance lease receivables (note 10) 24 33
Other receivables 44 50
618 551
Current
Contract receivables 3,473 2,671
Trade receivables 1,506 1,043
Amounts owed by equity accounted investments (note 33) 75 34
Prepayments 509 444
Accrued income 62 53
Finance lease receivables (note 10) 10 11
Other receivables
1
531 569
6,166 4,825
1. Includes \u00a3329m (2021 \u00a3419m) in relation to VAT receivable in the Kingdom of Saudi Arabia.
Trade receivables are stated net of a provision for expected credit losses. Disclosures relating to the ageing of trade receivables and movements
in the provision for expected credit losses are provided in note 15.
254 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
15. Other financial assets and liabilities and financial risk management
Derivative financial instruments and hedging activities
The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself
against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures.
The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings
and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon.
The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings
and deposits with the Group\u2019s subsidiaries and equity accounted investments.
In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes.
The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures.
Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at
fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit
risk and market risk.
Fair value through profit or loss
Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs
in the income statement for the year.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable
forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is
recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from
the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying
transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying
transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in
the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign
exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered
into on behalf of equity accounted investments (note 33) are classified as cash flow hedges.
2022 2021
Assets
\u00a3m
Liabilities
\u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Non-current
Cash flow hedges \u2013 foreign exchange contracts 175 (237) 191 (172)
Debt-related derivative financial instruments 147 (35) 114 (130)
322 (272) 305 (302)
Current
Cash flow hedges \u2013 foreign exchange contracts 229 (249) 186 (181)
Other foreign exchange/interest rate contracts 23 (79) 8 (33)
252 (328) 194 (214)
Debt-related derivative financial instruments
The debt-related derivative financial instruments represent the fair value of cross-currency, interest rate and foreign exchange derivatives
relating to the US$800m 3.8% bond, repayable 2024, the US$500m 7.5% bond, repayable 2027, the US$1,300m 3.4% bond, repayable
2030, and the US$400m 5.8% bond, repayable 2041 (see note 22). These derivatives have been entered into specifically to manage the
Group\u2019s exposure to foreign exchange or interest rate risk.
BAE Systems plc Annual Report 2022 255
Governance Financial statementsStrategic report
15. Other financial assets and liabilities and financial risk management continued
Interest rate risk
The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt
relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps.
The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is
maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating
rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets.
Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below:
2022 2021
Within
one year
\u00a3m
Between one
and two years
\u00a3m
Later than
two years
\u00a3m
Within
one year
\u00a3m
Between one
and two years
\u00a3m
Later than
two years
\u00a3m
Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013
Loans and overdrafts 745 745 745 661 661 661
The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable
on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap
outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in
respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost
of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%).
IBOR reform
The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During
the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to
calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the
swaps. The Group has no other derivatives that reference IBOR benchmarks.
The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate
the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA.
Sensitivity analysis
A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost
to the Group by approximately \u00a37.3m (2021 \u00a37m).
In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods
based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits
would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the
impact can be linearly interpolated.
256 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
15. Other financial assets and liabilities and financial risk management continued
Liquidity risk
Contractual cash outflows on financial liabilities
The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date
are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate
and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial
instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg.
2022 2021
Contracted cash outflow Contracted cash outflow
Carrying
amount
\u00a3m
Within
one
year
\u00a3m
Between
one and
five
years
\u00a3m
Later
than
five
years
\u00a3m
Total
\u00a3m
Carrying
amount
\u00a3m
Within
one
year
\u00a3m
Between
one and
five
years
\u00a3m
Later
than
five
years
\u00a3m
Total
\u00a3m
Cash outflows without directly
offsetting inflows
Accruals
1
(2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855)
Trade and other payables
2
(2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867)
Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509)
Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226)
(11,037) (10,078)
Cash outflows with largely
offsetting inflows
3
Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763)
Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381)
Other foreign exchange/interest
rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417)
Other foreign exchange/interest
rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250)
Debt-related derivatives \u2013 financial assets
4
147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976)
Debt-related derivatives \u2013 financial liabilities
4
(35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750)
(26) (17)
(11,063) (10,095)
1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities.
2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that
these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been
re-presented in the current year to reflect this change.
3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows
are expected to largely offset all outflows presented within this table.
4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated
inflow in the current year, and the prior year comparatives have been re-presented to reflect this change.
Borrowing facilities
The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities.
At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the
year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper
in issue (2021 \u00a3nil).
BAE Systems plc Annual Report 2022 257
Governance Financial statementsStrategic report
15. Other financial assets and liabilities and financial risk management continued
Currency risk
The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency
exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar.
The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material
firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow
hedge accounting to these transactions.
The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast
transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions
because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship
can be demonstrated on an ongoing basis.
The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the
forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting
risk positions as hedged items.
The Group considers the potential sources of hedge ineffectiveness to be:
\u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date;
\u2013 changes to the timing and amount of forecast transactions; and
\u2013 non-occurrence of the designated hedged items.
Ineffectiveness due to foreign currency basis was highly immaterial.
The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the
foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate:
2022 2021
Currency purchased Currency sold Currency purchased Currency sold
(Purchase)/sale contracts Maturity date
Weighted
average
hedged
rate
Notional
value of
currency
purchased
\u00a3m
Weighted
average
hedged
rate
Notional
value of
currency
sold
\u00a3m
Weighted
average
hedged
rate
Notional
value of
currency
purchased
\u00a3m
Weighted
average
hedged
rate
Notional
value of
currency
sold
\u00a3m
Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347
Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210
Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13
Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117
Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727
Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159
Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060
Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620
Later than five years n/a (379) n/a 378 n/a (13) n/a 13
Cash flow hedges (15,581) 16,222 (12,206) 13,266
The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows:
2022 2021
(Purchase)/sale contracts
Change in the
value of
hedging
instruments
since 1 January
\u00a3m
Change in
the value
of hedged
items since
1 January
\u00a3m
Notional
amount
\u00a3m
Carrying
amount
\u00a3m
Change in the
value of
hedging
instruments
since 1 January
\u00a3m
Change in
the value
of hedged
items since
1 January
\u00a3m
Notional
amount
\u00a3m
Carrying
amount
\u00a3m
Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24
Sterling/euro 9 (9) (378) 17 5 (5) (452) 10
Other (5) 5 13 3 (5) 5 (10) (10)
Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24
258 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
15. Other financial assets and liabilities and financial risk management continued
Currency risk continued
Sensitivity analysis
The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of
foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the
income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments.
The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar
exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m).
The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value
gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow
hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate
on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m).
Credit risk
For trade receivables, contract receivables, amounts due from equity accounted investments and finance lease receivables, the Group measures
a provision for expected credit losses at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant
forward-looking factors.
The Group\u2019s assessment is that credit risk in relation to defence-related sales to government customers or subcontractors to governments is
extremely low as the probability of default is insignificant; therefore the provision for expected credit losses is immaterial in respect of receivables
from these customers. For all non-government commercial customers, the Group assesses expected credit losses, including risk arising from
global economic uncertainty; however, this is not considered material to the financial statements. The Group considers that default has occurred
when a receivable is past 180 days overdue, because historical experience indicates that these receivables are generally not recoverable. The
Group recognises a provision of 100% against all receivables over 180 days past due unless there is evidence that individual receivables in
this category are recoverable.
The carrying amount of the Group\u2019s financial assets represents the maximum exposure to credit risk.
Movements on the provision for expected credit losses are as follows:
2022
\u00a3m
2021
\u00a3m
At 1 January 15 36
Net remeasurement of loss allowance 7 (19)
Amounts written off (2) (2)
At 31 December 20 15
For contract receivables, amounts due from equity accounted investments and finance lease receivables the expected credit loss provision is
immaterial as the probability of default is insignificant.
The Group writes off a receivable when there is evidence that the debtor is in significant financial difficulty and there is no realistic prospect of
recovery, for example, when a debtor enters bankruptcy or financial reorganisation. None of the trade receivables that were written off during
the year are still subject to enforcement activity. The ageing of trade receivables is detailed below:
2022 2021
Gross
\u00a3m
Provision
\u00a3m
Net
\u00a3m
Gross
\u00a3m
Provision
\u00a3m
Net
\u00a3m
Not past due 969 \u2013 969 783 \u2013 783
Up to 180 days overdue 499 (1) 498 223 (1) 222
Past 180 days overdue 58 (19) 39 52 (14) 38
1,526 (20) 1,506 1,058 (15) 1,043
Cash management
Cash flow forecasting is performed by the businesses on a monthly basis. The Group monitors a rolling forecast of its liquidity requirements
to ensure that there is sufficient cash to meet operational needs and maintain adequate headroom.
Surplus cash held by the businesses over and above balances required for working capital management is loaned to the Group\u2019s centralised
treasury department. Surplus cash is invested in instant-access current accounts, short-term deposits and money market funds, choosing
instruments with appropriate maturities or sufficient liquidity to provide adequate headroom as determined by cash forecasts.
The Group\u2019s objective is to monitor and control counterparty credit risk and credit limit utilisation. The Group adopts a conservative approach
to the investment of its surplus cash which is deposited with financial institutions with investment-grade (BBB- and above) credit ratings
for short periods. The cash and cash equivalents balance at 31 December 2022 of \u00a33,107m (2021 \u00a32,917m) was invested with 44 (2021 36)
financial institutions. A credit limit is allocated to each institution taking account of its market capitalisation, credit rating and credit default
swap price. The cash and cash equivalents of the Group are invested in non-speculative financial instruments which are usually highly liquid,
such as short-term deposits. The Group therefore believes it has reduced its exposure to counterparty credit risk through this process.
BAE Systems plc Annual Report 2022 259
Governance Financial statementsStrategic report
15. Other financial assets and liabilities and financial risk management continued
Credit risk continued
The cash and cash equivalents balance is subject to review for impairment under IFRS 9 as set out below:
Counterparty credit rating at 31 December 2022 2021
AAA to AA- 67% 68%
A+ to A- 32% 31%
BBB+ to BBB- 1% 1%
Offsetting financial assets and liabilities
2022 2021
Balance
sheet
\u00a3m
Amounts
not offset
\u00a3m
Net
balances
\u00a3m
Balance
sheet
\u00a3m
Amounts
not offset
\u00a3m
Net
balances
\u00a3m
Assets
Other financial assets 574 (455) 119 499 (383) 116
Liabilities
Other financial liabilities (600) 455 (145) (516) 383 (133)
16. Deferred tax
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable
that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
As at 31 December 2021, the most significant recognised deferred tax assets relate to the deficits on the Group\u2019s pension/post-employment
schemes (see below). This is because post-employment benefit costs are deducted in determining accounting profit as service is provided
by employees, but deducted in determining taxable profit either when contributions are paid to the pension/post-employment schemes
or when post-employment benefits are paid. As at 31 December 2022, the majority of the UK post-employment benefit schemes were
in surplus, therefore the deferred tax asset balance in relation to deficits is much smaller.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate
to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Deferred tax assets/(liabilities)
Deferred tax assets Deferred tax liabilities
Net balance at
31 December
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Property, plant and equipment 48 42 (126) (101) (78) (59)
Intangible assets 15 17 (2) (2) 13 15
Capitalised research and development 149 \u2013 \u2013 \u2013 149 \u2013
Provisions and accruals 233 203 \u2013 \u2013 233 203
Goodwill \u2013 \u2013 (352) (302) (352) (302)
Pension/post-employment schemes:
Deficits 97 430 \u2013 \u2013 97 430
Additional contributions and other
1
162 228 \u2013 \u2013 162 228
Share-based payments 64 28 \u2013 \u2013 64 28
Financial instruments 17 \u2013 (1) (9) 16 (9)
Other items 27 24 (2) (19) 25 5
Rolled over capital gains \u2013 \u2013 (14) (13) (14) (13)
Capital losses carried forward 14 13 \u2013 \u2013 14 13
Trading losses carried forward 4 6 \u2013 \u2013 4 6
Deferred tax assets/(liabilities) 830 991 (497) (446) 333 545
Set off of tax (492) (369) 492 369 \u2013 \u2013
Net deferred tax assets/(liabilities) 338 622 (5) (77) 333 545
1. Includes deferred tax assets on US deferred compensation plans and relief to be claimed in future periods on UK pension contributions.
260 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
16. Deferred tax continued
Movement in temporary differences during the year
At
1 January
2022
\u00a3m
Foreign
exchange
adjustments
\u00a3m
Acquisitions
and disposals
\u00a3m
Recognised
in income
\u00a3m
Recognised
in equity
\u00a3m
At
31 December
2022
\u00a3m
Property, plant and equipment (59) (12) \u2013 (7) \u2013 (78)
Intangible assets 15 2 (13) 9 \u2013 13
Capitalised research and development \u2013 4 \u2013 145 \u2013 149
Provisions and accruals 203 25 \u2013 5 \u2013 233
Goodwill (302) (39) \u2013 (11) \u2013 (352)
Pension/post-employment schemes:
Deficits 430 3 \u2013 20 (356) 97
Additional contributions and other
1
228 13 \u2013 (21) (58) 162
Share-based payments 28 \u2013 \u2013 12 24 64
Financial instruments (9) 1 \u2013 3 21 16
Other items 5 3 \u2013 17 \u2013 25
Rolled over capital gains (13) \u2013 \u2013 (1) \u2013 (14)
Capital losses carried forward 13 \u2013 \u2013 1 \u2013 14
Trading losses carried forward 6 \u2013 \u2013 (2) \u2013 4
545 \u2013 (13) 170 (369) 333
At
1 January
2021
\u00a3m
Foreign
exchange
adjustments
\u00a3m
Acquisitions
and disposals
\u00a3m
Recognised
in income
\u00a3m
Recognised
in equity
\u00a3m
At
31 December
2021
\u00a3m
Property, plant and equipment (70) (1) \u2013 12 \u2013 (59)
Intangible assets 4 \u2013 (3) 14 \u2013 15
Provisions and accruals 199 1 \u2013 3 \u2013 203
Goodwill (279) (2) \u2013 (21) \u2013 (302)
Pension/post-employment schemes:
Deficits 845 (1) \u2013 11 (425) 430
Additional contributions and other
1
251 1 \u2013 6 (30) 228
Share-based payments 19 \u2013 \u2013 7 2 28
Financial instruments (18) \u2013 \u2013 (3) 12 (9)
Other items 14 \u2013 \u2013 (9) \u2013 5
Rolled over capital gains (11) \u2013 \u2013 (2) \u2013 (13)
Capital losses carried forward 11 \u2013 \u2013 2 \u2013 13
Trading losses carried forward 7 \u2013 \u2013 (1) \u2013 6
972 (2) (3) 19 (441) 545
1. Includes deferred tax assets on US deferred compensation plans and relief to be claimed in future periods on UK pension contributions.
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the following items:
2022 2021
Gross
amount
\u00a3m
Unrecognised
deferred
tax asset
\u00a3m
Gross
amount
\u00a3m
Unrecognised
deferred
tax asset
\u00a3m
Deductible temporary differences, including tax credits 9 9 6 5
Capital losses carried forward 227 55 196 45
Trading and other losses carried forward 237 38 231 37
473 102 433 87
These assets have not been recognised as the incidence of future profits in the relevant countries and legal entities cannot be accurately
predicted at this time.
The Group has not recognised any deferred tax liability on temporary differences totalling \u00a3189m (2021 \u00a3390m) relating to potentially taxable
unremitted earnings of overseas subsidiaries and equity accounted investments because the Group is in a position to control the timing of the
reversal of the temporary differences and none are expected to reverse in the foreseeable future.
BAE Systems plc Annual Report 2022 261
Governance Financial statementsStrategic report
16. Deferred tax continued
Changes in tax rates
Both recognised and unrecognised UK deferred tax balances as at 31 December 2022 have been calculated at a blended rate of 24.2% (2021
22.8%). As at 31 December 2022, an increase in the UK current tax rate has been enacted, from 19% to 25% with effect from 1 April 2023.
An adjustment has been made to reflect the fact that most of the UK deferred tax balances are expected to unwind at 25%. Including the impact
of tax changes in other jurisdictions, this adjustment has been recorded as an adjusting item of \u00a33m in the Consolidated income statement and
as a loss of \u00a372m in the Consolidated statement of comprehensive income.
17. Inventories
Inventories are stated at the lower of cost, including all relevant overhead expenditure, and net realisable value. Inventory cost is valued
using the most appropriate method based on the business use of inventory. In the majority of cases this is moving average unit cost, with
some businesses using standard cost or first in first out (FIFO) as methods more indicative of their use of inventory.
2022
\u00a3m
2021
\u00a3m
Raw materials and consumables 535 432
Work-in-progress 372 312
Finished goods and goods for resale 69 67
976 811
The Group recognised \u00a326m (2021 \u00a313m) as a write down of inventories to net realisable value.
18. Current tax
Current tax for the current and prior years is recognised as a liability to the extent that it has not yet been settled, and as an asset to the
extent that the amounts already paid exceed the amount due or the benefit of a tax loss can be carried back to recover current tax of
a prior year. Current tax assets and liabilities are measured at the amount expected to be paid to or recovered from taxation authorities,
using the rates that have been enacted or substantively enacted by the balance sheet date.
2022
\u00a3m
2021
\u00a3m
Tax provisions (145) (106)
Research and development expenditure credits receivable 131 81
Other 44 69
30 44
Represented by:
Current tax assets 133 71
Current tax liabilities (103) (27)
30 44
Tax provisions of \u00a3145m (2021 \u00a3106m) are in respect of known tax issues, of which \u00a387m (2021 \u00a354m) relates to the US, \u00a356m (2021 \u00a350m)
relates to the UK and \u00a32m (2021 \u00a32m) relates to overseas territories.
19. Cash and cash equivalents
Cash and cash equivalents includes cash in hand, call and term deposits, investments in money market funds and other short-term liquid
investments with original maturities of three months or less and which are subject to an insignificant risk of change in value. For the
purpose of the cash flow statement, cash and cash equivalents also includes bank overdrafts that are repayable on demand and which
form an integral part of the Group\u2019s cash management.
2022
\u00a3m
2021
\u00a3m
Cash 484 903
Money market funds 1,149 1,171
Short-term deposits 1,474 843
3,107 2,917
Cash and cash equivalents includes \u00a355m (2021 \u00a383m) which is subject to regulatory restrictions and is therefore not available for general
use by other entities within the Group.
262 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
20. Business disposals
Assets and liabilities of disposal groups classified as held for sale comprise assets and liabilities that are expected to be recovered primarily
through sale rather than continuing use. Assets and liabilities of disposal groups classified as held for sale are measured at the lower of their
carrying value and fair value less costs to sell.
Business disposals during 2022
On 9 July 2022, the Group entered into an agreement for the sale of BAE Systems\u2019 financial crime detection business from the Digital
Intelligence business in our Cyber & Intelligence segment. The sale to SymphonyAI completed on 28 October 2022. Disposal costs of \u00a325m were
incurred in relation to the sale, relating to costs incurred in the sale and operational separation of the business.
The gain recognised on disposal was as follows:
\u00a3m
Cash received or receivable:
Cash 131
Total disposal consideration 131
Carrying amount of net assets sold (see below) (29)
Disposal costs (25)
Cumulative currency translation gain 17
Gain on sale before tax 94
Net cash inflow arising on disposal:
Cash consideration received 131
Less: cash and cash equivalents disposed (17)
Less: disposal costs (13)
101
Assets and liabilities presented as at the date of disposal were as follows:
\u00a3m
Intangible assets including goodwill 23
Right-of-use assets 3
Trade, other and contract receivables 26
Cash and cash equivalents 17
Total assets 69
Lease liabilities (3)
Contract liabilities (9)
Trade and other payables (27)
Provisions (1)
Total liabilities (40)
Net assets disposed 29
Business disposals during 2021
Advanced Electronics Company
In December 2020, the Group\u2019s Overhaul and Maintenance Company (OMC) entered into a heads of terms for the sale of its 50% shareholding
in Advanced Electronics Company Limited (AEC) to Saudi Arabian Military Industries, and this was reported in the financial statements for the
year ending 31 December 2020 as assets held for sale. The sale was completed on 23 February 2021. AEC was included in the Air segment.
BAE Systems plc Annual Report 2022 263
Governance Financial statementsStrategic report
20. Business disposals continued
Business disposals during 2021 continued
The gain recognised on disposal was as follows:
2021
\u00a3m
Cash received or receivable:
Cash 182
Deferred consideration 32
Total disposal consideration 214
Carrying amount of net assets sold (see below) (91)
Gain on sale before tax and reclassification of foreign currency translation reserve 123
Reclassification of foreign currency translation reserve 9
Gain on sale before tax 132
Attributable to:
Equity shareholders 69
Non-controlling interests 63
132
Net cash inflow arising on disposal:
Cash consideration received 193
Less: cash and cash equivalents disposed \u2013
193
Of the total consideration receivable, \u00a332m was deferred to be received over the 18 months following disposal. \u00a311m of this contingent
consideration was received in 2021 in relation to the sale of AEC, in addition to the cash received on disposal. The gain on disposal has been
included in the profit for the year from continuing operations as a component of Other income, and recognised as an adjusting item.
The Group\u2019s share of the net assets of AEC as at the date of disposal was as follows:
\u00a3m
Intangible assets including goodwill 16
Property, plant and equipment 8
Equity accounted investments 67
Net assets disposed 91
BAE Systems Rokar International
On 1 April 2021, BAE Systems agreed the sale of BAE Systems Rokar International Limited (Rokar) for $31m (\u00a322m), net of cash held by Rokar.
This resulted in consideration received of $47m (\u00a334m), a disposal of net assets of $12m (\u00a38m), including $16m (\u00a312m) of cash, and a gain
before tax on disposal of $35m (\u00a326m) which has been included in the profit for the year from continuing operations as a component of
Other income, and recognised as an adjusting item. Rokar was within the Electronic Systems segment.
21. Geographical analysis of assets
Analysis of non-current assets by geographical location
Asset location
Notes
2022
\u00a3m
2021
\u00a3m
UK 4,563 4,222
Rest of Europe 1,965 1,475
US 10,719 9,713
Kingdom of Saudi Arabia 586 449
Australia 518 487
Rest of Asia and Pacific 5 5
18,356 16,351
Other investments 13 99 76
Other receivables 14 416 480
Post-employment benefit surpluses 25 1,297 483
Other financial assets 15 322 305
Deferred tax assets 16 338 622
Non-current assets 20,828 18,317
264 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
22. Loans and overdrafts
Loans and overdrafts are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, loans and overdrafts
are stated at amortised cost. Any difference between the amount initially recognised and the redemption value is recognised in the income
statement over the period of the borrowings.
2022
\u00a3m
2021
\u00a3m
Non-current
US$800m 3.8% bond, repayable 2024 664 589
US$750m 3.85% bond, repayable 2025 621 550
US$500m 7.5% bond, repayable 2027 415 368
US$1,300m 3.4% bond, repayable 2030 1,073 952
US$1,000m 1.9% bond, repayable 2031 824 732
US$400m 5.8% bond, repayable 2041 330 293
US$550m 4.75% bond, repayable 2044 447 396
US$1,000m 3% bond, repayable 2050 815 724
5,189 4,604
Current
\u00a3400m 4.125% bond, repayable 2022 \u2013 400
Accrued interest 53 57
53 457
US$500m of the US$800m 3.8% bond, repayable 2024, has been converted to a floating rate bond by utilising interest rate swaps that
mature in October 2024 and give an effective rate during 2022 of 3.4%.
The US$500m 7.5% bond, repayable 2027, was converted at issue to a sterling fixed rate bond by utilising cross-currency swaps and has
an effective rate during 2022 of 7.7%.
The US$400m 5.8% bond, repayable 2041, has been converted to a floating rate bond by utilising interest rate swaps that mature in October
2024 and give an effective rate during 2022 of 5.3%.
US$1,237m of the US$1,300m 3.4% bond, repayable 2030, was converted at issue to a sterling fixed rate bond by utilising cross-currency
swaps and has an effective rate during 2022 of 3.5%.
BAE Systems plc Annual Report 2022 265
Governance Financial statementsStrategic report
23. Contract liabilities
Contract liabilities represent the obligation to transfer goods or services to a customer for which consideration has been received,
or consideration is due, from the customer.
2022
\u00a3m
2021
\u00a3m
Non-current
Contract liabilities 945 519
Current
Contract liabilities 3,882 2,874
4,827 3,393
Revenue recognised in the year includes \u00a32,393m (2021 \u00a32,701m) that was included in the opening contract liabilities balance.
Non-current and current contract liabilities as at 1 January 2021 were \u00a3524m and \u00a33,238m, respectively.
The increase in contract liabilities since 2021 is primarily due to customer advances received during the year.
24. Trade and other payables
Trade and other payables are stated at amortised cost.
US deferred compensation plan liabilities represent the present value of expected future payments required to settle the obligation
to employees in accordance with IAS 19 Employee Benefits.
2022
\u00a3m
2021
\u00a3m
Non-current
Accruals 50 43
Amounts owed to equity accounted investments (note 33) 8 7
Other taxes and social security costs \u2013 1
Deferred income
1
1,006 808
US deferred compensation plan liabilities 357 375
Other payables 20 14
1,441 1,248
Current
Trade payables 839 697
Amounts owed to equity accounted investments (note 33) 1,061 923
Other taxes and social security costs 76 197
Accruals 2,679 2,458
Deferred income 109 135
Other payables 226 226
4,990 4,636
1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK.
266 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
25. Post-employment benefits
Pension schemes
Defined contribution
Obligations for contributions are recognised as an expense in the income statement as incurred.
Defined benefit
The cost of providing benefits is determined periodically by independent actuaries and charged to the income statement in the period in
which those benefits are earned by the employees. Remeasurements, including actuarial gains and losses, are recognised in the Consolidated
statement of comprehensive income in the year in which they occur. Past service costs resulting from a plan amendment or curtailment are
recognised immediately in the income statement.
The post-employment benefit surpluses and obligations recognised in the Group\u2019s balance sheet represent the fair value of scheme assets,
less the present value of the defined benefit obligations calculated using a number of actuarial assumptions as set out on page 271. The bid
values of scheme assets are not intended to be realised in the short term and may be subject to significant change before they are realised.
The present values of scheme liabilities are derived from cash flow projections over long periods and are, therefore, inherently uncertain.
IAS 19 Employee Benefits limits the measurement of a defined benefit surplus to the lower of the surplus in the defined benefit scheme and
the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the scheme or reductions
in future contributions to the scheme. IFRIC 14 \u2013 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction, issued in 2007, provides an interpretation of the requirements of IAS 19, clarifying that a refund is available if the entity has
an unconditional right to a refund in certain circumstances. The Group has applied IFRIC 14 and has determined that there is no limit on
the recognition of the surpluses in its defined benefit pension schemes as at 31 December 2022. The surpluses have been recognised
on the basis that the future economic benefits are unconditionally available to the Group, which is assumed to be via a refund. These have
been recognised after deducting a 35% withholding tax which would be levied prior to the future refunding of any surplus and have been
presented on a net basis as this is not deemed to be an income tax of the Group.
MBDA participates in the Group\u2019s defined benefit schemes and, as these are multi-employer schemes, the Group has allocated a share
of the IAS 19 pension surpluses and deficits to MBDA based on the relative payroll contributions of active members or actual obligations
where known. Whilst this methodology is intended to reflect a reasonable estimate of the share of the surplus or deficit, it may not
accurately reflect the obligations of the participating employers.
In the event that an employer who participates in the Group\u2019s pension schemes fails or cannot be compelled to fulfil its obligations as a
participating employer, the remaining participating employers are obliged to collectively take on its obligations. The Group considers the
likelihood of this event arising as remote.
The Group\u2019s share of the IAS 19 pension surplus or deficit allocated to equity accounted investments is included in the balance sheet within
equity accounted investments.
Background
Pension schemes
BAE Systems plc operates pension schemes for the Group\u2019s qualifying employees in the UK, US and other countries. The principal schemes in
the UK and US are funded defined benefit schemes, and the assets are held in separate trustee-administered funds. The largest funded defined
benefit scheme is the Main Scheme which represents 93% (2021 93%) of the UK IAS 19 defined benefit obligation at 31 December 2022.
The schemes in other countries are primarily defined contribution schemes.
At 31 December 2022, the weighted average durations of the UK and US defined benefit pension obligations were 13 years (2021 17 years)
and 12 years (2021 12 years), respectively.
The split of the defined benefit pension liability on a funding basis between active, deferred and pensioner members for the Main Scheme
and US schemes in aggregate is set out below:
Active
%
Deferred
%
Pensioner
%
Main Scheme
1
28 21 51
US schemes
2
28 17 55
1. Source: 31 March 2021 actuarial valuation reports.
2. Source: Annual updates of the US schemes as at 1 January 2022.
BAE Systems plc Annual Report 2022 267
Governance Financial statementsStrategic report
25. Post-employment benefits continued
Regulatory framework
The funded UK schemes are registered and subject to the statutory scheme specific-funding requirements outlined in UK legislation, including
the payment of levies to the Pension Protection Fund as set out in the Pension Act 2004. These schemes were established under trust and the
responsibility for their governance lies jointly with the Trustees and the Group.
The funded US schemes are tax-qualified pension schemes regulated by the Pension Protection Act 2006 and insured by the Pension Benefit
Guaranty Corporation (PBGC) up to certain limits. These schemes were established under, and are governed by, the US Employee Retirement
Income Security Act 1974 and the BAE Systems Administrative Committee is a named fiduciary with the authority to manage their operation.
Benefits
The UK defined benefit schemes provide benefits to members in the form of a set level of pension payable for life based on members\u2019 final
salaries. The benefits attract inflation-related increases both in deferment and payment. All UK defined benefit schemes are closed to new
entrants, with benefits for new employees being provided through a defined contribution scheme. The Normal Retirement Age for the majority
of active members of the Main Scheme is 65. Specific benefits applicable to members differ between schemes. Further details on the benefits
provided by each scheme are provided on the BAE Systems Pensions website: baesystemspensions.com
A UK High Court judgment was delivered on 26 October 2018 concerning gender equalisation for the effect of Guaranteed Minimum
Pensions (GMPs) for occupational pension schemes. A further UK High Court judgment was delivered on 20 November 2020 which rules that
past cash-equivalent transfer values needed to account for gender equalisation for the effect of GMPs. In 2018 and 2020, a non-recurring past
service cost was included in the income statement to reflect the expectation that the impact of GMP equalisation would increase the pension
deficit in the balance sheet. In 2022, an allowance of \u00a396m (2021 \u00a3140m) was included within the pension surplus (2021 deficit) (before
allocation to equity accounted investments) to reflect these rulings.
The US defined benefit schemes ceased to be final salary schemes in January 2013. The benefits accrued based on the final salaries of members
at that point will become payable on retirement. The Normal Retirement Age for the largest scheme in the US is 65.
Other post-employment benefits
The Group operates a number of non-pension retirement benefit schemes, under which certain employees are eligible to receive benefits
after retirement, the majority of which relate to the provision of medical benefits to retired employees of the Group\u2019s subsidiaries in the US.
Funding
Introduction
Disclosures in respect of pension funding are provided below. Disclosures in respect of pension accounting under IAS 19 are provided
on pages 271 to 277.
The majority of the UK and US defined benefit pension schemes are funded by the Group\u2019s subsidiaries and equity accounted investments.
The individual pension schemes\u2019 funding requirements are based on actuarial measurement frameworks set out in their funding policies.
For funding valuation purposes, pension scheme assets are included at market value at the valuation date, whilst the liabilities are measured
on an actuarial funding basis using the projected unit credit method and discounted to their present value based on prudent assumptions set
by the trustees following consultation with scheme actuaries.
The funding valuations are performed by professionally qualified independent actuaries and include assumptions which differ from the actuarial
assumptions used for IAS 19 accounting purposes shown on page 271. The purpose of the funding valuations is to design funding plans which
ensure that the schemes have sufficient funds available to meet future benefit payments.
268 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
25. Post-employment benefits continued
Funding continued
UK valuations
Funding valuations of the Group\u2019s UK defined benefit pension schemes are performed at least every three years. Following the accelerated
payment in 2021 of the remaining sponsor deficit reduction contributions under the previously agreed deficit recovery plan, the Group and
Trustees agreed to carry out an early triennial funding valuation for the Main Scheme as at 31 March 2021. This valuation was concluded
and signed off on 30 June 2022.
The results of the most recent triennial valuations are shown below. These valuations were agreed with the Trustees and certified by the
scheme actuaries after consultation with The Pensions Regulator in the UK.
Main
Scheme as at
31 March 2021
\u00a3bn
Other
schemes as at
31 March 2020
\u00a3bn
Market value of assets 22.9 2.1
Present value of liabilities (22.9) (2.0)
Funding surplus \u2013 0.1
Percentage of accrued benefits covered by the assets at the valuation date 100% 105%
The valuations in 2020 and 2021 were determined using the following mortality assumptions:
Life expectancy of a male currently aged 65 (years) 86 \u2013 89
Life expectancy of a female currently aged 65 (years) 87 \u2013 90
Life expectancy of a male at age 65, currently aged 45 (years) 88 \u2013 91
Life expectancy of a female at age 65, currently aged 45 (years) 90 \u2013 93
As part of the process of the Main Scheme\u2019s 2021 valuation, the Trustees and the Group agreed to update the methodology to use a cash flow
matching strategy, such that assets are invested with the aim of the expected income directly matching the expected benefit payments of the
Scheme. The cash flow matching strategy aims to manage risk through a defined amount of risk buffer assets, which equate to the agreed
prudence margin in the valuation. The risk buffer assets are measured over time to assure the Scheme is sufficiently funded. The asset portfolio
is currently invested in a selection of bonds designed to match the pension payments for current pensioners, as well as a mix of growth-seeking
assets aimed to generate returns for the pension payments for future pensioners. Over time, assets from the return-seeking portfolio will be
realised to purchase additional, lower-risk assets to match the increasing current pensioner portfolio.
The 2020 valuations for the other schemes use a different method in that discount rates were directly based on prudent levels of expected
returns for the assets held by the schemes, reflecting the planned investment strategies and maturity profiles of each scheme. The discount
rates are curves which provide a different rate for each year into the future.
The inflation assumptions for each of the valuations were derived using data from the Bank of England, which is based on the difference
between the yields on index-linked and fixed-interest long-term government bonds. The inflation assumption is a curve which provides a
different rate for each year into the future.
Under IAS 19, the discount rate for accounting purposes is based on third-party AA corporate bond yields whereas, for funding valuation
purposes, the discount rate is based on a prudent level of expected returns from the broader and mixed types of investments reflected in
the schemes\u2019 investment strategies.
There have been no changes to the contributions or benefits, as set out in the rules of the schemes, for pension scheme members as a result
of the new funding valuations.
The results of future triennial valuations and associated funding requirements will be impacted by a number of factors, including the future
performance of investment markets and anticipated members\u2019 longevity.
US valuations
The Group\u2019s US pension schemes are valued annually, with the latest valuations performed as at 1 January 2022.
BAE Systems plc Annual Report 2022 269
Governance Financial statementsStrategic report
25. Post-employment benefits continued
Funding continued
Contributions
Under the terms of the trust deeds of the UK schemes, the Group is required to have a funding plan determined at the conclusion of the
triennial funding valuations.
Equity accounted investments make regular contributions to the schemes in which they participate in line with the schedule of contributions
and are allocated a share of funding contributions.
In 2022, total employer contributions to the Group\u2019s pension schemes were \u00a3267m (2021 \u00a3324m), including amounts funded by equity accounted
investments of \u00a323m (2021 \u00a339m), and included approximately \u00a345m (2021 \u00a390m) of deficit recovery payments in respect of the UK schemes.
Contributions in 2023, for both UK and US schemes, are expected to be at a similar level to 2022.
Risk management
The defined benefit pension schemes expose the Group to actuarial risks, including market (investment) risk, interest rate risk, inflation risk
and longevity risk.
Risk Mitigation
Market (investment) risk
Asset returns may not move
in line with the liabilities and
may be subject to volatility.
Following the 23 September 2022 UK \u2018mini budget\u2019, gilt yields increased at an unprecedented rate
causing significant market turmoil. Throughout the period following the mini budget, the Group and
Trustees monitored the schemes closely with the help of independent advisers. The schemes remained
in a strong position throughout and continued to have sufficient liquidity to meet all payments as they
fell due.
The investment portfolios are highly diversified, investing in a wide range of assets, in order to
reduce the exposure of the total portfolio to a materially adverse impact from a single security or type
of security. To reduce volatility, certain assets are held in a matching portfolio, which largely consists
of index-linked bonds, gilts and swaps, designed to mirror movements in corresponding liabilities.
Some 42% (2021 45%) of the Group\u2019s pension scheme assets are held in equities and pooled
investment vehicles due to the higher expected level of return over the long term.
Some of the Group\u2019s pension schemes use derivative financial instruments as part of their investment
strategy to manage the level of market risk. The Main Scheme has an equity option strategy protecting
\u00a30.9bn of assets against a significant fall in equity markets, in line with the prior year. The strategy also
caps the upside if equity markets increase more than an agreed percentage.
Interest rate risk
Liabilities are sensitive to
movements in interest rates,
with lower interest rates leading to an
increase in the valuation of liabilities.
As part of the funding valuation finalised during 2022, the main UK Scheme has adopted a cash flow
matching strategy, whereby contractual income from assets is designed to directly match benefits paid
to members each year. A portfolio of assets with contractual income has been structured to match
benefits already in payment, representing around half of the liabilities. This inherently hedges the
associated interest rate risk. As members retire and become pensioners, additional matching assets will
be purchased to keep pace. Interest rate risk associated with the remaining purchase of matching assets
is mitigated via a hedging strategy involving mainly physical assets rather than derivatives and only
modest levels of leverage. The overall level of interest rate hedging on the funding basis has increased
compared to 2021.
Inflation risk
Liabilities are sensitive to
movements in inflation, with
higher inflation leading to an increase
in the valuation of liabilities.
The main UK Scheme\u2019s cash flow matching strategy includes aligning asset income to the inflation-
linked members\u2019 benefit payments. Inflation risk associated with benefits already in payment is
inherently hedged by the portfolio of contractual income assets structured to match them, as well as an
overlay of inflation swaps held with several banks to reduce counterparty risk. The overall level of
inflation hedging on the funding basis is broadly similar to 2021.
The Group\u2019s US scheme benefits are not indexed with inflation.
In 2014, the Main Scheme implemented a pension increase exchange to allow retired members to
elect for a higher current pension in exchange for foregoing certain rights to future pension increases.
Longevity risk
Liabilities are sensitive to
life expectancy, with increases
in life expectancies leading
to an increase in the valuation
of liabilities.
Longevity adjustment factors are used in the majority of the UK pension schemes in order to adjust
the pension benefits payable so as to share the cost of people living longer with employees.
In 2013, with the agreement of the Company, the Trustees of the 2000 Plan, Royal Ordnance Pension
Scheme and Shipbuilding Industries Pension Scheme entered into arrangements with Legal & General
to insure against longevity risk for the current pensioner population, covering a total of \u00a34.4bn of pension
scheme liabilities. These arrangements reduce the funding volatility relating to increasing life expectancy.
This longevity risk cover with Legal & General remains in place following the merger of the 2000 Plan
and SIPS into the Main Scheme.
270 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
25. Post-employment benefits continued
IAS 19 accounting
The disclosures below relate to post-retirement benefit schemes in the UK, US and other countries which are accounted for as defined benefit
schemes in accordance with IAS 19.
Principal actuarial assumptions
The assumptions used are estimates chosen from a range of possible actuarial assumptions which, due to the long-term nature of the obligation
covered, may not necessarily occur in practice.
UK US
2022 2021 2020 2022 2021 2020
Financial assumptions
Discount rate \u2013 past service (%) 4.8 1.9 1.4 5.0 2.8 2.4
Discount rate \u2013 future service (%) 4.8 1.9 1.6 5.0 2.8 2.4
Retail Prices Index (RPI) inflation (%) 3.0 3.1 2.7 n/a n/a n/a
Rate of increase in salaries (%) 3.0 3.1 2.7 n/a n/a n/a
Rate of increase in deferred pensions (%) 2.3/3.0 2.4/3.1 2.0/2.7 n/a n/a n/a
Rate of increase in pensions in payment (%) 1.7 \u2013 3.6 1.7 \u2013 3.7 1.6 \u2013 3.6 n/a n/a n/a
Demographic assumptions
Life expectancy of a male currently aged 65 (years) 86 \u2013 89 86 \u2013 89 86 \u2013 88 87 87 87
Life expectancy of a female currently aged 65 (years) 88 \u2013 90 88 \u2013 90 88 \u2013 90 89 89 89
Life expectancy of a male currently aged 45 (years) 87 \u2013 90 86 \u2013 90 87 \u2013 89 87 87 87
Life expectancy of a female currently aged 45 (years) 89 \u2013 91 89 \u2013 91 89 \u2013 91 89 89 88
Discount rate
The discount rate assumptions are derived through discounting the projected benefit payments using a third-party AA corporate bond yield
curve to produce a single equivalent discount rate for the UK and US territories. This inherently captures the maturity profile of the expected
benefit payments. For the UK territory, the discount rate used for future service differs from that used for past service as it only uses the cash
flows relating to active members, which have a different duration. Further information on the duration of the schemes is detailed on page 267.
Retail Prices Index (RPI) and Consumer Prices Index (CPI) inflation
In the UK, the inflation assumptions are derived by reference to the difference between the yields on index-linked and fixed-interest long-term
government bonds, or advice from the local actuary depending on the available information. Index-linked government bonds contain a premium
that investors are willing to pay to mitigate the risk that RPI inflation is higher than expected. To account for this, the RPI assumption includes
an inflation risk premium deduction.
As a consequence of RPI reform announcements, the Company has reviewed its approach to setting inflation assumptions. The inflation risk
premium deduction has been set at 0.55% per annum (2021 0.55%) and the CPI assumption has been set at 0.7% per annum (2021 0.7%)
lower than RPI. The resulting RPI assumption is 3.0% per annum and the CPI assumption is 2.3% per annum. The 0.7% per annum RPI-CPI
differential is a weighted average of a 1% per annum differential pre-2030 and 0.1% per annum differential post-2030; this reflects the
anticipated change to the RPI index from 2030. In the US, inflation assumptions are not relevant as the Group\u2019s US pension schemes are
not indexed with inflation.
Rate of increase in salaries
The rate of increase in salaries for the UK schemes is assumed to be RPI inflation of 3.0% (2021 RPI inflation of 3.1%), plus a promotional scale.
From 1 January 2013, employees in the US schemes no longer accrue salary-related benefits.
Rate of increase in deferred pensions
The rate of increase in deferred pensions for the UK schemes is based on CPI inflation of 2.3% (2021 CPI inflation of 2.4%), with the exception
of the legacy 2000 Plan, which is based on RPI inflation of 3.0% (2021 RPI inflation of 3.1%). For all UK schemes, the rate of increase in deferred
pensions is subject to inflation caps.
Rate of increase in pensions in payment
The rate of increase in pensions in payment differs between UK schemes. Different tranches of the schemes\u2019 benefits increase at rates based
on either RPI or CPI inflation, and some are subject to an inflation cap. With the exception of two smaller schemes, the rate of increase in
pensions in payment is based on RPI inflation.
Life expectancy
For its UK pension schemes, the Group has used the Self-Administered Pension Schemes S3 mortality tables based on year of birth (as published
by the Institute of Actuaries) for both pensioner and non-pensioner members, in conjunction with the results of an investigation into the actual
mortality experience of scheme members and information on the demographic profile of the scheme\u2019s membership.
In addition, to allow for future improvements in longevity, the Continuous Mortality Investigation 2021 tables (published by the Institute of
Actuaries) have been used (in 2021, the Continuous Mortality Investigation 2020 tables were used), with an assumed long-term rate of future
annual mortality improvements of 1.0% per annum (2021 1.0%), an initial rate adjustment parameter (\u2018A\u2019) of 0.25% (2021 0.25%) in conjunction
with a smoothing parameter (\u2018S
k
\u2019) of 7 for all members (2021 7). The Group has chosen to apply a weighting to the 2021 data in recognition
of the abnormal excess deaths as a result of COVID-19. No further adjustments have been made to improvements expected in future years.
The impacts of COVID-19 will continue to be monitored and assessed at future reporting dates.
For the majority of the US schemes, the mortality tables used at 31 December 2022 are a blend of the fully generational PRI-2012 White Collar
table and the PRI-2012 Blue Collar table, both projected using Scale MP-2021.
BAE Systems plc Annual Report 2022 271
Governance Financial statementsStrategic report
25. Post-employment benefits continued
IAS 19 accounting continued
US healthcare schemes
The latest valuations of the principal schemes, covering retiree medical and life insurance schemes in certain US subsidiaries, were performed
by independent actuaries as at 1 January 2022. These valuations were rolled forward to reflect the information at 31 December 2022. The
method of accounting for these is similar to that used for defined benefit pension schemes.
Long-term healthcare cost is assumed to increase at 4.7% per annum (2021 4.8%). This is based on an assumed increase in 2022 of 6.3%
for pre-retirement and 5.3% for post-retirement, with both rates then reducing to 4.5% by 2029 and remaining at 4.5% per annum each
year thereafter.
Summary of movements in post-employment benefit obligations
UK
\u00a3m
US and
other
\u00a3m
Total
\u00a3m
Total net IAS 19 deficit at 1 January 2022 (1,973) (313) (2,286)
Actual return on assets excluding amounts included in net interest expense (5,094) (1,199) (6,293)
Decrease in liabilities due to changes in financial assumptions 10,745 1,067 11,812
Increase in liabilities due to changes in demographic assumptions (39) \u2013 (39)
Experience losses (1,672) (6) (1,678)
Contributions in excess of service cost 8 (9) (1)
Past service cost \u2013 plan amendments 14 2 16
Net interest expense (31) (6) (37)
Foreign exchange adjustments \u2013 (24) (24)
Movement in other schemes \u2013 5 5
Total net IAS 19 surplus/(deficit) at 31 December 2022 1,958 (483) 1,475
Withholding tax on surpluses (722) \u2013 (722)
Total net IAS 19 surplus/(deficit) at 31 December 2022 (net of withholding tax) 1,236 (483) 753
Allocated to equity accounted investments (107) \u2013 (107)
Group\u2019s share of net IAS 19 surplus/(deficit) excluding Group\u2019s share of
amounts allocated to equity accounted investments at 31 December 2022 1,129 (483) 646
Surplus recognition
A number of schemes are in an accounting surplus position. The surpluses have been recognised on the basis that the future economic benefits
are unconditionally available to the Group, which is assumed to be via a refund. These have been recognised after deducting a 35% withholding
tax, which would be levied prior to the future refunding of any surplus and have been presented on a net basis as this is not deemed to be an
income tax of the Group.
Amounts recognised on the balance sheet
The table below shows a reconciliation between the gross assets and liabilities of the Group\u2019s UK, US and other post-employment benefit
schemes and the amounts recognised on the Group\u2019s balance sheet after allocation to equity accounted investments.
2022
UK defined
benefit
pension
schemes
\u00a3m
US and
other
pension
schemes
\u00a3m
US
healthcare
schemes
\u00a3m
Kingdom
of Saudi
Arabia end
of service
benefit
\u00a3m
Total
\u00a3m
Present value of unfunded obligations (104) (105) \u2013 (142) (351)
Present value of funded obligations (19,462) (3,927) (128) \u2013 (23,517)
Fair value of scheme assets 21,524 3,629 190 \u2013 25,343
Total net IAS 19 surplus/(deficit) 1,958 (403) 62 (142) 1,475
Withholding tax on surpluses (722) \u2013 \u2013 \u2013 (722)
Allocated to equity accounted investments (107) \u2013 \u2013 \u2013 (107)
Group\u2019s share of net IAS 19 surplus/(deficit) 1,129 (403) 62 (142) 646
Represented by:
Post-employment benefit surpluses 1,224 11 62 \u2013 1,297
Post-employment benefit obligations (95) (414) \u2013 (142) (651)
1,129 (403) 62 (142) 646
Group\u2019s share of net IAS 19 surplus of equity accounted investments 38 \u2013 \u2013 \u2013 38
The US unfunded pension obligations have associated assets held in deferred compensation schemes with a fair value of \u00a356m (2021 \u00a361m),
which are shown in Other Investments. The funds held in these trusts can be used solely for the satisfaction of the unfunded obligations.
272 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
25. Post-employment benefits continued
IAS 19 accounting continued
2021
UK defined
benefit
pension
schemes
\u00a3m
US and
other
pension
schemes
\u00a3m
US
healthcare
schemes
\u00a3m
Kingdom
of Saudi
Arabia end
of service
benefit
\u00a3m
Total
\u00a3m
Present value of unfunded obligations (152) (131) \u2013 (153) (436)
Present value of funded obligations (28,768) (4,512) (150) \u2013 (33,430)
Fair value of scheme assets 26,947 4,415 218 \u2013 31,580
Total net IAS 19 (deficit)/surplus (1,973) (228) 68 (153) (2,286)
Allocated to equity accounted investments 162 \u2013 \u2013 \u2013 162
Group\u2019s share of net IAS 19 (deficit)/surplus (1,811) (228) 68 (153) (2,124)
Represented by:
Post-employment benefit surpluses 383 32 68 \u2013 483
Post-employment benefit obligations (2,194) (260) \u2013 (153) (2,607)
(1,811) (228) 68 (153) (2,124)
Group\u2019s share of net IAS 19 deficit of equity accounted investments (69) \u2013 \u2013 \u2013 (69)
Total cumulative actuarial losses recognised in equity since the transition to IFRS are \u00a31.1bn (2021 \u00a34.1bn).
Changes in the fair value of scheme assets before allocation to equity accounted investments
UK defined
benefit
pension
schemes
\u00a3m
US and
other
pension
schemes
\u00a3m
US
healthcare
schemes
\u00a3m
Kingdom
of Saudi
Arabia end
of service
benefit
\u00a3m
Total
\u00a3m
Value of scheme assets at 1 January 2021 25,029 4,482 218 \u2013 29,729
Interest income 345 103 5 \u2013 453
Actual return on assets excluding amounts included in interest income 2,274 49 2 \u2013 2,325
Actual return on assets 2,619 152 7 \u2013 2,778
Contributions by employer 313 11 1 14 339
Contributions by employer in respect of employee salary sacrifice arrangements 71 \u2013 \u2013 \u2013 71
Total contributions by employer 384 11 1 14 410
Members\u2019 contributions 6 \u2013 \u2013 \u2013 6
Administrative expenses (12) (7) (1) \u2013 (20)
Transfer to other investments \u2013 (56) \u2013 \u2013 (56)
Foreign exchange translation \u2013 39 2 \u2013 41
Benefits paid (1,079) (206) (9) (14) (1,308)
Value of scheme assets at 31 December 2021 26,947 4,415 218 \u2013 31,580
Interest income 490 132 6 \u2013 628
Actual return on assets excluding amounts included in interest income (5,094) (1,199) (48) \u2013 (6,341)
Actual return on assets (4,604) (1,067) (42) \u2013 (5,713)
Contributions by employer 257 10 \u2013 14 281
Contributions by employer in respect of employee salary sacrifice arrangements 72 \u2013 \u2013 \u2013 72
Total contributions by employer 329 10 \u2013 14 353
Members\u2019 contributions 5 \u2013 \u2013 \u2013 5
Administrative expenses (18) (7) (1) \u2013 (26)
Foreign exchange translation \u2013 521 26 \u2013 547
Benefits paid (1,135) (243) (11) (14) (1,403)
Value of scheme assets at 31 December 2022 21,524 3,629 190 \u2013 25,343
BAE Systems plc Annual Report 2022 273
Governance Financial statementsStrategic report
25. Post-employment benefits continued
IAS 19 accounting continued
Assets of defined benefit pension schemes
2022
UK US and other Total
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Equities:
UK
1
209 \u2013 209 \u2013 \u2013 \u2013 209 \u2013 209
Overseas 624 \u2013 624 \u2013 \u2013 \u2013 624 \u2013 624
Pooled investment vehicles
2
3 8,892 8,895 793 \u2013 793 796 8,892 9,688
Fixed-interest securities:
UK gilts 2,397 \u2013 2,397 \u2013 \u2013 \u2013 2,397 \u2013 2,397
UK corporates 1,832 2,416 4,248 \u2013 \u2013 \u2013 1,832 2,416 4,248
Overseas government 29 \u2013 29 599 \u2013 599 628 \u2013 628
Overseas corporates 1,248 56 1,304 2,105 \u2013 2,105 3,353 56 3,409
Index-linked securities:
UK gilts 2,050 \u2013 2,050 \u2013 \u2013 \u2013 2,050 \u2013 2,050
UK corporates \u2013 952 952 \u2013 \u2013 \u2013 \u2013 952 952
Overseas corporates 9 \u2013 9 \u2013 \u2013 \u2013 9 \u2013 9
Property
3
\u2013 1,731 1,731 \u2013 37 37 \u2013 1,768 1,768
Derivatives
4
\u2013 (1,595) (1,595) \u2013 \u2013 \u2013 \u2013 (1,595) (1,595)
Cash:
Sterling 566 84 650 \u2013 \u2013 \u2013 566 84 650
Foreign currency 12 (1) 11 95 \u2013 95 107 (1) 106
Other \u2013 10 10 \u2013 \u2013 \u2013 \u2013 10 10
Total 8,979 12,545 21,524 3,592 37 3,629 12,571 12,582 25,153
2021
UK US and other Total
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Equities:
UK
1
1,188 \u2013 1,188 \u2013 \u2013 \u2013 1,188 \u2013 1,188
Overseas 3,468 \u2013 3,468 \u2013 \u2013 \u2013 3,468 \u2013 3,468
Pooled investment vehicles
2
257 8,058 8,315 990 \u2013 990 1,247 8,058 9,305
Fixed-interest securities:
UK gilts 1,253 \u2013 1,253 \u2013 \u2013 \u2013 1,253 \u2013 1,253
UK corporates 1,850 3,171 5,021 \u2013 \u2013 \u2013 1,850 3,171 5,021
Overseas government 67 \u2013 67 305 \u2013 305 372 \u2013 372
Overseas corporates 1,152 50 1,202 2,990 \u2013 2,990 4,142 50 4,192
Index-linked securities:
UK gilts 3,397 \u2013 3,397 \u2013 \u2013 \u2013 3,397 \u2013 3,397
UK corporates \u2013 1,270 1,270 \u2013 \u2013 \u2013 \u2013 1,270 1,270
Property
3
\u2013 1,967 1,967 \u2013 42 42 \u2013 2,009 2,009
Derivatives
4
\u2013 (1,317) (1,317) \u2013 (3) (3) \u2013 (1,320) (1,320)
Cash:
Sterling 931 91 1,022 \u2013 \u2013 \u2013 931 91 1,022
Foreign currency 14 4 18 91 \u2013 91 105 4 109
Other 39 37 76 \u2013 \u2013 \u2013 39 37 76
Total 13,616 13,331 26,947 4,376 39 4,415 17,992 13,370 31,362
1. Includes \u00a33m (2021 \u00a35m) of the Company\u2019s own ordinary shares.
2. Primarily invested in private markets and exchange traded funds. The amounts classified as unquoted primarily comprise investments in private markets, with the majority
held in infrastructure, alternatives and direct funds, valued in accordance with International Private Equity and Venture Capital Valuation Guidelines.
3. Valued on the basis of open market value at the end of the year determined in accordance with the Royal Institution of Chartered Surveyors\u2019 Appraisal and Valuation
Standards and the Practice Note contained therein. Includes \u00a3223m (2021 \u00a3263m) of property occupied by Group companies.
4. Includes equity protection options, forward foreign exchange contracts, futures, and interest rate, inflation and longevity swaps. In addition, the total derivative figures
shown are net of \u00a3520m (2021 \u00a3464m) of repurchase agreements. The valuations are based on valuation techniques using underlying market data and discounted
cash flows.
274 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
25. Post-employment benefits continued
IAS 19 accounting continued
Longevity swap
The Group holds longevity insurance contracts for some of its UK defined benefit pension schemes. These provide long-term protection
and income to the underlying pension scheme in the event that insured members live longer than expected.
The value of the longevity insurance contracts held by the Group are calculated by an actuary. At a high level, they are measured by
discounting the difference between the projected fixed and floating cash flows payable under the contracts, excluding the value of future
projected fees. The significant assumptions used for this valuation are the discount rate and mortality assumptions; fair values for these
assumptions are advised by an actuary based on external data and characteristics of the insured member population.
As at 31 December 2022, the longevity swap valuation leads to a negative adjustment to the assets which reflects that experience to date
on the contracts has been higher than expected deaths.
Changes in the present value of the defined benefit obligations before allocation to equity accounted investments
UK defined
benefit
pension
schemes
\u00a3m
US and
other
pension
schemes
\u00a3m
US
healthcare
schemes
\u00a3m
Kingdom of
Saudi Arabia
end of service
benefit
\u00a3m
Total
\u00a3m
Defined benefit obligations at 1 January 2021 (29,391) (4,894) (157) (132) (34,574)
Current service cost (237) (13) (1) (23) (274)
Contributions by employer in respect of employee salary sacrifice arrangements (71) \u2013 \u2013 \u2013 (71)
Total current service cost (308) (13) (1) (23) (345)
Members\u2019 contributions (6) \u2013 \u2013 \u2013 (6)
Past service cost \u2013 plan amendments (3) \u2013 (1) \u2013 (4)
Actuarial gain/(loss) due to changes in financial assumptions 1,145 220 6 (2) 1,369
Actuarial gain/(loss) due to changes in demographic assumptions 74 (8) 1 \u2013 67
Experience losses (1,109) (8) (2) (6) (1,125)
Interest expense (401) (113) (4) (4) (522)
Foreign exchange translation \u2013 (33) (1) \u2013 (34)
Benefits paid 1,079 206 9 14 1,308
Defined benefit obligations at 31 December 2021 (28,920) (4,643) (150) (153) (33,866)
Current service cost (231) (12) (1) (27) (271)
Contributions by employer in respect of employee salary sacrifice arrangements (72) \u2013 \u2013 \u2013 (72)
Total current service cost (303) (12) (1) (27) (343)
Members\u2019 contributions (5) \u2013 \u2013 \u2013 (5)
Past service cost \u2013 plan amendments 14 2 (1) \u2013 15
Actuarial gain due to changes in financial assumptions 10,745 1,067 32 47 11,891
Actuarial loss due to changes in demographic assumptions (39) \u2013 \u2013 \u2013 (39)
Experience (losses)/gains (1,672) (6) 3 (4) (1,679)
Interest expense (521) (138) (4) (5) (668)
Foreign exchange translation \u2013 (545) (18) (14) (577)
Benefits paid 1,135 243 11 14 1,403
Defined benefit obligations at 31 December 2022 (19,566) (4,032) (128) (142) (23,868)
BAE Systems plc Annual Report 2022 275
Governance Financial statementsStrategic report
25. Post-employment benefits continued
IAS 19 accounting continued
Amounts recognised in the income statement after allocation to equity accounted investments
2022
UK defined
benefit
pension
schemes
\u00a3m
US and
other
pension
schemes
\u00a3m
Other
schemes
\u00a3m
Total
\u00a3m
Included in operating costs:
Current service cost (210) (12) (28) (250)
Past service cost \u2013 plan amendments 13 2 (1) 14
Administrative expenses (16) (7) (1) (24)
(213) (17) (30) (260)
Included in net finance costs:
Net interest expense on post-employment benefit obligations (28) (6) (3) (37)
Group defined benefit schemes included in share of results of equity accounted
investments:
Group\u2019s share of equity accounted investments\u2019 operating costs (10) \u2013 \u2013 (10)
Group\u2019s share of equity accounted investments\u2019 finance costs (1) \u2013 \u2013 (1)
2021
UK defined
benefit
pension
schemes
\u00a3m
US and
other
pension
schemes
\u00a3m
Other
schemes
\u00a3m
Total
\u00a3m
Included in operating costs:
Current service cost (217) (13) (24) (254)
Past service cost \u2013 plan amendments (3) \u2013 (1) (4)
Administrative expenses (11) (7) (1) (19)
(231) (20) (26) (277)
Included in net finance costs:
Net interest expense on post-employment benefit obligations (52) (10) (3) (65)
Group defined benefit schemes included in share of results of equity accounted
investments:
Group\u2019s share of equity accounted investments\u2019 operating costs (10) \u2013 \u2013 (10)
Group\u2019s share of equity accounted investments\u2019 finance costs (2) \u2013 \u2013 (2)
The Group incurred a charge of \u00a3299m (2021 \u00a3246m) in relation to defined contribution schemes for employees.
276 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
25. Post-employment benefits continued
IAS 19 accounting continued
Sensitivity analysis
The sensitivity information has been derived using scenario analysis from the actuarial assumptions as at 31 December 2022 and keeping
all other assumptions as set out on page 271.
The pension schemes hold a number of unquoted pooled investment vehicles, which are investments in private markets. These are valued
based on latest available valuation reports, and as noted on page 223, these valuations are subject to estimation uncertainty as their valuation
techniques incorporate a number of assumptions, including those associated with the COVID-19 pandemic and the impact of climate change.
Should these funds\u2019 actual valuations at 31 December 2022 be on average 2% different to those assumed, this would result in a \u00a30.2bn
(2021 \u00a30.2bn) change in the valuation of the assets.
Financial assumptions
The estimated impact of changes in the discount rate and inflation assumptions on the defined benefit pension obligation, together with the
estimated impact on scheme assets, is shown in the table below. The estimated impact on scheme assets takes into account the Group\u2019s risk
management activities in respect of interest rate and inflation risk. The sensitivity analysis on the defined benefit obligation is measured on
an IAS 19 accounting basis and, therefore, does not reflect the natural hedging in the discount rate used for funding valuation purposes.
Decrease/(increase)
in pension obligation
1
\u00a3bn
(Decrease)/increase
in scheme assets
1
\u00a3bn
Discount rate:
0.5 percentage point increase/decrease 1.4/(1.5) (1.2)/1.4
1.0 percentage point increase/decrease 2.6/(3.2) (2.3)/2.9
2.0 percentage point increase/decrease 4.7/(7.2) (4.3)/6.6
3.0 percentage point increase/decrease 6.5/(12.4) (5.9)/11.4
1. Before allocation to equity accounted investments and deduction of withholding tax.
(Increase)/decrease
in pension obligation
1
\u00a3bn
Increase/(decrease)
in scheme assets
1
\u00a3bn
Inflation:
0.1 percentage point increase/decrease (0.2)/0.2 0.1/(0.1)
0.5 percentage point increase/decrease (0.8)/0.8 0.7/(0.6)
1.0 percentage point increase/decrease (1.5)/1.5 1.4/(1.1)
1. Before allocation to equity accounted investments and deduction of withholding tax.
Demographic assumptions
Changes in the life expectancy assumption, including the benefit of longevity swap arrangements (see longevity risk on page 270), would have
the following effect on the total net IAS 19 surplus:
(Decrease)/increase
in net surplus
1
\u00a3bn
Life expectancy:
One-year increase/decrease (0.8)/0.7
1. Before allocation to equity accounted investments and deduction of withholding tax.
BAE Systems plc Annual Report 2022 277
Governance Financial statementsStrategic report
26. Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, it
is probable that an outflow of economic benefits will be required to settle the obligation and the amount has been reliably estimated.
If the effect is material, provisions are determined by discounting the expected future cash flows at an appropriate pre-tax discount rate.
Warranties and after-sales service
Warranties and after-sales service are provided in the normal course of business with provisions for associated costs being made based
on an assessment of future claims with reference to past experience. A provision for warranties is recognised when the underlying
products and services are sold. The provision is based on historical warranty data and a weighting of possible outcomes against their
associated probabilities.
Reorganisations
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring
has either commenced or has been announced to those affected. The costs associated with the reorganisation programmes are supported
by detailed plans and based on previous experience as well as other known factors. Future operating costs are not provided for.
Legal, contractual and environmental
The Group holds provisions for expected legal, contractual and environmental costs that it expects to incur over an extended period.
