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"6241000000.0", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:X57JK1U580XATGR67572", "period": "2026-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-281": { "value": "5572000000.0", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-11": { "value": "148000000.0", "decimals": -6, "dimensions": { "concept": "rollsroyceplc:OutflowOfCashForForeignExchangeContracts", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-12": { "value": "146000000.0", "decimals": -6, "dimensions": { "concept": "rollsroyceplc:OutflowOfCashForForeignExchangeContracts", "entity": "scheme:X57JK1U580XATGR67572", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-13": { "value": "In deriving the consolidated cash flow statement, movement in balance sheet items have been adjusted for non-cash items. The cash flow in the year includes the sale of goods and services to joint ventures and associates \u2013 see note 26.
202
5
202
4
Reconciliation of movements in cash and cash equivalents to movement
s in
net
cash
\u00a3m
\u00a3m
Change in cash and cash equivalents
654
1,903
Cash flow from decrease
in
borrowings and lease liabilities
889
778
Less: settlement of related derivat
iv
es included in fair value of swaps below
93
(11)
Change in net cash resulting from cash flows
1,636
2,670
Lease additions, modifications and other non
-
cash
adjustments on borrowings and lease liabilities
(232)
(193)
Exchange gains/(losses) on net cash
118
(50)
Fair value adjustments
8
(11)
Net
debt
disposed of on disposal of businesses
1
\u2013
Movement in net cash
1,531
2,416
Net cash/(debt) at 1 January excluding the fair value of swaps
441
(1,975)
Net cash
at 31 December excluding the fair value of swaps
1,972
441
Fair value of swaps hedging fixed rate borrowings
(77)
33
Net cash at 31 December
1,895
474
The movement in net cash/(debt) (defined by the Group as including the items shown below) is as follows: 1 Per balance sheet 2 Per cash flow statement 3 Fair value of swaps hedging fixed rate borrowings reflects the impact of derivatives on repayments of the principal amount of debt. Net cash/(debt) therefore includes the fair value of derivatives included in fair value hedges (2025: \u00a3(26)m, 2024: \u00a362m) and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges (2025: \u00a3(51)m, 2024: \u00a3(29)m)
Net funds on
disposal of Exchange Fair value Reclassi- Other At 31
At 1 January
Funds flow
businesses
differences
adjustments
fications
movements
December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
2025
Cash at bank and in hand
713
183
\u2013
(7)
\u2013
(432)
\u2013
457
Money market funds
1,900
484
\u2013
40
\u2013
(65)
\u2013
2,359
Short
-
term deposits
2,961
(12)
\u2013
(18)
\u2013
(29)
\u2013
2,902
Cash and cash equivalents
1
5,574
655
\u2013
15
\u2013
(526)
\u2013
5,718
Cash and cash equivalents
included within assets held for
sale
and distribution
\u2013
\u2013
\u2013
\u2013
\u2013
526
\u2013
526
Overdrafts
(2)
(1)
\u2013
\u2013
\u2013
3
\u2013
\u2013
Overdrafts included within
liabilities associated with assets
held for
sale and distribution
\u2013
\u2013
\u2013
\u2013
\u2013
(3)
\u2013
(3)
Cash and cash equivalents
2
5,572
654
\u2013
15
\u2013
\u2013
\u2013
6,241
Other current borrowings
(799)
750
\u2013
(32)
40
(983)
(2)
(1,026)
Non
-
current borrowings
(2,776)
\u2013
\u2013
54
(32)
992
(2)
(1,764)
Borrowings included within
liabilities associated with assets
held for sale and distribution
\u2013
\u2013
\u2013
\u2013
\u2013
(9)
\u2013
(9)
Lease liabilities
(1,555)
232
\u2013
81
\u2013
503
(228)
(967)
Lease liabilities included within
liabilities associated with assets
held for sale and distribution
(1)
\u2013
1
\u2013
\u2013
(503)
\u2013
(503)
Financial liabilities
(5,131)
982
1
103
8
\u2013
(232)
(4,269)
Net cash/(debt) excluding the
fair
value of swaps
441
1,636
1
118
8
\u2013
(232)
1,972
Fair value swaps hedging fixed
rate borrowings
3
33
(93)
\u2013
(22)
5
\u2013
\u2013
(77)
Net cash/(debt)
474
1,543
1
96
13
\u2013
(232)
1,895
2024
Cash at bank and in hand
739
(16)
\u2013
(10)
\u2013
\u2013
\u2013
713
Money market funds
1,077
841
\u2013
(18)
\u2013
\u2013
\u2013
1,900
Short
-
term deposits
1,968
1,027
\u2013
(34)
\u2013
\u2013
\u2013
2,961
Cash and cash equivalents
1
3,784
1,852
\u2013
(62)
\u2013
\u2013
\u2013
5,574
Overdrafts
(53)
51
\u2013
\u2013
\u2013
\u2013
\u2013
(2)
Cash and cash equivalents
2
3,731
1,903
\u2013
(62)
\u2013
\u2013
\u2013
5,572
Other current borrowings
(478)
471
\u2013
\u2013
(18)
(774)
\u2013
(799)
Non
-
current borrowings
(3,568)
(3)
\u2013
19
7
774
(5)
(2,776)
Lease liabilities
(1,660)
299
\u2013
(7)
\u2013
1
(188)
(1,555)
Lease liabilities included within
liabilities associated with assets
held for sale
\u2013
\u2013
\u2013
\u2013
\u2013
(1)
\u2013
(1)
Financial liabilities
(5,706)
767
\u2013
12
(11)
\u2013
(193)
(5,131)
Net cash/(debt) excluding the fair
value of swaps
(1,975)
2,670
\u2013
(50)
(11)
\u2013
(193)
441
Fair value swaps hedging fixed
rate borrowings
3
23
11
\u2013
(18)
17
\u2013
\u2013
33
Net cash/(debt)
(1,952)
2,681
\u2013
(68)
6
\u2013
(193)
474
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The Company and the Group
Rolls-Royce plc (the \u2018Company\u2019) is a public company limited by shares incorporated under the Companies Act 2006 and domiciled in England in
the United Kingdom. The Consolidated Financial Statements of the Company for the year ended 31 December 2025 consist of the audited
consolidation of the Financial Statements of the Company and its subsidiaries (together referred to as the Group) together with the Group\u2019s
interest in jointly controlled and associated entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-17": { "value": "Rolls-Royce plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-18": { "value": "public company limited", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-19": { "value": "England", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-554": { "value": "England", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-20": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:PrincipalPlaceOfBusiness", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-557": { "value": "
Basis of preparation and statement of compliance
The Company has elected to prepare its individual Company Financial Statements under FRS 101 Reduced Disclosure Framework. They are set
out on page 99 with the associated accounting policies from page 100.
The Consolidated Financial Statements have been prepared in accordance with UK-adopted International Accounting Standards (IAS) in
conformity with the requirements of the Companies Act 2006 and interpretations issued by the IFRS Interpretations Committee applicable to
companies reporting under UK-adopted IFRS.
The Consolidated Financial Statements have been prepared on a going concern basis as described on page 21. The historical cost basis has been used
except where IFRS require the revaluation of financial instruments to fair value and certain other assets and liabilities on an alternative basis, most
significantly post-retirement scheme obligations are valued on the basis required by IAS 19 Employee Benefits.
The Consolidated Financial Statements are presented in sterling which is the Company\u2019s functional currency.
The preparation of the Consolidated Financial Statements requires management to make judgements and estimates that affect the statutory
amounts of assets and liabilities at the date of the Consolidated Financial Statements and the statutory amounts of revenue and expenses during
the reporting period. Actual future outcomes could differ from those estimates.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-609": { "value": "Basis of preparation and statement of compliance The Company has elected to prepare its individual Company Financial Statements under FRS 101 Reduced Disclosure Framework. They are set out on page 99 with the associated accounting policies from page 100. The Consolidated Financial Statements have been prepared in accordance with UK-adopted International Accounting Standards (IAS) in conformity with the requirements of the Companies Act 2006 and interpretations issued by the IFRS Interpretations Committee applicable to companies reporting under UK-adopted IFRS. ", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-610": { "value": "The Consolidated Financial Statements are presented in sterling which is the Company\u2019s functional currency. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-558": { "value": "
Going concern
The Directors have undertaken a comprehensive going concern review. In adopting the going concern basis for preparing these Consolidated
and Company Financial Statements, the Directors have undertaken a review of the Group\u2019s cash flow forecasts and available liquidity, along with
consideration of possible risks and uncertainties over an 18-month period from the balance sheet date to June 2027. The Directors have
determined that the period to 30 June 2027 ('the going concern period') is an appropriate timeframe over which to assess going concern as it
considers the Group\u2019s short- to medium-term cash flow forecasts and available liquidity. Recognising the challenges of reliably estimating and
forecasting the impact of external factors on the Group, the Directors have considered two forecasts in the assessment of going concern, along
with a likelihood assessment of these forecasts, being:
\u2014 base case, which reflects the Directors\u2019 current expectations of future trading; and
\u2014 a downside forecast, which envisages severe but plausible downside risks.
Further details are given in the going concern review on page 21. After reviewing the current liquidity position and the cash flow forecasts
modelled under both the base case and downside forecast, the Directors consider that the Group has sufficient liquidity to continue in operational
existence over the going concern period to 30 June 2027 and are therefore satisfied that it is appropriate to adopt the going concern basis of
accounting in preparing the Consolidated Financial Statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-559": { "value": "Climate change In preparing the Consolidated Financial Statements the Directors have considered the potential impact of climate change, particularly in the context of the disclosures included in the Strategic Report that set out climate-related commitments, targets and the pillars of the Rolls-Royce energy transition strategy which are: - optimising our operations, including decarbonising operations, facilities, product testing and business activities. This will be met through a combination of procuring clean energy, reducing overall energy demand, and clean power generation. An estimate of the investment required to meet Scope 1 + 2 emission improvements is included in the forecasts that support these Consolidated Financial Statements; - enabling our customers, by delivering innovative products and solutions that can accelerate the global energy transition. This includes the development and deployment of a future portfolio that includes the UltraFan engine in Civil Aerospace, Battery Energy Storage Systems in Power Systems and small modular reactors. An estimate of the investment required to deliver these technologies is included in the forecasts that support the Consolidated Financial Statements; and - engaging and collaborating with customers, suppliers, industry and policymakers supporting the necessary enabling environment to achieve collective energy transition and climate goals. The climate change scenarios previously prepared to assess the viability of our business strategy, decarbonisation plans and approach to managing climate-related risk have continued to develop over the last year as set out in the Strategic Report. The scenarios are used to help assess the Group\u2019s strategic resilience to climate change and the energy transition. Consideration is made of how each of them impacts: the life of assets; future revenue projections; future profitability; and whether additional costs may occur. There remains inherent uncertainty around how the scenarios will impact the Group. The Directors assess the assumptions on a regular basis to ensure that they are consistent with the risk management activities and the commitments made to investors and other stakeholders. Based on the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations, the Group assesses the potential impact of climate-related risks which cover transition and physical risks and opportunities. The Group has identified four key transition risks (relating to changing customer demand, changes in cost due to carbon pricing, changes in cost due to commodity price changes and change in investment requirements) and three key physical risks (relating to facility disruption, supply chain disruption and impact on product performance) which may arise from the energy transition. The transition risks are the most likely to have an impact on the Consolidated Financial Statements, as exposure to physical risks will be greater in the longer term.
The key sources of estimation uncertainty at the balance sheet date are set out on page 41 and the Directors have considered the impact of climate
change on those estimates. The key assumptions used in this assessment are consistent with those used in the climate scenarios presented in the
Strategic Review. A summary of the assessment is set out below.
Risk
How reflected in the Financial Statements
Impact on
Civil Aerospace LTSAs
Changing customer The most likely assumptions are used in the estimates Forecast EFH are based on customer and market data
demand implicit in the preparation of the Financial Statements. and therefore already include the latest expectation of
The use of sensitivity analysis ensures that any impact the impact of climate change on demand. A sensitivity
of climate change on demand is immaterial. disclosing the impact of a 1% change in EFH forecasts
over the remaining term of Civil LTSA contracts is
disclosed on page 44.
Changes in costs due to
The
potential
impact
of
carbon
pricing
been
has
The increase in the cost base of the current Civil LTSA
carbon pricing
1
and
estimated by applying carbon prices to the forecast
contracts due
to carbon
and commodity prices is
commodity price changes
2
emissions generated
by
the
Group and
its
supply
estimated
to
be
around
1%.
(2024:
1%)
with
the
chain. This impact, together with that from estimated incremental cost included in the cost to complete
commodity prices under each scenario, have been estimates that drive revenue recognition. Changes in
added/deducted
to
forecast
in
costs
the
base
estimates have not had a material impact on revenue
forecasts. The analysis reflects that: decarbonisation activities not material). catch-ups or contract loss provisions in the year (2024:
will occur in both the Group and its supply chain; and A sensitivity disclosing the impact of a 2% change in
that some supplier contracts offer protection from shop visit costs over the remaining term of Civil LTSA
cost increases in the short- to medium-term where contracts is disclosed on page 44.
pricing
is
fixed
or
subject
capped
escalation
to
clauses.
Change in investment Changing investment requirements may arise due to No impact to existing LTSAs.
requirement the introduction /acceleration of new technologies.
Research
is
expensed
and
development
costs
capitalised as incurred.
1 Based on the Oxford Economics, Global Climate Service and Databank, with rates of $145 per tonne of carbon in 2025 increasing to c. $300 in 2030. Beyond 2030, the Group has considered
a range of carbon pricing data sources with an assumed increase (in outturn economics) of c. 2% per annum to c. $475 per tonne by 2050
2 Commodity prices from the Oxford Economics, Global Climate Service and Databank
Items that may be impacted by climate-related risks, but which are not considered to be key areas of judgement or sources of estimation
uncertainty in the current financial year are outlined below.
Carrying value of goodwill \u2013 The recoverable amount used in impairment testing is based on the cash flow projections of the CGUs to which the
goodwill balances relate (with the material balances being disclosed as assets held for distribution at 31 December 2025). The projections include
assumptions that are based on past experience and external sources of information in relation to sales volumes, product costs and the required
level of investment that could all be impacted by climate change. The climate scenarios prepared do not show a significant deterioration of
demand for Civil Aerospace (including Rolls-Royce Deutschland) programmes given that all commercial aero engines are compatible with
sustainable fuels, similarly the majority of the portfolio in Power Systems is compatible with alternative and more sustainable fuels. The scenarios
reflect the impact of a broad range of potential costs imposed by policy or regulatory interventions (through carbon pricing) and the investment
required to ensure new products will be compatible with net zero operation, and to achieve net zero Scope 1 + 2 GHG emission commitments. The
scenarios do not indicate the need for an impairment charge and the Directors do not consider that any reasonably possible changes in the
climate related assumptions would cause the value in use of the goodwill to fall below its carrying value.
Recoverability of programme intangible assets - The recoverable amount used in impairment testing is based on the cash flow projections of the
individual programmes. The projections include assumptions in relation to sales volumes and product costs that could be impacted by climate
change. Given the level of headroom in the programme intangible assets, with most engines being compatible with alternative or more sustainable
fuels, and with cost estimates including an allowance for the impact of carbon pricing, there is no indication of any potential impairment as a
result of climate change.
Useful lives of assets \u2013 The useful lives of property, plant and equipment and right-of-use assets could be reduced by climate-related matters, for
example, as a result of physical risks, obsolescence or legal restrictions. The change in useful lives would have a direct impact on the amount of
depreciation or amortisation recognised each year from the date of reassessment. The Directors' review of useful lives has taken into consideration
the impacts of the Group's decarbonisation strategy and climate-related matters have not had a material impact on the results for the year. The
Directors have also considered the remaining useful economic lives of material intangible assets, including the \u00a31,993m and \u00a3814m capitalised
development spend associated with the Trent and business aviation programmes disclosed in note 9. Given the measures the Group is taking,
including demonstration that all the commercial aero-engines and majority of the portfolio in Power Systems are compatible with alternative and
sustainable fuels, the Directors judge that no adjustment is required to the useful economic lives.
Inventory valuation \u2013 Climate-related matters may affect the value of inventories as a result of a decline in selling prices or where items could
become obsolete due to a reduction in demand. After consideration of the typical stock-turns of the inventory in relation to the rate of change
in the market the Directors consider that inventory is appropriately valued.
Recoverability of trade receivables and contract assets \u2013 The impact of climate-related matters could have an impact on the Group's customers in
the future, especially those customers in the Civil Aerospace business. No material climate-related issues have arisen during the year that have
impacted the assessment of the recoverability of receivables. The Group's expected credit loss (ECL) provision uses credit ratings which inherently
will include the market's assessment of the climate change impact on credit risk of the counter parties. Given the maturity time of trade receivables
and the majority of contract assets, climate change is unlikely to cause a material increase on counter party credit risk in that time.
Recoverability of deferred tax assets on UK tax losses \u2013 Deferred tax assets are recognised to the extent it is probable that future taxable profits
will be available against which the assets can be utilised. The deferred tax asset on UK tax losses primarily arises in Rolls-Royce plc and has been
recognised based on the expectation that the business will generate taxable profits and tax liabilities in the future against which the losses and
deductible temporary differences can be utilised. Recognising the longer term over which these assets will be recovered, the Group considers
climate change scenarios that could impact future taxable profits through changes in demand for our products or their cost. The variability in
taxable profits that could arise from changes in such estimates is not considered to be of sufficient magnitude that it would impact our judgement
that there will be sufficient future taxable profits available against which the assets can be utilised.
Share-based payments \u2013 The Group is committed to achieving net zero by 2050. The Group has committed to reduce the total Scope 1 + 2
greenhouse gas emissions from its facilities, operations and testing by 46% by the end of 2030 (against a baseline of 2019). This metric accounts
for 10% of the long-term incentive plan for awards granted in 2025, with performance measured against three-year cumulative targets.
Defined benefit pension plans \u2013 Having assessed the risks and opportunities of climate change and considered the nature of the assets of the fund,
climate change is unlikely to have a material impact on the position in the Consolidated Financial Statements.
Going concern \u2013 Given the short-term nature of the Group\u2019s going concern assessment, the impact of climate change does not have a significant
impact. The Directors have considered the level of liquidity available, and the potential impact of the climate change risks, in making their assessment.
", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForClimateChange", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-560": { "value": "
Presentation of underlying results
The Group measures financial performance on an underlying basis and discloses this information as an alternative performance measure (APM). This is
consistent with the way that financial performance is measured by the Directors and reported to the Board in accordance with IFRS 8 Operating
Segments. The Group believes this is the most appropriate basis to measure the in-year performance, as underlying results reflect the substance of
trading activity, including the impact of the Group's foreign exchange forward contracts, which economically hedge net foreign currency cash flows at
predetermined exchange rates. In addition, underlying results exclude the accounting impact of acquisition accounting and business disposals,
impairment charges where the reasons are outside of normal operating activities, exceptional items, and certain other items which are market driven
and outside of the control of management. Further details are given in note 2. A reconciliation of APMs to the statutory equivalent is provided on pages
137
to 140.
", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForPresentationOfUnderlyingResults", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-611": { "value": "
Revisions to IFRS applicable in 2025
There are no new standards or interpretations issued by the International Accounting Standards Board (IASB) that had a significant impact on these
Consolidated Financial Statements.
Revisions to IFRS not applicable in 2025
Standards and interpretations issued by the IASB are only applicable if endorsed by the UK. Other than IFRS 18 Presentation and Disclosure in Financial
Statements described below, the Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet
applicable will have a significant impact on the Consolidated Financial Statements.
IFRS 18 Presentation and Disclosure in Financial Statements
The IASB issued a new Standard, IFRS 18 Presentation and Disclosure in Financial Statements, on 9 April 2025 that will replace IAS 1 Presentation of
Financial Statements. The purpose of the new standard is to provide more consistent presentation of financial information across preparers as it is
acknowledged that existing standards have given flexibility to present information in different ways. IFRS 18 Presentation and Disclosure in Financial
Statements will not impact the recognition or measurement of items in the Financial Statements. Many of the existing presentation principles in IAS 1
Presentation of Financial Statements are retained, but there are some more specific requirements that will require the Group to make some changes in
its future Annual Reports.
The new Standard was endorsed by the UK Endorsement Board (UKEB) and will be applicable for reporting periods beginning on or after 1 January 2027.
The Group does not anticipate its early adoption of the new Standard. Comparative information for 2026 will need to be restated when subsequent
Financial Statements are published. The Group has continued its implementation activities and expects the most significant changes post 2027 to be in
relation to the presentation of items within the Statutory Consolidated Income Statement. The changes are expected to include: 'share of results of joint
ventures and associates' being presented in the new investing category and included when arriving at a new subtotal \u2018operating profit including share of
results of joint ventures and associates\u2019; interest income will be reclassified from net financing into the new investing category; the majority of foreign
exchange differences will be reclassified from net financing into the operating category; and fair value gains/(losses) related to foreign currency contracts
and commodity contracts will be reclassified from net financing into the operating category. The process of assessing the financial impact on the
Consolidated Financial Statements will continue during 2026.
", "dimensions": { "concept": "ifrs-full:DescriptionOfInitialApplicationOfStandardsOrInterpretations", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-612": { "value": "Key areas of judgement and sources of estimation uncertainty The determination of the Group's accounting policies requires judgement. The subsequent application of these policies requires estimates, and the actual outcome may differ from that calculated. The key judgements and key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year, are summarised below. Further details, together with sensitivities for key sources of estimation uncertainty where appropriate and practicable, are included within the significant accounting policies section of this note. Area Key judgements Key sources of estimation uncertainty Page Revenue recognition \u2014 Whether Civil Aerospace OE and aftermarket \u2014 Estimates of future revenue including 43 and contract assets contracts should be combined. customer pricing, and costs of long-term and liabilities \u2014 How performance on long-term aftermarket contractual arrangements, including the contracts should be measured. impact of climate change. \u2014 Whether long-term aftermarket contracts contain a significant financing component. \u2014 Whether any costs should be treated as wastage. \u2014 Whether the Civil Aerospace LTSA contracts are warranty style contracts entered into in connection with OE sales and therefore can be accounted for under IFRS 15 Revenue from Contracts with Customers. \u2014 Whether sales of spare engines to joint ventures are at fair value. \u2014 When revenue should be recognised in relation to spare engine sales. Risk and revenue \u2014 Determination of the nature of entry fees received. 44 sharing arrangements (RRSAs) Assets and liabilities \u2014 Whether components of the legal entity review 45 associated with assets programme are considered a single integrated held for distribution distribution transaction and hence disclosed as held for distribution. Research and \u2014 Determination of the point in time where costs 46 development incurred on an internal programme development meet the criteria for capitalisation. \u2014 Determination of the basis for amortising capitalised development costs. Leases \u2014 Determination of the lease term. 47 Impairment of non- \u2014 Determination of cash-generating units for 48 current assets assessing impairment of goodwill. Provisions \u2014 Whether any costs should be treated as wastage. \u2014 Estimates of the time and cost to incorporate 49 required modified parts into the fleet to resolve technical issues on certain programmes (which could be exacerbated by prolonged supply chain challenges) and the implications of this on forecast future costs when assessing onerous contracts. \u2014 Estimates of the future revenues and costs to fulfil onerous contracts. \u2014 Assumptions implicit within the calculation of discount rate. Post-retirement \u2014 Estimates of the assumptions for valuing the 49 benefits net defined benefit obligation. ", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-693": { "value": "Key areas of judgement and sources of estimation uncertainty The determination of the Group's accounting policies requires judgement. The subsequent application of these policies requires estimates, and the actual outcome may differ from that calculated. The key judgements and key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year, are summarised below. Further details, together with sensitivities for key sources of estimation uncertainty where appropriate and practicable, are included within the significant accounting policies section of this note.
Area
Key judgements
Key sources of estimation uncertainty
Page
Revenue recognition \u2014 Whether Civil Aerospace OE and aftermarket \u2014 Estimates of future revenue including 43
and contract assets contracts should be combined. customer pricing, and costs of long-term
and liabilities \u2014 How performance on long-term aftermarket contractual arrangements, including the
contracts should be measured. impact of climate change.
\u2014 Whether long-term aftermarket contracts contain
a significant financing component.
\u2014 Whether any costs should be treated as wastage.
\u2014 Whether the Civil Aerospace LTSA contracts are
warranty style contracts entered into in
connection with OE sales and therefore can be
accounted for under IFRS 15 Revenue from
Contracts with Customers.
\u2014 Whether sales of spare engines to joint ventures
are at fair value.
\u2014 When revenue should be recognised in relation to
spare engine sales.
Risk and revenue \u2014 Determination of the nature of entry fees received. 44
sharing arrangements
(RRSAs)
Assets and liabilities \u2014 Whether components of the legal entity review 45
associated with assets programme are considered a single integrated
held for distribution distribution transaction and hence disclosed as
held for distribution.
Research and \u2014 Determination of the point in time where costs 46
development incurred on an internal programme development
meet the criteria for capitalisation.
\u2014 Determination of the basis for amortising
capitalised development costs.
Leases
\u2014 Determination of the lease term.
47
Impairment of non- \u2014 Determination of cash-generating units for 48
current assets assessing impairment of goodwill.
Provisions
\u2014 Whether any costs should be treated as wastage.
\u2014 Estimates of the time and cost to incorporate 49
required modified parts into the fleet to
resolve technical issues on certain
programmes (which could be exacerbated
by prolonged supply chain challenges) and
the implications of this on forecast future
costs when assessing onerous contracts.
\u2014 Estimates of the future revenues and costs to
fulfil onerous contracts.
\u2014 Assumptions implicit within the calculation of
discount rate.
Post-retirement \u2014 Estimates of the assumptions for valuing the 49
benefits net defined benefit obligation.
Key judgement \u2013 Whether Civil Aerospace OE and aftermarket contracts should be combined In the Civil Aerospace business, OE contracts for the sale of engines to be installed on new aircraft are with the airframers, while the contracts to provide spare engines and aftermarket goods and services are with the aircraft operators, although there may be interdependencies between them. IFRS 15 Revenue from Contracts with Customers includes guidance on the combination of contracts, in particular that contracts with unrelated parties should not be combined. Notwithstanding the interdependencies, the Directors consider that the engine contract should be considered separately from the aftermarket contract. In making this judgement, they also took account of industry practice. Key judgement \u2013 How performance on long-term aftermarket contracts should be measured The Group generates a significant proportion of its revenue from aftermarket arrangements. These aftermarket contracts, such as TotalCare and CorporateCare agreements in the Civil Aerospace business, cover a range of services and generally have contractual terms covering more than one year. Under these contracts, the Group's primary obligation is to maintain customers' engines in an operational condition. This is achieved by undertaking various activities, such as maintenance, repair and overhaul, and engine monitoring over the period of the contract. Revenue on these contracts is recognised over the period of the contract and the basis for measuring progress is a matter of judgement. The Directors consider that the stage of completion of the contract is best measured by using the actual costs incurred to date compared to the estimated costs to complete the performance obligations, as this reflects the extent of completion of the activities to be performed. Key judgement \u2013 Whether long-term aftermarket contracts contain a significant financing component Long-term aftermarket contracts typically cover a period of eight to 15 years. Their pricing is the subject of negotiation with individual customers under competitive circumstances. It is the Directors' judgement that the consideration received approximates to the cash selling price and any timing difference between consideration being received and the supply of goods and services is typical of the industry and arises for reasons other than to provide financing. The customers typically pay on an 'as used' basis (e.g. USD/EFH) which reflects the wear and tear of the engine as it flies and aligns to the customer's own revenue streams. An adjustment to the transaction price is therefore not required. Key judgement \u2013 Whether any costs should be treated as wastage In rare circumstances, the Group may incur costs of wasted material, labour or other resources to fulfil a contract where the level of cost was not reflected in the contract price. The identification of such costs is a matter of judgement and would only be expected to arise where there has been a series of abnormal events which give rise to a significant level of cost of a nature that the Group would not expect to incur and hence is not reflected in the contract price. Examples include technical issues that: require resolution to meet regulatory requirements; have a wide- ranging impact across a product type; and cause significant operational disruption to customers. Similarly, in these rare circumstances, significant disruption costs to support customers resulting from the actual performance of a delivered good or service may be treated as a wastage cost. Provision is made for any costs identified as wastage when the obligation to incur them arises - see note 21. Key judgement \u2013 Whether the Civil Aerospace LTSA contracts are warranty style contacts entered into in connection with OE sales and therefore can be accounted for under IFRS 15 Revenue from Contracts with Customers The Group has considered whether these arrangements are insurance contracts as defined in IFRS 17 Insurance Contracts. While they may transfer an element of insurance risk, they relate to warranty and service type agreements that are entered into in connection with the Group's sales of its goods or services and therefore continue to be accounted for under the revenue and provisions standards. The Directors have judged that such arrangements entered into after the original equipment sale remain sufficiently related to the sale of the Group's goods and services to allow the contracts to continue to be measured under IFRS 15 Revenue from Contracts with Customers and IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Key judgement \u2013 Whether sales of spare engines to joint ventures are at fair value The Civil Aerospace business maintains a pool of spare engines to support its customers. Some of these engines are sold to, and held by, joint venture companies. The assessment of whether the sales price reflects fair value is a key judgement. The Group considers that based upon the terms and conditions of the sales, and by comparison to the sales price of spare engines to other third parties, the sales made to joint ventures reflect the fair value of the goods sold. See note 26 for the value of sales to joint ventures during the year. Key judgement \u2013 When revenue should be recognised in relation to spare engine sales Revenue is recognised at the point in time when a customer obtains control of a spare engine. The customer could be a related party, an external operator or a spare engine service provider. Depending on the contractual arrangements, judgement is required on when the Group relinquishes control of spare engines and, therefore, when the revenue is recognised. The point of control passing has been concluded to correspond to the point of legal sale, even for instances where the customer is contracted to provide some future spare engine capacity to the Group to support its installed engine base. In such cases, the customer has responsibility for generating revenue from the engines and exposure to periods of non-utilisation; exposure to risk of damage or loss, risk from residual value movements, and will determine if and when profits will be made from disposal. The spare engine capacity that will be made available to the Group in the future does not consist of identified assets and the provider retains a substantive right to substitute the asset through the Group's period of use. It is, therefore, appropriate to recognise revenue from the sale of the spare engines at the point that title transfers. During 2025, of the total 52 (2024: 57) large spare engine sales delivered, 5 (2024: 20) engines were sold to customers where contractual arrangement allows for some future spare engine capacity to be used by the Group. These sales contributed \u00a394m (2024: \u00a3399m) to revenue for the year. Key judgement \u2013 Determination of the nature of entry fees received RRSAs with key suppliers (workshare partners) are a feature of the civil aviation industry. Under these contractual arrangements, the key commercial objectives are that: (i) during the development phase the workshare partner shares in the risks of developing an engine by performing its own development work, providing development parts, and paying a non-refundable cash entry fee; and (ii) during the production phase the workshare partner supplies components in return for a share of the programme cash flows as a \u2018life of type\u2019 supplier (i.e. as long as the engine remains in service). The non-refundable cash entry fee is considered to be one element of a long-term supply agreement. These receipts are deferred on the balance sheet and recognised against the cost of sales over the estimated number of units to be delivered on a similar basis to the amortisation of development costs (see page 47).
Key estimate - Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements, including the
impact of climate change
The Group has long-term contracts that fall into different accounting periods and which can extend over significant periods (generally up to 25
years), the most significant of these are LTSAs in the Civil Aerospace business, with contracts typically covering a period of eight to 15 years.
The estimated revenue and costs are inherently imprecise and significant estimates are required to assess: EFHs, time on wing and other
operating parameters; the pattern of future maintenance activity and the costs to be incurred; lifecycle cost improvements over the term of the
contracts; and escalation of revenue and costs (that includes the impact of inflation). Many of the revenues and costs are denominated in
currencies other than that of the relevant group undertaking, these are translated at an estimated long-term exchange rate, based on historical
trends and economic forecasts.
The impact of climate change on EFHs and costs is also considered when making these estimates. Industry and customer data on expected levels
of utilisation is included in the forecasts used. Across the length of the current Civil Aerospace LTSA contracts, allowance has been made for
around a 1 % (2024: 1%) projected cost increase resulting from carbon pricing and commodity price changes.
During the year, changes to the estimate in relation to the Civil Aerospace long term contracts resulted in favourable catch-up adjustments to
revenue of \u00a3253m (2024: favourable catch-up adjustments of \u00a3311m).
The sensitivities below demonstrate how changes in assumptions (including as a result of climate change) could impact the level of revenue
recognised were assumptions to change. The Directors believe that the estimates used to prepare the Consolidated Financial Statements
take account of the inherent uncertainties, constraining the expected level of revenue as appropriate. Based upon the stage of completion
of all LTSA contracts within Civil Aerospace as at 31 December 2025, the following reasonably possible changes in estimates would result in
catch-up adjustments being recognised in the period in which the estimates change (at underlying rates):
- A change in forecast EFHs of 1% over the remaining term of the contracts would impact LTSA income and to a lesser extent costs, resulting in
an impact of around \u00a320m. This would be expected to be seen as a catch-up change in revenue or, to the extent it impacts onerous contracts,
within cost of sales.
- A 2% increase or decrease in our pricing to customers over the life of the contracts would lead to a revenue catch-up adjustment in the next
12 months of around \u00a3400m.
- A 2% increase or decrease in shop visit costs over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months
of around \u00a3120m.
Key judgement \u2013 Whether components of the legal entity review programme are considered a single integrated distribution transaction and hence disclosed as held for distribution. A Group legal entity review programme is being executed through a series of transactions that are highly probable to complete during 2026. Having considered the nature of the programme, and the significant interdependencies between the steps, the Directors consider that all the transaction steps are components of a single plan for the distribution of entities under common control to the owner of the Group, Rolls-Royce Holdings plc. Key judgement \u2013 Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation The Group incurs significant research and development expenditure in respect of various development programmes. Determining when capitalisation should commence and cease is a key judgement, as is the determination of when subsequent expenditure on the programme assets should be capitalised. During the year, \u00a3222m (2024: \u00a3263m) of development expenditure was capitalised. Within the Group there are established processes in place e.g., the Product Introduction and Lifecycle Management process (PILM), to consider technical feasibility, commercial viability and financial assessment of the programme at certain milestones. When these are met, development expenditure is capitalised. Prior to this, expenditure is expensed as incurred. The Group continues to invest in new technologies as a result of its decarbonisation commitments. As these are new technologies there is a higher level of uncertainty over potential outcomes and, therefore, this could impact the level of expenditure that is capitalised or recognised in the income statement in future years. Subsequent expenditure after entry into service which enhances the performance of the engine and the economic benefit to the Group is capitalised. This expenditure is referred to as enhanced performance and is governed by the PILM process referred to above. All other development costs are expensed as incurred. Key judgement \u2013 Determination of the basis for amortising capitalised development costs The economic benefits of the development costs are primarily those cash inflows arising from LTSAs, which are expected to be relatively consistent for each engine within a programme. Amortisation of development costs is recognised on a straight-line basis over the estimated period of operation of the engine by its initial operator. Key judgement \u2013 Determination of lease term In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension option or not exercise a termination option. Extension options (or periods after termination) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Certain land and building leases have renewal options, although none are due in the next 12 months that would have a material impact. Other renewals are evenly spread across 2029 to 2033 and then post 2038. The Group reviews its judgements on lease terms annually, including the operational significance of the site, especially where utilised for manufacturing activities.
Key judgement \u2013 Determination of CGUs for assessing impairment of goodwill
The Group conducts impairment reviews at the CGU level. As permitted by IAS 36 Impairment of Assets, impairment reviews for goodwill are
performed at the groups of CGUs level, representing the lowest level at which the Group monitors goodwill for internal management purposes
and no higher than the Group\u2019s operating segments. The main CGUs for which goodwill impairment reviews have been performed are Rolls-
Royce Deutschland Ltd & Co KG and at an aggregated Rolls-Royce Power Systems AG level.
Key estimate \u2013 Estimates of the assumptions for valuing the net defined benefit obligation The Group's defined benefit pension schemes and similar arrangements are assessed annually in accordance with IAS 19 Employee Benefits. The valuations, which are based on assumptions determined with independent actuarial advice, resulted in a net surplus of \u00a3256m before deferred taxation being recognised on the balance sheet at 31 December 2025 (2024: deficit of \u00a3191m). The size of the net surplus/deficit is sensitive to the actuarial assumptions which include the discount rate, price inflation, pension and salary increases, longevity and, in the UK, the number of plan members who take the option to transfer their pension to a lump sum on retirement or who choose to take the Bridging Pension Option. Following consultation, the UK scheme closed to future accrual on 31 December 2020. A reduction in the discount rate of 0.25% from 5.60% could lead to an increase in the defined benefit obligations of the Rolls-Royce UK Pension Fund (RRUKPF) of approximately \u00a3140m and an increase in the assumed rate of inflation of 0.25% (RPI of 3.05% and CPI of 2.70%) could lead to an increase in the defined benefit obligations of the RRUKPF of approximately \u00a355m. In August 2025 the scheme completed a Buy-in, with the purchase of a bulk insurance annuity policy, with the effect that the majority of scheme liabilities, and therefore these potential risks, are covered by this policy. See further details and overseas scheme sensitivities in note 22.
Key judgement \u2013 Whether any costs should be treated as wastage
In rare circumstances, the Group may incur costs of wasted material, labour or other resources to fulfil a contract where the level of cost was
not reflected in the contract price. The identification of such costs is a matter of judgement and would only be expected to arise where there
has been a series of abnormal events which give rise to a significant level of cost of a nature that the Group would not expect to incur. As the
Group is an owner of an engine Type Certificate, it has a present obligation to develop appropriate design changes to address certain engine
conditions that have been noted in issued Airworthiness Directives. The Group is also required to ensure engine operators can continue to
safely operate engines within the terms of their LTSAs, and this requires the engines to be compliant with the requirements of those issued
Airworthiness Directives. Where Airworthiness Directives are issued, requirements cannot be met without the Group incurring significant costs
in the form of replacement parts and customer claims. Given the significant activities of the Group in designing and overhauling aero engines
it is very experienced in making the required estimates in relation to the number and timing of shop visits, parts costs, overhaul labour costs
and customer claims.
During the year, the Group has utilised the remaining \u00a335m of the Trent 1000 wastage costs provision.
Key estimates - Estimates of the time to incorporate required modified parts into the fleet to resolve technical issues on the Trent 1000, and
the implications of this on forecast future costs when assessing onerous contracts
The Group considers that at 31 December 2025 the Trent 1000 onerous contract provisions are most sensitive to changes in estimates. Our
forecast increases in shop visit capacity could be impacted by several factors, including prolonged supply chain challenges. If forecast
increases in shop visit capacity are not achieved, this could have the impact of reducing planned output of engine overhauls. A 20% reduction
in Trent 1000 planned output during the first half of 2026 (and thus delayed incorporation of modified parts into the fleet) could lead to around
a \u00a320m to \u00a330m charge.
Key estimates - Estimates of the future revenues and costs to fulfil onerous contracts
The Group has provisions for onerous contracts at 31 December 2025 of \u00a3914m (2024: \u00a31,433m). An increase in Civil Aerospace large engine
estimates of LTSA costs of 1% over the remaining term of the contracts could lead to around a \u00a350m to \u00a370m increase in the onerous contract
provisions across all programmes.
Key estimates - Assumptions implicit within the calculation of discount rates
The onerous contract provisions are sensitive to changes in the discount rate used to value the provisions. The rate used for each contract is
derived from bond yields (i.e. risk-free rates) with a similar duration and currency to the contract that they are applied to. The rate is adjusted
to reflect the specific inflation characteristics of the contracts. The forecast rates are determined from third-party market analysis and average
5%. A 1% change in the discount rates used could lead to around a \u00a320m to \u00a330m change in the provision.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-555": { "value": "
Material accounting policies
The Group\u2019s significant accounting policies are set out on pages 42 to 50. These accounting policies have been applied consistently to all periods
presented in these Consolidated Financial Statements.
Basis of consolidation
The Consolidated Financial Statements include the Company Financial Statements and its subsidiary undertakings together with the Group\u2019s share
of the results of joint arrangements and associates up to 31 December.
A subsidiary is an entity controlled by the Company. Control exists when the Company has power over an entity, exposure to variable returns
from its involvement with an entity and the ability to use its power over an entity so as to affect the Company\u2019s returns. Subsidiaries are
consolidated in accordance with IFRS 10 Consolidated Financial Statements.
A joint arrangement is an entity in which the Group holds a long-term interest and which is jointly controlled by the Group and one or more other
investors under a contractual arrangement. Joint arrangements may be either joint ventures or joint operations. Joint ventures are accounted for
using the equity method of accounting and joint operations are accounted for using proportionate accounting.
An associate is an entity that is neither a subsidiary nor a joint arrangement, in which the Group holds a long-term interest and where the Group
has a significant influence. The results of associates are accounted for using the equity method of accounting.
All intra-group transactions, balances, income and expenses are eliminated on consolidation. Adjustments are made to eliminate the profit or loss
arising on transactions with joint arrangements and associates to the extent of the Group\u2019s interest in the entity. Transactions with non-controlling
interests are recorded directly in equity.
Any subsidiary undertaking, joint arrangement or associate sold or acquired during the year are included up to, or from, the date of change of
control. Details of transactions in the year are set out in note 27.
Revenue recognition and contract assets and liabilities
Revenue recognised comprises sales to the Group's customers after discounts and amounts payable to customers. Revenue excludes value added
taxes. The transaction price of a contract is typically clearly stated within the contract, although the absolute amount may be dependent on
escalation indices and long-term contracts that require the key estimates highlighted below to be made. Refund liabilities, where sales are made
with a right of return, are not typical in the Group's contracts. Where they do exist, and consideration has been received, a portion based on an
assessment of the expected refund liability is recognised within other payables. The Group has elected to use the practical expedient not to adjust
revenue for the effect of financing components where the expectation is that the period between the transfer of goods and services to customers
and the receipt of payment is less than a year. Consideration is received in the form of deposits and payments for completion of milestones or
performance obligations. LTSA cash receipts are typically received based on EFHs.
Sales of standard OE, spare parts and time and material (T&M) overhaul services are generally recognised on transfer of control to the customer.
This is generally on delivery to the customer, unless the specific contractual terms indicate a different point. The Directors consider whether
there is a need to constrain the amount of revenue to be recognised on delivery based on the contractual position and any relevant facts,
however, this is not typically required.
Sales of OE and services that are specifically designed for the contract (most significantly in the Defence business) are recognised by reference
to the progress towards completion of the performance obligation, using the cost method described in the key judgements, provided the outcome
of contracts can be assessed with reasonable certainty.
The Group generates a significant portion of its revenue on aftermarket arrangements arising from the installed OE fleet. As a consequence, in
particular in the Civil Aerospace large engine business, the Group will often agree contractual prices for OE deliveries that take into account the
anticipated aftermarket arrangements. Sometimes this may result in losses being incurred on OE. As described in the key judgements, these
contracts are not combined. The consideration in the OE contract is therefore allocated to OE performance obligations and the consideration in
the aftermarket contract to aftermarket performance obligations.
Key areas of the accounting policy are:
\u2013 Future variable revenue from long-term contracts is constrained to take account of the risk of non-recovery of resulting contract balances
from reduced utilisation e.g. EFHs, based on historical forecasting experience and the risk of aircraft being parked by the customer.
\u2013 A significant amount of revenue and cost related to long-term contract accounting is denominated in currencies other than that of the
relevant Group undertaking, most significantly USD transactions in sterling and euro denominated undertakings. These are translated at
estimated long-term exchange rates.
\u2013 The assessment of stage of completion is generally measured for each contract. However, in certain cases, such as for CorporateCare
agreements, where there are many contracts covering aftermarket services each for a small number of engines, the Group accounts for a
portfolio of contracts together, as the effect on the Consolidated Financial Statements would not differ materially from applying the standard
to the individual contracts in the portfolio. When accounting for a portfolio of LTSAs, the Group uses estimates and assumptions that reflect
the size and composition of the portfolio.
\u2013 A contract asset/liability is recognised where payment is received in arrears/advance of the revenue recognised in meeting performance obligations.
\u2013 Contract modifications of LTSAs can be accounted for as separate contracts, termination of the existing contract and the creation of a new
contract, or as part of the existing contract. The treatment is dependent on whether remaining goods and services are distinct and whether
the price of the contract increases by an amount of consideration that reflects the standalone selling prices of any additional goods and
services.
\u2013 Where material, wastage costs (see key judgements on page 43) are recorded as an expense and excluded from the measure of progress of
LTSA contracts.
\u2013 The Group recognises a liability for their obligation to repurchase parts it has sold to the maintenance, repair and overhaul bases who overhaul
the Group\u2019s customers\u2019 engines.
If the expected costs to fulfil a contract exceed the expected revenue, a contract loss provision is recognised for the excess costs.
The Group pays participation fees to airframe manufacturers, its customers for OE, on certain programmes. Amounts paid are initially treated as contract
assets and subsequently charged as a reduction to the OE revenue when the engines are transferred to the customer.
The Group has elected to use the practical expedient to expense as incurred any incremental costs of obtaining or fulfilling a contract if the
amortisation period of an asset created would have been one year or less. Where costs to obtain a contract are recognised in the balance sheet,
they are amortised over the performance of the related contract (eight to 15 years).
Key judgement \u2013 Whether Civil Aerospace OE and aftermarket contracts should be combined
In the Civil Aerospace business, OE contracts for the sale of engines to be installed on new aircraft are with the airframers, while the contracts
to provide spare engines and aftermarket goods and services are with the aircraft operators, although there may be interdependencies between
them. IFRS 15 Revenue from Contracts with Customers includes guidance on the combination of contracts, in particular that contracts with
unrelated parties should not be combined. Notwithstanding the interdependencies, the Directors consider that the engine contract should be
considered separately from the aftermarket contract. In making this judgement, they also took account of industry practice.
Key judgement \u2013 How performance on long-term aftermarket contracts should be measured
The Group generates a significant proportion of its revenue from aftermarket arrangements. These aftermarket contracts, such as TotalCare and
CorporateCare agreements in the Civil Aerospace business, cover a range of services and generally have contractual terms covering more than
one year. Under these contracts, the Group's primary obligation is to maintain customers' engines in an operational condition. This is achieved
by undertaking various activities, such as maintenance, repair and overhaul, and engine monitoring over the period of the contract. Revenue
on these contracts is recognised over the period of the contract and the basis for measuring progress is a matter of judgement. The Directors
consider that the stage of completion of the contract is best measured by using the actual costs incurred to date compared to the estimated
costs to complete the performance obligations, as this reflects the extent of completion of the activities to be performed.
Key judgement \u2013 Whether long-term aftermarket contracts contain a significant financing component
Long-term aftermarket contracts typically cover a period of eight to 15 years. Their pricing is the subject of negotiation with individual customers
under competitive circumstances. It is the Directors' judgement that the consideration received approximates to the cash selling price and any
timing difference between consideration being received and the supply of goods and services is typical of the industry and arises for reasons
other than to provide financing. The customers typically pay on an 'as used' basis (e.g. USD/EFH) which reflects the wear and tear of the engine
as it flies and aligns to the customer's own revenue streams. An adjustment to the transaction price is therefore not required.
Key judgement \u2013 Whether any costs should be treated as wastage
In rare circumstances, the Group may incur costs of wasted material, labour or other resources to fulfil a contract where the level of cost was
not reflected in the contract price. The identification of such costs is a matter of judgement and would only be expected to arise where there
has been a series of abnormal events which give rise to a significant level of cost of a nature that the Group would not expect to incur and hence
is not reflected in the contract price. Examples include technical issues that: require resolution to meet regulatory requirements; have a wide-
ranging impact across a product type; and cause significant operational disruption to customers. Similarly, in these rare circumstances,
significant disruption costs to support customers resulting from the actual performance of a delivered good or service may be treated as a
wastage cost. Provision is made for any costs identified as wastage when the obligation to incur them arises - see note 21.
Key judgement \u2013 Whether the Civil Aerospace LTSA contracts are warranty style contacts entered into in connection with OE sales and
therefore can be accounted for under IFRS 15 Revenue from Contracts with Customers
The Group has considered whether these arrangements are insurance contracts as defined in IFRS 17 Insurance Contracts. While they may
transfer an element of insurance risk, they relate to warranty and service type agreements that are entered into in connection with the Group's
sales of its goods or services and therefore continue to be accounted for under the revenue and provisions standards. The Directors have
judged that such arrangements entered into after the original equipment sale remain sufficiently related to the sale of the Group's goods and
services to allow the contracts to continue to be measured under IFRS 15 Revenue from Contracts with Customers and IAS 37 Provisions,
Contingent Liabilities and Contingent Assets.
Key judgement \u2013 Whether sales of spare engines to joint ventures are at fair value
The Civil Aerospace business maintains a pool of spare engines to support its customers. Some of these engines are sold to, and held by, joint
venture companies. The assessment of whether the sales price reflects fair value is a key judgement. The Group considers that based upon the
terms and conditions of the sales, and by comparison to the sales price of spare engines to other third parties, the sales made to joint ventures
reflect the fair value of the goods sold. See note 26 for the value of sales to joint ventures during the year.
Key judgement \u2013 When revenue should be recognised in relation to spare engine sales
Revenue is recognised at the point in time when a customer obtains control of a spare engine. The customer could be a related party, an external
operator or a spare engine service provider. Depending on the contractual arrangements, judgement is required on when the Group
relinquishes control of spare engines and, therefore, when the revenue is recognised. The point of control passing has been concluded to
correspond to the point of legal sale, even for instances where the customer is contracted to provide some future spare engine capacity to the
Group to support its installed engine base. In such cases, the customer has responsibility for generating revenue from the engines and exposure
to periods of non-utilisation; exposure to risk of damage or loss, risk from residual value movements, and will determine if and when profits will
be made from disposal. The spare engine capacity that will be made available to the Group in the future does not consist of identified assets and
the provider retains a substantive right to substitute the asset through the Group's period of use. It is, therefore, appropriate to recognise
revenue from the sale of the spare engines at the point that title transfers. During 2025, of the total 52 (2024: 57) large spare engine sales
delivered, 5 (2024: 20) engines were sold to customers where contractual arrangement allows for some future spare engine capacity to be used
by the Group. These sales contributed \u00a394m (2024: \u00a3399m) to revenue for the year.