Management exercises judgement to determine the amount of these provisions. Provision is made for known issues based on past
experience of similar items and other known factors. Each provision is considered separately and the amount provided reflects the
best estimate of the most likely amount, being the single most likely amount in a range of possible outcomes.
Warranties
and
after-sales
service
\u00a3m
Reorganisations
\u00a3m
Legal,
contractual
and
environmental
\u00a3m
Other
\u00a3m
Total
\u00a3m
Non-current 57 \u2013 249 25 331
Current 52 38 136 50 276
At 1 January 2022 109 38 385 75 607
Created 39 20 81 19 159
Utilised (31) (24) (45) (20) (120)
Transfer from other balance sheet categories 2 \u2013 1 \u2013 3
Released (16) (1) (64) (11) (92)
Net present value adjustments \u2013 \u2013 (6) (3) (9)
Business acquisitions \u2013 \u2013 \u2013 6 6
Business disposals \u2013 \u2013 \u2013 (1) (1)
Foreign exchange adjustments 6 1 21 6 34
At 31 December 2022 109 34 373 71 587
Represented by:
Non-current 57 9 244 28 338
Current 52 25 129 43 249
109 34 373 71 587
278 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
26. Provisions continued
Warranties and after-sales service
Warranty and after-sales service provisions are generally utilised within three years post-delivery. Whilst actual events could result in potentially
significant differences to the quantum, but not the timing, of the outflows in relation to the provisions, management has reflected current
knowledge in assessing the provision levels.
Reorganisations
Reorganisation provisions are generally utilised within one to three years. There is limited volatility around the timing and amount of the ultimate
outflows related to these provisions.
Other debtors includes \u00a3nil (2021 \u00a39m) which is reimbursable in respect of reorganisation costs.
Legal, contractual and environmental
Reflecting the inherent uncertainty within many legal proceedings, the amount of the outflows could differ significantly from the amount provided.
While the timing of the outflows is also uncertain, the Group expects these provisions to be utilised over a period of approximately 25 years.
Other
There are no individually significant provisions included within other provisions.
27. Share capital and other reserves
Share capital
Equity Non-equity Total
Ordinary shares of 2.5p each Special Share of \u00a31
Number of
shares
m
Nominal
value
\u00a3m
Number of
shares
Nominal
value
\u00a3
Nominal
value
\u00a3m
Issued and fully paid
At 1 January 2021 3,467 87 1 1 87
Shares cancelled (63) (2) \u2013 \u2013 (2)
At 1 January 2022 3,404 85 1 1 85
Shares cancelled (107) (3) \u2013 \u2013 (3)
At 31 December 2022 3,297 82 1 1 82
Special Share
One Special Share of \u00a31 in the Company is held on behalf of the Secretary of State for Business, Energy and Industrial Strategy (the Special
Shareholder). Certain provisions of the Company\u2019s Articles of Association cannot be amended without the consent of the Special Shareholder.
These provisions include the requirement that no foreign person, or foreign persons acting in concert, can have more than a 15% voting
interest in the Company, the requirement that the majority of the directors are British, and the requirement that the Chief Executive and
any executive Chairman are British. The effect of these requirements can also be amended by regulations made by the directors and approved
by the Special Shareholder.
The Special Shareholder may require the Company at any time to redeem the Special Share at par or to convert the Special Share into one
ordinary voting share. The Special Shareholder is entitled to receive notice of and to attend general meetings and class meetings of the Company\u2019s
shareholders, but has no voting right, nor other rights, other than to speak in relation to any business in respect of the Special Share.
Treasury shares
As at 31 December 2022, 220,086,959 (2021 236,807,031) ordinary shares of 2.5p each with an aggregate nominal value of \u00a35,502,174
(2021 \u00a35,920,176) were held in treasury. During 2022, 16,720,072 (2021 12,188,518) treasury shares were used to satisfy awards and options
under the Share Incentive Plan, International Share Incentive Plan, Performance Share Plan, the Performance Shares and Restricted Shares
elements of the Long-Term Incentive Plan, and the Executive Share Option Plan.
BAE Systems Employee Share Option Plan (ESOP) Trust
The Group has an ESOP discretionary trust to administer the share plans and to acquire Company shares, using funds loaned by the Group, to meet
commitments to Group employees. Dividend waivers were in operation for shares within the ESOP Trust, other than those owned beneficially
by the participants, for the dividends paid in the year.
At 31 December 2022, the ESOP Trust held 7,268,002 (2021 7,022,472) ordinary shares of 2.5p each, with a market value of \u00a362m (2021 \u00a339m).
The shares held by the ESOP Trust are recorded at cost and deducted from retained earnings until such time as the shares vest unconditionally
to employees.
A dividend waiver was also in operation for the dividends paid in the year over shares within the Company\u2019s share incentive plan trusts other
than those shares owned beneficially by the participants.
Own shares held
Own shares held, including treasury shares and shares held by BAE Systems ESOP Trust, are recognised as a deduction from retained earnings.
BAE Systems plc Annual Report 2022 279
Governance Financial statementsStrategic report
27. Share capital and other reserves continued
Equity dividends
Equity dividends on ordinary share capital are recognised as a liability on the date that the shareholder\u2019s right to receive payment is
established. This is generally the date that the dividend is declared.
2022
\u00a3m
2021
\u00a3m
Final 15.2p dividend per ordinary share paid in the year (2021 14.3p) 480 461
Interim 10.4p dividend per ordinary share paid in the year (2021 9.9p) 322 316
802 777
After the balance sheet date, the directors proposed a final dividend of 1 6.6p per ordinary share. The dividend proposed amounts to approximately
\u00a35 1 1m, although the final payment is likely to be lower as a result of the impact of share buybacks. The dividend, which is subject to shareholder
approval, will be paid on 1 June 2023 to shareholders registered on 21 April 2023. The ex-dividend date is 20 April 2023.
Shareholders who do not at present participate in the Company\u2019s Dividend Reinvestment Plan and wish to receive the final dividend in shares
rather than cash should complete a mandate form for the Dividend Reinvestment Plan and return it to the registrars no later than 5 May 2023.
Other reserves
Merger
reserve
\u00a3m
Statutory
reserve
\u00a3m
Revaluation
reserve
\u00a3m
Capital
redemption
reserve
\u00a3m
Hedging
reserve
\u00a3m
Translation
reserve
\u00a3m
Total
\u00a3m
At 1 January 2021 4,589 202 10 3 94 1,025 5,923
Subsidiaries:
Currency translation on foreign currency net investments \u2013 \u2013 \u2013 \u2013 \u2013 27 27
Reclassification of cumulative currency translation reserve
on disposal of subsidiary \u2013 \u2013 \u2013 \u2013 \u2013 (9) (9)
Net amounts debited to hedging reserve \u2013 \u2013 \u2013 \u2013 (52) \u2013 (52)
Equity accounted investments (net of tax) \u2013 \u2013 \u2013 \u2013 9 (13) (4)
Purchase of own shares \u2013 \u2013 \u2013 2 \u2013 \u2013 2
At 31 December 2021 4,589 202 10 5 51 1,030 5,887
Subsidiaries:
Currency translation on foreign currency net investments \u2013 \u2013 \u2013 \u2013 \u2013 1,151 1,151
Reclassification of cumulative currency translation reserve
on disposal of subsidiary \u2013 \u2013 \u2013 \u2013 \u2013 (17) (17)
Net amounts debited to hedging reserve \u2013 \u2013 \u2013 \u2013 (65) \u2013 (65)
Equity accounted investments (net of tax) \u2013 \u2013 \u2013 \u2013 3 (11) (8)
Purchase of own shares \u2013 \u2013 \u2013 3 \u2013 \u2013 3
At 31 December 2022 4,589 202 10 8 (11) 2,153 6,951
280 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
27. Share capital and other reserves continued Other reserves continued Merger reserve The merger reserve arose on the acquisition of the Marconi Electronic Systems (MES) business by British Aerospace in 1999 to form BAE Systems, and represents the amount by which the fair value of the shares issued by British Aerospace as consideration exceeded their nominal value. Statutory reserve Under Section 4 of the British Aerospace Act 1980, this reserve may only be applied in paying up unissued shares of the Company to be allotted to members of the Company as fully paid bonus shares. Revaluation reserve The revaluation reserve relates to the revaluation at fair value of the net assets of the BVT joint venture previously held as an equity accounted investment on the acquisition of the remaining 45% interest in 2009. Capital redemption reserve The capital redemption reserve represents the cumulative nominal value of the Company\u2019s ordinary shares repurchased and subsequently cancelled. Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Capital The Group funds its operations through a mixture of equity funding and debt financing, including bank and capital market borrowings. At 31 December 2022, the Group\u2019s capital was \u00a311,411m (2021 \u00a37,617m), which comprises total equity of \u00a311,400m (2021 \u00a37,668m), excluding amounts accumulated in equity relating to cash flow hedges of \u00a3(11)m (2021 \u00a351m). Net debt (excluding lease liabilities) was \u00a32,023m (2021 \u00a32,160m). The capital structure of the Group reflects the judgement of the directors of an appropriate balance of funding required. The Group\u2019s policy is to maintain an investment grade credit rating and ensure operating flexibility, whilst: \u2013 meeting its pension obligations; \u2013 investing in research and technology and pursuing other organic investment opportunities; \u2013 paying dividends in line with the Group\u2019s policy of long-term sustainable cover of around two times underlying earnings (see note 7); \u2013 making accelerated returns of capital to shareholders when the balance sheet allows and when the return from doing so is in excess of the Group\u2019s Weighted Average Cost of Capital; and \u2013 investing in value-enhancing acquisitions, where market conditions are right and where they deliver on the Group\u2019s strategy. Purchase of own shares 2021 buyback On 29 July 2021, the Company announced the details of a share buyback programme to repurchase up to \u00a3500m of its own shares over the following 12 months. As part of the buyback programme, it was agreed that should a better alternative use for the Company\u2019s cash reserves be identified, the share buyback programme would be ceased, and the money instead used for the alternative purpose. Therefore, when the Company issued a mandate to the brokers to purchase shares on their behalf, the mandates were structured such that they could be revoked at any point. As such, no financial liability was recognised for shares not yet purchased under the programme. During 2021, 63,272,873 shares were repurchased for a total price, including transaction costs, of \u00a3371m. These shares were subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve. The 2021 share buyback programme was completed on 2 February 2022. During 2022, a further 24,253,065 shares were repurchased for a total price, including transaction costs, of \u00a3132m. In total 87,525,938 shares were repurchased under the scheme for a total price, including transaction costs, of \u00a3503m. 2022 buyback In July 2022, the directors also approved a new share buyback programme of up to \u00a31.5bn over the next three years under the same terms as the 2021 buyback programme. At 31 December 2022, 82,997,065 shares were repurchased for a total price, including transaction costs, of \u00a3664m. These shares have been subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve . BAE Systems plc Annual Report 2022 281 Governance Financial statementsStrategic repor
28. Cash flow from operating activities
Reconciliation of net cash flow from operating activities to free cash flow
1
2022
\u00a3m
2021
\u00a3m
Net cash flow from operating activities 2,839 2,447
Add back Taxation paid 365 234
Purchase of property, plant and equipment, and investment property
2
(599) (516)
Purchase of intangible assets (94) (96)
Purchase of non-current other investment (8) (15)
Proceeds from funding related to assets
2
157 150
Proceeds from sale of property, plant and equipment, and investment property 18 271
Proceeds from sale of non-current other investments 7 \u2013
Equity accounted investment funding \u2013 (3)
Principal element of lease payments and receipts (227) (207)
Net capital expenditure, lease principal amounts and financial investment (746) (416)
Dividends received from equity accounted investments 94 57
Operating business cash flow
1
2,552 2,322
Taxation paid
3
(365) (234)
Interest paid, net of interest received (237) (224)
Free cash flow
1
1,950 1,864
Reconciliation of operating business cash flow
1
to net cash flow from operating activities by reporting segment
Operating business
cash flow
1
Deduct
Dividends received
from equity accounted
investments
Add back
Net capital expenditure,
lease principal amounts
and financial investment
Net cash flow from
operating activities
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Electronic Systems 650 774 (6) (3) 216 180 860 951
Platforms & Services 525 287 \u2013 (6) 108 70 633 351
Air 1,140 628 (84) (44) 146 159 1,202 743
Maritime & UK Land 235 321 (4) (4) 187 140 418 457
Cyber & Intelligence 154 173 \u2013 \u2013 37 29 191 202
HQ (152) 139 \u2013 \u2013 52 (162) (100) (23)
2,552 2,322 (94) (57) 746 416 3,204 2,681
Taxation paid
3
(365) (234)
Net cash flow from operating activities 2,839 2,447
1. Operating business cash flow and Free cash flow are alternative performance measures defined in the Financial glossary on page 302. They are presented here to provide
additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
2. To align with further detail provided in the current year cash flow statement, funding received from the UK government for the construction of assets for the year ended
31 December 2021 has been presented in equivalent detail with the cash inflow now shown separately as \u2018Proceeds from funding related to assets\u2019 to cash outflows on
the \u2018Purchase of property, plant and equipment, and investment property\u2019.
3. Taxation is managed on a Group-wide basis.
282 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
29. Movement in assets and liabilities arising from financing activities
Non-cash movements
As at
1 January
2022
\u00a3m
Cash flow
3
\u00a3m
Foreign
exchange
movements
\u00a3m
Leases
\u00a3m
Fair value
adjustments
\u00a3m
Financial
expense
\u00a3m
Other
movements
1
\u00a3m
As at
31 December
2022
\u00a3m
Assets
Other financial assets
2
122 (550) \u2013 \u2013 581 17 \u2013 170
122 (550) \u2013 \u2013 581 17 \u2013 170
Liabilities
Loans (5,061) 615 (584) \u2013 \u2013 (212) \u2013 (5,242)
Lease liabilities (1,295) 284 (95) (464) \u2013 (48) 2 (1,616)
Other financial liabilities
2
(163) 205 \u2013 \u2013 (155) (1) \u2013 (114)
(6,519) 1,104 (679) (464) (155) (261) 2 (6,972)
554
Other interest paid 23
Purchase of own shares 788
Equity dividends paid 802
Dividends paid to non-controlling interests 166
Net cash flow from financing activities 2,333
Non-cash movements
As at
1 January
2021
\u00a3m
Cash flow
3
\u00a3m
Foreign
exchange
movements
\u00a3m
Leases
\u00a3m
Fair value
adjustments
\u00a3m
Financial
expense
\u00a3m
Other
movements
1
\u00a3m
As at
31 December
2021
\u00a3m
Assets
Other financial assets
2
146 (79) \u2013 \u2013 37 18 \u2013 122
146 (79) \u2013 \u2013 37 18 \u2013 122
Liabilities
Loans (5,323) 574 (43) \u2013 \u2013 (209) (60) (5,061)
Lease liabilities (1,256) 260 (7) (246) \u2013 (43) (3) (1,295)
Other financial liabilities
2
(231) 154 \u2013 \u2013 (81) (5) \u2013 (163)
Cash collateral
4
(18) 18 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
(6,828) 1,006 (50) (246) (81) (257) (63) (6,519)
927
Other interest paid 10
Purchase of own shares 368
Equity dividends paid 777
Dividends paid to non-controlling interests 202
Partial disposal of shareholding
in subsidiary undertaking (28)
Net cash flow from financing activities 2,256
1. Other movements includes movements arising on the acquisition or disposal of businesses.
2. Excluding cash flow hedges, for which the cash flow is reported within cash flow from operating activities. See note 15 for an analysis of other financial assets and liabilities.
3. Cash flow movements represent both payments or receipts of principal and payments of interest, which are presented separately in the consolidated cash flow statement.
Cash flow movements in the prior year were presented net of interest paid. The movement tables have been re-presented in the current year to disclose greater levels of
detail and, as a result, the 2021 comparatives have been re-presented to the same level of detail.
4. Reported in other payables.
BAE Systems plc Annual Report 2022 283
Governance Financial statementsStrategic report
30. Net debt (excluding lease liabilities)
Components of net debt (excluding lease liabilities)
Notes
2022
\u00a3m
2021
\u00a3m
Cash and cash equivalents 19 3,107 2,917
Debt-related derivative financial instrument assets \u2013 non-current 15 147 114
Loans \u2013 non-current 22 (5,189) (4,604)
Loans and overdrafts \u2013 current 22 (53) (457)
Debt-related derivative financial instrument liabilities \u2013 non-current 15 (35) (130)
Net debt (excluding lease liabilities)
1
(2,023) (2,160)
1. Net debt (excluding lease liabilities) is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional
information on performance to the user, and to reconcile to the equivalent IFRS measure.
31. Fair value measurement
Fair value of financial instruments
Certain of the Group\u2019s financial instruments are held at fair value.
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the balance sheet date.
The fair values of financial instruments held at fair value have been determined based on available market information at the balance sheet date,
and the valuation methodologies listed below:
\u2013 the fair values of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the
appropriate balance sheet rates;
\u2013 the fair values of both interest rate and cross-currency swaps are calculated by discounting expected future principal and interest cash flows
and translating at the appropriate balance sheet rates; and
\u2013 the fair values of money market funds are calculated by multiplying the net asset value per share by the investment held at the balance
sheet date.
Due to the variability of the valuation factors, the fair values presented at 31 December may not be indicative of the amounts the Group will
realise in the future.
Fair value hierarchy
The fair value measurement hierarchy is as follows:
\u2013 Level 1 \u2013 Quoted prices (unadjusted) in active markets for identical assets or liabilities;
\u2013 Level 2 \u2013 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
\u2013 Level 3 \u2013 Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
284 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
31. Fair value measurement continued
Carrying amounts and fair values of certain financial instruments
2022 2021
Notes
Carrying
amount
\u00a3m
Fair
value
\u00a3m
Carrying
amount
\u00a3m
Fair
value
\u00a3m
Financial instruments measured at fair value:
Non-current
Other investments at fair value through other comprehensive income 13 99 99 76 76
Other financial assets 15 322 322 305 305
Other financial liabilities 15 (272) (272) (302) (302)
Current
Other financial assets 15 252 252 194 194
Money market funds 19 1,149 1,149 1,171 1,171
Other financial liabilities 15 (328) (328) (214) (214)
Financial instruments not measured at fair value:
Non-current
Loans 22 (5,189) (4,588) (4,604) (5,045)
Current
Loans and overdrafts 22 (53) (53) (457) (462)
All of the financial assets and liabilities measured at fair value are classified as level 2 using the fair value hierarchy, except for money market
funds, which are classified as level 1, and other investments, which are at a combination of level 1 and level 3. The total value of investments
classified as level 3 is immaterial. There were no transfers between levels during the year.
Financial assets and liabilities in the Group\u2019s Consolidated balance sheet are either held at fair value or at amortised cost. With the exception
of loans, the carrying value of financial instruments measured at amortised cost approximates their fair value. The fair value of loans presented
in the table above is derived from market prices, classified as level 1 using the fair value hierarchy.
BAE Systems plc Annual Report 2022 285
Governance Financial statementsStrategic report
32. Share-based payments
The Group has granted equity-settled share options and Long-Term Incentive Plan arrangements which are measured at fair value at the
date of grant using an option pricing model. The fair value is expensed on a straight-line basis over the vesting period, based on the Group\u2019s
estimate of the number of shares that will actually vest.
Details of the terms and conditions of each share-based payment plan are given in the Annual remuneration report on pages 160 to 205.
Expense in year
2022
\u00a3m
2021
\u00a3m
Executive Share Option Plan 10 8
Performance Share Plan 35 32
Restricted Share Plan 10 8
55 48
The Group also incurred a charge of \u00a346m (2021 \u00a344m) in respect of the equity-settled all-employee Free Shares and Matching Partnership Shares
elements of the Share Incentive Plan.
Executive Share Option Plan
2022 2021
Number of
shares
\u2019000
Weighted
average
exercise
price
\u00a3
Number of
shares
\u2019000
Weighted
average
exercise
price
\u00a3
Outstanding at 1 January 47,280 5.16 43,561 5.20
Granted during the year 8,141 7.39 10,995 5.02
Exercised during the year (18,020) 5.30 (2,695) 4.68
Expired during the year (2,587) 5.50 (4,581) 5.49
Outstanding at 31 December 34,814 5.58 47, 28 0 5.16
Exercisable at 31 December 8,271 5.38 17,279 5.57
2022 2021
Range of exercise price of outstanding options (\u00a3) 3.89 \u2013 7.83 3.01 \u2013 6.49
Weighted average remaining contracted life (years) 7 7
Weighted average fair value of options granted (\u00a3) 1.87 1.00
Performance Share Plan and Restricted Share Plan
Performance Share Plan Restricted Share Plan
2022
Number of
shares
\u2019000
2021
Number of
shares
\u2019000
2022
Number of
shares
\u2019000
2021
Number of
shares
\u2019000
Outstanding at 1 January 27,915 25,878 5,413 4,974
Granted during the year 6,799 9,387 2,205 2,304
Exercised during the year (3,719) (2,108) (1,383) (1,523)
Expired during the year (3,652) (5,242) (430) (342)
Outstanding at 31 December 27, 343 27,915 5,805 5,413
Exercisable at 31 December 387 387 38 \u2013
2022 2021 2022 2021
Weighted average remaining contracted life (years) 5 5 5 5
Weighted average fair value of awards granted (\u00a3) 7.32 4.90 7.49 5.01
The exercise price for the Performance Share Plan and Restricted Share Plan is \u00a3nil (2021 \u00a3nil).
286 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
32. Share-based payments continued Details of options/awards granted in the year The fair value of equity-settled options/awards granted in the year has been measured using the weighted average inputs below and the following valuation models: Executive Share Option Plan \u2013 Binomial Performance Share Plan \u2013 Monte Carlo Restricted Share Plan \u2013 Dividend valuation 2022 2021 Range of share price at date of grant (\u00a3) 7.35 \u2013 7.83 5.00 \u2013 5.68 Expected option/award life (years) 3 \u2013 10 3 \u2013 10 Volatility (%) 29 28 Risk-free interest rate (%) 1 \u2013 3 0.1 \u2013 0.2 Volatility was calculated with reference to the Group\u2019s weekly share price volatility, after allowing for dividends, for the greater of 30 weeks or for the period until vest date. The average share price in the year was \u00a37.53 (2021 \u00a35.33). 33. Related party transactions The Group has a related party relationship with its directors and key management personnel (see below), equity accounted investments (note 12) and pension schemes (note 25). Transactions with related parties occur in the normal course of business, are priced on an arm\u2019s-length basis and settled on normal trade terms. The more significant transactions are disclosed below: Sales to related parties Purchases from related parties Amounts owed by related parties Amounts owed to related parties 1 Management recharges 1 Related party 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Advanced Electronics Company Limited \u2013 1 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Eurofighter Jagdflugzeug GmbH 1,219 1,068 442 402 67 26 91 74 \u2013 \u2013 FADEC International LLC 73 54 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 MBDA SAS 19 23 76 114 6 2 949 837 8 19 Panavia Aircraft GmbH 22 32 49 46 1 1 2 \u2013 \u2013 \u2013 BAE Systems Pension Schemes \u2013 \u2013 20 16 \u2013 \u2013 193 207 \u2013 \u2013 Other 11 12 28 8 3 5 27 19 \u2013 \u2013 1,344 1,190 615 586 77 34 1,262 1,137 8 19 1. Also relates to disclosures under IAS 24 Related Party Disclosures, for the parent company, BAE Systems plc. At 31 December 2022, \u00a31,021m (2021 \u00a3907m) was owed by BAE Systems plc and \u00a3241m (2021 \u00a3230m) by other Group subsidiaries. The Group also manages certain treasury functions on behalf of some of their equity accounted investments. This includes entering into foreign exchange derivatives on their behalf. As at 31 December 2022, we entered into forward contracts to purchase \u20ac313m, sell $21m, and purchase \u00a314m worth of other currencies (2021 purchase \u20ac250m, sell $20m and purchase \u00a34m worth of other currencies) on their behalf. No service fee is charged for these arrangements. The Group considers key management personnel, as defined under IAS 24 Related Party Disclosures, to be the members of the Group\u2019s Executive Committee and the Company\u2019s non-executive directors. Fuller disclosures on directors\u2019 remuneration are set out in the Annual remuneration report on pages 160 to 205. Total emoluments for directors and key management personnel charged to the Consolidated income statement were: 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Short-term employee benefits 22,238 17,755 Post-employment benefits 677 1,121 Share-based payments 12,023 8,940 34,938 27,816 BAE Systems plc Annual Report 2022 287 Governance Financial statementsStrategic repor 34. Contingent liabilities Contingent liabilities are potential future cash outflows which are either not probable or cannot be measured reliably. The Group has entered into a number of guarantee and performance bond arrangements in the normal course of business. Various Group undertakings are parties to legal actions and claims which arise in the normal course of business. Provision is made for any amounts that the directors consider may become payable (see note 26) . The Group believes that any significant liability in respect of its guarantees and performance bond arrangements, and legal actions and claims not already provided for, is remote . 35. Acquisitions of businesses Businesses acquired during 2022 On 11 November 2021, the Group announced its intention to acquire 100% of the share capital of BIS Invest S.a.r.l. and its subsidiaries, together the Bohemia Interactive Simulations Group (BISim Group) for a consideration of $200m (\u00a3151m). On 4 March 2022, this deal passed all required pre-closing activities, and the acquisition was completed. Using the latest game-based technology, the experienced BISim team of engineers develops high-fidelity, cost-effective training and simulation software products and components to meet the growing demand for defence applications. BISim forms part of the Cyber & Intelligence segment. The results and financial position of the acquired business have been consolidated from the date of acquisition. The purchase price allocation exercise was finalised in the year and summarised below. Acquisition consideration and fair value of net assets acquired \u00a3m Intangible assets 71 Property, plant and equipment 1 Right-of-use assets 1 Receivables 10 Deferred tax assets 1 Lease liabilities (1) Payables (8) Deferred tax liabilities (14) Provisions (6) Cash and cash equivalents 5 Net identifiable assets acquired 60 Goodwill 91 Net assets acquired 151 Satisfied by: Cash consideration 151 Total consideration 151 The net outflow of cash in respect of the acquisition of BISim is as follows: \u00a3m Cash consideration 151 Cash and cash equivalents acquired (5) Net cash outflow in respect of the acquisition of the business 146 288 BAE Systems plc Annual Report 2022 Financial statements / Group accounts / Notes to the Group account
35. Acquisition of businesses continued
Businesses acquired during 2022 continued
The goodwill recognised is primarily attributable to expected synergies. No goodwill is expected to be deductible for tax purposes. Goodwill
has been allocated to the Intelligence & Security business. No impairment losses have been recognised in respect of goodwill in the year ended
31 December 2022.
The acquisition contributed \u00a338m to the Group\u2019s revenue and \u00a38m to the Group\u2019s underlying EBIT
1
between the date of acquisition
and 31 December 2022. If it had been completed on 1 January 2022, the Group\u2019s revenue from the acquisition would have been \u00a342m,
and the Group\u2019s underlying EBIT
1
would have been \u00a38m for the year ended 31 December 2022.
Contractual cash flows on trade, other and contract receivables are recognised net of expected credit losses. No contingent liabilities have
been recognised or require disclosure in respect of this acquisition.
1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance,
to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure.
Businesses acquired during 2021
On 4 March 2021, the Group acquired 100% of the share capital of Pulse Power and Measurement Limited for a consideration of \u00a321m.
The net assets acquired, including intangible assets identified, were valued at \u00a311m, resulting in goodwill of \u00a310m.
On 14 September 2021, the Group acquired 100% of the share capital of In-Space Missions Limited for a fair value consideration of \u00a315m.
The provisional net assets acquired, including intangible assets identified, have been valued at \u00a35m, resulting in provisional goodwill of \u00a310m.
The purchase price allocation for all 2021 acquisitions was finalised within the current year.
36. Events after the reporting period
There were no events after the reporting period which would materially impact the balances reported in this Annual Report.
BAE Systems plc Annual Report 2022 289
Governance Financial statementsStrategic report
37. Information about related undertakings
In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments as at 31 December 2022
is disclosed below. Unless otherwise stated, the Group\u2019s shareholding represents ordinary shares held indirectly by BAE Systems plc, the year end
is 31 December and the address of the registered office is Warwick House, PO Box 87, Farnborough Aerospace Centre, Farnborough, Hampshire
GU14 6YU, United Kingdom. For companies incorporated outside of the United Kingdom, the country of incorporation is shown in the address.
No subsidiary undertakings have been excluded from the consolidation.
Subsidiaries \u2013 wholly-owned
4219 Lafayette, LLC
1
4219 Lafayette Center Drive, Chantilly VA 20151,
United States
Aircraft Research Association Limited
2
Manton Lane, Bedford MK41 7PF, United Kingdom
Alvis Limited
Alvis Pension Scheme Trustees Limited
3
Alvis Vickers Limited
Armstrong Whitworth Aircraft Limited
3
ASC Shipbuilding Pty Limited
Bldg 01, Level 2, 640 Mersey Road North, Osborne SA 5017,
Australia
Australian Marine Engineering Corporation
(Finance) Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
Avro International Aerospace Limited
3
BAE Systems (Al Diriyah C4i) Limited
3
BAE Systems (Canada) Inc.
220 Laurier Avenue West, Suite 1200, Ottawa ON
K1P 5Z9, Canada
BAE Systems (Combat and Radar Systems) Limited
Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY
BAE Systems (Corporate Air Travel) Limited
BAE Systems (Defence Systems) Limited
BAE Systems (Dynamics) Limited
BAE Systems (Farnborough 3) Limited
BAE Systems (Finance) Limited
BAE Systems (Funding Four) Unlimited Company
Riverside One, Sir John Rogerson\u2019s Quay, Dublin D02 X576,
Ireland
BAE Systems (Funding Three) Limited
BAE Systems (Funding Two) Limited
BAE Systems (Gripen Overseas) Limited
BAE Systems (Holdings) Limited
3
BAE Systems (International) Limited
BAE Systems (Kazakhstan) Limited
BAE Systems (Kuwait) Limited
BAE Systems (Land and Sea Systems) Limited
4
BAE Systems (Malaysia) Sdn Bhd
Level 25 Menara Hong Leong, No. 6 Jalan Damanlela,
Bukit Damansara, 50490 Kuala Lumpur, Malaysia
BAE Systems (MEH) Limited
BAE Systems (Military Air) Overseas Limited
BAE Systems (Nominees) Limited
3
BAE Systems (Oman) Limited
BAE Systems (Operations) Limited
5
BAE Systems (Operations) Singapore Pte Limited
One Marina Boulevard #28-00, Singapore 018989,
Singapore
BAE Systems (Overseas Holdings) Limited
BAE Systems (Poland) Sp. z o.o.
ul. Abp. A. Baraniaka 88, 61-131 Poznan, Poland
BAE Systems (Projects) Limited
BAE Systems (Property Investments) Limited
BAE Systems (Vehicles and Equipment) Limited
6
BAE Systems 2000 Pension Plan Trustees Limited
3
BAE Systems AB
7
Box 5676, SE-114 86 Stockholm, Sweden
BAE Systems Air Japan KK
1-1 Katamachi, Shinjuku-ku, Tokyo, Japan
BAE Systems Al Diriyah Programme Limited
3
BAE Systems Applied Intelligence (Asia Pacific)
Pte Limited
United Square, 101 Thomson Road, #25-03/04, 307591,
Singapore
BAE Systems Applied Intelligence (Connect) A/S
c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East,
2100, Denmark
BAE Systems Applied Intelligence (GCS) Limited
Surrey Research Park, Guildford, Surrey GU2 7RQ,
United Kingdom
BAE Systems Applied Intelligence Integrated
Computer Solutions (Kuwait) (S.P.C.)
Al Hamra Tower, Office Number 3503, 35th Floor,
East Maqwa, Kuwait City, Kuwait
BAE Systems Applied Intelligence (Integration)
Limited
Surrey Research Park, Guildford, Surrey GU2 7RQ,
United Kingdom
BAE Systems Applied Intelligence (International)
Limited
Priestley Road, Surrey Research Park, Guildford,
Surrey GU2 7RQ, United Kingdom
BAE Systems Applied Intelligence (Japan) KK
12/F Ark Mori Building, 1-12-32 Akasaka, Minato-ku,
Tokyo, 107-6024, Japan
BAE Systems Applied Intelligence (Spain) S.A.
Paseo de la Castellana, 141, Cuzco IV, 28046 Madrid, Spain
BAE Systems Applied Intelligence (UK) Limited
BAE Systems Applied Intelligence A/S
c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East,
2100, Denmark
BAE Systems Applied Intelligence GCS Inc.
8
CSC, 100 Shockoe Slip, 2nd Floor Richmond VA 23219,
United States
BAE Systems Applied Intelligence Limited
Surrey Research Park, Guildford, Surrey GU2 7RQ,
United Kingdom
BAE Systems Applied Intelligence LLC
1
8000 Towers Crescent Blvd, 13th Floor, Vienna VA 22182,
United States
BAE Systems Applied Intelligence Malaysia Sdn Bhd
Level 25, Menara Hong Leong, No. 6 Jalan Damanlela,
Bukit Damansara, 50490 Kuala Lumpur, Malaysia
BAE Systems Applied Intelligence Pty Limited
Level 26, 459 Collins Street, Melbourne VIC 3000, Australia
BAE Systems Australia (Electronic Systems) Pty
Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia (NSW) Holdings Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia (NSW) Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Datagate Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Defence Holdings Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Defence Pty Limited
10
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Holdings Limited
3
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Logistics Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Australia Sea Sentinel Project Pty
Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Avionics Singapore Pte Limited
One Marina Boulevard, #28-00, Singapore 018989,
Singapore
BAE Systems Bofors AB
SE-691 80 Karlskoga, Sweden
BAE Systems Bofors Holdings Sdn Bhd
Level 21, Suite 21.01, The Gardens South Tower, Mid Valley
City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia
BAE Systems C-ITS AB
Box 5676, SE-114 86 Stockholm, Sweden
BAE Systems Communications Solutions LLC
1
Knowledge Oasis, Building 4, Second Floor, 0402-Z427,
Knowledge Oasis Muscat, PO Box 16, Postal Code 135,
Muscat, Oman
BAE Systems Controls Inc.
9
1098 Clark Street, Endicott NY 13760, United States
BAE Systems Creole Inc.
11
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Datagate Holdings Limited
BAE Systems Datagate Limited
6
BAE Systems Deployed Systems Limited
12
BAE Systems do Brasil Ltda
SCN Quadra 5 Bloco A, Ed. Brasilia Shopping, Torre Norte,
Sala 426, Brasilia, DF CEP:70715-900, Brazil
BAE Systems Electronic Systems (Overseas) Limited
BAE Systems Electronics Limited
BAE Systems Enterprises Limited
BAE Systems Executive Pension Scheme Trustees
Limited
3
BAE Systems Finance B.V.
c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam,
Netherlands
BAE Systems Finance Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Flight Training (Australia) Pty Limited
13
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
BAE Systems Funds Management
3,14
BAE Systems GCS International Limited
BAE Systems Global Combat Systems Bridging
Limited
6
BAE Systems Global Combat Systems Munitions
Limited
BAE Systems Global LLC
1
2941 Fairview Park Drive, Suite 100, Falls Church VA 22042,
United States
BAE Systems H\u00e4gglunds AB
SE-691 80, Karlskoga, Sweden
BAE Systems Hawaii Shipyards Inc.
8
The Corporation Company, Inc., 1136 Union Mall, Suite 301,
Honolulu HI 96813, United States
290 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
37. Information about related undertakings continued
Subsidiaries \u2013 wholly-owned continued
BAE Systems Holding GmbH
Hauptstrasse 48, 82433 Bad Kohlgrub, Germany
BAE Systems Holdings (South Africa) (Pty) Limited
Central Office Park No. 5, 257 Jean Avenue, Centurion,
Gauteng, 0157, South Africa
BAE Systems Holdings B.V.
c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam,
Netherlands
BAE Systems Holdings Inc.
9
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Holdings International LLC
1
1676 International Drive, 10th Floor, Suite 1000,
McLean VA 22102, United States
BAE Systems Imaging Solutions Inc.
9
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems India (Homeland Security)
Private Limited
15
#201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8,
New Delhi \u2013 110037, India
BAE Systems India (Services) Private Limited
15
#201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8,
New Delhi \u2013 110037, India
BAE Systems India (Technology) Private Limited
15
#201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8,
New Delhi \u2013 110037, India
BAE Systems India (Ventures) Private Limited
15
#201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8,
New Delhi \u2013 110037, India
BAE Systems Information and Electronic Systems
Integration Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Insurance (Isle of Man) Limited
Tower House, Loch Promenade, Douglas, IM1 2LZ,
Isle of Man
BAE Systems Integrated System Technologies
(KSA) Limited
BAE Systems Integrated System Technologies
(Overseas) Limited
BAE Systems Integrated System Technologies Limited
BAE Systems International Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Jacksonville Ship Repair LLC
1
8500 Hecksher Drive, Jacksonville FL 32226, United States
BAE Systems Japan GK
Ark Mori Building, 1-12-32 Akasaka, Minato-Ku, Tokyo,
Japan
BAE Systems Land & Armaments Holdings LLC
1
2941 Fairview Park Drive, Suite 100, Falls Church VA 22042,
United States
BAE Systems Land & Armaments Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Land & Armaments L.P.
1
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Land Systems (Finance) Limited
BAE Systems Land Systems (Investments South
Africa) Limited
6
BAE Systems Land Systems (Investments) Limited
BAE Systems Land Systems (Ranges) Limited
6
BAE Systems Land Systems ATF Limited
BAE Systems Land Systems FMTV International Inc.
11
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Land Systems Pinzgauer (Holdings)
Limited
BAE Systems Land Systems Pinzgauer Limited
BAE Systems MAI Turkey Hava Sistemleri A.S\u00b8 .
\u00dcniversiteler Mahallesi, Beytepe Lodumlu K\u00f6y Yolu Cad.
No: 5/348 \u00c7ankaya, Ankara, Turkey
BAE Systems Marine (Holdings) Limited
BAE Systems Marine (YSL) Limited
BAE Systems Marine Limited
BAE Systems Norfolk Ship Repair Inc.
8
CT Corporation System, 4701 Cox Road, Suite 285,
Glen Allen VA 23060-6802, United States
BAE Systems Oman LLC
1
PO Box 74, Postal Code 111, Seeb, Oman
BAE Systems Ordnance Systems Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Overseas Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Pension Funds CIF Trustees Limited
3
BAE Systems Pension Funds Investment
Management Limited
3,16
BAE Systems Pension Funds Trustees Limited
3
BAE Systems Project Services Limited
BAE Systems Projects (Canada) Limited
BAE Systems Properties Limited
BAE Systems Quest Limited
3
BAE Systems Air Japan KK
9
1-1 Katamachi, Shinjuku-ku, Tokyo, Japan
BAE Systems Regional Aircraft Colombia SAS
17
c/o Brigard & Urrutia, Calle 70 A No. 4-41, Bogot\u00e1, Colombia
BAE Systems Resolution Inc.
8
CT Corporation System, 1999 Bryan Street, Suite 900,
Dallas TX 75201, United States
BAE Systems S&S Operations Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems San Diego Ship Repair Inc.
8
330 N. Brand Boulevard, Glendale CA 91203-2336,
United States
BAE Systems Saudi America Limited
Riyadh Kingdom Centre 28th Floor (REGUS), PO Box 23088,
Riyadh 11321, Central Province, Riyadh, Kingdom of Saudi
Arabia
BAE Systems Saudi Arabia (Maintenance
and Equipment Services) Limited
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
BAE Systems Saudi Arabia (Vehicles and
Equipment Holdings) Limited
3
BAE Systems Saudi Arabia (Vehicles and
Equipment Nominees) Limited
3
BAE Systems Saudi Limited
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
BAE Systems Servi\u00e7os de Avi\u00f4nicos Ltda.
Rua Ambr\u00f3sio Molina, No. 1090. Bloco F, Eug\u00eanio de Melo,
S\u00e3o Jos\u00e9 dos Campos, S\u00e3o Paulo 12.247-000, Brazil
BAE Systems Share Plans Trustee Limited
3
BAE Systems Services Limited
BAE Systems Shared Services Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Ship Repair Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Southeast Shipyards AMHC Inc.
8
1200 South Pine Island Road, Plantation FL 33324,
United States
BAE Systems Surface Ships (Holdings) Limited
BAE Systems Surface Ships (Overseas) Limited
BAE Systems Surface Ships (Projects) Limited
BAE Systems Surface Ships Integrated
Support Limited
BAE Systems Surface Ships Intermediate
Holdings Limited
18
BAE Systems Surface Ships International Limited
BAE Systems Surface Ships Limited
BAE Systems Surface Ships Maritime Limited
BAE Systems Surface Ships Portsmouth Limited
18
BAE Systems Surface Ships Projects (Malaysia) Sdn Bhd
Level 29 Menara Binjai, No 2 Jalan Binjai, Off Jalan Ampang,
50450 Kuala Lumpur, Malaysia
BAE Systems Surface Ships Property Services Limited
BAE Systems Surface Ships Support Limited
5
BAE Systems SWS Defence AB
SE-691 80 Karlskoga, Sweden
BAE Systems Tactical Vehicle Systems LP
1
2941 Fairview Park Drive, Suite 100, Falls Church VA 22042,
United States
BAE Systems Technology Solutions & Services Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Training Services Limited
BAE Systems TVS Holdings LLC
1
2941 Fairview Park Drive, Suite 100, Falls Church VA 22042,
United States
BAE Systems Zephyr Corporation
9
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Zephyr Fifth Corporation
9
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Zephyr Fourth Corporation
9
The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Zephyr Second Corporation
9
The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems Zephyr Third Corporation
9
The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington DE 19801, United States
BAE Systems, Inc.
8
The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801, United States
BIS Invest S.\u00e0.r.l.
2, Place de Strasbourg, L-2562, Luxembourg, Grand Duchy
of Luxembourg
Bohemia Interactive Australia Pty Limited
Unit 2, Building A, 2 Technology Place, Williamtown
NSW 2318, Australia
Bohemia Interactive Simulations GK Limited
Abista Kudan Blgd. 10F, 2-4-12 Kudan-minami, Tokyo,
Chiyoda Ku, 102-0074, Japan
Bohemia Interactive Simulations GmbH
Vistra Corporate Services, Westendstra\u00dfe 28, 60325,
Frankfurt am Main, Germany
Bohemia Interactive Simulations, Inc.
8
CT Corporation System, 1200 South Pine Island Road,
Plantation FL 33324, United States
Bohemia Interactive Simulations K.S.
Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic
Bohemia Interactive Simulations Korea Limited
Rm 1 5/F 437 Teheran-ro, Gangnam-gu, Seoul, 06158,
Republic of Korea
Bohemia Interactive Simulations sp z.o.o.
Ul. Ostrobramska 101, 04-041, Warsaw, Poland
Bohemia Interactive Simulations (UK) Limited
31 Hercules Way, Farnborough Aerospace Centre,
Farnborough, Hampshire GU14 6UU, United Kingdom
Bohemia Invest One Ltd
Bohemia Invest Two Ltd
BAE Systems plc Annual Report 2022 291
Governance Financial statementsStrategic report
37. Information about related undertakings continued
Subsidiaries \u2013 wholly-owned continued
Brabazon Limited
British Aerospace (Far East) Limited
19
Level 54, Hopewell Centre, 183 Queen\u2019s Road East,
Hong Kong
British Aerospace (Malaysia) Sdn Bhd
19
Unit 30-01, Level 30, Tower A, Vertical Business Suite,
Avenue 3, Bangsar South, No.8, Jalan Kerinchi,
59200 Kuala Lumpur, Malaysia
British Aircraft Corporation (Pension Fund Trustees)
Limited
3
British Aircraft Corporation Limited
3
CPS International, Inc.
11
Benedetti & Benedetti, Comosa Building, 21st Floor,
PO Box 850120, Panama 5, Panama
Creole (Nigeria) Limited
5
Tapa House (2nd Floor), 45, Imman Dauda St (Abosede
Kuboye Crescent Entrance) Surulere, Lagos, Nigeria
Detica B.V.
Luna ArenA, Herikerbergweg 238, 1101 CM Amsterdam,
Netherlands
Detica Group Limited
Detica Mexico S. de R.L. de C.V.
Torre Esmeralda II, Blvd Manuel Avila Camacho No. 36
Piso 18, Lomas de Chapultepec, 11000 D.F., Mexico
Detica Services, Inc.
8
1209 Orange Street, Wilmington DE 19801, United States
Dividend Training Limited
ETI Engineering, Inc.
8
1676 International Drive, 10th Floor, Suite 1000,
McLean VA 22102, United States
EVU Czech, S.R.O.
Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic
Gloster Aircraft Limited
3
H-B Utveckling, H-B Development AB
Nybrogatan 7, SE-114 34 Stockholm, Sweden
Hadrian Holdings, Inc.
521 Fifth Avenue, New York NY 101075, United States
Hadrian Trustees Limited
2
H\u00e4gglunds Vehicle GmbH
Ernst-Grote Strasse 13, 30916 Isernhagen, Germany
Hawker Siddeley Aviation Limited
3
Hawker Siddeley Dynamics Limited
3
HSA/HSD Pension Fund Trustees Limited
3
Hunter Aerospace Corporation Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
In-Space Missions Limited
8 Oriel Court, Omega Park, Alton GU34 2YT,
United Kingdom
International Military Sales Limited
Jetstream Aircraft Limited
3
Prestwick International Airport, Prestwick, Ayrshire
KA9 2RW, United Kingdom
Lemacrown Limited
20
MES Holdco Limited
Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY
MES Interco
14
Meslink Limited
Newcombe Properties Limited
Pitch Technologies AB
Repslagaregatan 25, SE-582 22 Link\u00f6ping, Sweden
Pitch Technologies Limited
Sweden House, 5 Upper Montagu Street, London W1H 2AG,
United Kingdom
Prismatic Limited
5
2 Omega Park, Alton GU34 2QE, United Kingdom
PT. BAE Systems Services
8
Wisma 46, Kota BNI, 34th Floor, Suite 34.01.A,
Jl. Jenderal Sudirman Kavling 71, Jakarta 10220, Indonesia
Pulse Power and Measurement Inc.
1717 Pennsylvania Avenue, NW Suite, 1025 Washington DC
20006, United States
Pulse Power and Measurement Limited
21
65 Shrivenham Hundred Business Park, Watchfield, Swindon,
Wiltshire SN6 8TY, United Kingdom
Representaciones SSTS, CA
11
Ave Francisco de Miranda, Centro Lido El Rosal Oficina 71B,
Caracas, Venezuela
Riptide Autonomous Solutions Canada Company
1300-1969 Upper Water Street, Purdy\u2019s Wharf Tower II,
Halifax, NS, BJ3 3R7, Canada
Royal Ordnance (Crown Service) Pension Scheme
Trustees Limited
Royal Ordnance Senior Staff Pension Scheme
Trustees Limited
Royal Ordnance Speciality Metals Limited
3,18
RWT Limited
3,18
Salford Electrical Instruments Limited
18
10 Fleet Place, London EC4M 7RB, United Kingdom
Scentcivil Limited
18
c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB,
United Kingdom
Scottish Aviation Limited
3
Prestwick International Airport, Prestwick, Ayrshire
KA9 2RW, United Kingdom
Sepia, LLC
1
4219 Lafayette Center Drive, Chantilly VA 20151,
United States
Shipbuilding (MSF) Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
Shipbuilding (VIC) Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
Stewart & Stevenson Operations (Nigeria) Limited
11
9th Floor, St. Nicholas House, 26 Catholic Mission Street,
Lagos, Nigeria
Stewart & Stevenson TVS UK Limited
Stratsec.net Sdn Bhd
Unit F-3-1, Blok F, Third Floor, CBD Perdana 3, Jalan Perdana,
Cyber 12, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia
Support Solutions General Services and Contracting
Company/Limited Liability company
1,17
House No. 145, Street No. 1, Qtr. 611, Al Andulous Area,
Al Mansour, Baghdad, Iraq
TDS International Holdings Pty Limited
22
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
TDS International Pty Limited
Level 2, 80 Flinders Street, Adelaide SA 5000, Australia
Techmodal Limited
Techmodal Ventures Limited
TerraSim, Inc.
8
307 Fourth Avenue, Suite 400, Pittsburgh PA 15222,
United States
The Blackburn Aeroplane & Motor Co Limited
3
The Bristol Aviation Company Limited
3
The British & Colonial Aeroplane Co. Limited
3
The Supermarine Aviation Works Limited
3,4
Thomas Sopwith Aviation Company Limited
3
VSEL Birkenhead Limited
Warship Design Services Limited
18
c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB,
United Kingdom
Westover Controls Incorporated
8
1098 Clark Street, Endicott NY 13760, United State s
292 BAE Systems plc Annual Report 2022
Financial statements / Group accounts / Notes to the Group accounts
37. Information about related undertakings continued
Subsidiaries \u2013 not wholly-owned
Advanced National Company for Aircraft
Maintenance Limited (51%)
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
BAE Systems Saudi Development and Training
Company Limited (50.98%)
23
PO Box 67775, Riyadh 11517, Kingdom of Saudi Arabia
BAE Systems SDT (UK) Limited (51%)
Flight Control System Management GmbH (66.6%)
24
PO Box 801109, 81663 Munich, Germany
Granada Enterprises Limited (51%)
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
Hadrian Properties, Inc. (95%)
14
521 Fifth Avenue, New York NY 101075, United States
International Systems Engineering Company Limited
(46.2%)
PO Box 54002, Riyadh 11514, Kingdom of Saudi Arabia
Overhaul and Maintenance Company Holding (51%)
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
Saudi Maintenance & Supply Chain Management
Company Limited (51%)
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
Saudi Technology & Logistics Services Limited (65%)
3
PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia
SMSCMC (UK) Limited (51%)
Equity accounted investments
Abercromby Property International (20.42%)
521 Fifth Avenue, New York NY 101075, United States
Air Astana (49%)
10
121 Kabanbay Batyr Avenue, Yessil District, Astana 010000,
Kazakhstan
AMSH B.V. (50%)
25
Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam,
Netherlands
BAE Systems Strategic Aerospace Services WLL (49%)
Building 58, Street 850, Area 23, Qatari Bin Al Fajaa,
Doha, Qatar
BAeHAL Software Limited (40%)
3,15
Airport Lane, HAL Estate, Bangalore 560010, India
BHIC Bofors Defense Asia Sdn Bhd (49%)
Level 21, Suite 21.01, The Gardens South Tower, Mid Valley
City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia
Canadian Naval Support Limited (50%)
26
3099 Barrington Street, Halifax NS B3K 5M7, Canada
CTA International SAS (50%)
13 Route De La Miniere, 78034 Versailles Cedex, France
Data Link Solutions L.L.C. (50%)
1,19
350 Collins Road, Northeast Cedar Rapids IA 52498,
United States
Eurofighter Jagdflugzeug GmbH (33%)
3
Am Soldnermoos 17, 85399 Hallbergmoos, Germany
European Aerosystems Limited (50%)
2,3,18,22
FADEC International LLC (50%)
1
1098 Clark Street, Endicott NY 13760, United States
FAST Holdings Limited (50%)
15,22
FAST Training Services Limited (50%)
15
FNSS Savunma Sistemleri A.S (49%)
22
Og\u02d8 ulbey Mahallesi, Og\u02d8 ulbey Kumeevleri, No. 441/A, 441/B,
G\u00f6lbas\u00b8 \u0131, Ankara, Turkey
KBS Maritime Limited (50%)
7
MBDA B.V. (37.5%)
Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam,
Netherlands
MBDA Holdings S.A.S. (25%)
1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France
MBDA S.A.S. (37.5%)
1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France
Nobeli Business Support AB (34%)
SE-691 80 Karlskoga, Sweden
Panavia Aircraft GmbH (42.5%)
3
Am Soldnermoos 17, 85399 Hallbergmoos, Germany
Promoveo Solutions JV LLC (49%)
260 Peachtree Street NW, #2200, Atlanta GA 30303,
United States
Reaction Engines Limited (15.5%)
Rheinmetall BAE Systems Land Limited (45%)
Hadley Castle Works, PO Box 106, Telford TF1 6QW,
United Kingdom
Saab Bofors Test Center AB (30%)
Box 418, SE-691 27 Karlskoga, Sweden
Sealand Support Services Limited (33.3%)
27
MoD Sealand, Welsh Road, Sealand, Deeside, Flintshire
CH5 2LS, United Kingdom
Winner Developments Limited (33.3% )
Notes
1. Unincorporated entity for which the address
given is the principal place of business.
2. Company limited by guarantee.
3. Directly owned by BAE Systems plc.
4. Ownership held in class of A shares, B shares
and preference shares.
5. Ownership held in class of A shares and B shares.
6. In strike off.
7. Ownership held in ordinary shares and
preference shares.
8. Ownership held in common shares.
9. Ownership held in common stock.
10. Ownership held in ordinary shares and
redeemable preference shares.
11. Ownership held in authorized shares.
12. 40% owned by BAE Systems plc.
13. Ownership held in ordinary shares, ordinary A
and ordinary B shares.
14. Unlimited company.
15. Year end 31 March.
16. Year end 5 April.
17. In liquidation.
18. In Members\u2019 Voluntary Liquidation.
19. Year end 30 September.
20. Ownership held in ordinary shares and class
of A shares.
21. Ownership held in class of A, B, C, D, E, F
and G ordinary shares.
22. Ownership held in class of A shares.
23. 1% owned by BAE Systems plc.
24. 33.3% owned by BAE Systems plc.
25. Ownership held in class of B shares.
26. Ownership held in common shares and
B Preferred shares.
27. Ownership held in ordinary and A Cumulative
Redeemable Preference shares.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-435": { "value": "Basis of preparation The consolidated financial statements of BAE Systems plc have been prepared on a going concern basis, as discussed in the Directors\u2019 report on page 127, and in accordance with UK-adopted international accounting standards and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest million. They have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments). Transactions in foreign currencies are translated at the exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date, with the resulting exchange differences recognised in the income statement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-518": { "value": "Basis of preparation The consolidated financial statements of BAE Systems plc have been prepared on a going concern basis, as discussed in the Directors\u2019 report on page 127, and in accordance with UK-adopted international accounting standards and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest million. They have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments). Transactions in foreign currencies are translated at the exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date, with the resulting exchange differences recognised in the income statement. Consolidation The financial statements of the Group consolidate the results of the Company and its subsidiary entities, and include its share of its equity accounted investments\u2019 results accounted for under the equity method. A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries are included in the income statement from the date of acquisition. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Joint ventures are accounted for under the equity method where the Consolidated income statement includes the Group\u2019s share of their profits and losses, and the Consolidated balance sheet includes its share of their net assets within equity accounted investments. The assets and liabilities of overseas subsidiaries and equity accounted investments are translated at the exchange rates ruling at the balance sheet date. The income statements of such entities are translated at average rates of exchange during the year. All resulting exchange differences are recognised directly in a separate component of equity. Translation differences that arose before the transition date to IFRS (1 January 2004) are presented in equity, but not as a separate component. When a foreign operation is sold, the cumulative exchange differences recognised in equity since 1 January 2004 are recognised in the income statement as part of the profit or loss on sale.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-469": { "value": "The consolidated financial statements of BAE Systems plc have been prepared on a going concern basis, as discussed in the Directors\u2019 report on page 127, and in accordance with UK-adopted international accounting standards and the Companies Act 2006 applicable to companies reporting under IFRS. ", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-2": { "value": "BAE Systems plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-407": { "value": "plc", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-563": { "value": "The consolidated financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest million.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-564": { "value": "Transactions in foreign currencies are translated at the exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date, with the resulting exchange differences recognised in the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-539": { "value": "Significant accounting policies The significant accounting policies applied in the preparation of these consolidated financial statements are set out in the relevant notes. These policies have been applied consistently to all the years presented, unless otherwise stated. The directors believe that the consolidated financial statements reflect appropriate judgements and estimates, and provide a true and fair view of the Group\u2019s financial performance and position. Key sources of estimation uncertainty The application of the Group\u2019s accounting policies requires the use of estimates. In response to the potential impact of risks and uncertainties, the Group undertakes risk assessments and scenario planning in order to be able to respond to potential rapid changes in circumstances. The Group therefore considers a range of estimates and assumptions in the application of its accounting policies and management\u2019s assessment of the carrying value of assets and liabilities. In the event that these estimates or assumptions prove to be incorrect, there may be an adjustment to the carrying values of assets and liabilities within the next year. Potential areas of the Group\u2019s financial statements which could be materially impacted may include, but are not limited to: Accounting policy Description Notes Revenue and profit recognition The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers and finance and commercial professionals. Material changes in these estimates could affect the profitability of individual contracts. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events or circumstances. The long-term nature of many of the Group\u2019s contracts means that judgements are made in estimating future costs on a contract, as well as when risks will be mitigated or retired. The impact of global supply chain issues, volatility in global gas and energy prices, and the ongoing response to climate change, have increased uncertainty in relation to these judgements and estimates. The Group continues to work closely and collaboratively with its key customers to continue to deliver effectively on its contracts and commitments. However, the volume, scale, complexity and long-term nature of its programmes mean that a range of calculated potential sensitivities would be wide-ranging and not practicable to calculate. Owing to the ongoing uncertainty regarding the potential future impact of the current uncertainties, the Group\u2019s estimates and assumptions related to revenue recognition could be impacted by issues such as reduced productivity as a result of operation disruption, production delays and increased costs as a result of disruption to the supply chain, changing working practices to move towards net zero, or where there is uncertainty as to the recovery from customers of programme costs incurred. As shown in note 1, the Group has recognised \u00a30.3bn of revenue in respect of performance obligations satisfied or partially satisfied in previous years (2021 \u00a30.3bn). This continues to provide an approximation of the potential revenue sensitivity arising as a result of management\u2019s estimates and assumptions for variable consideration, future costs, and technical and other risks, however it may not reflect the full potential impact on the contract receivables and contract liabilities balances. Post-employment benefit obligations A number of actuarial assumptions are made in assessing the value of post-employment benefit obligations, including discount rate, inflation rate and mortality assumptions. For each of the actuarial assumptions used there is a wide range of possible values and management estimates a point within that range that most appropriately reflects the Group\u2019s circumstances. If estimates relating to these actuarial assumptions are no longer valid or change due to changing economic and social conditions, then the potential obligations due under these schemes could change significantly. Discount and inflation rates could change significantly as a result of a prolonged economic downturn, monetary policy decisions and interventions or other macroeconomic issues. The impact of estimates made with regard to mortality projections may also change. Similarly, the values of many assets are subject to estimates and assumptions, in particular those which are held in unquoted pooled investment vehicles. The associated fair value of these unquoted pooled investments is estimated with consideration of the most recently available valuations provided by the investment or fund managers. These valuations inherently incorporate a number of assumptions including the impact of climate change on the underlying investments. The overall level of estimation uncertainty in valuing these assets could therefore give rise to a material change in valuation within the next 12 months. Furthermore, estimates are required around the Group\u2019s ability to access its defined benefit surpluses, and on what basis, which then determines the associated rate of tax to apply. Depending on the outcome, judgement is then required to determine the presentation of any tax payable in recovering a surplus. Note 25 provides information on the key assumptions and analysis of their sensitivities. 25 In preparing the consolidated financial statements management has considered the potential impact of climate change, in the context of the disclosures included in the Strategic report this year and the impact of the Group\u2019s net zero ambitions. Estimates and judgement are required in establishing how the Group will pursue its net zero targets, as well as further mitigating actions identified as part of the detailed review of climate risks and opportunities. These have been factored in to the future business plans of the Group, through the IBP process, and are not considered to have a material impact on the financial reporting estimates and judgements. The following additional areas of estimation were considered in reaching this conclusion: \u2013 estimates of future cash flows to support impairment assessments of the carrying value of non-current assets and the assessment of going concern and the longer-term viability of the Group; \u2013 an assessment of the useful economic lives of assets; and \u2013 potential climate-related impacts on the Group\u2019s environmental provisions, in particular with regard to legislative changes. Critical judgements made in applying accounting policies In the course of preparing the financial statements and when applying its accounting policies, the Group has been required to make judgements with regard to the actions required to enable the business to continue to meet customers\u2019 requirements, in an operating environment still dominated by uncertainties arising from global economic uncertainties. No critical judgements have been made in the process of applying the Group\u2019s accounting policies, other than those involving estimates, that have had a significant effect on the amounts recognised in the financial statements. Changes in accounting policies The following standards, interpretations and amendments to existing standards became effective on 1 January 2022 and have not had a material impact on the Group: \u2013 Amendments to IFRS 3 Business Combinations, effective from 1 January 2022; \u2013 Amendments to IAS 16 Property, Plant and Equipment \u2013 Proceeds before Intended Use effective from 1 January 2022; \u2013 Amendments to IAS 37 Onerous Contracts \u2013 Cost of Fulfilling a Contract effective from 1 January 2022; and \u2013 Annual Improvements to IFRS Accounting Standards 2018\u20132020 Cycle effective from 1 January 2022. The following other standards, interpretations and amendments to existing standards have been issued but were not mandatory for accounting periods beginning on 1 January 2022. These either have been, or are expected to be endorsed by the UK Endorsement Board and are not expected to have a material impact on the Group: \u2013 IFRS 17 Insurance Contracts, effective from 1 January 2023; \u2013 Amendments to IAS 1: Presentation of Financial Statements, effective from 1 January 2023; \u2013 Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies, effective from 1 January 2023; \u2013 Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, effective from 1 January 2023; \u2013 Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; and \u2013 Amendments to IAS 12: Income Taxes, effective from 1 January 2023. Consolidation The financial statements of the Group consolidate the results of the Company and its subsidiary entities, and include its share of its equity accounted investments\u2019 results accounted for under the equity method. A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries are included in the income statement from the date of acquisition. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Joint ventures are accounted for under the equity method where the Consolidated income statement includes the Group\u2019s share of their profits and losses, and the Consolidated balance sheet includes its share of their net assets within equity accounted investments. The assets and liabilities of overseas subsidiaries and equity accounted investments are translated at the exchange rates ruling at the balance sheet date. The income statements of such entities are translated at average rates of exchange during the year. All resulting exchange differences are recognised directly in a separate component of equity. Translation differences that arose before the transition date to IFRS (1 January 2004) are presented in equity, but not as a separate component. When a foreign operation is sold, the cumulative exchange differences recognised in equity since 1 January 2004 are recognised in the income statement as part of the profit or loss on sale. Revenue and profit recognition Revenue represents income derived from contracts for the provision of goods and services, over time or at a point in time, by the Group to customers in exchange for consideration in the ordinary course of the Group\u2019s activities. The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers, and finance and commercial professionals. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events and circumstances. The Group typically enters into the following types of contracts with customers: \u2013 to design, build or create assets uniquely available to the customer such as ships and aircraft; \u2013 to service or maintain assets over a period of time; \u2013 to give access to software and licences; and \u2013 to offer bespoke services to customers, for example through training or the offering of cyber, intelligence and security capabilities. Revenue is recognised against each of these types of contracts in line with the following accounting policies. Performance obligations Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance obligations in the contract if the customer can benefit from them either on their own or together with other resources that are readily available to the customer and they are separately identifiable in the contract. In some cases, the Group provides warranties to its customers to give them assurance that its products and services will function in line with agreed-upon specifications. Warranties are not provided separately and, therefore, do not represent separate performance obligations. A provision for warranties is recognised when the underlying products and services are sold (see note 26 for further detail). Transaction price At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as variable price mechanisms, is included based on the expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of cumulative revenue recognised. The transaction price does not include estimates of consideration resulting from contract modifications, such as change orders, until they have been approved by the parties to the contract. The total transaction price is allocated to the performance obligations identified in the contract in proportion to their relative stand-alone selling prices. Given the bespoke nature of many of the Group\u2019s products and services, which are designed and/or manufactured under contract to the customer\u2019s individual specifications, there are typically no observable stand-alone selling prices. Instead, stand-alone selling prices are typically estimated based on expected costs plus contract margin consistent with the Group\u2019s pricing principles. Whilst payment terms vary from contract to contract, on many of the Group\u2019s contracts, an element of the transaction price is received in advance of delivery. When cash is received in advance of goods or services being delivered, a contract liability is recognised. The Group therefore has significant contract liabilities (note 23). The Group\u2019s contracts are not considered to include significant financing components on the basis that there is no difference between the consideration and the cash selling price. UK Ministry of Defence contracting rules prohibit the inclusion of financing in the sales price. Negotiations on competitive international export contracts do not make allowance for the cash payment profile. Revenue and profit recognition Revenue is recognised as performance obligations are satisfied as control of the goods and services is transferred to the customer. For each performance obligation within a contract, the Group determines whether it is satisfied over time or at a point in time. Performance obligations are satisfied over time if one of the following criteria is satisfied: \u2013 the customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance as it performs; \u2013 the Group\u2019s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or \u2013 the Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date. The Group has determined that most of its contracts satisfy the over-time criteria, either because the customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance as it is performed (typically services or support contracts, for example in the case of ongoing maintenance and support of aircraft and flying capability), or the Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date (typically development or production contracts, such as in the production of ships or aircraft to customers\u2019 unique specifications). For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for technical and other risks including the impact of global economic uncertainties and climate change. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s performance in transferring control of the goods and services to the customer. If the over-time criteria for revenue recognition are not met, revenue is recognised at the point in time that control is transferred to the customer, which is usually when legal title passes to the customer and the business has the right to payment, for example, on delivery. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense. Software licences The Group sells software licences either separately or together with other goods and services, including computer hardware and implementation, hosting and support. Revenue recognition in respect of software licences sold as part of a bundle of goods and services is considered separately when the licence is determined to be a separate performance obligation. Software licences either represent a right to access the Group\u2019s intellectual property as it exists throughout the licence period or a right to use the Group\u2019s intellectual property as it exists at the point in time at which the licence is granted. Revenue in respect of right to access licences is recognised over the licence term or, in relation to perpetual licences, over the related customer relationship and revenue in respect of right to use licences is recognised on delivery of the software to the customer or, if the customer chooses not to access and take delivery of the software, on expiry of the licence arrangement. A software licence is considered to be a right to access the Group\u2019s intellectual property as it exists throughout the licence period if all of the following criteria are satisfied: \u2013 the contract requires, or the customer reasonably expects, that the Group will undertake activities that significantly affect the intellectual property; and \u2013 the licence directly exposes the customer to the effects of those activities; and \u2013 those activities do not result in the transfer of a good or service to the customer. Contract modifications The Group\u2019s contracts are often amended for changes in customers\u2019 requirements and specifications. A contract modification exists when the parties to the contract approve a modification that either changes existing or creates new enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group\u2019s measure of progress towards the satisfaction of the performance obligation to which it relates is recognised in one of the following ways: 1. prospectively, as an additional, separate contract; 2. prospectively, as a termination of the existing contract and creation of a new contract; or 3. as part of the original contract using a cumulative catch-up. The majority of the Group\u2019s contract modifications are treated under either 1 (for example, the requirement for additional distinct goods or services) or 3 (for example, a change in the specification of the distinct goods or services for a partially completed contract), although the facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract-by-contract and may result in different accounting outcomes. Costs to obtain a contract The Group expenses pre-contract bidding costs which are incurred regardless of whether a contract is awarded. The Group does not typically incur costs to obtain contracts that it would not have incurred had the contracts not been awarded, such as sales commission. Costs to fulfil a contract Contract fulfilment costs in respect of over-time contracts are expensed as incurred. Contract fulfilment costs in respect of point in time contracts are accounted for under IAS 2 Inventories. Research and development The Group undertakes research and development activities either on its own behalf or on behalf of customers. Group-funded expenditure on research, and on development activities not meeting the conditions for capitalisation, is written off as incurred and charged to the income statement. Customer-funded expenditure on research and development activities is recognised in the income statement in accordance with the Group\u2019s revenue recognition policy (note 1) . Leases Lease income under operating leases is recognised in the income statement on a straight-line basis over the lease term. Interest income and borrowing costs Interest income and borrowing costs are recognised in the income statement in the period in which they are incurred. Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences: \u2013 on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; \u2013 related to investments in subsidiaries and equity accounted investments to the extent that it is probable that they will not reverse in the foreseeable future; and \u2013 arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. The weighted average number of ordinary shares used for the purpose of calculating earnings per share is calculated by taking the number of ordinary shares outstanding at the start of the year less the weighted average number of shares repurchased, plus the weighted average number of shares issued within the year (including those issued from treasury), and those shares held in trust that are no longer contingently returnable (i.e. all performance conditions attached to them are met, excluding the passage of time). The number of ordinary shares outstanding at the start of the year is calculated by taking the total number of ordinary shares in issue, less treasury shares and shares held in trust which are contingently returnable (i.e. where the performance conditions attached to those shares have not been met, excluding the passage of time). The weighted average number of ordinary shares purchased, issued or released is calculated by reference to the day on which each transaction occurred. The weighted average number of ordinary shares used in calculating diluted earnings per share is calculated by taking the weighted average number of ordinary shares outstanding, plus the number of ordinary shares which are considered potentially dilutive ordinary shares in respect of share incentive schemes, should the vesting conditions have been met as at the period end. Intangible assets are carried at cost or valuation, less accumulated amortisation and impairment losses. Cost or valuation Goodwill Under the acquisition method for business combinations, goodwill is the acquisition-date fair value of the consideration transferred, less the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of joint ventures and associates is included in the carrying value of equity accounted investments. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Software Software includes: \u2013 Computer software licences acquired for use within the Group are capitalised as an intangible asset on the basis of the costs incurred to acquire and bring to use the specific software; and \u2013 Software development costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Group-funded expenditure associated with enhancing or maintaining computer software programs for sale is recognised as an expense as incurred. Development costs Development costs funded by the Group on activities applied to a plan or design for the production of new or substantially improved products are capitalised as an internally generated intangible asset if certain conditions are met. The costs capitalised include materials, direct labour and related overheads. Programme and customer-related Intangible assets recognised by the Group include those relating to ongoing programmes within businesses acquired, mainly in respect of customer relationships and order backlog. These assets are initially recognised at their fair value at the acquisition date. Other Other intangible assets includes patents, trademarks and licences. Amortisation Goodwill is not amortised, but is tested annually for impairment, and carried at cost less accumulated impairment losses. Amortisation on intangible assets, excluding goodwill, is charged to the income statement on a straight-line basis over their estimated useful lives. For programme-related intangibles, amortisation is set on a programme-by-programme basis over the life of the individual programme. Amortisation for customer-related intangibles is also set on an individual basis. The estimated useful lives are as follows: Software up to 5 years Development costs up to 10 years Programme and customer-related up to 15 years Other up to 20 years The Group has no indefinite-life intangible assets other than goodwill. Impairment of intangible assets, property, plant and equipment, right-of-use assets, investment property and equity accounted investments The carrying amounts of the Group\u2019s intangible assets (excluding goodwill), property, plant and equipment, right-of-use assets, investment property and equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment, as required by IAS 36 Impairment of Assets. If any such indication exists, the asset\u2019s recoverable amount is estimated. For goodwill and intangible assets that are not yet available for use, impairment testing is performed annually. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of other intangible assets, property, plant and equipment, investment property and equity accounted investments is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised or if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Cost Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads. The cost of demonstration assets is written off as incurred. The reimbursement of the cost of an item of property, plant and equipment by way of a government grant is presented as deferred income and recognised in the income statement on a basis consistent with the depreciation of the asset over its estimated useful life. Assets held for leasing out under operating leases are included in property, plant and equipment at cost less accumulated depreciation and impairment losses. Depreciation Depreciation is provided, normally on a straight-line basis, to write off the cost of items of property, plant and equipment over their estimated useful lives to any estimated residual value, using the following rates: Buildings up to 50 years, or the lease term if shorter Plant and machinery: Computing equipment and motor vehicles 4 to 5 years Other equipment 10 to 20 years, or the project life if shorter No depreciation is provided on freehold land and assets in the course of construction. The assets\u2019 residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. Impairment The carrying amounts of the Group\u2019s property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. The Group as lessee All leases in which the Group is lessee (except as noted below) are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between repayment of the lease liability and finance cost. The finance cost is charged to the income statement over the lease term to produce a constant periodic rate of interest on the lease liability. The right-of-use asset is depreciated over the shorter of the asset\u2019s useful life and the lease term on a straight-line basis. The lease liability is initially measured as the present value of future lease payments, discounted using the interest rate implicit in the lease. Where this rate is not determinable, the Group\u2019s incremental borrowing rate is used, which is the interest rate the Group would have to pay to borrow the amount necessary to obtain an asset of similar value, in a similar economic environment with similar terms and conditions. The right-of-use asset is initially measured at cost, comprising the initial value of the lease liability, any lease payments made (net of any incentives received from the lessor) before the commencement of the lease, any initial direct costs and any restoration costs. The carrying amounts of the Group\u2019s right-of-use assets are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. Payments in respect of short-term leases, low-value leases and leases of intangible assets are charged to the income statement on a straight-line basis over the lease term. The Group as lessor Leases in which the Group is lessor are classified as finance leases or operating leases. If the lease transfers substantially all of the risks and rewards of ownership to the lessee, the lease is classified as a finance lease. All other leases are classified as operating leases. A sublease where the Group is an intermediate lessor is classified as a finance lease when it transfers substantially all of the risks and rewards of the right-of-use asset arising from the head lease. Lease income under operating leases is recognised in the income statement on a straight-line basis over the lease term. Amounts due from lessees under finance leases are recognised as a receivable discounted at the interest rate implicit in the lease. Finance lease income is recognised in the income statement over the lease term to produce a constant periodic rate of interest on the receivable. Cost Land and buildings that are leased to non-Group entities are classified as investment property. The Group measures investment property at its cost less accumulated depreciation and impairment losses. Depreciation Depreciation is provided, on a straight-line basis, to write off the cost of investment property over its estimated useful life of up to 50 years. The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Impairment The carrying amounts of the Group\u2019s investment property are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. Equity accounted investments comprises joint ventures and associates. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets of the arrangement. An associate is an entity over which the Group has significant influence but not control or joint control. The Group recognises its share of the profit or loss and other comprehensive income of equity accounted investments as a separate line in the Consolidated income statement and Consolidated statement of comprehensive income, respectively. The carrying value of an equity accounted investment comprises the Group\u2019s share of net assets and purchased goodwill, and is assessed for impairment as a single asset. The carrying amounts of the Group\u2019s equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. Other investments are carried at fair value through other comprehensive income. Trade and contract receivables are measured at amortised cost under IFRS 9 Financial Instruments as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Contract receivables represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue recognised at the balance sheet date and comprise costs incurred plus attributable margin. Trade receivables, contract receivables, amounts owed by equity accounted investments and finance lease receivables include a provision for expected credit losses. The Group measures the provision at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group writes off a receivable when there is objective evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. US deferred compensation plan assets are measured at fair value in accordance with IAS 19 Employee Benefits. Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised. As at 31 December 2021, the most significant recognised deferred tax assets relate to the deficits on the Group\u2019s pension/post-employment schemes (see below). This is because post-employment benefit costs are deducted in determining accounting profit as service is provided by employees, but deducted in determining taxable profit either when contributions are paid to the pension/post-employment schemes or when post-employment benefits are paid. As at 31 December 2022, the majority of the UK post-employment benefit schemes were in surplus, therefore the deferred tax asset balance in relation to deficits is much smaller. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Inventories are stated at the lower of cost, including all relevant overhead expenditure, and net realisable value. Inventory cost is valued using the most appropriate method based on the business use of inventory. In the majority of cases this is moving average unit cost, with some businesses using standard cost or first in first out (FIFO) as methods more indicative of their use of inventory. Current tax for the current and prior years is recognised as a liability to the extent that it has not yet been settled, and as an asset to the extent that the amounts already paid exceed the amount due or the benefit of a tax loss can be carried back to recover current tax of a prior year. Current tax assets and liabilities are measured at the amount expected to be paid to or recovered from taxation authorities, using the rates that have been enacted or substantively enacted by the balance sheet date. Cash and cash equivalents includes cash in hand, call and term deposits, investments in money market funds and other short-term liquid investments with original maturities of three months or less and which are subject to an insignificant risk of change in value. For the purpose of the cash flow statement, cash and cash equivalents also includes bank overdrafts that are repayable on demand and which form an integral part of the Group\u2019s cash management. Assets and liabilities of disposal groups classified as held for sale comprise assets and liabilities that are expected to be recovered primarily through sale rather than continuing use. Assets and liabilities of disposal groups classified as held for sale are measured at the lower of their carrying value and fair value less costs to sell. Loans and overdrafts are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, loans and overdrafts are stated at amortised cost. Any difference between the amount initially recognised and the redemption value is recognised in the income statement over the period of the borrowings. Contract liabilities represent the obligation to transfer goods or services to a customer for which consideration has been received, or consideration is due, from the customer. Trade and other payables are stated at amortised cost. US deferred compensation plan liabilities represent the present value of expected future payments required to settle the obligation to employees in accordance with IAS 19 Employee Benefits. Pension schemes Defined contribution Obligations for contributions are recognised as an expense in the income statement as incurred. Defined benefit The cost of providing benefits is determined periodically by independent actuaries and charged to the income statement in the period in which those benefits are earned by the employees. Remeasurements, including actuarial gains and losses, are recognised in the Consolidated statement of comprehensive income in the year in which they occur. Past service costs resulting from a plan amendment or curtailment are recognised immediately in the income statement. The post-employment benefit surpluses and obligations recognised in the Group\u2019s balance sheet represent the fair value of scheme assets, less the present value of the defined benefit obligations calculated using a number of actuarial assumptions as set out on page 271. The bid values of scheme assets are not intended to be realised in the short term and may be subject to significant change before they are realised. The present values of scheme liabilities are derived from cash flow projections over long periods and are, therefore, inherently uncertain. IAS 19 Employee Benefits limits the measurement of a defined benefit surplus to the lower of the surplus in the defined benefit scheme and the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the scheme or reductions in future contributions to the scheme. IFRIC 14 \u2013 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, issued in 2007, provides an interpretation of the requirements of IAS 19, clarifying that a refund is available if the entity has an unconditional right to a refund in certain circumstances. The Group has applied IFRIC 14 and has determined that there is no limit on the recognition of the surpluses in its defined benefit pension schemes as at 31 December 2022. The surpluses have been recognised on the basis that the future economic benefits are unconditionally available to the Group, which is assumed to be via a refund. These have been recognised after deducting a 35% withholding tax which would be levied prior to the future refunding of any surplus and have been presented on a net basis as this is not deemed to be an income tax of the Group. MBDA participates in the Group\u2019s defined benefit schemes and, as these are multi-employer schemes, the Group has allocated a share of the IAS 19 pension surpluses and deficits to MBDA based on the relative payroll contributions of active members or actual obligations where known. Whilst this methodology is intended to reflect a reasonable estimate of the share of the surplus or deficit, it may not accurately reflect the obligations of the participating employers. In the event that an employer who participates in the Group\u2019s pension schemes fails or cannot be compelled to fulfil its obligations as a participating employer, the remaining participating employers are obliged to collectively take on its obligations. The Group considers the likelihood of this event arising as remote. The Group\u2019s share of the IAS 19 pension surplus or deficit allocated to equity accounted investments is included in the balance sheet within equity accounted investments. A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount has been reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at an appropriate pre-tax discount rate. Warranties and after-sales service Warranties and after-sales service are provided in the normal course of business with provisions for associated costs being made based on an assessment of future claims with reference to past experience. A provision for warranties is recognised when the underlying products and services are sold. The provision is based on historical warranty data and a weighting of possible outcomes against their associated probabilities. Reorganisations A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced to those affected. The costs associated with the reorganisation programmes are supported by detailed plans and based on previous experience as well as other known factors. Future operating costs are not provided for. Legal, contractual and environmental The Group holds provisions for expected legal, contractual and environmental costs that it expects to incur over an extended period. Management exercises judgement to determine the amount of these provisions. Provision is made for known issues based on past experience of similar items and other known factors. Each provision is considered separately and the amount provided reflects the best estimate of the most likely amount, being the single most likely amount in a range of possible outcomes. Equity dividends on ordinary share capital are recognised as a liability on the date that the shareholder\u2019s right to receive payment is established. This is generally the date that the dividend is declared. The Group has granted equity-settled share options and Long-Term Incentive Plan arrangements which are measured at fair value at the date of grant using an option pricing model. The fair value is expensed on a straight-line basis over the vesting period, based on the Group\u2019s estimate of the number of shares that will actually vest. Contingent liabilities are potential future cash outflows which are either not probable or cannot be measured reliably. The Group has entered into a number of guarantee and performance bond arrangements in the normal course of business. Various Group undertakings are parties to legal actions and claims which arise in the normal course of business. Provision is made for any amounts that the directors consider may become payable (see note 26) . ", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-436": { "value": "Key sources of estimation uncertainty The application of the Group\u2019s accounting policies requires the use of estimates. In response to the potential impact of risks and uncertainties, the Group undertakes risk assessments and scenario planning in order to be able to respond to potential rapid changes in circumstances. The Group therefore considers a range of estimates and assumptions in the application of its accounting policies and management\u2019s assessment of the carrying value of assets and liabilities. In the event that these estimates or assumptions prove to be incorrect, there may be an adjustment to the carrying values of assets and liabilities within the next year. Potential areas of the Group\u2019s financial statements which could be materially impacted may include, but are not limited to: Accounting policy Description Notes Revenue and profit recognition The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers and finance and commercial professionals. Material changes in these estimates could affect the profitability of individual contracts. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events or circumstances. The long-term nature of many of the Group\u2019s contracts means that judgements are made in estimating future costs on a contract, as well as when risks will be mitigated or retired. The impact of global supply chain issues, volatility in global gas and energy prices, and the ongoing response to climate change, have increased uncertainty in relation to these judgements and estimates. The Group continues to work closely and collaboratively with its key customers to continue to deliver effectively on its contracts and commitments. However, the volume, scale, complexity and long-term nature of its programmes mean that a range of calculated potential sensitivities would be wide-ranging and not practicable to calculate. Owing to the ongoing uncertainty regarding the potential future impact of the current uncertainties, the Group\u2019s estimates and assumptions related to revenue recognition could be impacted by issues such as reduced productivity as a result of operation disruption, production delays and increased costs as a result of disruption to the supply chain, changing working practices to move towards net zero, or where there is uncertainty as to the recovery from customers of programme costs incurred. As shown in note 1, the Group has recognised \u00a30.3bn of revenue in respect of performance obligations satisfied or partially satisfied in previous years (2021 \u00a30.3bn). This continues to provide an approximation of the potential revenue sensitivity arising as a result of management\u2019s estimates and assumptions for variable consideration, future costs, and technical and other risks, however it may not reflect the full potential impact on the contract receivables and contract liabilities balances. Post-employment benefit obligations A number of actuarial assumptions are made in assessing the value of post-employment benefit obligations, including discount rate, inflation rate and mortality assumptions. For each of the actuarial assumptions used there is a wide range of possible values and management estimates a point within that range that most appropriately reflects the Group\u2019s circumstances. If estimates relating to these actuarial assumptions are no longer valid or change due to changing economic and social conditions, then the potential obligations due under these schemes could change significantly. Discount and inflation rates could change significantly as a result of a prolonged economic downturn, monetary policy decisions and interventions or other macroeconomic issues. The impact of estimates made with regard to mortality projections may also change. Similarly, the values of many assets are subject to estimates and assumptions, in particular those which are held in unquoted pooled investment vehicles. The associated fair value of these unquoted pooled investments is estimated with consideration of the most recently available valuations provided by the investment or fund managers. These valuations inherently incorporate a number of assumptions including the impact of climate change on the underlying investments. The overall level of estimation uncertainty in valuing these assets could therefore give rise to a material change in valuation within the next 12 months. Furthermore, estimates are required around the Group\u2019s ability to access its defined benefit surpluses, and on what basis, which then determines the associated rate of tax to apply. Depending on the outcome, judgement is then required to determine the presentation of any tax payable in recovering a surplus. Note 25 provides information on the key assumptions and analysis of their sensitivities. 25 In preparing the consolidated financial statements management has considered the potential impact of climate change, in the context of the disclosures included in the Strategic report this year and the impact of the Group\u2019s net zero ambitions. Estimates and judgement are required in establishing how the Group will pursue its net zero targets, as well as further mitigating actions identified as part of the detailed review of climate risks and opportunities. These have been factored in to the future business plans of the Group, through the IBP process, and are not considered to have a material impact on the financial reporting estimates and judgements. The following additional areas of estimation were considered in reaching this conclusion: \u2013 estimates of future cash flows to support impairment assessments of the carrying value of non-current assets and the assessment of going concern and the longer-term viability of the Group; \u2013 an assessment of the useful economic lives of assets; and \u2013 potential climate-related impacts on the Group\u2019s environmental provisions, in particular with regard to legislative changes. Critical judgements made in applying accounting policies In the course of preparing the financial statements and when applying its accounting policies, the Group has been required to make judgements with regard to the actions required to enable the business to continue to meet customers\u2019 requirements, in an operating environment still dominated by uncertainties arising from global economic uncertainties. No critical judgements have been made in the process of applying the Group\u2019s accounting policies, other than those involving estimates, that have had a significant effect on the amounts recognised in the financial statements. Sensitivity analysis The sensitivity information has been derived using scenario analysis from the actuarial assumptions as at 31 December 2022 and keeping all other assumptions as set out on page 271. The pension schemes hold a number of unquoted pooled investment vehicles, which are investments in private markets. These are valued based on latest available valuation reports, and as noted on page 223, these valuations are subject to estimation uncertainty as their valuation techniques incorporate a number of assumptions, including those associated with the COVID-19 pandemic and the impact of climate change. Should these funds\u2019 actual valuations at 31 December 2022 be on average 2% different to those assumed, this would result in a \u00a30.2bn (2021 \u00a30.2bn) change in the valuation of the assets. Financial assumptions The estimated impact of changes in the discount rate and inflation assumptions on the defined benefit pension obligation, together with the estimated impact on scheme assets, is shown in the table below. The estimated impact on scheme assets takes into account the Group\u2019s risk management activities in respect of interest rate and inflation risk. The sensitivity analysis on the defined benefit obligation is measured on an IAS 19 accounting basis and, therefore, does not reflect the natural hedging in the discount rate used for funding valuation purposes. Decrease/(increase) in pension obligation1 \u00a3bn (Decrease)/increase in scheme assets1 \u00a3bn Discount rate: 0.5 percentage point increase/decrease 1.4/(1.5) (1.2)/1.4 1.0 percentage point increase/decrease 2.6/(3.2) (2.3)/2.9 2.0 percentage point increase/decrease 4.7/(7.2) (4.3)/6.6 3.0 percentage point increase/decrease 6.5/(12.4) (5.9)/11.4 1. Before allocation to equity accounted investments and deduction of withholding tax. (Increase)/decrease in pension obligation1 \u00a3bn Increase/(decrease) in scheme assets1 \u00a3bn Inflation: 0.1 percentage point increase/decrease (0.2)/0.2 0.1/(0.1) 0.5 percentage point increase/decrease (0.8)/0.8 0.7/(0.6) 1.0 percentage point increase/decrease (1.5)/1.5 1.4/(1.1) 1. Before allocation to equity accounted investments and deduction of withholding tax. Demographic assumptions Changes in the life expectancy assumption, including the benefit of longevity swap arrangements (see longevity risk on page 270), would have the following effect on the total net IAS 19 surplus: (Decrease)/increase in net surplus 1 \u00a3bn Life expectancy: One-year increase/decrease (0.8)/0.7 1. Before allocation to equity accounted investments and deduction of withholding tax. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-529": { "value": "Key sources of estimation uncertainty The application of the Group\u2019s accounting policies requires the use of estimates. In response to the potential impact of risks and uncertainties, the Group undertakes risk assessments and scenario planning in order to be able to respond to potential rapid changes in circumstances. The Group therefore considers a range of estimates and assumptions in the application of its accounting policies and management\u2019s assessment of the carrying value of assets and liabilities. In the event that these estimates or assumptions prove to be incorrect, there may be an adjustment to the carrying values of assets and liabilities within the next year. Potential areas of the Group\u2019s financial statements which could be materially impacted may include, but are not limited to: Accounting policy Description Notes Revenue and profit recognition The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers and finance and commercial professionals. Material changes in these estimates could affect the profitability of individual contracts. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events or circumstances. The long-term nature of many of the Group\u2019s contracts means that judgements are made in estimating future costs on a contract, as well as when risks will be mitigated or retired. The impact of global supply chain issues, volatility in global gas and energy prices, and the ongoing response to climate change, have increased uncertainty in relation to these judgements and estimates. The Group continues to work closely and collaboratively with its key customers to continue to deliver effectively on its contracts and commitments. However, the volume, scale, complexity and long-term nature of its programmes mean that a range of calculated potential sensitivities would be wide-ranging and not practicable to calculate. Owing to the ongoing uncertainty regarding the potential future impact of the current uncertainties, the Group\u2019s estimates and assumptions related to revenue recognition could be impacted by issues such as reduced productivity as a result of operation disruption, production delays and increased costs as a result of disruption to the supply chain, changing working practices to move towards net zero, or where there is uncertainty as to the recovery from customers of programme costs incurred. As shown in note 1, the Group has recognised \u00a30.3bn of revenue in respect of performance obligations satisfied or partially satisfied in previous years (2021 \u00a30.3bn). This continues to provide an approximation of the potential revenue sensitivity arising as a result of management\u2019s estimates and assumptions for variable consideration, future costs, and technical and other risks, however it may not reflect the full potential impact on the contract receivables and contract liabilities balances. Post-employment benefit obligations A number of actuarial assumptions are made in assessing the value of post-employment benefit obligations, including discount rate, inflation rate and mortality assumptions. For each of the actuarial assumptions used there is a wide range of possible values and management estimates a point within that range that most appropriately reflects the Group\u2019s circumstances. If estimates relating to these actuarial assumptions are no longer valid or change due to changing economic and social conditions, then the potential obligations due under these schemes could change significantly. Discount and inflation rates could change significantly as a result of a prolonged economic downturn, monetary policy decisions and interventions or other macroeconomic issues. The impact of estimates made with regard to mortality projections may also change. Similarly, the values of many assets are subject to estimates and assumptions, in particular those which are held in unquoted pooled investment vehicles. The associated fair value of these unquoted pooled investments is estimated with consideration of the most recently available valuations provided by the investment or fund managers. These valuations inherently incorporate a number of assumptions including the impact of climate change on the underlying investments. The overall level of estimation uncertainty in valuing these assets could therefore give rise to a material change in valuation within the next 12 months. Furthermore, estimates are required around the Group\u2019s ability to access its defined benefit surpluses, and on what basis, which then determines the associated rate of tax to apply. Depending on the outcome, judgement is then required to determine the presentation of any tax payable in recovering a surplus. Note 25 provides information on the key assumptions and analysis of their sensitivities. 25 In preparing the consolidated financial statements management has considered the potential impact of climate change, in the context of the disclosures included in the Strategic report this year and the impact of the Group\u2019s net zero ambitions. Estimates and judgement are required in establishing how the Group will pursue its net zero targets, as well as further mitigating actions identified as part of the detailed review of climate risks and opportunities. These have been factored in to the future business plans of the Group, through the IBP process, and are not considered to have a material impact on the financial reporting estimates and judgements. The following additional areas of estimation were considered in reaching this conclusion: \u2013 estimates of future cash flows to support impairment assessments of the carrying value of non-current assets and the assessment of going concern and the longer-term viability of the Group; \u2013 an assessment of the useful economic lives of assets; and \u2013 potential climate-related impacts on the Group\u2019s environmental provisions, in particular with regard to legislative changes. Sensitivity analysis The sensitivity information has been derived using scenario analysis from the actuarial assumptions as at 31 December 2022 and keeping all other assumptions as set out on page 271. The pension schemes hold a number of unquoted pooled investment vehicles, which are investments in private markets. These are valued based on latest available valuation reports, and as noted on page 223, these valuations are subject to estimation uncertainty as their valuation techniques incorporate a number of assumptions, including those associated with the COVID-19 pandemic and the impact of climate change. Should these funds\u2019 actual valuations at 31 December 2022 be on average 2% different to those assumed, this would result in a \u00a30.2bn (2021 \u00a30.2bn) change in the valuation of the assets. ", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-488": { "value": "Key sources of estimation uncertainty The application of the Group\u2019s accounting policies requires the use of estimates. In response to the potential impact of risks and uncertainties, the Group undertakes risk assessments and scenario planning in order to be able to respond to potential rapid changes in circumstances. The Group therefore considers a range of estimates and assumptions in the application of its accounting policies and management\u2019s assessment of the carrying value of assets and liabilities. In the event that these estimates or assumptions prove to be incorrect, there may be an adjustment to the carrying values of assets and liabilities within the next year. Potential areas of the Group\u2019s financial statements which could be materially impacted may include, but are not limited to: Accounting policy Description Notes Revenue and profit recognition The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers and finance and commercial professionals. Material changes in these estimates could affect the profitability of individual contracts. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events or circumstances. The long-term nature of many of the Group\u2019s contracts means that judgements are made in estimating future costs on a contract, as well as when risks will be mitigated or retired. The impact of global supply chain issues, volatility in global gas and energy prices, and the ongoing response to climate change, have increased uncertainty in relation to these judgements and estimates. The Group continues to work closely and collaboratively with its key customers to continue to deliver effectively on its contracts and commitments. However, the volume, scale, complexity and long-term nature of its programmes mean that a range of calculated potential sensitivities would be wide-ranging and not practicable to calculate. Owing to the ongoing uncertainty regarding the potential future impact of the current uncertainties, the Group\u2019s estimates and assumptions related to revenue recognition could be impacted by issues such as reduced productivity as a result of operation disruption, production delays and increased costs as a result of disruption to the supply chain, changing working practices to move towards net zero, or where there is uncertainty as to the recovery from customers of programme costs incurred. As shown in note 1, the Group has recognised \u00a30.3bn of revenue in respect of performance obligations satisfied or partially satisfied in previous years (2021 \u00a30.3bn). This continues to provide an approximation of the potential revenue sensitivity arising as a result of management\u2019s estimates and assumptions for variable consideration, future costs, and technical and other risks, however it may not reflect the full potential impact on the contract receivables and contract liabilities balances. Post-employment benefit obligations A number of actuarial assumptions are made in assessing the value of post-employment benefit obligations, including discount rate, inflation rate and mortality assumptions. For each of the actuarial assumptions used there is a wide range of possible values and management estimates a point within that range that most appropriately reflects the Group\u2019s circumstances. If estimates relating to these actuarial assumptions are no longer valid or change due to changing economic and social conditions, then the potential obligations due under these schemes could change significantly. Discount and inflation rates could change significantly as a result of a prolonged economic downturn, monetary policy decisions and interventions or other macroeconomic issues. The impact of estimates made with regard to mortality projections may also change. Similarly, the values of many assets are subject to estimates and assumptions, in particular those which are held in unquoted pooled investment vehicles. The associated fair value of these unquoted pooled investments is estimated with consideration of the most recently available valuations provided by the investment or fund managers. These valuations inherently incorporate a number of assumptions including the impact of climate change on the underlying investments. The overall level of estimation uncertainty in valuing these assets could therefore give rise to a material change in valuation within the next 12 months. Furthermore, estimates are required around the Group\u2019s ability to access its defined benefit surpluses, and on what basis, which then determines the associated rate of tax to apply. Depending on the outcome, judgement is then required to determine the presentation of any tax payable in recovering a surplus. Note 25 provides information on the key assumptions and analysis of their sensitivities. 25 In preparing the consolidated financial statements management has considered the potential impact of climate change, in the context of the disclosures included in the Strategic report this year and the impact of the Group\u2019s net zero ambitions. Estimates and judgement are required in establishing how the Group will pursue its net zero targets, as well as further mitigating actions identified as part of the detailed review of climate risks and opportunities. These have been factored in to the future business plans of the Group, through the IBP process, and are not considered to have a material impact on the financial reporting estimates and judgements. The following additional areas of estimation were considered in reaching this conclusion: \u2013 estimates of future cash flows to support impairment assessments of the carrying value of non-current assets and the assessment of going concern and the longer-term viability of the Group; \u2013 an assessment of the useful economic lives of assets; and \u2013 potential climate-related impacts on the Group\u2019s environmental provisions, in particular with regard to legislative changes. Sensitivity analysis The sensitivity information has been derived using scenario analysis from the actuarial assumptions as at 31 December 2022 and keeping all other assumptions as set out on page 271. The pension schemes hold a number of unquoted pooled investment vehicles, which are investments in private markets. These are valued based on latest available valuation reports, and as noted on page 223, these valuations are subject to estimation uncertainty as their valuation techniques incorporate a number of assumptions, including those associated with the COVID-19 pandemic and the impact of climate change. Should these funds\u2019 actual valuations at 31 December 2022 be on average 2% different to those assumed, this would result in a \u00a30.2bn (2021 \u00a30.2bn) change in the valuation of the assets. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-437": { "value": "Changes in accounting policies The following standards, interpretations and amendments to existing standards became effective on 1 January 2022 and have not had a material impact on the Group: \u2013 Amendments to IFRS 3 Business Combinations, effective from 1 January 2022; \u2013 Amendments to IAS 16 Property, Plant and Equipment \u2013 Proceeds before Intended Use effective from 1 January 2022; \u2013 Amendments to IAS 37 Onerous Contracts \u2013 Cost of Fulfilling a Contract effective from 1 January 2022; and \u2013 Annual Improvements to IFRS Accounting Standards 2018\u20132020 Cycle effective from 1 January 2022. The following other standards, interpretations and amendments to existing standards have been issued but were not mandatory for accounting periods beginning on 1 January 2022. These either have been, or are expected to be endorsed by the UK Endorsement Board and are not expected to have a material impact on the Group: \u2013 IFRS 17 Insurance Contracts, effective from 1 January 2023; \u2013 Amendments to IAS 1: Presentation of Financial Statements, effective from 1 January 2023; \u2013 Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies, effective from 1 January 2023; \u2013 Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, effective from 1 January 2023; \u2013 Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; and \u2013 Amendments to IAS 12: Income Taxes, effective from 1 January 2023. ", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-438": { "value": "Consolidation The financial statements of the Group consolidate the results of the Company and its subsidiary entities, and include its share of its equity accounted investments\u2019 results accounted for under the equity method. A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries are included in the income statement from the date of acquisition. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Joint ventures are accounted for under the equity method where the Consolidated income statement includes the Group\u2019s share of their profits and losses, and the Consolidated balance sheet includes its share of their net assets within equity accounted investments. The assets and liabilities of overseas subsidiaries and equity accounted investments are translated at the exchange rates ruling at the balance sheet date. The income statements of such entities are translated at average rates of exchange during the year. All resulting exchange differences are recognised directly in a separate component of equity. Translation differences that arose before the transition date to IFRS (1 January 2004) are presented in equity, but not as a separate component. When a foreign operation is sold, the cumulative exchange differences recognised in equity since 1 January 2004 are recognised in the income statement as part of the profit or loss on sale.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-540": { "value": "A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries are included in the income statement from the date of acquisition. 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The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group\u2019s contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired. The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group\u2019s project managers, engineers, and finance and commercial professionals. Revenue and cost estimates are reviewed and updated at least quarterly, and more frequently as determined by events and circumstances. The Group typically enters into the following types of contracts with customers: \u2013 to design, build or create assets uniquely available to the customer such as ships and aircraft; \u2013 to service or maintain assets over a period of time; \u2013 to give access to software and licences; and \u2013 to offer bespoke services to customers, for example through training or the offering of cyber, intelligence and security capabilities. Revenue is recognised against each of these types of contracts in line with the following accounting policies. Performance obligations Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance obligations in the contract if the customer can benefit from them either on their own or together with other resources that are readily available to the customer and they are separately identifiable in the contract. In some cases, the Group provides warranties to its customers to give them assurance that its products and services will function in line with agreed-upon specifications. Warranties are not provided separately and, therefore, do not represent separate performance obligations. A provision for warranties is recognised when the underlying products and services are sold (see note 26 for further detail). Transaction price At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as variable price mechanisms, is included based on the expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of cumulative revenue recognised. The transaction price does not include estimates of consideration resulting from contract modifications, such as change orders, until they have been approved by the parties to the contract. The total transaction price is allocated to the performance obligations identified in the contract in proportion to their relative stand-alone selling prices. Given the bespoke nature of many of the Group\u2019s products and services, which are designed and/or manufactured under contract to the customer\u2019s individual specifications, there are typically no observable stand-alone selling prices. Instead, stand-alone selling prices are typically estimated based on expected costs plus contract margin consistent with the Group\u2019s pricing principles. Whilst payment terms vary from contract to contract, on many of the Group\u2019s contracts, an element of the transaction price is received in advance of delivery. When cash is received in advance of goods or services being delivered, a contract liability is recognised. The Group therefore has significant contract liabilities (note 23). The Group\u2019s contracts are not considered to include significant financing components on the basis that there is no difference between the consideration and the cash selling price. UK Ministry of Defence contracting rules prohibit the inclusion of financing in the sales price. Negotiations on competitive international export contracts do not make allowance for the cash payment profile. Revenue and profit recognition Revenue is recognised as performance obligations are satisfied as control of the goods and services is transferred to the customer. For each performance obligation within a contract, the Group determines whether it is satisfied over time or at a point in time. Performance obligations are satisfied over time if one of the following criteria is satisfied: \u2013 the customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance as it performs; \u2013 the Group\u2019s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or \u2013 the Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date. The Group has determined that most of its contracts satisfy the over-time criteria, either because the customer simultaneously receives and consumes the benefits provided by the Group\u2019s performance as it is performed (typically services or support contracts, for example in the case of ongoing maintenance and support of aircraft and flying capability), or the Group\u2019s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date (typically development or production contracts, such as in the production of ships or aircraft to customers\u2019 unique specifications). For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for technical and other risks including the impact of global economic uncertainties and climate change. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s performance in transferring control of the goods and services to the customer. If the over-time criteria for revenue recognition are not met, revenue is recognised at the point in time that control is transferred to the customer, which is usually when legal title passes to the customer and the business has the right to payment, for example, on delivery. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense. Software licences The Group sells software licences either separately or together with other goods and services, including computer hardware and implementation, hosting and support. Revenue recognition in respect of software licences sold as part of a bundle of goods and services is considered separately when the licence is determined to be a separate performance obligation. Software licences either represent a right to access the Group\u2019s intellectual property as it exists throughout the licence period or a right to use the Group\u2019s intellectual property as it exists at the point in time at which the licence is granted. Revenue in respect of right to access licences is recognised over the licence term or, in relation to perpetual licences, over the related customer relationship and revenue in respect of right to use licences is recognised on delivery of the software to the customer or, if the customer chooses not to access and take delivery of the software, on expiry of the licence arrangement. A software licence is considered to be a right to access the Group\u2019s intellectual property as it exists throughout the licence period if all of the following criteria are satisfied: \u2013 the contract requires, or the customer reasonably expects, that the Group will undertake activities that significantly affect the intellectual property; and \u2013 the licence directly exposes the customer to the effects of those activities; and \u2013 those activities do not result in the transfer of a good or service to the customer. Contract modifications The Group\u2019s contracts are often amended for changes in customers\u2019 requirements and specifications. A contract modification exists when the parties to the contract approve a modification that either changes existing or creates new enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group\u2019s measure of progress towards the satisfaction of the performance obligation to which it relates is recognised in one of the following ways: 1. prospectively, as an additional, separate contract; 2. prospectively, as a termination of the existing contract and creation of a new contract; or 3. as part of the original contract using a cumulative catch-up. The majority of the Group\u2019s contract modifications are treated under either 1 (for example, the requirement for additional distinct goods or services) or 3 (for example, a change in the specification of the distinct goods or services for a partially completed contract), although the facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract-by-contract and may result in different accounting outcomes. Costs to obtain a contract The Group expenses pre-contract bidding costs which are incurred regardless of whether a contract is awarded. The Group does not typically incur costs to obtain contracts that it would not have incurred had the contracts not been awarded, such as sales commission. Costs to fulfil a contract Contract fulfilment costs in respect of over-time contracts are expensed as incurred. Contract fulfilment costs in respect of point in time contracts are accounted for under IAS 2 Inventories. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-470": { "value": "Reporting segments The Group has five sectors which, together with HQ, make its six reporting segments as defined by IFRS 8 Operating Segments: \u2013 Electronic Systems comprises the US- and UK-based electronics activities, including electronic warfare systems, navigation systems, electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, next-generation military communications systems and data links, persistent surveillance capabilities, space electronics and electric drive propulsion systems; \u2013 Platforms & Services has operations in the US, UK and Sweden. It manufactures and upgrades combat vehicles, weapons and munitions, and delivers services and sustainment activities, including naval ship repair, and the management and operation of government-owned munitions facilities; \u2013 Air comprises the Group\u2019s UK-based air activities for European and International Markets, US Programmes and development of future combat air systems alongside its businesses in the Kingdom of Saudi Arabia, together with its 37.5% interest in the European MBDA joint venture; \u2013 Maritime comprises the Group\u2019s UK-based maritime and land activities, as well as its Australia business; \u2013 Cyber & Intelligence comprises the US-based Intelligence & Security business and UK-headquartered Digital Intelligence business, which have been aggregated together due to the similarities of the services offered. Together, they cover the Group\u2019s cyber security and secure government activities; and \u2013 HQ comprises the Group\u2019s head office and UK-based shared services activities, together with a 49% interest in Air Astana. The Board (the chief operating decision maker as defined by IFRS 8 Operating Segments) monitors the results of these reporting segments to assess performance and make decisions about the allocation of resources. Segmental performance is evaluated based on Key Performance 1 1 Indicators \u2013 sales (see page 232) and underlying EBIT (see page 233). Finance costs and taxation expense are managed on a Group basis. 1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302 Sales1 and revenue by reporting segment Sales1 Deduct Share of revenue of equity accounted investments Add Subsidiaries\u2019 revenue from equity accounted investments Revenue 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 5,057 4,491 (73) (54) 73 54 5,057 4,491 Platforms & Services 3,688 3,395 (90) (79) \u2013 2 3,598 3,318 Air 7,698 7,4 49 (2,651) (2,505) 1,239 1,097 6,286 6,041 Maritime 4,598 4,169 (119) (79) 5 3 4,484 4,093 Cyber & Intelligence 2,205 1,923 \u2013 \u2013 \u2013 \u2013 2,205 1,923 HQ 420 281 (410) (271) \u2013 \u2013 10 10 23,666 21,708 (3,343) (2,988) 1,317 1,156 21,640 19,876 Intra-group sales/revenue (410) (398) 1 9 27 34 (382) (355) 23,256 21,310 (3,342) (2,979) 1,344 1,190 21,258 19,521 Intra-group revenue Revenue from external customers 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 115 101 4,942 4,390 Platforms & Services 43 34 3,555 3,284 Air 29 19 6,257 6,022 Maritime 71 80 4,413 4,013 Cyber & Intelligence 114 111 2,091 1,812 HQ 10 10 \u2013 \u2013 382 355 21,258 19,521 1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. Sales1 and revenue by customer location Sales1 Revenue 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m UK 4,608 4,201 4,324 3,935 Rest of Europe 3,021 2,435 1,824 1,502 US 10,166 9,109 10,157 9,108 Canada 125 141 125 141 Kingdom of Saudi Arabia 2,539 2,497 2,540 2,476 Qatar 1,156 1,267 885 1,014 Rest of Middle East 263 326 225 275 Australia 854 763 853 762 Rest of Asia and Pacific 420 449 283 285 Africa, and Central and South America 104 122 42 23 23,256 21,310 21,258 19,521 1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. Revenue from external customers by domain 2022 20211 Air \u00a3m Maritime \u00a3m Land \u00a3m Cyber \u00a3m Total \u00a3m Air \u00a3m Maritime \u00a3m Land \u00a3m Cyber \u00a3m Total \u00a3m Electronic Systems 4,404 145 393 \u2013 4,942 3,846 87 457 \u2013 4,390 Platforms & Services 41 1,043 2,471 \u2013 3,555 37 1,061 2,186 \u2013 3,284 Air 6,223 34 \u2013 \u2013 6,257 5,987 33 2 \u2013 6,022 Maritime 268 3,778 367 \u2013 4,413 255 3,417 341 \u2013 4,013 Cyber & Intelligence 250 274 127 1,440 2,091 264 411 136 1,001 1,812 HQ \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 11,186 5,274 3,358 1,440 21,258 10,389 5,009 3,122 1,001 19,521 1. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. Revenue by major customer Revenue from the Group\u2019s three principal customers, which individually represent over 10% of total revenue, is as follows: 2022 \u00a3m 2021 \u00a3m US Department of Defense 7,439 7,0 08 UK Ministry of Defence 4,721 4,185 Kingdom of Saudi Arabia Ministry of Defence and Aviation 2,425 2,380 Revenue from the UK Ministry of Defence and the US Department of Defense was generated by the five reporting segments, excluding HQ. Revenue from the Kingdom of Saudi Arabia Ministry of Defence and Aviation was generated by the Air and Maritime segments. Operating profit/(loss) by reporting segment Underlying EBIT 1 Adjusting items3 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense of equity accounted investments Operating profit/(loss) 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 2021 2 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 838 766 \u2013 33 (91) (84) \u2013 \u2013 747 715 Platforms & Services 326 259 \u2013 \u2013 \u2013 (1) (4) (6) 322 252 Air 849 772 (1) 132 (1) (10) (38) (45) 809 849 Maritime 356 351 \u2013 \u2013 \u2013 (1) (4) (3) 352 347 Cyber & Intelligence 232 179 78 3 (19) (5) \u2013 \u2013 291 177 HQ (122) (122) 14 182 \u2013 \u2013 (29) (11) (137) 49 2,479 2,205 91 350 (111) (101) (75) (65) 2,384 2,389 Net finance costs (395) (279) Profit before taxation 1,989 2,110 Taxation expense (315) (198) Profit for the year 1,674 1,912 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. 3. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some items could be considered recurring in nature. Share of results of equity accounted investments within reporting segments Underlying EBIT 1 Adjusting items2 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense Share of results of equity accounted investments 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Electronic Systems 4 4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4 4 Platforms & Services 11 9 \u2013 \u2013 \u2013 \u2013 (4) (6) 7 3 Air 164 151 \u2013 \u2013 \u2013 \u2013 (38) (45) 126 106 Maritime 11 11 \u2013 \u2013 \u2013 \u2013 (4) (3) 7 8 HQ 65 29 \u2013 \u2013 \u2013 \u2013 (29) (11) 36 18 255 204 \u2013 \u2013 \u2013 \u2013 (75) (65) 180 139 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some categories of items could be considered recurring in nature. Adjusting items 2022 Adjusting items in 2022 comprises a \u00a394m gain on the disposal of the Financial Services business in Digital Intelligence, \u00a316m costs related to current and historical business transactions, and a \u00a313m gain related to past service on the pension schemes. 2021 Adjusting items in 2021 reflect a gain of \u00a3350m, comprising a gain in HQ on the sale of the Filton and Broughton sites (\u00a3182m), gains on disposal of Advanced Electronics Company in the Air segment (\u00a3132m, of which \u00a363m is attributable to non-controlling interests \u2013 see note 20), and on disposal of a business in our Electronic Systems segment (\u00a326m), and a net \u00a310m gain relating to historical and current year acquisitions. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-439": { "value": "Reporting segments The Group has five sectors which, together with HQ, make its six reporting segments as defined by IFRS 8 Operating Segments: \u2013 Electronic Systems comprises the US- and UK-based electronics activities, including electronic warfare systems, navigation systems, electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, next-generation military communications systems and data links, persistent surveillance capabilities, space electronics and electric drive propulsion systems; \u2013 Platforms & Services has operations in the US, UK and Sweden. It manufactures and upgrades combat vehicles, weapons and munitions, and delivers services and sustainment activities, including naval ship repair, and the management and operation of government-owned munitions facilities; \u2013 Air comprises the Group\u2019s UK-based air activities for European and International Markets, US Programmes and development of future combat air systems alongside its businesses in the Kingdom of Saudi Arabia, together with its 37.5% interest in the European MBDA joint venture; \u2013 Maritime comprises the Group\u2019s UK-based maritime and land activities, as well as its Australia business; \u2013 Cyber & Intelligence comprises the US-based Intelligence & Security business and UK-headquartered Digital Intelligence business, which have been aggregated together due to the similarities of the services offered. Together, they cover the Group\u2019s cyber security and secure government activities; and \u2013 HQ comprises the Group\u2019s head office and UK-based shared services activities, together with a 49% interest in Air Astana. The Board (the chief operating decision maker as defined by IFRS 8 Operating Segments) monitors the results of these reporting segments to assess performance and make decisions about the allocation of resources. Segmental performance is evaluated based on Key Performance 1 1 Indicators \u2013 sales (see page 232) and underlying EBIT (see page 233). Finance costs and taxation expense are managed on a Group basis. 1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302 . Sales1 and revenue by reporting segment Sales1 Deduct Share of revenue of equity accounted investments Add Subsidiaries\u2019 revenue from equity accounted investments Revenue 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 5,057 4,491 (73) (54) 73 54 5,057 4,491 Platforms & Services 3,688 3,395 (90) (79) \u2013 2 3,598 3,318 Air 7,698 7,4 49 (2,651) (2,505) 1,239 1,097 6,286 6,041 Maritime 4,598 4,169 (119) (79) 5 3 4,484 4,093 Cyber & Intelligence 2,205 1,923 \u2013 \u2013 \u2013 \u2013 2,205 1,923 HQ 420 281 (410) (271) \u2013 \u2013 10 10 23,666 21,708 (3,343) (2,988) 1,317 1,156 21,640 19,876 Intra-group sales/revenue (410) (398) 1 9 27 34 (382) (355) 23,256 21,310 (3,342) (2,979) 1,344 1,190 21,258 19,521 Intra-group revenue Revenue from external customers 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 115 101 4,942 4,390 Platforms & Services 43 34 3,555 3,284 Air 29 19 6,257 6,022 Maritime 71 80 4,413 4,013 Cyber & Intelligence 114 111 2,091 1,812 HQ 10 10 \u2013 \u2013 382 355 21,258 19,521 1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. Sales1 and revenue by customer location Sales1 Revenue 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m UK 4,608 4,201 4,324 3,935 Rest of Europe 3,021 2,435 1,824 1,502 US 10,166 9,109 10,157 9,108 Canada 125 141 125 141 Kingdom of Saudi Arabia 2,539 2,497 2,540 2,476 Qatar 1,156 1,267 885 1,014 Rest of Middle East 263 326 225 275 Australia 854 763 853 762 Rest of Asia and Pacific 420 449 283 285 Africa, and Central and South America 104 122 42 23 23,256 21,310 21,258 19,521 1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. Revenue from external customers by domain 2022 20211 Air \u00a3m Maritime \u00a3m Land \u00a3m Cyber \u00a3m Total \u00a3m Air \u00a3m Maritime \u00a3m Land \u00a3m Cyber \u00a3m Total \u00a3m Electronic Systems 4,404 145 393 \u2013 4,942 3,846 87 457 \u2013 4,390 Platforms & Services 41 1,043 2,471 \u2013 3,555 37 1,061 2,186 \u2013 3,284 Air 6,223 34 \u2013 \u2013 6,257 5,987 33 2 \u2013 6,022 Maritime 268 3,778 367 \u2013 4,413 255 3,417 341 \u2013 4,013 Cyber & Intelligence 250 274 127 1,440 2,091 264 411 136 1,001 1,812 HQ \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 11,186 5,274 3,358 1,440 21,258 10,389 5,009 3,122 1,001 19,521 1. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. Revenue by major customer Revenue from the Group\u2019s three principal customers, which individually represent over 10% of total revenue, is as follows: 2022 \u00a3m 2021 \u00a3m US Department of Defense 7,439 7,0 08 UK Ministry of Defence 4,721 4,185 Kingdom of Saudi Arabia Ministry of Defence and Aviation 2,425 2,380 Revenue from the UK Ministry of Defence and the US Department of Defense was generated by the five reporting segments, excluding HQ. Revenue from the Kingdom of Saudi Arabia Ministry of Defence and Aviation was generated by the Air and Maritime segments. Operating profit/(loss) by reporting segment Underlying EBIT 1 Adjusting items3 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense of equity accounted investments Operating profit/(loss) 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 2021 2 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 838 766 \u2013 33 (91) (84) \u2013 \u2013 747 715 Platforms & Services 326 259 \u2013 \u2013 \u2013 (1) (4) (6) 322 252 Air 849 772 (1) 132 (1) (10) (38) (45) 809 849 Maritime 356 351 \u2013 \u2013 \u2013 (1) (4) (3) 352 347 Cyber & Intelligence 232 179 78 3 (19) (5) \u2013 \u2013 291 177 HQ (122) (122) 14 182 \u2013 \u2013 (29) (11) (137) 49 2,479 2,205 91 350 (111) (101) (75) (65) 2,384 2,389 Net finance costs (395) (279) Profit before taxation 1,989 2,110 Taxation expense (315) (198) Profit for the year 1,674 1,912 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. 3. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some items could be considered recurring in nature. Share of results of equity accounted investments within reporting segments Underlying EBIT 1 Adjusting items2 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense Share of results of equity accounted investments 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Electronic Systems 4 4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4 4 Platforms & Services 11 9 \u2013 \u2013 \u2013 \u2013 (4) (6) 7 3 Air 164 151 \u2013 \u2013 \u2013 \u2013 (38) (45) 126 106 Maritime 11 11 \u2013 \u2013 \u2013 \u2013 (4) (3) 7 8 HQ 65 29 \u2013 \u2013 \u2013 \u2013 (29) (11) 36 18 255 204 \u2013 \u2013 \u2013 \u2013 (75) (65) 180 139 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some categories of items could be considered recurring in nature. Adjusting items 2022 Adjusting items in 2022 comprises a \u00a394m gain on the disposal of the Financial Services business in Digital Intelligence, \u00a316m costs related to current and historical business transactions, and a \u00a313m gain related to past service on the pension schemes. 2021 Adjusting items in 2021 reflect a gain of \u00a3350m, comprising a gain in HQ on the sale of the Filton and Broughton sites (\u00a3182m), gains on disposal of Advanced Electronics Company in the Air segment (\u00a3132m, of which \u00a363m is attributable to non-controlling interests \u2013 see note 20), and on disposal of a business in our Electronic Systems segment (\u00a326m), and a net \u00a310m gain relating to historical and current year acquisitions. Performance obligations The Group\u2019s order book1 , reconciled to order backlog as defined by the Group, is shown below. 2022 \u00a3bn 2021 \u00a3bn Order backlog2 as defined by the Group 58.9 44.0 Deduct Unfunded order backlog (2.3) (2.3) Deduct Share of order backlog 2 of equity accounted investments (12.0) (10.1) Add Order backlog2 in respect of orders from equity accounted investments 4.3 3.9 Order book1 48.9 35.5 1. Order book represents the transaction price allocated to unsatisfied and partially satisfied performance obligations as defined by IFRS 15 Revenue from Contracts with Customers. 2. Order backlog is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. The Group expects that approximately 33% (2021 41%) of the order book will be recognised as revenue during the next year, with the remainder largely recognised over the following four (2021 four) years. For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s performance in transferring control of the goods and services to the customer. Accordingly, revenue of \u00a30.3bn (2021 \u00a30.3bn) was recognised during the year in respect of performance obligations satisfied or partially satisfied in previous years. Prior year re-presentation With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structures. The below table outlines the impact on the key reported line items: 2021 Sales1 Revenue As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m Electronic Systems 4,491 \u2013 4,491 4,491 \u2013 4,491 Platforms & Services 3,395 \u2013 3,395 3,318 \u2013 3,318 Air 8,321 (872) 7, 449 6,913 (872) 6,041 Maritime 3,416 753 4,169 3,340 753 4,093 Cyber & Intelligence 1,752 171 1,923 1,752 171 1,923 HQ 307 (26) 281 36 (26) 10 21,682 26 21,708 19,850 26 19,876 Intra-group sales/revenue (372) (26) (398) (329) (26) (355) 21,310 \u2013 21,310 19,521 \u2013 19,521 Underlying EBIT1 Operating profit As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m Electronic Systems 766 \u2013 766 715 \u2013 715 Platforms & Services 259 \u2013 259 252 \u2013 252 Air 856 (84) 772 930 (81) 849 Maritime 288 63 351 289 58 347 Cyber & Intelligence 156 23 179 152 25 177 HQ (120) (2) (122) 51 (2) 49 2,205 \u2013 2,205 2,389 \u2013 2,389 1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302. They are presented here as our internal measure of segmenta performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-519": { "value": "Reporting segments The Group has five sectors which, together with HQ, make its six reporting segments as defined by IFRS 8 Operating Segments: \u2013 Electronic Systems comprises the US- and UK-based electronics activities, including electronic warfare systems, navigation systems, electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, next-generation military communications systems and data links, persistent surveillance capabilities, space electronics and electric drive propulsion systems; \u2013 Platforms & Services has operations in the US, UK and Sweden. It manufactures and upgrades combat vehicles, weapons and munitions, and delivers services and sustainment activities, including naval ship repair, and the management and operation of government-owned munitions facilities; \u2013 Air comprises the Group\u2019s UK-based air activities for European and International Markets, US Programmes and development of future combat air systems alongside its businesses in the Kingdom of Saudi Arabia, together with its 37.5% interest in the European MBDA joint venture; \u2013 Maritime comprises the Group\u2019s UK-based maritime and land activities, as well as its Australia business; \u2013 Cyber & Intelligence comprises the US-based Intelligence & Security business and UK-headquartered Digital Intelligence business, which have been aggregated together due to the similarities of the services offered. Together, they cover the Group\u2019s cyber security and secure government activities; and \u2013 HQ comprises the Group\u2019s head office and UK-based shared services activities, together with a 49% interest in Air Astana. The Board (the chief operating decision maker as defined by IFRS 8 Operating Segments) monitors the results of these reporting segments to assess performance and make decisions about the allocation of resources. Segmental performance is evaluated based on Key Performance 1 1 Indicators \u2013 sales (see page 232) and underlying EBIT (see page 233). Finance costs and taxation expense are managed on a Group basis. 1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302 . Sales1 and revenue by reporting segment Sales1 Deduct Share of revenue of equity accounted investments Add Subsidiaries\u2019 revenue from equity accounted investments Revenue 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 5,057 4,491 (73) (54) 73 54 5,057 4,491 Platforms & Services 3,688 3,395 (90) (79) \u2013 2 3,598 3,318 Air 7,698 7,4 49 (2,651) (2,505) 1,239 1,097 6,286 6,041 Maritime 4,598 4,169 (119) (79) 5 3 4,484 4,093 Cyber & Intelligence 2,205 1,923 \u2013 \u2013 \u2013 \u2013 2,205 1,923 HQ 420 281 (410) (271) \u2013 \u2013 10 10 23,666 21,708 (3,343) (2,988) 1,317 1,156 21,640 19,876 Intra-group sales/revenue (410) (398) 1 9 27 34 (382) (355) 23,256 21,310 (3,342) (2,979) 1,344 1,190 21,258 19,521 Intra-group revenue Revenue from external customers 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 115 101 4,942 4,390 Platforms & Services 43 34 3,555 3,284 Air 29 19 6,257 6,022 Maritime 71 80 4,413 4,013 Cyber & Intelligence 114 111 2,091 1,812 HQ 10 10 \u2013 \u2013 382 355 21,258 19,521 1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. Sales1 and revenue by customer location Sales1 Revenue 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m UK 4,608 4,201 4,324 3,935 Rest of Europe 3,021 2,435 1,824 1,502 US 10,166 9,109 10,157 9,108 Canada 125 141 125 141 Kingdom of Saudi Arabia 2,539 2,497 2,540 2,476 Qatar 1,156 1,267 885 1,014 Rest of Middle East 263 326 225 275 Australia 854 763 853 762 Rest of Asia and Pacific 420 449 283 285 Africa, and Central and South America 104 122 42 23 23,256 21,310 21,258 19,521 1. Sales is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. Revenue from external customers by domain 2022 20211 Air \u00a3m Maritime \u00a3m Land \u00a3m Cyber \u00a3m Total \u00a3m Air \u00a3m Maritime \u00a3m Land \u00a3m Cyber \u00a3m Total \u00a3m Electronic Systems 4,404 145 393 \u2013 4,942 3,846 87 457 \u2013 4,390 Platforms & Services 41 1,043 2,471 \u2013 3,555 37 1,061 2,186 \u2013 3,284 Air 6,223 34 \u2013 \u2013 6,257 5,987 33 2 \u2013 6,022 Maritime 268 3,778 367 \u2013 4,413 255 3,417 341 \u2013 4,013 Cyber & Intelligence 250 274 127 1,440 2,091 264 411 136 1,001 1,812 HQ \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 11,186 5,274 3,358 1,440 21,258 10,389 5,009 3,122 1,001 19,521 1. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. Revenue by major customer Revenue from the Group\u2019s three principal customers, which individually represent over 10% of total revenue, is as follows: 2022 \u00a3m 2021 \u00a3m US Department of Defense 7,439 7,0 08 UK Ministry of Defence 4,721 4,185 Kingdom of Saudi Arabia Ministry of Defence and Aviation 2,425 2,380 Revenue from the UK Ministry of Defence and the US Department of Defense was generated by the five reporting segments, excluding HQ. Revenue from the Kingdom of Saudi Arabia Ministry of Defence and Aviation was generated by the Air and Maritime segments. Operating profit/(loss) by reporting segment Underlying EBIT 1 Adjusting items3 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense of equity accounted investments Operating profit/(loss) 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 2021 2 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 838 766 \u2013 33 (91) (84) \u2013 \u2013 747 715 Platforms & Services 326 259 \u2013 \u2013 \u2013 (1) (4) (6) 322 252 Air 849 772 (1) 132 (1) (10) (38) (45) 809 849 Maritime 356 351 \u2013 \u2013 \u2013 (1) (4) (3) 352 347 Cyber & Intelligence 232 179 78 3 (19) (5) \u2013 \u2013 291 177 HQ (122) (122) 14 182 \u2013 \u2013 (29) (11) (137) 49 2,479 2,205 91 350 (111) (101) (75) (65) 2,384 2,389 Net finance costs (395) (279) Profit before taxation 1,989 2,110 Taxation expense (315) (198) Profit for the year 1,674 1,912 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. 3. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some items could be considered recurring in nature. Share of results of equity accounted investments within reporting segments Underlying EBIT 1 Adjusting items2 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense Share of results of equity accounted investments 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Electronic Systems 4 4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4 4 Platforms & Services 11 9 \u2013 \u2013 \u2013 \u2013 (4) (6) 7 3 Air 164 151 \u2013 \u2013 \u2013 \u2013 (38) (45) 126 106 Maritime 11 11 \u2013 \u2013 \u2013 \u2013 (4) (3) 7 8 HQ 65 29 \u2013 \u2013 \u2013 \u2013 (29) (11) 36 18 255 204 \u2013 \u2013 \u2013 \u2013 (75) (65) 180 139 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some categories of items could be considered recurring in nature. Adjusting items 2022 Adjusting items in 2022 comprises a \u00a394m gain on the disposal of the Financial Services business in Digital Intelligence, \u00a316m costs related to current and historical business transactions, and a \u00a313m gain related to past service on the pension schemes. 2021 Adjusting items in 2021 reflect a gain of \u00a3350m, comprising a gain in HQ on the sale of the Filton and Broughton sites (\u00a3182m), gains on disposal of Advanced Electronics Company in the Air segment (\u00a3132m, of which \u00a363m is attributable to non-controlling interests \u2013 see note 20), and on disposal of a business in our Electronic Systems segment (\u00a326m), and a net \u00a310m gain relating to historical and current year acquisitions. Performance obligations The Group\u2019s order book1 , reconciled to order backlog as defined by the Group, is shown below. 2022 \u00a3bn 2021 \u00a3bn Order backlog2 as defined by the Group 58.9 44.0 Deduct Unfunded order backlog (2.3) (2.3) Deduct Share of order backlog 2 of equity accounted investments (12.0) (10.1) Add Order backlog2 in respect of orders from equity accounted investments 4.3 3.9 Order book1 48.9 35.5 1. Order book represents the transaction price allocated to unsatisfied and partially satisfied performance obligations as defined by IFRS 15 Revenue from Contracts with Customers. 2. Order backlog is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. The Group expects that approximately 33% (2021 41%) of the order book will be recognised as revenue during the next year, with the remainder largely recognised over the following four (2021 four) years. For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s performance in transferring control of the goods and services to the customer. Accordingly, revenue of \u00a30.3bn (2021 \u00a30.3bn) was recognised during the year in respect of performance obligations satisfied or partially satisfied in previous years. Prior year re-presentation With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structures. The below table outlines the impact on the key reported line items: 2021 Sales1 Revenue As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m Electronic Systems 4,491 \u2013 4,491 4,491 \u2013 4,491 Platforms & Services 3,395 \u2013 3,395 3,318 \u2013 3,318 Air 8,321 (872) 7, 449 6,913 (872) 6,041 Maritime 3,416 753 4,169 3,340 753 4,093 Cyber & Intelligence 1,752 171 1,923 1,752 171 1,923 HQ 307 (26) 281 36 (26) 10 21,682 26 21,708 19,850 26 19,876 Intra-group sales/revenue (372) (26) (398) (329) (26) (355) 21,310 \u2013 21,310 19,521 \u2013 19,521 Underlying EBIT1 Operating profit As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m As reported \u00a3m Adjustment \u00a3m Re-presented \u00a3m Electronic Systems 766 \u2013 766 715 \u2013 715 Platforms & Services 259 \u2013 259 252 \u2013 252 Air 856 (84) 772 930 (81) 849 Maritime 288 63 351 289 58 347 Cyber & Intelligence 156 23 179 152 25 177 HQ (120) (2) (122) 51 (2) 49 2,205 \u2013 2,205 2,389 \u2013 2,389 1. Sales and underlying EBIT are alternative performance measures defined in the Financial glossary on page 302. They are presented here as our internal measure of segmenta performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-490": { "value": "
The Group has five sectors which, together with HQ, make its six reporting segments as defined by IFRS 8 Operating Segments:
\u2013 Electronic Systems comprises the US- and UK-based electronics activities, including electronic warfare systems, navigation systems,
electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, next-generation
military communications systems and data links, persistent surveillance capabilities, space electronics and electric drive propulsion systems;
\u2013 Platforms & Services has operations in the US, UK and Sweden. It manufactures and upgrades combat vehicles, weapons and munitions, and
delivers services and sustainment activities, including naval ship repair, and the management and operation of government-owned munitions
facilities;
\u2013 Air comprises the Group\u2019s UK-based air activities for European and International Markets, US Programmes and development of future combat
air systems alongside its businesses in the Kingdom of Saudi Arabia, together with its 37.5% interest in the European MBDA joint venture;
\u2013 Maritime comprises the Group\u2019s UK-based maritime and land activities, as well as its Australia business;
\u2013 Cyber & Intelligence comprises the US-based Intelligence & Security business and UK-headquartered Digital Intelligence business,
which have been aggregated together due to the similarities of the services offered. Together, they cover the Group\u2019s cyber security
and secure government activities; and
\u2013 HQ comprises the Group\u2019s head office and UK-based shared services activities, together with a 49% interest in Air Astana.
", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-491": { "value": "Operating profit/(loss) by reporting segment Underlying EBIT 1 Adjusting items3 Amortisation of programme, customer- related and other intangible assets, and impairment of intangibles Financial and taxation expense of equity accounted investments Operating profit/(loss) 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 20212 \u00a3m 2022 \u00a3m 2021 2 \u00a3m 2022 \u00a3m 20212 \u00a3m Electronic Systems 838 766 \u2013 33 (91) (84) \u2013 \u2013 747 715 Platforms & Services 326 259 \u2013 \u2013 \u2013 (1) (4) (6) 322 252 Air 849 772 (1) 132 (1) (10) (38) (45) 809 849 Maritime 356 351 \u2013 \u2013 \u2013 (1) (4) (3) 352 347 Cyber & Intelligence 232 179 78 3 (19) (5) \u2013 \u2013 291 177 HQ (122) (122) 14 182 \u2013 \u2013 (29) (11) (137) 49 2,479 2,205 91 350 (111) (101) (75) (65) 2,384 2,389 Net finance costs (395) (279) Profit before taxation 1,989 2,110 Taxation expense (315) (198) Profit for the year 1,674 1,912 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. 3. Adjusting items were referred to as non-recurring items in the prior year. No change has been made to the definition of these items, but the name has been changed to reflect that some items could be considered recurring in nature. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-492": { "value": "Performance obligations The Group\u2019s order book1 , reconciled to order backlog as defined by the Group, is shown below. 2022 \u00a3bn 2021 \u00a3bn Order backlog2 as defined by the Group 58.9 44.0 Deduct Unfunded order backlog (2.3) (2.3) Deduct Share of order backlog 2 of equity accounted investments (12.0) (10.1) Add Order backlog2 in respect of orders from equity accounted investments 4.3 3.9 Order book1 48.9 35.5 1. Order book represents the transaction price allocated to unsatisfied and partially satisfied performance obligations as defined by IFRS 15 Revenue from Contracts with Customers. 2. Order backlog is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. The Group expects that approximately 33% (2021 41%) of the order book will be recognised as revenue during the next year, with the remainder largely recognised over the following four (2021 four) years. For each performance obligation to be recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group\u2019s performance in transferring control of the goods and services to the customer. Accordingly, revenue of \u00a30.3bn (2021 \u00a30.3bn) was recognised during the year in respect of performance obligations satisfied or partially satisfied in previous years. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPerformanceObligationsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-541": { "value": "Research and development The Group undertakes research and development activities either on its own behalf or on behalf of customers. Group-funded expenditure on research, and on development activities not meeting the conditions for capitalisation, is written off as incurred and charged to the income statement. Customer-funded expenditure on research and development activities is recognised in the income statement in accordance with the Group\u2019s revenue recognition policy (note 1) ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-537": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials, subcontracts and other bought-in items used 7,088 6,934 Change in inventories of finished goods and work-in-progress 6 27 Staff costs (note 3) 7,495 6,667 Depreciation 549 513 Amortisation 215 188 Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4 Impairment \u2013 intangible assets (note 8) 1 15 Current and historical business transaction costs 16 3 Loss on disposal of property, plant and equipment, and investment property 2 2 Other operating charges 3,895 3,390 Operating costs 19,269 17,743 Impairment testing The recoverable amount of the Group\u2019s goodwill is based on value in use estimated using risk-adjusted future cash flow projections from the five-year Integrated Business Plan (IBP) and a terminal value based on the projections for the final year of that plan, with growth rate assumptions of 2% applied for each significant group of Cash-Generating Units (CGUs). The IBP process includes the use of historical experience, available government spending data and the Group\u2019s order backlog, as well as the impact of evolving issues such as global economic uncertainty and climate change. Pre-tax discount rates, derived from the Group\u2019s post-tax weighted average cost of capital and adjusted for factors specific to the market in which the CGU operates, have been used in discounting these projected risk-adjusted cash flows. Significant CGUs Within the year, the Group restructured its operations (see note 1 for details) and changed elements of how it operates. As a result, the level at which goodwill is monitored has changed, resulting in goodwill being allocated to the group of CGUs within the Maritime segment (the \u2018Maritime CGU\u2019), which is now identified as a significant CGU. Prior to the reallocation of goodwill, an impairment assessment was performed based on the previous allocation, and no impairment was identified. A summary of the significant groups of CGUs is presented below. Allocated goodwill Pre-tax discount rate Cash-Generating Unit Key assumptions 2022 \u00a3bn 2021 \u00a3bn 2022 % 2021 % Electronic Systems Continued demand from the US government for electronic warfare systems (where the business has a leadership position), other technology-based solutions and growth in the commercial avionics market 5.2 4.9 9 9 Platforms & Services Continued demand in the Group\u2019s principal markets for existing and successor military tracked vehicles, naval guns, missile launchers, artillery systems, munitions, upgrade programmes and support, and in the US for complex infrastructure, maritime and aviation services 3.8 3.3 9 9 Maritime Continued demand, primarily from the UK and Australian governments, for existing and successor programmes for submarines, complex warships and munitions. This includes upgrade and sustainment programmes in these areas as well as in the field of air, electronic systems and wide- area surveillance 1.5 1.5 10 8 The headroom, calculated as the difference between net assets including allocated goodwill as at 31 December 2022 and the value in use calculations, for the CGUs listed above, is shown below. The table also shows the headroom assuming a 1% reduction in the terminal value growth rate assumption, a 2% increase in the discount rate and a 1% reduction in the operating margin used in the value in use calculations, considered to be reasonable worst-case scenarios in the current economic climate. Headroom as at 31 December Headroom assuming a 1% reduction in the terminal value growth rate assumption Headroom assuming a 2% increase in the discount rate Headroom assuming a 1% reduction in operating margin Cash-Generating Unit 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn Electronic Systems 5.4 4.3 3.8 2.8 2.0 1.3 4.5 3.6 Platforms & Services 2.1 1.5 1.3 0.7 0.3 (0.1) 1.5 0.9 Maritime 4.2 5.1 3.5 4.1 1.7 3.1 3.5 4.3 Other CGUs The remaining goodwill balance of \u00a31.3bn (2021 \u00a31.2bn) is allocated across multiple CGUs. No individual CGU exceeds 10% of the Group\u2019s total goodwill balance. The majority of the projected cash flows within these CGUs are primarily underpinned by expected levels of government spending on defence, aerospace and security, and the Group\u2019s ability to capture a broadly consistent market share. ", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-530": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials, subcontracts and other bought-in items used 7,088 6,934 Change in inventories of finished goods and work-in-progress 6 27 Staff costs (note 3) 7,495 6,667 Depreciation 549 513 Amortisation 215 188 Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4 Impairment \u2013 intangible assets (note 8) 1 15 Current and historical business transaction costs 16 3 Loss on disposal of property, plant and equipment, and investment property 2 2 Other operating charges 3,895 3,390 Operating costs 19,269 17,743 Operating costs includes research and development expenditure of \u00a3276m (2021 \u00a3251m) funded by the Group. Development investment of \u00a311m (2021 \u00a34m) was capitalised during the year (see note 8). Fees payable to the Company\u2019s auditor and its associates included in operating costs 2022 2021 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts 2,963 \u2013 2,963 2,349 \u2013 2,349 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: The audit of the Company\u2019s subsidiaries 5,184 7,413 12,597 4,154 5,561 9,715 Total audit fees 8,147 7,413 15,560 6,503 5,561 12,064 Audit-related assurance services1 805 3 808 632 3 635 Other non-audit services 1 \u2013 1 \u2013 \u2013 \u2013 Total non-audit fees 2 806 3 809 632 3 635 Total fees payable to the Company\u2019s auditor and its associates 8,953 7,416 16,369 7,135 5,564 12,699 1. Audit-related assurance services principally comprises fees in respect of the review of the Group\u2019s Half-yearly Report and, in 2022, ESG assurance work. 2. In addition to the amounts shown above, the auditor received fees of \u00a3446k (2021 \u00a3nil) for the audit of the BAE Systems UK pension schemes and \u00a3534k (2021 \u00a3453k) for the audit of BAE Systems pension schemes in the US. ", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-510": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials, subcontracts and other bought-in items used 7,088 6,934 Change in inventories of finished goods and work-in-progress 6 27 Staff costs (note 3) 7,495 6,667 Depreciation 549 513 Amortisation 215 188 Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4 Impairment \u2013 intangible assets (note 8) 1 15 Current and historical business transaction costs 16 3 Loss on disposal of property, plant and equipment, and investment property 2 2 Other operating charges 3,895 3,390 Operating costs 19,269 17,743 Operating costs includes research and development expenditure of \u00a3276m (2021 \u00a3251m) funded by the Group. Development investment of \u00a311m (2021 \u00a34m) was capitalised during the year (see note 8). Fees payable to the Company\u2019s auditor and its associates included in operating costs 2022 2021 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts 2,963 \u2013 2,963 2,349 \u2013 2,349 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: The audit of the Company\u2019s subsidiaries 5,184 7,413 12,597 4,154 5,561 9,715 Total audit fees 8,147 7,413 15,560 6,503 5,561 12,064 Audit-related assurance services1 805 3 808 632 3 635 Other non-audit services 1 \u2013 1 \u2013 \u2013 \u2013 Total non-audit fees 2 806 3 809 632 3 635 Total fees payable to the Company\u2019s auditor and its associates 8,953 7,416 16,369 7,135 5,564 12,699 1. Audit-related assurance services principally comprises fees in respect of the review of the Group\u2019s Half-yearly Report and, in 2022, ESG assurance work. 2. In addition to the amounts shown above, the auditor received fees of \u00a3446k (2021 \u00a3nil) for the audit of the BAE Systems UK pension schemes and \u00a3534k (2021 \u00a3453k) for the audit of BAE Systems pension schemes in the US. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-493": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials, subcontracts and other bought-in items used 7,088 6,934 Change in inventories of finished goods and work-in-progress 6 27 Staff costs (note 3) 7,495 6,667 Depreciation 549 513 Amortisation 215 188 Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4 Impairment \u2013 intangible assets (note 8) 1 15 Current and historical business transaction costs 16 3 Loss on disposal of property, plant and equipment, and investment property 2 2 Other operating charges 3,895 3,390 Operating costs 19,269 17,743 Operating costs includes research and development expenditure of \u00a3276m (2021 \u00a3251m) funded by the Group. Development investment of \u00a311m (2021 \u00a34m) was capitalised during the year (see note 8). Fees payable to the Company\u2019s auditor and its associates included in operating costs 2022 2021 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts 2,963 \u2013 2,963 2,349 \u2013 2,349 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: The audit of the Company\u2019s subsidiaries 5,184 7,413 12,597 4,154 5,561 9,715 Total audit fees 8,147 7,413 15,560 6,503 5,561 12,064 Audit-related assurance services1 805 3 808 632 3 635 Other non-audit services 1 \u2013 1 \u2013 \u2013 \u2013 Total non-audit fees 2 806 3 809 632 3 635 Total fees payable to the Company\u2019s auditor and its associates 8,953 7,416 16,369 7,135 5,564 12,699 1. Audit-related assurance services principally comprises fees in respect of the review of the Group\u2019s Half-yearly Report and, in 2022, ESG assurance work. 2. In addition to the amounts shown above, the auditor received fees of \u00a3446k (2021 \u00a3nil) for the audit of the BAE Systems UK pension schemes and \u00a3534k (2021 \u00a3453k) for the audit of BAE Systems pension schemes in the US. ", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-472": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials, subcontracts and other bought-in items used 7,088 6,934 Change in inventories of finished goods and work-in-progress 6 27 Staff costs (note 3) 7,495 6,667 Depreciation 549 513 Amortisation 215 188 Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4 Impairment \u2013 intangible assets (note 8) 1 15 Current and historical business transaction costs 16 3 Loss on disposal of property, plant and equipment, and investment property 2 2 Other operating charges 3,895 3,390 Operating costs 19,269 17,743 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-440": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials, subcontracts and other bought-in items used 7,088 6,934 Change in inventories of finished goods and work-in-progress 6 27 Staff costs (note 3) 7,495 6,667 Depreciation 549 513 Amortisation 215 188 Impairment \u2013 property, plant and equipment (note 9), and right-of-use assets (note 10) 2 4 Impairment \u2013 intangible assets (note 8) 1 15 Current and historical business transaction costs 16 3 Loss on disposal of property, plant and equipment, and investment property 2 2 Other operating charges 3,895 3,390 Operating costs 19,269 17,743 Operating costs includes research and development expenditure of \u00a3276m (2021 \u00a3251m) funded by the Group. Development investment of \u00a311m (2021 \u00a34m) was capitalised during the year (see note 8). ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-520": { "value": "Operating costs includes research and development expenditure of \u00a3276m (2021 \u00a3251m) funded by the Group.", "dimensions": { "concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-471": { "value": "Fees payable to the Company\u2019s auditor and its associates included in operating costs 2022 2021 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 UK \u00a3\u2019000 Overseas \u00a3\u2019000 Total \u00a3\u2019000 Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s annual accounts 2,963 \u2013 2,963 2,349 \u2013 2,349 Fees payable to the Company\u2019s auditor and its associates for other services to the Group: The audit of the Company\u2019s subsidiaries 5,184 7,413 12,597 4,154 5,561 9,715 Total audit fees 8,147 7,413 15,560 6,503 5,561 12,064 Audit-related assurance services1 805 3 808 632 3 635 Other non-audit services 1 \u2013 1 \u2013 \u2013 \u2013 Total non-audit fees 2 806 3 809 632 3 635 Total fees payable to the Company\u2019s auditor and its associates 8,953 7,416 16,369 7,135 5,564 12,699 1. Audit-related assurance services principally comprises fees in respect of the review of the Group\u2019s Half-yearly Report and, in 2022, ESG assurance work. 2. In addition to the amounts shown above, the auditor received fees of \u00a3446k (2021 \u00a3nil) for the audit of the BAE Systems UK pension schemes and \u00a3534k (2021 \u00a3453k) for the audit of BAE Systems pension schemes in the US. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-441": { "value": "3. Employees The average and year-end numbers of employees, excluding those in equity accounted investments, were as follows: Average At year end 2022 Number \u2019000 2021 1 Number \u2019000 2022 Number \u2019000 20211 Number \u2019000 Electronic Systems 16 16 16 16 Platforms & Services 12 12 12 12 Air 19 20 19 19 Maritime 23 22 24 22 Cyber & Intelligence 11 10 11 11 HQ 2 2 2 2 83 82 84 82 The aggregate staff costs of Group employees, excluding employees of equity accounted investments, were as follows: 2022 \u00a3m 2021 \u00a3m Wages and salaries 6,350 5,643 Social security costs 485 428 Share-based payments (note 32) 101 92 Pension costs \u2013 defined contribution plans (note 25) 299 246 Pension costs \u2013 defined benefit plans (note 25) 230 233 Other post-employment benefit costs (note 25) 30 25 7,495 6,667 1. With effect from 2022, the Group established a new Digital Intelligence business, bringing together our non-US digital and data capabilities to further strengthen how we deliver these services and capabilities for our customers. The new Digital Intelligence business is reported within the Cyber & Intelligence segment. In addition, our BAE Systems Australia business transitioned from the Air segment to the Maritime segment. Comparative segmental financial information for 2021 has been re-presented in this report to reflect the new business structure. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-473": { "value": "The aggregate staff costs of Group employees, excluding employees of equity accounted investments, were as follows: 2022 \u00a3m 2021 \u00a3m Wages and salaries 6,350 5,643 Social security costs 485 428 Share-based payments (note 32) 101 92 Pension costs \u2013 defined contribution plans (note 25) 299 246 Pension costs \u2013 defined benefit plans (note 25) 230 233 Other post-employment benefit costs (note 25) 30 25 7,495 6,667 Background Pension schemes BAE Systems plc operates pension schemes for the Group\u2019s qualifying employees in the UK, US and other countries. The principal schemes in the UK and US are funded defined benefit schemes, and the assets are held in separate trustee-administered funds. The largest funded defined benefit scheme is the Main Scheme which represents 93% (2021 93%) of the UK IAS 19 defined benefit obligation at 31 December 2022. The schemes in other countries are primarily defined contribution schemes. At 31 December 2022, the weighted average durations of the UK and US defined benefit pension obligations were 13 years (2021 17 years) and 12 years (2021 12 years), respectively. The split of the defined benefit pension liability on a funding basis between active, deferred and pensioner members for the Main Scheme and US schemes in aggregate is set out below: Active % Deferred % Pensioner % Main Scheme1 28 21 51 US schemes2 28 17 55 1. Source: 31 March 2021 actuarial valuation reports. 2. Source: Annual updates of the US schemes as at 1 January 2022. Regulatory framework The funded UK schemes are registered and subject to the statutory scheme specific-funding requirements outlined in UK legislation, including the payment of levies to the Pension Protection Fund as set out in the Pension Act 2004. These schemes were established under trust and the responsibility for their governance lies jointly with the Trustees and the Group. The funded US schemes are tax-qualified pension schemes regulated by the Pension Protection Act 2006 and insured by the Pension Benefit Guaranty Corporation (PBGC) up to certain limits. These schemes were established under, and are governed by, the US Employee Retirement Income Security Act 1974 and the BAE Systems Administrative Committee is a named fiduciary with the authority to manage their operation. Benefits The UK defined benefit schemes provide benefits to members in the form of a set level of pension payable for life based on members\u2019 final salaries. The benefits attract inflation-related increases both in deferment and payment. All UK defined benefit schemes are closed to new entrants, with benefits for new employees being provided through a defined contribution scheme. The Normal Retirement Age for the majority of active members of the Main Scheme is 65. Specific benefits applicable to members differ between schemes. Further details on the benefits provided by each scheme are provided on the BAE Systems Pensions website: baesystemspensions.com A UK High Court judgment was delivered on 26 October 2018 concerning gender equalisation for the effect of Guaranteed Minimum Pensions (GMPs) for occupational pension schemes. A further UK High Court judgment was delivered on 20 November 2020 which rules that past cash-equivalent transfer values needed to account for gender equalisation for the effect of GMPs. In 2018 and 2020, a non-recurring past service cost was included in the income statement to reflect the expectation that the impact of GMP equalisation would increase the pension deficit in the balance sheet. In 2022, an allowance of \u00a396m (2021 \u00a3140m) was included within the pension surplus (2021 deficit) (before allocation to equity accounted investments) to reflect these rulings. The US defined benefit schemes ceased to be final salary schemes in January 2013. The benefits accrued based on the final salaries of members at that point will become payable on retirement. The Normal Retirement Age for the largest scheme in the US is 65. Other post-employment benefits The Group operates a number of non-pension retirement benefit schemes, under which certain employees are eligible to receive benefits after retirement, the majority of which relate to the provision of medical benefits to retired employees of the Group\u2019s subsidiaries in the US. Funding Introduction Disclosures in respect of pension funding are provided below. Disclosures in respect of pension accounting under IAS 19 are provided on pages 271 to 277. The majority of the UK and US defined benefit pension schemes are funded by the Group\u2019s subsidiaries and equity accounted investments. The individual pension schemes\u2019 funding requirements are based on actuarial measurement frameworks set out in their funding policies. For funding valuation purposes, pension scheme assets are included at market value at the valuation date, whilst the liabilities are measured on an actuarial funding basis using the projected unit credit method and discounted to their present value based on prudent assumptions set by the trustees following consultation with scheme actuaries. The funding valuations are performed by professionally qualified independent actuaries and include assumptions which differ from the actuarial assumptions used for IAS 19 accounting purposes shown on page 271. The purpose of the funding valuations is to design funding plans which ensure that the schemes have sufficient funds available to meet future benefit payments. UK valuations Funding valuations of the Group\u2019s UK defined benefit pension schemes are performed at least every three years. Following the accelerated payment in 2021 of the remaining sponsor deficit reduction contributions under the previously agreed deficit recovery plan, the Group and Trustees agreed to carry out an early triennial funding valuation for the Main Scheme as at 31 March 2021. This valuation was concluded and signed off on 30 June 2022. The results of the most recent triennial valuations are shown below. These valuations were agreed with the Trustees and certified by the scheme actuaries after consultation with The Pensions Regulator in the UK. Main Scheme as at 31 March 2021 \u00a3bn Other schemes as at 31 March 2020 \u00a3bn Market value of assets 22.9 2.1 Present value of liabilities (22.9) (2.0) Funding surplus \u2013 0.1 Percentage of accrued benefits covered by the assets at the valuation date 100% 105% The valuations in 2020 and 2021 were determined using the following mortality assumptions: Life expectancy of a male currently aged 65 (years) 86 \u2013 89 Life expectancy of a female currently aged 65 (years) 87 \u2013 90 Life expectancy of a male at age 65, currently aged 45 (years) 88 \u2013 91 Life expectancy of a female at age 65, currently aged 45 (years) 90 \u2013 93 As part of the process of the Main Scheme\u2019s 2021 valuation, the Trustees and the Group agreed to update the methodology to use a cash flow matching strategy, such that assets are invested with the aim of the expected income directly matching the expected benefit payments of the Scheme. The cash flow matching strategy aims to manage risk through a defined amount of risk buffer assets, which equate to the agreed prudence margin in the valuation. The risk buffer assets are measured over time to assure the Scheme is sufficiently funded. The asset portfolio is currently invested in a selection of bonds designed to match the pension payments for current pensioners, as well as a mix of growth-seeking assets aimed to generate returns for the pension payments for future pensioners. Over time, assets from the return-seeking portfolio will be realised to purchase additional, lower-risk assets to match the increasing current pensioner portfolio. The 2020 valuations for the other schemes use a different method in that discount rates were directly based on prudent levels of expected returns for the assets held by the schemes, reflecting the planned investment strategies and maturity profiles of each scheme. The discount rates are curves which provide a different rate for each year into the future. The inflation assumptions for each of the valuations were derived using data from the Bank of England, which is based on the difference between the yields on index-linked and fixed-interest long-term government bonds. The inflation assumption is a curve which provides a different rate for each year into the future. Under IAS 19, the discount rate for accounting purposes is based on third-party AA corporate bond yields whereas, for funding valuation purposes, the discount rate is based on a prudent level of expected returns from the broader and mixed types of investments reflected in the schemes\u2019 investment strategies. There have been no changes to the contributions or benefits, as set out in the rules of the schemes, for pension scheme members as a result of the new funding valuations. The results of future triennial valuations and associated funding requirements will be impacted by a number of factors, including the future performance of investment markets and anticipated members\u2019 longevity. US valuations The Group\u2019s US pension schemes are valued annually, with the latest valuations performed as at 1 January 2022. Contributions Under the terms of the trust deeds of the UK schemes, the Group is required to have a funding plan determined at the conclusion of the triennial funding valuations. Equity accounted investments make regular contributions to the schemes in which they participate in line with the schedule of contributions and are allocated a share of funding contributions. In 2022, total employer contributions to the Group\u2019s pension schemes were \u00a3267m (2021 \u00a3324m), including amounts funded by equity accounted investments of \u00a323m (2021 \u00a339m), and included approximately \u00a345m (2021 \u00a390m) of deficit recovery payments in respect of the UK schemes. Contributions in 2023, for both UK and US schemes, are expected to be at a similar level to 2022. Risk management The defined benefit pension schemes expose the Group to actuarial risks, including market (investment) risk, interest rate risk, inflation risk and longevity risk. Risk Mitigation Market (investment) risk Asset returns may not move in line with the liabilities and may be subject to volatility. Following the 23 September 2022 UK \u2018mini budget\u2019, gilt yields increased at an unprecedented rate causing significant market turmoil. Throughout the period following the mini budget, the Group and Trustees monitored the schemes closely with the help of independent advisers. The schemes remained in a strong position throughout and continued to have sufficient liquidity to meet all payments as they fell due. The investment portfolios are highly diversified, investing in a wide range of assets, in order to reduce the exposure of the total portfolio to a materially adverse impact from a single security or type of security. To reduce volatility, certain assets are held in a matching portfolio, which largely consists of index-linked bonds, gilts and swaps, designed to mirror movements in corresponding liabilities. Some 42% (2021 45%) of the Group\u2019s pension scheme assets are held in equities and pooled investment vehicles due to the higher expected level of return over the long term. Some of the Group\u2019s pension schemes use derivative financial instruments as part of their investment strategy to manage the level of market risk. The Main Scheme has an equity option strategy protecting \u00a30.9bn of assets against a significant fall in equity markets, in line with the prior year. The strategy also caps the upside if equity markets increase more than an agreed percentage. Interest rate risk Liabilities are sensitive to movements in interest rates, with lower interest rates leading to an increase in the valuation of liabilities. As part of the funding valuation finalised during 2022, the main UK Scheme has adopted a cash flow matching strategy, whereby contractual income from assets is designed to directly match benefits paid to members each year. A portfolio of assets with contractual income has been structured to match benefits already in payment, representing around half of the liabilities. This inherently hedges the associated interest rate risk. As members retire and become pensioners, additional matching assets will be purchased to keep pace. Interest rate risk associated with the remaining purchase of matching assets is mitigated via a hedging strategy involving mainly physical assets rather than derivatives and only modest levels of leverage. The overall level of interest rate hedging on the funding basis has increased compared to 2021. Inflation risk Liabilities are sensitive to movements in inflation, with higher inflation leading to an increase in the valuation of liabilities. The main UK Scheme\u2019s cash flow matching strategy includes aligning asset income to the inflation- linked members\u2019 benefit payments. Inflation risk associated with benefits already in payment is inherently hedged by the portfolio of contractual income assets structured to match them, as well as an overlay of inflation swaps held with several banks to reduce counterparty risk. The overall level of inflation hedging on the funding basis is broadly similar to 2021. The Group\u2019s US scheme benefits are not indexed with inflation. In 2014, the Main Scheme implemented a pension increase exchange to allow retired members to elect for a higher current pension in exchange for foregoing certain rights to future pension increases. Longevity risk Liabilities are sensitive to life expectancy, with increases in life expectancies leading to an increase in the valuation of liabilities. Longevity adjustment factors are used in the majority of the UK pension schemes in order to adjust the pension benefits payable so as to share the cost of people living longer with employees. In 2013, with the agreement of the Company, the Trustees of the 2000 Plan, Royal Ordnance Pension Scheme and Shipbuilding Industries Pension Scheme entered into arrangements with Legal & General to insure against longevity risk for the current pensioner population, covering a total of \u00a34.4bn of pension scheme liabilities. These arrangements reduce the funding volatility relating to increasing life expectancy. This longevity risk cover with Legal & General remains in place following the merger of the 2000 Plan and SIPS into the Main Scheme. IAS 19 accounting The disclosures below relate to post-retirement benefit schemes in the UK, US and other countries which are accounted for as defined benefit schemes in accordance with IAS 19. Principal actuarial assumptions The assumptions used are estimates chosen from a range of possible actuarial assumptions which, due to the long-term nature of the obligation covered, may not necessarily occur in practice. UK US 2022 2021 2020 2022 2021 2020 Financial assumptions Discount rate \u2013 past service (%) 4.8 1.9 1.4 5.0 2.8 2.4 Discount rate \u2013 future service (%) 4.8 1.9 1.6 5.0 2.8 2.4 Retail Prices Index (RPI) inflation (%) 3.0 3.1 2.7 n/a n/a n/a Rate of increase in salaries (%) 3.0 3.1 2.7 n/a n/a n/a Rate of increase in deferred pensions (%) 2.3/3.0 2.4/3.1 2.0/2.7 n/a n/a n/a Rate of increase in pensions in payment (%) 1.7 \u2013 3.6 1.7 \u2013 3.7 1.6 \u2013 3.6 n/a n/a n/a Demographic assumptions Life expectancy of a male currently aged 65 (years) 86 \u2013 89 86 \u2013 89 86 \u2013 88 87 87 87 Life expectancy of a female currently aged 65 (years) 88 \u2013 90 88 \u2013 90 88 \u2013 90 89 89 89 Life expectancy of a male currently aged 45 (years) 87 \u2013 90 86 \u2013 90 87 \u2013 89 87 87 87 Life expectancy of a female currently aged 45 (years) 89 \u2013 91 89 \u2013 91 89 \u2013 91 89 89 88 Discount rate The discount rate assumptions are derived through discounting the projected benefit payments using a third-party AA corporate bond yield curve to produce a single equivalent discount rate for the UK and US territories. This inherently captures the maturity profile of the expected benefit payments. For the UK territory, the discount rate used for future service differs from that used for past service as it only uses the cash flows relating to active members, which have a different duration. Further information on the duration of the schemes is detailed on page 267. Retail Prices Index (RPI) and Consumer Prices Index (CPI) inflation In the UK, the inflation assumptions are derived by reference to the difference between the yields on index-linked and fixed-interest long-term government bonds, or advice from the local actuary depending on the available information. Index-linked government bonds contain a premium that investors are willing to pay to mitigate the risk that RPI inflation is higher than expected. To account for this, the RPI assumption includes an inflation risk premium deduction. As a consequence of RPI reform announcements, the Company has reviewed its approach to setting inflation assumptions. The inflation risk premium deduction has been set at 0.55% per annum (2021 0.55%) and the CPI assumption has been set at 0.7% per annum (2021 0.7%) lower than RPI. The resulting RPI assumption is 3.0% per annum and the CPI assumption is 2.3% per annum. The 0.7% per annum RPI-CPI differential is a weighted average of a 1% per annum differential pre-2030 and 0.1% per annum differential post-2030; this reflects the anticipated change to the RPI index from 2030. In the US, inflation assumptions are not relevant as the Group\u2019s US pension schemes are not indexed with inflation. Rate of increase in salaries The rate of increase in salaries for the UK schemes is assumed to be RPI inflation of 3.0% (2021 RPI inflation of 3.1%), plus a promotional scale. From 1 January 2013, employees in the US schemes no longer accrue salary-related benefits. Rate of increase in deferred pensions The rate of increase in deferred pensions for the UK schemes is based on CPI inflation of 2.3% (2021 CPI inflation of 2.4%), with the exception of the legacy 2000 Plan, which is based on RPI inflation of 3.0% (2021 RPI inflation of 3.1%). For all UK schemes, the rate of increase in deferred pensions is subject to inflation caps. Rate of increase in pensions in payment The rate of increase in pensions in payment differs between UK schemes. Different tranches of the schemes\u2019 benefits increase at rates based on either RPI or CPI inflation, and some are subject to an inflation cap. With the exception of two smaller schemes, the rate of increase in pensions in payment is based on RPI inflation. Life expectancy For its UK pension schemes, the Group has used the Self-Administered Pension Schemes S3 mortality tables based on year of birth (as published by the Institute of Actuaries) for both pensioner and non-pensioner members, in conjunction with the results of an investigation into the actual mortality experience of scheme members and information on the demographic profile of the scheme\u2019s membership. In addition, to allow for future improvements in longevity, the Continuous Mortality Investigation 2021 tables (published by the Institute of Actuaries) have been used (in 2021, the Continuous Mortality Investigation 2020 tables were used), with an assumed long-term rate of future annual mortality improvements of 1.0% per annum (2021 1.0%), an initial rate adjustment parameter (\u2018A\u2019) of 0.25% (2021 0.25%) in conjunction with a smoothing parameter (\u2018S k\u2019) of 7 for all members (2021 7). The Group has chosen to apply a weighting to the 2021 data in recognition of the abnormal excess deaths as a result of COVID-19. No further adjustments have been made to improvements expected in future years. The impacts of COVID-19 will continue to be monitored and assessed at future reporting dates. For the majority of the US schemes, the mortality tables used at 31 December 2022 are a blend of the fully generational PRI-2012 White Collar table and the PRI-2012 Blue Collar table, both projected using Scale MP-2021. US healthcare schemes The latest valuations of the principal schemes, covering retiree medical and life insurance schemes in certain US subsidiaries, were performed by independent actuaries as at 1 January 2022. These valuations were rolled forward to reflect the information at 31 December 2022. The method of accounting for these is similar to that used for defined benefit pension schemes. Long-term healthcare cost is assumed to increase at 4.7% per annum (2021 4.8%). This is based on an assumed increase in 2022 of 6.3% for pre-retirement and 5.3% for post-retirement, with both rates then reducing to 4.5% by 2029 and remaining at 4.5% per annum each year thereafter. Summary of movements in post-employment benefit obligations UK \u00a3m US and other \u00a3m Total \u00a3m Total net IAS 19 deficit at 1 January 2022 (1,973) (313) (2,286) Actual return on assets excluding amounts included in net interest expense (5,094) (1,199) (6,293) Decrease in liabilities due to changes in financial assumptions 10,745 1,067 11,812 Increase in liabilities due to changes in demographic assumptions (39) \u2013 (39) Experience losses (1,672) (6) (1,678) Contributions in excess of service cost 8 (9) (1) Past service cost \u2013 plan amendments 14 2 16 Net interest expense (31) (6) (37) Foreign exchange adjustments \u2013 (24) (24) Movement in other schemes \u2013 5 5 Total net IAS 19 surplus/(deficit) at 31 December 2022 1,958 (483) 1,475 Withholding tax on surpluses (722) \u2013 (722) Total net IAS 19 surplus/(deficit) at 31 December 2022 (net of withholding tax) 1,236 (483) 753 Allocated to equity accounted investments (107) \u2013 (107) Group\u2019s share of net IAS 19 surplus/(deficit) excluding Group\u2019s share of amounts allocated to equity accounted investments at 31 December 2022 1,129 (483) 646 Surplus recognition A number of schemes are in an accounting surplus position. The surpluses have been recognised on the basis that the future economic benefits are unconditionally available to the Group, which is assumed to be via a refund. These have been recognised after deducting a 35% withholding tax, which would be levied prior to the future refunding of any surplus and have been presented on a net basis as this is not deemed to be an income tax of the Group. Amounts recognised on the balance sheet The table below shows a reconciliation between the gross assets and liabilities of the Group\u2019s UK, US and other post-employment benefit schemes and the amounts recognised on the Group\u2019s balance sheet after allocation to equity accounted investments. 2022 UK defined benefit pension schemes \u00a3m US and other pension schemes \u00a3m US healthcare schemes \u00a3m Kingdom of Saudi Arabia end of service benefit \u00a3m Total \u00a3m Present value of unfunded obligations (104) (105) \u2013 (142) (351) Present value of funded obligations (19,462) (3,927) (128) \u2013 (23,517) Fair value of scheme assets 21,524 3,629 190 \u2013 25,343 Total net IAS 19 surplus/(deficit) 1,958 (403) 62 (142) 1,475 Withholding tax on surpluses (722) \u2013 \u2013 \u2013 (722) Allocated to equity accounted investments (107) \u2013 \u2013 \u2013 (107) Group\u2019s share of net IAS 19 surplus/(deficit) 1,129 (403) 62 (142) 646 Represented by: Post-employment benefit surpluses 1,224 11 62 \u2013 1,297 Post-employment benefit obligations (95) (414) \u2013 (142) (651) 1,129 (403) 62 (142) 646 Group\u2019s share of net IAS 19 surplus of equity accounted investments 38 \u2013 \u2013 \u2013 38 The US unfunded pension obligations have associated assets held in deferred compensation schemes with a fair value of \u00a356m (2021 \u00a361m), which are shown in Other Investments. The funds held in these trusts can be used solely for the satisfaction of the unfunded obligations. 2021 UK defined benefit pension schemes \u00a3m US and other pension schemes \u00a3m US healthcare schemes \u00a3m Kingdom of Saudi Arabia end of service benefit \u00a3m Total \u00a3m Present value of unfunded obligations (152) (131) \u2013 (153) (436) Present value of funded obligations (28,768) (4,512) (150) \u2013 (33,430) Fair value of scheme assets 26,947 4,415 218 \u2013 31,580 Total net IAS 19 (deficit)/surplus (1,973) (228) 68 (153) (2,286) Allocated to equity accounted investments 162 \u2013 \u2013 \u2013 162 Group\u2019s share of net IAS 19 (deficit)/surplus (1,811) (228) 68 (153) (2,124) Represented by: Post-employment benefit surpluses 383 32 68 \u2013 483 Post-employment benefit obligations (2,194) (260) \u2013 (153) (2,607) (1,811) (228) 68 (153) (2,124) Group\u2019s share of net IAS 19 deficit of equity accounted investments (69) \u2013 \u2013 \u2013 (69) Total cumulative actuarial losses recognised in equity since the transition to IFRS are \u00a31.1bn (2021 \u00a34.1bn). Changes in the fair value of scheme assets before allocation to equity accounted investments UK defined benefit pension schemes \u00a3m US and other pension schemes \u00a3m US healthcare schemes \u00a3m Kingdom of Saudi Arabia end of service benefit \u00a3m Total \u00a3m Value of scheme assets at 1 January 2021 25,029 4,482 218 \u2013 29,729 Interest income 345 103 5 \u2013 453 Actual return on assets excluding amounts included in interest income 2,274 49 2 \u2013 2,325 Actual return on assets 2,619 152 7 \u2013 2,778 Contributions by employer 313 11 1 14 339 Contributions by employer in respect of employee salary sacrifice arrangements 71 \u2013 \u2013 \u2013 71 Total contributions by employer 384 11 1 14 410 Members\u2019 contributions 6 \u2013 \u2013 \u2013 6 Administrative expenses (12) (7) (1) \u2013 (20) Transfer to other investments \u2013 (56) \u2013 \u2013 (56) Foreign exchange translation \u2013 39 2 \u2013 41 Benefits paid (1,079) (206) (9) (14) (1,308) Value of scheme assets at 31 December 2021 26,947 4,415 218 \u2013 31,580 Interest income 490 132 6 \u2013 628 Actual return on assets excluding amounts included in interest income (5,094) (1,199) (48) \u2013 (6,341) Actual return on assets (4,604) (1,067) (42) \u2013 (5,713) Contributions by employer 257 10 \u2013 14 281 Contributions by employer in respect of employee salary sacrifice arrangements 72 \u2013 \u2013 \u2013 72 Total contributions by employer 329 10 \u2013 14 353 Members\u2019 contributions 5 \u2013 \u2013 \u2013 5 Administrative expenses (18) (7) (1) \u2013 (26) Foreign exchange translation \u2013 521 26 \u2013 547 Benefits paid (1,135) (243) (11) (14) (1,403) Value of scheme assets at 31 December 2022 21,524 3,629 190 \u2013 25,343 Assets of defined benefit pension schemes 2022 UK US and other Total Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Equities: UK 1 209 \u2013 209 \u2013 \u2013 \u2013 209 \u2013 209 Overseas 624 \u2013 624 \u2013 \u2013 \u2013 624 \u2013 624 Pooled investment vehicles 2 3 8,892 8,895 793 \u2013 793 796 8,892 9,688 Fixed-interest securities: UK gilts 2,397 \u2013 2,397 \u2013 \u2013 \u2013 2,397 \u2013 2,397 UK corporates 1,832 2,416 4,248 \u2013 \u2013 \u2013 1,832 2,416 4,248 Overseas government 29 \u2013 29 599 \u2013 599 628 \u2013 628 Overseas corporates 1,248 56 1,304 2,105 \u2013 2,105 3,353 56 3,409 Index-linked securities: UK gilts 2,050 \u2013 2,050 \u2013 \u2013 \u2013 2,050 \u2013 2,050 UK corporates \u2013 952 952 \u2013 \u2013 \u2013 \u2013 952 952 Overseas corporates 9 \u2013 9 \u2013 \u2013 \u2013 9 \u2013 9 Property 3 \u2013 1,731 1,731 \u2013 37 37 \u2013 1,768 1,768 Derivatives 4 \u2013 (1,595) (1,595) \u2013 \u2013 \u2013 \u2013 (1,595) (1,595) Cash: Sterling 566 84 650 \u2013 \u2013 \u2013 566 84 650 Foreign currency 12 (1) 11 95 \u2013 95 107 (1) 106 Other \u2013 10 10 \u2013 \u2013 \u2013 \u2013 10 10 Total 8,979 12,545 21,524 3,592 37 3,629 12,571 12,582 25,153 2021 UK US and other Total Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Equities: UK 1 1,188 \u2013 1,188 \u2013 \u2013 \u2013 1,188 \u2013 1,188 Overseas 3,468 \u2013 3,468 \u2013 \u2013 \u2013 3,468 \u2013 3,468 Pooled investment vehicles 2 257 8,058 8,315 990 \u2013 990 1,247 8,058 9,305 Fixed-interest securities: UK gilts 1,253 \u2013 1,253 \u2013 \u2013 \u2013 1,253 \u2013 1,253 UK corporates 1,850 3,171 5,021 \u2013 \u2013 \u2013 1,850 3,171 5,021 Overseas government 67 \u2013 67 305 \u2013 305 372 \u2013 372 Overseas corporates 1,152 50 1,202 2,990 \u2013 2,990 4,142 50 4,192 Index-linked securities: UK gilts 3,397 \u2013 3,397 \u2013 \u2013 \u2013 3,397 \u2013 3,397 UK corporates \u2013 1,270 1,270 \u2013 \u2013 \u2013 \u2013 1,270 1,270 Property 3 \u2013 1,967 1,967 \u2013 42 42 \u2013 2,009 2,009 Derivatives 4 \u2013 (1,317) (1,317) \u2013 (3) (3) \u2013 (1,320) (1,320) Cash: Sterling 931 91 1,022 \u2013 \u2013 \u2013 931 91 1,022 Foreign currency 14 4 18 91 \u2013 91 105 4 109 Other 39 37 76 \u2013 \u2013 \u2013 39 37 76 Total 13,616 13,331 26,947 4,376 39 4,415 17,992 13,370 31,362 1. Includes \u00a33m (2021 \u00a35m) of the Company\u2019s own ordinary shares. 2. Primarily invested in private markets and exchange traded funds. The amounts classified as unquoted primarily comprise investments in private markets, with the majority held in infrastructure, alternatives and direct funds, valued in accordance with International Private Equity and Venture Capital Valuation Guidelines. 3. Valued on the basis of open market value at the end of the year determined in accordance with the Royal Institution of Chartered Surveyors\u2019 Appraisal and Valuation Standards and the Practice Note contained therein. Includes \u00a3223m (2021 \u00a3263m) of property occupied by Group companies. 4. Includes equity protection options, forward foreign exchange contracts, futures, and interest rate, inflation and longevity swaps. In addition, the total derivative figures shown are net of \u00a3520m (2021 \u00a3464m) of repurchase agreements. The valuations are based on valuation techniques using underlying market data and discounted cash flows. Longevity swap The Group holds longevity insurance contracts for some of its UK defined benefit pension schemes. These provide long-term protection and income to the underlying pension scheme in the event that insured members live longer than expected. The value of the longevity insurance contracts held by the Group are calculated by an actuary. At a high level, they are measured by discounting the difference between the projected fixed and floating cash flows payable under the contracts, excluding the value of future projected fees. The significant assumptions used for this valuation are the discount rate and mortality assumptions; fair values for these assumptions are advised by an actuary based on external data and characteristics of the insured member population. As at 31 December 2022, the longevity swap valuation leads to a negative adjustment to the assets which reflects that experience to date on the contracts has been higher than expected deaths. Changes in the present value of the defined benefit obligations before allocation to equity accounted investments UK defined benefit pension schemes \u00a3m US and other pension schemes \u00a3m US healthcare schemes \u00a3m Kingdom of Saudi Arabia end of service benefit \u00a3m Total \u00a3m Defined benefit obligations at 1 January 2021 (29,391) (4,894) (157) (132) (34,574) Current service cost (237) (13) (1) (23) (274) Contributions by employer in respect of employee salary sacrifice arrangements (71) \u2013 \u2013 \u2013 (71) Total current service cost (308) (13) (1) (23) (345) Members\u2019 contributions (6) \u2013 \u2013 \u2013 (6) Past service cost \u2013 plan amendments (3) \u2013 (1) \u2013 (4) Actuarial gain/(loss) due to changes in financial assumptions 1,145 220 6 (2) 1,369 Actuarial gain/(loss) due to changes in demographic assumptions 74 (8) 1 \u2013 67 Experience losses (1,109) (8) (2) (6) (1,125) Interest expense (401) (113) (4) (4) (522) Foreign exchange translation \u2013 (33) (1) \u2013 (34) Benefits paid 1,079 206 9 14 1,308 Defined benefit obligations at 31 December 2021 (28,920) (4,643) (150) (153) (33,866) Current service cost (231) (12) (1) (27) (271) Contributions by employer in respect of employee salary sacrifice arrangements (72) \u2013 \u2013 \u2013 (72) Total current service cost (303) (12) (1) (27) (343) Members\u2019 contributions (5) \u2013 \u2013 \u2013 (5) Past service cost \u2013 plan amendments 14 2 (1) \u2013 15 Actuarial gain due to changes in financial assumptions 10,745 1,067 32 47 11,891 Actuarial loss due to changes in demographic assumptions (39) \u2013 \u2013 \u2013 (39) Experience (losses)/gains (1,672) (6) 3 (4) (1,679) Interest expense (521) (138) (4) (5) (668) Foreign exchange translation \u2013 (545) (18) (14) (577) Benefits paid 1,135 243 11 14 1,403 Defined benefit obligations at 31 December 2022 (19,566) (4,032) (128) (142) (23,868) Amounts recognised in the income statement after allocation to equity accounted investments 2022 UK defined benefit pension schemes \u00a3m US and other pension schemes \u00a3m Other schemes \u00a3m Total \u00a3m Included in operating costs: Current service cost (210) (12) (28) (250) Past service cost \u2013 plan amendments 13 2 (1) 14 Administrative expenses (16) (7) (1) (24) (213) (17) (30) (260) Included in net finance costs: Net interest expense on post-employment benefit obligations (28) (6) (3) (37) Group defined benefit schemes included in share of results of equity accounted investments: Group\u2019s share of equity accounted investments\u2019 operating costs (10) \u2013 \u2013 (10) Group\u2019s share of equity accounted investments\u2019 finance costs (1) \u2013 \u2013 (1) 2021 UK defined benefit pension schemes \u00a3m US and other pension schemes \u00a3m Other schemes \u00a3m Total \u00a3m Included in operating costs: Current service cost (217) (13) (24) (254) Past service cost \u2013 plan amendments (3) \u2013 (1) (4) Administrative expenses (11) (7) (1) (19) (231) (20) (26) (277) Included in net finance costs: Net interest expense on post-employment benefit obligations (52) (10) (3) (65) Group defined benefit schemes included in share of results of equity accounted investments: Group\u2019s share of equity accounted investments\u2019 operating costs (10) \u2013 \u2013 (10) Group\u2019s share of equity accounted investments\u2019 finance costs (2) \u2013 \u2013 (2) The Group incurred a charge of \u00a3299m (2021 \u00a3246m) in relation to defined contribution schemes for employees. Sensitivity analysis The sensitivity information has been derived using scenario analysis from the actuarial assumptions as at 31 December 2022 and keeping all other assumptions as set out on page 271. The pension schemes hold a number of unquoted pooled investment vehicles, which are investments in private markets. These are valued based on latest available valuation reports, and as noted on page 223, these valuations are subject to estimation uncertainty as their valuation techniques incorporate a number of assumptions, including those associated with the COVID-19 pandemic and the impact of climate change. Should these funds\u2019 actual valuations at 31 December 2022 be on average 2% different to those assumed, this would result in a \u00a30.2bn (2021 \u00a30.2bn) change in the valuation of the assets. Financial assumptions The estimated impact of changes in the discount rate and inflation assumptions on the defined benefit pension obligation, together with the estimated impact on scheme assets, is shown in the table below. The estimated impact on scheme assets takes into account the Group\u2019s risk management activities in respect of interest rate and inflation risk. The sensitivity analysis on the defined benefit obligation is measured on an IAS 19 accounting basis and, therefore, does not reflect the natural hedging in the discount rate used for funding valuation purposes. Decrease/(increase) in pension obligation1 \u00a3bn (Decrease)/increase in scheme assets1 \u00a3bn Discount rate: 0.5 percentage point increase/decrease 1.4/(1.5) (1.2)/1.4 1.0 percentage point increase/decrease 2.6/(3.2) (2.3)/2.9 2.0 percentage point increase/decrease 4.7/(7.2) (4.3)/6.6 3.0 percentage point increase/decrease 6.5/(12.4) (5.9)/11.4 1. Before allocation to equity accounted investments and deduction of withholding tax. (Increase)/decrease in pension obligation1 \u00a3bn Increase/(decrease) in scheme assets1 \u00a3bn Inflation: 0.1 percentage point increase/decrease (0.2)/0.2 0.1/(0.1) 0.5 percentage point increase/decrease (0.8)/0.8 0.7/(0.6) 1.0 percentage point increase/decrease (1.5)/1.5 1.4/(1.1) 1. Before allocation to equity accounted investments and deduction of withholding tax. Demographic assumptions Changes in the life expectancy assumption, including the benefit of longevity swap arrangements (see longevity risk on page 270), would have the following effect on the total net IAS 19 surplus: (Decrease)/increase in net surplus 1 \u00a3bn Life expectancy: One-year increase/decrease (0.8)/0.7 1. Before allocation to equity accounted investments and deduction of withholding tax. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-542": { "value": "Leases Lease income under operating leases is recognised in the income statement on a straight-line basis over the lease term. The Group as lessee All leases in which the Group is lessee (except as noted below) are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between repayment of the lease liability and finance cost. The finance cost is charged to the income statement over the lease term to produce a constant periodic rate of interest on the lease liability. The right-of-use asset is depreciated over the shorter of the asset\u2019s useful life and the lease term on a straight-line basis. The lease liability is initially measured as the present value of future lease payments, discounted using the interest rate implicit in the lease. Where this rate is not determinable, the Group\u2019s incremental borrowing rate is used, which is the interest rate the Group would have to pay to borrow the amount necessary to obtain an asset of similar value, in a similar economic environment with similar terms and conditions. The right-of-use asset is initially measured at cost, comprising the initial value of the lease liability, any lease payments made (net of any incentives received from the lessor) before the commencement of the lease, any initial direct costs and any restoration costs. The carrying amounts of the Group\u2019s right-of-use assets are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. Payments in respect of short-term leases, low-value leases and leases of intangible assets are charged to the income statement on a straight-line basis over the lease term. The Group as lessor Leases in which the Group is lessor are classified as finance leases or operating leases. If the lease transfers substantially all of the risks and rewards of ownership to the lessee, the lease is classified as a finance lease. All other leases are classified as operating leases. A sublease where the Group is an intermediate lessor is classified as a finance lease when it transfers substantially all of the risks and rewards of the right-of-use asset arising from the head lease. Lease income under operating leases is recognised in the income statement on a straight-line basis over the lease term. Amounts due from lessees under finance leases are recognised as a receivable discounted at the interest rate implicit in the lease. Finance lease income is recognised in the income statement over the lease term to produce a constant periodic rate of interest on the receivable. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-442": { "value": "2022 \u00a3m 2021 \u00a3m Research and development expenditure credits 35 16 Operating lease income from investment property (note 10) 3 9 Operating lease income from subleasing right-of-use assets (note 10) 1 1 Profit on disposal of businesses 94 158 Profit on disposal of non-current investment 7 \u2013 Gain on sale of property, plant and equipment 1 \u2013 Profit on disposal of investment property 4 194 Management recharges to equity accounted investments (note 33) 8 19 Royalties 30 17 Gain on historical acquisition \u2013 13 Other 32 45 Other income 215 472 ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-574": { "value": "Interest income and borrowing costs Interest income and borrowing costs are recognised in the income statement in the period in which they are incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-543": { "value": "Interest income and borrowing costs Interest income and borrowing costs are recognised in the income statement in the period in which they are incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-566": { "value": "Interest income and borrowing costs Interest income and borrowing costs are recognised in the income statement in the period in which they are incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-578": { "value": "Interest income and borrowing costs Interest income and borrowing costs are recognised in the income statement in the period in which they are incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-531": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. Additional analysis 2022 \u00a3m 2021 \u00a3m Net finance costs: Group (395) (279) Share of equity accounted investments (25) (27) Total of Group and equity accounted investments\u2019 finance costs (420) (306) Analysed as: Underlying net interest expense 1: Group (230) (220) Share of equity accounted investments (16) (21) (246) (241) Other: Group: Net interest expense on post-employment benefit obligations (37) (65) Fair value and foreign exchange adjustments on financial instruments and investments (128) 6 Share of equity accounted investments: Net interest expense on post-employment benefit obligations (1) (2) Fair value and foreign exchange adjustments on financial instruments and investments (8) (4) Total of Group and equity accounted investments\u2019 finance costs (420) (306) 1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure . ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-521": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. Additional analysis 2022 \u00a3m 2021 \u00a3m Net finance costs: Group (395) (279) Share of equity accounted investments (25) (27) Total of Group and equity accounted investments\u2019 finance costs (420) (306) Analysed as: Underlying net interest expense 1: Group (230) (220) Share of equity accounted investments (16) (21) (246) (241) Other: Group: Net interest expense on post-employment benefit obligations (37) (65) Fair value and foreign exchange adjustments on financial instruments and investments (128) 6 Share of equity accounted investments: Net interest expense on post-employment benefit obligations (1) (2) Fair value and foreign exchange adjustments on financial instruments and investments (8) (4) Total of Group and equity accounted investments\u2019 finance costs (420) (306) 1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure . ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-511": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. Additional analysis 2022 \u00a3m 2021 \u00a3m Net finance costs: Group (395) (279) Share of equity accounted investments (25) (27) Total of Group and equity accounted investments\u2019 finance costs (420) (306) Analysed as: Underlying net interest expense 1: Group (230) (220) Share of equity accounted investments (16) (21) (246) (241) Other: Group: Net interest expense on post-employment benefit obligations (37) (65) Fair value and foreign exchange adjustments on financial instruments and investments (128) 6 Share of equity accounted investments: Net interest expense on post-employment benefit obligations (1) (2) Fair value and foreign exchange adjustments on financial instruments and investments (8) (4) Total of Group and equity accounted investments\u2019 finance costs (420) (306) 1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-494": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. Additional analysis 2022 \u00a3m 2021 \u00a3m Net finance costs: Group (395) (279) Share of equity accounted investments (25) (27) Total of Group and equity accounted investments\u2019 finance costs (420) (306) Analysed as: Underlying net interest expense 1: Group (230) (220) Share of equity accounted investments (16) (21) (246) (241) Other: Group: Net interest expense on post-employment benefit obligations (37) (65) Fair value and foreign exchange adjustments on financial instruments and investments (128) 6 Share of equity accounted investments: Net interest expense on post-employment benefit obligations (1) (2) Fair value and foreign exchange adjustments on financial instruments and investments (8) (4) Total of Group and equity accounted investments\u2019 finance costs (420) (306) 1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure . ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-474": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. Additional analysis 2022 \u00a3m 2021 \u00a3m Net finance costs: Group (395) (279) Share of equity accounted investments (25) (27) Total of Group and equity accounted investments\u2019 finance costs (420) (306) Analysed as: Underlying net interest expense 1: Group (230) (220) Share of equity accounted investments (16) (21) (246) (241) Other: Group: Net interest expense on post-employment benefit obligations (37) (65) Fair value and foreign exchange adjustments on financial instruments and investments (128) 6 Share of equity accounted investments: Net interest expense on post-employment benefit obligations (1) (2) Fair value and foreign exchange adjustments on financial instruments and investments (8) (4) Total of Group and equity accounted investments\u2019 finance costs (420) (306) 1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure . ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-443": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. Additional analysis 2022 \u00a3m 2021 \u00a3m Net finance costs: Group (395) (279) Share of equity accounted investments (25) (27) Total of Group and equity accounted investments\u2019 finance costs (420) (306) Analysed as: Underlying net interest expense 1: Group (230) (220) Share of equity accounted investments (16) (21) (246) (241) Other: Group: Net interest expense on post-employment benefit obligations (37) (65) Fair value and foreign exchange adjustments on financial instruments and investments (128) 6 Share of equity accounted investments: Net interest expense on post-employment benefit obligations (1) (2) Fair value and foreign exchange adjustments on financial instruments and investments (8) (4) Total of Group and equity accounted investments\u2019 finance costs (420) (306) 1. Underlying net interest expense is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure . ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-408": { "value": "2022 \u00a3m 2021 \u00a3m Interest income on cash and other financial instruments 34 29 Interest income on finance lease receivables (note 10) 1 1 Net present value adjustments 12 2 Financial income 47 32 Interest expense on bonds and other financial instruments (221) (206) Facility fees (4) (3) Interest expense on lease liabilities (note 10) (48) (43) Net present value adjustments on provisions and other payables (4) \u2013 Net interest expense on post-employment benefit obligations (note 25) (37) (65) Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss 1,2 396 (29) Foreign exchange (losses)/gains 2,3 (524) 35 Financial expense (442) (311) Net finance costs (395) (279) 1. Comprises gains and losses on derivative financial instruments, principally derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on external borrowings and exchange rate fluctuations on balances with the Group\u2019s subsidiaries and equity accounted investments. 2. The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions. 3. The foreign exchange losses/gains primarily reflects exchange rate movements on US dollar-denominated borrowings. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-544": { "value": "Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences: \u2013 on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; \u2013 related to investments in subsidiaries and equity accounted investments to the extent that it is probable that they will not reverse in the foreseeable future; and \u2013 arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised. As at 31 December 2021, the most significant recognised deferred tax assets relate to the deficits on the Group\u2019s pension/post-employment schemes (see below). This is because post-employment benefit costs are deducted in determining accounting profit as service is provided by employees, but deducted in determining taxable profit either when contributions are paid to the pension/post-employment schemes or when post-employment benefits are paid. As at 31 December 2022, the majority of the UK post-employment benefit schemes were in surplus, therefore the deferred tax asset balance in relation to deficits is much smaller. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Current tax for the current and prior years is recognised as a liability to the extent that it has not yet been settled, and as an asset to the extent that the amounts already paid exceed the amount due or the benefit of a tax loss can be carried back to recover current tax of a prior year. Current tax assets and liabilities are measured at the amount expected to be paid to or recovered from taxation authorities, using the rates that have been enacted or substantively enacted by the balance sheet date. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-567": { "value": "Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences: \u2013 on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; \u2013 related to investments in subsidiaries and equity accounted investments to the extent that it is probable that they will not reverse in the foreseeable future; and \u2013 arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised. As at 31 December 2021, the most significant recognised deferred tax assets relate to the deficits on the Group\u2019s pension/post-employment schemes (see below). This is because post-employment benefit costs are deducted in determining accounting profit as service is provided by employees, but deducted in determining taxable profit either when contributions are paid to the pension/post-employment schemes or when post-employment benefits are paid. As at 31 December 2022, the majority of the UK post-employment benefit schemes were in surplus, therefore the deferred tax asset balance in relation to deficits is much smaller. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-444": { "value": "Taxation expense 2022 \u00a3m 2021 \u00a3m Current taxation UK: Current year (115) (114) Adjustments in respect of prior years (1) 96 (116) (18) Overseas: Current year (354) (204) Adjustments in respect of prior years (15) 5 (369) (199) Total current taxation (485) (217) Deferred taxation UK: Origination and reversal of temporary differences 11 24 Adjustments in respect of prior years (3) \u2013 Tax rate adjustment 4 10 12 34 Overseas: Origination and reversal of temporary differences 132 (23) Adjustments in respect of prior years 27 8 Tax rate adjustment (1) \u2013 158 (15) Total deferred taxation 170 19 Taxation expense (315) (198) UK (104) 16 Overseas (211) (214) Taxation expense (315) (198) Reconciliation of taxation expense The following table reconciles the theoretical income tax expense, using the UK corporation tax rate, to the reported tax expense. The reconciling items represent, besides the impact of tax rate differentials and changes, non-taxable benefits or non-deductible expenses arising from differences between the local tax base and the reported financial statements. 2022 \u00a3m 2021 \u00a3m Profit before taxation 1,989 2,110 UK corporation tax rate 19% 19% Expected income tax expense (378) (401) Effect of tax rates in foreign jurisdictions, including US state taxes (54) (56) Expenses not tax effected (19) (5) Income not subject to tax 68 70 Research and development tax credits 15 23 Adjusting items 17 48 Chargeable gains \u2013 (3) Utilisation of previously unrecognised tax losses \u2013 2 Adjustments in respect of prior years 8 109 Adjustments in respect of equity accounted investments 34 26 Tax rate adjustment 3 10 Other (9) (21) Taxation expense (315) (198) Calculation of the underlying effective tax rate 2022 \u00a3m 2021 \u00a3m Profit before taxation 1,989 2,110 Add back: Taxation expense of equity accounted investments 50 38 Add back/(deduct): Taxable adjusting items 1 (347) Deduct: Non-taxable adjusting items (92) (3) Adjusted profit before taxation 1,948 1,798 Taxation expense (315) (198) Taxation expense of equity accounted investments (50) (38) Exclude: One-off tax benefit 2 \u2013 (94) Exclude: Taxation adjustments in respect of taxable adjusting items \u2013 19 Exclude: Tax rate adjustment (3) (10) Adjusted taxation expense (including equity accounted investments) (368) (321) Underlying effective tax rate1 19% 18% 1. Underlying effective tax rate is an alternative performance measure defined in the Financial glossary on page 302. 