Risk and revenue sharing arrangements (RRSAs) Cash entry fees received are initially deferred on the balance sheet as deferred receipts from RRSA workshare partners within trade payables and other liabilities. The cash entry fee is a transaction with a supplier and is recognised as a reduction in cost of sales incurred. Individual programme amounts are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is delivered and then recognised on a 15-year straight-line basis. The payments to suppliers of their shares of the programme cash flows for their production components are charged to cost of sales when OE sales are recognised or as LTSA costs are incurred. These prepayments are initially recognised within trade receivables and other assets. The Group also has arrangements with third parties who invest in a programme and receive a return based on its performance, but do not undertake development work or supply parts. Such arrangements (financial RRSAs) are financial instruments as defined by IAS 32 Financial Instruments: Presentation and are accounted for using the amortised cost method. Key judgement \u2013 Determination of the nature of entry fees received RRSAs with key suppliers (workshare partners) are a feature of the civil aviation industry. Under these contractual arrangements, the key commercial objectives are that: (i) during the development phase the workshare partner shares in the risks of developing an engine by performing its own development work, providing development parts, and paying a non-refundable cash entry fee; and (ii) during the production phase the workshare partner supplies components in return for a share of the programme cash flows as a \u2018life of type\u2019 supplier (i.e. as long as the engine remains in service). The non-refundable cash entry fee is considered to be one element of a long-term supply agreement. These receipts are deferred on the balance sheet and recognised against the cost of sales over the estimated number of units to be delivered on a similar basis to the amortisation of development costs (see page 47). Government grants Government grants received are varied in nature and are recognised in the income statement so as to match them with the related expenses that they are intended to compensate. Where grants are received in advance of the related expenses, they are initially recognised as liabilities within trade payables and other liabilities and released to match the related expenditure. Non-monetary grants are recognised at fair value. Interest Interest receivable/payable is credited/charged to the income statement using the effective interest method. Where borrowing costs are attributable to the acquisition, construction or production of a qualifying asset, such costs are capitalised as part of the specific asset. Key estimate - Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements, including the impact of climate change The Group has long-term contracts that fall into different accounting periods and which can extend over significant periods (generally up to 25 years), the most significant of these are LTSAs in the Civil Aerospace business, with contracts typically covering a period of eight to 15 years. The estimated revenue and costs are inherently imprecise and significant estimates are required to assess: EFHs, time on wing and other operating parameters; the pattern of future maintenance activity and the costs to be incurred; lifecycle cost improvements over the term of the contracts; and escalation of revenue and costs (that includes the impact of inflation). Many of the revenues and costs are denominated in currencies other than that of the relevant group undertaking, these are translated at an estimated long-term exchange rate, based on historical trends and economic forecasts. The impact of climate change on EFHs and costs is also considered when making these estimates. Industry and customer data on expected levels of utilisation is included in the forecasts used. Across the length of the current Civil Aerospace LTSA contracts, allowance has been made for around a 1 % (2024: 1%) projected cost increase resulting from carbon pricing and commodity price changes. During the year, changes to the estimate in relation to the Civil Aerospace long term contracts resulted in favourable catch-up adjustments to revenue of \u00a3253m (2024: favourable catch-up adjustments of \u00a3311m). The sensitivities below demonstrate how changes in assumptions (including as a result of climate change) could impact the level of revenue recognised were assumptions to change. The Directors believe that the estimates used to prepare the Consolidated Financial Statements take account of the inherent uncertainties, constraining the expected level of revenue as appropriate. Based upon the stage of completion of all LTSA contracts within Civil Aerospace as at 31 December 2025, the following reasonably possible changes in estimates would result in catch-up adjustments being recognised in the period in which the estimates change (at underlying rates): - A change in forecast EFHs of 1% over the remaining term of the contracts would impact LTSA income and to a lesser extent costs, resulting in an impact of around \u00a320m. This would be expected to be seen as a catch-up change in revenue or, to the extent it impacts onerous contracts, within cost of sales. - A 2% increase or decrease in our pricing to customers over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around \u00a3400m. - A 2% increase or decrease in shop visit costs over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around \u00a3120m.
Taxation
The tax charge/credit on the profit or loss for the year comprises current and deferred tax:
\u2013 Current tax is the expected tax payable for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years; and
\u2013 Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of the
assets and liabilities for financial reporting purposes and the amounts used for tax purposes and is calculated using the enacted or
substantively enacted rates that are expected to apply when the asset or liability is settled. In the UK, the deferred tax liability on the pension
scheme surplus is recognised consistently with the basis for recognising the surplus i.e. at the rate applicable to refunds from a trust.
Tax is charged or credited to the income statement or OCI as appropriate, except when it relates to items credited or charged directly to equity
in which case the tax is also dealt with in equity.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint arrangements, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future. Deferred tax is not recognised on taxable temporary differences arising on the initial recognition of goodwill or for
temporary differences arising from the initial recognition of assets and liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits, which include the reversal of taxable temporary
differences, will be available against which the assets can be utilised. Further details on the Group\u2019s tax position can be found on pages 59 to 62.
Foreign currency translation
Transactions denominated in currencies other than the functional currency of the transacting group undertaking are translated into the functional
currency at the average monthly exchange rate when the transaction occurs. Monetary assets and liabilities denominated in foreign currencies
are translated into the relevant functional currency at the rate prevailing at the year end. Exchange differences arising on foreign exchange
transactions and the retranslation of monetary assets and liabilities into functional currencies at the rate prevailing at the year end are included
in profit/(loss) before taxation.
The trading results of Group undertakings are translated into sterling at the average exchange rates for the year. The assets and liabilities of
overseas undertakings, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates prevailing at the
year end. Exchange adjustments arising from the retranslation of the opening net assets, and from the translation of the profits or losses at
average rates, are recognised in OCI.
Discontinued operations and business disposals
A discontinued operation is defined in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as a component of an entity that
has been disposed of or is classified as held for sale, represents a separate major line of business or geographical area of operations, is part of a
single co-ordinated plan to dispose of such a line of business or is a subsidiary acquired exclusively with a view to resale. The results of
discontinued operations are required to be presented separately in the income statement.
Assets and businesses are classified as held for sale when their carrying amounts will be recovered through sale rather than through continuing use.
Disposal group held for distribution to owners
A disposal group is classified as held for distribution to owners when the Group is committed to such a distribution. For this to be the case the disposal
group must be available for immediate distribution in its present condition and the distribution must be highly probable.
Key judgement \u2013 Whether components of the legal entity review programme are considered a single integrated distribution transaction and
hence disclosed as held for distribution.
A Group legal entity review programme is being executed through a series of transactions that are highly probable to complete during 2026.
Having considered the nature of the programme, and the significant interdependencies between the steps, the Directors consider that all the
transaction steps are components of a single plan for the distribution of entities under common control to the owner of the Group, Rolls-Royce
Holdings plc.
Financial instruments \u2013 Classification and measurement
Financial assets primarily include trade receivables and other non-derivative financial assets, cash and cash equivalents, short-term investments,
derivatives (foreign exchange, commodity and interest rate contracts), and listed and unlisted investments.
\u2013 Trade receivables and other assets are classified either as held to collect and measured at amortised cost, or as held to collect and sell and
measured at fair value, with movements in fair value recognised through other comprehensive income (FVOCI). The Group may sell trade
receivables due from certain customers before the due date. Any trade receivables from such customers that are not sold at the reporting
date are classified as \u2018held to collect and sell\u2019.
\u2013 Cash and cash equivalents (consisting of balances with banks and other financial institutions, money market funds, short-term deposits) and short-
term investments are subject to low market risk. Cash balances, short-term deposits (with a maturity of primarily three months or less) and short-
term investments are measured at amortised cost. Money market funds are measured at fair value, with movements in fair value recognised in the
income statement as a profit or loss (FVPL).
\u2013 Derivatives and unlisted investments are measured at FVPL. The Company has elected to measure its listed investments at FVOCI.
Financial liabilities primarily consist of trade payables and other non-derivative financial liabilities, borrowings, derivatives, financial RRSAs and
C Shares.
\u2013 Derivatives are classified and measured at FVPL.
\u2013 All other financial liabilities are classified and measured at amortised cost.
Financial instruments \u2013 Impairment of financial assets and contract assets
IFRS 9 Financial Instruments sets out the basis for the accounting of ECLs on financial assets and contract assets resulting from transactions within
the scope of IFRS 15 Revenue from Contracts with Customers. The Group has adopted the simplified approach to provide for ECLs, measuring the
loss allowance at a probability weighted amount that considers reasonable and supportable information about past events, current conditions and
forecasts of future economic conditions of customers. These are incorporated in the simplified model adopted by using credit ratings which are
publicly available, or through internal risk assessments derived using the customer's latest available financial information. The ECLs are updated at
each reporting date to reflect changes in credit risk since initial recognition. ECLs are calculated for all financial assets in scope, regardless of whether
or not they are overdue.
Financial instruments \u2013 Hedge accounting
Forward foreign exchange contracts and commodity swaps (derivative financial instruments) are held to manage the cash flow exposures of forecast
transactions denominated in foreign currencies or in commodities respectively. Derivative financial instruments qualify for hedge accounting when: (i)
there is a formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking
the hedge at the inception of the hedge; and (ii) the hedge is expected to be effective. In general, the Group has chosen to not apply hedge accounting
in respect of these exposures.
The Group economically hedges the fair value and cash flow exposures of its borrowings. Cross-currency interest rate swaps are held to manage the fair
value or cash flow exposures of borrowings denominated in foreign currencies and are designated as fair value hedges or cash flow hedges as appropriate.
Interest rate swaps are held to manage the interest rate exposures of fixed and floating rate borrowings and may be designated as fair value hedges or
cash flow hedges as appropriate. If the swaps are not designated as fair value or cash flow hedges, the economic effect is included in the underlying
results - see note 20.
Changes in the fair values of derivatives that are designated as fair value hedges are recognised directly in the income statement. The fair value changes
of effective cash flow hedge derivatives are recognised in OCI and subsequently recycled to the income statement in the same period or periods during
which the hedged cash flows affect profit or loss. Any ineffectiveness in the hedging relationship is included in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge
accounting. At that time, for cash flow hedges and, if the forecast transaction remains probable, any net cumulative gain or loss on the hedging
instrument recognised in the Statement of Changes in Equity (SOCIE) is retained until the forecast transaction occurs. If a hedged transaction is
no longer expected to occur, the net cumulative gain or loss is recycled to the income statement.
Business combinations and goodwill
Goodwill recognised represents the excess of the fair value of the purchase consideration over the fair value to the Group of the net of the
identifiable assets acquired and the liabilities assumed. On transition to IFRS on 1 January 2004, business combinations were not retrospectively
adjusted to comply with UK-adopted International Accounting Standards and goodwill was recognised based on the carrying value under the
previous accounting policies. Goodwill, in respect of the acquisition of a subsidiary, is recognised as an intangible asset. Goodwill arising on the
acquisition of joint arrangements and associates is included in the carrying value of the investment.
Customer relationships
The fair value of customer relationships recognised as a result of a business combination relate to the acquired company's established
relationships with its existing customers that result in repeat purchases and customer loyalty. Amortisation is charged on a straight-line basis over
its useful economic life, up to a maximum of 15 years.
Certification costs
Costs incurred in respect of meeting regulatory certification requirements for new Civil Aerospace aero-engine/aircraft combinations, including
payments made to airframe manufacturers for this, are recognised as intangible assets to the extent that they can be recovered out of future
sales. They are charged to the income statement over the programme life. Individual programme assets are allocated pro rata to the estimated
number of units to be produced. Amortisation commences as each unit is delivered and then charged on a 15-year straight-line basis.
Research and development
Expenditure incurred on research and development is distinguished as relating either to a research phase or to a development phase. All research
phase expenditure is charged to the income statement. Development expenditure is recognised as an internally generated intangible asset
(programme asset) only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. More
specifically, development costs are capitalised from the point at which the following conditions have been met:
\u2013 the technical feasibility of completing the programme and the intention and ability (availability of technical, financial and other resources) to
complete the programme asset and use or sell it;
\u2013 the probability that future economic benefits will flow from the programme asset; and
\u2013 the ability to measure reliably the expenditure attributable to the programme asset during its development.
Capitalisation continues until the point at which the programme asset meets its originally contracted technical specification (defined internally as
the point at which the asset is capable of operating in the manner intended by the Directors). Subsequent expenditure is capitalised where it
enhances the functionality of the programme asset and demonstrably generates an enhanced economic benefit to the Group. All other
subsequent expenditure on programme assets is expensed as incurred.
Individual programme assets are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is
delivered and then charged on a 15-year straight-line basis. In accordance with IAS 38 Intangible Assets, the basis on which programme assets
are amortised is assessed annually.
Key judgement \u2013 Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation The Group incurs significant research and development expenditure in respect of various development programmes. Determining when capitalisation should commence and cease is a key judgement, as is the determination of when subsequent expenditure on the programme assets should be capitalised. During the year, \u00a3222m (2024: \u00a3263m) of development expenditure was capitalised. Within the Group there are established processes in place e.g., the Product Introduction and Lifecycle Management process (PILM), to consider technical feasibility, commercial viability and financial assessment of the programme at certain milestones. When these are met, development expenditure is capitalised. Prior to this, expenditure is expensed as incurred. The Group continues to invest in new technologies as a result of its decarbonisation commitments. As these are new technologies there is a higher level of uncertainty over potential outcomes and, therefore, this could impact the level of expenditure that is capitalised or recognised in the income statement in future years. Subsequent expenditure after entry into service which enhances the performance of the engine and the economic benefit to the Group is capitalised. This expenditure is referred to as enhanced performance and is governed by the PILM process referred to above. All other development costs are expensed as incurred. Key judgement \u2013 Determination of the basis for amortising capitalised development costs The economic benefits of the development costs are primarily those cash inflows arising from LTSAs, which are expected to be relatively consistent for each engine within a programme. Amortisation of development costs is recognised on a straight-line basis over the estimated period of operation of the engine by its initial operator. Software Software that is not specific to an item of property, plant and equipment is classified as an intangible asset, recognised at its acquisition cost and amortised on a straight-line basis over its useful economic life, up to a maximum of ten years. The amortisation period of software assets is reviewed annually. The cost of internally developed software includes direct labour and an appropriate proportion of overheads. Other intangible assets These include intangible assets arising on acquisition of businesses, such as technology which is amortised on a straight-line basis over a maximum of 15 years and trademarks which are not amortised. They also include the costs incurred testing and analysing engines with the longest time in service (fleet leader engines) to gather technical knowledge on engine endurance, which are amortised on a straight-line basis over a maximum of 15 years. Property, plant and equipment Property, plant and equipment are stated at acquisition cost less accumulated depreciation and any provision for impairment in value. The cost of self- constructed assets includes the cost of materials, direct labour, an appropriate proportion of overheads and, where appropriate, interest. Depreciation is provided on a straight-line basis to write off the cost, less the estimated residual value, of property, plant and equipment over their estimated useful lives. No depreciation is recorded on assets in the course of construction. Estimated useful lives are reassessed annually and are as follows: \u2014 Land and buildings, as advised by the Group\u2019s professional advisers: No depreciation is provided on freehold land. Freehold buildings - three to 50 years; and \u2014 Plant and equipment \u2013 two to 25 years. \u2014 Aircraft and engines \u2013 five to 20 years. Leases Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: \u2013 fixed payments less any lease incentive receivable; \u2013 variable lease payments that are based on an index or a rate; \u2013 amounts expected to be payable by the Group under residual value guarantees; \u2013 the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and \u2013 payments of penalties for termination of the lease, if the lease term reflects the Group exercising that option. Where leases commenced after the initial IFRS 16 Leases transition date, the lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group\u2019s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Where appropriate, lease liabilities are revalued at each reporting date using the spot exchange rate. Right-of-use assets are measured at cost comprising the following: \u2013 the amount of the initial measurement of lease liability or a revaluation of the liability; \u2013 any lease payments made at or before the commencement date less any lease incentives received; \u2013 any initial direct costs; and \u2013 restoration costs. Each right-of-use asset is depreciated over the shorter of its useful economic life and the lease term on a straight-line basis unless the lease is expected to transfer ownership of the underlying asset to the Group, in which case the asset is depreciated to the end of the useful life of the asset. Short-term leases are leases with a lease term of 12 months or less. Payments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense in the income statement. Key judgement \u2013 Determination of lease term In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension option or not exercise a termination option. Extension options (or periods after termination) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Certain land and building leases have renewal options, although none are due in the next 12 months that would have a material impact. Other renewals are evenly spread across 2029 to 2033 and then post 2038. The Group reviews its judgements on lease terms annually, including the operational significance of the site, especially where utilised for manufacturing activities. Impairment of non-current assets Impairment of non-current assets is considered in accordance with IAS 36 Impairment of Assets. Where the asset does not generate cash flows that are independent of other assets, impairment is considered for the cash-generating unit (CGU) to which the asset belongs. Goodwill, indefinite life intangible assets and intangible assets not yet available for use are tested for impairment annually. Other intangible assets (including programme-related intangible assets), property, plant and equipment, right-of-use assets and investments are assessed for any indications of impairment annually. If any indication of impairment is identified, an impairment test is performed to estimate the recoverable amount. If the recoverable amount of an asset (or CGU) is estimated to be below the carrying value, the carrying value is reduced to the recoverable amount and the impairment loss is recognised as an expense. The recoverable amount is the higher of value in use or fair value less costs of disposal. The value in use is the present value of future cash flows using a pre-tax discount rate that reflects the time value of money and the risk specific to the asset (or CGU). Fair value less costs of disposal (FVLCOD) reflects market inputs or inputs based on market evidence if readily available. If these inputs are not readily available, the fair value is estimated by discounting future cash flows modified for market participants\u2019 views. The relevant local statutory tax rates have been applied in calculating post-tax to pre-tax discount rates. Inventories Inventories are valued on a first-in, first-out basis, at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those direct and indirect overheads, including depreciation of property, plant and equipment, that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling prices less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. All inventories are classified as current as it is expected that they will be used in the Group\u2019s operating cycle, regardless of whether this is expected to be within 12 months of the balance sheet date. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand, investments in money market funds and short-term deposits with a maturity of three months or less on inception. The Group considers overdrafts (repayable on demand) to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash flow statement. Where the Group operates pooled banking arrangements across multiple accounts, these are presented on a net basis when it has both a legal right and intention to settle the balances on a net basis. The Group\u2019s suppliers have access to a supply chain financing (SCF) programme through partnership with banks. This is to enable smaller suppliers, including joint ventures (90-day standard payment terms), who are on our standard 75 day or more payment terms to receive their payment sooner. The election to utilise the programme is the sole decision of the supplier. As the Group continues to have a contractual obligation to pay its suppliers under commercial terms, which are unaffected by any utilisation of the programme, and it does not retain any ongoing involvement in the SCFs, the related payables are retained on the Group\u2019s balance sheet and classified as trade payables. Further details are disclosed in note 19. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are discounted to present value where the effect is material. The principal provisions are recognised as follows: \u2013 onerous contracts based on an assessment of whether the direct costs to fulfil a contract are greater than the expected revenue; \u2013 warranty and guarantees based on an assessment of future claims with reference to past experience and recognised at the earlier of when the underlying products and services are sold and when the likelihood of a future cost is identified; and transformation and restructuring when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has created a valid expectation to those affected. Key judgement \u2013 Determination of CGUs for assessing impairment of goodwill The Group conducts impairment reviews at the CGU level. As permitted by IAS 36 Impairment of Assets, impairment reviews for goodwill are performed at the groups of CGUs level, representing the lowest level at which the Group monitors goodwill for internal management purposes and no higher than the Group\u2019s operating segments. The main CGUs for which goodwill impairment reviews have been performed are Rolls- Royce Deutschland Ltd & Co KG and at an aggregated Rolls-Royce Power Systems AG level. Customer financing support In connection with the sale of its products, the Group will, on occasion, provide financing support for its customers. Credit-based guarantees are disclosed as commitments or contingent liabilities dependent on whether aircraft have been delivered or not. As described on page 93, the Directors consider the likelihood of crystallisation in assessing whether provision is required for any contingent liabilities. The Group\u2019s contingent liabilities relating to financing arrangements are spread over many years and relate to a number of customers and a broad product portfolio and are reported on a discounted basis. Post-retirement benefits Pensions and similar benefits (principally healthcare) are accounted for under IAS 19 Employee Benefits. For defined benefit plans, obligations are measured at discounted present value, using a discount rate derived from high-quality corporate bonds denominated in the currency of the plan, whilst plan assets are recorded at fair value. Surpluses in schemes are recognised as assets only if they represent economic benefits available to the Group in the future. Actuarial gains and losses are recognised immediately in OCI. The service and financing costs of such plans are recognised separately in the income statement: \u2013 current service costs are spread systematically over the lives of employees; \u2013 past-service costs and settlements are recognised immediately; and \u2013 financing costs are recognised in the periods in which they arise. UK pension obligations include the estimated impact of the obligation to equalise defined benefit pensions and transfer values for men and women. Payments to defined contribution schemes are charged as an expense as they fall due. Key estimate \u2013 Estimates of the assumptions for valuing the net defined benefit obligation The Group's defined benefit pension schemes and similar arrangements are assessed annually in accordance with IAS 19 Employee Benefits. The valuations, which are based on assumptions determined with independent actuarial advice, resulted in a net surplus of \u00a3256m before deferred taxation being recognised on the balance sheet at 31 December 2025 (2024: deficit of \u00a3191m). The size of the net surplus/deficit is sensitive to the actuarial assumptions which include the discount rate, price inflation, pension and salary increases, longevity and, in the UK, the number of plan members who take the option to transfer their pension to a lump sum on retirement or who choose to take the Bridging Pension Option. Following consultation, the UK scheme closed to future accrual on 31 December 2020. A reduction in the discount rate of 0.25% from 5.60% could lead to an increase in the defined benefit obligations of the Rolls-Royce UK Pension Fund (RRUKPF) of approximately \u00a3140m and an increase in the assumed rate of inflation of 0.25% (RPI of 3.05% and CPI of 2.70%) could lead to an increase in the defined benefit obligations of the RRUKPF of approximately \u00a355m. In August 2025 the scheme completed a Buy-in, with the purchase of a bulk insurance annuity policy, with the effect that the majority of scheme liabilities, and therefore these potential risks, are covered by this policy. See further details and overseas scheme sensitivities in note 22. Key judgement \u2013 Whether any costs should be treated as wastage In rare circumstances, the Group may incur costs of wasted material, labour or other resources to fulfil a contract where the level of cost was not reflected in the contract price. The identification of such costs is a matter of judgement and would only be expected to arise where there has been a series of abnormal events which give rise to a significant level of cost of a nature that the Group would not expect to incur. As the Group is an owner of an engine Type Certificate, it has a present obligation to develop appropriate design changes to address certain engine conditions that have been noted in issued Airworthiness Directives. The Group is also required to ensure engine operators can continue to safely operate engines within the terms of their LTSAs, and this requires the engines to be compliant with the requirements of those issued Airworthiness Directives. Where Airworthiness Directives are issued, requirements cannot be met without the Group incurring significant costs in the form of replacement parts and customer claims. Given the significant activities of the Group in designing and overhauling aero engines it is very experienced in making the required estimates in relation to the number and timing of shop visits, parts costs, overhaul labour costs and customer claims. During the year, the Group has utilised the remaining \u00a335m of the Trent 1000 wastage costs provision. Key estimates - Estimates of the time to incorporate required modified parts into the fleet to resolve technical issues on the Trent 1000, and the implications of this on forecast future costs when assessing onerous contracts The Group considers that at 31 December 2025 the Trent 1000 onerous contract provisions are most sensitive to changes in estimates. Our forecast increases in shop visit capacity could be impacted by several factors, including prolonged supply chain challenges. If forecast increases in shop visit capacity are not achieved, this could have the impact of reducing planned output of engine overhauls. A 20% reduction in Trent 1000 planned output during the first half of 2026 (and thus delayed incorporation of modified parts into the fleet) could lead to around a \u00a320m to \u00a330m charge. Key estimates - Estimates of the future revenues and costs to fulfil onerous contracts The Group has provisions for onerous contracts at 31 December 2025 of \u00a3914m (2024: \u00a31,433m). An increase in Civil Aerospace large engine estimates of LTSA costs of 1% over the remaining term of the contracts could lead to around a \u00a350m to \u00a370m increase in the onerous contract provisions across all programmes. Key estimates - Assumptions implicit within the calculation of discount rates The onerous contract provisions are sensitive to changes in the discount rate used to value the provisions. The rate used for each contract is derived from bond yields (i.e. risk-free rates) with a similar duration and currency to the contract that they are applied to. The rate is adjusted to reflect the specific inflation characteristics of the contracts. The forecast rates are determined from third-party market analysis and average 5%. A 1% change in the discount rates used could lead to around a \u00a320m to \u00a330m change in the provision. Share-based payments The Group provides share-based payment arrangements to certain employees. These are principally equity-settled arrangements and are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value is expensed on a straight- line basis over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of shares or options that will vest based on expected performance, except where additional shares vest as a result market-based performance conditions, such as the total shareholder return (TSR) performance condition in the long-term incentive plan (LTIP), where no adjustment is required as allowance for these performance conditions are included in the initial fair value. Cash-settled share options (grants in the International ShareSave plan) are measured at fair value at the balance sheet date. The Group recognises a liability at the balance sheet date based on these fair values, taking into account the estimated number of options that are expected to vest and the relative completion of the vesting period. Changes in the value of this liability are recognised in the income statement for the year. The cost of shares of Rolls-Royce plc held by the Group for the purpose of fulfilling obligations in respect of employee share plans is deducted from equity in the consolidated balance sheet. See note 24 for a further description of the share-based payment plans. Post balance sheet events Rolls-Royce plc and the Trustee of the UK pension scheme signed an agreement on 2 February 2026 triggering the wind up of the UK scheme. The Group\u2019s current expectation is that the residual surplus on the scheme will be shared between the Group and the scheme\u2019s members, and communications to this effect have been made to members. This is subject to a statutory consultation process between the Trustee and the members, expected to be completed in 2026. Subject to the outcome of that process, it is currently expected that this will result in a constructive obligation of around \u00a3100m being recognised as a past service charge in the income statement in 2026. On 16 February 2026, the Group repaid \u20ac750m of borrowings on their contractual maturity date which, along with the associated cross currency interest rate swaps, resulted in a cash outflow of \u00a3677m. As part of the Group\u2019s legal entity review programme, the Company sold its investment in Rolls-Royce Overseas Holdings Limited to Rolls-Royce US Holdings Limited (a subsidiary of Rolls-Royce Holdings plc) on 1 January 2026 for \u00a34.4bn. The associated assets and liabilities were part of the disposal group held for distribution to owners on 31 December 2025. To facilitate the transaction, the Company issued two loans on 1 January 2026; these being \u00a31.9bn to its ultimate parent company Rolls-Royce Holdings plc; and \u00a32.5bn to Rolls-Royce US Holdings Limited. The Group has taken the latest legal position in relation to any ongoing legal proceedings and reflected these in the 2025 results as appropriate.", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-561": { "value": "Basis of consolidation The Consolidated Financial Statements include the Company Financial Statements and its subsidiary undertakings together with the Group\u2019s share of the results of joint arrangements and associates up to 31 December. A subsidiary is an entity controlled by the Company. Control exists when the Company has power over an entity, exposure to variable returns from its involvement with an entity and the ability to use its power over an entity so as to affect the Company\u2019s returns. Subsidiaries are consolidated in accordance with IFRS 10 Consolidated Financial Statements. A joint arrangement is an entity in which the Group holds a long-term interest and which is jointly controlled by the Group and one or more other investors under a contractual arrangement. Joint arrangements may be either joint ventures or joint operations. Joint ventures are accounted for using the equity method of accounting and joint operations are accounted for using proportionate accounting. An associate is an entity that is neither a subsidiary nor a joint arrangement, in which the Group holds a long-term interest and where the Group has a significant influence. The results of associates are accounted for using the equity method of accounting. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Adjustments are made to eliminate the profit or loss arising on transactions with joint arrangements and associates to the extent of the Group\u2019s interest in the entity. Transactions with non-controlling interests are recorded directly in equity. Any subsidiary undertaking, joint arrangement or associate sold or acquired during the year are included up to, or from, the date of change of control. Details of transactions in the year are set out in note 27. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-613": { "value": "A subsidiary is an entity controlled by the Company. Control exists when the Company has power over an entity, exposure to variable returns from its involvement with an entity and the ability to use its power over an entity so as to affect the Company\u2019s returns. Subsidiaries are consolidated in accordance with IFRS 10 Consolidated Financial Statements. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-653": { "value": "A joint arrangement is an entity in which the Group holds a long-term interest and which is jointly controlled by the Group and one or more other investors under a contractual arrangement. Joint arrangements may be either joint ventures or joint operations. Joint ventures are accounted for using the equity method of accounting and joint operations are accounted for using proportionate accounting. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-614": { "value": "A joint arrangement is an entity in which the Group holds a long-term interest and which is jointly controlled by the Group and one or more other investors under a contractual arrangement. Joint arrangements may be either joint ventures or joint operations. Joint ventures are accounted for using the equity method of accounting and joint operations are accounted for using proportionate accounting. An associate is an entity that is neither a subsidiary nor a joint arrangement, in which the Group holds a long-term interest and where the Group has a significant influence. The results of associates are accounted for using the equity method of accounting. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-652": { "value": "An associate is an entity that is neither a subsidiary nor a joint arrangement, in which the Group holds a long-term interest and where the Group has a significant influence. The results of associates are accounted for using the equity method of accounting. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-562": { "value": "Revenue recognition and contract assets and liabilities Revenue recognised comprises sales to the Group's customers after discounts and amounts payable to customers. Revenue excludes value added taxes. The transaction price of a contract is typically clearly stated within the contract, although the absolute amount may be dependent on escalation indices and long-term contracts that require the key estimates highlighted below to be made. Refund liabilities, where sales are made with a right of return, are not typical in the Group's contracts. Where they do exist, and consideration has been received, a portion based on an assessment of the expected refund liability is recognised within other payables. The Group has elected to use the practical expedient not to adjust revenue for the effect of financing components where the expectation is that the period between the transfer of goods and services to customers and the receipt of payment is less than a year. Consideration is received in the form of deposits and payments for completion of milestones or performance obligations. LTSA cash receipts are typically received based on EFHs. Sales of standard OE, spare parts and time and material (T&M) overhaul services are generally recognised on transfer of control to the customer. This is generally on delivery to the customer, unless the specific contractual terms indicate a different point. The Directors consider whether there is a need to constrain the amount of revenue to be recognised on delivery based on the contractual position and any relevant facts, however, this is not typically required. Sales of OE and services that are specifically designed for the contract (most significantly in the Defence business) are recognised by reference to the progress towards completion of the performance obligation, using the cost method described in the key judgements, provided the outcome of contracts can be assessed with reasonable certainty. The Group generates a significant portion of its revenue on aftermarket arrangements arising from the installed OE fleet. As a consequence, in particular in the Civil Aerospace large engine business, the Group will often agree contractual prices for OE deliveries that take into account the anticipated aftermarket arrangements. Sometimes this may result in losses being incurred on OE. As described in the key judgements, these contracts are not combined. The consideration in the OE contract is therefore allocated to OE performance obligations and the consideration in the aftermarket contract to aftermarket performance obligations. Key areas of the accounting policy are: \u2013 Future variable revenue from long-term contracts is constrained to take account of the risk of non-recovery of resulting contract balances from reduced utilisation e.g. EFHs, based on historical forecasting experience and the risk of aircraft being parked by the customer. \u2013 A significant amount of revenue and cost related to long-term contract accounting is denominated in currencies other than that of the relevant Group undertaking, most significantly USD transactions in sterling and euro denominated undertakings. These are translated at estimated long-term exchange rates. \u2013 The assessment of stage of completion is generally measured for each contract. However, in certain cases, such as for CorporateCare agreements, where there are many contracts covering aftermarket services each for a small number of engines, the Group accounts for a portfolio of contracts together, as the effect on the Consolidated Financial Statements would not differ materially from applying the standard to the individual contracts in the portfolio. When accounting for a portfolio of LTSAs, the Group uses estimates and assumptions that reflect the size and composition of the portfolio. \u2013 A contract asset/liability is recognised where payment is received in arrears/advance of the revenue recognised in meeting performance obligations. \u2013 Contract modifications of LTSAs can be accounted for as separate contracts, termination of the existing contract and the creation of a new contract, or as part of the existing contract. The treatment is dependent on whether remaining goods and services are distinct and whether the price of the contract increases by an amount of consideration that reflects the standalone selling prices of any additional goods and services. \u2013 Where material, wastage costs (see key judgements on page 43) are recorded as an expense and excluded from the measure of progress of LTSA contracts. \u2013 The Group recognises a liability for their obligation to repurchase parts it has sold to the maintenance, repair and overhaul bases who overhaul the Group\u2019s customers\u2019 engines. If the expected costs to fulfil a contract exceed the expected revenue, a contract loss provision is recognised for the excess costs. The Group pays participation fees to airframe manufacturers, its customers for OE, on certain programmes. Amounts paid are initially treated as contract assets and subsequently charged as a reduction to the OE revenue when the engines are transferred to the customer. The Group has elected to use the practical expedient to expense as incurred any incremental costs of obtaining or fulfilling a contract if the amortisation period of an asset created would have been one year or less. Where costs to obtain a contract are recognised in the balance sheet, they are amortised over the performance of the related contract (eight to 15 years). Key judgement \u2013 Whether Civil Aerospace OE and aftermarket contracts should be combined In the Civil Aerospace business, OE contracts for the sale of engines to be installed on new aircraft are with the airframers, while the contracts to provide spare engines and aftermarket goods and services are with the aircraft operators, although there may be interdependencies between them. IFRS 15 Revenue from Contracts with Customers includes guidance on the combination of contracts, in particular that contracts with unrelated parties should not be combined. Notwithstanding the interdependencies, the Directors consider that the engine contract should be considered separately from the aftermarket contract. In making this judgement, they also took account of industry practice. Key judgement \u2013 How performance on long-term aftermarket contracts should be measured The Group generates a significant proportion of its revenue from aftermarket arrangements. These aftermarket contracts, such as TotalCare and CorporateCare agreements in the Civil Aerospace business, cover a range of services and generally have contractual terms covering more than one year. Under these contracts, the Group's primary obligation is to maintain customers' engines in an operational condition. This is achieved by undertaking various activities, such as maintenance, repair and overhaul, and engine monitoring over the period of the contract. Revenue on these contracts is recognised over the period of the contract and the basis for measuring progress is a matter of judgement. The Directors consider that the stage of completion of the contract is best measured by using the actual costs incurred to date compared to the estimated costs to complete the performance obligations, as this reflects the extent of completion of the activities to be performed. Key judgement \u2013 Whether long-term aftermarket contracts contain a significant financing component Long-term aftermarket contracts typically cover a period of eight to 15 years. Their pricing is the subject of negotiation with individual customers under competitive circumstances. It is the Directors' judgement that the consideration received approximates to the cash selling price and any timing difference between consideration being received and the supply of goods and services is typical of the industry and arises for reasons other than to provide financing. The customers typically pay on an 'as used' basis (e.g. USD/EFH) which reflects the wear and tear of the engine as it flies and aligns to the customer's own revenue streams. An adjustment to the transaction price is therefore not required. Key judgement \u2013 Whether any costs should be treated as wastage In rare circumstances, the Group may incur costs of wasted material, labour or other resources to fulfil a contract where the level of cost was not reflected in the contract price. The identification of such costs is a matter of judgement and would only be expected to arise where there has been a series of abnormal events which give rise to a significant level of cost of a nature that the Group would not expect to incur and hence is not reflected in the contract price. Examples include technical issues that: require resolution to meet regulatory requirements; have a wide- ranging impact across a product type; and cause significant operational disruption to customers. Similarly, in these rare circumstances, significant disruption costs to support customers resulting from the actual performance of a delivered good or service may be treated as a wastage cost. Provision is made for any costs identified as wastage when the obligation to incur them arises - see note 21. Key judgement \u2013 Whether the Civil Aerospace LTSA contracts are warranty style contacts entered into in connection with OE sales and therefore can be accounted for under IFRS 15 Revenue from Contracts with Customers The Group has considered whether these arrangements are insurance contracts as defined in IFRS 17 Insurance Contracts. While they may transfer an element of insurance risk, they relate to warranty and service type agreements that are entered into in connection with the Group's sales of its goods or services and therefore continue to be accounted for under the revenue and provisions standards. The Directors have judged that such arrangements entered into after the original equipment sale remain sufficiently related to the sale of the Group's goods and services to allow the contracts to continue to be measured under IFRS 15 Revenue from Contracts with Customers and IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Key judgement \u2013 Whether sales of spare engines to joint ventures are at fair value The Civil Aerospace business maintains a pool of spare engines to support its customers. Some of these engines are sold to, and held by, joint venture companies. The assessment of whether the sales price reflects fair value is a key judgement. The Group considers that based upon the terms and conditions of the sales, and by comparison to the sales price of spare engines to other third parties, the sales made to joint ventures reflect the fair value of the goods sold. See note 26 for the value of sales to joint ventures during the year. Key judgement \u2013 When revenue should be recognised in relation to spare engine sales Revenue is recognised at the point in time when a customer obtains control of a spare engine. The customer could be a related party, an external operator or a spare engine service provider. Depending on the contractual arrangements, judgement is required on when the Group relinquishes control of spare engines and, therefore, when the revenue is recognised. The point of control passing has been concluded to correspond to the point of legal sale, even for instances where the customer is contracted to provide some future spare engine capacity to the Group to support its installed engine base. In such cases, the customer has responsibility for generating revenue from the engines and exposure to periods of non-utilisation; exposure to risk of damage or loss, risk from residual value movements, and will determine if and when profits will be made from disposal. The spare engine capacity that will be made available to the Group in the future does not consist of identified assets and the provider retains a substantive right to substitute the asset through the Group's period of use. It is, therefore, appropriate to recognise revenue from the sale of the spare engines at the point that title transfers. During 2025, of the total 52 (2024: 57) large spare engine sales delivered, 5 (2024: 20) engines were sold to customers where contractual arrangement allows for some future spare engine capacity to be used by the Group. These sales contributed \u00a394m (2024: \u00a3399m) to revenue for the year. Key estimate - Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements, including the impact of climate change The Group has long-term contracts that fall into different accounting periods and which can extend over significant periods (generally up to 25 years), the most significant of these are LTSAs in the Civil Aerospace business, with contracts typically covering a period of eight to 15 years. The estimated revenue and costs are inherently imprecise and significant estimates are required to assess: EFHs, time on wing and other operating parameters; the pattern of future maintenance activity and the costs to be incurred; lifecycle cost improvements over the term of the contracts; and escalation of revenue and costs (that includes the impact of inflation). Many of the revenues and costs are denominated in currencies other than that of the relevant group undertaking, these are translated at an estimated long-term exchange rate, based on historical trends and economic forecasts. The impact of climate change on EFHs and costs is also considered when making these estimates. Industry and customer data on expected levels of utilisation is included in the forecasts used. Across the length of the current Civil Aerospace LTSA contracts, allowance has been made for around a 1 % (2024: 1%) projected cost increase resulting from carbon pricing and commodity price changes. During the year, changes to the estimate in relation to the Civil Aerospace long term contracts resulted in favourable catch-up adjustments to revenue of \u00a3253m (2024: favourable catch-up adjustments of \u00a3311m). The sensitivities below demonstrate how changes in assumptions (including as a result of climate change) could impact the level of revenue recognised were assumptions to change. The Directors believe that the estimates used to prepare the Consolidated Financial Statements take account of the inherent uncertainties, constraining the expected level of revenue as appropriate. Based upon the stage of completion of all LTSA contracts within Civil Aerospace as at 31 December 2025, the following reasonably possible changes in estimates would result in catch-up adjustments being recognised in the period in which the estimates change (at underlying rates): - A change in forecast EFHs of 1% over the remaining term of the contracts would impact LTSA income and to a lesser extent costs, resulting in an impact of around \u00a320m. This would be expected to be seen as a catch-up change in revenue or, to the extent it impacts onerous contracts, within cost of sales. - A 2% increase or decrease in our pricing to customers over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around \u00a3400m. - A 2% increase or decrease in shop visit costs over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around \u00a3120m. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-563": { "value": "
Risk and revenue sharing arrangements (RRSAs)
Cash entry fees received are initially deferred on the balance sheet as deferred receipts from RRSA workshare partners within trade payables
and other liabilities. The cash entry fee is a transaction with a supplier and is recognised as a reduction in cost of sales incurred. Individual
programme amounts are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is delivered
and then recognised on a 15-year straight-line basis.
The payments to suppliers of their shares of the programme cash flows for their production components are charged to cost of sales when OE
sales are recognised or as LTSA costs are incurred. These prepayments are initially recognised within trade receivables and other assets.
The Group also has arrangements with third parties who invest in a programme and receive a return based on its performance, but do not
undertake development work or supply parts. Such arrangements (financial RRSAs) are financial instruments as defined by IAS 32 Financial
Instruments: Presentation and are accounted for using the amortised cost method.
Key judgement \u2013 Determination of the nature of entry fees received
RRSAs with key suppliers (workshare partners) are a feature of the civil aviation industry. Under these contractual arrangements, the key
commercial objectives are that: (i) during the development phase the workshare partner shares in the risks of developing an engine by
performing its own development work, providing development parts, and paying a non-refundable cash entry fee; and (ii) during the production
phase the workshare partner supplies components in return for a share of the programme cash flows as a \u2018life of type\u2019 supplier (i.e. as long as
the engine remains in service).
The non-refundable cash entry fee is considered to be one element of a long-term supply agreement. These receipts are deferred on the
balance sheet and recognised against the cost of sales over the estimated number of units to be delivered on a similar basis to the amortisation
of development costs (see page 47).
", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForRiskAndRevenueSharingArrangements", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-564": { "value": "
Government grants
Government grants received are varied in nature and are recognised in the income statement so as to match them with the related expenses that
they are intended to compensate. Where grants are received in advance of the related expenses, they are initially recognised as liabilities within
trade payables and other liabilities and released to match the related expenditure. Non-monetary grants are recognised at fair value.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-565": { "value": "
Interest
Interest receivable/payable is credited/charged to the income statement using the effective interest method. Where borrowing costs are
attributable to the acquisition, construction or production of a qualifying asset, such costs are capitalised as part of the specific asset.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-654": { "value": "Interest Interest receivable/payable is credited/charged to the income statement using the effective interest method. Where borrowing costs are attributable to the acquisition, construction or production of a qualifying asset, such costs are capitalised as part of the specific asset. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-615": { "value": "Interest Interest receivable/payable is credited/charged to the income statement using the effective interest method. Where borrowing costs are attributable to the acquisition, construction or production of a qualifying asset, such costs are capitalised as part of the specific asset. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-616": { "value": "Taxation The tax charge/credit on the profit or loss for the year comprises current and deferred tax: \u2013 Current tax is the expected tax payable for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years; and \u2013 Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for tax purposes and is calculated using the enacted or substantively enacted rates that are expected to apply when the asset or liability is settled. In the UK, the deferred tax liability on the pension scheme surplus is recognised consistently with the basis for recognising the surplus i.e. at the rate applicable to refunds from a trust. Tax is charged or credited to the income statement or OCI as appropriate, except when it relates to items credited or charged directly to equity in which case the tax is also dealt with in equity. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint arrangements, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is not recognised on taxable temporary differences arising on the initial recognition of goodwill or for temporary differences arising from the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits, which include the reversal of taxable temporary differences, will be available against which the assets can be utilised. Further details on the Group\u2019s tax position can be found on pages 59 to 62.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-566": { "value": "Taxation The tax charge/credit on the profit or loss for the year comprises current and deferred tax: \u2013 Current tax is the expected tax payable for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years; and \u2013 Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for tax purposes and is calculated using the enacted or substantively enacted rates that are expected to apply when the asset or liability is settled. In the UK, the deferred tax liability on the pension scheme surplus is recognised consistently with the basis for recognising the surplus i.e. at the rate applicable to refunds from a trust. Tax is charged or credited to the income statement or OCI as appropriate, except when it relates to items credited or charged directly to equity in which case the tax is also dealt with in equity. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint arrangements, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is not recognised on taxable temporary differences arising on the initial recognition of goodwill or for temporary differences arising from the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits, which include the reversal of taxable temporary differences, will be available against which the assets can be utilised. Further details on the Group\u2019s tax position can be found on pages 59 to 62.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-567": { "value": "Foreign currency translation Transactions denominated in currencies other than the functional currency of the transacting group undertaking are translated into the functional currency at the average monthly exchange rate when the transaction occurs. Monetary assets and liabilities denominated in foreign currencies are translated into the relevant functional currency at the rate prevailing at the year end. Exchange differences arising on foreign exchange transactions and the retranslation of monetary assets and liabilities into functional currencies at the rate prevailing at the year end are included in profit/(loss) before taxation. The trading results of Group undertakings are translated into sterling at the average exchange rates for the year. The assets and liabilities of overseas undertakings, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates prevailing at the year end. Exchange adjustments arising from the retranslation of the opening net assets, and from the translation of the profits or losses at average rates, are recognised in OCI. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-655": { "value": "Discontinued operations and business disposals A discontinued operation is defined in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as a component of an entity that has been disposed of or is classified as held for sale, represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are required to be presented separately in the income statement. Assets and businesses are classified as held for sale when their carrying amounts will be recovered through sale rather than through continuing use. Disposal group held for distribution to owners A disposal group is classified as held for distribution to owners when the Group is committed to such a distribution. For this to be the case the disposal group must be available for immediate distribution in its present condition and the distribution must be highly probable. Key judgement \u2013 Whether components of the legal entity review programme are considered a single integrated distribution transaction and hence disclosed as held for distribution. A Group legal entity review programme is being executed through a series of transactions that are highly probable to complete during 2026. Having considered the nature of the programme, and the significant interdependencies between the steps, the Directors consider that all the transaction steps are components of a single plan for the distribution of entities under common control to the owner of the Group, Rolls-Royce Holdings plc. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-617": { "value": "Discontinued operations and business disposals A discontinued operation is defined in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as a component of an entity that has been disposed of or is classified as held for sale, represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are required to be presented separately in the income statement. Assets and businesses are classified as held for sale when their carrying amounts will be recovered through sale rather than through continuing use. Disposal group held for distribution to owners A disposal group is classified as held for distribution to owners when the Group is committed to such a distribution. For this to be the case the disposal group must be available for immediate distribution in its present condition and the distribution must be highly probable. Key judgement \u2013 Whether components of the legal entity review programme are considered a single integrated distribution transaction and hence disclosed as held for distribution. A Group legal entity review programme is being executed through a series of transactions that are highly probable to complete during 2026. Having considered the nature of the programme, and the significant interdependencies between the steps, the Directors consider that all the transaction steps are components of a single plan for the distribution of entities under common control to the owner of the Group, Rolls-Royce Holdings plc. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-568": { "value": "Discontinued operations and business disposals A discontinued operation is defined in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as a component of an entity that has been disposed of or is classified as held for sale, represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are required to be presented separately in the income statement. Assets and businesses are classified as held for sale when their carrying amounts will be recovered through sale rather than through continuing use. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-618": { "value": "Financial instruments \u2013 Classification and measurement Financial assets primarily include trade receivables and other non-derivative financial assets, cash and cash equivalents, short-term investments, derivatives (foreign exchange, commodity and interest rate contracts), and listed and unlisted investments. \u2013 Trade receivables and other assets are classified either as held to collect and measured at amortised cost, or as held to collect and sell and measured at fair value, with movements in fair value recognised through other comprehensive income (FVOCI). The Group may sell trade receivables due from certain customers before the due date. Any trade receivables from such customers that are not sold at the reporting date are classified as \u2018held to collect and sell\u2019. \u2013 Cash and cash equivalents (consisting of balances with banks and other financial institutions, money market funds, short-term deposits) and short- term investments are subject to low market risk. Cash balances, short-term deposits (with a maturity of primarily three months or less) and short- term investments are measured at amortised cost. Money market funds are measured at fair value, with movements in fair value recognised in the income statement as a profit or loss (FVPL). \u2013 Derivatives and unlisted investments are measured at FVPL. The Company has elected to measure its listed investments at FVOCI. Financial liabilities primarily consist of trade payables and other non-derivative financial liabilities, borrowings, derivatives, financial RRSAs and C Shares. \u2013 Derivatives are classified and measured at FVPL. \u2013 All other financial liabilities are classified and measured at amortised cost. ", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForFinancialInstrumentsClassificationAndMeasurement", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-569": { "value": "Financial instruments \u2013 Classification and measurement Financial assets primarily include trade receivables and other non-derivative financial assets, cash and cash equivalents, short-term investments, derivatives (foreign exchange, commodity and interest rate contracts), and listed and unlisted investments. \u2013 Trade receivables and other assets are classified either as held to collect and measured at amortised cost, or as held to collect and sell and measured at fair value, with movements in fair value recognised through other comprehensive income (FVOCI). The Group may sell trade receivables due from certain customers before the due date. Any trade receivables from such customers that are not sold at the reporting date are classified as \u2018held to collect and sell\u2019. \u2013 Cash and cash equivalents (consisting of balances with banks and other financial institutions, money market funds, short-term deposits) and short- term investments are subject to low market risk. Cash balances, short-term deposits (with a maturity of primarily three months or less) and short- term investments are measured at amortised cost. Money market funds are measured at fair value, with movements in fair value recognised in the income statement as a profit or loss (FVPL). \u2013 Derivatives and unlisted investments are measured at FVPL. The Company has elected to measure its listed investments at FVOCI. Financial liabilities primarily consist of trade payables and other non-derivative financial liabilities, borrowings, derivatives, financial RRSAs and C Shares. \u2013 Derivatives are classified and measured at FVPL. \u2013 All other financial liabilities are classified and measured at amortised cost. Financial instruments \u2013 Impairment of financial assets and contract assets IFRS 9 Financial Instruments sets out the basis for the accounting of ECLs on financial assets and contract assets resulting from transactions within the scope of IFRS 15 Revenue from Contracts with Customers. The Group has adopted the simplified approach to provide for ECLs, measuring the loss allowance at a probability weighted amount that considers reasonable and supportable information about past events, current conditions and forecasts of future economic conditions of customers. These are incorporated in the simplified model adopted by using credit ratings which are publicly available, or through internal risk assessments derived using the customer's latest available financial information. The ECLs are updated at each reporting date to reflect changes in credit risk since initial recognition. ECLs are calculated for all financial assets in scope, regardless of whether or not they are overdue. Financial instruments \u2013 Hedge accounting Forward foreign exchange contracts and commodity swaps (derivative financial instruments) are held to manage the cash flow exposures of forecast transactions denominated in foreign currencies or in commodities respectively. Derivative financial instruments qualify for hedge accounting when: (i) there is a formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge at the inception of the hedge; and (ii) the hedge is expected to be effective. In general, the Group has chosen to not apply hedge accounting in respect of these exposures. The Group economically hedges the fair value and cash flow exposures of its borrowings. Cross-currency interest rate swaps are held to manage the fair value or cash flow exposures of borrowings denominated in foreign currencies and are designated as fair value hedges or cash flow hedges as appropriate. Interest rate swaps are held to manage the interest rate exposures of fixed and floating rate borrowings and may be designated as fair value hedges or cash flow hedges as appropriate. If the swaps are not designated as fair value or cash flow hedges, the economic effect is included in the underlying results - see note 20. Changes in the fair values of derivatives that are designated as fair value hedges are recognised directly in the income statement. The fair value changes of effective cash flow hedge derivatives are recognised in OCI and subsequently recycled to the income statement in the same period or periods during which the hedged cash flows affect profit or loss. Any ineffectiveness in the hedging relationship is included in the income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, for cash flow hedges and, if the forecast transaction remains probable, any net cumulative gain or loss on the hedging instrument recognised in the Statement of Changes in Equity (SOCIE) is retained until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss is recycled to the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-656": { "value": "Trade receivables and other assets are classified either as held to collect and measured at amortised cost, or as held to collect and sell and measured at fair value, with movements in fair value recognised through other comprehensive income (FVOCI). The Group may sell trade receivables due from certain customers before the due date. Any trade receivables from such customers that are not sold at the reporting date are classified as \u2018held to collect and sell\u2019. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-657": { "value": "Financial instruments \u2013 Impairment of financial assets and contract assets IFRS 9 Financial Instruments sets out the basis for the accounting of ECLs on financial assets and contract assets resulting from transactions within the scope of IFRS 15 Revenue from Contracts with Customers. The Group has adopted the simplified approach to provide for ECLs, measuring the loss allowance at a probability weighted amount that considers reasonable and supportable information about past events, current conditions and forecasts of future economic conditions of customers. These are incorporated in the simplified model adopted by using credit ratings which are publicly available, or through internal risk assessments derived using the customer's latest available financial information. The ECLs are updated at each reporting date to reflect changes in credit risk since initial recognition. ECLs are calculated for all financial assets in scope, regardless of whether or not they are overdue. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-619": { "value": "Financial instruments \u2013 Impairment of financial assets and contract assets IFRS 9 Financial Instruments sets out the basis for the accounting of ECLs on financial assets and contract assets resulting from transactions within the scope of IFRS 15 Revenue from Contracts with Customers. The Group has adopted the simplified approach to provide for ECLs, measuring the loss allowance at a probability weighted amount that considers reasonable and supportable information about past events, current conditions and forecasts of future economic conditions of customers. These are incorporated in the simplified model adopted by using credit ratings which are publicly available, or through internal risk assessments derived using the customer's latest available financial information. The ECLs are updated at each reporting date to reflect changes in credit risk since initial recognition. ECLs are calculated for all financial assets in scope, regardless of whether or not they are overdue. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-658": { "value": "Financial instruments \u2013 Hedge accounting Forward foreign exchange contracts and commodity swaps (derivative financial instruments) are held to manage the cash flow exposures of forecast transactions denominated in foreign currencies or in commodities respectively. Derivative financial instruments qualify for hedge accounting when: (i) there is a formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge at the inception of the hedge; and (ii) the hedge is expected to be effective. In general, the Group has chosen to not apply hedge accounting in respect of these exposures. The Group economically hedges the fair value and cash flow exposures of its borrowings. Cross-currency interest rate swaps are held to manage the fair value or cash flow exposures of borrowings denominated in foreign currencies and are designated as fair value hedges or cash flow hedges as appropriate. Interest rate swaps are held to manage the interest rate exposures of fixed and floating rate borrowings and may be designated as fair value hedges or cash flow hedges as appropriate. If the swaps are not designated as fair value or cash flow hedges, the economic effect is included in the underlying results - see note 20. Changes in the fair values of derivatives that are designated as fair value hedges are recognised directly in the income statement. The fair value changes of effective cash flow hedge derivatives are recognised in OCI and subsequently recycled to the income statement in the same period or periods during which the hedged cash flows affect profit or loss. Any ineffectiveness in the hedging relationship is included in the income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, for cash flow hedges and, if the forecast transaction remains probable, any net cumulative gain or loss on the hedging instrument recognised in the Statement of Changes in Equity (SOCIE) is retained until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss is recycled to the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-620": { "value": "Financial instruments \u2013 Hedge accounting Forward foreign exchange contracts and commodity swaps (derivative financial instruments) are held to manage the cash flow exposures of forecast transactions denominated in foreign currencies or in commodities respectively. Derivative financial instruments qualify for hedge accounting when: (i) there is a formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge at the inception of the hedge; and (ii) the hedge is expected to be effective. In general, the Group has chosen to not apply hedge accounting in respect of these exposures. The Group economically hedges the fair value and cash flow exposures of its borrowings. Cross-currency interest rate swaps are held to manage the fair value or cash flow exposures of borrowings denominated in foreign currencies and are designated as fair value hedges or cash flow hedges as appropriate. Interest rate swaps are held to manage the interest rate exposures of fixed and floating rate borrowings and may be designated as fair value hedges or cash flow hedges as appropriate. If the swaps are not designated as fair value or cash flow hedges, the economic effect is included in the underlying results - see note 20. Changes in the fair values of derivatives that are designated as fair value hedges are recognised directly in the income statement. The fair value changes of effective cash flow hedge derivatives are recognised in OCI and subsequently recycled to the income statement in the same period or periods during which the hedged cash flows affect profit or loss. Any ineffectiveness in the hedging relationship is included in the income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, for cash flow hedges and, if the forecast transaction remains probable, any net cumulative gain or loss on the hedging instrument recognised in the Statement of Changes in Equity (SOCIE) is retained until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss is recycled to the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-570": { "value": "Business combinations and goodwill Goodwill recognised represents the excess of the fair value of the purchase consideration over the fair value to the Group of the net of the identifiable assets acquired and the liabilities assumed. On transition to IFRS on 1 January 2004, business combinations were not retrospectively adjusted to comply with UK-adopted International Accounting Standards and goodwill was recognised based on the carrying value under the previous accounting policies. Goodwill, in respect of the acquisition of a subsidiary, is recognised as an intangible asset. Goodwill arising on the acquisition of joint arrangements and associates is included in the carrying value of the investment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-659": { "value": "Business combinations and goodwill Goodwill recognised represents the excess of the fair value of the purchase consideration over the fair value to the Group of the net of the identifiable assets acquired and the liabilities assumed. On transition to IFRS on 1 January 2004, business combinations were not retrospectively adjusted to comply with UK-adopted International Accounting Standards and goodwill was recognised based on the carrying value under the previous accounting policies. Goodwill, in respect of the acquisition of a subsidiary, is recognised as an intangible asset. Goodwill arising on the acquisition of joint arrangements and associates is included in the carrying value of the investment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-621": { "value": "Business combinations and goodwill Goodwill recognised represents the excess of the fair value of the purchase consideration over the fair value to the Group of the net of the identifiable assets acquired and the liabilities assumed. On transition to IFRS on 1 January 2004, business combinations were not retrospectively adjusted to comply with UK-adopted International Accounting Standards and goodwill was recognised based on the carrying value under the previous accounting policies. Goodwill, in respect of the acquisition of a subsidiary, is recognised as an intangible asset. Goodwill arising on the acquisition of joint arrangements and associates is included in the carrying value of the investment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-622": { "value": "Customer relationships The fair value of customer relationships recognised as a result of a business combination relate to the acquired company's established relationships with its existing customers that result in repeat purchases and customer loyalty. Amortisation is charged on a straight-line basis over its useful economic life, up to a maximum of 15 years. Certification costs Costs incurred in respect of meeting regulatory certification requirements for new Civil Aerospace aero-engine/aircraft combinations, including payments made to airframe manufacturers for this, are recognised as intangible assets to the extent that they can be recovered out of future sales. They are charged to the income statement over the programme life. Individual programme assets are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is delivered and then charged on a 15-year straight-line basis. Research and development Expenditure incurred on research and development is distinguished as relating either to a research phase or to a development phase. All research phase expenditure is charged to the income statement. Development expenditure is recognised as an internally generated intangible asset (programme asset) only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. More specifically, development costs are capitalised from the point at which the following conditions have been met: \u2013 the technical feasibility of completing the programme and the intention and ability (availability of technical, financial and other resources) to complete the programme asset and use or sell it; \u2013 the probability that future economic benefits will flow from the programme asset; and \u2013 the ability to measure reliably the expenditure attributable to the programme asset during its development. Capitalisation continues until the point at which the programme asset meets its originally contracted technical specification (defined internally as the point at which the asset is capable of operating in the manner intended by the Directors). Subsequent expenditure is capitalised where it enhances the functionality of the programme asset and demonstrably generates an enhanced economic benefit to the Group. All other subsequent expenditure on programme assets is expensed as incurred. Individual programme assets are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is delivered and then charged on a 15-year straight-line basis. In accordance with IAS 38 Intangible Assets, the basis on which programme assets are amortised is assessed annually. Key judgement \u2013 Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation The Group incurs significant research and development expenditure in respect of various development programmes. Determining when capitalisation should commence and cease is a key judgement, as is the determination of when subsequent expenditure on the programme assets should be capitalised. During the year, \u00a3222m (2024: \u00a3263m) of development expenditure was capitalised. Within the Group there are established processes in place e.g., the Product Introduction and Lifecycle Management process (PILM), to consider technical feasibility, commercial viability and financial assessment of the programme at certain milestones. When these are met, development expenditure is capitalised. Prior to this, expenditure is expensed as incurred. The Group continues to invest in new technologies as a result of its decarbonisation commitments. As these are new technologies there is a higher level of uncertainty over potential outcomes and, therefore, this could impact the level of expenditure that is capitalised or recognised in the income statement in future years. Subsequent expenditure after entry into service which enhances the performance of the engine and the economic benefit to the Group is capitalised. This expenditure is referred to as enhanced performance and is governed by the PILM process referred to above. All other development costs are expensed as incurred. Key judgement \u2013 Determination of the basis for amortising capitalised development costs The economic benefits of the development costs are primarily those cash inflows arising from LTSAs, which are expected to be relatively consistent for each engine within a programme. Amortisation of development costs is recognised on a straight-line basis over the estimated period of operation of the engine by its initial operator. Software Software that is not specific to an item of property, plant and equipment is classified as an intangible asset, recognised at its acquisition cost and amortised on a straight-line basis over its useful economic life, up to a maximum of ten years. The amortisation period of software assets is reviewed annually. The cost of internally developed software includes direct labour and an appropriate proportion of overheads. Other intangible assets These include intangible assets arising on acquisition of businesses, such as technology which is amortised on a straight-line basis over a maximum of 15 years and trademarks which are not amortised. They also include the costs incurred testing and analysing engines with the longest time in service (fleet leader engines) to gather technical knowledge on engine endurance, which are amortised on a straight-line basis over a maximum of 15 years. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-571": { "value": "Customer relationships The fair value of customer relationships recognised as a result of a business combination relate to the acquired company's established relationships with its existing customers that result in repeat purchases and customer loyalty. Amortisation is charged on a straight-line basis over its useful economic life, up to a maximum of 15 years. ", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForCustomerRelationships", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-572": { "value": "Certification costs Costs incurred in respect of meeting regulatory certification requirements for new Civil Aerospace aero-engine/aircraft combinations, including payments made to airframe manufacturers for this, are recognised as intangible assets to the extent that they can be recovered out of future sales. They are charged to the income statement over the programme life. Individual programme assets are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is delivered and then charged on a 15-year straight-line basis. ", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForCertificationCosts", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-573": { "value": "Research and development Expenditure incurred on research and development is distinguished as relating either to a research phase or to a development phase. All research phase expenditure is charged to the income statement. Development expenditure is recognised as an internally generated intangible asset (programme asset) only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. More specifically, development costs are capitalised from the point at which the following conditions have been met: \u2013 the technical feasibility of completing the programme and the intention and ability (availability of technical, financial and other resources) to complete the programme asset and use or sell it; \u2013 the probability that future economic benefits will flow from the programme asset; and \u2013 the ability to measure reliably the expenditure attributable to the programme asset during its development. Capitalisation continues until the point at which the programme asset meets its originally contracted technical specification (defined internally as the point at which the asset is capable of operating in the manner intended by the Directors). Subsequent expenditure is capitalised where it enhances the functionality of the programme asset and demonstrably generates an enhanced economic benefit to the Group. All other subsequent expenditure on programme assets is expensed as incurred. Individual programme assets are allocated pro rata to the estimated number of units to be produced. Amortisation commences as each unit is delivered and then charged on a 15-year straight-line basis. In accordance with IAS 38 Intangible Assets, the basis on which programme assets are amortised is assessed annually.
Key judgement \u2013 Determination of the point in time where costs incurred on an internal programme development meet the criteria for
capitalisation
The Group incurs significant research and development expenditure in respect of various development programmes. Determining when
capitalisation should commence and cease is a key judgement, as is the determination of when subsequent expenditure on the programme
assets should be capitalised. During the year, \u00a3222m (2024: \u00a3263m) of development expenditure was capitalised.
Within the Group there are established processes in place e.g., the Product Introduction and Lifecycle Management process (PILM), to consider
technical feasibility, commercial viability and financial assessment of the programme at certain milestones. When these are met, development
expenditure is capitalised. Prior to this, expenditure is expensed as incurred.
The Group continues to invest in new technologies as a result of its decarbonisation commitments. As these are new technologies there is a higher
level of uncertainty over potential outcomes and, therefore, this could impact the level of expenditure that is capitalised or recognised in the income
statement in future years.
Subsequent expenditure after entry into service which enhances the performance of the engine and the economic benefit to the Group is
capitalised. This expenditure is referred to as enhanced performance and is governed by the PILM process referred to above. All other
development costs are expensed as incurred.
Key judgement \u2013 Determination of the basis for amortising capitalised development costs
The economic benefits of the development costs are primarily those cash inflows arising from LTSAs, which are expected to be relatively
consistent for each engine within a programme. Amortisation of development costs is recognised on a straight-line basis over the estimated
period of operation of the engine by its initial operator.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-574": { "value": "
Software
Software that is not specific to an item of property, plant and equipment is classified as an intangible asset, recognised at its acquisition cost and
amortised on a straight-line basis over its useful economic life, up to a maximum of ten years. The amortisation period of software assets is reviewed
annually. The cost of internally developed software includes direct labour and an appropriate proportion of overheads.
", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForSoftware", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-575": { "value": "
Property, plant and equipment
Property, plant and equipment are stated at acquisition cost less accumulated depreciation and any provision for impairment in value. The cost of self-
constructed assets includes the cost of materials, direct labour, an appropriate proportion of overheads and, where appropriate, interest.
Depreciation is provided on a straight-line basis to write off the cost, less the estimated residual value, of property, plant and equipment over
their estimated useful lives. No depreciation is recorded on assets in the course of construction. Estimated useful lives are reassessed annually
and are as follows:
\u2014
Land and buildings, as advised by the Group\u2019s professional advisers:
No depreciation is provided on freehold land.
Freehold buildings
- three to 50 years; and
\u2014
Plant and equipment
\u2013
two to 25 years.
\u2014
Aircraft and engines
\u2013
five to 20 years.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-623": { "value": "Property, plant and equipment Property, plant and equipment are stated at acquisition cost less accumulated depreciation and any provision for impairment in value. The cost of self- constructed assets includes the cost of materials, direct labour, an appropriate proportion of overheads and, where appropriate, interest. Depreciation is provided on a straight-line basis to write off the cost, less the estimated residual value, of property, plant and equipment over their estimated useful lives. No depreciation is recorded on assets in the course of construction. Estimated useful lives are reassessed annually and are as follows: \u2014 Land and buildings, as advised by the Group\u2019s professional advisers: No depreciation is provided on freehold land. Freehold buildings - three to 50 years; and \u2014 Plant and equipment \u2013 two to 25 years. \u2014 Aircraft and engines \u2013 five to 20 years. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-576": { "value": "
Leases
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
\u2013 fixed payments less any lease incentive receivable;
\u2013 variable lease payments that are based on an index or a rate;
\u2013 amounts expected to be payable by the Group under residual value guarantees;
\u2013 the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
\u2013 payments of penalties for termination of the lease, if the lease term reflects the Group exercising that option.
Where leases commenced after the initial IFRS 16 Leases transition date, the lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the Group\u2019s incremental borrowing rate is used, being the rate that the Group would have to pay to
borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Where
appropriate, lease liabilities are revalued at each reporting date using the spot exchange rate.
Right-of-use assets are measured at cost comprising the following:
\u2013 the amount of the initial measurement of lease liability or a revaluation of the liability;
\u2013 any lease payments made at or before the commencement date less any lease incentives received;
\u2013 any initial direct costs; and
\u2013 restoration costs.
Each right-of-use asset is depreciated over the shorter of its useful economic life and the lease term on a straight-line basis unless the lease is
expected to transfer ownership of the underlying asset to the Group, in which case the asset is depreciated to the end of the useful life of the asset.
Short-term leases are leases with a lease term of 12 months or less. Payments associated with short-term leases and low-value leases are recognised
on a straight-line basis as an expense in the income statement.
Key judgement \u2013 Determination of lease term
In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension
option or not exercise a termination option. Extension options (or periods after termination) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated). Certain land and building leases have renewal options, although none are due in the
next 12 months that would have a material impact. Other renewals are evenly spread across 2029 to 2033 and then post 2038. The Group
reviews its judgements on lease terms annually, including the operational significance of the site, especially where utilised for manufacturing
activities.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-580": { "value": "Impairment of non-current assets Impairment of non-current assets is considered in accordance with IAS 36 Impairment of Assets. Where the asset does not generate cash flows that are independent of other assets, impairment is considered for the cash-generating unit (CGU) to which the asset belongs. Goodwill, indefinite life intangible assets and intangible assets not yet available for use are tested for impairment annually. Other intangible assets (including programme-related intangible assets), property, plant and equipment, right-of-use assets and investments are assessed for any indications of impairment annually. If any indication of impairment is identified, an impairment test is performed to estimate the recoverable amount. If the recoverable amount of an asset (or CGU) is estimated to be below the carrying value, the carrying value is reduced to the recoverable amount and the impairment loss is recognised as an expense. The recoverable amount is the higher of value in use or fair value less costs of disposal. The value in use is the present value of future cash flows using a pre-tax discount rate that reflects the time value of money and the risk specific to the asset (or CGU). Fair value less costs of disposal (FVLCOD) reflects market inputs or inputs based on market evidence if readily available. If these inputs are not readily available, the fair value is estimated by discounting future cash flows modified for market participants\u2019 views. The relevant local statutory tax rates have been applied in calculating post-tax to pre-tax discount rates. Key judgement \u2013 Determination of CGUs for assessing impairment of goodwill The Group conducts impairment reviews at the CGU level. As permitted by IAS 36 Impairment of Assets, impairment reviews for goodwill are performed at the groups of CGUs level, representing the lowest level at which the Group monitors goodwill for internal management purposes and no higher than the Group\u2019s operating segments. The main CGUs for which goodwill impairment reviews have been performed are Rolls- Royce Deutschland Ltd & Co KG and at an aggregated Rolls-Royce Power Systems AG level. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-624": { "value": "Impairment of non-current assets Impairment of non-current assets is considered in accordance with IAS 36 Impairment of Assets. Where the asset does not generate cash flows that are independent of other assets, impairment is considered for the cash-generating unit (CGU) to which the asset belongs. Goodwill, indefinite life intangible assets and intangible assets not yet available for use are tested for impairment annually. Other intangible assets (including programme-related intangible assets), property, plant and equipment, right-of-use assets and investments are assessed for any indications of impairment annually. If any indication of impairment is identified, an impairment test is performed to estimate the recoverable amount. If the recoverable amount of an asset (or CGU) is estimated to be below the carrying value, the carrying value is reduced to the recoverable amount and the impairment loss is recognised as an expense. The recoverable amount is the higher of value in use or fair value less costs of disposal. The value in use is the present value of future cash flows using a pre-tax discount rate that reflects the time value of money and the risk specific to the asset (or CGU). Fair value less costs of disposal (FVLCOD) reflects market inputs or inputs based on market evidence if readily available. If these inputs are not readily available, the fair value is estimated by discounting future cash flows modified for market participants\u2019 views. The relevant local statutory tax rates have been applied in calculating post-tax to pre-tax discount rates. Key judgement \u2013 Determination of CGUs for assessing impairment of goodwill The Group conducts impairment reviews at the CGU level. As permitted by IAS 36 Impairment of Assets, impairment reviews for goodwill are performed at the groups of CGUs level, representing the lowest level at which the Group monitors goodwill for internal management purposes and no higher than the Group\u2019s operating segments. The main CGUs for which goodwill impairment reviews have been performed are Rolls- Royce Deutschland Ltd & Co KG and at an aggregated Rolls-Royce Power Systems AG level. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-577": { "value": "
Inventories
Inventories are valued on a first-in, first-out basis, at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable,
direct labour costs and those direct and indirect overheads, including depreciation of property, plant and equipment, that have been incurred in
bringing the inventories to their present location and condition. Net realisable value represents the estimated selling prices less all estimated costs
of completion and costs to be incurred in marketing, selling and distribution. All inventories are classified as current as it is expected that they will
be used in the Group\u2019s operating cycle, regardless of whether this is expected to be within 12 months of the balance sheet date.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-578": { "value": "
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, investments in money market funds and short-term deposits with a maturity of three
months or less on inception. The Group considers overdrafts (repayable on demand) to be an integral part of its cash management activities and
these are included in cash and cash equivalents for the purposes of the cash flow statement. Where the Group operates pooled banking
arrangements across multiple accounts, these are presented on a net basis when it has both a legal right and intention to settle the balances on
a net basis.
The Group\u2019s suppliers have access to a supply chain financing (SCF) programme through partnership with banks. This is to enable smaller
suppliers, including joint ventures (90-day standard payment terms), who are on our standard 75 day or more payment terms to receive their
payment sooner. The election to utilise the programme is the sole decision of the supplier. As the Group continues to have a contractual obligation
to pay its suppliers under commercial terms, which are unaffected by any utilisation of the programme, and it does not retain any ongoing
involvement in the SCFs, the related payables are retained on the Group\u2019s balance sheet and classified as trade payables. Further details are
disclosed in note 19.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-579": { "value": "
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required
to settle that obligation. Provisions are discounted to present value where the effect is material.
The principal provisions are recognised as follows:
\u2013 onerous contracts based on an assessment of whether the direct costs to fulfil a contract are greater than the expected revenue;
\u2013 warranty and guarantees based on an assessment of future claims with reference to past experience and recognised at the earlier of when
the underlying products and services are sold and when the likelihood of a future cost is identified; and
transformation and restructuring when the Group has approved a detailed and formal restructuring plan, and the restructuring has either
commenced or has created a valid expectation to those affected.
Key judgement \u2013 Whether any costs should be treated as wastage In rare circumstances, the Group may incur costs of wasted material, labour or other resources to fulfil a contract where the level of cost was not reflected in the contract price. The identification of such costs is a matter of judgement and would only be expected to arise where there has been a series of abnormal events which give rise to a significant level of cost of a nature that the Group would not expect to incur. As the Group is an owner of an engine Type Certificate, it has a present obligation to develop appropriate design changes to address certain engine conditions that have been noted in issued Airworthiness Directives. The Group is also required to ensure engine operators can continue to safely operate engines within the terms of their LTSAs, and this requires the engines to be compliant with the requirements of those issued Airworthiness Directives. Where Airworthiness Directives are issued, requirements cannot be met without the Group incurring significant costs in the form of replacement parts and customer claims. Given the significant activities of the Group in designing and overhauling aero engines it is very experienced in making the required estimates in relation to the number and timing of shop visits, parts costs, overhaul labour costs and customer claims. During the year, the Group has utilised the remaining \u00a335m of the Trent 1000 wastage costs provision. Key estimates - Estimates of the time to incorporate required modified parts into the fleet to resolve technical issues on the Trent 1000, and the implications of this on forecast future costs when assessing onerous contracts The Group considers that at 31 December 2025 the Trent 1000 onerous contract provisions are most sensitive to changes in estimates. Our forecast increases in shop visit capacity could be impacted by several factors, including prolonged supply chain challenges. If forecast increases in shop visit capacity are not achieved, this could have the impact of reducing planned output of engine overhauls. A 20% reduction in Trent 1000 planned output during the first half of 2026 (and thus delayed incorporation of modified parts into the fleet) could lead to around a \u00a320m to \u00a330m charge. Key estimates - Estimates of the future revenues and costs to fulfil onerous contracts The Group has provisions for onerous contracts at 31 December 2025 of \u00a3914m (2024: \u00a31,433m). An increase in Civil Aerospace large engine estimates of LTSA costs of 1% over the remaining term of the contracts could lead to around a \u00a350m to \u00a370m increase in the onerous contract provisions across all programmes. Key estimates - Assumptions implicit within the calculation of discount rates The onerous contract provisions are sensitive to changes in the discount rate used to value the provisions. The rate used for each contract is derived from bond yields (i.e. risk-free rates) with a similar duration and currency to the contract that they are applied to. The rate is adjusted to reflect the specific inflation characteristics of the contracts. The forecast rates are determined from third-party market analysis and average 5%. A 1% change in the discount rates used could lead to around a \u00a320m to \u00a330m change in the provision. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-581": { "value": "
Customer financing support
In connection with the sale of its products, the Group will, on occasion, provide financing support for its customers. Credit-based guarantees are
disclosed as commitments or contingent liabilities dependent on whether aircraft have been delivered or not. As described on page 93, the
Directors consider the likelihood of crystallisation in assessing whether provision is required for any contingent liabilities.