2. The one-off tax benefit of \u00a394m in 2021 was in respect of agreements reached regarding the exposure arising from the April 2019 European Commission decision regarding the UK\u2019s Controlled Foreign Company regime. The Group\u2019s underlying effective tax rate is sensitive to the geographic mix of profits and may be impacted when multiple territories implement the Organisation for Economic Co-operation and Development\u2019s Global Anti-Base Erosion Model Rules (Pillar Two). Management is closely monitoring the progress of the tax legislation process in each jurisdiction in which the Group operates. As at the balance sheet date, none of the jurisdictions in which the Group operates had enacted or substantively enacted tax legislation related to Pillar Two. The Group does not have sufficient information at this stage to determine the potential quantitative impact. Tax recognised in other comprehensive income 2022 2021 Before tax \u00a3m Tax (expense)/ benefit \u00a3m Net of tax \u00a3m Before tax \u00a3m Tax (expense)/ benefit \u00a3m Net of tax \u00a3m Items that will not be reclassified to the income statement: Consolidated: Remeasurements on post-employment benefit schemes and other investments 2,851 (285) 2,566 2,451 (482) 1,969 Tax rate adjustment \u2013 (72) (72) \u2013 88 88 Share of the other comprehensive income of associates and joint ventures accounted for using the equity method 140 (24) 116 85 (21) 64 Items that may be reclassified to the income statement: Consolidated: Currency translation on foreign currency net investments 1,172 \u2013 1,172 32 \u2013 32 Reclassification of cumulative currency translation reserve on disposal of subsidiary (17) \u2013 (17) (9) \u2013 (9) Fair value (loss)/gain arising on hedging instruments during the year (102) 25 (77) 11 (2) 9 Cumulative fair value loss/(gain) on hedging instruments reclassified to the income statement 5 (1) 4 (32) 6 (26) Share of the other comprehensive income of associates and joint ventures accounted for using the equity method (9) 1 (8) (1) (3) (4) 4,040 (356) 3,684 2,537 (414) 2,123 2022 2021 Other reserves \u00a3m Retained earnings \u00a3m Total \u00a3m Other reserves \u00a3m Retained earnings \u00a3m Total \u00a3m Current tax Consolidated: Remeasurements on post-employment benefit schemes and other investments \u2013 57 57 \u2013 61 61 \u2013 57 57 \u2013 61 61 Deferred tax Consolidated: Remeasurements on post-employment benefit schemes and other investments \u2013 (342) (342) \u2013 (543) (543) Tax rate adjustment \u2013 (72) (72) \u2013 88 88 Fair value tax loss/(gain) arising on hedging instruments during the year 25 \u2013 25 (2) \u2013 (2) Cumulative fair value tax (loss)/gain on hedging instruments reclassified to the income statement (1) \u2013 (1) 6 \u2013 6 Share of the other comprehensive income of associates and joint ventures accounted for using the equity method 1 (24) (23) (3) (21) (24) 25 (438) (413) 1 (476) (475) Tax on other comprehensive income 25 (381) (356) 1 (415) (414) Deferred tax assets/(liabilities) Deferred tax assets Deferred tax liabilities Net balance at 31 December 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Property, plant and equipment 48 42 (126) (101) (78) (59) Intangible assets 15 17 (2) (2) 13 15 Capitalised research and development 149 \u2013 \u2013 \u2013 149 \u2013 Provisions and accruals 233 203 \u2013 \u2013 233 203 Goodwill \u2013 \u2013 (352) (302) (352) (302) Pension/post-employment schemes: Deficits 97 430 \u2013 \u2013 97 430 Additional contributions and other 1 162 228 \u2013 \u2013 162 228 Share-based payments 64 28 \u2013 \u2013 64 28 Financial instruments 17 \u2013 (1) (9) 16 (9) Other items 27 24 (2) (19) 25 5 Rolled over capital gains \u2013 \u2013 (14) (13) (14) (13) Capital losses carried forward 14 13 \u2013 \u2013 14 13 Trading losses carried forward 4 6 \u2013 \u2013 4 6 Deferred tax assets/(liabilities) 830 991 (497) (446) 333 545 Set off of tax (492) (369) 492 369 \u2013 \u2013 Net deferred tax assets/(liabilities) 338 622 (5) (77) 333 545 1. Includes deferred tax assets on US deferred compensation plans and relief to be claimed in future periods on UK pension contributions. Movement in temporary differences during the year At 1 January 2022 \u00a3m Foreign exchange adjustments \u00a3m Acquisitions and disposals \u00a3m Recognised in income \u00a3m Recognised in equity \u00a3m At 31 December 2022 \u00a3m Property, plant and equipment (59) (12) \u2013 (7) \u2013 (78) Intangible assets 15 2 (13) 9 \u2013 13 Capitalised research and development \u2013 4 \u2013 145 \u2013 149 Provisions and accruals 203 25 \u2013 5 \u2013 233 Goodwill (302) (39) \u2013 (11) \u2013 (352) Pension/post-employment schemes: Deficits 430 3 \u2013 20 (356) 97 Additional contributions and other 1 228 13 \u2013 (21) (58) 162 Share-based payments 28 \u2013 \u2013 12 24 64 Financial instruments (9) 1 \u2013 3 21 16 Other items 5 3 \u2013 17 \u2013 25 Rolled over capital gains (13) \u2013 \u2013 (1) \u2013 (14) Capital losses carried forward 13 \u2013 \u2013 1 \u2013 14 Trading losses carried forward 6 \u2013 \u2013 (2) \u2013 4 545 \u2013 (13) 170 (369) 333 At 1 January 2021 \u00a3m Foreign exchange adjustments \u00a3m Acquisitions and disposals \u00a3m Recognised in income \u00a3m Recognised in equity \u00a3m At 31 December 2021 \u00a3m Property, plant and equipment (70) (1) \u2013 12 \u2013 (59) Intangible assets 4 \u2013 (3) 14 \u2013 15 Provisions and accruals 199 1 \u2013 3 \u2013 203 Goodwill (279) (2) \u2013 (21) \u2013 (302) Pension/post-employment schemes: Deficits 845 (1) \u2013 11 (425) 430 Additional contributions and other 1 251 1 \u2013 6 (30) 228 Share-based payments 19 \u2013 \u2013 7 2 28 Financial instruments (18) \u2013 \u2013 (3) 12 (9) Other items 14 \u2013 \u2013 (9) \u2013 5 Rolled over capital gains (11) \u2013 \u2013 (2) \u2013 (13) Capital losses carried forward 11 \u2013 \u2013 2 \u2013 13 Trading losses carried forward 7 \u2013 \u2013 (1) \u2013 6 972 (2) (3) 19 (441) 545 1. Includes deferred tax assets on US deferred compensation plans and relief to be claimed in future periods on UK pension contributions. Unrecognised deferred tax assets and liabilities Deferred tax assets have not been recognised in respect of the following items: 2022 2021 Gross amount \u00a3m Unrecognised deferred tax asset \u00a3m Gross amount \u00a3m Unrecognised deferred tax asset \u00a3m Deductible temporary differences, including tax credits 9 9 6 5 Capital losses carried forward 227 55 196 45 Trading and other losses carried forward 237 38 231 37 473 102 433 87 These assets have not been recognised as the incidence of future profits in the relevant countries and legal entities cannot be accurately predicted at this time. The Group has not recognised any deferred tax liability on temporary differences totalling \u00a3189m (2021 \u00a3390m) relating to potentially taxable unremitted earnings of overseas subsidiaries and equity accounted investments because the Group is in a position to control the timing of the reversal of the temporary differences and none are expected to reverse in the foreseeable future. Changes in tax rates Both recognised and unrecognised UK deferred tax balances as at 31 December 2022 have been calculated at a blended rate of 24.2% (2021 22.8%). As at 31 December 2022, an increase in the UK current tax rate has been enacted, from 19% to 25% with effect from 1 April 2023. An adjustment has been made to reflect the fact that most of the UK deferred tax balances are expected to unwind at 25%. Including the impact of tax changes in other jurisdictions, this adjustment has been recorded as an adjusting item of \u00a33m in the Consolidated income statement and as a loss of \u00a372m in the Consolidated statement of comprehensive income. 2022 \u00a3m 2021 \u00a3m Tax provisions (145) (106) Research and development expenditure credits receivable 131 81 Other 44 69 30 44 Represented by: Current tax assets 133 71 Current tax liabilities (103) (27) 30 44 Tax provisions of \u00a3145m (2021 \u00a3106m) are in respect of known tax issues, of which \u00a387m (2021 \u00a354m) relates to the US, \u00a356m (2021 \u00a350m) relates to the UK and \u00a32m (2021 \u00a32m) relates to overseas territories. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-545": { "value": "The weighted average number of ordinary shares used for the purpose of calculating earnings per share is calculated by taking the number of ordinary shares outstanding at the start of the year less the weighted average number of shares repurchased, plus the weighted average number of shares issued within the year (including those issued from treasury), and those shares held in trust that are no longer contingently returnable (i.e. all performance conditions attached to them are met, excluding the passage of time). The number of ordinary shares outstanding at the start of the year is calculated by taking the total number of ordinary shares in issue, less treasury shares and shares held in trust which are contingently returnable (i.e. where the performance conditions attached to those shares have not been met, excluding the passage of time). The weighted average number of ordinary shares purchased, issued or released is calculated by reference to the day on which each transaction occurred. The weighted average number of ordinary shares used in calculating diluted earnings per share is calculated by taking the weighted average number of ordinary shares outstanding, plus the number of ordinary shares which are considered potentially dilutive ordinary shares in respect of share incentive schemes, should the vesting conditions have been met as at the period end. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-445": { "value": "2022 2021 \u00a3m Basic pence per share Diluted pence per share \u00a3m Basic pence per share Diluted pence per share Profit for the year attributable to equity shareholders 1,591 51.1 50.5 1,758 55.2 54.7 Add back/(deduct): Amortisation of programme, customer-related and other intangible assets, and impairment of intangibles, post tax 1 90 84 Net interest expense on post-employment benefit obligations, post tax 1 31 55 Fair value and foreign exchange adjustments on financial instruments and investments, post tax 1 110 (1) Adjusting items attributable to shareholders, post tax 2 (94) (279) Underlying earnings3 , post tax 1,728 55.5 54.8 1,617 50.7 50.4 One-off tax benefit 4 \u2013 (94) Underlying earnings3 , excluding one-off tax benefit 1,728 55.5 54.8 1,523 47.8 47.4 Millions Millions Millions Millions Ordinary shares in issue as at 1 January 3,404 3,467 Less: Treasury shares as at 1 January (237) (249) Shares held in trust which were contingently returnable as at 1 January (23) (23) Number of ordinary shares outstanding as at 1 January 3,14 4 3,195 Net weighted average number of ordinary shares repurchased in year (32) (8) Weighted average number of ordinary shares used in calculating basic earnings per share 3,112 3,112 3,187 3,187 Incremental ordinary shares in respect of employee share schemes 41 24 Weighted average number of ordinary shares used in calculating diluted earnings per share 3,153 3,211 1. The tax impact is calculated using the underlying effective tax rate of 19% (2021 18%). The calculation of the underlying effective tax rate is shown in note 6. 2. In 2021, \u00a363m of the gain on disposal of AEC was attributable to non-controlling interest. Therefore, only the gain attributable to shareholders has been removed in calculating the underlying earnings attributable to shareholders. See note 20 for more details. The tax on adjusting items has been determined using the actual tax due on those items, see note 6 for details. 3. Underlying earnings per share is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 4. The one-off tax benefit of \u00a394m in 2021 was in respect of agreements reached regarding the exposure arising from the April 2019 European Commission decision regarding the UK\u2019s Controlled Foreign Company regime. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-584": { "value": "Intangible assets are carried at cost or valuation, less accumulated amortisation and impairment losses. Cost or valuation Goodwill Under the acquisition method for business combinations, goodwill is the acquisition-date fair value of the consideration transferred, less the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of joint ventures and associates is included in the carrying value of equity accounted investments. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Amortisation Goodwill is not amortised, but is tested annually for impairment, and carried at cost less accumulated impairment losses. Amortisation on intangible assets, excluding goodwill, is charged to the income statement on a straight-line basis over their estimated useful lives. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-575": { "value": "Intangible assets are carried at cost or valuation, less accumulated amortisation and impairment losses. Cost or valuation Goodwill Under the acquisition method for business combinations, goodwill is the acquisition-date fair value of the consideration transferred, less the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of joint ventures and associates is included in the carrying value of equity accounted investments. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Amortisation Goodwill is not amortised, but is tested annually for impairment, and carried at cost less accumulated impairment losses. Amortisation on intangible assets, excluding goodwill, is charged to the income statement on a straight-line basis over their estimated useful lives. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-568": { "value": "Intangible assets are carried at cost or valuation, less accumulated amortisation and impairment losses. Cost or valuation Software Software includes: \u2013 Computer software licences acquired for use within the Group are capitalised as an intangible asset on the basis of the costs incurred to acquire and bring to use the specific software; and \u2013 Software development costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Group-funded expenditure associated with enhancing or maintaining computer software programs for sale is recognised as an expense as incurred. Development costs Development costs funded by the Group on activities applied to a plan or design for the production of new or substantially improved products are capitalised as an internally generated intangible asset if certain conditions are met. The costs capitalised include materials, direct labour and related overheads. Programme and customer-related Intangible assets recognised by the Group include those relating to ongoing programmes within businesses acquired, mainly in respect of customer relationships and order backlog. These assets are initially recognised at their fair value at the acquisition date. Other Other intangible assets includes patents, trademarks and licences. Amortisation Goodwill is not amortised, but is tested annually for impairment, and carried at cost less accumulated impairment losses. Amortisation on intangible assets, excluding goodwill, is charged to the income statement on a straight-line basis over their estimated useful lives. For programme-related intangibles, amortisation is set on a programme-by-programme basis over the life of the individual programme. Amortisation for customer-related intangibles is also set on an individual basis. The estimated useful lives are as follows: Software up to 5 years Development costs up to 10 years Programme and customer-related up to 15 years Other up to 20 years The Group has no indefinite-life intangible assets other than goodwill. Impairment of intangible assets, property, plant and equipment, right-of-use assets, investment property and equity accounted investments The carrying amounts of the Group\u2019s intangible assets (excluding goodwill), property, plant and equipment, right-of-use assets, investment property and equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment, as required by IAS 36 Impairment of Assets. If any such indication exists, the asset\u2019s recoverable amount is estimated. For goodwill and intangible assets that are not yet available for use, impairment testing is performed annually. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of other intangible assets, property, plant and equipment, investment property and equity accounted investments is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised or if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-546": { "value": "Intangible assets are carried at cost or valuation, less accumulated amortisation and impairment losses. Cost or valuation Goodwill Under the acquisition method for business combinations, goodwill is the acquisition-date fair value of the consideration transferred, less the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of joint ventures and associates is included in the carrying value of equity accounted investments. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Software Software includes: \u2013 Computer software licences acquired for use within the Group are capitalised as an intangible asset on the basis of the costs incurred to acquire and bring to use the specific software; and \u2013 Software development costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Group-funded expenditure associated with enhancing or maintaining computer software programs for sale is recognised as an expense as incurred. Development costs Development costs funded by the Group on activities applied to a plan or design for the production of new or substantially improved products are capitalised as an internally generated intangible asset if certain conditions are met. The costs capitalised include materials, direct labour and related overheads. Programme and customer-related Intangible assets recognised by the Group include those relating to ongoing programmes within businesses acquired, mainly in respect of customer relationships and order backlog. These assets are initially recognised at their fair value at the acquisition date. Other Other intangible assets includes patents, trademarks and licences. Amortisation Goodwill is not amortised, but is tested annually for impairment, and carried at cost less accumulated impairment losses. Amortisation on intangible assets, excluding goodwill, is charged to the income statement on a straight-line basis over their estimated useful lives. For programme-related intangibles, amortisation is set on a programme-by-programme basis over the life of the individual programme. Amortisation for customer-related intangibles is also set on an individual basis. The estimated useful lives are as follows: Software up to 5 years Development costs up to 10 years Programme and customer-related up to 15 years Other up to 20 years The Group has no indefinite-life intangible assets other than goodwill. Impairment of intangible assets, property, plant and equipment, right-of-use assets, investment property and equity accounted investments The carrying amounts of the Group\u2019s intangible assets (excluding goodwill), property, plant and equipment, right-of-use assets, investment property and equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment, as required by IAS 36 Impairment of Assets. If any such indication exists, the asset\u2019s recoverable amount is estimated. For goodwill and intangible assets that are not yet available for use, impairment testing is performed annually. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of other intangible assets, property, plant and equipment, investment property and equity accounted investments is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised or if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-581": { "value": "Goodwill Under the acquisition method for business combinations, goodwill is the acquisition-date fair value of the consideration transferred, less the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of joint ventures and associates is included in the carrying value of equity accounted investments. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-582": { "value": "Impairment of intangible assets, property, plant and equipment, right-of-use assets, investment property and equity accounted investments The carrying amounts of the Group\u2019s intangible assets (excluding goodwill), property, plant and equipment, right-of-use assets, investment property and equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment, as required by IAS 36 Impairment of Assets. If any such indication exists, the asset\u2019s recoverable amount is estimated. For goodwill and intangible assets that are not yet available for use, impairment testing is performed annually. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of other intangible assets, property, plant and equipment, investment property and equity accounted investments is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised or if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-579": { "value": "Impairment of intangible assets, property, plant and equipment, right-of-use assets, investment property and equity accounted investments The carrying amounts of the Group\u2019s intangible assets (excluding goodwill), property, plant and equipment, right-of-use assets, investment property and equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment, as required by IAS 36 Impairment of Assets. If any such indication exists, the asset\u2019s recoverable amount is estimated. For goodwill and intangible assets that are not yet available for use, impairment testing is performed annually. Goodwill is tested annually for impairment. For the purposes of impairment testing, goodwill is allocated to Cash-Generating Units (CGUs), or a group of CGUs on a consistent basis. The impairment calculations require the use of estimates of the future profitability and cash- generating ability of the CGU to determine its value in use based on the Group\u2019s five-year Integrated Business Plan and the pre-tax discount rate used in discounting these projected cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount, which is the higher of its value in use, and its fair value less cost of disposal. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate pre-tax discount rate. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognised in the income statement. An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of other intangible assets, property, plant and equipment, investment property and equity accounted investments is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised or if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-446": { "value": "Goodwill \u00a3m Software \u00a3m Development costs \u00a3m Programme and customer-related \u00a3m Other \u00a3m Total \u00a3m Cost or valuation At 1 January 2021 15,555 837 111 542 99 17,14 4 Additions: Acquired separately \u2013 90 \u2013 \u2013 \u2013 90 Internally developed \u2013 3 4 \u2013 \u2013 7 Business acquisitions (note 35) 20 2 \u2013 6 9 37 Disposals 1 \u2013 (38) \u2013 \u2013 \u2013 (38) Transfer from property, plant and equipment \u2013 1 \u2013 \u2013 \u2013 1 Foreign exchange adjustments 49 (2) 1 3 2 53 At 31 December 2021 15,624 893 116 551 110 17, 29 4 Additions: Acquired separately \u2013 76 \u2013 \u2013 \u2013 76 Internally developed \u2013 6 11 \u2013 \u2013 17 Business acquisitions (note 35) 91 \u2013 \u2013 66 5 162 Disposals 1 \u2013 (34) \u2013 \u2013 \u2013 (34) Business disposals (191) \u2013 \u2013 \u2013 \u2013 (191) Transfer from property, plant and equipment \u2013 5 \u2013 \u2013 \u2013 5 Foreign exchange adjustments 1,069 27 14 71 15 1,196 At 31 December 2022 16,593 973 141 688 130 18,525 Amortisation and impairment At 1 January 2021 4,709 487 75 94 34 5,399 Amortisation 2 \u2013 104 3 75 11 193 Impairment charge \u2013 15 \u2013 \u2013 \u2013 15 Disposals 1 \u2013 (38) \u2013 \u2013 \u2013 (38) Foreign exchange adjustments 5 1 1 1 1 9 At 31 December 2021 4,714 569 79 170 46 5,578 Amortisation 2 \u2013 106 2 95 15 218 Impairment charge \u2013 1 \u2013 \u2013 \u2013 1 Disposals 1 \u2013 (34) \u2013 \u2013 \u2013 (34) Business disposals (168) \u2013 \u2013 \u2013 \u2013 (168) Foreign exchange adjustments 228 21 10 21 6 286 At 31 December 2022 4,774 663 91 286 67 5,881 Net book value At 31 December 2022 11,819 310 50 402 63 12,644 At 31 December 2021 10,910 324 37 381 64 11,716 At 1 January 2021 10,846 350 36 448 65 11,745 1. Includes intangible assets with \u00a3nil net book value no longer used by the Group. 2. Amortisation of \u00a3218m (2021 \u00a3193m) includes \u00a3215m (2021 \u00a3188m) charged to the income statement as an amortisation expense and \u00a33m (2021 \u00a35m) recoverable on customer contracts. Impairment testing The recoverable amount of the Group\u2019s goodwill is based on value in use estimated using risk-adjusted future cash flow projections from the five-year Integrated Business Plan (IBP) and a terminal value based on the projections for the final year of that plan, with growth rate assumptions of 2% applied for each significant group of Cash-Generating Units (CGUs). The IBP process includes the use of historical experience, available government spending data and the Group\u2019s order backlog, as well as the impact of evolving issues such as global economic uncertainty and climate change. Pre-tax discount rates, derived from the Group\u2019s post-tax weighted average cost of capital and adjusted for factors specific to the market in which the CGU operates, have been used in discounting these projected risk-adjusted cash flows. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-475": { "value": "Goodwill \u00a3m Software \u00a3m Development costs \u00a3m Programme and customer-related \u00a3m Other \u00a3m Total \u00a3m Cost or valuation At 1 January 2021 15,555 837 111 542 99 17,14 4 Additions: Acquired separately \u2013 90 \u2013 \u2013 \u2013 90 Internally developed \u2013 3 4 \u2013 \u2013 7 Business acquisitions (note 35) 20 2 \u2013 6 9 37 Disposals 1 \u2013 (38) \u2013 \u2013 \u2013 (38) Transfer from property, plant and equipment \u2013 1 \u2013 \u2013 \u2013 1 Foreign exchange adjustments 49 (2) 1 3 2 53 At 31 December 2021 15,624 893 116 551 110 17, 29 4 Additions: Acquired separately \u2013 76 \u2013 \u2013 \u2013 76 Internally developed \u2013 6 11 \u2013 \u2013 17 Business acquisitions (note 35) 91 \u2013 \u2013 66 5 162 Disposals 1 \u2013 (34) \u2013 \u2013 \u2013 (34) Business disposals (191) \u2013 \u2013 \u2013 \u2013 (191) Transfer from property, plant and equipment \u2013 5 \u2013 \u2013 \u2013 5 Foreign exchange adjustments 1,069 27 14 71 15 1,196 At 31 December 2022 16,593 973 141 688 130 18,525 Amortisation and impairment At 1 January 2021 4,709 487 75 94 34 5,399 Amortisation 2 \u2013 104 3 75 11 193 Impairment charge \u2013 15 \u2013 \u2013 \u2013 15 Disposals 1 \u2013 (38) \u2013 \u2013 \u2013 (38) Foreign exchange adjustments 5 1 1 1 1 9 At 31 December 2021 4,714 569 79 170 46 5,578 Amortisation 2 \u2013 106 2 95 15 218 Impairment charge \u2013 1 \u2013 \u2013 \u2013 1 Disposals 1 \u2013 (34) \u2013 \u2013 \u2013 (34) Business disposals (168) \u2013 \u2013 \u2013 \u2013 (168) Foreign exchange adjustments 228 21 10 21 6 286 At 31 December 2022 4,774 663 91 286 67 5,881 Net book value At 31 December 2022 11,819 310 50 402 63 12,644 At 31 December 2021 10,910 324 37 381 64 11,716 At 1 January 2021 10,846 350 36 448 65 11,745 1. Includes intangible assets with \u00a3nil net book value no longer used by the Group. 2. Amortisation of \u00a3218m (2021 \u00a3193m) includes \u00a3215m (2021 \u00a3188m) charged to the income statement as an amortisation expense and \u00a33m (2021 \u00a35m) recoverable on customer contracts. Impairment testing The recoverable amount of the Group\u2019s goodwill is based on value in use estimated using risk-adjusted future cash flow projections from the five-year Integrated Business Plan (IBP) and a terminal value based on the projections for the final year of that plan, with growth rate assumptions of 2% applied for each significant group of Cash-Generating Units (CGUs). The IBP process includes the use of historical experience, available government spending data and the Group\u2019s order backlog, as well as the impact of evolving issues such as global economic uncertainty and climate change. Pre-tax discount rates, derived from the Group\u2019s post-tax weighted average cost of capital and adjusted for factors specific to the market in which the CGU operates, have been used in discounting these projected risk-adjusted cash flows. Significant CGUs Within the year, the Group restructured its operations (see note 1 for details) and changed elements of how it operates. As a result, the level at which goodwill is monitored has changed, resulting in goodwill being allocated to the group of CGUs within the Maritime segment (the \u2018Maritime CGU\u2019), which is now identified as a significant CGU. Prior to the reallocation of goodwill, an impairment assessment was performed based on the previous allocation, and no impairment was identified. A summary of the significant groups of CGUs is presented below. Allocated goodwill Pre-tax discount rate Cash-Generating Unit Key assumptions 2022 \u00a3bn 2021 \u00a3bn 2022 % 2021 % Electronic Systems Continued demand from the US government for electronic warfare systems (where the business has a leadership position), other technology-based solutions and growth in the commercial avionics market 5.2 4.9 9 9 Platforms & Services Continued demand in the Group\u2019s principal markets for existing and successor military tracked vehicles, naval guns, missile launchers, artillery systems, munitions, upgrade programmes and support, and in the US for complex infrastructure, maritime and aviation services 3.8 3.3 9 9 Maritime Continued demand, primarily from the UK and Australian governments, for existing and successor programmes for submarines, complex warships and munitions. This includes upgrade and sustainment programmes in these areas as well as in the field of air, electronic systems and wide- area surveillance 1.5 1.5 10 8 The headroom, calculated as the difference between net assets including allocated goodwill as at 31 December 2022 and the value in use calculations, for the CGUs listed above, is shown below. The table also shows the headroom assuming a 1% reduction in the terminal value growth rate assumption, a 2% increase in the discount rate and a 1% reduction in the operating margin used in the value in use calculations, considered to be reasonable worst-case scenarios in the current economic climate. Headroom as at 31 December Headroom assuming a 1% reduction in the terminal value growth rate assumption Headroom assuming a 2% increase in the discount rate Headroom assuming a 1% reduction in operating margin Cash-Generating Unit 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn Electronic Systems 5.4 4.3 3.8 2.8 2.0 1.3 4.5 3.6 Platforms & Services 2.1 1.5 1.3 0.7 0.3 (0.1) 1.5 0.9 Maritime 4.2 5.1 3.5 4.1 1.7 3.1 3.5 4.3 Other CGUs The remaining goodwill balance of \u00a31.3bn (2021 \u00a31.2bn) is allocated across multiple CGUs. No individual CGU exceeds 10% of the Group\u2019s total goodwill balance. The majority of the projected cash flows within these CGUs are primarily underpinned by expected levels of government spending on defence, aerospace and security, and the Group\u2019s ability to capture a broadly consistent market share. Capital commitments At 31 December 2022, capital expenditure of \u00a341m (2021 \u00a325m) in respect of intangible assets was contracted for but not provided for in the accounts. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-495": { "value": "Goodwill \u00a3m Software \u00a3m Development costs \u00a3m Programme and customer-related \u00a3m Other \u00a3m Total \u00a3m Cost or valuation At 1 January 2021 15,555 837 111 542 99 17,14 4 Additions: Acquired separately \u2013 90 \u2013 \u2013 \u2013 90 Internally developed \u2013 3 4 \u2013 \u2013 7 Business acquisitions (note 35) 20 2 \u2013 6 9 37 Disposals 1 \u2013 (38) \u2013 \u2013 \u2013 (38) Transfer from property, plant and equipment \u2013 1 \u2013 \u2013 \u2013 1 Foreign exchange adjustments 49 (2) 1 3 2 53 At 31 December 2021 15,624 893 116 551 110 17, 29 4 Additions: Acquired separately \u2013 76 \u2013 \u2013 \u2013 76 Internally developed \u2013 6 11 \u2013 \u2013 17 Business acquisitions (note 35) 91 \u2013 \u2013 66 5 162 Disposals 1 \u2013 (34) \u2013 \u2013 \u2013 (34) Business disposals (191) \u2013 \u2013 \u2013 \u2013 (191) Transfer from property, plant and equipment \u2013 5 \u2013 \u2013 \u2013 5 Foreign exchange adjustments 1,069 27 14 71 15 1,196 At 31 December 2022 16,593 973 141 688 130 18,525 Amortisation and impairment At 1 January 2021 4,709 487 75 94 34 5,399 Amortisation 2 \u2013 104 3 75 11 193 Impairment charge \u2013 15 \u2013 \u2013 \u2013 15 Disposals 1 \u2013 (38) \u2013 \u2013 \u2013 (38) Foreign exchange adjustments 5 1 1 1 1 9 At 31 December 2021 4,714 569 79 170 46 5,578 Amortisation 2 \u2013 106 2 95 15 218 Impairment charge \u2013 1 \u2013 \u2013 \u2013 1 Disposals 1 \u2013 (34) \u2013 \u2013 \u2013 (34) Business disposals (168) \u2013 \u2013 \u2013 \u2013 (168) Foreign exchange adjustments 228 21 10 21 6 286 At 31 December 2022 4,774 663 91 286 67 5,881 Net book value At 31 December 2022 11,819 310 50 402 63 12,644 At 31 December 2021 10,910 324 37 381 64 11,716 At 1 January 2021 10,846 350 36 448 65 11,745 1. Includes intangible assets with \u00a3nil net book value no longer used by the Group. 2. Amortisation of \u00a3218m (2021 \u00a3193m) includes \u00a3215m (2021 \u00a3188m) charged to the income statement as an amortisation expense and \u00a33m (2021 \u00a35m) recoverable on customer contracts. Impairment testing The recoverable amount of the Group\u2019s goodwill is based on value in use estimated using risk-adjusted future cash flow projections from the five-year Integrated Business Plan (IBP) and a terminal value based on the projections for the final year of that plan, with growth rate assumptions of 2% applied for each significant group of Cash-Generating Units (CGUs). The IBP process includes the use of historical experience, available government spending data and the Group\u2019s order backlog, as well as the impact of evolving issues such as global economic uncertainty and climate change. Pre-tax discount rates, derived from the Group\u2019s post-tax weighted average cost of capital and adjusted for factors specific to the market in which the CGU operates, have been used in discounting these projected risk-adjusted cash flows. Significant CGUs Within the year, the Group restructured its operations (see note 1 for details) and changed elements of how it operates. As a result, the level at which goodwill is monitored has changed, resulting in goodwill being allocated to the group of CGUs within the Maritime segment (the \u2018Maritime CGU\u2019), which is now identified as a significant CGU. Prior to the reallocation of goodwill, an impairment assessment was performed based on the previous allocation, and no impairment was identified. A summary of the significant groups of CGUs is presented below. Allocated goodwill Pre-tax discount rate Cash-Generating Unit Key assumptions 2022 \u00a3bn 2021 \u00a3bn 2022 % 2021 % Electronic Systems Continued demand from the US government for electronic warfare systems (where the business has a leadership position), other technology-based solutions and growth in the commercial avionics market 5.2 4.9 9 9 Platforms & Services Continued demand in the Group\u2019s principal markets for existing and successor military tracked vehicles, naval guns, missile launchers, artillery systems, munitions, upgrade programmes and support, and in the US for complex infrastructure, maritime and aviation services 3.8 3.3 9 9 Maritime Continued demand, primarily from the UK and Australian governments, for existing and successor programmes for submarines, complex warships and munitions. This includes upgrade and sustainment programmes in these areas as well as in the field of air, electronic systems and wide- area surveillance 1.5 1.5 10 8 The headroom, calculated as the difference between net assets including allocated goodwill as at 31 December 2022 and the value in use calculations, for the CGUs listed above, is shown below. The table also shows the headroom assuming a 1% reduction in the terminal value growth rate assumption, a 2% increase in the discount rate and a 1% reduction in the operating margin used in the value in use calculations, considered to be reasonable worst-case scenarios in the current economic climate. Headroom as at 31 December Headroom assuming a 1% reduction in the terminal value growth rate assumption Headroom assuming a 2% increase in the discount rate Headroom assuming a 1% reduction in operating margin Cash-Generating Unit 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn 2022 \u00a3bn 2021 \u00a3bn Electronic Systems 5.4 4.3 3.8 2.8 2.0 1.3 4.5 3.6 Platforms & Services 2.1 1.5 1.3 0.7 0.3 (0.1) 1.5 0.9 Maritime 4.2 5.1 3.5 4.1 1.7 3.1 3.5 4.3 Other CGUs The remaining goodwill balance of \u00a31.3bn (2021 \u00a31.2bn) is allocated across multiple CGUs. No individual CGU exceeds 10% of the Group\u2019s total goodwill balance. The majority of the projected cash flows within these CGUs are primarily underpinned by expected levels of government spending on defence, aerospace and security, and the Group\u2019s ability to capture a broadly consistent market share. Capital commitments At 31 December 2022, capital expenditure of \u00a341m (2021 \u00a325m) in respect of intangible assets was contracted for but not provided for in the accounts. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-522": { "value": "Capital commitments At 31 December 2022, capital expenditure of \u00a341m (2021 \u00a325m) in respect of intangible assets was contracted for but not provided for in the accounts. Capital commitments At 31 December 2022, capital expenditure of \u00a3403m (2021 \u00a3210m) in respect of property, plant and equipment was contracted for but not provided for in the accounts. Capital commitments At 31 December 2022, capital expenditure of \u00a314m (2021 \u00a320m) in respect of investment property was contracted for but not provided for in the accounts. The Group believes that any significant liability in respect of its guarantees and performance bond arrangements, and legal actions and claims not already provided for, is remote . ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-512": { "value": "Capital commitments At 31 December 2022, capital expenditure of \u00a341m (2021 \u00a325m) in respect of intangible assets was contracted for but not provided for in the accounts. Capital commitments At 31 December 2022, capital expenditure of \u00a3403m (2021 \u00a3210m) in respect of property, plant and equipment was contracted for but not provided for in the accounts. Capital commitments At 31 December 2022, capital expenditure of \u00a314m (2021 \u00a320m) in respect of investment property was contracted for but not provided for in the accounts. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-547": { "value": "Cost Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads. The cost of demonstration assets is written off as incurred. The reimbursement of the cost of an item of property, plant and equipment by way of a government grant is presented as deferred income and recognised in the income statement on a basis consistent with the depreciation of the asset over its estimated useful life. Assets held for leasing out under operating leases are included in property, plant and equipment at cost less accumulated depreciation and impairment losses. Depreciation Depreciation is provided, normally on a straight-line basis, to write off the cost of items of property, plant and equipment over their estimated useful lives to any estimated residual value, using the following rates: Buildings up to 50 years, or the lease term if shorter Plant and machinery: Computing equipment and motor vehicles 4 to 5 years Other equipment 10 to 20 years, or the project life if shorter No depreciation is provided on freehold land and assets in the course of construction. The assets\u2019 residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. Impairment The carrying amounts of the Group\u2019s property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-497": { "value": "The reimbursement of the cost of an item of property, plant and equipment by way of a government grant is presented as deferred income and recognised in the income statement on a basis consistent with the depreciation of the asset over its estimated useful life. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-569": { "value": "Depreciation Depreciation is provided, normally on a straight-line basis, to write off the cost of items of property, plant and equipment over their estimated useful lives to any estimated residual value, using the following rates: Buildings up to 50 years, or the lease term if shorter Plant and machinery: Computing equipment and motor vehicles 4 to 5 years Other equipment 10 to 20 years, or the project life if shorter No depreciation is provided on freehold land and assets in the course of construction. The assets\u2019 residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-496": { "value": "No depreciation is provided on freehold land and assets in the course of construction. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForConstructionInProgressExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-447": { "value": "Land and buildings \u00a3m Plant and machinery \u00a3m Total \u00a3m Cost At 1 January 2021 2,531 3,610 6,141 Additions1 239 262 501 Business acquisitions (note 35) \u2013 1 1 Transfer to intangible assets \u2013 (1) (1) Reclassification between categories 7 (7) \u2013 Disposals (23) (115) (138) Foreign exchange adjustments \u2013 6 6 At 31 December 2021 2,754 3,756 6,510 Additions1 302 289 591 Business acquisitions (note 35) \u2013 1 1 Transfer to intangible assets \u2013 (5) (5) Reclassification between categories 16 (16) \u2013 Disposals (45) (131) (176) Foreign exchange adjustments 143 227 370 At 31 December 2022 3,170 4,121 7,291 Depreciation and impairment At 1 January 2021 1,113 2,373 3,486 Depreciation charge for the year 94 202 296 Impairment charge \u2013 4 4 Reclassification between categories 4 (4) \u2013 Disposals (22) (112) (134) Foreign exchange adjustments 2 4 6 At 31 December 2021 1,191 2,467 3,658 Depreciation charge for the year 109 218 327 Impairment charge \u2013 2 2 Disposals (40) (125) (165) Business disposals \u2013 \u2013 \u2013 Foreign exchange adjustments 79 155 234 At 31 December 2022 1,339 2,717 4,056 Net book value At 31 December 2022 1,831 1,404 3,235 At 31 December 2021 1,563 1,289 2,852 At 1 January 2021 1,418 1,237 2,655 1. Includes \u00a3160m (2021 \u00a3149m) of land and buildings at Barrow-in-Furness, UK, funded by the UK government. Assets in the course of construction Land and buildings \u00a3m Plant and machinery \u00a3m Total 1 \u00a3m At 31 December 2022 547 292 839 At 31 December 2021 398 274 672 1. Includes \u00a3464m (2021 \u00a3262m) at Barrow-in-Furness, UK, funded by the UK government. Capital commitments At 31 December 2022, capital expenditure of \u00a3403m (2021 \u00a3210m) in respect of property, plant and equipment was contracted for but not provided for in the accounts. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-448": { "value": "The Group leases land, buildings, vehicles and equipment under non-cancellable lease arrangements. The leases have varying terms, including escalation clauses, renewal rights and purchase options. None of these terms represent unusual arrangements or create material onerous or beneficial rights or obligations. Right-of-use assets 2022 2021 Land and buildings \u00a3m Plant and machinery \u00a3m Total \u00a3m Land and buildings \u00a3m Plant and machinery \u00a3m Total \u00a3m Net book value at 1 January 1,075 16 1,091 1,037 16 1,053 Additions during the year 397 20 417 117 9 126 Business acquisitions (note 35) 1 \u2013 1 \u2013 \u2013 \u2013 Lease modifications during the year 50 1 51 125 (1) 124 Depreciation charge for the year (205) (12) (217) (206) (8) (214) Business disposals (note 20) (3) \u2013 (3) \u2013 \u2013 \u2013 Foreign exchange adjustments 85 \u2013 85 2 \u2013 2 Net book value at 31 December 1,400 25 1,425 1,075 16 1,091 Lease liabilities A maturity analysis of the future undiscounted lease payments in respect of the Group\u2019s lease liabilities is presented in the table below: 2022 \u00a3m 2021 \u00a3m Payments due: Within one year 290 240 Between one and five years 632 586 Later than five years 1,227 683 Total undiscounted gross payments 2,149 1,509 Deduct: Impact of discounting (533) (214) Lease liabilities 1,616 1,295 The Group is also committed to future undiscounted lease payments of \u00a35m in respect of leases which had not yet commenced at 31 December 2022 (2021 \u00a3214m). The total cash outflow for leases in the year ended 31 December 2022, including short-term leases and low-value leases, amounted to \u00a3314m (2021 \u00a3281m). Amounts recognised in the income statement 2022 \u00a3m 2021 \u00a3m Included in operating costs: Depreciation on right-of-use assets (217) (214) Short-term lease expense (25) (19) Low-value lease expense (5) (4) (247) (237) Included in other income: Operating lease income from investment property 3 9 Operating lease income from subleasing right-of-use assets 1 1 4 10 Included in net finance costs: Interest income on finance lease receivables 1 1 Interest expense on lease liabilities (48) (43) (47) (42) Operating leases The Group is party to operating leases in which it is the lessor, primarily relating to investment property. Under the terms of the lease agreements, no contingent rents are receivable. The leases have varying terms including escalation clauses and renewal rights. None of these terms represent unusual arrangements or create material onerous or beneficial rights or obligations. A maturity analysis of the future undiscounted lease receipts from operating leases, in which the Group is lessor, is presented in the table below: 2022 \u00a3m 2021 \u00a3m Receipts due: Within one year 3 2 Between one and two years 3 1 Between two and three years 2 1 Between three and four years 2 1 Between four and five years 2 1 Later than five years 6 2 18 8 Finance lease receivables A sublease is classified as a finance lease when it transfers substantially all of the risks and rewards of the right-of-use asset arising from the head lease. A maturity analysis of the future undiscounted lease receipts from finance leases, in which the Group is lessor, is presented in the table below: 2022 \u00a3m 2021 \u00a3m Receipts due: Within one year 11 11 Between one and two years 10 11 Between two and three years 5 10 Between three and four years 4 5 Between four and five years 4 4 Later than five years 2 7 Total undiscounted gross receipts 36 48 Deduct: Impact of discounting (2) (4) Finance lease receivables (note 14) 34 44 ", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-548": { "value": "Cost Land and buildings that are leased to non-Group entities are classified as investment property. The Group measures investment property at its cost less accumulated depreciation and impairment losses. Depreciation Depreciation is provided, on a straight-line basis, to write off the cost of investment property over its estimated useful life of up to 50 years. The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Impairment The carrying amounts of the Group\u2019s investment property are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-449": { "value": "\u00a3m Cost At 1 January 2021 200 Additions 17 Disposals (141) At 31 December 2021 76 Additions 5 Disposals (4) At 31 December 2022 77 Depreciation and impairment At 1 January 2021 72 Depreciation charge for the year 3 Disposals (66) At 31 December 2021 9 Depreciation charge for the year 5 Disposals \u2013 At 31 December 2022 14 Net book value At 31 December 2022 63 At 31 December 2021 67 At 1 January 2021 128 Fair value At 31 December 2022 76 At 31 December 2021 82 The fair values above are based on and reflect current market values as prepared by in-house professionals who have the appropriate professional qualifications and recent experience of valuing properties in the location and of the type being valued. Capital commitments At 31 December 2022, capital expenditure of \u00a314m (2021 \u00a320m) in respect of investment property was contracted for but not provided for in the accounts. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-576": { "value": "Equity accounted investments comprises joint ventures and associates. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets of the arrangement. An associate is an entity over which the Group has significant influence but not control or joint control. The Group recognises its share of the profit or loss and other comprehensive income of equity accounted investments as a separate line in the Consolidated income statement and Consolidated statement of comprehensive income, respectively. The carrying value of an equity accounted investment comprises the Group\u2019s share of net assets and purchased goodwill, and is assessed for impairment as a single asset. The carrying amounts of the Group\u2019s equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-570": { "value": "Equity accounted investments comprises joint ventures and associates. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets of the arrangement. An associate is an entity over which the Group has significant influence but not control or joint control. The Group recognises its share of the profit or loss and other comprehensive income of equity accounted investments as a separate line in the Consolidated income statement and Consolidated statement of comprehensive income, respectively. The carrying value of an equity accounted investment comprises the Group\u2019s share of net assets and purchased goodwill, and is assessed for impairment as a single asset. The carrying amounts of the Group\u2019s equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-549": { "value": "Equity accounted investments comprises joint ventures and associates. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets of the arrangement. An associate is an entity over which the Group has significant influence but not control or joint control. The Group recognises its share of the profit or loss and other comprehensive income of equity accounted investments as a separate line in the Consolidated income statement and Consolidated statement of comprehensive income, respectively. The carrying value of an equity accounted investment comprises the Group\u2019s share of net assets and purchased goodwill, and is assessed for impairment as a single asset. The carrying amounts of the Group\u2019s equity accounted investments are reviewed at each balance sheet date to determine whether there is any indication of impairment in accordance with the policy shown in note 8. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-523": { "value": "Principal equity accounted investments Joint venture Principal activities Shareholding Principally operates in Eurofighter Jagdflugzeug Management and control of the European Typhoon programme 33% Germany MBDA Development and manufacture of guided weapons 37.5% Europe The following tables summarise the financial information of the Group\u2019s principal equity accounted investments included in their own financial statements, as adjusted for fair value adjustments at acquisition and differences in accounting policies, and reconcile this to the Group\u2019s interest in those equity accounted investments. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Revenue (100%) 3,693 3,590 3,165 3,513 Underlying EBIT 1 excluding depreciation and amortisation 19 574 6 512 Depreciation and amortisation (4) (152) \u2013 (117) Financial income 2 25 2 7 Financial expense (2) (13) (2) (12) Taxation expense (6) (105) (3) (107) Profit for the year (100%) 9 329 3 283 Remeasurements on post-employment benefit schemes, net of tax \u2013 310 \u2013 172 Amounts (debited)/credited to hedging reserve, net of tax \u2013 (4) \u2013 17 Foreign exchange adjustments (5) (24) \u2013 13 Total comprehensive income for the year (100%) 4 611 3 485 Group\u2019s share of total comprehensive income for the year 1 230 1 182 Non-current assets 30 2,464 32 2,280 Cash and cash equivalents 42 2,650 24 2,367 Current assets excluding cash and cash equivalents 8,591 4,697 7,630 4,210 Current assets 8,633 7,347 7,654 6,577 Non-current financial liabilities excluding trade and other payables, and provisions \u2013 (10) \u2013 (5) Other non-current liabilities (47) (20) (62) (527) Non-current liabilities (47) (30) (62) (532) Current financial liabilities excluding trade and other payables, and provisions (10) \u2013 (7) \u2013 Other current liabilities (8,581) (8,416) (7,59 0) (7,424) Current liabilities (8,591) (8,416) (7,597) (7,424) Net assets (100%) 25 1,365 27 901 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Group\u2019s share of net assets 8 512 520 9 338 347 Goodwill adjustment \u2013 8 8 \u2013 7 7 Carrying value 8 520 528 9 345 354 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Dividends received 3 80 83 2 41 43 Group summary The Group also has a number of individually immaterial joint ventures and associates, the carrying values of the most significant at 31 December 2022 are as follows: Rheinmetall BAE Systems Land (RBSL) (\u00a382m), FADEC International (\u00a348m), Air Astana (\u00a363m), FNSS (\u00a322m) and Panavia Aircraft (\u00a318m). The following table shows a reconciliation of opening to closing carrying value for both the Group\u2019s principal and immaterial joint ventures and associates in aggregate. Principal equity accounted investments \u00a3m Other joint ventures \u00a3m Other associates \u00a3m Total \u00a3m At 1 January 2021 231 96 82 409 Group\u2019s share of profit for the year 107 28 4 139 Group\u2019s share of remeasurements on post-employment benefit schemes 85 \u2013 \u2013 85 Tax on items that will not be reclassified to the income statement (21) \u2013 \u2013 (21) Foreign exchange adjustments 6 \u2013 (1) 5 Amounts credited to hedging reserve 8 4 \u2013 12 Tax on items that may be reclassified to the income statement (2) (1) \u2013 (3) Group\u2019s share of total comprehensive income for the year 183 31 3 217 Equity accounted investment funding \u2013 3 \u2013 3 Dividends received from equity accounted investments (43) (14) \u2013 (57) Foreign exchange adjustments (17) (1) \u2013 (18) At 31 December 2021 354 115 85 554 Group\u2019s share of profit for the year 126 46 8 180 Group\u2019s share of remeasurements on post-employment benefit schemes 140 \u2013 \u2013 140 Tax on items that will not be reclassified to the income statement (24) \u2013 \u2013 (24) Foreign exchange adjustments (10) \u2013 (1) (11) Amounts (debited)/credited to hedging reserve (2) 4 \u2013 2 Tax on items that may be reclassified to the income statement 1 \u2013 \u2013 1 Group\u2019s share of total comprehensive income for the year 231 50 7 288 Dividends received from equity accounted investments (83) (11) \u2013 (94) Foreign exchange adjustments 26 13 \u2013 39 At 31 December 2022 528 167 92 787 Contingent liabilities The Group is not aware of any material contingent liabilities in respect of its equity accounted investments. 2022 \u00a3m 2021 \u00a3m Fair value through other comprehensive income 99 76 37. Information about related undertakings In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments as at 31 December 2022 is disclosed below. Unless otherwise stated, the Group\u2019s shareholding represents ordinary shares held indirectly by BAE Systems plc, the year end is 31 December and the address of the registered office is Warwick House, PO Box 87, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6YU, United Kingdom. For companies incorporated outside of the United Kingdom, the country of incorporation is shown in the address. No subsidiary undertakings have been excluded from the consolidation. Subsidiaries \u2013 wholly-owned 4219 Lafayette, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Aircraft Research Association Limited2 Manton Lane, Bedford MK41 7PF, United Kingdom Alvis Limited Alvis Pension Scheme Trustees Limited 3 Alvis Vickers Limited Armstrong Whitworth Aircraft Limited 3 ASC Shipbuilding Pty Limited Bldg 01, Level 2, 640 Mersey Road North, Osborne SA 5017, Australia Australian Marine Engineering Corporation (Finance) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Avro International Aerospace Limited3 BAE Systems (Al Diriyah C4i) Limited 3 BAE Systems (Canada) Inc. 220 Laurier Avenue West, Suite 1200, Ottawa ON K1P 5Z9, Canada BAE Systems (Combat and Radar Systems) Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY BAE Systems (Corporate Air Travel) Limited BAE Systems (Defence Systems) Limited BAE Systems (Dynamics) Limited BAE Systems (Farnborough 3) Limited BAE Systems (Finance) Limited BAE Systems (Funding Four) Unlimited Company Riverside One, Sir John Rogerson\u2019s Quay, Dublin D02 X576, Ireland BAE Systems (Funding Three) Limited BAE Systems (Funding Two) Limited BAE Systems (Gripen Overseas) Limited BAE Systems (Holdings) Limited 3 BAE Systems (International) Limited BAE Systems (Kazakhstan) Limited BAE Systems (Kuwait) Limited BAE Systems (Land and Sea Systems) Limited 4 BAE Systems (Malaysia) Sdn Bhd Level 25 Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems (MEH) Limited BAE Systems (Military Air) Overseas Limited BAE Systems (Nominees) Limited 3 BAE Systems (Oman) Limited BAE Systems (Operations) Limited5 BAE Systems (Operations) Singapore Pte Limited One Marina Boulevard #28-00, Singapore 018989, Singapore BAE Systems (Overseas Holdings) Limited BAE Systems (Poland) Sp. z o.o. ul. Abp. A. Baraniaka 88, 61-131 Poznan, Poland BAE Systems (Projects) Limited BAE Systems (Property Investments) Limited BAE Systems (Vehicles and Equipment) Limited 6 BAE Systems 2000 Pension Plan Trustees Limited3 BAE Systems AB 7 Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Air Japan KK 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Al Diriyah Programme Limited 3 BAE Systems Applied Intelligence (Asia Pacific) Pte Limited United Square, 101 Thomson Road, #25-03/04, 307591, Singapore BAE Systems Applied Intelligence (Connect) A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence (GCS) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence Integrated Computer Solutions (Kuwait) (S.P.C.) Al Hamra Tower, Office Number 3503, 35th Floor, East Maqwa, Kuwait City, Kuwait BAE Systems Applied Intelligence (Integration) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (International) Limited Priestley Road, Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (Japan) KK 12/F Ark Mori Building, 1-12-32 Akasaka, Minato-ku, Tokyo, 107-6024, Japan BAE Systems Applied Intelligence (Spain) S.A. Paseo de la Castellana, 141, Cuzco IV, 28046 Madrid, Spain BAE Systems Applied Intelligence (UK) Limited BAE Systems Applied Intelligence A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence GCS Inc.8 CSC, 100 Shockoe Slip, 2nd Floor Richmond VA 23219, United States BAE Systems Applied Intelligence Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence LLC 1 8000 Towers Crescent Blvd, 13th Floor, Vienna VA 22182, United States BAE Systems Applied Intelligence Malaysia Sdn Bhd Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems Applied Intelligence Pty Limited Level 26, 459 Collins Street, Melbourne VIC 3000, Australia BAE Systems Australia (Electronic Systems) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Datagate Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Pty Limited10 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Holdings Limited3 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Logistics Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Sea Sentinel Project Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Avionics Singapore Pte Limited One Marina Boulevard, #28-00, Singapore 018989, Singapore BAE Systems Bofors AB SE-691 80 Karlskoga, Sweden BAE Systems Bofors Holdings Sdn Bhd Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia BAE Systems C-ITS AB Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Communications Solutions LLC 1 Knowledge Oasis, Building 4, Second Floor, 0402-Z427, Knowledge Oasis Muscat, PO Box 16, Postal Code 135, Muscat, Oman BAE Systems Controls Inc.9 1098 Clark Street, Endicott NY 13760, United States BAE Systems Creole Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Datagate Holdings Limited BAE Systems Datagate Limited6 BAE Systems Deployed Systems Limited12 BAE Systems do Brasil Ltda SCN Quadra 5 Bloco A, Ed. Brasilia Shopping, Torre Norte, Sala 426, Brasilia, DF CEP:70715-900, Brazil BAE Systems Electronic Systems (Overseas) Limited BAE Systems Electronics Limited BAE Systems Enterprises Limited BAE Systems Executive Pension Scheme Trustees Limited3 BAE Systems Finance B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Finance Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Flight Training (Australia) Pty Limited13 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Funds Management 3,14 BAE Systems GCS International Limited BAE Systems Global Combat Systems Bridging Limited6 BAE Systems Global Combat Systems Munitions Limited BAE Systems Global LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems H\u00e4gglunds AB SE-691 80, Karlskoga, Sweden BAE Systems Hawaii Shipyards Inc. 8 The Corporation Company, Inc., 1136 Union Mall, Suite 301, Honolulu HI 96813, United States BAE Systems Holding GmbH Hauptstrasse 48, 82433 Bad Kohlgrub, Germany BAE Systems Holdings (South Africa) (Pty) Limited Central Office Park No. 5, 257 Jean Avenue, Centurion, Gauteng, 0157, South Africa BAE Systems Holdings B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Holdings Inc.9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Holdings International LLC1 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States BAE Systems Imaging Solutions Inc. 9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems India (Homeland Security) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Services) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Technology) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Ventures) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems Information and Electronic Systems Integration Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Insurance (Isle of Man) Limited Tower House, Loch Promenade, Douglas, IM1 2LZ, Isle of Man BAE Systems Integrated System Technologies (KSA) Limited BAE Systems Integrated System Technologies (Overseas) Limited BAE Systems Integrated System Technologies Limited BAE Systems International Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Jacksonville Ship Repair LLC1 8500 Hecksher Drive, Jacksonville FL 32226, United States BAE Systems Japan GK Ark Mori Building, 1-12-32 Akasaka, Minato-Ku, Tokyo, Japan BAE Systems Land & Armaments Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Land & Armaments Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land & Armaments L.P.1 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems (Finance) Limited BAE Systems Land Systems (Investments South Africa) Limited6 BAE Systems Land Systems (Investments) Limited BAE Systems Land Systems (Ranges) Limited 6 BAE Systems Land Systems ATF Limited BAE Systems Land Systems FMTV International Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems Pinzgauer (Holdings) Limited BAE Systems Land Systems Pinzgauer Limited BAE Systems MAI Turkey Hava Sistemleri A.S\u00b8 . \u00dcniversiteler Mahallesi, Beytepe Lodumlu K\u00f6y Yolu Cad. No: 5/348 \u00c7ankaya, Ankara, Turkey BAE Systems Marine (Holdings) Limited BAE Systems Marine (YSL) Limited BAE Systems Marine Limited BAE Systems Norfolk Ship Repair Inc.8 CT Corporation System, 4701 Cox Road, Suite 285, Glen Allen VA 23060-6802, United States BAE Systems Oman LLC 1 PO Box 74, Postal Code 111, Seeb, Oman BAE Systems Ordnance Systems Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Overseas Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Pension Funds CIF Trustees Limited 3 BAE Systems Pension Funds Investment Management Limited 3,16 BAE Systems Pension Funds Trustees Limited 3 BAE Systems Project Services Limited BAE Systems Projects (Canada) Limited BAE Systems Properties Limited BAE Systems Quest Limited3 BAE Systems Air Japan KK 9 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Regional Aircraft Colombia SAS 17 c/o Brigard & Urrutia, Calle 70 A No. 4-41, Bogot\u00e1, Colombia BAE Systems Resolution Inc. 8 CT Corporation System, 1999 Bryan Street, Suite 900, Dallas TX 75201, United States BAE Systems S&S Operations Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems San Diego Ship Repair Inc. 8 330 N. Brand Boulevard, Glendale CA 91203-2336, United States BAE Systems Saudi America Limited Riyadh Kingdom Centre 28th Floor (REGUS), PO Box 23088, Riyadh 11321, Central Province, Riyadh, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Maintenance and Equipment Services) Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Vehicles and Equipment Holdings) Limited 3 BAE Systems Saudi Arabia (Vehicles and Equipment Nominees) Limited 3 BAE Systems Saudi Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Servi\u00e7os de Avi\u00f4nicos Ltda. Rua Ambr\u00f3sio Molina, No. 1090. Bloco F, Eug\u00eanio de Melo, S\u00e3o Jos\u00e9 dos Campos, S\u00e3o Paulo 12.247-000, Brazil BAE Systems Share Plans Trustee Limited 3 BAE Systems Services Limited BAE Systems Shared Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Ship Repair Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Southeast Shipyards AMHC Inc.8 1200 South Pine Island Road, Plantation FL 33324, United States BAE Systems Surface Ships (Holdings) Limited BAE Systems Surface Ships (Overseas) Limited BAE Systems Surface Ships (Projects) Limited BAE Systems Surface Ships Integrated Support Limited BAE Systems Surface Ships Intermediate Holdings Limited18 BAE Systems Surface Ships International Limited BAE Systems Surface Ships Limited BAE Systems Surface Ships Maritime Limited BAE Systems Surface Ships Portsmouth Limited 18 BAE Systems Surface Ships Projects (Malaysia) Sdn Bhd Level 29 Menara Binjai, No 2 Jalan Binjai, Off Jalan Ampang, 50450 Kuala Lumpur, Malaysia BAE Systems Surface Ships Property Services Limited BAE Systems Surface Ships Support Limited 5 BAE Systems SWS Defence AB SE-691 80 Karlskoga, Sweden BAE Systems Tactical Vehicle Systems LP 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Technology Solutions & Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Training Services Limited BAE Systems TVS Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Zephyr Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fifth Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fourth Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Second Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Third Corporation 9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems, Inc. 8 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801, United States BIS Invest S.\u00e0.r.l. 2, Place de Strasbourg, L-2562, Luxembourg, Grand Duchy of Luxembourg Bohemia Interactive Australia Pty Limited Unit 2, Building A, 2 Technology Place, Williamtown NSW 2318, Australia Bohemia Interactive Simulations GK Limited Abista Kudan Blgd. 10F, 2-4-12 Kudan-minami, Tokyo, Chiyoda Ku, 102-0074, Japan Bohemia Interactive Simulations GmbH Vistra Corporate Services, Westendstra\u00dfe 28, 60325, Frankfurt am Main, Germany Bohemia Interactive Simulations, Inc.8 CT Corporation System, 1200 South Pine Island Road, Plantation FL 33324, United States Bohemia Interactive Simulations K.S. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Bohemia Interactive Simulations Korea Limited Rm 1 5/F 437 Teheran-ro, Gangnam-gu, Seoul, 06158, Republic of Korea Bohemia Interactive Simulations sp z.o.o. Ul. Ostrobramska 101, 04-041, Warsaw, Poland Bohemia Interactive Simulations (UK) Limited 31 Hercules Way, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6UU, United Kingdom Bohemia Invest One Ltd Bohemia Invest Two Ltd Brabazon Limited British Aerospace (Far East) Limited19 Level 54, Hopewell Centre, 183 Queen\u2019s Road East, Hong Kong British Aerospace (Malaysia) Sdn Bhd 19 Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia British Aircraft Corporation (Pension Fund Trustees) Limited 3 British Aircraft Corporation Limited3 CPS International, Inc.11 Benedetti & Benedetti, Comosa Building, 21st Floor, PO Box 850120, Panama 5, Panama Creole (Nigeria) Limited 5 Tapa House (2nd Floor), 45, Imman Dauda St (Abosede Kuboye Crescent Entrance) Surulere, Lagos, Nigeria Detica B.V. Luna ArenA, Herikerbergweg 238, 1101 CM Amsterdam, Netherlands Detica Group Limited Detica Mexico S. de R.L. de C.V. Torre Esmeralda II, Blvd Manuel Avila Camacho No. 36 Piso 18, Lomas de Chapultepec, 11000 D.F., Mexico Detica Services, Inc. 8 1209 Orange Street, Wilmington DE 19801, United States Dividend Training Limited ETI Engineering, Inc. 8 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States EVU Czech, S.R.O. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Gloster Aircraft Limited 3 H-B Utveckling, H-B Development AB Nybrogatan 7, SE-114 34 Stockholm, Sweden Hadrian Holdings, Inc. 521 Fifth Avenue, New York NY 101075, United States Hadrian Trustees Limited 2 H\u00e4gglunds Vehicle GmbH Ernst-Grote Strasse 13, 30916 Isernhagen, Germany Hawker Siddeley Aviation Limited 3 Hawker Siddeley Dynamics Limited3 HSA/HSD Pension Fund Trustees Limited3 Hunter Aerospace Corporation Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia In-Space Missions Limited 8 Oriel Court, Omega Park, Alton GU34 2YT, United Kingdom International Military Sales Limited Jetstream Aircraft Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Lemacrown Limited 20 MES Holdco Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY MES Interco 14 Meslink Limited Newcombe Properties Limited Pitch Technologies AB Repslagaregatan 25, SE-582 22 Link\u00f6ping, Sweden Pitch Technologies Limited Sweden House, 5 Upper Montagu Street, London W1H 2AG, United Kingdom Prismatic Limited 5 2 Omega Park, Alton GU34 2QE, United Kingdom PT. BAE Systems Services 8 Wisma 46, Kota BNI, 34th Floor, Suite 34.01.A, Jl. Jenderal Sudirman Kavling 71, Jakarta 10220, Indonesia Pulse Power and Measurement Inc. 1717 Pennsylvania Avenue, NW Suite, 1025 Washington DC 20006, United States Pulse Power and Measurement Limited 21 65 Shrivenham Hundred Business Park, Watchfield, Swindon, Wiltshire SN6 8TY, United Kingdom Representaciones SSTS, CA11 Ave Francisco de Miranda, Centro Lido El Rosal Oficina 71B, Caracas, Venezuela Riptide Autonomous Solutions Canada Company 1300-1969 Upper Water Street, Purdy\u2019s Wharf Tower II, Halifax, NS, BJ3 3R7, Canada Royal Ordnance (Crown Service) Pension Scheme Trustees Limited Royal Ordnance Senior Staff Pension Scheme Trustees Limited Royal Ordnance Speciality Metals Limited 3,18 RWT Limited 3,18 Salford Electrical Instruments Limited18 10 Fleet Place, London EC4M 7RB, United Kingdom Scentcivil Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Scottish Aviation Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Sepia, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Shipbuilding (MSF) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Shipbuilding (VIC) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Stewart & Stevenson Operations (Nigeria) Limited 11 9th Floor, St. Nicholas House, 26 Catholic Mission Street, Lagos, Nigeria Stewart & Stevenson TVS UK Limited Stratsec.net Sdn Bhd Unit F-3-1, Blok F, Third Floor, CBD Perdana 3, Jalan Perdana, Cyber 12, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia Support Solutions General Services and Contracting Company/Limited Liability company 1,17 House No. 145, Street No. 1, Qtr. 611, Al Andulous Area, Al Mansour, Baghdad, Iraq TDS International Holdings Pty Limited 22 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia TDS International Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Techmodal Limited Techmodal Ventures Limited TerraSim, Inc. 8 307 Fourth Avenue, Suite 400, Pittsburgh PA 15222, United States The Blackburn Aeroplane & Motor Co Limited 3 The Bristol Aviation Company Limited3 The British & Colonial Aeroplane Co. Limited 3 The Supermarine Aviation Works Limited 3,4 Thomas Sopwith Aviation Company Limited3 VSEL Birkenhead Limited Warship Design Services Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Westover Controls Incorporated8 1098 Clark Street, Endicott NY 13760, United State Subsidiaries \u2013 not wholly-owned Advanced National Company for Aircraft Maintenance Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Development and Training Company Limited (50.98%) 23 PO Box 67775, Riyadh 11517, Kingdom of Saudi Arabia BAE Systems SDT (UK) Limited (51%) Flight Control System Management GmbH (66.6%) 24 PO Box 801109, 81663 Munich, Germany Granada Enterprises Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Hadrian Properties, Inc. (95%) 14 521 Fifth Avenue, New York NY 101075, United States International Systems Engineering Company Limited (46.2%) PO Box 54002, Riyadh 11514, Kingdom of Saudi Arabia Overhaul and Maintenance Company Holding (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Saudi Maintenance & Supply Chain Management Company Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Saudi Technology & Logistics Services Limited (65%) 3 PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia SMSCMC (UK) Limited (51%) Equity accounted investments Abercromby Property International (20.42%) 521 Fifth Avenue, New York NY 101075, United States Air Astana (49%)10 121 Kabanbay Batyr Avenue, Yessil District, Astana 010000, Kazakhstan AMSH B.V. (50%)25 Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands BAE Systems Strategic Aerospace Services WLL (49%) Building 58, Street 850, Area 23, Qatari Bin Al Fajaa, Doha, Qatar BAeHAL Software Limited (40%) 3,15 Airport Lane, HAL Estate, Bangalore 560010, India BHIC Bofors Defense Asia Sdn Bhd (49%) Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Canadian Naval Support Limited (50%) 26 3099 Barrington Street, Halifax NS B3K 5M7, Canada CTA International SAS (50%) 13 Route De La Miniere, 78034 Versailles Cedex, France Data Link Solutions L.L.C. (50%)1,19 350 Collins Road, Northeast Cedar Rapids IA 52498, United States Eurofighter Jagdflugzeug GmbH (33%)3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany European Aerosystems Limited (50%)2,3,18,22 FADEC International LLC (50%)1 1098 Clark Street, Endicott NY 13760, United States FAST Holdings Limited (50%)15,22 FAST Training Services Limited (50%)15 FNSS Savunma Sistemleri A.S (49%) 22 Og\u02d8 ulbey Mahallesi, Og\u02d8 ulbey Kumeevleri, No. 441/A, 441/B, G\u00f6lbas\u00b8 \u0131, Ankara, Turkey KBS Maritime Limited (50%)7 MBDA B.V. (37.5%) Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands MBDA Holdings S.A.S. (25%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France MBDA S.A.S. (37.5%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France Nobeli Business Support AB (34%) SE-691 80 Karlskoga, Sweden Panavia Aircraft GmbH (42.5%) 3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany Promoveo Solutions JV LLC (49%) 260 Peachtree Street NW, #2200, Atlanta GA 30303, United States Reaction Engines Limited (15.5%) Rheinmetall BAE Systems Land Limited (45%) Hadley Castle Works, PO Box 106, Telford TF1 6QW, United Kingdom Saab Bofors Test Center AB (30%) Box 418, SE-691 27 Karlskoga, Sweden Sealand Support Services Limited (33.3%) 27 MoD Sealand, Welsh Road, Sealand, Deeside, Flintshire CH5 2LS, United Kingdom Winner Developments Limited (33.3% ) Notes 1. Unincorporated entity for which the address given is the principal place of business. 2. Company limited by guarantee. 3. Directly owned by BAE Systems plc. 4. Ownership held in class of A shares, B shares and preference shares. 5. Ownership held in class of A shares and B shares. 6. In strike off. 7. Ownership held in ordinary shares and preference shares. 8. Ownership held in common shares. 9. Ownership held in common stock. 10. Ownership held in ordinary shares and redeemable preference shares. 11. Ownership held in authorized shares. 12. 40% owned by BAE Systems plc. 13. Ownership held in ordinary shares, ordinary A and ordinary B shares. 14. Unlimited company. 15. Year end 31 March. 16. Year end 5 April. 17. In liquidation. 18. In Members\u2019 Voluntary Liquidation. 19. Year end 30 September. 20. Ownership held in ordinary shares and class of A shares. 21. Ownership held in class of A, B, C, D, E, F and G ordinary shares. 22. Ownership held in class of A shares. 23. 1% owned by BAE Systems plc. 24. 33.3% owned by BAE Systems plc. 25. Ownership held in class of B shares. 26. Ownership held in common shares and B Preferred shares. 27. Ownership held in ordinary and A Cumulative Redeemable Preference shares.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-513": { "value": "Principal equity accounted investments Joint venture Principal activities Shareholding Principally operates in Eurofighter Jagdflugzeug Management and control of the European Typhoon programme 33% Germany MBDA Development and manufacture of guided weapons 37.5% Europe The following tables summarise the financial information of the Group\u2019s principal equity accounted investments included in their own financial statements, as adjusted for fair value adjustments at acquisition and differences in accounting policies, and reconcile this to the Group\u2019s interest in those equity accounted investments. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Revenue (100%) 3,693 3,590 3,165 3,513 Underlying EBIT 1 excluding depreciation and amortisation 19 574 6 512 Depreciation and amortisation (4) (152) \u2013 (117) Financial income 2 25 2 7 Financial expense (2) (13) (2) (12) Taxation expense (6) (105) (3) (107) Profit for the year (100%) 9 329 3 283 Remeasurements on post-employment benefit schemes, net of tax \u2013 310 \u2013 172 Amounts (debited)/credited to hedging reserve, net of tax \u2013 (4) \u2013 17 Foreign exchange adjustments (5) (24) \u2013 13 Total comprehensive income for the year (100%) 4 611 3 485 Group\u2019s share of total comprehensive income for the year 1 230 1 182 Non-current assets 30 2,464 32 2,280 Cash and cash equivalents 42 2,650 24 2,367 Current assets excluding cash and cash equivalents 8,591 4,697 7,630 4,210 Current assets 8,633 7,347 7,654 6,577 Non-current financial liabilities excluding trade and other payables, and provisions \u2013 (10) \u2013 (5) Other non-current liabilities (47) (20) (62) (527) Non-current liabilities (47) (30) (62) (532) Current financial liabilities excluding trade and other payables, and provisions (10) \u2013 (7) \u2013 Other current liabilities (8,581) (8,416) (7,59 0) (7,424) Current liabilities (8,591) (8,416) (7,597) (7,424) Net assets (100%) 25 1,365 27 901 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Group\u2019s share of net assets 8 512 520 9 338 347 Goodwill adjustment \u2013 8 8 \u2013 7 7 Carrying value 8 520 528 9 345 354 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Dividends received 3 80 83 2 41 43 Group summary The Group also has a number of individually immaterial joint ventures and associates, the carrying values of the most significant at 31 December 2022 are as follows: Rheinmetall BAE Systems Land (RBSL) (\u00a382m), FADEC International (\u00a348m), Air Astana (\u00a363m), FNSS (\u00a322m) and Panavia Aircraft (\u00a318m). The following table shows a reconciliation of opening to closing carrying value for both the Group\u2019s principal and immaterial joint ventures and associates in aggregate. Principal equity accounted investments \u00a3m Other joint ventures \u00a3m Other associates \u00a3m Total \u00a3m At 1 January 2021 231 96 82 409 Group\u2019s share of profit for the year 107 28 4 139 Group\u2019s share of remeasurements on post-employment benefit schemes 85 \u2013 \u2013 85 Tax on items that will not be reclassified to the income statement (21) \u2013 \u2013 (21) Foreign exchange adjustments 6 \u2013 (1) 5 Amounts credited to hedging reserve 8 4 \u2013 12 Tax on items that may be reclassified to the income statement (2) (1) \u2013 (3) Group\u2019s share of total comprehensive income for the year 183 31 3 217 Equity accounted investment funding \u2013 3 \u2013 3 Dividends received from equity accounted investments (43) (14) \u2013 (57) Foreign exchange adjustments (17) (1) \u2013 (18) At 31 December 2021 354 115 85 554 Group\u2019s share of profit for the year 126 46 8 180 Group\u2019s share of remeasurements on post-employment benefit schemes 140 \u2013 \u2013 140 Tax on items that will not be reclassified to the income statement (24) \u2013 \u2013 (24) Foreign exchange adjustments (10) \u2013 (1) (11) Amounts (debited)/credited to hedging reserve (2) 4 \u2013 2 Tax on items that may be reclassified to the income statement 1 \u2013 \u2013 1 Group\u2019s share of total comprehensive income for the year 231 50 7 288 Dividends received from equity accounted investments (83) (11) \u2013 (94) Foreign exchange adjustments 26 13 \u2013 39 At 31 December 2022 528 167 92 787 Contingent liabilities The Group is not aware of any material contingent liabilities in respect of its equity accounted investments. Equity accounted investments Abercromby Property International (20.42%) 521 Fifth Avenue, New York NY 101075, United States Air Astana (49%)10 121 Kabanbay Batyr Avenue, Yessil District, Astana 010000, Kazakhstan AMSH B.V. (50%)25 Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands BAE Systems Strategic Aerospace Services WLL (49%) Building 58, Street 850, Area 23, Qatari Bin Al Fajaa, Doha, Qatar BAeHAL Software Limited (40%) 3,15 Airport Lane, HAL Estate, Bangalore 560010, India BHIC Bofors Defense Asia Sdn Bhd (49%) Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Canadian Naval Support Limited (50%) 26 3099 Barrington Street, Halifax NS B3K 5M7, Canada CTA International SAS (50%) 13 Route De La Miniere, 78034 Versailles Cedex, France Data Link Solutions L.L.C. (50%)1,19 350 Collins Road, Northeast Cedar Rapids IA 52498, United States Eurofighter Jagdflugzeug GmbH (33%)3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany European Aerosystems Limited (50%)2,3,18,22 FADEC International LLC (50%)1 1098 Clark Street, Endicott NY 13760, United States FAST Holdings Limited (50%)15,22 FAST Training Services Limited (50%)15 FNSS Savunma Sistemleri A.S (49%) 22 Og\u02d8 ulbey Mahallesi, Og\u02d8 ulbey Kumeevleri, No. 441/A, 441/B, G\u00f6lbas\u00b8 \u0131, Ankara, Turkey KBS Maritime Limited (50%)7 MBDA B.V. (37.5%) Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands MBDA Holdings S.A.S. (25%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France MBDA S.A.S. (37.5%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France Nobeli Business Support AB (34%) SE-691 80 Karlskoga, Sweden Panavia Aircraft GmbH (42.5%) 3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany Promoveo Solutions JV LLC (49%) 260 Peachtree Street NW, #2200, Atlanta GA 30303, United States Reaction Engines Limited (15.5%) Rheinmetall BAE Systems Land Limited (45%) Hadley Castle Works, PO Box 106, Telford TF1 6QW, United Kingdom Saab Bofors Test Center AB (30%) Box 418, SE-691 27 Karlskoga, Sweden Sealand Support Services Limited (33.3%) 27 MoD Sealand, Welsh Road, Sealand, Deeside, Flintshire CH5 2LS, United Kingdom Winner Developments Limited (33.3% ) ", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-498": { "value": "Principal equity accounted investments Joint venture Principal activities Shareholding Principally operates in Eurofighter Jagdflugzeug Management and control of the European Typhoon programme 33% Germany MBDA Development and manufacture of guided weapons 37.5% Europe The following tables summarise the financial information of the Group\u2019s principal equity accounted investments included in their own financial statements, as adjusted for fair value adjustments at acquisition and differences in accounting policies, and reconcile this to the Group\u2019s interest in those equity accounted investments. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Revenue (100%) 3,693 3,590 3,165 3,513 Underlying EBIT 1 excluding depreciation and amortisation 19 574 6 512 Depreciation and amortisation (4) (152) \u2013 (117) Financial income 2 25 2 7 Financial expense (2) (13) (2) (12) Taxation expense (6) (105) (3) (107) Profit for the year (100%) 9 329 3 283 Remeasurements on post-employment benefit schemes, net of tax \u2013 310 \u2013 172 Amounts (debited)/credited to hedging reserve, net of tax \u2013 (4) \u2013 17 Foreign exchange adjustments (5) (24) \u2013 13 Total comprehensive income for the year (100%) 4 611 3 485 Group\u2019s share of total comprehensive income for the year 1 230 1 182 Non-current assets 30 2,464 32 2,280 Cash and cash equivalents 42 2,650 24 2,367 Current assets excluding cash and cash equivalents 8,591 4,697 7,630 4,210 Current assets 8,633 7,347 7,654 6,577 Non-current financial liabilities excluding trade and other payables, and provisions \u2013 (10) \u2013 (5) Other non-current liabilities (47) (20) (62) (527) Non-current liabilities (47) (30) (62) (532) Current financial liabilities excluding trade and other payables, and provisions (10) \u2013 (7) \u2013 Other current liabilities (8,581) (8,416) (7,59 0) (7,424) Current liabilities (8,591) (8,416) (7,597) (7,424) Net assets (100%) 25 1,365 27 901 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Group\u2019s share of net assets 8 512 520 9 338 347 Goodwill adjustment \u2013 8 8 \u2013 7 7 Carrying value 8 520 528 9 345 354 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Dividends received 3 80 83 2 41 43 Group summary The Group also has a number of individually immaterial joint ventures and associates, the carrying values of the most significant at 31 December 2022 are as follows: Rheinmetall BAE Systems Land (RBSL) (\u00a382m), FADEC International (\u00a348m), Air Astana (\u00a363m), FNSS (\u00a322m) and Panavia Aircraft (\u00a318m). The following table shows a reconciliation of opening to closing carrying value for both the Group\u2019s principal and immaterial joint ventures and associates in aggregate. Principal equity accounted investments \u00a3m Other joint ventures \u00a3m Other associates \u00a3m Total \u00a3m At 1 January 2021 231 96 82 409 Group\u2019s share of profit for the year 107 28 4 139 Group\u2019s share of remeasurements on post-employment benefit schemes 85 \u2013 \u2013 85 Tax on items that will not be reclassified to the income statement (21) \u2013 \u2013 (21) Foreign exchange adjustments 6 \u2013 (1) 5 Amounts credited to hedging reserve 8 4 \u2013 12 Tax on items that may be reclassified to the income statement (2) (1) \u2013 (3) Group\u2019s share of total comprehensive income for the year 183 31 3 217 Equity accounted investment funding \u2013 3 \u2013 3 Dividends received from equity accounted investments (43) (14) \u2013 (57) Foreign exchange adjustments (17) (1) \u2013 (18) At 31 December 2021 354 115 85 554 Group\u2019s share of profit for the year 126 46 8 180 Group\u2019s share of remeasurements on post-employment benefit schemes 140 \u2013 \u2013 140 Tax on items that will not be reclassified to the income statement (24) \u2013 \u2013 (24) Foreign exchange adjustments (10) \u2013 (1) (11) Amounts (debited)/credited to hedging reserve (2) 4 \u2013 2 Tax on items that may be reclassified to the income statement 1 \u2013 \u2013 1 Group\u2019s share of total comprehensive income for the year 231 50 7 288 Dividends received from equity accounted investments (83) (11) \u2013 (94) Foreign exchange adjustments 26 13 \u2013 39 At 31 December 2022 528 167 92 787 Contingent liabilities The Group is not aware of any material contingent liabilities in respect of its equity accounted investments. Equity accounted investments Abercromby Property International (20.42%) 521 Fifth Avenue, New York NY 101075, United States Air Astana (49%)10 121 Kabanbay Batyr Avenue, Yessil District, Astana 010000, Kazakhstan AMSH B.V. (50%)25 Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands BAE Systems Strategic Aerospace Services WLL (49%) Building 58, Street 850, Area 23, Qatari Bin Al Fajaa, Doha, Qatar BAeHAL Software Limited (40%) 3,15 Airport Lane, HAL Estate, Bangalore 560010, India BHIC Bofors Defense Asia Sdn Bhd (49%) Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Canadian Naval Support Limited (50%) 26 3099 Barrington Street, Halifax NS B3K 5M7, Canada CTA International SAS (50%) 13 Route De La Miniere, 78034 Versailles Cedex, France Data Link Solutions L.L.C. (50%)1,19 350 Collins Road, Northeast Cedar Rapids IA 52498, United States Eurofighter Jagdflugzeug GmbH (33%)3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany European Aerosystems Limited (50%)2,3,18,22 FADEC International LLC (50%)1 1098 Clark Street, Endicott NY 13760, United States FAST Holdings Limited (50%)15,22 FAST Training Services Limited (50%)15 FNSS Savunma Sistemleri A.S (49%) 22 Og\u02d8 ulbey Mahallesi, Og\u02d8 ulbey Kumeevleri, No. 441/A, 441/B, G\u00f6lbas\u00b8 \u0131, Ankara, Turkey KBS Maritime Limited (50%)7 MBDA B.V. (37.5%) Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands MBDA Holdings S.A.S. (25%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France MBDA S.A.S. (37.5%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France Nobeli Business Support AB (34%) SE-691 80 Karlskoga, Sweden Panavia Aircraft GmbH (42.5%) 3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany Promoveo Solutions JV LLC (49%) 260 Peachtree Street NW, #2200, Atlanta GA 30303, United States Reaction Engines Limited (15.5%) Rheinmetall BAE Systems Land Limited (45%) Hadley Castle Works, PO Box 106, Telford TF1 6QW, United Kingdom Saab Bofors Test Center AB (30%) Box 418, SE-691 27 Karlskoga, Sweden Sealand Support Services Limited (33.3%) 27 MoD Sealand, Welsh Road, Sealand, Deeside, Flintshire CH5 2LS, United Kingdom Winner Developments Limited (33.3% ) ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-476": { "value": "Principal equity accounted investments Joint venture Principal activities Shareholding Principally operates in Eurofighter Jagdflugzeug Management and control of the European Typhoon programme 33% Germany MBDA Development and manufacture of guided weapons 37.5% Europe The following tables summarise the financial information of the Group\u2019s principal equity accounted investments included in their own financial statements, as adjusted for fair value adjustments at acquisition and differences in accounting policies, and reconcile this to the Group\u2019s interest in those equity accounted investments. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Revenue (100%) 3,693 3,590 3,165 3,513 Underlying EBIT 1 excluding depreciation and amortisation 19 574 6 512 Depreciation and amortisation (4) (152) \u2013 (117) Financial income 2 25 2 7 Financial expense (2) (13) (2) (12) Taxation expense (6) (105) (3) (107) Profit for the year (100%) 9 329 3 283 Remeasurements on post-employment benefit schemes, net of tax \u2013 310 \u2013 172 Amounts (debited)/credited to hedging reserve, net of tax \u2013 (4) \u2013 17 Foreign exchange adjustments (5) (24) \u2013 13 Total comprehensive income for the year (100%) 4 611 3 485 Group\u2019s share of total comprehensive income for the year 1 230 1 182 Non-current assets 30 2,464 32 2,280 Cash and cash equivalents 42 2,650 24 2,367 Current assets excluding cash and cash equivalents 8,591 4,697 7,630 4,210 Current assets 8,633 7,347 7,654 6,577 Non-current financial liabilities excluding trade and other payables, and provisions \u2013 (10) \u2013 (5) Other non-current liabilities (47) (20) (62) (527) Non-current liabilities (47) (30) (62) (532) Current financial liabilities excluding trade and other payables, and provisions (10) \u2013 (7) \u2013 Other current liabilities (8,581) (8,416) (7,59 0) (7,424) Current liabilities (8,591) (8,416) (7,597) (7,424) Net assets (100%) 25 1,365 27 901 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Group\u2019s share of net assets 8 512 520 9 338 347 Goodwill adjustment \u2013 8 8 \u2013 7 7 Carrying value 8 520 528 9 345 354 2022 2021 Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Eurofighter Jagdflugzeug \u00a3m MBDA \u00a3m Total \u00a3m Dividends received 3 80 83 2 41 43 Group summary The Group also has a number of individually immaterial joint ventures and associates, the carrying values of the most significant at 31 December 2022 are as follows: Rheinmetall BAE Systems Land (RBSL) (\u00a382m), FADEC International (\u00a348m), Air Astana (\u00a363m), FNSS (\u00a322m) and Panavia Aircraft (\u00a318m). The following table shows a reconciliation of opening to closing carrying value for both the Group\u2019s principal and immaterial joint ventures and associates in aggregate. Principal equity accounted investments \u00a3m Other joint ventures \u00a3m Other associates \u00a3m Total \u00a3m At 1 January 2021 231 96 82 409 Group\u2019s share of profit for the year 107 28 4 139 Group\u2019s share of remeasurements on post-employment benefit schemes 85 \u2013 \u2013 85 Tax on items that will not be reclassified to the income statement (21) \u2013 \u2013 (21) Foreign exchange adjustments 6 \u2013 (1) 5 Amounts credited to hedging reserve 8 4 \u2013 12 Tax on items that may be reclassified to the income statement (2) (1) \u2013 (3) Group\u2019s share of total comprehensive income for the year 183 31 3 217 Equity accounted investment funding \u2013 3 \u2013 3 Dividends received from equity accounted investments (43) (14) \u2013 (57) Foreign exchange adjustments (17) (1) \u2013 (18) At 31 December 2021 354 115 85 554 Group\u2019s share of profit for the year 126 46 8 180 Group\u2019s share of remeasurements on post-employment benefit schemes 140 \u2013 \u2013 140 Tax on items that will not be reclassified to the income statement (24) \u2013 \u2013 (24) Foreign exchange adjustments (10) \u2013 (1) (11) Amounts (debited)/credited to hedging reserve (2) 4 \u2013 2 Tax on items that may be reclassified to the income statement 1 \u2013 \u2013 1 Group\u2019s share of total comprehensive income for the year 231 50 7 288 Dividends received from equity accounted investments (83) (11) \u2013 (94) Foreign exchange adjustments 26 13 \u2013 39 At 31 December 2022 528 167 92 787 Contingent liabilities The Group is not aware of any material contingent liabilities in respect of its equity accounted investments. Equity accounted investments Abercromby Property International (20.42%) 521 Fifth Avenue, New York NY 101075, United States Air Astana (49%)10 121 Kabanbay Batyr Avenue, Yessil District, Astana 010000, Kazakhstan AMSH B.V. (50%)25 Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands BAE Systems Strategic Aerospace Services WLL (49%) Building 58, Street 850, Area 23, Qatari Bin Al Fajaa, Doha, Qatar BAeHAL Software Limited (40%) 3,15 Airport Lane, HAL Estate, Bangalore 560010, India BHIC Bofors Defense Asia Sdn Bhd (49%) Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Canadian Naval Support Limited (50%) 26 3099 Barrington Street, Halifax NS B3K 5M7, Canada CTA International SAS (50%) 13 Route De La Miniere, 78034 Versailles Cedex, France Data Link Solutions L.L.C. (50%)1,19 350 Collins Road, Northeast Cedar Rapids IA 52498, United States Eurofighter Jagdflugzeug GmbH (33%)3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany European Aerosystems Limited (50%)2,3,18,22 FADEC International LLC (50%)1 1098 Clark Street, Endicott NY 13760, United States FAST Holdings Limited (50%)15,22 FAST Training Services Limited (50%)15 FNSS Savunma Sistemleri A.S (49%) 22 Og\u02d8 ulbey Mahallesi, Og\u02d8 ulbey Kumeevleri, No. 441/A, 441/B, G\u00f6lbas\u00b8 \u0131, Ankara, Turkey KBS Maritime Limited (50%)7 MBDA B.V. (37.5%) Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands MBDA Holdings S.A.S. (25%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France MBDA S.A.S. (37.5%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France Nobeli Business Support AB (34%) SE-691 80 Karlskoga, Sweden Panavia Aircraft GmbH (42.5%) 3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany Promoveo Solutions JV LLC (49%) 260 Peachtree Street NW, #2200, Atlanta GA 30303, United States Reaction Engines Limited (15.5%) Rheinmetall BAE Systems Land Limited (45%) Hadley Castle Works, PO Box 106, Telford TF1 6QW, United Kingdom Saab Bofors Test Center AB (30%) Box 418, SE-691 27 Karlskoga, Sweden Sealand Support Services Limited (33.3%) 27 MoD Sealand, Welsh Road, Sealand, Deeside, Flintshire CH5 2LS, United Kingdom Winner Developments Limited (33.3% ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-580": { "value": "Other investments are carried at fair value through other comprehensive income. Trade and contract receivables are measured at amortised cost under IFRS 9 Financial Instruments as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Contract receivables represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue recognised at the balance sheet date and comprise costs incurred plus attributable margin. Trade receivables, contract receivables, amounts owed by equity accounted investments and finance lease receivables include a provision for expected credit losses. The Group measures the provision at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group writes off a receivable when there is objective evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. US deferred compensation plan assets are measured at fair value in accordance with IAS 19 Employee Benefits. Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-585": { "value": "Other investments are carried at fair value through other comprehensive income. Trade and contract receivables are measured at amortised cost under IFRS 9 Financial Instruments as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Contract receivables represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue recognised at the balance sheet date and comprise costs incurred plus attributable margin. Trade receivables, contract receivables, amounts owed by equity accounted investments and finance lease receivables include a provision for expected credit losses. The Group measures the provision at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group writes off a receivable when there is objective evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. US deferred compensation plan assets are measured at fair value in accordance with IAS 19 Employee Benefits. Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. Trade and other payables are stated at amortised cost. US deferred compensation plan liabilities represent the present value of expected future payments required to settle the obligation to employees in accordance with IAS 19 Employee Benefits. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-500": { "value": "Other investments are carried at fair value through other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-532": { "value": "2022 \u00a3m 2021 \u00a3m Fair value through other comprehensive income 99 76 37. Information about related undertakings In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments as at 31 December 2022 is disclosed below. Unless otherwise stated, the Group\u2019s shareholding represents ordinary shares held indirectly by BAE Systems plc, the year end is 31 December and the address of the registered office is Warwick House, PO Box 87, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6YU, United Kingdom. For companies incorporated outside of the United Kingdom, the country of incorporation is shown in the address. No subsidiary undertakings have been excluded from the consolidation. Subsidiaries \u2013 wholly-owned 4219 Lafayette, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Aircraft Research Association Limited2 Manton Lane, Bedford MK41 7PF, United Kingdom Alvis Limited Alvis Pension Scheme Trustees Limited 3 Alvis Vickers Limited Armstrong Whitworth Aircraft Limited 3 ASC Shipbuilding Pty Limited Bldg 01, Level 2, 640 Mersey Road North, Osborne SA 5017, Australia Australian Marine Engineering Corporation (Finance) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Avro International Aerospace Limited3 BAE Systems (Al Diriyah C4i) Limited 3 BAE Systems (Canada) Inc. 220 Laurier Avenue West, Suite 1200, Ottawa ON K1P 5Z9, Canada BAE Systems (Combat and Radar Systems) Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY BAE Systems (Corporate Air Travel) Limited BAE Systems (Defence Systems) Limited BAE Systems (Dynamics) Limited BAE Systems (Farnborough 3) Limited BAE Systems (Finance) Limited BAE Systems (Funding Four) Unlimited Company Riverside One, Sir John Rogerson\u2019s Quay, Dublin D02 X576, Ireland BAE Systems (Funding Three) Limited BAE Systems (Funding Two) Limited BAE Systems (Gripen Overseas) Limited BAE Systems (Holdings) Limited 3 BAE Systems (International) Limited BAE Systems (Kazakhstan) Limited BAE Systems (Kuwait) Limited BAE Systems (Land and Sea Systems) Limited 4 BAE Systems (Malaysia) Sdn Bhd Level 25 Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems (MEH) Limited BAE Systems (Military Air) Overseas Limited BAE Systems (Nominees) Limited 3 BAE Systems (Oman) Limited BAE Systems (Operations) Limited5 BAE Systems (Operations) Singapore Pte Limited One Marina Boulevard #28-00, Singapore 018989, Singapore BAE Systems (Overseas Holdings) Limited BAE Systems (Poland) Sp. z o.o. ul. Abp. A. Baraniaka 88, 61-131 Poznan, Poland BAE Systems (Projects) Limited BAE Systems (Property Investments) Limited BAE Systems (Vehicles and Equipment) Limited 6 BAE Systems 2000 Pension Plan Trustees Limited3 BAE Systems AB 7 Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Air Japan KK 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Al Diriyah Programme Limited 3 BAE Systems Applied Intelligence (Asia Pacific) Pte Limited United Square, 101 Thomson Road, #25-03/04, 307591, Singapore BAE Systems Applied Intelligence (Connect) A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence (GCS) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence Integrated Computer Solutions (Kuwait) (S.P.C.) Al Hamra Tower, Office Number 3503, 35th Floor, East Maqwa, Kuwait City, Kuwait BAE Systems Applied Intelligence (Integration) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (International) Limited Priestley Road, Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (Japan) KK 12/F Ark Mori Building, 1-12-32 Akasaka, Minato-ku, Tokyo, 107-6024, Japan BAE Systems Applied Intelligence (Spain) S.A. Paseo de la Castellana, 141, Cuzco IV, 28046 Madrid, Spain BAE Systems Applied Intelligence (UK) Limited BAE Systems Applied Intelligence A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence GCS Inc.8 CSC, 100 Shockoe Slip, 2nd Floor Richmond VA 23219, United States BAE Systems Applied Intelligence Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence LLC 1 8000 Towers Crescent Blvd, 13th Floor, Vienna VA 22182, United States BAE Systems Applied Intelligence Malaysia Sdn Bhd Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems Applied Intelligence Pty Limited Level 26, 459 Collins Street, Melbourne VIC 3000, Australia BAE Systems Australia (Electronic Systems) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Datagate Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Pty Limited10 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Holdings Limited3 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Logistics Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Sea Sentinel Project Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Avionics Singapore Pte Limited One Marina Boulevard, #28-00, Singapore 018989, Singapore BAE Systems Bofors AB SE-691 80 Karlskoga, Sweden BAE Systems Bofors Holdings Sdn Bhd Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia BAE Systems C-ITS AB Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Communications Solutions LLC 1 Knowledge Oasis, Building 4, Second Floor, 0402-Z427, Knowledge Oasis Muscat, PO Box 16, Postal Code 135, Muscat, Oman BAE Systems Controls Inc.9 1098 Clark Street, Endicott NY 13760, United States BAE Systems Creole Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Datagate Holdings Limited BAE Systems Datagate Limited6 BAE Systems Deployed Systems Limited12 BAE Systems do Brasil Ltda SCN Quadra 5 Bloco A, Ed. Brasilia Shopping, Torre Norte, Sala 426, Brasilia, DF CEP:70715-900, Brazil BAE Systems Electronic Systems (Overseas) Limited BAE Systems Electronics Limited BAE Systems Enterprises Limited BAE Systems Executive Pension Scheme Trustees Limited3 BAE Systems Finance B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Finance Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Flight Training (Australia) Pty Limited13 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Funds Management 3,14 BAE Systems GCS International Limited BAE Systems Global Combat Systems Bridging Limited6 BAE Systems Global Combat Systems Munitions Limited BAE Systems Global LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems H\u00e4gglunds AB SE-691 80, Karlskoga, Sweden BAE Systems Hawaii Shipyards Inc. 8 The Corporation Company, Inc., 1136 Union Mall, Suite 301, Honolulu HI 96813, United States BAE Systems Holding GmbH Hauptstrasse 48, 82433 Bad Kohlgrub, Germany BAE Systems Holdings (South Africa) (Pty) Limited Central Office Park No. 5, 257 Jean Avenue, Centurion, Gauteng, 0157, South Africa BAE Systems Holdings B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Holdings Inc.9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Holdings International LLC1 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States BAE Systems Imaging Solutions Inc. 9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems India (Homeland Security) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Services) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Technology) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Ventures) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems Information and Electronic Systems Integration Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Insurance (Isle of Man) Limited Tower House, Loch Promenade, Douglas, IM1 2LZ, Isle of Man BAE Systems Integrated System Technologies (KSA) Limited BAE Systems Integrated System Technologies (Overseas) Limited BAE Systems Integrated System Technologies Limited BAE Systems International Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Jacksonville Ship Repair LLC1 8500 Hecksher Drive, Jacksonville FL 32226, United States BAE Systems Japan GK Ark Mori Building, 1-12-32 Akasaka, Minato-Ku, Tokyo, Japan BAE Systems Land & Armaments Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Land & Armaments Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land & Armaments L.P.1 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems (Finance) Limited BAE Systems Land Systems (Investments South Africa) Limited6 BAE Systems Land Systems (Investments) Limited BAE Systems Land Systems (Ranges) Limited 6 BAE Systems Land Systems ATF Limited BAE Systems Land Systems FMTV International Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems Pinzgauer (Holdings) Limited BAE Systems Land Systems Pinzgauer Limited BAE Systems MAI Turkey Hava Sistemleri A.S\u00b8 . \u00dcniversiteler Mahallesi, Beytepe Lodumlu K\u00f6y Yolu Cad. No: 5/348 \u00c7ankaya, Ankara, Turkey BAE Systems Marine (Holdings) Limited BAE Systems Marine (YSL) Limited BAE Systems Marine Limited BAE Systems Norfolk Ship Repair Inc.8 CT Corporation System, 4701 Cox Road, Suite 285, Glen Allen VA 23060-6802, United States BAE Systems Oman LLC 1 PO Box 74, Postal Code 111, Seeb, Oman BAE Systems Ordnance Systems Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Overseas Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Pension Funds CIF Trustees Limited 3 BAE Systems Pension Funds Investment Management Limited 3,16 BAE Systems Pension Funds Trustees Limited 3 BAE Systems Project Services Limited BAE Systems Projects (Canada) Limited BAE Systems Properties Limited BAE Systems Quest Limited3 BAE Systems Air Japan KK 9 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Regional Aircraft Colombia SAS 17 c/o Brigard & Urrutia, Calle 70 A No. 4-41, Bogot\u00e1, Colombia BAE Systems Resolution Inc. 8 CT Corporation System, 1999 Bryan Street, Suite 900, Dallas TX 75201, United States BAE Systems S&S Operations Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems San Diego Ship Repair Inc. 8 330 N. Brand Boulevard, Glendale CA 91203-2336, United States BAE Systems Saudi America Limited Riyadh Kingdom Centre 28th Floor (REGUS), PO Box 23088, Riyadh 11321, Central Province, Riyadh, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Maintenance and Equipment Services) Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Vehicles and Equipment Holdings) Limited 3 BAE Systems Saudi Arabia (Vehicles and Equipment Nominees) Limited 3 BAE Systems Saudi Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Servi\u00e7os de Avi\u00f4nicos Ltda. Rua Ambr\u00f3sio Molina, No. 1090. Bloco F, Eug\u00eanio de Melo, S\u00e3o Jos\u00e9 dos Campos, S\u00e3o Paulo 12.247-000, Brazil BAE Systems Share Plans Trustee Limited 3 BAE Systems Services Limited BAE Systems Shared Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Ship Repair Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Southeast Shipyards AMHC Inc.8 1200 South Pine Island Road, Plantation FL 33324, United States BAE Systems Surface Ships (Holdings) Limited BAE Systems Surface Ships (Overseas) Limited BAE Systems Surface Ships (Projects) Limited BAE Systems Surface Ships Integrated Support Limited BAE Systems Surface Ships Intermediate Holdings Limited18 BAE Systems Surface Ships International Limited BAE Systems Surface Ships Limited BAE Systems Surface Ships Maritime Limited BAE Systems Surface Ships Portsmouth Limited 18 BAE Systems Surface Ships Projects (Malaysia) Sdn Bhd Level 29 Menara Binjai, No 2 Jalan Binjai, Off Jalan Ampang, 50450 Kuala Lumpur, Malaysia BAE Systems Surface Ships Property Services Limited BAE Systems Surface Ships Support Limited 5 BAE Systems SWS Defence AB SE-691 80 Karlskoga, Sweden BAE Systems Tactical Vehicle Systems LP 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Technology Solutions & Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Training Services Limited BAE Systems TVS Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Zephyr Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fifth Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fourth Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Second Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Third Corporation 9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems, Inc. 8 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801, United States BIS Invest S.\u00e0.r.l. 2, Place de Strasbourg, L-2562, Luxembourg, Grand Duchy of Luxembourg Bohemia Interactive Australia Pty Limited Unit 2, Building A, 2 Technology Place, Williamtown NSW 2318, Australia Bohemia Interactive Simulations GK Limited Abista Kudan Blgd. 10F, 2-4-12 Kudan-minami, Tokyo, Chiyoda Ku, 102-0074, Japan Bohemia Interactive Simulations GmbH Vistra Corporate Services, Westendstra\u00dfe 28, 60325, Frankfurt am Main, Germany Bohemia Interactive Simulations, Inc.8 CT Corporation System, 1200 South Pine Island Road, Plantation FL 33324, United States Bohemia Interactive Simulations K.S. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Bohemia Interactive Simulations Korea Limited Rm 1 5/F 437 Teheran-ro, Gangnam-gu, Seoul, 06158, Republic of Korea Bohemia Interactive Simulations sp z.o.o. Ul. Ostrobramska 101, 04-041, Warsaw, Poland Bohemia Interactive Simulations (UK) Limited 31 Hercules Way, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6UU, United Kingdom Bohemia Invest One Ltd Bohemia Invest Two Ltd Brabazon Limited British Aerospace (Far East) Limited19 Level 54, Hopewell Centre, 183 Queen\u2019s Road East, Hong Kong British Aerospace (Malaysia) Sdn Bhd 19 Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia British Aircraft Corporation (Pension Fund Trustees) Limited 3 British Aircraft Corporation Limited3 CPS International, Inc.11 Benedetti & Benedetti, Comosa Building, 21st Floor, PO Box 850120, Panama 5, Panama Creole (Nigeria) Limited 5 Tapa House (2nd Floor), 45, Imman Dauda St (Abosede Kuboye Crescent Entrance) Surulere, Lagos, Nigeria Detica B.V. Luna ArenA, Herikerbergweg 238, 1101 CM Amsterdam, Netherlands Detica Group Limited Detica Mexico S. de R.L. de C.V. Torre Esmeralda II, Blvd Manuel Avila Camacho No. 36 Piso 18, Lomas de Chapultepec, 11000 D.F., Mexico Detica Services, Inc. 8 1209 Orange Street, Wilmington DE 19801, United States Dividend Training Limited ETI Engineering, Inc. 8 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States EVU Czech, S.R.O. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Gloster Aircraft Limited 3 H-B Utveckling, H-B Development AB Nybrogatan 7, SE-114 34 Stockholm, Sweden Hadrian Holdings, Inc. 521 Fifth Avenue, New York NY 101075, United States Hadrian Trustees Limited 2 H\u00e4gglunds Vehicle GmbH Ernst-Grote Strasse 13, 30916 Isernhagen, Germany Hawker Siddeley Aviation Limited 3 Hawker Siddeley Dynamics Limited3 HSA/HSD Pension Fund Trustees Limited3 Hunter Aerospace Corporation Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia In-Space Missions Limited 8 Oriel Court, Omega Park, Alton GU34 2YT, United Kingdom International Military Sales Limited Jetstream Aircraft Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Lemacrown Limited 20 MES Holdco Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY MES Interco 14 Meslink Limited Newcombe Properties Limited Pitch Technologies AB Repslagaregatan 25, SE-582 22 Link\u00f6ping, Sweden Pitch Technologies Limited Sweden House, 5 Upper Montagu Street, London W1H 2AG, United Kingdom Prismatic Limited 5 2 Omega Park, Alton GU34 2QE, United Kingdom PT. BAE Systems Services 8 Wisma 46, Kota BNI, 34th Floor, Suite 34.01.A, Jl. Jenderal Sudirman Kavling 71, Jakarta 10220, Indonesia Pulse Power and Measurement Inc. 1717 Pennsylvania Avenue, NW Suite, 1025 Washington DC 20006, United States Pulse Power and Measurement Limited 21 65 Shrivenham Hundred Business Park, Watchfield, Swindon, Wiltshire SN6 8TY, United Kingdom Representaciones SSTS, CA11 Ave Francisco de Miranda, Centro Lido El Rosal Oficina 71B, Caracas, Venezuela Riptide Autonomous Solutions Canada Company 1300-1969 Upper Water Street, Purdy\u2019s Wharf Tower II, Halifax, NS, BJ3 3R7, Canada Royal Ordnance (Crown Service) Pension Scheme Trustees Limited Royal Ordnance Senior Staff Pension Scheme Trustees Limited Royal Ordnance Speciality Metals Limited 3,18 RWT Limited 3,18 Salford Electrical Instruments Limited18 10 Fleet Place, London EC4M 7RB, United Kingdom Scentcivil Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Scottish Aviation Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Sepia, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Shipbuilding (MSF) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Shipbuilding (VIC) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Stewart & Stevenson Operations (Nigeria) Limited 11 9th Floor, St. Nicholas House, 26 Catholic Mission Street, Lagos, Nigeria Stewart & Stevenson TVS UK Limited Stratsec.net Sdn Bhd Unit F-3-1, Blok F, Third Floor, CBD Perdana 3, Jalan Perdana, Cyber 12, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia Support Solutions General Services and Contracting Company/Limited Liability company 1,17 House No. 145, Street No. 1, Qtr. 611, Al Andulous Area, Al Mansour, Baghdad, Iraq TDS International Holdings Pty Limited 22 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia TDS International Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Techmodal Limited Techmodal Ventures Limited TerraSim, Inc. 8 307 Fourth Avenue, Suite 400, Pittsburgh PA 15222, United States The Blackburn Aeroplane & Motor Co Limited 3 The Bristol Aviation Company Limited3 The British & Colonial Aeroplane Co. Limited 3 The Supermarine Aviation Works Limited 3,4 Thomas Sopwith Aviation Company Limited3 VSEL Birkenhead Limited Warship Design Services Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Westover Controls Incorporated8 1098 Clark Street, Endicott NY 13760, United State s Subsidiaries \u2013 not wholly-owned Advanced National Company for Aircraft Maintenance Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Development and Training Company Limited (50.98%) 23 PO Box 67775, Riyadh 11517, Kingdom of Saudi Arabia BAE Systems SDT (UK) Limited (51%) Flight Control System Management GmbH (66.6%) 24 PO Box 801109, 81663 Munich, Germany Granada Enterprises Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Hadrian Properties, Inc. (95%) 14 521 Fifth Avenue, New York NY 101075, United States International Systems Engineering Company Limited (46.2%) PO Box 54002, Riyadh 11514, Kingdom of Saudi Arabia Overhaul and Maintenance Company Holding (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Saudi Maintenance & Supply Chain Management Company Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Saudi Technology & Logistics Services Limited (65%) 3 PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia SMSCMC (UK) Limited (51%) ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-550": { "value": "Trade and contract receivables are measured at amortised cost under IFRS 9 Financial Instruments as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Contract receivables represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue recognised at the balance sheet date and comprise costs incurred plus attributable margin. Trade receivables, contract receivables, amounts owed by equity accounted investments and finance lease receivables include a provision for expected credit losses. The Group measures the provision at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group writes off a receivable when there is objective evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. US deferred compensation plan assets are measured at fair value in accordance with IAS 19 Employee Benefits. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-450": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Contract receivables 20 21 Prepayments 201 70 Accrued income 1 1 US deferred compensation plan assets 328 376 Finance lease receivables (note 10) 24 33 Other receivables 44 50 618 551 Current Contract receivables 3,473 2,671 Trade receivables 1,506 1,043 Amounts owed by equity accounted investments (note 33) 75 34 Prepayments 509 444 Accrued income 62 53 Finance lease receivables (note 10) 10 11 Other receivables 1 531 569 6,166 4,825 1. Includes \u00a3329m (2021 \u00a3419m) in relation to VAT receivable in the Kingdom of Saudi Arabia. Trade receivables are stated net of a provision for expected credit losses. Disclosures relating to the ageing of trade receivables and movements in the provision for expected credit losses are provided in note 15. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-477": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Contract receivables 20 21 Prepayments 201 70 Accrued income 1 1 US deferred compensation plan assets 328 376 Finance lease receivables (note 10) 24 33 Other receivables 44 50 618 551 Current Contract receivables 3,473 2,671 Trade receivables 1,506 1,043 Amounts owed by equity accounted investments (note 33) 75 34 Prepayments 509 444 Accrued income 62 53 Finance lease receivables (note 10) 10 11 Other receivables 1 531 569 6,166 4,825 1. Includes \u00a3329m (2021 \u00a3419m) in relation to VAT receivable in the Kingdom of Saudi Arabia. Trade receivables are stated net of a provision for expected credit losses. Disclosures relating to the ageing of trade receivables and movements in the provision for expected credit losses are provided in note 15. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-499": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Contract receivables 20 21 Prepayments 201 70 Accrued income 1 1 US deferred compensation plan assets 328 376 Finance lease receivables (note 10) 24 33 Other receivables 44 50 618 551 Current Contract receivables 3,473 2,671 Trade receivables 1,506 1,043 Amounts owed by equity accounted investments (note 33) 75 34 Prepayments 509 444 Accrued income 62 53 Finance lease receivables (note 10) 10 11 Other receivables 1 531 569 6,166 4,825 1. Includes \u00a3329m (2021 \u00a3419m) in relation to VAT receivable in the Kingdom of Saudi Arabia. Trade receivables are stated net of a provision for expected credit losses. Disclosures relating to the ageing of trade receivables and movements in the provision for expected credit losses are provided in note 15. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-514": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Contract receivables 20 21 Prepayments 201 70 Accrued income 1 1 US deferred compensation plan assets 328 376 Finance lease receivables (note 10) 24 33 Other receivables 44 50 618 551 Current Contract receivables 3,473 2,671 Trade receivables 1,506 1,043 Amounts owed by equity accounted investments (note 33) 75 34 Prepayments 509 444 Accrued income 62 53 Finance lease receivables (note 10) 10 11 Other receivables 1 531 569 6,166 4,825 1. Includes \u00a3329m (2021 \u00a3419m) in relation to VAT receivable in the Kingdom of Saudi Arabia. Trade receivables are stated net of a provision for expected credit losses. Disclosures relating to the ageing of trade receivables and movements in the provision for expected credit losses are provided in note 15. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-533": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Contract receivables 20 21 Prepayments 201 70 Accrued income 1 1 US deferred compensation plan assets 328 376 Finance lease receivables (note 10) 24 33 Other receivables 44 50 618 551 Current Contract receivables 3,473 2,671 Trade receivables 1,506 1,043 Amounts owed by equity accounted investments (note 33) 75 34 Prepayments 509 444 Accrued income 62 53 Finance lease receivables (note 10) 10 11 Other receivables 1 531 569 6,166 4,825 1. Includes \u00a3329m (2021 \u00a3419m) in relation to VAT receivable in the Kingdom of Saudi Arabia. Trade receivables are stated net of a provision for expected credit losses. Disclosures relating to the ageing of trade receivables and movements in the provision for expected credit losses are provided in note 15. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-586": { "value": "Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. Trade and other payables are stated at amortised cost. US deferred compensation plan liabilities represent the present value of expected future payments required to settle the obligation to employees in accordance with IAS 19 Employee Benefits. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-583": { "value": "Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-577": { "value": "Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-571": { "value": "Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-551": { "value": "Derivative financial instruments and hedging activities The international nature of the Group\u2019s business means it is exposed to volatility in currency exchange rates. In order to protect itself against currency fluctuations, the Group\u2019s policy is to hedge all material firm transactional exposures. The Group uses interest rate derivative instruments to manage the Group\u2019s exposure to interest rate fluctuations on its borrowings and deposits by varying the proportion of fixed rate debt relative to floating rate debt over the forward time horizon. The Group uses foreign exchange derivative instruments to manage the Group\u2019s exposure to currency fluctuations on its borrowings and deposits with the Group\u2019s subsidiaries and equity accounted investments. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. The Group aims to achieve hedge accounting treatment for all derivatives that hedge material foreign currency exposures. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, such instruments are stated at fair value at the balance sheet date. The fair values are estimated by discounting expected future cash flows and then adjusting for credit risk and market risk. Fair value through profit or loss Gains and losses on derivative financial instruments that are not designated as cash flow hedges are recognised within finance costs in the income statement for the year. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows relating to a highly probable forecast transaction (income or expense) or recognised asset or liability, the effective portion of any change in the fair value of the instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Amounts recognised in equity are removed from the hedging reserve and included in the cost of the underlying transaction or reclassified to the income statement when the underlying transaction affects profit or loss. These amounts are presented within the same line item in the income statement as the underlying transaction, typically revenue or operating costs. The ineffective portion of any change in the fair value of the instrument is recognised in the income statement within finance costs immediately. The Group treats the foreign currency basis element of the designated foreign exchange derivative hedging instruments as a cost of hedging and as such it is excluded from the hedge designation. Any hedges entered into on behalf of equity accounted investments (note 33) are classified as cash flow hedges. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-451": { "value": "2022 2021 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Non-current Cash flow hedges \u2013 foreign exchange contracts 175 (237) 191 (172) Debt-related derivative financial instruments 147 (35) 114 (130) 322 (272) 305 (302) Current Cash flow hedges \u2013 foreign exchange contracts 229 (249) 186 (181) Other foreign exchange/interest rate contracts 23 (79) 8 (33) 252 (328) 194 (214) Debt-related derivative financial instruments The debt-related derivative financial instruments represent the fair value of cross-currency, interest rate and foreign exchange derivatives relating to the US$800m 3.8% bond, repayable 2024, the US$500m 7.5% bond, repayable 2027, the US$1,300m 3.4% bond, repayable 2030, and the US$400m 5.8% bond, repayable 2041 (see note 22). These derivatives have been entered into specifically to manage the Group\u2019s exposure to foreign exchange or interest rate risk. Interest rate risk The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps. The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets. Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below: 2022 2021 Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013 Loans and overdrafts 745 745 745 661 661 661 The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%). IBOR reform The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the swaps. The Group has no other derivatives that reference IBOR benchmarks. The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA. Sensitivity analysis A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost to the Group by approximately \u00a37.3m (2021 \u00a37m). In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the impact can be linearly interpolated. Liquidity risk Contractual cash outflows on financial liabilities The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg. 2022 2021 Contracted cash outflow Contracted cash outflow Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Cash outflows without directly offsetting inflows Accruals1 (2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855) Trade and other payables 2 (2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867) Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509) Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226) (11,037) (10,078) Cash outflows with largely offsetting inflows 3 Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763) Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381) Other foreign exchange/interest rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417) Other foreign exchange/interest rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250) Debt-related derivatives \u2013 financial assets 4 147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976) Debt-related derivatives \u2013 financial liabilities 4 (35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750) (26) (17) (11,063) (10,095) 1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities. 2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been re-presented in the current year to reflect this change. 3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows are expected to largely offset all outflows presented within this table. 4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated inflow in the current year, and the prior year comparatives have been re-presented to reflect this change. Borrowing facilities The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities. At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper in issue (2021 \u00a3nil). Currency risk The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar. The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow hedge accounting to these transactions. The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship can be demonstrated on an ongoing basis. The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting risk positions as hedged items. The Group considers the potential sources of hedge ineffectiveness to be: \u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date; \u2013 changes to the timing and amount of forecast transactions; and \u2013 non-occurrence of the designated hedged items. Ineffectiveness due to foreign currency basis was highly immaterial. The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate: 2022 2021 Currency purchased Currency sold Currency purchased Currency sold (Purchase)/sale contracts Maturity date Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347 Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210 Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13 Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117 Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727 Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159 Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060 Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620 Later than five years n/a (379) n/a 378 n/a (13) n/a 13 Cash flow hedges (15,581) 16,222 (12,206) 13,266 The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows: 2022 2021 (Purchase)/sale contracts Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24 Sterling/euro 9 (9) (378) 17 5 (5) (452) 10 Other (5) 5 13 3 (5) 5 (10) (10) Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24 Sensitivity analysis The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments. The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m). The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m). Credit risk For trade receivables, contract receivables, amounts due from equity accounted investments and finance lease receivables, the Group measures a provision for expected credit losses at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group\u2019s assessment is that credit risk in relation to defence-related sales to government customers or subcontractors to governments is extremely low as the probability of default is insignificant; therefore the provision for expected credit losses is immaterial in respect of receivables from these customers. For all non-government commercial customers, the Group assesses expected credit losses, including risk arising from global economic uncertainty; however, this is not considered material to the financial statements. The Group considers that default has occurred when a receivable is past 180 days overdue, because historical experience indicates that these receivables are generally not recoverable. The Group recognises a provision of 100% against all receivables over 180 days past due unless there is evidence that individual receivables in this category are recoverable. The carrying amount of the Group\u2019s financial assets represents the maximum exposure to credit risk. Movements on the provision for expected credit losses are as follows: 2022 \u00a3m 2021 \u00a3m At 1 January 15 36 Net remeasurement of loss allowance 7 (19) Amounts written off (2) (2) At 31 December 20 15 For contract receivables, amounts due from equity accounted investments and finance lease receivables the expected credit loss provision is immaterial as the probability of default is insignificant. The Group writes off a receivable when there is evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. None of the trade receivables that were written off during the year are still subject to enforcement activity. The ageing of trade receivables is detailed below: 2022 2021 Gross \u00a3m Provision \u00a3m Net \u00a3m Gross \u00a3m Provision \u00a3m Net \u00a3m Not past due 969 \u2013 969 783 \u2013 783 Up to 180 days overdue 499 (1) 498 223 (1) 222 Past 180 days overdue 58 (19) 39 52 (14) 38 1,526 (20) 1,506 1,058 (15) 1,043 Cash management Cash flow forecasting is performed by the businesses on a monthly basis. The Group monitors a rolling forecast of its liquidity requirements to ensure that there is sufficient cash to meet operational needs and maintain adequate headroom. Surplus cash held by the businesses over and above balances required for working capital management is loaned to the Group\u2019s centralised treasury department. Surplus cash is invested in instant-access current accounts, short-term deposits and money market funds, choosing instruments with appropriate maturities or sufficient liquidity to provide adequate headroom as determined by cash forecasts. The Group\u2019s objective is to monitor and control counterparty credit risk and credit limit utilisation. The Group adopts a conservative approach to the investment of its surplus cash which is deposited with financial institutions with investment-grade (BBB- and above) credit ratings for short periods. The cash and cash equivalents balance at 31 December 2022 of \u00a33,107m (2021 \u00a32,917m) was invested with 44 (2021 36) financial institutions. A credit limit is allocated to each institution taking account of its market capitalisation, credit rating and credit default swap price. The cash and cash equivalents of the Group are invested in non-speculative financial instruments which are usually highly liquid, such as short-term deposits. The Group therefore believes it has reduced its exposure to counterparty credit risk through this process. The cash and cash equivalents balance is subject to review for impairment under IFRS 9 as set out below: Counterparty credit rating at 31 December 2022 2021 AAA to AA- 67% 68% A+ to A- 32% 31% BBB+ to BBB- 1% 1% Offsetting financial assets and liabilities 2022 2021 Balance sheet \u00a3m Amounts not offset \u00a3m Net balances \u00a3m Balance sheet \u00a3m Amounts not offset \u00a3m Net balances \u00a3m Assets Other financial assets 574 (455) 119 499 (383) 116 Liabilities Other financial liabilities (600) 455 (145) (516) 383 (133) ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-501": { "value": "2022 2021 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Non-current Cash flow hedges \u2013 foreign exchange contracts 175 (237) 191 (172) Debt-related derivative financial instruments 147 (35) 114 (130) 322 (272) 305 (302) Current Cash flow hedges \u2013 foreign exchange contracts 229 (249) 186 (181) Other foreign exchange/interest rate contracts 23 (79) 8 (33) 252 (328) 194 (214) Debt-related derivative financial instruments The debt-related derivative financial instruments represent the fair value of cross-currency, interest rate and foreign exchange derivatives relating to the US$800m 3.8% bond, repayable 2024, the US$500m 7.5% bond, repayable 2027, the US$1,300m 3.4% bond, repayable 2030, and the US$400m 5.8% bond, repayable 2041 (see note 22). These derivatives have been entered into specifically to manage the Group\u2019s exposure to foreign exchange or interest rate risk. Interest rate risk The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps. The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets. Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below: 2022 2021 Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013 Loans and overdrafts 745 745 745 661 661 661 The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%). IBOR reform The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the swaps. The Group has no other derivatives that reference IBOR benchmarks. The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA. Sensitivity analysis A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost to the Group by approximately \u00a37.3m (2021 \u00a37m). In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the impact can be linearly interpolated. Liquidity risk Contractual cash outflows on financial liabilities The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg. 2022 2021 Contracted cash outflow Contracted cash outflow Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Cash outflows without directly offsetting inflows Accruals1 (2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855) Trade and other payables 2 (2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867) Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509) Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226) (11,037) (10,078) Cash outflows with largely offsetting inflows 3 Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763) Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381) Other foreign exchange/interest rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417) Other foreign exchange/interest rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250) Debt-related derivatives \u2013 financial assets 4 147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976) Debt-related derivatives \u2013 financial liabilities 4 (35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750) (26) (17) (11,063) (10,095) 1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities. 2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been re-presented in the current year to reflect this change. 3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows are expected to largely offset all outflows presented within this table. 4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated inflow in the current year, and the prior year comparatives have been re-presented to reflect this change. Borrowing facilities The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities. At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper in issue (2021 \u00a3nil). Currency risk The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar. The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow hedge accounting to these transactions. The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship can be demonstrated on an ongoing basis. The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting risk positions as hedged items. The Group considers the potential sources of hedge ineffectiveness to be: \u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date; \u2013 changes to the timing and amount of forecast transactions; and \u2013 non-occurrence of the designated hedged items. Ineffectiveness due to foreign currency basis was highly immaterial. The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate: 2022 2021 Currency purchased Currency sold Currency purchased Currency sold (Purchase)/sale contracts Maturity date Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347 Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210 Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13 Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117 Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727 Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159 Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060 Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620 Later than five years n/a (379) n/a 378 n/a (13) n/a 13 Cash flow hedges (15,581) 16,222 (12,206) 13,266 The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows: 2022 2021 (Purchase)/sale contracts Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24 Sterling/euro 9 (9) (378) 17 5 (5) (452) 10 Other (5) 5 13 3 (5) 5 (10) (10) Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24 Sensitivity analysis The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments. The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m). The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-515": { "value": "2022 2021 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Non-current Cash flow hedges \u2013 foreign exchange contracts 175 (237) 191 (172) Debt-related derivative financial instruments 147 (35) 114 (130) 322 (272) 305 (302) Current Cash flow hedges \u2013 foreign exchange contracts 229 (249) 186 (181) Other foreign exchange/interest rate contracts 23 (79) 8 (33) 252 (328) 194 (214) Debt-related derivative financial instruments The debt-related derivative financial instruments represent the fair value of cross-currency, interest rate and foreign exchange derivatives relating to the US$800m 3.8% bond, repayable 2024, the US$500m 7.5% bond, repayable 2027, the US$1,300m 3.4% bond, repayable 2030, and the US$400m 5.8% bond, repayable 2041 (see note 22). These derivatives have been entered into specifically to manage the Group\u2019s exposure to foreign exchange or interest rate risk. Interest rate risk The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps. The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets. Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below: 2022 2021 Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013 Loans and overdrafts 745 745 745 661 661 661 The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%). IBOR reform The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the swaps. The Group has no other derivatives that reference IBOR benchmarks. The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA. Sensitivity analysis A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost to the Group by approximately \u00a37.3m (2021 \u00a37m). In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the impact can be linearly interpolated. Contractual cash outflows on financial liabilities The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg. 2022 2021 Contracted cash outflow Contracted cash outflow Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Cash outflows without directly offsetting inflows Accruals1 (2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855) Trade and other payables 2 (2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867) Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509) Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226) (11,037) (10,078) Cash outflows with largely offsetting inflows 3 Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763) Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381) Other foreign exchange/interest rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417) Other foreign exchange/interest rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250) Debt-related derivatives \u2013 financial assets 4 147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976) Debt-related derivatives \u2013 financial liabilities 4 (35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750) (26) (17) (11,063) (10,095) 1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities. 2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been re-presented in the current year to reflect this change. 3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows are expected to largely offset all outflows presented within this table. 4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated inflow in the current year, and the prior year comparatives have been re-presented to reflect this change. Borrowing facilities The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities. At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper in issue (2021 \u00a3nil). Currency risk The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar. The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow hedge accounting to these transactions. The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship can be demonstrated on an ongoing basis. The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting risk positions as hedged items. The Group considers the potential sources of hedge ineffectiveness to be: \u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date; \u2013 changes to the timing and amount of forecast transactions; and \u2013 non-occurrence of the designated hedged items. Ineffectiveness due to foreign currency basis was highly immaterial. The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate: 2022 2021 Currency purchased Currency sold Currency purchased Currency sold (Purchase)/sale contracts Maturity date Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347 Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210 Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13 Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117 Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727 Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159 Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060 Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620 Later than five years n/a (379) n/a 378 n/a (13) n/a 13 Cash flow hedges (15,581) 16,222 (12,206) 13,266 The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows: 2022 2021 (Purchase)/sale contracts Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24 Sterling/euro 9 (9) (378) 17 5 (5) (452) 10 Other (5) 5 13 3 (5) 5 (10) (10) Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24 Sensitivity analysis The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments. The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m). The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-534": { "value": "2022 2021 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Non-current Cash flow hedges \u2013 foreign exchange contracts 175 (237) 191 (172) Debt-related derivative financial instruments 147 (35) 114 (130) 322 (272) 305 (302) Current Cash flow hedges \u2013 foreign exchange contracts 229 (249) 186 (181) Other foreign exchange/interest rate contracts 23 (79) 8 (33) 252 (328) 194 (214) Debt-related derivative financial instruments The debt-related derivative financial instruments represent the fair value of cross-currency, interest rate and foreign exchange derivatives relating to the US$800m 3.8% bond, repayable 2024, the US$500m 7.5% bond, repayable 2027, the US$1,300m 3.4% bond, repayable 2030, and the US$400m 5.8% bond, repayable 2041 (see note 22). These derivatives have been entered into specifically to manage the Group\u2019s exposure to foreign exchange or interest rate risk. Interest rate risk The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps. The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets. Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below: 2022 2021 Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013 Loans and overdrafts 745 745 745 661 661 661 The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%). IBOR reform The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the swaps. The Group has no other derivatives that reference IBOR benchmarks. The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA. Sensitivity analysis A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost to the Group by approximately \u00a37.3m (2021 \u00a37m). In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the impact can be linearly interpolated. Contractual cash outflows on financial liabilities The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg. 2022 2021 Contracted cash outflow Contracted cash outflow Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Cash outflows without directly offsetting inflows Accruals1 (2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855) Trade and other payables 2 (2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867) Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509) Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226) (11,037) (10,078) Cash outflows with largely offsetting inflows 3 Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763) Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381) Other foreign exchange/interest rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417) Other foreign exchange/interest rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250) Debt-related derivatives \u2013 financial assets 4 147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976) Debt-related derivatives \u2013 financial liabilities 4 (35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750) (26) (17) (11,063) (10,095) 1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities. 2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been re-presented in the current year to reflect this change. 3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows are expected to largely offset all outflows presented within this table. 