The Group\u2019s contingent liabilities relating to financing arrangements are spread over many years and relate to a number of customers and a broad
product portfolio and are reported on a discounted basis.
", "dimensions": { "concept": "rollsroyceplc:DescriptionOfAccountingPolicyForCustomerFinancingSupport", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-582": { "value": "
Post-retirement benefits
Pensions and similar benefits (principally healthcare) are accounted for under IAS 19 Employee Benefits.
For defined benefit plans, obligations are measured at discounted present value, using a discount rate derived from high-quality corporate bonds
denominated in the currency of the plan, whilst plan assets are recorded at fair value. Surpluses in schemes are recognised as assets only if they
represent economic benefits available to the Group in the future. Actuarial gains and losses are recognised immediately in OCI. The service and
financing costs of such plans are recognised separately in the income statement:
\u2013 current service costs are spread systematically over the lives of employees;
\u2013 past-service costs and settlements are recognised immediately; and
\u2013 financing costs are recognised in the periods in which they arise.
UK pension obligations include the estimated impact of the obligation to equalise defined benefit pensions and transfer values for men and women.
Payments to defined contribution schemes are charged as an expense as they fall due.
Key estimate \u2013 Estimates of the assumptions for valuing the net defined benefit obligation
The Group's defined benefit pension schemes and similar arrangements are assessed annually in accordance with IAS 19 Employee Benefits.
The valuations, which are based on assumptions determined with independent actuarial advice, resulted in a net surplus of \u00a3256m before
deferred taxation being recognised on the balance sheet at 31 December 2025 (2024: deficit of \u00a3191m). The size of the net surplus/deficit is
sensitive to the actuarial assumptions which include the discount rate, price inflation, pension and salary increases, longevity and, in the UK,
the number of plan members who take the option to transfer their pension to a lump sum on retirement or who choose to take the Bridging
Pension Option. Following consultation, the UK scheme closed to future accrual on 31 December 2020.
A reduction in the discount rate of 0.25% from 5.60% could lead to an increase in the defined benefit obligations of the Rolls-Royce UK
Pension Fund (RRUKPF) of approximately \u00a3140m and an increase in the assumed rate of inflation of 0.25% (RPI of 3.05% and CPI of 2.70%)
could lead to an increase in the defined benefit obligations of the RRUKPF of approximately \u00a355m. In August 2025 the scheme completed a
Buy-in, with the purchase of a bulk insurance annuity policy, with the effect that the majority of scheme liabilities, and therefore these potential
risks, are covered by this policy. See further details and overseas scheme sensitivities in note 22.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-583": { "value": "
Share-based payments
The Group provides share-based payment arrangements to certain employees. These are principally equity-settled arrangements and are
measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value is expensed on a straight-
line basis over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of shares or options that will
vest based on expected performance, except where additional shares vest as a result market-based performance conditions, such as the total
shareholder return (TSR) performance condition in the long-term incentive plan (LTIP), where no adjustment is required as allowance for these
performance conditions are included in the initial fair value.
Cash-settled share options (grants in the International ShareSave plan) are measured at fair value at the balance sheet date. The Group recognises
a liability at the balance sheet date based on these fair values, taking into account the estimated number of options that are expected to vest and
the relative completion of the vesting period. Changes in the value of this liability are recognised in the income statement for the year.
The cost of shares of Rolls-Royce plc held by the Group for the purpose of fulfilling obligations in respect of employee share plans is deducted
from equity in the consolidated balance sheet. See note 24 for a further description of the share-based payment plans.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-584": { "value": "
Post balance sheet events
Rolls-Royce plc and the Trustee of the UK pension scheme signed an agreement on 2 February 2026 triggering the wind up of the UK scheme.
The Group\u2019s current expectation is that the residual surplus on the scheme will be shared between the Group and the scheme\u2019s members, and
communications to this effect have been made to members. This is subject to a statutory consultation process between the Trustee and the
members, expected to be completed in 2026. Subject to the outcome of that process, it is currently expected that this will result in a constructive
obligation of around \u00a3100m being recognised as a past service charge in the income statement in 2026.
On 16 February 2026, the Group repaid \u20ac750m of borrowings on their contractual maturity date which, along with the associated cross currency
interest rate swaps, resulted in a cash outflow of \u00a3677m.
As part of the Group\u2019s legal entity review programme, the Company sold its investment in Rolls-Royce Overseas Holdings Limited to Rolls-Royce
US Holdings Limited (a subsidiary of Rolls-Royce Holdings plc) on 1 January 2026 for \u00a34.4bn. The associated assets and liabilities were part of the
disposal group held for distribution to owners on 31 December 2025. To facilitate the transaction, the Company issued two loans on 1 January
2026; these being \u00a31.9bn to its ultimate parent company Rolls-Royce Holdings plc; and \u00a32.5bn to Rolls-Royce US Holdings Limited.
The Group has taken the latest legal position in relation to any ongoing legal proceedings and reflected these in the 2025 results as appropriate.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-684": { "value": "
2 Segmental analysis
The analysis by segment is presented in accordance with IFRS 8 Operating Segments, on the basis of those segments whose operating results are
regularly reviewed by the Board (who acts as the Chief Operating Decision Maker as defined by IFRS 8 Operating Segments). The Group\u2019s three
divisions are set out below.
Civil Aerospace development, manufacture, marketing and sales of commercial aero engines and aftermarket services
Defence development, manufacture, marketing and sales of military aero engines, naval engines, submarine nuclear power plants and
aftermarket services
Power Systems development, manufacture, marketing and sales of integrated solutions for onsite power and propulsors
On 4 March 2025, an investment was received by Rolls-Royce SMR Limited from \u010cEZ Group (CEZ), as a result the Group relinquished control of
Rolls-Royce SMR Limited and the subsidiary was deconsolidated (see note 27 for further details).
Following the decision in 2024 to exit the Group\u2019s advanced air mobility activities and the deconsolidation of Rolls-Royce SMR Limited on 4 March
2025 (see note 27) the New Markets operating segment that was reported at 31 December 2024 is no longer regularly reviewed by the Board as
a basis for making decisions about the allocation of resources to the business or to assess its performance. In line with IFRS 8 Operating Segments,
New Markets is no longer considered to meet the definition of an operating segment.
Revenue and expenses from new electrical power solutions and the Group\u2019s share of the financial results of Rolls-Royce SMR Limited have been
included in \u2018All Other Businesses\u2019, which also includes the trading results of the UK Civil Nuclear business. The segmental analysis for 2024 has
been restated to reflect the 2025 assessment of operating segments.
Underlying results
The Group presents the financial performance of the businesses in accordance with IFRS 8 Operating Segments and consistently with the basis
on which performance is communicated to the Board each month.
Underlying results are presented by recording all relevant revenue and cost of sales transactions at the average exchange rate achieved on
effective settled derivative contracts for the Company and its subsidiaries in the period that the cash flow occurs. The impact of the revaluation
of monetary assets and liabilities (other than lease liabilities) using the exchange rate that is expected to be achieved by the use of the effective
hedge book is recorded within underlying cost of sales. Underlying financing excludes the impact of revaluing monetary assets and liabilities to
period end exchange rates. Lease liabilities are not revalued to reflect the expected exchange rates due to their multi-year remaining term, the
Directors believe that doing so would not be the most appropriate basis to measure the in-year performance. Transactions between segments are
presented on the same basis as underlying results and eliminated on consolidation. Unrealised fair value gains/(losses) on foreign exchange
contracts, which are recognised as they arise in the statutory results, are excluded from underlying results. To the extent that the previously
forecast transactions are no longer expected to occur, an appropriate portion of the unrealised fair value gain/(loss) on foreign exchange
contracts is recorded immediately in the underlying results.
Amounts receivable/(payable) on interest rate swaps which are not designated as hedge relationships for accounting purposes are reclassified
from fair value movement on a statutory basis to interest receivable/(payable) on an underlying basis, as if they were in an effective hedge
relationship.
In the year to 31 December 2025, the Group was a net seller of USD at an achieved exchange rate GBP:USD of 1.44 (2024: 1.48) based on the USD
hedge book.
In 2020, the Group experienced a significant decline in its medium-term outlook and consequently a significant deterioration to its forecast net
USD cash inflows. The Group took action to reduce the size of the USD hedge book by $11.8bn across 2020-2026 to reflect the fact that, at that
time, future operating cash flows were no longer forecast to materialise. An underlying charge of \u00a31.7bn was recognised within the underlying
finance costs in 2020 and the associated cash settlement costs occur over the period 2020-2026. The derivatives relating to this underlying
charge have been subsequently excluded from the hedge book and therefore are also excluded from the calculation of the average exchange
rate achieved in the current and future periods.
Underlying performance also excludes the following:
\u2013 the effect of acquisition accounting and business disposals;
\u2013 impairment of goodwill, other non-current and current assets where the reasons for the impairment are outside of normal operating activities;
\u2013 exceptional items; and
\u2013 certain other items which are market driven and outside of the control of management.
Subsequent changes in items excluded from underlying performance in a prior period will also be excluded from underlying performance. All
other changes will be recognised within underlying performance.
Acquisition accounting, business disposals and impairment
The Group exclude these from underlying results so that the current year and comparative results are directly comparable.
Exceptional items
Items are classified as exceptional where the Directors believe that presentation of the results in this way is useful in providing an understanding
of the Group's financial performance. Exceptional items are identified by virtue of their size, nature or incidence.
In determining whether an event or transaction is exceptional, the Directors consider quantitative as well as qualitative factors such as the
frequency or predictability of occurrence. Examples of exceptional items include one-time costs and charges in respect of aerospace programmes,
costs of exceptional restructuring and transformation programmes and one-time past service charges and credits on post-retirement schemes.
Exceptional items are not allocated to segments and may not be comparable to similarly titled measures used by other companies.
Other items The financing component of the defined benefit pension scheme cost is determined by market conditions and has therefore been included as a reconciling difference between underlying and statutory performance. The tax effects of adjustments above are excluded from the underlying tax charge. Changes in tax rates are excluded from the underlying tax charge. In addition, changes in the amount of recoverable deferred tax recognised are excluded from the underlying results to the extent that their recognition or derecognition was not originally recorded within the underlying results. The following analysis sets out the results of the Group\u2019s divisions on the basis described above and also includes a reconciliation of the underlying results to those reported in the consolidated income statement.
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems
Businesses
1
segment
2
Underlying
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Underlying revenue from sale of original equipment
3,21
7
2,228
3,433
13
\u2013
8,89
1
Underlying revenue from aftermarket services
7,165
2,544
1,459
\u2013
\u2013
11,168
Total underlying revenue
10,38
2
4,772
4,892
13
\u2013
20,0
59
Gross profit/(loss)
2,6
75
93
3
1,52
2
(2)
(2)
5,1
26
Commercial and administrative costs
(432)
(201)
(51
8
)
(5)
(67)
(1,22
3
)
Research and development costs
(267)
(45)
(16
4
)
(21)
\u2013
(
497
)
Share of results of joint ventures and associates
154
2
1
2
(112)
\u2013
5
6
Underlying operating profit/(loss)
2,1
30
68
9
85
2
(140)
(69)
3,4
62
Year ended 31 December 202
4
Underlying revenue from sale of original equipment
3,105
1,943
2,942
15
\u2013
8,005
Underlying revenue from aftermarket services
5,935
2,579
1,329
\u2013
\u2013
9,843
Total underlying revenue
9,040
4,522
4,271
15
\u2013
17,848
Gross
profit/(loss)
1,990
908
1,199
(3)
(3)
4,091
Commercial and administrative costs
(396)
(212)
(483)
(41)
(65)
(1,197)
Research and development costs
(252)
(55)
(165)
(133)
\u2013
(605)
Share of results of joint ventures and associates
163
3
9
\u2013
\u2013
175
U
nderlying
operating
profit/(loss)
1,505
644
560
(177)
(68)
2,464
1 Following the decision to exit the Group\u2019s advanced air mobility activities in 2024 and the relinquishment of control of Rolls-Royce SMR Limited on 4 March 2025 (see note 27) the results of those activities in both 2024 and 2025 have been reported within All Other Businesses. The Group\u2019s income statement for 2025 includes two months of the results of Rolls-Royce SMR Limited as a subsidiary and ten months of the Group\u2019s share of the results of the equity-accounted investment 2 Corporate and Inter-segment consists of costs that are not attributable to a specific segment and consolidation adjustments Reconciliation to statutory results
Underlying
adjustments and Group
Total adjustments to statutory
underlying foreign exchange results
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Revenue from sale of original equipment
8,
891
212
9,
103
Revenue from aftermarket services
11,168 936 12,104
Total revenue
20,059 1,148 21,207
Gross profit
5,126 1,049 6,175
Commercial and administrative costs
(1,
223
)
(
45
)
(1,
268
)
Research and development costs
(497) 2 (495)
Share of results of joint venture and associates
56 \u2013 56
Operating
profit
3,462 1,006 4,468
Gain
arising on the disposal of
businesses
\u2013 809 809
Profit before financing and taxation
3,
462
1,
815
5,
277
Net financing
(110) 1,768 1,658
Profit before taxation
3,352 3,583 6,935
Taxation
(
593
)
(
506
)
(1,
099
)
Profit for the year
2,759 3,077 5,836
Attributable to:
Ordinary shareholders
2,
764
3,
077
5,
841
NCI
(5) \u2013 (5)
Year
ended 31 December 2024
Revenue from sale of original equipment
8,005
384
8,389
Revenue from aftermarket services
9,843
677
10,520
Total
revenue
17,848
1,061
18,909
Gross
profit
4,091
130
4,221
Commercial and administrative costs
(1,197)
(87)
(1,284)
Research and development costs
(605)
402
(203)
Share of results of joint venture and associates
175
(3)
172
Operating
profit
2,464
442
2,906
Gain arising on the disposal of business
\u2013
16
16
Profit before financing and taxation
2,464
458
2,922
Net financing
(171)
(517)
(688)
Profit/(loss)
before taxation
2,293
(59)
2,234
Taxation
(282)
532
250
Profit for the year
2,011
473
2,484
Attributable to:
Ordinary shareholders
2,048
473
2,521
NCI
(37)
\u2013
(37)
Disaggregation of revenue from contracts with customers Analysis by type and basis of recognition
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems Businesses segment Underlying
Year ended 31 December
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Original equipment recognised at a point in time
3,
217
409
3,368
\u2013
\u2013
6,
994
Original equipment recognised over time
\u2013
1,819
65
13
\u2013
1,897
Aftermarket services recognised at a point in time
1,617
735
1,348
\u2013
\u2013
3,700
Aftermarket services recognised over time
5,469
1,809
111
\u2013
\u2013
7,389
Total underlying customer contract revenue
10,
303
4,772
4,892
13
\u2013
19,
980
Other underlying revenue
1
79
\u2013
\u2013
\u2013
\u2013
79
Total underlying
revenue
2
10,
382
4,772
4,892
13
\u2013
20,
059
Year ended 31 December 202
4
Original equipment recognised at a point in time
3,105
562
2,871
3
\u2013
6,541
Original equipment recognised over time
\u2013
1,381
71
12
\u2013
1,464
Aftermarket
services recognised at a point in time
1,258
918
1,231
\u2013
\u2013
3,407
Aftermarket services recognised over time
4,594
1,661
98
\u2013
\u2013
6,353
Total underlying customer contract revenue
8,957
4,522
4,271
1
5
\u2013
17,765
Other underlying revenue
1
83
\u2013
\u2013
\u2013
\u2013
83
Total underlying revenue
2
9,040
4,522
4,271
1
5
\u2013
17,848
1 Includes leasing revenue 2 Includes \u00a3259m of revenue recognised in the year relating to performance obligations satisfied in previous years, of which \u00a3253m related to Civil Aerospace long term contracts (2024: \u00a3317m , of which \u00a3311m relates to Civil Aerospace long term contracts) 1 During the year to 31 December 2025, revenue recognised within Civil Aerospace, Defence and Power Systems of \u00a32,034m (2024: \u00a31,915m) was received from a single customer
Underlying
adjustments and
adjustments to Group statutory
Total underlying foreign exchange
results
1
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
202
5
Original equipment recognised at a point in time
6,
994
211
7,
205
Original equipment recognised over time
1,897
1
1,898
Aftermarket services recognised at a point in time
3,700
123
3,823
Aftermarket
services recognised over time
7,389
806
8,195
Total customer contract revenue
19,
980
1,141
21,
121
Other revenue
79
7
86
Total revenue
20,
059
1,148
21,
207
Year ended 31 December 202
4
Original equipment recognised at a point in
time
6,541
384
6,925
Original equipment recognised over time
1,464
\u2013
1,464
Aftermarket services recognised at a point in time
3,407
163
3,570
Aftermarket services recognised over time
6,353
501
6,854
Total customer contract revenue
17,765
1,048
18,813
Other revenue
83
13
96
Total revenue
17,848
1,061
18,909
Analysis by geographical destination The Group\u2019s revenue by destination of the ultimate operator is as follows:
202
5
202
4
\u00a3m
\u00a3m
United Kingdom
3,103
2,642
Germany
1,
225
1,048
T\u00fcrkiye
442
307
Spain
410
282
Switzerland
362
440
Italy
357
318
France
327
332
Ireland
202
324
Netherlands
199
130
Israel
139
73
Norway
132
96
Poland
107
141
Sweden
95
28
Portugal
82
121
Latvia
54
16
Rest of Europe
192
273
Europe
7,
428
6,571
United
States
5,802
5,477
Canada
529
462
North America
6,331
5,939
South America
300
336
Central America
90
169
United Arab Emirates
543
255
Saudi Arabia
514
428
Qatar
374
196
Rest of Middle East
243
301
Middle East
1,674
1,180
China
1,500
1,400
Japan
733
634
Singapore
558
506
South Korea
404
359
Indonesia
199
125
Philippines
166
130
India
152
147
Taiwan
148
211
Thailand
140
138
Rest of Asia
380
243
Asia
4,380
3,893
Africa
587
406
Australasia
417
415
21,
207
18,909
Order backlog Contracted consideration, translated at the estimated long-term exchange rates, that is expected to be recognised as revenue when performance obligations are satisfied in the future (referred to as order backlog) is as follows:
2025
2024
Within After five Within After five
five years years Total five years years Total
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Civil Aerospace
29.2
35.4
64.6
29.7
30.2
59.9
Defence
14.1
3.3
17.4
14.0
3.4
17.4
Power Systems
5.9
0.2
6.1
4.7
0.1
4.8
All Other Businesses
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
49.2
38.9
88.1
48.4
33.7
82.1
The parties to these contracts have approved the contract and customers do not have a unilateral enforceable right to terminate the contract without compensation. The Group excludes Civil Aerospace OE orders (for deliveries beyond the next seven to 12 months) that customers have placed where they retain a right to cancel. The Group's expectation based on historical experience is that these orders will be fulfilled. Civil Aerospace order backlog has increased by \u00a34.7bn, this is due to new aftermarket contracts and contract extensions. Other drivers include commercial optimisation and revenue escalation with major customers. The Civil order backlog will be recognised over the contract term. The \u00a31.3bn increase within Power Systems is mainly driven by orders for power generation (from the growth in data centres) and governmental, which will be mainly recognised over the next three years.
202
5
202
4
Profit/(loss) Profit/(loss)
before Net before Net
Revenue financing financing Taxation Revenue financing financing Taxation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Underlying performance
20,
059
3,
462
(
110
)
(
593
)
17,848
2,464
(171)
(282)
Impact of foreign exchange differences as a
result of hedging activities on trading
transactions
1
A
1,148
797
499
(328)
1,061
197
190
(97)
Unrealised fair value changes on derivative
contracts held for trading
2
A
\u2013
\u2013
1,328
(333)
\u2013
(6)
(649)
164
Unrealised fair value change to derivative
contracts held for financing
3
A
\u2013
\u2013
(4)
1
\u2013
\u2013
40
(10)
Exceptional programme credits
4
B
\u2013
83
\u2013
(21)
\u2013
\u2013
\u2013
\u2013
Exceptional transformation and restructuring
charges
5
B
\u2013
(44)
\u2013
4
\u2013
(234)
(11)
65
Impairment reversals
6
C
\u2013
179
\u2013
(
44
)
\u2013
547
\u2013
(157)
Effect of acquisition accounting
7
C
\u2013
(
16
)
\u2013
3
\u2013
(45)
\u2013
11
Other
8
D
\u2013
7
(
55
)
12
\u2013
(17)
(87)
27
Gain arising on the disposals of businesses
9
C
\u2013
809
\u2013
(
28
)
\u2013
16
\u2013
(6)
Impact of tax rate change
10
D
\u2013
\u2013
\u2013
(58)
\u2013
\u2013
\u2013
10
Recognition of deferred tax assets
11
D
\u2013
\u2013
\u2013
286
\u2013
\u2013
\u2013
525
Total underlying
adjustments
1,148
1,
815
1,
768
(
506
)
1,061
458
(517)
532
Statutory performance per consolidated
income statement
21,
207
5,
277
1,
658
(1,
099
)
18,909
2,922
(688)
250
A \u2013 FX, B \u2013 Exceptional, C \u2013 M&A and impairment, D \u2013 Other 1 The impact of measuring revenues and costs at the average exchange rate during the year and the impact of valuation of assets and liabilities using the year end exchange rate rather than the achieved rate or the exchange rate that is expected to be achieved by the use of the hedge book increased statutory revenues by \u00a31,148m (2024: \u00a31,061m) and increased profit before financing and taxation by \u00a3797m (2024: \u00a3197m). Underlying financing excludes the impact of revaluing monetary assets and liabilities at the year end exchange rate 2 The underlying results exclude the fair value changes on derivative contracts held for trading. These fair value changes are subsequently recognised in the underlying results when the contracts are settled 3 Includes net fair value loss of \u00a34m (2024: gain of \u00a340m) on any interest rate swaps not designated into hedging relationships for accounting purposes 4 During 2025, contract loss provisions have reduced by \u00a383m (2024: \u00a3nil) as a result of amounts released following contractual renegotiations where the original charge was treated as non- underlying 5 In 2023, the Group announced a major multi-year transformation programme (set out in the 2022 Annual Report). During 2025, the Group incurred charges of \u00a344m related to this programme (2024: \u00a3234m). The charges comprise of advisory fees and transformation office costs \u00a352m (2024: \u00a337m) and severance costs \u00a33m (2024: \u00a368m). These were partly offset by an \u00a311m reversal of previously recognised costs for impairments, write-offs and closure costs related to the exit of the Group\u2019s advanced air mobility activities (2024: \u00a3129m) 6 The Group has assessed the carrying value of its assets and reviewed them for potential impairment and impairment reversal triggers. During 2025, there was an impairment reversal of intangible assets of \u00a310m (2024 \u00a3413m), property plant and equipment assets of \u00a346m (2024: \u00a3nil), right of use assets of \u00a3129m (2024: \u00a3nil) and contract assets of \u00a3nil (2024: \u00a3132m). See notes 8, 9, 10 and 11 for further details. Of the \u00a3185m reversed, \u00a3179m (2024: \u00a3132m) was included within cost of sales, and \u00a36m has been included with research and development costs, see note 3 for further details 7 The effect of acquisition accounting includes the amortisation of intangible assets arising on previous acquisitions 8 Includes interest received of \u00a352m (2024: \u00a378m) on interest rate swaps which are not designated into hedge relationships for statutory purposes from interest payable on an underlying basis to fair value movement and \u00a36m (2024: \u00a313m charge) past-service credit on defined benefit schemes 9 An exceptional gain on disposal was recognised as a result of the deconsolidation of Rolls-Royce SMR Limited and the sale of the naval propulsors business during the year. Further details can be found in note 27 10 Represents the impact to the income statement of the gradual reduction in the German Federal corporate income tax rate from 15% to 10%, in 2024 this represented the reduction in the tax rate on authorised surplus pension charges from 35% to 25% in 2024 11 During 2025, the Group recognised deferred tax assets of \u00a3563m (2024: \u00a31,033m) relating to UK tax losses of which \u00a3277m (2024: \u00a3508m) is included in underlying performance and \u00a3286m (2024: \u00a3525m) in non-underlying Balance sheet analysis
Total
Power reportable
Civil Aerospace Defence Systems segments
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Segment assets
16,
613
1,0
2
3
116
17,
752
Interests in joint ventures and associates
102
9
\u2013
111
Segment liabilities
(22,
610
)
(1,
20
8
)
(
1
41
)
(2
3,959
)
Net
liabilities
(5,
895
)
(
1
76
)
(
25
)
(6,
096
)
Investment in intangible assets, property, plant and equipment, right-of-use
assets and joint ventures and associates
766
185
219
1,
170
Depreciation, amortisation and impairment
493
73
167
733
Year ended 31 December 2024
Segment
assets
19,303
3,495
3,998
26,
796
Interests in joint ventures and associates
550
9
33
592
Segment liabilities
(26,611)
(3,315)
(1,964)
(3
1
,
890
)
Net
(liabilities)/assets
(6,758)
189
2,067
(4,5
02
)
Investment in intangible assets, property, plant and equipment, right-of-use
assets and joint ventures and associates
650
164
198
1,0
12
Depreciation, amortisation and impairment
210
85
199
549
Reconciliation to the balance sheet
202
5
202
4
\u00a3m
\u00a3m
S
egment assets (excluding
assets
held for sale
and distribution
)
17,
752
26,796
Interests in joint ventures and associates
111
592
All other businesses
674
122
Corporate and Inter
-
segment
684
(1,889)
Assets held for sale
and distribution
12,
058
153
Cash and cash
equivalents
5,718
5,574
Fair value of swaps hedging fixed rate borrowings
\u2013
154
Deferred and income tax assets
3,
025
3,731
Post
-
retirement scheme surplus
286
790
Total assets
40,
308
36,023
S
egment liabilities (excluding
liabilities associated with assets
held
f
or sale
and distribution
)
(23,959)
(31,890)
All other businesses
(6)
(199)
Corporate and Inter
-
segment
1,573
2,227
Liabilities associated with assets held for sale
and distribution
(8,
9
36
)
(100)
Borrowings and lease liabilities
(3,
757
)
(5,132)
Fair value of swaps hedging fixed rate borrowings
(77)
(121)
Deferred and income tax liabilities
(
139
)
(348)
Post
-
retirement scheme deficits
(
30
)
(981)
Total liabilities
(35,
331
)
(36,544)
Net assets
/(liabilities)
4,
977
(521)
At 31 December 2025, \u00a312,043m of assets and \u00a38,917m of liabilities were reclassified to held for distribution, see note 27 for further details. The carrying amounts of the Group\u2019s non-current assets including investments but excluding financial instruments, deferred tax assets and post-retirement scheme surpluses/(deficits), by the geographical area in which the assets are located, are as follows:
202
5
202
4
\u00a3m
\u00a3m
United Kingdom
5,
766
4,968
Germany
15
2,326
United States
\u2013
1,481
Other
67
709
5,
848
9,484
At 31 December 2025, \u00a34,811m of non-current assets were reclassified to held for distribution, see note 27 for further details.", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-21": { "value": "The Group\u2019s three divisions are set out below. Civil Aerospace development, manufacture, marketing and sales of commercial aero engines and aftermarket services Defence development, manufacture, marketing and sales of military aero engines, naval engines, submarine nuclear power plants and aftermarket services Power Systems development, manufacture, marketing and sales of integrated solutions for onsite power and propulsors", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-689": { "value": "
Other items
The financing component of the defined benefit pension scheme cost is determined by market conditions and has therefore been included as a
reconciling difference between underlying and statutory performance.
The tax effects of adjustments above are excluded from the underlying tax charge. Changes in tax rates are excluded from the underlying tax
charge. In addition, changes in the amount of recoverable deferred tax recognised are excluded from the underlying results to the extent that
their recognition or derecognition was not originally recorded within the underlying results.
The following analysis sets out the results of the Group\u2019s divisions on the basis described above and also includes a reconciliation of the underlying
results to those reported in the consolidated income statement.
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems
Businesses
1
segment
2
Underlying
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Underlying revenue from sale of original equipment
3,21
7
2,228
3,433
13
\u2013
8,89
1
Underlying revenue from aftermarket services
7,165
2,544
1,459
\u2013
\u2013
11,168
Total underlying revenue
10,38
2
4,772
4,892
13
\u2013
20,0
59
Gross profit/(loss)
2,6
75
93
3
1,52
2
(2)
(2)
5,1
26
Commercial and administrative costs
(432)
(201)
(51
8
)
(5)
(67)
(1,22
3
)
Research and development costs
(267)
(45)
(16
4
)
(21)
\u2013
(
497
)
Share of results of joint ventures and associates
154
2
1
2
(112)
\u2013
5
6
Underlying operating profit/(loss)
2,1
30
68
9
85
2
(140)
(69)
3,4
62
Year ended 31 December 202
4
Underlying revenue from sale of original equipment
3,105
1,943
2,942
15
\u2013
8,005
Underlying revenue from aftermarket services
5,935
2,579
1,329
\u2013
\u2013
9,843
Total underlying revenue
9,040
4,522
4,271
15
\u2013
17,848
Gross
profit/(loss)
1,990
908
1,199
(3)
(3)
4,091
Commercial and administrative costs
(396)
(212)
(483)
(41)
(65)
(1,197)
Research and development costs
(252)
(55)
(165)
(133)
\u2013
(605)
Share of results of joint ventures and associates
163
3
9
\u2013
\u2013
175
U
nderlying
operating
profit/(loss)
1,505
644
560
(177)
(68)
2,464
1 Following the decision to exit the Group\u2019s advanced air mobility activities in 2024 and the relinquishment of control of Rolls-Royce SMR Limited on 4 March 2025 (see note 27) the results of
those activities in both 2024 and 2025 have been reported within All Other Businesses. The Group\u2019s income statement for 2025 includes two months of the results of Rolls-Royce SMR Limited
as a subsidiary and ten months of the Group\u2019s share of the results of the equity-accounted investment
2 Corporate and Inter-segment consists of costs that are not attributable to a specific segment and consolidation adjustments
Reconciliation to statutory results
Underlying
adjustments and Group
Total adjustments to statutory
underlying foreign exchange results
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Revenue from sale of original equipment
8,
891
212
9,
103
Revenue from aftermarket services
11,168 936 12,104
Total revenue
20,059 1,148 21,207
Gross profit
5,126 1,049 6,175
Commercial and administrative costs
(1,
223
)
(
45
)
(1,
268
)
Research and development costs
(497) 2 (495)
Share of results of joint venture and associates
56 \u2013 56
Operating
profit
3,462 1,006 4,468
Gain
arising on the disposal of
businesses
\u2013 809 809
Profit before financing and taxation
3,
462
1,
815
5,
277
Net financing
(110) 1,768 1,658
Profit before taxation
3,352 3,583 6,935
Taxation
(
593
)
(
506
)
(1,
099
)
Profit for the year
2,759 3,077 5,836
Attributable to:
Ordinary shareholders
2,
764
3,
077
5,
841
NCI
(5) \u2013 (5)
Year
ended 31 December 2024
Revenue from sale of original equipment
8,005
384
8,389
Revenue from aftermarket services
9,843
677
10,520
Total
revenue
17,848
1,061
18,909
Gross
profit
4,091
130
4,221
Commercial and administrative costs
(1,197)
(87)
(1,284)
Research and development costs
(605)
402
(203)
Share of results of joint venture and associates
175
(3)
172
Operating
profit
2,464
442
2,906
Gain arising on the disposal of business
\u2013
16
16
Profit before financing and taxation
2,464
458
2,922
Net financing
(171)
(517)
(688)
Profit/(loss)
before taxation
2,293
(59)
2,234
Taxation
(282)
532
250
Profit for the year
2,011
473
2,484
Attributable to:
Ordinary shareholders
2,048
473
2,521
NCI
(37)
\u2013
(37)
3 Research and development
202
5
202
4
\u00a3m
\u00a3m
Gross research and development
expenditure
(1,
417
)
(1,475)
Contributions and fees
1
814
700
Net expenditure
(
603
)
(775)
Capitalised as intangible assets
2
2
11
263
Amortisation and impairment of capitalised costs
3, 4
(103)
309
Net
amount
recognised in the income statement
(
495
)
(203)
Underlying adjustments
4
(2)
(402)
Net underlying cost recognised in the income statement
(
497
)
(605)
1 Includes \u00a3795m (2024: \u00a3667m) of government funding
2 R&D capitalised as intangibles is presented net of \u00a311m (2024: \u00a3nil) Government funding received
3 See notes 8 and 9 for analysis of amortisation and impairment
4 Underlying adjustments include impact of acquisition accounting, foreign exchange and an impairment reversal of \u00a36m (2024: \u00a3413m). Further details can be found in notes 2, 8 and 9
6 Auditors\u2019 remuneration
202
5
202
4
\u00a3m
\u00a3m
Fees
payable to the Company\u2019s auditors for the audit of the Company\u2019s Annual Financial Statements
6.2
7.1
Fees payable to the Company\u2019s auditor and its associates for the audit of the Company\u2019s subsidiaries
pursuant to legislation
5.5
5.3
Total
fees payable for audit services
11.
7
12.4
Fees payable to the Company\u2019s auditor and its associates for other services: Audit related assurance services 1 0.7 0.7 Other assurance services 2 0.1 0.1 Total fees payable to the Company\u2019s auditor and its associates 3 12.5 13.2 Fees payable in respect of the Group\u2019s pension schemes: Audit 0.1 0.1 1 This includes \u00a30.7m (2024: \u00a30.7m) for the review of the half-year report 2 This includes \u00a30.1m (2024: \u00a30.1m) in respect of agreed upon procedures in respect of levies payable and \u00a3nil for sustainability assurance work (2024: \u00a3nil) 3 Audit fees for overseas entities are reported at the average exchange rate for the year 7 Employee information
202
5
202
4
Number
1
Number
1
United Kingdom
22,100
21,900
Germany
9,900
10,000
United
States
5,300
5,300
Italy
1,000
900
Singapore
700
700
Canada
700
700
India
700
600
China
500
500
Israel
300
300
France
200
200
Rest of world
1,200
1,300
Monthly average number of employees
42,600
42,400
Civil
Aerospace
19,400
18,700
Defence
12,800
12,500
Power Systems
10,000
9,900
All Other Businesses
2
200
1,200
Corporate
3
200
100
Monthly average number of employees
42,600
42,400
202
5
202
4
Total
Total
\u00a3m
\u00a3m
Wages, salaries and benefits
3,107
3,056
Social security costs
43
7
369
Share
-
based payments (note 24)
10
4
136
Pensions and other post
-
retirement scheme benefits (note 22)
403
3
87
Group employment costs
4
4,051
3,948
1 Employee numbers have been rounded to the nearest hundred 2 Following the decision to exit the Group\u2019s advanced air mobility activities in 2024 and the relinquishment of control of Rolls-Royce SMR Limited on 4 March 2025 the results of those activities in both 2024 and 2025 have been reported within All Other Business. The employee information above contains two months of Rolls-Royce SMR Limited employee information, following the relinquishment of control of Rolls-Royce SMR Limited in March 2025 the employee information of Rolls-Royce SMR Limited was not included within the monthly average number of employees for the Group 3 Corporate consists of employees who do not provide a shared service to the segments. Where corporate functions provide such a service, employees have been allocated to the segments on an appropriate basis 4 Remuneration of key management personnel is shown in note 26 21 Provisions for liabilities and charges
At 1 Charged to Transfers to At 31
January income held for Exchange December
2025
statement
1
Reversed Utilised distribution differences 2025
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Onerous contracts
1,433
433
(
694
)
(
187
)
(72)
1
914
Warranty and guarantees
354
179
(25)
(93)
(404)
7
18
Trent 1000 wastage costs
36
\u2013
\u2013
(3
5
)
\u2013
(1)
\u2013
Employer liability claims
25
1
(4)
(2)
(9)
\u2013
11
Transformation and restructuring
62
10
(16)
(35)
(18)
1
4
Tax related interest and penalties
16
2
(1)
\u2013
(8)
\u2013
9
Claims and litigation
25
30
(12)
(7)
(18)
\u2013
18
Other
43
2
2
(3)
(7)
(
33
)
(1)
21
1,994
677
(
755
)
(
366
)
(56
2
)
7
99
5
Current liabilities
589
2
40
Non
-
current liabilities
1,405
755
1 The charge to the income statement within net financing includes \u00a327m (2024: \u00a347m) as a result of the unwinding of the discounting of provisions previously recognised and \u00a316m (2024: \u00a336m) as a result of changes in discount rates during the year Onerous contract Onerous contract provisions are recorded when the direct costs to fulfil a contract are assessed as being greater than the expected recoverable amount. Onerous contract provisions are measured on a fully costed basis. During the year, additional contract losses for the Group of \u00a3433m (2024: \u00a3558m) have been recognised. These are mainly a result of increases in the estimate of future LTSA costs due to prolonged supply chain challenges and inflationary cost increases. Contract losses of \u00a3694m (2024: \u00a3374m) previously recognised have been reversed following improvements to the forecast revenue, cost estimates and time on wing across various engine programmes as a result of operational improvements, contractual renegotiations and extensions. During the year \u00a3187m (2024: \u00a3218m) of the provisions has been utilised. The Group continues to monitor onerous contract provisions for changes in the market and revises the provision as required. The value of the remaining onerous contract provisions reflect, in each case, the single most likely outcome. The provisions are expected to be utilised over the term of the customer contracts, typically within eight to 15 years. IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires a company to recognise any impairment loss that has occurred on assets used in fulfilling the contract before recognising a separate provision for an onerous contract. No impairments were required for any of the assets solely used in the fulfilment of onerous contracts. At 31 December 2025, \u00a372m of the onerous contract provision was transferred to assets held for distribution. See note 27 for further details. Warranty and guarantees Provisions for warranty and guarantees relate to products sold and are calculated based on an assessment of the remediation costs related to future claims based on past experience. The provision generally covers a period of up to three years. At 31 December 2025, \u00a3404m of the warranties and guarantees provision was transferred to assets held for distribution, see note 27 for further details. Trent 1000 wastage costs During the year, the Group has utilised the remaining \u00a335m (2024: \u00a382m) of the Trent 1000 wastage costs provision. This represents customer disruption costs and remediation shop visit costs. Employer liability claims The provision relating to employer healthcare liability claims is as a result of an historical insolvency of the previous provider and is expected to be utilised over the next 30 years. At 31 December 2025, \u00a39m of the employer liability provision was transferred to assets held for distribution, see note 27 for further details. Transformation and restructuring The Group announced a major multi-year transformation programme in 2023. During the year \u00a335m (2024: \u00a335m) was utilised and \u00a316m reversed (2024: \u00a312m). As part of these plans a further \u00a33m (2024: \u00a32m) has been charged directly to the income statement that had not been provided for. The remaining provision is expected to be utilised by 31 December 2027. At 31 December 2025, \u00a318m of the transformation and restructuring provision was transferred to assets held for distribution, see note 27 for further details. Tax related interest and penalties Provisions for tax related interest and penalties relate to uncertain tax positions in some of the jurisdictions in which the Group operates. Utilisation of the provisions will depend on the timing of resolution of the issues with the relevant tax authorities. At 31 December 2025, \u00a38m of the tax related interest and penalties provision was transferred to assets held for distribution, see note 27 for further details. Claims and litigation Provisions for claims and litigation represent ongoing matters where the outcome for the Group may be unfavourable. The balance also includes the best estimate of any retained exposure by the Group\u2019s captive insurance company for any claims that have been incurred but not yet reported to the Group, as that entity retains a portion of the exposures it insures on behalf of the remainder of the Group. Such exposures include policies for aviation claims, employer liabilities and healthcare claims. Significant delays can occur in the notification and settlement of claims, and judgement is involved in assessing outstanding liabilities, the ultimate cost and timing of which cannot be known with certainty at the balance sheet date. The insurance provisions are based on information currently available, however, it is inherent in the nature of the business that ultimate liabilities may vary if the frequency or severity of claims differs from estimated. At 31 December 2025, \u00a318m of the claims and litigation provision was transferred to assets held for distribution, see note 27 for further details. Other Other items are individually immaterial. The value of any remaining provisions reflects the single most likely outcome in each case. At 31 December 2025, \u00a333m of other provisions were transferred to assets held for distribution, see note 27 for further details. There were no provisions held for customer financing at 31 December 2025 (2024: \u00a3nil). Provisions are held to cover potential calls on guarantees provided over asset values and/or financing when it is considered probable by management that the exposure will crystallise. The Group discloses contingent liabilities for customer financing arrangements where the payment is not probable. See note 25 for further details. 22 Post-retirement benefits The Group operates a number of defined benefit and defined contribution schemes: \u2013 the UK defined benefit scheme is funded, with the assets held in a separate UK trust. The scheme closed to future accrual on 31 December 2020 for all active members and there are no new defined benefit accruals in the UK scheme. In August 2025 the scheme completed a Buy- in, with the purchase of a bulk insurance annuity policy, with the effect that the majority of scheme liabilities are now covered by this policy. For further details see below; \u2013 the Group also operates a large trust-based defined contribution scheme for current employees in the UK (Rolls-Royce Retirement Savings Trust). Pension contributions are generally paid as a salary sacrifice under which employees agree to a reduction in gross contractual pay in return for the Group making additional pension contributions on their behalf. As a result, there is a decrease in wages and salaries and a corresponding increase in pension costs of \u00a3106m (2024: \u00a388m) in the year; and \u2013 overseas defined benefit schemes are a mixture of funded and unfunded plans and provide benefits in line with local practice. Additionally, in the US, and to a lesser extent in some other countries, the Group\u2019s employment practices include the provision of healthcare and life insurance benefits for retired employees. These healthcare schemes are unfunded. The valuations of the defined benefit schemes are based on the results of the most recent funding valuation from 31 March 2023, where relevant, updated by the scheme actuaries to 31 December 2025. Virgin Media A UK High Court legal ruling that took place in June 2023 between Virgin Media Limited and NTL Pension Trustees II Limited, found that certain historic rule amendments were invalid if they were not accompanied by actuarial certifications. The ruling was subject to an appeal with a judgement delivered on 25 July 2024. The Court of Appeal unanimously upheld the decision of the High Court and concluded that the pre-April 2013 conditions applied to amendments to both future and past service. Whilst this ruling was in respect of another scheme, its relevance and hence the potential impact of this to the RRUKPF scheme, and other UK schemes was unclear. On 5 June 2025 the Government announced that in light of this uncertainty, it would introduce legislation to give potentially affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic rule amendments met the necessary standards. As a result of this Government intervention the Group does not anticipate any scheme amendments or additional liabilities. Buy-in of Rolls-Royce UK Pension Fund In August 2025, the Trustee of the Rolls-Royce UK Pension Fund entered into a Buy-in transaction with Pension Insurance Corporation plc (PIC), whereby the Fund purchased a bulk purchase annuity policy in exchange for consideration of \u00a34.3bn. This was paid from the Fund's existing assets, with no additional funding required by the Group. This transaction resulted in substantially all the benefits and liabilities under the Fund being insured. The Buy-in was undertaken in anticipation of entering into a Buy-out during 2026, upon which the liabilities and management of bought out benefits will be transferred to PIC. A charge of \u00a3517m has been recognised within the line \u2018Actuarial gains/(losses) recognised in OCI\u2019 in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2025 comprising around \u00a3450m relating to the impact of the Buy-in. Following the transaction, the bulk purchase annuity policy has been treated as an asset of the Fund and has been valued on the same basis as the liabilities to which it relates, as until a Buy-out takes place, the legal responsibility to pay relevant benefits remains with the Trustee. The Company and the Trustee of the UK pension scheme agreed on 2 February 2026 to terminate and wind up the UK scheme. See further details in note 1. Overseas Schemes During the year, Rolls-Royce Deutschland replaced a number of their existing defined benefit schemes with a new company pension scheme to offer payment options at time of retirement. The new system, which is similar in structure to the UK defined contribution scheme but with a guarantee from the Company regarding investment returns in accordance with German legislation, significantly reduces interest risks and longevity risks for the employer for future commitments. A past service credit of \u00a310m has been recognised within non-underlying operating profit in respect of these changes. Amounts recognised in the income statement
2025 2024
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
Defined benefit schemes:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Current service cost and administrative expenses
6 42 48
5
37
42
Past-service cost/(credit) and settlement loss
1
4 (10) (6) 14
\u2013
14
10 32 42
19
37
56
Defined contribution schemes
251 104 355
228
101
329
Operating cost
261
136 397 247
138
385
Net
financing (credit)/charge in respect
of defined benefit schemes
(32)
38
6
(35)
37
2
Total income statement charge
229
174
403
212
175
387
1 Following the signing of the framework agreement with PIC, adjustments have been made to align the methodology for the calculation of certain benefits with those required by the insurer. These have resulted in an additional past service charge of \u00a3(4)m being recognised in the income statement in 2025. A past service credit of \u00a310m has also been recognised in the year in respect of the changes to the Rolls-Royce Deutschland schemes detailed above. In 2024 a past service charge of \u00a314m was recognised in respect of the UK scheme as a result of further work carried out by the pension scheme administrators and the Scheme Actuary in 2024 to review all relevant data points and make further changes to member records and required payments under the Barber judgement which sought to equalise normal retirement ages between men and women The operating cost is charged as follows:
Defined
Defined benefit
contribution
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost of sales
37
30
252
227
289
257
Commercial and administrative costs
(3
)
20
50
51
47
71
Research and development costs
8
6
53
51
61
57
42
56
355
329
397
385
Net financing comprises:
202
5
202
4
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financing on scheme obligations
214
64
278
200
61
261
Financing on scheme assets
(246)
(26)
(272)
(235)
(24)
(259)
Net financing (income)/charge in respect of defined benefit
schemes
(32)
38
6
(35)
37
2
Financing income on scheme surpluses
(32)
\u2013
(32)
(35)
(2)
(37)
Financing cost on scheme deficits
\u2013
38
38
\u2013
39
39
Amounts recognised in OCI in respect of defined benefit schemes
202
5
202
4
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
Actuarial gains and losses arising from:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Demographic assumptions
1
(121)
\u2013
(121)
19
(10)
9
Financial assumptions
2
97
63
160
617
56
673
Experience adjustments
3
(9)
1
(8)
(8)
(14)
(22)
(Loss)/return
on scheme assets excluding financing income
4
(484)
9
(475)
(633)
(5)
(638)
(517)
73
(444)
(5)
27
22
1 For the UK Scheme, this reflects latest available CMI mortality projections, and a charge of around \u00a3100m in relation to the Buy-in of the UK scheme due to updates to the assumptions relating to transfer values, and alignments made to insurer factors post Buy-in 2 Actuarial gains and losses arising from financial assumptions arise primarily due to changes in discount rate and inflation 3 This reflects an experience loss as a result of realised inflation being higher than expected over the period meaning that actual and projected increases are now higher than previously expected 4 Includes an asset remeasurement loss estimated at \u00a3350m recognised in respect of the Buy-in of the UK Scheme that took place during the year Changes in present value of defined benefit obligations
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
(3,958)
(1,501)
(5,459)
(4,537)
(1,540)
(6,077)
Exchange
differences
\u2013
13
1
3
\u2013
38
38
Current service cost
\u2013
(41)
(41)
\u2013
(37)
(37)
Past
-
service
(
cost
)/credit
1
(4)
10
6
(14)
\u2013
(14)
Finance
(
cost
)/credit
(214)
(64)
(278)
(200)
(61)
(261)
Contributions by employe
es
\u2013
(14)
(14)
\u2013
(13)
(13)
Benefits paid out
169
83
252
165
80
245
Transferred to held for distribution
2
\u2013
1,234
1
,
234
\u2013
\u2013
\u2013
Actuarial
(losses)/
gains
3
(33)
64
31
628
32
660
At
31 December
(4,040)
(21
6
)
(4,25
6
)
(3,958)
(1,501)
(5,459)
Funded schemes
(4,040)
(19
7
)
(4,23
7
)
(3,958)
(986)
(4,944)
Unfunded schemes
\u2013
(19)
(19)
\u2013
(515)
(515)
1 Following the signing of the framework agreement with the UK scheme\u2019s Trustee, which was signed alongside the Buy-in agreement, adjustments have been made to align the methodology for the calculation of certain benefits with the pricing methodology used by the insurer. These have resulted in an additional past service charge of \u00a34m being recognised in the income statement in 2025. A past service credit of \u00a310m has also been recognised in the year in respect of the changes to the Rolls-Royce Deutschland schemes detailed above. In 2024 a past service charge of \u00a314m was recognised in respect of the UK scheme as a result of further work carried out by the pension scheme administrators and the Scheme Actuary in 2024 to review all relevant data points and make further changes to member records and required payments under the Barber judgement which sought to equalise normal retirement ages between men and women 2 At 31 December 2025, \u00a31,234m of pension obligations relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details 3 The actuarial loss of \u00a3(33)m relating to the UK schemes includes a charge of around \u00a3(100)m in respect of the Buy-in of the UK scheme detailed above Changes in fair value of scheme assets
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
4,737
531
5,268
5,304
520
5,824
Exchange
differences
\u2013
(20)
(20)
\u2013
(13)
(13)
Administrative expenses
(6)
(1)
(
7
)
(5)
(1)
(6)
Financing
246
26
2
72
235
24
259
(Loss)/ r
eturn on plan assets excluding financing
1
(484)
9
(4
75
)
(633)
(5)
(638)
Contributions by employe
r
\u2013
84
84
1
73
74
Contributions by employe
es
\u2013
14
14
\u2013
13
13
Benefits paid out
(169)
(83)
(
252
)
(165)
(80)
(245)
Transferred to held for
distribution
2
\u2013
(372)
(372)
\u2013
\u2013
\u2013
At 31 December
4,324
188
4,512
4,737
531
5,268
Total
(loss)/return
on scheme assets
(238)
35
(203)
(398)
19
(379)
1 Includes an asset remeasurement net loss estimated at \u00a3350m recognised in respect of the Buy-in of the UK Scheme that took place in the year. For further details see page 86 2 At 31 December 2025, \u00a3372m of pension assets relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details Future contributions The Group expects to contribute approximately \u00a381m to its overseas defined benefit schemes in 2026 (2025: \u00a384m). In the UK, any cash funding of RRUKPF is based on a statutory triennial funding valuation process. The Group and the Trustee negotiate and agree the actuarial assumptions used to value the liabilities (Technical Provisions); assumptions which may differ from those used for accounting set out above. Once each valuation is signed, a Schedule of Contributions (SoC) must be agreed which sets out the cash contributions to be paid. The most recent valuation, as at 31 March 2023, agreed by the Trustee in October 2023, showed that the RRUKPF was estimated to be 115% funded on the Technical Provisions basis. All cash due has been paid in full and the current SoC does not require any cash contributions to be made by the Group. Following the Buy-in of the scheme in August 2025 substantially all the scheme liabilities have been insured and it is expected that no further funding will be required by the Group: any further liabilities arising are expected to be funded from the scheme\u2019s existing assets. ", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-625": { "value": "Other items The financing component of the defined benefit pension scheme cost is determined by market conditions and has therefore been included as a reconciling difference between underlying and statutory performance. The tax effects of adjustments above are excluded from the underlying tax charge. Changes in tax rates are excluded from the underlying tax charge. In addition, changes in the amount of recoverable deferred tax recognised are excluded from the underlying results to the extent that their recognition or derecognition was not originally recorded within the underlying results. The following analysis sets out the results of the Group\u2019s divisions on the basis described above and also includes a reconciliation of the underlying results to those reported in the consolidated income statement.