4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated inflow in the current year, and the prior year comparatives have been re-presented to reflect this change. Borrowing facilities The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities. At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper in issue (2021 \u00a3nil). Currency risk The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar. The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow hedge accounting to these transactions. The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship can be demonstrated on an ongoing basis. The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting risk positions as hedged items. The Group considers the potential sources of hedge ineffectiveness to be: \u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date; \u2013 changes to the timing and amount of forecast transactions; and \u2013 non-occurrence of the designated hedged items. Ineffectiveness due to foreign currency basis was highly immaterial. The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate: 2022 2021 Currency purchased Currency sold Currency purchased Currency sold (Purchase)/sale contracts Maturity date Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347 Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210 Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13 Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117 Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727 Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159 Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060 Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620 Later than five years n/a (379) n/a 378 n/a (13) n/a 13 Cash flow hedges (15,581) 16,222 (12,206) 13,266 The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows: 2022 2021 (Purchase)/sale contracts Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24 Sterling/euro 9 (9) (378) 17 5 (5) (452) 10 Other (5) 5 13 3 (5) 5 (10) (10) Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24 Sensitivity analysis The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments. The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m). The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m). Credit risk For trade receivables, contract receivables, amounts due from equity accounted investments and finance lease receivables, the Group measures a provision for expected credit losses at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group\u2019s assessment is that credit risk in relation to defence-related sales to government customers or subcontractors to governments is extremely low as the probability of default is insignificant; therefore the provision for expected credit losses is immaterial in respect of receivables from these customers. For all non-government commercial customers, the Group assesses expected credit losses, including risk arising from global economic uncertainty; however, this is not considered material to the financial statements. The Group considers that default has occurred when a receivable is past 180 days overdue, because historical experience indicates that these receivables are generally not recoverable. The Group recognises a provision of 100% against all receivables over 180 days past due unless there is evidence that individual receivables in this category are recoverable. The carrying amount of the Group\u2019s financial assets represents the maximum exposure to credit risk. Movements on the provision for expected credit losses are as follows: 2022 \u00a3m 2021 \u00a3m At 1 January 15 36 Net remeasurement of loss allowance 7 (19) Amounts written off (2) (2) At 31 December 20 15 For contract receivables, amounts due from equity accounted investments and finance lease receivables the expected credit loss provision is immaterial as the probability of default is insignificant. The Group writes off a receivable when there is evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. None of the trade receivables that were written off during the year are still subject to enforcement activity. The ageing of trade receivables is detailed below: 2022 2021 Gross \u00a3m Provision \u00a3m Net \u00a3m Gross \u00a3m Provision \u00a3m Net \u00a3m Not past due 969 \u2013 969 783 \u2013 783 Up to 180 days overdue 499 (1) 498 223 (1) 222 Past 180 days overdue 58 (19) 39 52 (14) 38 1,526 (20) 1,506 1,058 (15) 1,043 Cash management Cash flow forecasting is performed by the businesses on a monthly basis. The Group monitors a rolling forecast of its liquidity requirements to ensure that there is sufficient cash to meet operational needs and maintain adequate headroom. Surplus cash held by the businesses over and above balances required for working capital management is loaned to the Group\u2019s centralised treasury department. Surplus cash is invested in instant-access current accounts, short-term deposits and money market funds, choosing instruments with appropriate maturities or sufficient liquidity to provide adequate headroom as determined by cash forecasts. The Group\u2019s objective is to monitor and control counterparty credit risk and credit limit utilisation. The Group adopts a conservative approach to the investment of its surplus cash which is deposited with financial institutions with investment-grade (BBB- and above) credit ratings for short periods. The cash and cash equivalents balance at 31 December 2022 of \u00a33,107m (2021 \u00a32,917m) was invested with 44 (2021 36) financial institutions. A credit limit is allocated to each institution taking account of its market capitalisation, credit rating and credit default swap price. The cash and cash equivalents of the Group are invested in non-speculative financial instruments which are usually highly liquid, such as short-term deposits. The Group therefore believes it has reduced its exposure to counterparty credit risk through this process. The cash and cash equivalents balance is subject to review for impairment under IFRS 9 as set out below: Counterparty credit rating at 31 December 2022 2021 AAA to AA- 67% 68% A+ to A- 32% 31% BBB+ to BBB- 1% 1% Offsetting financial assets and liabilities 2022 2021 Balance sheet \u00a3m Amounts not offset \u00a3m Net balances \u00a3m Balance sheet \u00a3m Amounts not offset \u00a3m Net balances \u00a3m Assets Other financial assets 574 (455) 119 499 (383) 116 Liabilities Other financial liabilities (600) 455 (145) (516) 383 (133) ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-538": { "value": "2022 2021 Assets \u00a3m Liabilities \u00a3m Assets \u00a3m Liabilities \u00a3m Non-current Cash flow hedges \u2013 foreign exchange contracts 175 (237) 191 (172) Debt-related derivative financial instruments 147 (35) 114 (130) 322 (272) 305 (302) Current Cash flow hedges \u2013 foreign exchange contracts 229 (249) 186 (181) Other foreign exchange/interest rate contracts 23 (79) 8 (33) 252 (328) 194 (214) Debt-related derivative financial instruments The debt-related derivative financial instruments represent the fair value of cross-currency, interest rate and foreign exchange derivatives relating to the US$800m 3.8% bond, repayable 2024, the US$500m 7.5% bond, repayable 2027, the US$1,300m 3.4% bond, repayable 2030, and the US$400m 5.8% bond, repayable 2041 (see note 22). These derivatives have been entered into specifically to manage the Group\u2019s exposure to foreign exchange or interest rate risk. Interest rate risk The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps. The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets. Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below: 2022 2021 Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013 Loans and overdrafts 745 745 745 661 661 661 The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%). IBOR reform The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the swaps. The Group has no other derivatives that reference IBOR benchmarks. The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA. Sensitivity analysis A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost to the Group by approximately \u00a37.3m (2021 \u00a37m). In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the impact can be linearly interpolated. Liquidity risk Contractual cash outflows on financial liabilities The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg. 2022 2021 Contracted cash outflow Contracted cash outflow Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Cash outflows without directly offsetting inflows Accruals1 (2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855) Trade and other payables 2 (2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867) Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509) Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226) (11,037) (10,078) Cash outflows with largely offsetting inflows 3 Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763) Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381) Other foreign exchange/interest rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417) Other foreign exchange/interest rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250) Debt-related derivatives \u2013 financial assets 4 147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976) Debt-related derivatives \u2013 financial liabilities 4 (35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750) (26) (17) (11,063) (10,095) 1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities. 2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been re-presented in the current year to reflect this change. 3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows are expected to largely offset all outflows presented within this table. 4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated inflow in the current year, and the prior year comparatives have been re-presented to reflect this change. Borrowing facilities The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities. At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper in issue (2021 \u00a3nil). Currency risk The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar. The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow hedge accounting to these transactions. The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship can be demonstrated on an ongoing basis. The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting risk positions as hedged items. The Group considers the potential sources of hedge ineffectiveness to be: \u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date; \u2013 changes to the timing and amount of forecast transactions; and \u2013 non-occurrence of the designated hedged items. Ineffectiveness due to foreign currency basis was highly immaterial. The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate: 2022 2021 Currency purchased Currency sold Currency purchased Currency sold (Purchase)/sale contracts Maturity date Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347 Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210 Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13 Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117 Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727 Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159 Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060 Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620 Later than five years n/a (379) n/a 378 n/a (13) n/a 13 Cash flow hedges (15,581) 16,222 (12,206) 13,266 The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows: 2022 2021 (Purchase)/sale contracts Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24 Sterling/euro 9 (9) (378) 17 5 (5) (452) 10 Other (5) 5 13 3 (5) 5 (10) (10) Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24 Sensitivity analysis The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments. The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m). The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m). 31. Fair value measurement Fair value of financial instruments Certain of the Group\u2019s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date. The fair values of financial instruments held at fair value have been determined based on available market information at the balance sheet date, and the valuation methodologies listed below: \u2013 the fair values of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the appropriate balance sheet rates; \u2013 the fair values of both interest rate and cross-currency swaps are calculated by discounting expected future principal and interest cash flows and translating at the appropriate balance sheet rates; and \u2013 the fair values of money market funds are calculated by multiplying the net asset value per share by the investment held at the balance sheet date. Due to the variability of the valuation factors, the fair values presented at 31 December may not be indicative of the amounts the Group will realise in the future. Fair value hierarchy The fair value measurement hierarchy is as follows: \u2013 Level 1 \u2013 Quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2013 Level 2 \u2013 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2013 Level 3 \u2013 Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). Carrying amounts and fair values of certain financial instruments 2022 2021 Notes Carrying amount \u00a3m Fair value \u00a3m Carrying amount \u00a3m Fair value \u00a3m Financial instruments measured at fair value: Non-current Other investments at fair value through other comprehensive income 13 99 99 76 76 Other financial assets 15 322 322 305 305 Other financial liabilities 15 (272) (272) (302) (302) Current Other financial assets 15 252 252 194 194 Money market funds 19 1,149 1,149 1,171 1,171 Other financial liabilities 15 (328) (328) (214) (214) Financial instruments not measured at fair value: Non-current Loans 22 (5,189) (4,588) (4,604) (5,045) Current Loans and overdrafts 22 (53) (53) (457) (462) All of the financial assets and liabilities measured at fair value are classified as level 2 using the fair value hierarchy, except for money market funds, which are classified as level 1, and other investments, which are at a combination of level 1 and level 3. The total value of investments classified as level 3 is immaterial. There were no transfers between levels during the year. Financial assets and liabilities in the Group\u2019s Consolidated balance sheet are either held at fair value or at amortised cost. With the exception of loans, the carrying value of financial instruments measured at amortised cost approximates their fair value. The fair value of loans presented in the table above is derived from market prices, classified as level 1 using the fair value hierarchy. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsDesignatedAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-478": { "value": "Interest rate risk The Group\u2019s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt relative to floating rate debt with derivative instruments, including interest rate and cross-currency swaps. The Group\u2019s interest rate management policy is that a minimum of 50% (2021 50%) and a maximum of 90% (2021 90%) of gross debt is maintained at fixed interest rates. At 31 December 2022, the Group had 85% (2021 87%) of fixed rate debt and 15% (2021 13%) of floating rate debt based on a gross debt of \u00a35.0bn (2021 \u00a35.1bn), including debt-related derivative financial assets. Based on contracted maturities and/or repricing dates, the following amounts are exposed to interest rate risk over the future as shown below: 2022 2021 Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Within one year \u00a3m Between one and two years \u00a3m Later than two years \u00a3m Cash and cash equivalents 3,107 \u2013 \u2013 2,917 \u2013 \u2013 Loans and overdrafts 745 745 745 661 661 661 The floating rate debt has been predominantly achieved by entering into interest rate swaps which swap the fixed rate US dollar interest payable on debt into either floating rate sterling or US dollars. At the end of 2022, the Group had a total of $0.9bn (2021 $0.9bn) of this type of swap outstanding with a weighted average duration of 1.8 years (2021 2.8 years). In respect of the fixed rate debt, the weighted average period in respect of which interest is fixed was 12.9 years (2021 12.2 years). Given the level of short-term interest rates during the year, the average cost of the floating rate debt was 4.2% (2021 2.6%) on US dollars. The cost of the fixed rate debt was 3.7% (2021 3.8%). IBOR reform The Group has interest rate swaps that reference USD LIBOR, with a combined notional value of $0.9bn, that mature in October 2024. During the year, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol, which will be used to calculate the USD floating rates applicable for these interest rate swaps between the period post cessation of USD LIBOR and maturity of the swaps. The Group has no other derivatives that reference IBOR benchmarks. The Group\u2019s undrawn committed Revolving Credit Facility of \u00a32bn, contracted until April 2025, was amended on 27 October 2021 to migrate the benchmark interest rate applicable away from LIBOR to risk-free rates, SOFR and SONIA. Sensitivity analysis A change of 100 basis points in short-term rates applied to the average fixed/floating mix and level of borrowings would vary the interest cost to the Group by approximately \u00a37.3m (2021 \u00a37m). In respect of cash deposits, given the fluctuation in the Group\u2019s working capital requirements, cash is generally invested for short-term periods based at floating interest rates. A change of 100 basis points in the average interest rates during the year applied to the average cash deposits would vary the interest receivable by approximately \u00a319m (2021 \u00a321m). Should interest rates fluctuate by a different rate to those disclosed, the impact can be linearly interpolated. Currency risk The Group\u2019s objective is to reduce its exposure to transactional volatility in earnings and cash flows from movements in foreign currency exchange rates, mainly the US dollar, euro, Saudi riyal and Australian dollar. The Group is exposed to movements in foreign currency exchange rates in respect of foreign currency-denominated transactions. All material firm transactional exposures are hedged using foreign exchange forward contracts and the Group aims, where possible, to apply cash flow hedge accounting to these transactions. The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the forecast transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the hedged items, an economic relationship can be demonstrated on an ongoing basis. The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal amount of the forecast foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of items with offsetting risk positions as hedged items. The Group considers the potential sources of hedge ineffectiveness to be: \u2013 valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness measurement date; \u2013 changes to the timing and amount of forecast transactions; and \u2013 non-occurrence of the designated hedged items. Ineffectiveness due to foreign currency basis was highly immaterial. The Group enters into derivative contracts with varying maturities up to 2032. The following table presents the sterling nominal amounts of the foreign currency contracts used to hedge foreign currency risk, split by maturity profile, along with the exchange rate: 2022 2021 Currency purchased Currency sold Currency purchased Currency sold (Purchase)/sale contracts Maturity date Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Weighted average hedged rate Notional value of currency purchased \u00a3m Weighted average hedged rate Notional value of currency sold \u00a3m Sterling/US dollar Within one year 1.23 (2,790) 1.24 3,060 1.36 (1,937) 1.35 2,347 Between one and five years 1.28 (1,423) 1.30 2,171 1.36 (1,047) 1.36 2,210 Later than five years 1.40 (31) 1.29 19 1.41 (64) 1.41 13 Sterling/euro Within one year 1.12 (3,689) 1.12 3,299 1.14 (3,471) 1.13 3,117 Between one and five years 1.09 (2,576) 1.09 2,583 1.09 (2,823) 1.09 2,727 Later than five years 1.08 (383) 1.07 388 1.05 (161) 1.04 159 Other Within one year n/a (2,873) n/a 2,869 n/a (2,073) n/a 2,060 Between one and five years n/a (1,437) n/a 1,455 n/a (617) n/a 620 Later than five years n/a (379) n/a 378 n/a (13) n/a 13 Cash flow hedges (15,581) 16,222 (12,206) 13,266 The effect of cash flow hedges on the Group\u2019s financial position and performance for the year is as follows: 2022 2021 (Purchase)/sale contracts Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Change in the value of hedging instruments since 1 January \u00a3m Change in the value of hedged items since 1 January \u00a3m Notional amount \u00a3m Carrying amount \u00a3m Sterling/US dollar (106) 106 1,006 (102) 11 (11) 1,522 24 Sterling/euro 9 (9) (378) 17 5 (5) (452) 10 Other (5) 5 13 3 (5) 5 (10) (10) Cash flow hedges (102) 102 641 (82) 11 (11) 1,060 24 Sensitivity analysis The Group is exposed to movements in foreign currency exchange rates in respect of the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group does not hedge the translation effect of exchange rate movements on the income statements or balance sheets of foreign subsidiaries and equity accounted investments it regards as long-term investments. The estimated impact on foreign exchange gains and losses in net finance costs of a ten cent movement in the closing sterling to US dollar exchange rate on the retranslation of US dollar-denominated bonds held by BAE Systems plc is approximately \u00a3258m (2021 \u00a3203m). The Group enters into cash flow hedges in order to manage all material firm transactional exposures. The estimated impact on fair value gains and losses in other reserves of a ten cent movement in the closing sterling to US dollar exchange rates on the transactional cash flow hedges is approximately \u00a394m (2021 \u00a3111m). The estimated impact of a ten cent movement in the closing sterling to euro exchange rate on the transactional cash flow hedges is approximately \u00a335m (2021 \u00a339m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-479": { "value": "Liquidity risk Contractual cash outflows on financial liabilities The contracted cash outflows on loans and overdrafts, derivative financial instruments and other financial instruments at the reporting date are shown below, classified by maturity. The cash outflows are shown on a gross basis, are not discounted, are translated at the spot rate and include estimated interest payments where applicable. Contracted cash outflows reflect the gross cash outflow on derivative financial instruments and exclude the broadly offsetting cash inflows for the receive leg of derivatives that are settled separately to the pay leg. 2022 2021 Contracted cash outflow Contracted cash outflow Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Carrying amount \u00a3m Within one year \u00a3m Between one and five years \u00a3m Later than five years \u00a3m Total \u00a3m Cash outflows without directly offsetting inflows Accruals1 (2,025) (1,997) (28) \u2013 (2,025) (1,855) (1,832) (23) \u2013 (1,855) Trade and other payables 2 (2,154) (2,126) (28) \u2013 (2,154) (1,867) (1,846) (21) \u2013 (1,867) Lease liabilities (1,616) (290) (632) (1,227) (2,149) (1,295) (240) (586) (683) (1,509) Loans and overdrafts (5,242) (199) (2,377) (4,893) (7,469) (5,061) (593) (1,785) (4,848) (7,226) (11,037) (10,078) Cash outflows with largely offsetting inflows 3 Cash flow hedges \u2013 financial assets 404 (7,434) (4,444) (443) (12,321) 377 (6,509) (4,081) (173) (10,763) Cash flow hedges \u2013 financial liabilities (486) (8,258) (5,758) (741) (14,757) (353) (6,204) (4,963) (214) (11,381) Other foreign exchange/interest rate contracts \u2013 financial assets 23 (2,364) \u2013 \u2013 (2,364) 8 (417) \u2013 \u2013 (417) Other foreign exchange/interest rate contracts \u2013 financial liabilities (79) (1,693) \u2013 \u2013 (1,693) (33) (2,247) (3) \u2013 (2,250) Debt-related derivatives \u2013 financial assets 4 147 (58) (534) (1,124) (1,716) 114 (489) (127) (360) (976) Debt-related derivatives \u2013 financial liabilities 4 (35) (47) (47) \u2013 (94) (130) (486) (141) (1,123) (1,750) (26) (17) (11,063) (10,095) 1. Accruals presented in the table excludes \u00a3719m (2021 \u00a3646m) of accruals which are non-financial liabilities. 2. Trade and other payables excludes other taxes and social security costs, deferred income and US deferred compensation plan liabilities (see note 24) on the basis that these are non-financial liabilities. The prior year included other taxes and social security costs, which have been removed in the current year. The prior year has been re-presented in the current year to reflect this change. 3. Cash outflows in relation to derivatives presented in this table do not include the cash inflows which would be received when closing out the trades. These cash inflows are expected to largely offset all outflows presented within this table. 4. Cash outflows in relation to debt-related derivatives were presented net of the associated cash inflows in the prior year. These have been presented without the associated inflow in the current year, and the prior year comparatives have been re-presented to reflect this change. Borrowing facilities The Group\u2019s objective is to maintain adequate undrawn committed borrowing facilities. At 31 December 2022, the Group had a committed Revolving Credit Facility (RCF) of \u00a32bn (2021 \u00a32bn). The RCF was undrawn throughout the year. The RCF also acts as a backstop to Commercial Paper issued by the Group. At 31 December 2022, the Group had no Commercial Paper in issue (2021 \u00a3nil). ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-502": { "value": "Credit risk For trade receivables, contract receivables, amounts due from equity accounted investments and finance lease receivables, the Group measures a provision for expected credit losses at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group\u2019s assessment is that credit risk in relation to defence-related sales to government customers or subcontractors to governments is extremely low as the probability of default is insignificant; therefore the provision for expected credit losses is immaterial in respect of receivables from these customers. For all non-government commercial customers, the Group assesses expected credit losses, including risk arising from global economic uncertainty; however, this is not considered material to the financial statements. The Group considers that default has occurred when a receivable is past 180 days overdue, because historical experience indicates that these receivables are generally not recoverable. The Group recognises a provision of 100% against all receivables over 180 days past due unless there is evidence that individual receivables in this category are recoverable. The carrying amount of the Group\u2019s financial assets represents the maximum exposure to credit risk. Movements on the provision for expected credit losses are as follows: 2022 \u00a3m 2021 \u00a3m At 1 January 15 36 Net remeasurement of loss allowance 7 (19) Amounts written off (2) (2) At 31 December 20 15 For contract receivables, amounts due from equity accounted investments and finance lease receivables the expected credit loss provision is immaterial as the probability of default is insignificant. The Group writes off a receivable when there is evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. None of the trade receivables that were written off during the year are still subject to enforcement activity. The ageing of trade receivables is detailed below: 2022 2021 Gross \u00a3m Provision \u00a3m Net \u00a3m Gross \u00a3m Provision \u00a3m Net \u00a3m Not past due 969 \u2013 969 783 \u2013 783 Up to 180 days overdue 499 (1) 498 223 (1) 222 Past 180 days overdue 58 (19) 39 52 (14) 38 1,526 (20) 1,506 1,058 (15) 1,043 Cash management Cash flow forecasting is performed by the businesses on a monthly basis. The Group monitors a rolling forecast of its liquidity requirements to ensure that there is sufficient cash to meet operational needs and maintain adequate headroom. Surplus cash held by the businesses over and above balances required for working capital management is loaned to the Group\u2019s centralised treasury department. Surplus cash is invested in instant-access current accounts, short-term deposits and money market funds, choosing instruments with appropriate maturities or sufficient liquidity to provide adequate headroom as determined by cash forecasts. The Group\u2019s objective is to monitor and control counterparty credit risk and credit limit utilisation. The Group adopts a conservative approach to the investment of its surplus cash which is deposited with financial institutions with investment-grade (BBB- and above) credit ratings for short periods. The cash and cash equivalents balance at 31 December 2022 of \u00a33,107m (2021 \u00a32,917m) was invested with 44 (2021 36) financial institutions. A credit limit is allocated to each institution taking account of its market capitalisation, credit rating and credit default swap price. The cash and cash equivalents of the Group are invested in non-speculative financial instruments which are usually highly liquid, such as short-term deposits. The Group therefore believes it has reduced its exposure to counterparty credit risk through this process. The cash and cash equivalents balance is subject to review for impairment under IFRS 9 as set out below: Counterparty credit rating at 31 December 2022 2021 AAA to AA- 67% 68% A+ to A- 32% 31% BBB+ to BBB- 1% 1% ", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-480": { "value": "Credit risk For trade receivables, contract receivables, amounts due from equity accounted investments and finance lease receivables, the Group measures a provision for expected credit losses at an amount equal to lifetime expected credit losses, estimated by reference to past experience and relevant forward-looking factors. The Group\u2019s assessment is that credit risk in relation to defence-related sales to government customers or subcontractors to governments is extremely low as the probability of default is insignificant; therefore the provision for expected credit losses is immaterial in respect of receivables from these customers. For all non-government commercial customers, the Group assesses expected credit losses, including risk arising from global economic uncertainty; however, this is not considered material to the financial statements. The Group considers that default has occurred when a receivable is past 180 days overdue, because historical experience indicates that these receivables are generally not recoverable. The Group recognises a provision of 100% against all receivables over 180 days past due unless there is evidence that individual receivables in this category are recoverable. The carrying amount of the Group\u2019s financial assets represents the maximum exposure to credit risk. Movements on the provision for expected credit losses are as follows: 2022 \u00a3m 2021 \u00a3m At 1 January 15 36 Net remeasurement of loss allowance 7 (19) Amounts written off (2) (2) At 31 December 20 15 For contract receivables, amounts due from equity accounted investments and finance lease receivables the expected credit loss provision is immaterial as the probability of default is insignificant. The Group writes off a receivable when there is evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example, when a debtor enters bankruptcy or financial reorganisation. None of the trade receivables that were written off during the year are still subject to enforcement activity. The ageing of trade receivables is detailed below: 2022 2021 Gross \u00a3m Provision \u00a3m Net \u00a3m Gross \u00a3m Provision \u00a3m Net \u00a3m Not past due 969 \u2013 969 783 \u2013 783 Up to 180 days overdue 499 (1) 498 223 (1) 222 Past 180 days overdue 58 (19) 39 52 (14) 38 1,526 (20) 1,506 1,058 (15) 1,043 Cash management Cash flow forecasting is performed by the businesses on a monthly basis. The Group monitors a rolling forecast of its liquidity requirements to ensure that there is sufficient cash to meet operational needs and maintain adequate headroom. Surplus cash held by the businesses over and above balances required for working capital management is loaned to the Group\u2019s centralised treasury department. Surplus cash is invested in instant-access current accounts, short-term deposits and money market funds, choosing instruments with appropriate maturities or sufficient liquidity to provide adequate headroom as determined by cash forecasts. The Group\u2019s objective is to monitor and control counterparty credit risk and credit limit utilisation. The Group adopts a conservative approach to the investment of its surplus cash which is deposited with financial institutions with investment-grade (BBB- and above) credit ratings for short periods. The cash and cash equivalents balance at 31 December 2022 of \u00a33,107m (2021 \u00a32,917m) was invested with 44 (2021 36) financial institutions. A credit limit is allocated to each institution taking account of its market capitalisation, credit rating and credit default swap price. The cash and cash equivalents of the Group are invested in non-speculative financial instruments which are usually highly liquid, such as short-term deposits. The Group therefore believes it has reduced its exposure to counterparty credit risk through this process. The cash and cash equivalents balance is subject to review for impairment under IFRS 9 as set out below: Counterparty credit rating at 31 December 2022 2021 AAA to AA- 67% 68% A+ to A- 32% 31% BBB+ to BBB- 1% 1% ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-481": { "value": "Offsetting financial assets and liabilities 2022 2021 Balance sheet \u00a3m Amounts not offset \u00a3m Net balances \u00a3m Balance sheet \u00a3m Amounts not offset \u00a3m Net balances \u00a3m Assets Other financial assets 574 (455) 119 499 (383) 116 Liabilities Other financial liabilities (600) 455 (145) (516) 383 (133) ", "dimensions": { "concept": "ifrs-full:DisclosureOfOffsettingOfFinancialAssetsAndFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-482": { "value": "Deferred tax assets/(liabilities) Deferred tax assets Deferred tax liabilities Net balance at 31 December 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Property, plant and equipment 48 42 (126) (101) (78) (59) Intangible assets 15 17 (2) (2) 13 15 Capitalised research and development 149 \u2013 \u2013 \u2013 149 \u2013 Provisions and accruals 233 203 \u2013 \u2013 233 203 Goodwill \u2013 \u2013 (352) (302) (352) (302) Pension/post-employment schemes: Deficits 97 430 \u2013 \u2013 97 430 Additional contributions and other 1 162 228 \u2013 \u2013 162 228 Share-based payments 64 28 \u2013 \u2013 64 28 Financial instruments 17 \u2013 (1) (9) 16 (9) Other items 27 24 (2) (19) 25 5 Rolled over capital gains \u2013 \u2013 (14) (13) (14) (13) Capital losses carried forward 14 13 \u2013 \u2013 14 13 Trading losses carried forward 4 6 \u2013 \u2013 4 6 Deferred tax assets/(liabilities) 830 991 (497) (446) 333 545 Set off of tax (492) (369) 492 369 \u2013 \u2013 Net deferred tax assets/(liabilities) 338 622 (5) (77) 333 545 1. Includes deferred tax assets on US deferred compensation plans and relief to be claimed in future periods on UK pension contributions. Movement in temporary differences during the year At 1 January 2022 \u00a3m Foreign exchange adjustments \u00a3m Acquisitions and disposals \u00a3m Recognised in income \u00a3m Recognised in equity \u00a3m At 31 December 2022 \u00a3m Property, plant and equipment (59) (12) \u2013 (7) \u2013 (78) Intangible assets 15 2 (13) 9 \u2013 13 Capitalised research and development \u2013 4 \u2013 145 \u2013 149 Provisions and accruals 203 25 \u2013 5 \u2013 233 Goodwill (302) (39) \u2013 (11) \u2013 (352) Pension/post-employment schemes: Deficits 430 3 \u2013 20 (356) 97 Additional contributions and other 1 228 13 \u2013 (21) (58) 162 Share-based payments 28 \u2013 \u2013 12 24 64 Financial instruments (9) 1 \u2013 3 21 16 Other items 5 3 \u2013 17 \u2013 25 Rolled over capital gains (13) \u2013 \u2013 (1) \u2013 (14) Capital losses carried forward 13 \u2013 \u2013 1 \u2013 14 Trading losses carried forward 6 \u2013 \u2013 (2) \u2013 4 545 \u2013 (13) 170 (369) 333 At 1 January 2021 \u00a3m Foreign exchange adjustments \u00a3m Acquisitions and disposals \u00a3m Recognised in income \u00a3m Recognised in equity \u00a3m At 31 December 2021 \u00a3m Property, plant and equipment (70) (1) \u2013 12 \u2013 (59) Intangible assets 4 \u2013 (3) 14 \u2013 15 Provisions and accruals 199 1 \u2013 3 \u2013 203 Goodwill (279) (2) \u2013 (21) \u2013 (302) Pension/post-employment schemes: Deficits 845 (1) \u2013 11 (425) 430 Additional contributions and other 1 251 1 \u2013 6 (30) 228 Share-based payments 19 \u2013 \u2013 7 2 28 Financial instruments (18) \u2013 \u2013 (3) 12 (9) Other items 14 \u2013 \u2013 (9) \u2013 5 Rolled over capital gains (11) \u2013 \u2013 (2) \u2013 (13) Capital losses carried forward 11 \u2013 \u2013 2 \u2013 13 Trading losses carried forward 7 \u2013 \u2013 (1) \u2013 6 972 (2) (3) 19 (441) 545 1. Includes deferred tax assets on US deferred compensation plans and relief to be claimed in future periods on UK pension contributions. Unrecognised deferred tax assets and liabilities Deferred tax assets have not been recognised in respect of the following items: 2022 2021 Gross amount \u00a3m Unrecognised deferred tax asset \u00a3m Gross amount \u00a3m Unrecognised deferred tax asset \u00a3m Deductible temporary differences, including tax credits 9 9 6 5 Capital losses carried forward 227 55 196 45 Trading and other losses carried forward 237 38 231 37 473 102 433 87 These assets have not been recognised as the incidence of future profits in the relevant countries and legal entities cannot be accurately predicted at this time. The Group has not recognised any deferred tax liability on temporary differences totalling \u00a3189m (2021 \u00a3390m) relating to potentially taxable unremitted earnings of overseas subsidiaries and equity accounted investments because the Group is in a position to control the timing of the reversal of the temporary differences and none are expected to reverse in the foreseeable future. Changes in tax rates Both recognised and unrecognised UK deferred tax balances as at 31 December 2022 have been calculated at a blended rate of 24.2% (2021 22.8%). As at 31 December 2022, an increase in the UK current tax rate has been enacted, from 19% to 25% with effect from 1 April 2023. An adjustment has been made to reflect the fact that most of the UK deferred tax balances are expected to unwind at 25%. Including the impact of tax changes in other jurisdictions, this adjustment has been recorded as an adjusting item of \u00a33m in the Consolidated income statement and as a loss of \u00a372m in the Consolidated statement of comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-552": { "value": "Inventories are stated at the lower of cost, including all relevant overhead expenditure, and net realisable value. Inventory cost is valued using the most appropriate method based on the business use of inventory. In the majority of cases this is moving average unit cost, with some businesses using standard cost or first in first out (FIFO) as methods more indicative of their use of inventory. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-452": { "value": "2022 \u00a3m 2021 \u00a3m Raw materials and consumables 535 432 Work-in-progress 372 312 Finished goods and goods for resale 69 67 976 811 The Group recognised \u00a326m (2021 \u00a313m) as a write down of inventories to net realisable value. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-524": { "value": "2022 \u00a3m 2021 \u00a3m Tax provisions (145) (106) Research and development expenditure credits receivable 131 81 Other 44 69 30 44 Represented by: Current tax assets 133 71 Current tax liabilities (103) (27) 30 44 Tax provisions of \u00a3145m (2021 \u00a3106m) are in respect of known tax issues, of which \u00a387m (2021 \u00a354m) relates to the US, \u00a356m (2021 \u00a350m) relates to the UK and \u00a32m (2021 \u00a32m) relates to overseas territories. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-572": { "value": "Cash and cash equivalents includes cash in hand, call and term deposits, investments in money market funds and other short-term liquid investments with original maturities of three months or less and which are subject to an insignificant risk of change in value. For the purpose of the cash flow statement, cash and cash equivalents also includes bank overdrafts that are repayable on demand and which form an integral part of the Group\u2019s cash management. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-453": { "value": "2022 \u00a3m 2021 \u00a3m Cash 484 903 Money market funds 1,149 1,171 Short-term deposits 1,474 843 3,107 2,917 Cash and cash equivalents includes \u00a355m (2021 \u00a383m) which is subject to regulatory restrictions and is therefore not available for general use by other entities within the Group. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-503": { "value": "Cash and cash equivalents includes \u00a355m (2021 \u00a383m) which is subject to regulatory restrictions and is therefore not available for general use by other entities within the Group. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-553": { "value": "Assets and liabilities of disposal groups classified as held for sale comprise assets and liabilities that are expected to be recovered primarily through sale rather than continuing use. Assets and liabilities of disposal groups classified as held for sale are measured at the lower of their carrying value and fair value less costs to sell. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-454": { "value": "Business disposals during 2022 On 9 July 2022, the Group entered into an agreement for the sale of BAE Systems\u2019 financial crime detection business from the Digital Intelligence business in our Cyber & Intelligence segment. The sale to SymphonyAI completed on 28 October 2022. Disposal costs of \u00a325m were incurred in relation to the sale, relating to costs incurred in the sale and operational separation of the business. The gain recognised on disposal was as follows: \u00a3m Cash received or receivable: Cash 131 Total disposal consideration 131 Carrying amount of net assets sold (see below) (29) Disposal costs (25) Cumulative currency translation gain 17 Gain on sale before tax 94 Net cash inflow arising on disposal: Cash consideration received 131 Less: cash and cash equivalents disposed (17) Less: disposal costs (13) 101 Assets and liabilities presented as at the date of disposal were as follows: \u00a3m Intangible assets including goodwill 23 Right-of-use assets 3 Trade, other and contract receivables 26 Cash and cash equivalents 17 Total assets 69 Lease liabilities (3) Contract liabilities (9) Trade and other payables (27) Provisions (1) Total liabilities (40) Net assets disposed 29 Business disposals during 2021 Advanced Electronics Company In December 2020, the Group\u2019s Overhaul and Maintenance Company (OMC) entered into a heads of terms for the sale of its 50% shareholding in Advanced Electronics Company Limited (AEC) to Saudi Arabian Military Industries, and this was reported in the financial statements for the year ending 31 December 2020 as assets held for sale. The sale was completed on 23 February 2021. AEC was included in the Air segment. The gain recognised on disposal was as follows: 2021 \u00a3m Cash received or receivable: Cash 182 Deferred consideration 32 Total disposal consideration 214 Carrying amount of net assets sold (see below) (91) Gain on sale before tax and reclassification of foreign currency translation reserve 123 Reclassification of foreign currency translation reserve 9 Gain on sale before tax 132 Attributable to: Equity shareholders 69 Non-controlling interests 63 132 Net cash inflow arising on disposal: Cash consideration received 193 Less: cash and cash equivalents disposed \u2013 193 Of the total consideration receivable, \u00a332m was deferred to be received over the 18 months following disposal. \u00a311m of this contingent consideration was received in 2021 in relation to the sale of AEC, in addition to the cash received on disposal. The gain on disposal has been included in the profit for the year from continuing operations as a component of Other income, and recognised as an adjusting item. The Group\u2019s share of the net assets of AEC as at the date of disposal was as follows: \u00a3m Intangible assets including goodwill 16 Property, plant and equipment 8 Equity accounted investments 67 Net assets disposed 91 BAE Systems Rokar International On 1 April 2021, BAE Systems agreed the sale of BAE Systems Rokar International Limited (Rokar) for $31m (\u00a322m), net of cash held by Rokar. This resulted in consideration received of $47m (\u00a334m), a disposal of net assets of $12m (\u00a38m), including $16m (\u00a312m) of cash, and a gain before tax on disposal of $35m (\u00a326m) which has been included in the profit for the year from continuing operations as a component of Other income, and recognised as an adjusting item. Rokar was within the Electronic Systems segment. ", "dimensions": { "concept": "baesystemsplc:DisclosureOfBusinessDisposals", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-455": { "value": "21. Geographical analysis of assets Analysis of non-current assets by geographical location Asset location Notes 2022 \u00a3m 2021 \u00a3m UK 4,563 4,222 Rest of Europe 1,965 1,475 US 10,719 9,713 Kingdom of Saudi Arabia 586 449 Australia 518 487 Rest of Asia and Pacific 5 5 18,356 16,351 Other investments 13 99 76 Other receivables 14 416 480 Post-employment benefit surpluses 25 1,297 483 Other financial assets 15 322 305 Deferred tax assets 16 338 622 Non-current assets 20,828 18,317 ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeographicalAreasExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-554": { "value": "Loans and overdrafts are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, loans and overdrafts are stated at amortised cost. Any difference between the amount initially recognised and the redemption value is recognised in the income statement over the period of the borrowings. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-456": { "value": "2022 \u00a3m 2021 \u00a3m Non-current US$800m 3.8% bond, repayable 2024 664 589 US$750m 3.85% bond, repayable 2025 621 550 US$500m 7.5% bond, repayable 2027 415 368 US$1,300m 3.4% bond, repayable 2030 1,073 952 US$1,000m 1.9% bond, repayable 2031 824 732 US$400m 5.8% bond, repayable 2041 330 293 US$550m 4.75% bond, repayable 2044 447 396 US$1,000m 3% bond, repayable 2050 815 724 5,189 4,604 Current \u00a3400m 4.125% bond, repayable 2022 \u2013 400 Accrued interest 53 57 53 457 US$500m of the US$800m 3.8% bond, repayable 2024, has been converted to a floating rate bond by utilising interest rate swaps that mature in October 2024 and give an effective rate during 2022 of 3.4%. The US$500m 7.5% bond, repayable 2027, was converted at issue to a sterling fixed rate bond by utilising cross-currency swaps and has an effective rate during 2022 of 7.7%. The US$400m 5.8% bond, repayable 2041, has been converted to a floating rate bond by utilising interest rate swaps that mature in October 2024 and give an effective rate during 2022 of 5.3%. US$1,237m of the US$1,300m 3.4% bond, repayable 2030, was converted at issue to a sterling fixed rate bond by utilising cross-currency swaps and has an effective rate during 2022 of 3.5%. 30. Net debt (excluding lease liabilities) Components of net debt (excluding lease liabilities) Notes 2022 \u00a3m 2021 \u00a3m Cash and cash equivalents 19 3,107 2,917 Debt-related derivative financial instrument assets \u2013 non-current 15 147 114 Loans \u2013 non-current 22 (5,189) (4,604) Loans and overdrafts \u2013 current 22 (53) (457) Debt-related derivative financial instrument liabilities \u2013 non-current 15 (35) (130) Net debt (excluding lease liabilities)1 (2,023) (2,160) 1. Net debt (excluding lease liabilities) is an alternative performance measure defined in the Financial glossary on page 302. It is presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-555": { "value": "Contract liabilities represent the obligation to transfer goods or services to a customer for which consideration has been received, or consideration is due, from the customer. ", "dimensions": { "concept": "baesystemsplc:DescriptionOfAccountingPolicyForContractLiabilities", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-457": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Contract liabilities 945 519 Current Contract liabilities 3,882 2,874 4,827 3,393 Revenue recognised in the year includes \u00a32,393m (2021 \u00a32,701m) that was included in the opening contract liabilities balance. Non-current and current contract liabilities as at 1 January 2021 were \u00a3524m and \u00a33,238m, respectively. The increase in contract liabilities since 2021 is primarily due to customer advances received during the year. ", "dimensions": { "concept": "ifrs-full:ExplanationOfSignificantChangesInContractAssetsAndContractLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-556": { "value": "Trade and other payables are stated at amortised cost. US deferred compensation plan liabilities represent the present value of expected future payments required to settle the obligation to employees in accordance with IAS 19 Employee Benefits. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-458": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Accruals 50 43 Amounts owed to equity accounted investments (note 33) 8 7 Other taxes and social security costs \u2013 1 Deferred income1 1,006 808 US deferred compensation plan liabilities 357 375 Other payables 20 14 1,441 1,248 Current Trade payables 839 697 Amounts owed to equity accounted investments (note 33) 1,061 923 Other taxes and social security costs 76 197 Accruals 2,679 2,458 Deferred income 109 135 Other payables 226 226 4,990 4,636 1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-483": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Accruals 50 43 Amounts owed to equity accounted investments (note 33) 8 7 Other taxes and social security costs \u2013 1 Deferred income1 1,006 808 US deferred compensation plan liabilities 357 375 Other payables 20 14 1,441 1,248 Current Trade payables 839 697 Amounts owed to equity accounted investments (note 33) 1,061 923 Other taxes and social security costs 76 197 Accruals 2,679 2,458 Deferred income 109 135 Other payables 226 226 4,990 4,636 1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-504": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Accruals 50 43 Amounts owed to equity accounted investments (note 33) 8 7 Other taxes and social security costs \u2013 1 Deferred income1 1,006 808 US deferred compensation plan liabilities 357 375 Other payables 20 14 1,441 1,248 Current Trade payables 839 697 Amounts owed to equity accounted investments (note 33) 1,061 923 Other taxes and social security costs 76 197 Accruals 2,679 2,458 Deferred income 109 135 Other payables 226 226 4,990 4,636 1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-516": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Accruals 50 43 Amounts owed to equity accounted investments (note 33) 8 7 Other taxes and social security costs \u2013 1 Deferred income1 1,006 808 US deferred compensation plan liabilities 357 375 Other payables 20 14 1,441 1,248 Current Trade payables 839 697 Amounts owed to equity accounted investments (note 33) 1,061 923 Other taxes and social security costs 76 197 Accruals 2,679 2,458 Deferred income 109 135 Other payables 226 226 4,990 4,636 1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-525": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Accruals 50 43 Amounts owed to equity accounted investments (note 33) 8 7 Other taxes and social security costs \u2013 1 Deferred income1 1,006 808 US deferred compensation plan liabilities 357 375 Other payables 20 14 1,441 1,248 Current Trade payables 839 697 Amounts owed to equity accounted investments (note 33) 1,061 923 Other taxes and social security costs 76 197 Accruals 2,679 2,458 Deferred income 109 135 Other payables 226 226 4,990 4,636 1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-535": { "value": "2022 \u00a3m 2021 \u00a3m Non-current Accruals 50 43 Amounts owed to equity accounted investments (note 33) 8 7 Other taxes and social security costs \u2013 1 Deferred income1 1,006 808 US deferred compensation plan liabilities 357 375 Other payables 20 14 1,441 1,248 Current Trade payables 839 697 Amounts owed to equity accounted investments (note 33) 1,061 923 Other taxes and social security costs 76 197 Accruals 2,679 2,458 Deferred income 109 135 Other payables 226 226 4,990 4,636 1. Includes \u00a31,004m (2021 \u00a3806m) of funding received from the UK government for property, plant and equipment at Barrow-in-Furness, UK. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-557": { "value": "Pension schemes Defined contribution Obligations for contributions are recognised as an expense in the income statement as incurred. Defined benefit The cost of providing benefits is determined periodically by independent actuaries and charged to the income statement in the period in which those benefits are earned by the employees. Remeasurements, including actuarial gains and losses, are recognised in the Consolidated statement of comprehensive income in the year in which they occur. Past service costs resulting from a plan amendment or curtailment are recognised immediately in the income statement. The post-employment benefit surpluses and obligations recognised in the Group\u2019s balance sheet represent the fair value of scheme assets, less the present value of the defined benefit obligations calculated using a number of actuarial assumptions as set out on page 271. The bid values of scheme assets are not intended to be realised in the short term and may be subject to significant change before they are realised. The present values of scheme liabilities are derived from cash flow projections over long periods and are, therefore, inherently uncertain. IAS 19 Employee Benefits limits the measurement of a defined benefit surplus to the lower of the surplus in the defined benefit scheme and the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the scheme or reductions in future contributions to the scheme. IFRIC 14 \u2013 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, issued in 2007, provides an interpretation of the requirements of IAS 19, clarifying that a refund is available if the entity has an unconditional right to a refund in certain circumstances. The Group has applied IFRIC 14 and has determined that there is no limit on the recognition of the surpluses in its defined benefit pension schemes as at 31 December 2022. The surpluses have been recognised on the basis that the future economic benefits are unconditionally available to the Group, which is assumed to be via a refund. These have been recognised after deducting a 35% withholding tax which would be levied prior to the future refunding of any surplus and have been presented on a net basis as this is not deemed to be an income tax of the Group. MBDA participates in the Group\u2019s defined benefit schemes and, as these are multi-employer schemes, the Group has allocated a share of the IAS 19 pension surpluses and deficits to MBDA based on the relative payroll contributions of active members or actual obligations where known. Whilst this methodology is intended to reflect a reasonable estimate of the share of the surplus or deficit, it may not accurately reflect the obligations of the participating employers. In the event that an employer who participates in the Group\u2019s pension schemes fails or cannot be compelled to fulfil its obligations as a participating employer, the remaining participating employers are obliged to collectively take on its obligations. The Group considers the likelihood of this event arising as remote. The Group\u2019s share of the IAS 19 pension surplus or deficit allocated to equity accounted investments is included in the balance sheet within equity accounted investments. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-558": { "value": "A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount has been reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at an appropriate pre-tax discount rate. Warranties and after-sales service Warranties and after-sales service are provided in the normal course of business with provisions for associated costs being made based on an assessment of future claims with reference to past experience. A provision for warranties is recognised when the underlying products and services are sold. The provision is based on historical warranty data and a weighting of possible outcomes against their associated probabilities. Reorganisations A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced to those affected. The costs associated with the reorganisation programmes are supported by detailed plans and based on previous experience as well as other known factors. Future operating costs are not provided for. Legal, contractual and environmental The Group holds provisions for expected legal, contractual and environmental costs that it expects to incur over an extended period. Management exercises judgement to determine the amount of these provisions. Provision is made for known issues based on past experience of similar items and other known factors. Each provision is considered separately and the amount provided reflects the best estimate of the most likely amount, being the single most likely amount in a range of possible outcomes. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-536": { "value": "Warranties and after-sales service \u00a3m Reorganisations \u00a3m Legal, contractual and environmental \u00a3m Other \u00a3m Total \u00a3m Non-current 57 \u2013 249 25 331 Current 52 38 136 50 276 At 1 January 2022 109 38 385 75 607 Created 39 20 81 19 159 Utilised (31) (24) (45) (20) (120) Transfer from other balance sheet categories 2 \u2013 1 \u2013 3 Released (16) (1) (64) (11) (92) Net present value adjustments \u2013 \u2013 (6) (3) (9) Business acquisitions \u2013 \u2013 \u2013 6 6 Business disposals \u2013 \u2013 \u2013 (1) (1) Foreign exchange adjustments 6 1 21 6 34 At 31 December 2022 109 34 373 71 587 Represented by: Non-current 57 9 244 28 338 Current 52 25 129 43 249 109 34 373 71 587 Warranties and after-sales service Warranty and after-sales service provisions are generally utilised within three years post-delivery. Whilst actual events could result in potentially significant differences to the quantum, but not the timing, of the outflows in relation to the provisions, management has reflected current knowledge in assessing the provision levels. Reorganisations Reorganisation provisions are generally utilised within one to three years. There is limited volatility around the timing and amount of the ultimate outflows related to these provisions. Other debtors includes \u00a3nil (2021 \u00a39m) which is reimbursable in respect of reorganisation costs. Legal, contractual and environmental Reflecting the inherent uncertainty within many legal proceedings, the amount of the outflows could differ significantly from the amount provided. While the timing of the outflows is also uncertain, the Group expects these provisions to be utilised over a period of approximately 25 years. Other There are no individually significant provisions included within other provisions. The Group believes that any significant liability in respect of its guarantees and performance bond arrangements, and legal actions and claims not already provided for, is remote ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-459": { "value": "Warranties and after-sales service \u00a3m Reorganisations \u00a3m Legal, contractual and environmental \u00a3m Other \u00a3m Total \u00a3m Non-current 57 \u2013 249 25 331 Current 52 38 136 50 276 At 1 January 2022 109 38 385 75 607 Created 39 20 81 19 159 Utilised (31) (24) (45) (20) (120) Transfer from other balance sheet categories 2 \u2013 1 \u2013 3 Released (16) (1) (64) (11) (92) Net present value adjustments \u2013 \u2013 (6) (3) (9) Business acquisitions \u2013 \u2013 \u2013 6 6 Business disposals \u2013 \u2013 \u2013 (1) (1) Foreign exchange adjustments 6 1 21 6 34 At 31 December 2022 109 34 373 71 587 Represented by: Non-current 57 9 244 28 338 Current 52 25 129 43 249 109 34 373 71 587 Warranties and after-sales service Warranty and after-sales service provisions are generally utilised within three years post-delivery. Whilst actual events could result in potentially significant differences to the quantum, but not the timing, of the outflows in relation to the provisions, management has reflected current knowledge in assessing the provision levels. Reorganisations Reorganisation provisions are generally utilised within one to three years. There is limited volatility around the timing and amount of the ultimate outflows related to these provisions. Other debtors includes \u00a3nil (2021 \u00a39m) which is reimbursable in respect of reorganisation costs. Legal, contractual and environmental Reflecting the inherent uncertainty within many legal proceedings, the amount of the outflows could differ significantly from the amount provided. While the timing of the outflows is also uncertain, the Group expects these provisions to be utilised over a period of approximately 25 years. Other There are no individually significant provisions included within other provisions. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-460": { "value": "27. Share capital and other reserves Share capital Equity Non-equity Total Ordinary shares of 2.5p each Special Share of \u00a31 Number of shares m Nominal value \u00a3m Number of shares Nominal value \u00a3 Nominal value \u00a3m Issued and fully paid At 1 January 2021 3,467 87 1 1 87 Shares cancelled (63) (2) \u2013 \u2013 (2) At 1 January 2022 3,404 85 1 1 85 Shares cancelled (107) (3) \u2013 \u2013 (3) At 31 December 2022 3,297 82 1 1 82 Special Share One Special Share of \u00a31 in the Company is held on behalf of the Secretary of State for Business, Energy and Industrial Strategy (the Special Shareholder). Certain provisions of the Company\u2019s Articles of Association cannot be amended without the consent of the Special Shareholder. These provisions include the requirement that no foreign person, or foreign persons acting in concert, can have more than a 15% voting interest in the Company, the requirement that the majority of the directors are British, and the requirement that the Chief Executive and any executive Chairman are British. The effect of these requirements can also be amended by regulations made by the directors and approved by the Special Shareholder. The Special Shareholder may require the Company at any time to redeem the Special Share at par or to convert the Special Share into one ordinary voting share. The Special Shareholder is entitled to receive notice of and to attend general meetings and class meetings of the Company\u2019s shareholders, but has no voting right, nor other rights, other than to speak in relation to any business in respect of the Special Share. Treasury shares As at 31 December 2022, 220,086,959 (2021 236,807,031) ordinary shares of 2.5p each with an aggregate nominal value of \u00a35,502,174 (2021 \u00a35,920,176) were held in treasury. During 2022, 16,720,072 (2021 12,188,518) treasury shares were used to satisfy awards and options under the Share Incentive Plan, International Share Incentive Plan, Performance Share Plan, the Performance Shares and Restricted Shares elements of the Long-Term Incentive Plan, and the Executive Share Option Plan. BAE Systems Employee Share Option Plan (ESOP) Trust The Group has an ESOP discretionary trust to administer the share plans and to acquire Company shares, using funds loaned by the Group, to meet commitments to Group employees. Dividend waivers were in operation for shares within the ESOP Trust, other than those owned beneficially by the participants, for the dividends paid in the year. At 31 December 2022, the ESOP Trust held 7,268,002 (2021 7,022,472) ordinary shares of 2.5p each, with a market value of \u00a362m (2021 \u00a339m). The shares held by the ESOP Trust are recorded at cost and deducted from retained earnings until such time as the shares vest unconditionally to employees. A dividend waiver was also in operation for the dividends paid in the year over shares within the Company\u2019s share incentive plan trusts other than those shares owned beneficially by the participants. Own shares held Own shares held, including treasury shares and shares held by BAE Systems ESOP Trust, are recognised as a deduction from retained earnings. 2022 \u00a3m 2021 \u00a3m Final 15.2p dividend per ordinary share paid in the year (2021 14.3p) 480 461 Interim 10.4p dividend per ordinary share paid in the year (2021 9.9p) 322 316 802 777 After the balance sheet date, the directors proposed a final dividend of 1 6.6p per ordinary share. The dividend proposed amounts to approximately \u00a35 1 1m, although the final payment is likely to be lower as a result of the impact of share buybacks. The dividend, which is subject to shareholder approval, will be paid on 1 June 2023 to shareholders registered on 21 April 2023. The ex-dividend date is 20 April 2023. Shareholders who do not at present participate in the Company\u2019s Dividend Reinvestment Plan and wish to receive the final dividend in shares rather than cash should complete a mandate form for the Dividend Reinvestment Plan and return it to the registrars no later than 5 May 2023. Other reserves Merger reserve \u00a3m Statutory reserve \u00a3m Revaluation reserve \u00a3m Capital redemption reserve \u00a3m Hedging reserve \u00a3m Translation reserve \u00a3m Total \u00a3m At 1 January 2021 4,589 202 10 3 94 1,025 5,923 Subsidiaries: Currency translation on foreign currency net investments \u2013 \u2013 \u2013 \u2013 \u2013 27 27 Reclassification of cumulative currency translation reserve on disposal of subsidiary \u2013 \u2013 \u2013 \u2013 \u2013 (9) (9) Net amounts debited to hedging reserve \u2013 \u2013 \u2013 \u2013 (52) \u2013 (52) Equity accounted investments (net of tax) \u2013 \u2013 \u2013 \u2013 9 (13) (4) Purchase of own shares \u2013 \u2013 \u2013 2 \u2013 \u2013 2 At 31 December 2021 4,589 202 10 5 51 1,030 5,887 Subsidiaries: Currency translation on foreign currency net investments \u2013 \u2013 \u2013 \u2013 \u2013 1,151 1,151 Reclassification of cumulative currency translation reserve on disposal of subsidiary \u2013 \u2013 \u2013 \u2013 \u2013 (17) (17) Net amounts debited to hedging reserve \u2013 \u2013 \u2013 \u2013 (65) \u2013 (65) Equity accounted investments (net of tax) \u2013 \u2013 \u2013 \u2013 3 (11) (8) Purchase of own shares \u2013 \u2013 \u2013 3 \u2013 \u2013 3 At 31 December 2022 4,589 202 10 8 (11) 2,153 6,951 Merger reserve The merger reserve arose on the acquisition of the Marconi Electronic Systems (MES) business by British Aerospace in 1999 to form BAE Systems, and represents the amount by which the fair value of the shares issued by British Aerospace as consideration exceeded their nominal value. Statutory reserve Under Section 4 of the British Aerospace Act 1980, this reserve may only be applied in paying up unissued shares of the Company to be allotted to members of the Company as fully paid bonus shares. Revaluation reserve The revaluation reserve relates to the revaluation at fair value of the net assets of the BVT joint venture previously held as an equity accounted investment on the acquisition of the remaining 45% interest in 2009. Capital redemption reserve The capital redemption reserve represents the cumulative nominal value of the Company\u2019s ordinary shares repurchased and subsequently cancelled. Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Capital The Group funds its operations through a mixture of equity funding and debt financing, including bank and capital market borrowings. At 31 December 2022, the Group\u2019s capital was \u00a311,411m (2021 \u00a37,617m), which comprises total equity of \u00a311,400m (2021 \u00a37,668m), excluding amounts accumulated in equity relating to cash flow hedges of \u00a3(11)m (2021 \u00a351m). Net debt (excluding lease liabilities) was \u00a32,023m (2021 \u00a32,160m). The capital structure of the Group reflects the judgement of the directors of an appropriate balance of funding required. The Group\u2019s policy is to maintain an investment grade credit rating and ensure operating flexibility, whilst: \u2013 meeting its pension obligations; \u2013 investing in research and technology and pursuing other organic investment opportunities; \u2013 paying dividends in line with the Group\u2019s policy of long-term sustainable cover of around two times underlying earnings (see note 7); \u2013 making accelerated returns of capital to shareholders when the balance sheet allows and when the return from doing so is in excess of the Group\u2019s Weighted Average Cost of Capital; and \u2013 investing in value-enhancing acquisitions, where market conditions are right and where they deliver on the Group\u2019s strategy. Purchase of own shares 2021 buyback On 29 July 2021, the Company announced the details of a share buyback programme to repurchase up to \u00a3500m of its own shares over the following 12 months. As part of the buyback programme, it was agreed that should a better alternative use for the Company\u2019s cash reserves be identified, the share buyback programme would be ceased, and the money instead used for the alternative purpose. Therefore, when the Company issued a mandate to the brokers to purchase shares on their behalf, the mandates were structured such that they could be revoked at any point. As such, no financial liability was recognised for shares not yet purchased under the programme. During 2021, 63,272,873 shares were repurchased for a total price, including transaction costs, of \u00a3371m. These shares were subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve. The 2021 share buyback programme was completed on 2 February 2022. During 2022, a further 24,253,065 shares were repurchased for a total price, including transaction costs, of \u00a3132m. In total 87,525,938 shares were repurchased under the scheme for a total price, including transaction costs, of \u00a3503m. 2022 buyback In July 2022, the directors also approved a new share buyback programme of up to \u00a31.5bn over the next three years under the same terms as the 2021 buyback programme. At 31 December 2022, 82,997,065 shares were repurchased for a total price, including transaction costs, of \u00a3664m. These shares have been subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve . ", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-526": { "value": "Share capital Equity Non-equity Total Ordinary shares of 2.5p each Special Share of \u00a31 Number of shares m Nominal value \u00a3m Number of shares Nominal value \u00a3 Nominal value \u00a3m Issued and fully paid At 1 January 2021 3,467 87 1 1 87 Shares cancelled (63) (2) \u2013 \u2013 (2) At 1 January 2022 3,404 85 1 1 85 Shares cancelled (107) (3) \u2013 \u2013 (3) At 31 December 2022 3,297 82 1 1 82 Special Share One Special Share of \u00a31 in the Company is held on behalf of the Secretary of State for Business, Energy and Industrial Strategy (the Special Shareholder). Certain provisions of the Company\u2019s Articles of Association cannot be amended without the consent of the Special Shareholder. These provisions include the requirement that no foreign person, or foreign persons acting in concert, can have more than a 15% voting interest in the Company, the requirement that the majority of the directors are British, and the requirement that the Chief Executive and any executive Chairman are British. The effect of these requirements can also be amended by regulations made by the directors and approved by the Special Shareholder. The Special Shareholder may require the Company at any time to redeem the Special Share at par or to convert the Special Share into one ordinary voting share. The Special Shareholder is entitled to receive notice of and to attend general meetings and class meetings of the Company\u2019s shareholders, but has no voting right, nor other rights, other than to speak in relation to any business in respect of the Special Share. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-527": { "value": "Treasury shares As at 31 December 2022, 220,086,959 (2021 236,807,031) ordinary shares of 2.5p each with an aggregate nominal value of \u00a35,502,174 (2021 \u00a35,920,176) were held in treasury. During 2022, 16,720,072 (2021 12,188,518) treasury shares were used to satisfy awards and options under the Share Incentive Plan, International Share Incentive Plan, Performance Share Plan, the Performance Shares and Restricted Shares elements of the Long-Term Incentive Plan, and the Executive Share Option Plan. Purchase of own shares 2021 buyback On 29 July 2021, the Company announced the details of a share buyback programme to repurchase up to \u00a3500m of its own shares over the following 12 months. As part of the buyback programme, it was agreed that should a better alternative use for the Company\u2019s cash reserves be identified, the share buyback programme would be ceased, and the money instead used for the alternative purpose. Therefore, when the Company issued a mandate to the brokers to purchase shares on their behalf, the mandates were structured such that they could be revoked at any point. As such, no financial liability was recognised for shares not yet purchased under the programme. During 2021, 63,272,873 shares were repurchased for a total price, including transaction costs, of \u00a3371m. These shares were subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve. The 2021 share buyback programme was completed on 2 February 2022. During 2022, a further 24,253,065 shares were repurchased for a total price, including transaction costs, of \u00a3132m. In total 87,525,938 shares were repurchased under the scheme for a total price, including transaction costs, of \u00a3503m. 2022 buyback In July 2022, the directors also approved a new share buyback programme of up to \u00a31.5bn over the next three years under the same terms as the 2021 buyback programme. At 31 December 2022, 82,997,065 shares were repurchased for a total price, including transaction costs, of \u00a3664m. These shares have been subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-559": { "value": "Equity dividends on ordinary share capital are recognised as a liability on the date that the shareholder\u2019s right to receive payment is established. This is generally the date that the dividend is declared. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-484": { "value": "2022 \u00a3m 2021 \u00a3m Final 15.2p dividend per ordinary share paid in the year (2021 14.3p) 480 461 Interim 10.4p dividend per ordinary share paid in the year (2021 9.9p) 322 316 802 777 After the balance sheet date, the directors proposed a final dividend of 1 6.6p per ordinary share. The dividend proposed amounts to approximately \u00a35 1 1m, although the final payment is likely to be lower as a result of the impact of share buybacks. The dividend, which is subject to shareholder approval, will be paid on 1 June 2023 to shareholders registered on 21 April 2023. The ex-dividend date is 20 April 2023. Shareholders who do not at present participate in the Company\u2019s Dividend Reinvestment Plan and wish to receive the final dividend in shares rather than cash should complete a mandate form for the Dividend Reinvestment Plan and return it to the registrars no later than 5 May 2023. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-505": { "value": "0.166", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "fact-506": { "value": "511000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-485": { "value": "Other reserves Merger reserve \u00a3m Statutory reserve \u00a3m Revaluation reserve \u00a3m Capital redemption reserve \u00a3m Hedging reserve \u00a3m Translation reserve \u00a3m Total \u00a3m At 1 January 2021 4,589 202 10 3 94 1,025 5,923 Subsidiaries: Currency translation on foreign currency net investments \u2013 \u2013 \u2013 \u2013 \u2013 27 27 Reclassification of cumulative currency translation reserve on disposal of subsidiary \u2013 \u2013 \u2013 \u2013 \u2013 (9) (9) Net amounts debited to hedging reserve \u2013 \u2013 \u2013 \u2013 (52) \u2013 (52) Equity accounted investments (net of tax) \u2013 \u2013 \u2013 \u2013 9 (13) (4) Purchase of own shares \u2013 \u2013 \u2013 2 \u2013 \u2013 2 At 31 December 2021 4,589 202 10 5 51 1,030 5,887 Subsidiaries: Currency translation on foreign currency net investments \u2013 \u2013 \u2013 \u2013 \u2013 1,151 1,151 Reclassification of cumulative currency translation reserve on disposal of subsidiary \u2013 \u2013 \u2013 \u2013 \u2013 (17) (17) Net amounts debited to hedging reserve \u2013 \u2013 \u2013 \u2013 (65) \u2013 (65) Equity accounted investments (net of tax) \u2013 \u2013 \u2013 \u2013 3 (11) (8) Purchase of own shares \u2013 \u2013 \u2013 3 \u2013 \u2013 3 At 31 December 2022 4,589 202 10 8 (11) 2,153 6,951 Merger reserve The merger reserve arose on the acquisition of the Marconi Electronic Systems (MES) business by British Aerospace in 1999 to form BAE Systems, and represents the amount by which the fair value of the shares issued by British Aerospace as consideration exceeded their nominal value. Statutory reserve Under Section 4 of the British Aerospace Act 1980, this reserve may only be applied in paying up unissued shares of the Company to be allotted to members of the Company as fully paid bonus shares. Revaluation reserve The revaluation reserve relates to the revaluation at fair value of the net assets of the BVT joint venture previously held as an equity accounted investment on the acquisition of the remaining 45% interest in 2009. Capital redemption reserve The capital redemption reserve represents the cumulative nominal value of the Company\u2019s ordinary shares repurchased and subsequently cancelled. Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Capital The Group funds its operations through a mixture of equity funding and debt financing, including bank and capital market borrowings. At 31 December 2022, the Group\u2019s capital was \u00a311,411m (2021 \u00a37,617m), which comprises total equity of \u00a311,400m (2021 \u00a37,668m), excluding amounts accumulated in equity relating to cash flow hedges of \u00a3(11)m (2021 \u00a351m). Net debt (excluding lease liabilities) was \u00a32,023m (2021 \u00a32,160m). The capital structure of the Group reflects the judgement of the directors of an appropriate balance of funding required. The Group\u2019s policy is to maintain an investment grade credit rating and ensure operating flexibility, whilst: \u2013 meeting its pension obligations; \u2013 investing in research and technology and pursuing other organic investment opportunities; \u2013 paying dividends in line with the Group\u2019s policy of long-term sustainable cover of around two times underlying earnings (see note 7); \u2013 making accelerated returns of capital to shareholders when the balance sheet allows and when the return from doing so is in excess of the Group\u2019s Weighted Average Cost of Capital; and \u2013 investing in value-enhancing acquisitions, where market conditions are right and where they deliver on the Group\u2019s strategy. Purchase of own shares 2021 buyback On 29 July 2021, the Company announced the details of a share buyback programme to repurchase up to \u00a3500m of its own shares over the following 12 months. As part of the buyback programme, it was agreed that should a better alternative use for the Company\u2019s cash reserves be identified, the share buyback programme would be ceased, and the money instead used for the alternative purpose. Therefore, when the Company issued a mandate to the brokers to purchase shares on their behalf, the mandates were structured such that they could be revoked at any point. As such, no financial liability was recognised for shares not yet purchased under the programme. During 2021, 63,272,873 shares were repurchased for a total price, including transaction costs, of \u00a3371m. These shares were subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve. The 2021 share buyback programme was completed on 2 February 2022. During 2022, a further 24,253,065 shares were repurchased for a total price, including transaction costs, of \u00a3132m. In total 87,525,938 shares were repurchased under the scheme for a total price, including transaction costs, of \u00a3503m. 2022 buyback In July 2022, the directors also approved a new share buyback programme of up to \u00a31.5bn over the next three years under the same terms as the 2021 buyback programme. At 31 December 2022, 82,997,065 shares were repurchased for a total price, including transaction costs, of \u00a3664m. These shares have been subsequently cancelled, with the nominal value of shares cancelled deducted from share capital against the capital redemption reserve ", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-517": { "value": "Capital The Group funds its operations through a mixture of equity funding and debt financing, including bank and capital market borrowings. At 31 December 2022, the Group\u2019s capital was \u00a311,411m (2021 \u00a37,617m), which comprises total equity of \u00a311,400m (2021 \u00a37,668m), excluding amounts accumulated in equity relating to cash flow hedges of \u00a3(11)m (2021 \u00a351m). Net debt (excluding lease liabilities) was \u00a32,023m (2021 \u00a32,160m). The capital structure of the Group reflects the judgement of the directors of an appropriate balance of funding required. The Group\u2019s policy is to maintain an investment grade credit rating and ensure operating flexibility, whilst: \u2013 meeting its pension obligations; \u2013 investing in research and technology and pursuing other organic investment opportunities; \u2013 paying dividends in line with the Group\u2019s policy of long-term sustainable cover of around two times underlying earnings (see note 7); \u2013 making accelerated returns of capital to shareholders when the balance sheet allows and when the return from doing so is in excess of the Group\u2019s Weighted Average Cost of Capital; and \u2013 investing in value-enhancing acquisitions, where market conditions are right and where they deliver on the Group\u2019s strategy. ", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-461": { "value": "28. Cash flow from operating activities Reconciliation of net cash flow from operating activities to free cash flow1 2022 \u00a3m 2021 \u00a3m Net cash flow from operating activities 2,839 2,447 Add back Taxation paid 365 234 Purchase of property, plant and equipment, and investment property 2 (599) (516) Purchase of intangible assets (94) (96) Purchase of non-current other investment (8) (15) Proceeds from funding related to assets2 157 150 Proceeds from sale of property, plant and equipment, and investment property 18 271 Proceeds from sale of non-current other investments 7 \u2013 Equity accounted investment funding \u2013 (3) Principal element of lease payments and receipts (227) (207) Net capital expenditure, lease principal amounts and financial investment (746) (416) Dividends received from equity accounted investments 94 57 Operating business cash flow 1 2,552 2,322 Taxation paid3 (365) (234) Interest paid, net of interest received (237) (224) Free cash flow 1 1,950 1,864 Reconciliation of operating business cash flow1 to net cash flow from operating activities by reporting segment Operating business cash flow 1 Deduct Dividends received from equity accounted investments Add back Net capital expenditure, lease principal amounts and financial investment Net cash flow from operating activities 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Electronic Systems 650 774 (6) (3) 216 180 860 951 Platforms & Services 525 287 \u2013 (6) 108 70 633 351 Air 1,140 628 (84) (44) 146 159 1,202 743 Maritime & UK Land 235 321 (4) (4) 187 140 418 457 Cyber & Intelligence 154 173 \u2013 \u2013 37 29 191 202 HQ (152) 139 \u2013 \u2013 52 (162) (100) (23) 2,552 2,322 (94) (57) 746 416 3,204 2,681 Taxation paid 3 (365) (234) Net cash flow from operating activities 2,839 2,447 1. Operating business cash flow and Free cash flow are alternative performance measures defined in the Financial glossary on page 302. They are presented here to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. 2. To align with further detail provided in the current year cash flow statement, funding received from the UK government for the construction of assets for the year ended 31 December 2021 has been presented in equivalent detail with the cash inflow now shown separately as \u2018Proceeds from funding related to assets\u2019 to cash outflows on the \u2018Purchase of property, plant and equipment, and investment property\u2019. 3. Taxation is managed on a Group-wide basis. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-507": { "value": "29. Movement in assets and liabilities arising from financing activities Non-cash movements As at 1 January 2022 \u00a3m Cash flow 3 \u00a3m Foreign exchange movements \u00a3m Leases \u00a3m Fair value adjustments \u00a3m Financial expense \u00a3m Other movements 1 \u00a3m As at 31 December 2022 \u00a3m Assets Other financial assets 2 122 (550) \u2013 \u2013 581 17 \u2013 170 122 (550) \u2013 \u2013 581 17 \u2013 170 Liabilities Loans (5,061) 615 (584) \u2013 \u2013 (212) \u2013 (5,242) Lease liabilities (1,295) 284 (95) (464) \u2013 (48) 2 (1,616) Other financial liabilities2 (163) 205 \u2013 \u2013 (155) (1) \u2013 (114) (6,519) 1,104 (679) (464) (155) (261) 2 (6,972) 554 Other interest paid 23 Purchase of own shares 788 Equity dividends paid 802 Dividends paid to non-controlling interests 166 Net cash flow from financing activities 2,333 Non-cash movements As at 1 January 2021 \u00a3m Cash flow 3 \u00a3m Foreign exchange movements \u00a3m Leases \u00a3m Fair value adjustments \u00a3m Financial expense \u00a3m Other movements 1 \u00a3m As at 31 December 2021 \u00a3m Assets Other financial assets 2 146 (79) \u2013 \u2013 37 18 \u2013 122 146 (79) \u2013 \u2013 37 18 \u2013 122 Liabilities Loans (5,323) 574 (43) \u2013 \u2013 (209) (60) (5,061) Lease liabilities (1,256) 260 (7) (246) \u2013 (43) (3) (1,295) Other financial liabilities2 (231) 154 \u2013 \u2013 (81) (5) \u2013 (163) Cash collateral 4 (18) 18 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (6,828) 1,006 (50) (246) (81) (257) (63) (6,519) 927 Other interest paid 10 Purchase of own shares 368 Equity dividends paid 777 Dividends paid to non-controlling interests 202 Partial disposal of shareholding in subsidiary undertaking (28) Net cash flow from financing activities 2,256 1. Other movements includes movements arising on the acquisition or disposal of businesses. 2. Excluding cash flow hedges, for which the cash flow is reported within cash flow from operating activities. See note 15 for an analysis of other financial assets and liabilities. 3. Cash flow movements represent both payments or receipts of principal and payments of interest, which are presented separately in the consolidated cash flow statement. Cash flow movements in the prior year were presented net of interest paid. The movement tables have been re-presented in the current year to disclose greater levels of detail and, as a result, the 2021 comparatives have been re-presented to the same level of detail. 4. Reported in other payables. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-462": { "value": "29. Movement in assets and liabilities arising from financing activities Non-cash movements As at 1 January 2022 \u00a3m Cash flow 3 \u00a3m Foreign exchange movements \u00a3m Leases \u00a3m Fair value adjustments \u00a3m Financial expense \u00a3m Other movements 1 \u00a3m As at 31 December 2022 \u00a3m Assets Other financial assets 2 122 (550) \u2013 \u2013 581 17 \u2013 170 122 (550) \u2013 \u2013 581 17 \u2013 170 Liabilities Loans (5,061) 615 (584) \u2013 \u2013 (212) \u2013 (5,242) Lease liabilities (1,295) 284 (95) (464) \u2013 (48) 2 (1,616) Other financial liabilities2 (163) 205 \u2013 \u2013 (155) (1) \u2013 (114) (6,519) 1,104 (679) (464) (155) (261) 2 (6,972) 554 Other interest paid 23 Purchase of own shares 788 Equity dividends paid 802 Dividends paid to non-controlling interests 166 Net cash flow from financing activities 2,333 Non-cash movements As at 1 January 2021 \u00a3m Cash flow 3 \u00a3m Foreign exchange movements \u00a3m Leases \u00a3m Fair value adjustments \u00a3m Financial expense \u00a3m Other movements 1 \u00a3m As at 31 December 2021 \u00a3m Assets Other financial assets 2 146 (79) \u2013 \u2013 37 18 \u2013 122 146 (79) \u2013 \u2013 37 18 \u2013 122 Liabilities Loans (5,323) 574 (43) \u2013 \u2013 (209) (60) (5,061) Lease liabilities (1,256) 260 (7) (246) \u2013 (43) (3) (1,295) Other financial liabilities2 (231) 154 \u2013 \u2013 (81) (5) \u2013 (163) Cash collateral 4 (18) 18 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (6,828) 1,006 (50) (246) (81) (257) (63) (6,519) 927 Other interest paid 10 Purchase of own shares 368 Equity dividends paid 777 Dividends paid to non-controlling interests 202 Partial disposal of shareholding in subsidiary undertaking (28) Net cash flow from financing activities 2,256 1. Other movements includes movements arising on the acquisition or disposal of businesses. 2. Excluding cash flow hedges, for which the cash flow is reported within cash flow from operating activities. See note 15 for an analysis of other financial assets and liabilities. 3. Cash flow movements represent both payments or receipts of principal and payments of interest, which are presented separately in the consolidated cash flow statement. Cash flow movements in the prior year were presented net of interest paid. The movement tables have been re-presented in the current year to disclose greater levels of detail and, as a result, the 2021 comparatives have been re-presented to the same level of detail. 4. Reported in other payables. ", "dimensions": { "concept": "ifrs-full:DisclosureOfReconciliationOfLiabilitiesArisingFromFinancingActivitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-486": { "value": "31. Fair value measurement Fair value of financial instruments Certain of the Group\u2019s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date. The fair values of financial instruments held at fair value have been determined based on available market information at the balance sheet date, and the valuation methodologies listed below: \u2013 the fair values of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the appropriate balance sheet rates; \u2013 the fair values of both interest rate and cross-currency swaps are calculated by discounting expected future principal and interest cash flows and translating at the appropriate balance sheet rates; and \u2013 the fair values of money market funds are calculated by multiplying the net asset value per share by the investment held at the balance sheet date. Due to the variability of the valuation factors, the fair values presented at 31 December may not be indicative of the amounts the Group will realise in the future. Fair value hierarchy The fair value measurement hierarchy is as follows: \u2013 Level 1 \u2013 Quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2013 Level 2 \u2013 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2013 Level 3 \u2013 Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). Carrying amounts and fair values of certain financial instruments 2022 2021 Notes Carrying amount \u00a3m Fair value \u00a3m Carrying amount \u00a3m Fair value \u00a3m Financial instruments measured at fair value: Non-current Other investments at fair value through other comprehensive income 13 99 99 76 76 Other financial assets 15 322 322 305 305 Other financial liabilities 15 (272) (272) (302) (302) Current Other financial assets 15 252 252 194 194 Money market funds 19 1,149 1,149 1,171 1,171 Other financial liabilities 15 (328) (328) (214) (214) Financial instruments not measured at fair value: Non-current Loans 22 (5,189) (4,588) (4,604) (5,045) Current Loans and overdrafts 22 (53) (53) (457) (462) All of the financial assets and liabilities measured at fair value are classified as level 2 using the fair value hierarchy, except for money market funds, which are classified as level 1, and other investments, which are at a combination of level 1 and level 3. The total value of investments classified as level 3 is immaterial. There were no transfers between levels during the year. Financial assets and liabilities in the Group\u2019s Consolidated balance sheet are either held at fair value or at amortised cost. With the exception of loans, the carrying value of financial instruments measured at amortised cost approximates their fair value. The fair value of loans presented in the table above is derived from market prices, classified as level 1 using the fair value hierarchy. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-463": { "value": "31. Fair value measurement Fair value of financial instruments Certain of the Group\u2019s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date. The fair values of financial instruments held at fair value have been determined based on available market information at the balance sheet date, and the valuation methodologies listed below: \u2013 the fair values of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the appropriate balance sheet rates; \u2013 the fair values of both interest rate and cross-currency swaps are calculated by discounting expected future principal and interest cash flows and translating at the appropriate balance sheet rates; and \u2013 the fair values of money market funds are calculated by multiplying the net asset value per share by the investment held at the balance sheet date. Due to the variability of the valuation factors, the fair values presented at 31 December may not be indicative of the amounts the Group will realise in the future. Fair value hierarchy The fair value measurement hierarchy is as follows: \u2013 Level 1 \u2013 Quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2013 Level 2 \u2013 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2013 Level 3 \u2013 Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). Carrying amounts and fair values of certain financial instruments 2022 2021 Notes Carrying amount \u00a3m Fair value \u00a3m Carrying amount \u00a3m Fair value \u00a3m Financial instruments measured at fair value: Non-current Other investments at fair value through other comprehensive income 13 99 99 76 76 Other financial assets 15 322 322 305 305 Other financial liabilities 15 (272) (272) (302) (302) Current Other financial assets 15 252 252 194 194 Money market funds 19 1,149 1,149 1,171 1,171 Other financial liabilities 15 (328) (328) (214) (214) Financial instruments not measured at fair value: Non-current Loans 22 (5,189) (4,588) (4,604) (5,045) Current Loans and overdrafts 22 (53) (53) (457) (462) All of the financial assets and liabilities measured at fair value are classified as level 2 using the fair value hierarchy, except for money market funds, which are classified as level 1, and other investments, which are at a combination of level 1 and level 3. The total value of investments classified as level 3 is immaterial. There were no transfers between levels during the year. Financial assets and liabilities in the Group\u2019s Consolidated balance sheet are either held at fair value or at amortised cost. With the exception of loans, the carrying value of financial instruments measured at amortised cost approximates their fair value. The fair value of loans presented in the table above is derived from market prices, classified as level 1 using the fair value hierarchy. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-560": { "value": "Fair value of financial instruments Certain of the Group\u2019s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date. The fair values of financial instruments held at fair value have been determined based on available market information at the balance sheet date, and the valuation methodologies listed below: \u2013 the fair values of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the appropriate balance sheet rates; \u2013 the fair values of both interest rate and cross-currency swaps are calculated by discounting expected future principal and interest cash flows and translating at the appropriate balance sheet rates; and \u2013 the fair values of money market funds are calculated by multiplying the net asset value per share by the investment held at the balance sheet date. Due to the variability of the valuation factors, the fair values presented at 31 December may not be indicative of the amounts the Group will realise in the future. Fair value hierarchy The fair value measurement hierarchy is as follows: \u2013 Level 1 \u2013 Quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2013 Level 2 \u2013 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2013 Level 3 \u2013 Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-561": { "value": "The Group has granted equity-settled share options and Long-Term Incentive Plan arrangements which are measured at fair value at the date of grant using an option pricing model. The fair value is expensed on a straight-line basis over the vesting period, based on the Group\u2019s estimate of the number of shares that will actually vest. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-464": { "value": "Details of the terms and conditions of each share-based payment plan are given in the Annual remuneration report on pages 160 to 205. Expense in year 2022 \u00a3m 2021 \u00a3m Executive Share Option Plan 10 8 Performance Share Plan 35 32 Restricted Share Plan 10 8 55 48 The Group also incurred a charge of \u00a346m (2021 \u00a344m) in respect of the equity-settled all-employee Free Shares and Matching Partnership Shares elements of the Share Incentive Plan. Executive Share Option Plan 2022 2021 Number of shares \u2019000 Weighted average exercise price \u00a3 Number of shares \u2019000 Weighted average exercise price \u00a3 Outstanding at 1 January 47,280 5.16 43,561 5.20 Granted during the year 8,141 7.39 10,995 5.02 Exercised during the year (18,020) 5.30 (2,695) 4.68 Expired during the year (2,587) 5.50 (4,581) 5.49 Outstanding at 31 December 34,814 5.58 47, 28 0 5.16 Exercisable at 31 December 8,271 5.38 17,279 5.57 2022 2021 Range of exercise price of outstanding options (\u00a3) 3.89 \u2013 7.83 3.01 \u2013 6.49 Weighted average remaining contracted life (years) 7 7 Weighted average fair value of options granted (\u00a3) 1.87 1.00 Performance Share Plan and Restricted Share Plan Performance Share Plan Restricted Share Plan 2022 Number of shares \u2019000 2021 Number of shares \u2019000 2022 Number of shares \u2019000 2021 Number of shares \u2019000 Outstanding at 1 January 27,915 25,878 5,413 4,974 Granted during the year 6,799 9,387 2,205 2,304 Exercised during the year (3,719) (2,108) (1,383) (1,523) Expired during the year (3,652) (5,242) (430) (342) Outstanding at 31 December 27, 343 27,915 5,805 5,413 Exercisable at 31 December 387 387 38 \u2013 2022 2021 2022 2021 Weighted average remaining contracted life (years) 5 5 5 5 Weighted average fair value of awards granted (\u00a3) 7.32 4.90 7.49 5.01 The exercise price for the Performance Share Plan and Restricted Share Plan is \u00a3nil (2021 \u00a3nil). Details of options/awards granted in the year The fair value of equity-settled options/awards granted in the year has been measured using the weighted average inputs below and the following valuation models: Executive Share Option Plan \u2013 Binomial Performance Share Plan \u2013 Monte Carlo Restricted Share Plan \u2013 Dividend valuation 2022 2021 Range of share price at date of grant (\u00a3) 7.35 \u2013 7.83 5.00 \u2013 5.68 Expected option/award life (years) 3 \u2013 10 3 \u2013 10 Volatility (%) 29 28 Risk-free interest rate (%) 1 \u2013 3 0.1 \u2013 0.2 Volatility was calculated with reference to the Group\u2019s weekly share price volatility, after allowing for dividends, for the greater of 30 weeks or for the period until vest date. The average share price in the year was \u00a37.53 (2021 \u00a35.33). ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-465": { "value": "
33. Related party transactions
The Group has a related party relationship with its directors and key management personnel (see below), equity accounted investments (note 12)
and pension schemes (note 25).
Transactions with related parties occur in the normal course of business, are priced on an arm\u2019s-length basis and settled on normal trade terms.
The more significant transactions are disclosed below:
Sales to
related parties
Purchases from
related parties
Amounts owed by
related parties
Amounts owed to
related parties
1
Management
recharges
1
Related party
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Advanced Electronics Company Limited \u2013 1 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Eurofighter Jagdflugzeug GmbH 1,219 1,068 442 402 67 26 91 74 \u2013 \u2013
FADEC International LLC 73 54 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
MBDA SAS 19 23 76 114 6 2 949 837 8 19
Panavia Aircraft GmbH 22 32 49 46 1 1 2 \u2013 \u2013 \u2013
BAE Systems Pension Schemes \u2013 \u2013 20 16 \u2013 \u2013 193 207 \u2013 \u2013
Other 11 12 28 8 3 5 27 19 \u2013 \u2013
1,344 1,190 615 586 77 34 1,262 1,137 8 19
1. Also relates to disclosures under IAS 24 Related Party Disclosures, for the parent company, BAE Systems plc. At 31 December 2022, \u00a31,021m (2021 \u00a3907m) was owed
by BAE Systems plc and \u00a3241m (2021 \u00a3230m) by other Group subsidiaries.
The Group also manages certain treasury functions on behalf of some of their equity accounted investments. This includes entering into foreign
exchange derivatives on their behalf. As at 31 December 2022, we entered into forward contracts to purchase \u20ac313m, sell $21m, and purchase
\u00a314m worth of other currencies (2021 purchase \u20ac250m, sell $20m and purchase \u00a34m worth of other currencies) on their behalf. No service fee
is charged for these arrangements.
The Group considers key management personnel, as defined under IAS 24 Related Party Disclosures, to be the members of the Group\u2019s
Executive Committee and the Company\u2019s non-executive directors. Fuller disclosures on directors\u2019 remuneration are set out in the Annual
remuneration report on pages 160 to 205. Total emoluments for directors and key management personnel charged to the Consolidated income
statement were:
2022
\u00a3\u2019000
2021
\u00a3\u2019000
Short-term employee benefits 22,238 17,755
Post-employment benefits 677 1,121
Share-based payments 12,023 8,940
34,938 27,816
37. Information about related undertakings In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries and equity accounted investments as at 31 December 2022 is disclosed below. Unless otherwise stated, the Group\u2019s shareholding represents ordinary shares held indirectly by BAE Systems plc, the year end is 31 December and the address of the registered office is Warwick House, PO Box 87, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6YU, United Kingdom. For companies incorporated outside of the United Kingdom, the country of incorporation is shown in the address. No subsidiary undertakings have been excluded from the consolidation. Subsidiaries \u2013 wholly-owned 4219 Lafayette, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Aircraft Research Association Limited2 Manton Lane, Bedford MK41 7PF, United Kingdom Alvis Limited Alvis Pension Scheme Trustees Limited 3 Alvis Vickers Limited Armstrong Whitworth Aircraft Limited 3 ASC Shipbuilding Pty Limited Bldg 01, Level 2, 640 Mersey Road North, Osborne SA 5017, Australia Australian Marine Engineering Corporation (Finance) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Avro International Aerospace Limited3 BAE Systems (Al Diriyah C4i) Limited 3 BAE Systems (Canada) Inc. 220 Laurier Avenue West, Suite 1200, Ottawa ON K1P 5Z9, Canada BAE Systems (Combat and Radar Systems) Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY BAE Systems (Corporate Air Travel) Limited BAE Systems (Defence Systems) Limited BAE Systems (Dynamics) Limited BAE Systems (Farnborough 3) Limited BAE Systems (Finance) Limited BAE Systems (Funding Four) Unlimited Company Riverside One, Sir John Rogerson\u2019s Quay, Dublin D02 X576, Ireland BAE Systems (Funding Three) Limited BAE Systems (Funding Two) Limited BAE Systems (Gripen Overseas) Limited BAE Systems (Holdings) Limited 3 BAE Systems (International) Limited BAE Systems (Kazakhstan) Limited BAE Systems (Kuwait) Limited BAE Systems (Land and Sea Systems) Limited 4 BAE Systems (Malaysia) Sdn Bhd Level 25 Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems (MEH) Limited BAE Systems (Military Air) Overseas Limited BAE Systems (Nominees) Limited 3 BAE Systems (Oman) Limited BAE Systems (Operations) Limited5 BAE Systems (Operations) Singapore Pte Limited One Marina Boulevard #28-00, Singapore 018989, Singapore BAE Systems (Overseas Holdings) Limited BAE Systems (Poland) Sp. z o.o. ul. Abp. A. Baraniaka 88, 61-131 Poznan, Poland BAE Systems (Projects) Limited BAE Systems (Property Investments) Limited BAE Systems (Vehicles and Equipment) Limited 6 BAE Systems 2000 Pension Plan Trustees Limited3 BAE Systems AB 7 Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Air Japan KK 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Al Diriyah Programme Limited 3 BAE Systems Applied Intelligence (Asia Pacific) Pte Limited United Square, 101 Thomson Road, #25-03/04, 307591, Singapore BAE Systems Applied Intelligence (Connect) A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence (GCS) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence Integrated Computer Solutions (Kuwait) (S.P.C.) Al Hamra Tower, Office Number 3503, 35th Floor, East Maqwa, Kuwait City, Kuwait BAE Systems Applied Intelligence (Integration) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (International) Limited Priestley Road, Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (Japan) KK 12/F Ark Mori Building, 1-12-32 Akasaka, Minato-ku, Tokyo, 107-6024, Japan BAE Systems Applied Intelligence (Spain) S.A. Paseo de la Castellana, 141, Cuzco IV, 28046 Madrid, Spain BAE Systems Applied Intelligence (UK) Limited BAE Systems Applied Intelligence A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence GCS Inc.8 CSC, 100 Shockoe Slip, 2nd Floor Richmond VA 23219, United States BAE Systems Applied Intelligence Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence LLC 1 8000 Towers Crescent Blvd, 13th Floor, Vienna VA 22182, United States BAE Systems Applied Intelligence Malaysia Sdn Bhd Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems Applied Intelligence Pty Limited Level 26, 459 Collins Street, Melbourne VIC 3000, Australia BAE Systems Australia (Electronic Systems) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Datagate Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Pty Limited10 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Holdings Limited3 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Logistics Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Sea Sentinel Project Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Avionics Singapore Pte Limited One Marina Boulevard, #28-00, Singapore 018989, Singapore BAE Systems Bofors AB SE-691 80 Karlskoga, Sweden BAE Systems Bofors Holdings Sdn Bhd Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia BAE Systems C-ITS AB Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Communications Solutions LLC 1 Knowledge Oasis, Building 4, Second Floor, 0402-Z427, Knowledge Oasis Muscat, PO Box 16, Postal Code 135, Muscat, Oman BAE Systems Controls Inc.9 1098 Clark Street, Endicott NY 13760, United States BAE Systems Creole Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Datagate Holdings Limited BAE Systems Datagate Limited6 BAE Systems Deployed Systems Limited12 BAE Systems do Brasil Ltda SCN Quadra 5 Bloco A, Ed. Brasilia Shopping, Torre Norte, Sala 426, Brasilia, DF CEP:70715-900, Brazil BAE Systems Electronic Systems (Overseas) Limited BAE Systems Electronics Limited BAE Systems Enterprises Limited BAE Systems Executive Pension Scheme Trustees Limited3 BAE Systems Finance B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Finance Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Flight Training (Australia) Pty Limited13 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Funds Management 3,14 BAE Systems GCS International Limited BAE Systems Global Combat Systems Bridging Limited6 BAE Systems Global Combat Systems Munitions Limited BAE Systems Global LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems H\u00e4gglunds AB SE-691 80, Karlskoga, Sweden BAE Systems Hawaii Shipyards Inc. 8 The Corporation Company, Inc., 1136 Union Mall, Suite 301, Honolulu HI 96813, United States BAE Systems Holding GmbH Hauptstrasse 48, 82433 Bad Kohlgrub, Germany BAE Systems Holdings (South Africa) (Pty) Limited Central Office Park No. 5, 257 Jean Avenue, Centurion, Gauteng, 0157, South Africa BAE Systems Holdings B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Holdings Inc.9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Holdings International LLC1 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States BAE Systems Imaging Solutions Inc. 9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems India (Homeland Security) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Services) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Technology) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Ventures) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems Information and Electronic Systems Integration Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Insurance (Isle of Man) Limited Tower House, Loch Promenade, Douglas, IM1 2LZ, Isle of Man BAE Systems Integrated System Technologies (KSA) Limited BAE Systems Integrated System Technologies (Overseas) Limited BAE Systems Integrated System Technologies Limited BAE Systems International Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Jacksonville Ship Repair LLC1 8500 Hecksher Drive, Jacksonville FL 32226, United States BAE Systems Japan GK Ark Mori Building, 1-12-32 Akasaka, Minato-Ku, Tokyo, Japan BAE Systems Land & Armaments Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Land & Armaments Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land & Armaments L.P.1 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems (Finance) Limited BAE Systems Land Systems (Investments South Africa) Limited6 BAE Systems Land Systems (Investments) Limited BAE Systems Land Systems (Ranges) Limited 6 BAE Systems Land Systems ATF Limited BAE Systems Land Systems FMTV International Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems Pinzgauer (Holdings) Limited BAE Systems Land Systems Pinzgauer Limited BAE Systems MAI Turkey Hava Sistemleri A.S\u00b8 . \u00dcniversiteler Mahallesi, Beytepe Lodumlu K\u00f6y Yolu Cad. No: 5/348 \u00c7ankaya, Ankara, Turkey BAE Systems Marine (Holdings) Limited BAE Systems Marine (YSL) Limited BAE Systems Marine Limited BAE Systems Norfolk Ship Repair Inc.8 CT Corporation System, 4701 Cox Road, Suite 285, Glen Allen VA 23060-6802, United States BAE Systems Oman LLC 1 PO Box 74, Postal Code 111, Seeb, Oman BAE Systems Ordnance Systems Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Overseas Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Pension Funds CIF Trustees Limited 3 BAE Systems Pension Funds Investment Management Limited 3,16 BAE Systems Pension Funds Trustees Limited 3 BAE Systems Project Services Limited BAE Systems Projects (Canada) Limited BAE Systems Properties Limited BAE Systems Quest Limited3 BAE Systems Air Japan KK 9 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Regional Aircraft Colombia SAS 17 c/o Brigard & Urrutia, Calle 70 A No. 4-41, Bogot\u00e1, Colombia BAE Systems Resolution Inc. 8 CT Corporation System, 1999 Bryan Street, Suite 900, Dallas TX 75201, United States BAE Systems S&S Operations Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems San Diego Ship Repair Inc. 8 330 N. Brand Boulevard, Glendale CA 91203-2336, United States BAE Systems Saudi America Limited Riyadh Kingdom Centre 28th Floor (REGUS), PO Box 23088, Riyadh 11321, Central Province, Riyadh, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Maintenance and Equipment Services) Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Vehicles and Equipment Holdings) Limited 3 BAE Systems Saudi Arabia (Vehicles and Equipment Nominees) Limited 3 BAE Systems Saudi Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Servi\u00e7os de Avi\u00f4nicos Ltda. Rua Ambr\u00f3sio Molina, No. 1090. Bloco F, Eug\u00eanio de Melo, S\u00e3o Jos\u00e9 dos Campos, S\u00e3o Paulo 12.247-000, Brazil BAE Systems Share Plans Trustee Limited 3 BAE Systems Services Limited BAE Systems Shared Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Ship Repair Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Southeast Shipyards AMHC Inc.8 1200 South Pine Island Road, Plantation FL 33324, United States BAE Systems Surface Ships (Holdings) Limited BAE Systems Surface Ships (Overseas) Limited BAE Systems Surface Ships (Projects) Limited BAE Systems Surface Ships Integrated Support Limited BAE Systems Surface Ships Intermediate Holdings Limited18 BAE Systems Surface Ships International Limited BAE Systems Surface Ships Limited BAE Systems Surface Ships Maritime Limited BAE Systems Surface Ships Portsmouth Limited 18 BAE Systems Surface Ships Projects (Malaysia) Sdn Bhd Level 29 Menara Binjai, No 2 Jalan Binjai, Off Jalan Ampang, 50450 Kuala Lumpur, Malaysia BAE Systems Surface Ships Property Services Limited BAE Systems Surface Ships Support Limited 5 BAE Systems SWS Defence AB SE-691 80 Karlskoga, Sweden BAE Systems Tactical Vehicle Systems LP 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Technology Solutions & Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Training Services Limited BAE Systems TVS Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Zephyr Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fifth Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fourth Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Second Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Third Corporation 9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems, Inc. 8 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801, United States BIS Invest S.\u00e0.r.l. 2, Place de Strasbourg, L-2562, Luxembourg, Grand Duchy of Luxembourg Bohemia Interactive Australia Pty Limited Unit 2, Building A, 2 Technology Place, Williamtown NSW 2318, Australia Bohemia Interactive Simulations GK Limited Abista Kudan Blgd. 10F, 2-4-12 Kudan-minami, Tokyo, Chiyoda Ku, 102-0074, Japan Bohemia Interactive Simulations GmbH Vistra Corporate Services, Westendstra\u00dfe 28, 60325, Frankfurt am Main, Germany Bohemia Interactive Simulations, Inc.8 CT Corporation System, 1200 South Pine Island Road, Plantation FL 33324, United States Bohemia Interactive Simulations K.S. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Bohemia Interactive Simulations Korea Limited Rm 1 5/F 437 Teheran-ro, Gangnam-gu, Seoul, 06158, Republic of Korea Bohemia Interactive Simulations sp z.o.o. Ul. Ostrobramska 101, 04-041, Warsaw, Poland Bohemia Interactive Simulations (UK) Limited 31 Hercules Way, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6UU, United Kingdom Bohemia Invest One Ltd Bohemia Invest Two Ltd Brabazon Limited British Aerospace (Far East) Limited19 Level 54, Hopewell Centre, 183 Queen\u2019s Road East, Hong Kong British Aerospace (Malaysia) Sdn Bhd 19 Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia British Aircraft Corporation (Pension Fund Trustees) Limited 3 British Aircraft Corporation Limited3 CPS International, Inc.11 Benedetti & Benedetti, Comosa Building, 21st Floor, PO Box 850120, Panama 5, Panama Creole (Nigeria) Limited 5 Tapa House (2nd Floor), 45, Imman Dauda St (Abosede Kuboye Crescent Entrance) Surulere, Lagos, Nigeria Detica B.V. Luna ArenA, Herikerbergweg 238, 1101 CM Amsterdam, Netherlands Detica Group Limited Detica Mexico S. de R.L. de C.V. Torre Esmeralda II, Blvd Manuel Avila Camacho No. 36 Piso 18, Lomas de Chapultepec, 11000 D.F., Mexico Detica Services, Inc. 8 1209 Orange Street, Wilmington DE 19801, United States Dividend Training Limited ETI Engineering, Inc. 8 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States EVU Czech, S.R.O. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Gloster Aircraft Limited 3 H-B Utveckling, H-B Development AB Nybrogatan 7, SE-114 34 Stockholm, Sweden Hadrian Holdings, Inc. 521 Fifth Avenue, New York NY 101075, United States Hadrian Trustees Limited 2 H\u00e4gglunds Vehicle GmbH Ernst-Grote Strasse 13, 30916 Isernhagen, Germany Hawker Siddeley Aviation Limited 3 Hawker Siddeley Dynamics Limited3 HSA/HSD Pension Fund Trustees Limited3 Hunter Aerospace Corporation Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia In-Space Missions Limited 8 Oriel Court, Omega Park, Alton GU34 2YT, United Kingdom International Military Sales Limited Jetstream Aircraft Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Lemacrown Limited 20 MES Holdco Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY MES Interco 14 Meslink Limited Newcombe Properties Limited Pitch Technologies AB Repslagaregatan 25, SE-582 22 Link\u00f6ping, Sweden Pitch Technologies Limited Sweden House, 5 Upper Montagu Street, London W1H 2AG, United Kingdom Prismatic Limited 5 2 Omega Park, Alton GU34 2QE, United Kingdom PT. BAE Systems Services 8 Wisma 46, Kota BNI, 34th Floor, Suite 34.01.A, Jl. Jenderal Sudirman Kavling 71, Jakarta 10220, Indonesia Pulse Power and Measurement Inc. 1717 Pennsylvania Avenue, NW Suite, 1025 Washington DC 20006, United States Pulse Power and Measurement Limited 21 65 Shrivenham Hundred Business Park, Watchfield, Swindon, Wiltshire SN6 8TY, United Kingdom Representaciones SSTS, CA11 Ave Francisco de Miranda, Centro Lido El Rosal Oficina 71B, Caracas, Venezuela Riptide Autonomous Solutions Canada Company 1300-1969 Upper Water Street, Purdy\u2019s Wharf Tower II, Halifax, NS, BJ3 3R7, Canada Royal Ordnance (Crown Service) Pension Scheme Trustees Limited Royal Ordnance Senior Staff Pension Scheme Trustees Limited Royal Ordnance Speciality Metals Limited 3,18 RWT Limited 3,18 Salford Electrical Instruments Limited18 10 Fleet Place, London EC4M 7RB, United Kingdom Scentcivil Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Scottish Aviation Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Sepia, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Shipbuilding (MSF) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Shipbuilding (VIC) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Stewart & Stevenson Operations (Nigeria) Limited 11 9th Floor, St. Nicholas House, 26 Catholic Mission Street, Lagos, Nigeria Stewart & Stevenson TVS UK Limited Stratsec.net Sdn Bhd Unit F-3-1, Blok F, Third Floor, CBD Perdana 3, Jalan Perdana, Cyber 12, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia Support Solutions General Services and Contracting Company/Limited Liability company 1,17 House No. 145, Street No. 1, Qtr. 611, Al Andulous Area, Al Mansour, Baghdad, Iraq TDS International Holdings Pty Limited 22 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia TDS International Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Techmodal Limited Techmodal Ventures Limited TerraSim, Inc. 8 307 Fourth Avenue, Suite 400, Pittsburgh PA 15222, United States The Blackburn Aeroplane & Motor Co Limited 3 The Bristol Aviation Company Limited3 The British & Colonial Aeroplane Co. Limited 3 The Supermarine Aviation Works Limited 3,4 Thomas Sopwith Aviation Company Limited3 VSEL Birkenhead Limited Warship Design Services Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Westover Controls Incorporated8 1098 Clark Street, Endicott NY 13760, United State s Subsidiaries \u2013 not wholly-owned Advanced National Company for Aircraft Maintenance Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Development and Training Company Limited (50.98%) 23 PO Box 67775, Riyadh 11517, Kingdom of Saudi Arabia BAE Systems SDT (UK) Limited (51%) Flight Control System Management GmbH (66.6%) 24 PO Box 801109, 81663 Munich, Germany Granada Enterprises Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Hadrian Properties, Inc. (95%) 14 521 Fifth Avenue, New York NY 101075, United States International Systems Engineering Company Limited (46.2%) PO Box 54002, Riyadh 11514, Kingdom of Saudi Arabia Overhaul and Maintenance Company Holding (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Saudi Maintenance & Supply Chain Management Company Limited (51%) PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia Saudi Technology & Logistics Services Limited (65%) 3 PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia SMSCMC (UK) Limited (51%) Equity accounted investments Abercromby Property International (20.42%) 521 Fifth Avenue, New York NY 101075, United States Air Astana (49%)10 121 Kabanbay Batyr Avenue, Yessil District, Astana 010000, Kazakhstan AMSH B.V. (50%)25 Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands BAE Systems Strategic Aerospace Services WLL (49%) Building 58, Street 850, Area 23, Qatari Bin Al Fajaa, Doha, Qatar BAeHAL Software Limited (40%) 3,15 Airport Lane, HAL Estate, Bangalore 560010, India BHIC Bofors Defense Asia Sdn Bhd (49%) Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Canadian Naval Support Limited (50%) 26 3099 Barrington Street, Halifax NS B3K 5M7, Canada CTA International SAS (50%) 13 Route De La Miniere, 78034 Versailles Cedex, France Data Link Solutions L.L.C. (50%)1,19 350 Collins Road, Northeast Cedar Rapids IA 52498, United States Eurofighter Jagdflugzeug GmbH (33%)3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany European Aerosystems Limited (50%)2,3,18,22 FADEC International LLC (50%)1 1098 Clark Street, Endicott NY 13760, United States FAST Holdings Limited (50%)15,22 FAST Training Services Limited (50%)15 FNSS Savunma Sistemleri A.S (49%) 22 Og\u02d8 ulbey Mahallesi, Og\u02d8 ulbey Kumeevleri, No. 441/A, 441/B, G\u00f6lbas\u00b8 \u0131, Ankara, Turkey KBS Maritime Limited (50%)7 MBDA B.V. (37.5%) Coolsingel 61, 7th Floor \u2013 right, 3012 AB Rotterdam, Netherlands MBDA Holdings S.A.S. (25%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France MBDA S.A.S. (37.5%) 1 avenue R\u00e9aumur, 92350 Le Plessis-Robinson, France Nobeli Business Support AB (34%) SE-691 80 Karlskoga, Sweden Panavia Aircraft GmbH (42.5%) 3 Am Soldnermoos 17, 85399 Hallbergmoos, Germany Promoveo Solutions JV LLC (49%) 260 Peachtree Street NW, #2200, Atlanta GA 30303, United States Reaction Engines Limited (15.5%) Rheinmetall BAE Systems Land Limited (45%) Hadley Castle Works, PO Box 106, Telford TF1 6QW, United Kingdom Saab Bofors Test Center AB (30%) Box 418, SE-691 27 Karlskoga, Sweden Sealand Support Services Limited (33.3%) 27 MoD Sealand, Welsh Road, Sealand, Deeside, Flintshire CH5 2LS, United Kingdom Winner Developments Limited (33.3% ) Notes 1. Unincorporated entity for which the address given is the principal place of business. 2. Company limited by guarantee. 3. Directly owned by BAE Systems plc. 4. Ownership held in class of A shares, B shares and preference shares. 5. Ownership held in class of A shares and B shares. 6. In strike off. 7. Ownership held in ordinary shares and preference shares. 8. Ownership held in common shares. 9. Ownership held in common stock. 10. Ownership held in ordinary shares and redeemable preference shares. 11. Ownership held in authorized shares. 12. 40% owned by BAE Systems plc. 13. Ownership held in ordinary shares, ordinary A and ordinary B shares. 14. Unlimited company. 15. Year end 31 March. 16. Year end 5 April. 17. In liquidation. 18. In Members\u2019 Voluntary Liquidation. 19. Year end 30 September. 20. Ownership held in ordinary shares and class of A shares. 21. Ownership held in class of A, B, C, D, E, F and G ordinary shares. 22. Ownership held in class of A shares. 23. 1% owned by BAE Systems plc. 24. 33.3% owned by BAE Systems plc. 25. Ownership held in class of B shares. 26. Ownership held in common shares and B Preferred shares. 27. Ownership held in ordinary and A Cumulative Redeemable Preference shares.", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-528": { "value": "The Group considers key management personnel, as defined under IAS 24 Related Party Disclosures, to be the members of the Group\u2019s Executive Committee and the Company\u2019s non-executive directors. Fuller disclosures on directors\u2019 remuneration are set out in the Annual remuneration report on pages 160 to 205. Total emoluments for directors and key management personnel charged to the Consolidated income statement were: 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Short-term employee benefits 22,238 17,755 Post-employment benefits 677 1,121 Share-based payments 12,023 8,940 34,938 27,816 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-573": { "value": "Contingent liabilities are potential future cash outflows which are either not probable or cannot be measured reliably. The Group has entered into a number of guarantee and performance bond arrangements in the normal course of business. Various Group undertakings are parties to legal actions and claims which arise in the normal course of business. Provision is made for any amounts that the directors consider may become payable (see note 26) ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialGuaranteesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-562": { "value": "Contingent liabilities are potential future cash outflows which are either not probable or cannot be measured reliably. The Group has entered into a number of guarantee and performance bond arrangements in the normal course of business. Various Group undertakings are parties to legal actions and claims which arise in the normal course of business. Provision is made for any amounts that the directors consider may become payable (see note 26) ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-466": { "value": "The Group believes that any significant liability in respect of its guarantees and performance bond arrangements, and legal actions and claims not already provided for, is remote ", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-467": { "value": "
35. Acquisitions of businesses
Businesses acquired during 2022
On 11 November 2021, the Group announced its intention to acquire 100% of the share capital of BIS Invest S.a.r.l. and its subsidiaries, together
the Bohemia Interactive Simulations Group (BISim Group) for a consideration of $200m (\u00a3151m). On 4 March 2022, this deal passed all required
pre-closing activities, and the acquisition was completed. Using the latest game-based technology, the experienced BISim team of engineers
develops high-fidelity, cost-effective training and simulation software products and components to meet the growing demand for defence
applications. BISim forms part of the Cyber & Intelligence segment.
The results and financial position of the acquired business have been consolidated from the date of acquisition. The purchase price allocation
exercise was finalised in the year and summarised below.
Acquisition consideration and fair value of net assets acquired
\u00a3m
Intangible assets 71
Property, plant and equipment 1
Right-of-use assets 1
Receivables 10
Deferred tax assets 1
Lease liabilities (1)
Payables (8)
Deferred tax liabilities (14)
Provisions (6)
Cash and cash equivalents 5
Net identifiable assets acquired 60
Goodwill 91
Net assets acquired 151
Satisfied by:
Cash consideration 151
Total consideration 151
The net outflow of cash in respect of the acquisition of BISim is as follows:
\u00a3m
Cash consideration 151
Cash and cash equivalents acquired (5)
Net cash outflow in respect of the acquisition of the business 146
The goodwill recognised is primarily attributable to expected synergies. No goodwill is expected to be deductible for tax purposes. Goodwill has been allocated to the Intelligence & Security business. No impairment losses have been recognised in respect of goodwill in the year ended 31 December 2022. The acquisition contributed \u00a338m to the Group\u2019s revenue and \u00a38m to the Group\u2019s underlying EBIT1 between the date of acquisition and 31 December 2022. If it had been completed on 1 January 2022, the Group\u2019s revenue from the acquisition would have been \u00a342m, and the Group\u2019s underlying EBIT 1 would have been \u00a38m for the year ended 31 December 2022. Contractual cash flows on trade, other and contract receivables are recognised net of expected credit losses. No contingent liabilities have been recognised or require disclosure in respect of this acquisition. 1. Underlying EBIT is an alternative performance measure defined in the Financial glossary on page 302. It is presented here as our internal measure of segmental performance, to provide additional information on performance to the user, and to reconcile to the equivalent IFRS measure. Businesses acquired during 2021 On 4 March 2021, the Group acquired 100% of the share capital of Pulse Power and Measurement Limited for a consideration of \u00a321m. The net assets acquired, including intangible assets identified, were valued at \u00a311m, resulting in goodwill of \u00a310m. On 14 September 2021, the Group acquired 100% of the share capital of In-Space Missions Limited for a fair value consideration of \u00a315m. The provisional net assets acquired, including intangible assets identified, have been valued at \u00a35m, resulting in provisional goodwill of \u00a310m. The purchase price allocation for all 2021 acquisitions was finalised within the current year. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-468": { "value": "36. Events after the reporting period There were no events after the reporting period which would materially impact the balances reported in this Annual Report. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:8SVCSVKSGDWMW2QHOH83", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-487": { "value": "Subsidiaries \u2013 wholly-owned 4219 Lafayette, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Aircraft Research Association Limited2 Manton Lane, Bedford MK41 7PF, United Kingdom Alvis Limited Alvis Pension Scheme Trustees Limited 3 Alvis Vickers Limited Armstrong Whitworth Aircraft Limited 3 ASC Shipbuilding Pty Limited Bldg 01, Level 2, 640 Mersey Road North, Osborne SA 5017, Australia Australian Marine Engineering Corporation (Finance) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Avro International Aerospace Limited3 BAE Systems (Al Diriyah C4i) Limited 3 BAE Systems (Canada) Inc. 220 Laurier Avenue West, Suite 1200, Ottawa ON K1P 5Z9, Canada BAE Systems (Combat and Radar Systems) Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY BAE Systems (Corporate Air Travel) Limited BAE Systems (Defence Systems) Limited BAE Systems (Dynamics) Limited BAE Systems (Farnborough 3) Limited BAE Systems (Finance) Limited BAE Systems (Funding Four) Unlimited Company Riverside One, Sir John Rogerson\u2019s Quay, Dublin D02 X576, Ireland BAE Systems (Funding Three) Limited BAE Systems (Funding Two) Limited BAE Systems (Gripen Overseas) Limited BAE Systems (Holdings) Limited 3 BAE Systems (International) Limited BAE Systems (Kazakhstan) Limited BAE Systems (Kuwait) Limited BAE Systems (Land and Sea Systems) Limited 4 BAE Systems (Malaysia) Sdn Bhd Level 25 Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems (MEH) Limited BAE Systems (Military Air) Overseas Limited BAE Systems (Nominees) Limited 3 BAE Systems (Oman) Limited BAE Systems (Operations) Limited5 BAE Systems (Operations) Singapore Pte Limited One Marina Boulevard #28-00, Singapore 018989, Singapore BAE Systems (Overseas Holdings) Limited BAE Systems (Poland) Sp. z o.o. ul. Abp. A. Baraniaka 88, 61-131 Poznan, Poland BAE Systems (Projects) Limited BAE Systems (Property Investments) Limited BAE Systems (Vehicles and Equipment) Limited 6 BAE Systems 2000 Pension Plan Trustees Limited3 BAE Systems AB 7 Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Air Japan KK 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Al Diriyah Programme Limited 3 BAE Systems Applied Intelligence (Asia Pacific) Pte Limited United Square, 101 Thomson Road, #25-03/04, 307591, Singapore BAE Systems Applied Intelligence (Connect) A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence (GCS) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence Integrated Computer Solutions (Kuwait) (S.P.C.) Al Hamra Tower, Office Number 3503, 35th Floor, East Maqwa, Kuwait City, Kuwait BAE Systems Applied Intelligence (Integration) Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (International) Limited Priestley Road, Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence (Japan) KK 12/F Ark Mori Building, 1-12-32 Akasaka, Minato-ku, Tokyo, 107-6024, Japan BAE Systems Applied Intelligence (Spain) S.A. Paseo de la Castellana, 141, Cuzco IV, 28046 Madrid, Spain BAE Systems Applied Intelligence (UK) Limited BAE Systems Applied Intelligence A/S c/o Kromann Reumert, Sundkrogsgade 5, Copenhagen East, 2100, Denmark BAE Systems Applied Intelligence GCS Inc.8 CSC, 100 Shockoe Slip, 2nd Floor Richmond VA 23219, United States BAE Systems Applied Intelligence Limited Surrey Research Park, Guildford, Surrey GU2 7RQ, United Kingdom BAE Systems Applied Intelligence LLC 1 8000 Towers Crescent Blvd, 13th Floor, Vienna VA 22182, United States BAE Systems Applied Intelligence Malaysia Sdn Bhd Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Malaysia BAE Systems Applied Intelligence Pty Limited Level 26, 459 Collins Street, Melbourne VIC 3000, Australia BAE Systems Australia (Electronic Systems) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia (NSW) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Datagate Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Holdings Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Defence Pty Limited10 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Holdings Limited3 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Logistics Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Australia Sea Sentinel Project Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Avionics Singapore Pte Limited One Marina Boulevard, #28-00, Singapore 018989, Singapore BAE Systems Bofors AB SE-691 80 Karlskoga, Sweden BAE Systems Bofors Holdings Sdn Bhd Level 21, Suite 21.01, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia BAE Systems C-ITS AB Box 5676, SE-114 86 Stockholm, Sweden BAE Systems Communications Solutions LLC 1 Knowledge Oasis, Building 4, Second Floor, 0402-Z427, Knowledge Oasis Muscat, PO Box 16, Postal Code 135, Muscat, Oman BAE Systems Controls Inc.9 1098 Clark Street, Endicott NY 13760, United States BAE Systems Creole Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Datagate Holdings Limited BAE Systems Datagate Limited6 BAE Systems Deployed Systems Limited12 BAE Systems do Brasil Ltda SCN Quadra 5 Bloco A, Ed. Brasilia Shopping, Torre Norte, Sala 426, Brasilia, DF CEP:70715-900, Brazil BAE Systems Electronic Systems (Overseas) Limited BAE Systems Electronics Limited BAE Systems Enterprises Limited BAE Systems Executive Pension Scheme Trustees Limited3 BAE Systems Finance B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Finance Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Flight Training (Australia) Pty Limited13 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia BAE Systems Funds Management 3,14 BAE Systems GCS International Limited BAE Systems Global Combat Systems Bridging Limited6 BAE Systems Global Combat Systems Munitions Limited BAE Systems Global LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems H\u00e4gglunds AB SE-691 80, Karlskoga, Sweden BAE Systems Hawaii Shipyards Inc. 8 The Corporation Company, Inc., 1136 Union Mall, Suite 301, Honolulu HI 96813, United States BAE Systems Holding GmbH Hauptstrasse 48, 82433 Bad Kohlgrub, Germany BAE Systems Holdings (South Africa) (Pty) Limited Central Office Park No. 5, 257 Jean Avenue, Centurion, Gauteng, 0157, South Africa BAE Systems Holdings B.V. c/o IQ-EQ, Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands BAE Systems Holdings Inc.9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Holdings International LLC1 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States BAE Systems Imaging Solutions Inc. 9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems India (Homeland Security) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Services) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Technology) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems India (Ventures) Private Limited15 #201, 2nd Floor, World Mark 2, Asset No. 8, Aerocity, NH-8, New Delhi \u2013 110037, India BAE Systems Information and Electronic Systems Integration Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Insurance (Isle of Man) Limited Tower House, Loch Promenade, Douglas, IM1 2LZ, Isle of Man BAE Systems Integrated System Technologies (KSA) Limited BAE Systems Integrated System Technologies (Overseas) Limited BAE Systems Integrated System Technologies Limited BAE Systems International Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Jacksonville Ship Repair LLC1 8500 Hecksher Drive, Jacksonville FL 32226, United States BAE Systems Japan GK Ark Mori Building, 1-12-32 Akasaka, Minato-Ku, Tokyo, Japan BAE Systems Land & Armaments Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Land & Armaments Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land & Armaments L.P.1 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems (Finance) Limited BAE Systems Land Systems (Investments South Africa) Limited6 BAE Systems Land Systems (Investments) Limited BAE Systems Land Systems (Ranges) Limited 6 BAE Systems Land Systems ATF Limited BAE Systems Land Systems FMTV International Inc.11 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Land Systems Pinzgauer (Holdings) Limited BAE Systems Land Systems Pinzgauer Limited BAE Systems MAI Turkey Hava Sistemleri A.S\u00b8 . \u00dcniversiteler Mahallesi, Beytepe Lodumlu K\u00f6y Yolu Cad. No: 5/348 \u00c7ankaya, Ankara, Turkey BAE Systems Marine (Holdings) Limited BAE Systems Marine (YSL) Limited BAE Systems Marine Limited BAE Systems Norfolk Ship Repair Inc.8 CT Corporation System, 4701 Cox Road, Suite 285, Glen Allen VA 23060-6802, United States BAE Systems Oman LLC 1 PO Box 74, Postal Code 111, Seeb, Oman BAE Systems Ordnance Systems Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Overseas Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Pension Funds CIF Trustees Limited 3 BAE Systems Pension Funds Investment Management Limited 3,16 BAE Systems Pension Funds Trustees Limited 3 BAE Systems Project Services Limited BAE Systems Projects (Canada) Limited BAE Systems Properties Limited BAE Systems Quest Limited3 BAE Systems Air Japan KK 9 1-1 Katamachi, Shinjuku-ku, Tokyo, Japan BAE Systems Regional Aircraft Colombia SAS 17 c/o Brigard & Urrutia, Calle 70 A No. 4-41, Bogot\u00e1, Colombia BAE Systems Resolution Inc. 8 CT Corporation System, 1999 Bryan Street, Suite 900, Dallas TX 75201, United States BAE Systems S&S Operations Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems San Diego Ship Repair Inc. 8 330 N. Brand Boulevard, Glendale CA 91203-2336, United States BAE Systems Saudi America Limited Riyadh Kingdom Centre 28th Floor (REGUS), PO Box 23088, Riyadh 11321, Central Province, Riyadh, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Maintenance and Equipment Services) Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Saudi Arabia (Vehicles and Equipment Holdings) Limited 3 BAE Systems Saudi Arabia (Vehicles and Equipment Nominees) Limited 3 BAE Systems Saudi Limited PO Box 1732, Riyadh 11441, Kingdom of Saudi Arabia BAE Systems Servi\u00e7os de Avi\u00f4nicos Ltda. Rua Ambr\u00f3sio Molina, No. 1090. Bloco F, Eug\u00eanio de Melo, S\u00e3o Jos\u00e9 dos Campos, S\u00e3o Paulo 12.247-000, Brazil BAE Systems Share Plans Trustee Limited 3 BAE Systems Services Limited BAE Systems Shared Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Ship Repair Inc. 8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Southeast Shipyards AMHC Inc.8 1200 South Pine Island Road, Plantation FL 33324, United States BAE Systems Surface Ships (Holdings) Limited BAE Systems Surface Ships (Overseas) Limited BAE Systems Surface Ships (Projects) Limited BAE Systems Surface Ships Integrated Support Limited BAE Systems Surface Ships Intermediate Holdings Limited18 BAE Systems Surface Ships International Limited BAE Systems Surface Ships Limited BAE Systems Surface Ships Maritime Limited BAE Systems Surface Ships Portsmouth Limited 18 BAE Systems Surface Ships Projects (Malaysia) Sdn Bhd Level 29 Menara Binjai, No 2 Jalan Binjai, Off Jalan Ampang, 50450 Kuala Lumpur, Malaysia BAE Systems Surface Ships Property Services Limited BAE Systems Surface Ships Support Limited 5 BAE Systems SWS Defence AB SE-691 80 Karlskoga, Sweden BAE Systems Tactical Vehicle Systems LP 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Technology Solutions & Services Inc.8 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Training Services Limited BAE Systems TVS Holdings LLC 1 2941 Fairview Park Drive, Suite 100, Falls Church VA 22042, United States BAE Systems Zephyr Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fifth Corporation9 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Fourth Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Second Corporation9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems Zephyr Third Corporation 9 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States BAE Systems, Inc. 8 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801, United States BIS Invest S.\u00e0.r.l. 2, Place de Strasbourg, L-2562, Luxembourg, Grand Duchy of Luxembourg Bohemia Interactive Australia Pty Limited Unit 2, Building A, 2 Technology Place, Williamtown NSW 2318, Australia Bohemia Interactive Simulations GK Limited Abista Kudan Blgd. 10F, 2-4-12 Kudan-minami, Tokyo, Chiyoda Ku, 102-0074, Japan Bohemia Interactive Simulations GmbH Vistra Corporate Services, Westendstra\u00dfe 28, 60325, Frankfurt am Main, Germany Bohemia Interactive Simulations, Inc.8 CT Corporation System, 1200 South Pine Island Road, Plantation FL 33324, United States Bohemia Interactive Simulations K.S. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Bohemia Interactive Simulations Korea Limited Rm 1 5/F 437 Teheran-ro, Gangnam-gu, Seoul, 06158, Republic of Korea Bohemia Interactive Simulations sp z.o.o. Ul. Ostrobramska 101, 04-041, Warsaw, Poland Bohemia Interactive Simulations (UK) Limited 31 Hercules Way, Farnborough Aerospace Centre, Farnborough, Hampshire GU14 6UU, United Kingdom Bohemia Invest One Ltd Bohemia Invest Two Ltd Brabazon Limited British Aerospace (Far East) Limited19 Level 54, Hopewell Centre, 183 Queen\u2019s Road East, Hong Kong British Aerospace (Malaysia) Sdn Bhd 19 Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia British Aircraft Corporation (Pension Fund Trustees) Limited 3 British Aircraft Corporation Limited3 CPS International, Inc.11 Benedetti & Benedetti, Comosa Building, 21st Floor, PO Box 850120, Panama 5, Panama Creole (Nigeria) Limited 5 Tapa House (2nd Floor), 45, Imman Dauda St (Abosede Kuboye Crescent Entrance) Surulere, Lagos, Nigeria Detica B.V. Luna ArenA, Herikerbergweg 238, 1101 CM Amsterdam, Netherlands Detica Group Limited Detica Mexico S. de R.L. de C.V. Torre Esmeralda II, Blvd Manuel Avila Camacho No. 36 Piso 18, Lomas de Chapultepec, 11000 D.F., Mexico Detica Services, Inc. 8 1209 Orange Street, Wilmington DE 19801, United States Dividend Training Limited ETI Engineering, Inc. 8 1676 International Drive, 10th Floor, Suite 1000, McLean VA 22102, United States EVU Czech, S.R.O. Pernerova 691/42, Karlin, 186 00 Prague 8, Czech Republic Gloster Aircraft Limited 3 H-B Utveckling, H-B Development AB Nybrogatan 7, SE-114 34 Stockholm, Sweden Hadrian Holdings, Inc. 521 Fifth Avenue, New York NY 101075, United States Hadrian Trustees Limited 2 H\u00e4gglunds Vehicle GmbH Ernst-Grote Strasse 13, 30916 Isernhagen, Germany Hawker Siddeley Aviation Limited 3 Hawker Siddeley Dynamics Limited3 HSA/HSD Pension Fund Trustees Limited3 Hunter Aerospace Corporation Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia In-Space Missions Limited 8 Oriel Court, Omega Park, Alton GU34 2YT, United Kingdom International Military Sales Limited Jetstream Aircraft Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Lemacrown Limited 20 MES Holdco Limited Charter Place, 23/27 Seaton Place, St. Helier, Jersey JE1 1JY MES Interco 14 Meslink Limited Newcombe Properties Limited Pitch Technologies AB Repslagaregatan 25, SE-582 22 Link\u00f6ping, Sweden Pitch Technologies Limited Sweden House, 5 Upper Montagu Street, London W1H 2AG, United Kingdom Prismatic Limited 5 2 Omega Park, Alton GU34 2QE, United Kingdom PT. BAE Systems Services 8 Wisma 46, Kota BNI, 34th Floor, Suite 34.01.A, Jl. Jenderal Sudirman Kavling 71, Jakarta 10220, Indonesia Pulse Power and Measurement Inc. 1717 Pennsylvania Avenue, NW Suite, 1025 Washington DC 20006, United States Pulse Power and Measurement Limited 21 65 Shrivenham Hundred Business Park, Watchfield, Swindon, Wiltshire SN6 8TY, United Kingdom Representaciones SSTS, CA11 Ave Francisco de Miranda, Centro Lido El Rosal Oficina 71B, Caracas, Venezuela Riptide Autonomous Solutions Canada Company 1300-1969 Upper Water Street, Purdy\u2019s Wharf Tower II, Halifax, NS, BJ3 3R7, Canada Royal Ordnance (Crown Service) Pension Scheme Trustees Limited Royal Ordnance Senior Staff Pension Scheme Trustees Limited Royal Ordnance Speciality Metals Limited 3,18 RWT Limited 3,18 Salford Electrical Instruments Limited18 10 Fleet Place, London EC4M 7RB, United Kingdom Scentcivil Limited18 c/o Interpath Limited, 10 Fleet Place, London EC4M 7RB, United Kingdom Scottish Aviation Limited 3 Prestwick International Airport, Prestwick, Ayrshire KA9 2RW, United Kingdom Sepia, LLC 1 4219 Lafayette Center Drive, Chantilly VA 20151, United States Shipbuilding (MSF) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Shipbuilding (VIC) Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Stewart & Stevenson Operations (Nigeria) Limited 11 9th Floor, St. Nicholas House, 26 Catholic Mission Street, Lagos, Nigeria Stewart & Stevenson TVS UK Limited Stratsec.net Sdn Bhd Unit F-3-1, Blok F, Third Floor, CBD Perdana 3, Jalan Perdana, Cyber 12, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia Support Solutions General Services and Contracting Company/Limited Liability company 1,17 House No. 145, Street No. 1, Qtr. 611, Al Andulous Area, Al Mansour, Baghdad, Iraq TDS International Holdings Pty Limited 22 Level 2, 80 Flinders Street, Adelaide SA 5000, Australia TDS International Pty Limited Level 2, 80 Flinders Street, Adelaide SA 5000, Australia Techmodal Limited Techmodal Ventures Limited TerraSim, Inc. 8 307 Fourth Avenue, Suite 400, Pittsburgh PA 15222, United States The Blackburn Aeroplane & Motor Co Limited 3 The Bristol Aviation Company Limited3 The British & Colonial Aeroplane Co. 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