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems
Businesses
1
segment
2
Underlying
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Underlying revenue from sale of original equipment
3,21
7
2,228
3,433
13
\u2013
8,89
1
Underlying revenue from aftermarket services
7,165
2,544
1,459
\u2013
\u2013
11,168
Total underlying revenue
10,38
2
4,772
4,892
13
\u2013
20,0
59
Gross profit/(loss)
2,6
75
93
3
1,52
2
(2)
(2)
5,1
26
Commercial and administrative costs
(432)
(201)
(51
8
)
(5)
(67)
(1,22
3
)
Research and development costs
(267)
(45)
(16
4
)
(21)
\u2013
(
497
)
Share of results of joint ventures and associates
154
2
1
2
(112)
\u2013
5
6
Underlying operating profit/(loss)
2,1
30
68
9
85
2
(140)
(69)
3,4
62
Year ended 31 December 202
4
Underlying revenue from sale of original equipment
3,105
1,943
2,942
15
\u2013
8,005
Underlying revenue from aftermarket services
5,935
2,579
1,329
\u2013
\u2013
9,843
Total underlying revenue
9,040
4,522
4,271
15
\u2013
17,848
Gross
profit/(loss)
1,990
908
1,199
(3)
(3)
4,091
Commercial and administrative costs
(396)
(212)
(483)
(41)
(65)
(1,197)
Research and development costs
(252)
(55)
(165)
(133)
\u2013
(605)
Share of results of joint ventures and associates
163
3
9
\u2013
\u2013
175
U
nderlying
operating
profit/(loss)
1,505
644
560
(177)
(68)
2,464
1 Following the decision to exit the Group\u2019s advanced air mobility activities in 2024 and the relinquishment of control of Rolls-Royce SMR Limited on 4 March 2025 (see note 27) the results of those activities in both 2024 and 2025 have been reported within All Other Businesses. The Group\u2019s income statement for 2025 includes two months of the results of Rolls-Royce SMR Limited as a subsidiary and ten months of the Group\u2019s share of the results of the equity-accounted investment 2 Corporate and Inter-segment consists of costs that are not attributable to a specific segment and consolidation adjustments Reconciliation to statutory results
Underlying
adjustments and Group
Total adjustments to statutory
underlying foreign exchange results
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Revenue from sale of original equipment
8,
891
212
9,
103
Revenue from aftermarket services
11,168 936 12,104
Total revenue
20,059 1,148 21,207
Gross profit
5,126 1,049 6,175
Commercial and administrative costs
(1,
223
)
(
45
)
(1,
268
)
Research and development costs
(497) 2 (495)
Share of results of joint venture and associates
56 \u2013 56
Operating
profit
3,462 1,006 4,468
Gain
arising on the disposal of
businesses
\u2013 809 809
Profit before financing and taxation
3,
462
1,
815
5,
277
Net financing
(110) 1,768 1,658
Profit before taxation
3,352 3,583 6,935
Taxation
(
593
)
(
506
)
(1,
099
)
Profit for the year
2,759 3,077 5,836
Attributable to:
Ordinary shareholders
2,
764
3,
077
5,
841
NCI
(5) \u2013 (5)
Year
ended 31 December 2024
Revenue from sale of original equipment
8,005
384
8,389
Revenue from aftermarket services
9,843
677
10,520
Total
revenue
17,848
1,061
18,909
Gross
profit
4,091
130
4,221
Commercial and administrative costs
(1,197)
(87)
(1,284)
Research and development costs
(605)
402
(203)
Share of results of joint venture and associates
175
(3)
172
Operating
profit
2,464
442
2,906
Gain arising on the disposal of business
\u2013
16
16
Profit before financing and taxation
2,464
458
2,922
Net financing
(171)
(517)
(688)
Profit/(loss)
before taxation
2,293
(59)
2,234
Taxation
(282)
532
250
Profit for the year
2,011
473
2,484
Attributable to:
Ordinary shareholders
2,048
473
2,521
NCI
(37)
\u2013
(37)
Disaggregation of revenue from contracts with customers
Analysis by type and basis of recognition
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems Businesses segment Underlying
Year ended 31 December
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Original equipment recognised at a point in time
3,
217
409
3,368
\u2013
\u2013
6,
994
Original equipment recognised over time
\u2013
1,819
65
13
\u2013
1,897
Aftermarket services recognised at a point in time
1,617
735
1,348
\u2013
\u2013
3,700
Aftermarket services recognised over time
5,469
1,809
111
\u2013
\u2013
7,389
Total underlying customer contract revenue
10,
303
4,772
4,892
13
\u2013
19,
980
Other underlying revenue
1
79
\u2013
\u2013
\u2013
\u2013
79
Total underlying
revenue
2
10,
382
4,772
4,892
13
\u2013
20,
059
Year ended 31 December 202
4
Original equipment recognised at a point in time
3,105
562
2,871
3
\u2013
6,541
Original equipment recognised over time
\u2013
1,381
71
12
\u2013
1,464
Aftermarket
services recognised at a point in time
1,258
918
1,231
\u2013
\u2013
3,407
Aftermarket services recognised over time
4,594
1,661
98
\u2013
\u2013
6,353
Total underlying customer contract revenue
8,957
4,522
4,271
1
5
\u2013
17,765
Other underlying revenue
1
83
\u2013
\u2013
\u2013
\u2013
83
Total underlying revenue
2
9,040
4,522
4,271
1
5
\u2013
17,848
1 Includes leasing revenue
2 Includes \u00a3259m of revenue recognised in the year relating to performance obligations satisfied in previous years, of which \u00a3253m related to Civil Aerospace long term contracts (2024: \u00a3317m ,
of which \u00a3311m relates to Civil Aerospace long term contracts)
1 During the year to 31 December 2025, revenue recognised within Civil Aerospace, Defence and Power Systems of \u00a32,034m (2024: \u00a31,915m) was received from a single customer
Underlying
adjustments and
adjustments to Group statutory
Total underlying foreign exchange
results
1
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
202
5
Original equipment recognised at a point in time
6,
994
211
7,
205
Original equipment recognised over time
1,897
1
1,898
Aftermarket services recognised at a point in time
3,700
123
3,823
Aftermarket
services recognised over time
7,389
806
8,195
Total customer contract revenue
19,
980
1,141
21,
121
Other revenue
79
7
86
Total revenue
20,
059
1,148
21,
207
Year ended 31 December 202
4
Original equipment recognised at a point in
time
6,541
384
6,925
Original equipment recognised over time
1,464
\u2013
1,464
Aftermarket services recognised at a point in time
3,407
163
3,570
Aftermarket services recognised over time
6,353
501
6,854
Total customer contract revenue
17,765
1,048
18,813
Other revenue
83
13
96
Total revenue
17,848
1,061
18,909
Analysis by geographical destination
The Group\u2019s revenue by destination of the ultimate operator is as follows:
202
5
202
4
\u00a3m
\u00a3m
United Kingdom
3,103
2,642
Germany
1,
225
1,048
T\u00fcrkiye
442
307
Spain
410
282
Switzerland
362
440
Italy
357
318
France
327
332
Ireland
202
324
Netherlands
199
130
Israel
139
73
Norway
132
96
Poland
107
141
Sweden
95
28
Portugal
82
121
Latvia
54
16
Rest of Europe
192
273
Europe
7,
428
6,571
United
States
5,802
5,477
Canada
529
462
North America
6,331
5,939
South America
300
336
Central America
90
169
United Arab Emirates
543
255
Saudi Arabia
514
428
Qatar
374
196
Rest of Middle East
243
301
Middle East
1,674
1,180
China
1,500
1,400
Japan
733
634
Singapore
558
506
South Korea
404
359
Indonesia
199
125
Philippines
166
130
India
152
147
Taiwan
148
211
Thailand
140
138
Rest of Asia
380
243
Asia
4,380
3,893
Africa
587
406
Australasia
417
415
21,
207
18,909
Order backlog
Contracted consideration, translated at the estimated long-term exchange rates, that is expected to be recognised as revenue when performance
obligations are satisfied in the future (referred to as order backlog) is as follows:
2025
2024
Within After five Within After five
five years years Total five years years Total
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Civil Aerospace
29.2
35.4
64.6
29.7
30.2
59.9
Defence
14.1
3.3
17.4
14.0
3.4
17.4
Power Systems
5.9
0.2
6.1
4.7
0.1
4.8
All Other Businesses
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
49.2
38.9
88.1
48.4
33.7
82.1
The parties to these contracts have approved the contract and customers do not have a unilateral enforceable right to terminate the contract
without compensation. The Group excludes Civil Aerospace OE orders (for deliveries beyond the next seven to 12 months) that customers have
placed where they retain a right to cancel. The Group's expectation based on historical experience is that these orders will be fulfilled. Civil
Aerospace order backlog has increased by \u00a34.7bn, this is due to new aftermarket contracts and contract extensions. Other drivers include
commercial optimisation and revenue escalation with major customers. The Civil order backlog will be recognised over the contract term. The
\u00a31.3bn increase within Power Systems is mainly driven by orders for power generation (from the growth in data centres) and governmental, which
will be mainly recognised over the next three years.
202
5
202
4
Profit/(loss) Profit/(loss)
before Net before Net
Revenue financing financing Taxation Revenue financing financing Taxation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Underlying performance
20,
059
3,
462
(
110
)
(
593
)
17,848
2,464
(171)
(282)
Impact of foreign exchange differences as a
result of hedging activities on trading
transactions
1
A
1,148
797
499
(328)
1,061
197
190
(97)
Unrealised fair value changes on derivative
contracts held for trading
2
A
\u2013
\u2013
1,328
(333)
\u2013
(6)
(649)
164
Unrealised fair value change to derivative
contracts held for financing
3
A
\u2013
\u2013
(4)
1
\u2013
\u2013
40
(10)
Exceptional programme credits
4
B
\u2013
83
\u2013
(21)
\u2013
\u2013
\u2013
\u2013
Exceptional transformation and restructuring
charges
5
B
\u2013
(44)
\u2013
4
\u2013
(234)
(11)
65
Impairment reversals
6
C
\u2013
179
\u2013
(
44
)
\u2013
547
\u2013
(157)
Effect of acquisition accounting
7
C
\u2013
(
16
)
\u2013
3
\u2013
(45)
\u2013
11
Other
8
D
\u2013
7
(
55
)
12
\u2013
(17)
(87)
27
Gain arising on the disposals of businesses
9
C
\u2013
809
\u2013
(
28
)
\u2013
16
\u2013
(6)
Impact of tax rate change
10
D
\u2013
\u2013
\u2013
(58)
\u2013
\u2013
\u2013
10
Recognition of deferred tax assets
11
D
\u2013
\u2013
\u2013
286
\u2013
\u2013
\u2013
525
Total underlying
adjustments
1,148
1,
815
1,
768
(
506
)
1,061
458
(517)
532
Statutory performance per consolidated
income statement
21,
207
5,
277
1,
658
(1,
099
)
18,909
2,922
(688)
250
A \u2013 FX, B \u2013 Exceptional, C \u2013 M&A and impairment, D \u2013 Other
1 The impact of measuring revenues and costs at the average exchange rate during the year and the impact of valuation of assets and liabilities using the year end exchange rate rather than
the achieved rate or the exchange rate that is expected to be achieved by the use of the hedge book increased statutory revenues by \u00a31,148m (2024: \u00a31,061m) and increased profit before
financing and taxation by \u00a3797m (2024: \u00a3197m). Underlying financing excludes the impact of revaluing monetary assets and liabilities at the year end exchange rate
2 The underlying results exclude the fair value changes on derivative contracts held for trading. These fair value changes are subsequently recognised in the underlying results when the
contracts are settled
3 Includes net fair value loss of \u00a34m (2024: gain of \u00a340m) on any interest rate swaps not designated into hedging relationships for accounting purposes
4 During 2025, contract loss provisions have reduced by \u00a383m (2024: \u00a3nil) as a result of amounts released following contractual renegotiations where the original charge was treated as non-
underlying
5 In 2023, the Group announced a major multi-year transformation programme (set out in the 2022 Annual Report). During 2025, the Group incurred charges of \u00a344m related to this programme
(2024: \u00a3234m). The charges comprise of advisory fees and transformation office costs \u00a352m (2024: \u00a337m) and severance costs \u00a33m (2024: \u00a368m). These were partly offset by an \u00a311m reversal
of previously recognised costs for impairments, write-offs and closure costs related to the exit of the Group\u2019s advanced air mobility activities (2024: \u00a3129m)
6 The Group has assessed the carrying value of its assets and reviewed them for potential impairment and impairment reversal triggers. During 2025, there was an impairment reversal of
intangible assets of \u00a310m (2024 \u00a3413m), property plant and equipment assets of \u00a346m (2024: \u00a3nil), right of use assets of \u00a3129m (2024: \u00a3nil) and contract assets of \u00a3nil (2024: \u00a3132m). See notes
8, 9, 10 and 11 for further details. Of the \u00a3185m reversed, \u00a3179m (2024: \u00a3132m) was included within cost of sales, and \u00a36m has been included with research and development costs, see note 3
for further details
7 The effect of acquisition accounting includes the amortisation of intangible assets arising on previous acquisitions
8 Includes interest received of \u00a352m (2024: \u00a378m) on interest rate swaps which are not designated into hedge relationships for statutory purposes from interest payable on an underlying
basis to fair value movement and \u00a36m (2024: \u00a313m charge) past-service credit on defined benefit schemes
9 An exceptional gain on disposal was recognised as a result of the deconsolidation of Rolls-Royce SMR Limited and the sale of the naval propulsors business during the year. Further details
can be found in note 27
10 Represents the impact to the income statement of the gradual reduction in the German Federal corporate income tax rate from 15% to 10%, in 2024 this represented the reduction in the
tax rate on authorised surplus pension charges from 35% to 25% in 2024
11 During 2025, the Group recognised deferred tax assets of \u00a3563m (2024: \u00a31,033m) relating to UK tax losses of which \u00a3277m (2024: \u00a3508m) is included in underlying performance and \u00a3286m
(2024: \u00a3525m) in non-underlying
", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-675": { "value": "Other items The financing component of the defined benefit pension scheme cost is determined by market conditions and has therefore been included as a reconciling difference between underlying and statutory performance. The tax effects of adjustments above are excluded from the underlying tax charge. Changes in tax rates are excluded from the underlying tax charge. In addition, changes in the amount of recoverable deferred tax recognised are excluded from the underlying results to the extent that their recognition or derecognition was not originally recorded within the underlying results. The following analysis sets out the results of the Group\u2019s divisions on the basis described above and also includes a reconciliation of the underlying results to those reported in the consolidated income statement.
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems
Businesses
1
segment
2
Underlying
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Underlying revenue from sale of original equipment
3,21
7
2,228
3,433
13
\u2013
8,89
1
Underlying revenue from aftermarket services
7,165
2,544
1,459
\u2013
\u2013
11,168
Total underlying revenue
10,38
2
4,772
4,892
13
\u2013
20,0
59
Gross profit/(loss)
2,6
75
93
3
1,52
2
(2)
(2)
5,1
26
Commercial and administrative costs
(432)
(201)
(51
8
)
(5)
(67)
(1,22
3
)
Research and development costs
(267)
(45)
(16
4
)
(21)
\u2013
(
497
)
Share of results of joint ventures and associates
154
2
1
2
(112)
\u2013
5
6
Underlying operating profit/(loss)
2,1
30
68
9
85
2
(140)
(69)
3,4
62
Year ended 31 December 202
4
Underlying revenue from sale of original equipment
3,105
1,943
2,942
15
\u2013
8,005
Underlying revenue from aftermarket services
5,935
2,579
1,329
\u2013
\u2013
9,843
Total underlying revenue
9,040
4,522
4,271
15
\u2013
17,848
Gross
profit/(loss)
1,990
908
1,199
(3)
(3)
4,091
Commercial and administrative costs
(396)
(212)
(483)
(41)
(65)
(1,197)
Research and development costs
(252)
(55)
(165)
(133)
\u2013
(605)
Share of results of joint ventures and associates
163
3
9
\u2013
\u2013
175
U
nderlying
operating
profit/(loss)
1,505
644
560
(177)
(68)
2,464
1 Following the decision to exit the Group\u2019s advanced air mobility activities in 2024 and the relinquishment of control of Rolls-Royce SMR Limited on 4 March 2025 (see note 27) the results of those activities in both 2024 and 2025 have been reported within All Other Businesses. The Group\u2019s income statement for 2025 includes two months of the results of Rolls-Royce SMR Limited as a subsidiary and ten months of the Group\u2019s share of the results of the equity-accounted investment 2 Corporate and Inter-segment consists of costs that are not attributable to a specific segment and consolidation adjustments Reconciliation to statutory results
Underlying
adjustments and Group
Total adjustments to statutory
underlying foreign exchange results
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Revenue from sale of original equipment
8,
891
212
9,
103
Revenue from aftermarket services
11,168 936 12,104
Total revenue
20,059 1,148 21,207
Gross profit
5,126 1,049 6,175
Commercial and administrative costs
(1,
223
)
(
45
)
(1,
268
)
Research and development costs
(497) 2 (495)
Share of results of joint venture and associates
56 \u2013 56
Operating
profit
3,462 1,006 4,468
Gain
arising on the disposal of
businesses
\u2013 809 809
Profit before financing and taxation
3,
462
1,
815
5,
277
Net financing
(110) 1,768 1,658
Profit before taxation
3,352 3,583 6,935
Taxation
(
593
)
(
506
)
(1,
099
)
Profit for the year
2,759 3,077 5,836
Attributable to:
Ordinary shareholders
2,
764
3,
077
5,
841
NCI
(5) \u2013 (5)
Year
ended 31 December 2024
Revenue from sale of original equipment
8,005
384
8,389
Revenue from aftermarket services
9,843
677
10,520
Total
revenue
17,848
1,061
18,909
Gross
profit
4,091
130
4,221
Commercial and administrative costs
(1,197)
(87)
(1,284)
Research and development costs
(605)
402
(203)
Share of results of joint venture and associates
175
(3)
172
Operating
profit
2,464
442
2,906
Gain arising on the disposal of business
\u2013
16
16
Profit before financing and taxation
2,464
458
2,922
Net financing
(171)
(517)
(688)
Profit/(loss)
before taxation
2,293
(59)
2,234
Taxation
(282)
532
250
Profit for the year
2,011
473
2,484
Attributable to:
Ordinary shareholders
2,048
473
2,521
NCI
(37)
\u2013
(37)
3 Research and development
202
5
202
4
\u00a3m
\u00a3m
Gross research and development
expenditure
(1,
417
)
(1,475)
Contributions and fees
1
814
700
Net expenditure
(
603
)
(775)
Capitalised as intangible assets
2
2
11
263
Amortisation and impairment of capitalised costs
3, 4
(103)
309
Net
amount
recognised in the income statement
(
495
)
(203)
Underlying adjustments
4
(2)
(402)
Net underlying cost recognised in the income statement
(
497
)
(605)
1 Includes \u00a3795m (2024: \u00a3667m) of government funding 2 R&D capitalised as intangibles is presented net of \u00a311m (2024: \u00a3nil) Government funding received 3 See notes 8 and 9 for analysis of amortisation and impairment 4 Underlying adjustments include impact of acquisition accounting, foreign exchange and an impairment reversal of \u00a36m (2024: \u00a3413m). Further details can be found in notes 2, 8 and 9 ", "dimensions": { "concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-585": { "value": "
Reconciliation to statutory results
Underlying
adjustments and Group
Total adjustments to statutory
underlying foreign exchange results
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Revenue from sale of original equipment
8,
891
212
9,
103
Revenue from aftermarket services
11,168 936 12,104
Total revenue
20,059 1,148 21,207
Gross profit
5,126 1,049 6,175
Commercial and administrative costs
(1,
223
)
(
45
)
(1,
268
)
Research and development costs
(497) 2 (495)
Share of results of joint venture and associates
56 \u2013 56
Operating
profit
3,462 1,006 4,468
Gain
arising on the disposal of
businesses
\u2013 809 809
Profit before financing and taxation
3,
462
1,
815
5,
277
Net financing
(110) 1,768 1,658
Profit before taxation
3,352 3,583 6,935
Taxation
(
593
)
(
506
)
(1,
099
)
Profit for the year
2,759 3,077 5,836
Attributable to:
Ordinary shareholders
2,
764
3,
077
5,
841
NCI
(5) \u2013 (5)
Year
ended 31 December 2024
Revenue from sale of original equipment
8,005
384
8,389
Revenue from aftermarket services
9,843
677
10,520
Total
revenue
17,848
1,061
18,909
Gross
profit
4,091
130
4,221
Commercial and administrative costs
(1,197)
(87)
(1,284)
Research and development costs
(605)
402
(203)
Share of results of joint venture and associates
175
(3)
172
Operating
profit
2,464
442
2,906
Gain arising on the disposal of business
\u2013
16
16
Profit before financing and taxation
2,464
458
2,922
Net financing
(171)
(517)
(688)
Profit/(loss)
before taxation
2,293
(59)
2,234
Taxation
(282)
532
250
Profit for the year
2,011
473
2,484
Attributable to:
Ordinary shareholders
2,048
473
2,521
NCI
(37)
\u2013
(37)
202
5
202
4
Profit/(loss) Profit/(loss)
before Net before Net
Revenue financing financing Taxation Revenue financing financing Taxation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Underlying performance
20,
059
3,
462
(
110
)
(
593
)
17,848
2,464
(171)
(282)
Impact of foreign exchange differences as a
result of hedging activities on trading
transactions
1
A
1,148
797
499
(328)
1,061
197
190
(97)
Unrealised fair value changes on derivative
contracts held for trading
2
A
\u2013
\u2013
1,328
(333)
\u2013
(6)
(649)
164
Unrealised fair value change to derivative
contracts held for financing
3
A
\u2013
\u2013
(4)
1
\u2013
\u2013
40
(10)
Exceptional programme credits
4
B
\u2013
83
\u2013
(21)
\u2013
\u2013
\u2013
\u2013
Exceptional transformation and restructuring
charges
5
B
\u2013
(44)
\u2013
4
\u2013
(234)
(11)
65
Impairment reversals
6
C
\u2013
179
\u2013
(
44
)
\u2013
547
\u2013
(157)
Effect of acquisition accounting
7
C
\u2013
(
16
)
\u2013
3
\u2013
(45)
\u2013
11
Other
8
D
\u2013
7
(
55
)
12
\u2013
(17)
(87)
27
Gain arising on the disposals of businesses
9
C
\u2013
809
\u2013
(
28
)
\u2013
16
\u2013
(6)
Impact of tax rate change
10
D
\u2013
\u2013
\u2013
(58)
\u2013
\u2013
\u2013
10
Recognition of deferred tax assets
11
D
\u2013
\u2013
\u2013
286
\u2013
\u2013
\u2013
525
Total underlying
adjustments
1,148
1,
815
1,
768
(
506
)
1,061
458
(517)
532
Statutory performance per consolidated
income statement
21,
207
5,
277
1,
658
(1,
099
)
18,909
2,922
(688)
250
A \u2013 FX, B \u2013 Exceptional, C \u2013 M&A and impairment, D \u2013 Other 1 The impact of measuring revenues and costs at the average exchange rate during the year and the impact of valuation of assets and liabilities using the year end exchange rate rather than the achieved rate or the exchange rate that is expected to be achieved by the use of the hedge book increased statutory revenues by \u00a31,148m (2024: \u00a31,061m) and increased profit before financing and taxation by \u00a3797m (2024: \u00a3197m). Underlying financing excludes the impact of revaluing monetary assets and liabilities at the year end exchange rate 2 The underlying results exclude the fair value changes on derivative contracts held for trading. These fair value changes are subsequently recognised in the underlying results when the contracts are settled 3 Includes net fair value loss of \u00a34m (2024: gain of \u00a340m) on any interest rate swaps not designated into hedging relationships for accounting purposes 4 During 2025, contract loss provisions have reduced by \u00a383m (2024: \u00a3nil) as a result of amounts released following contractual renegotiations where the original charge was treated as non- underlying 5 In 2023, the Group announced a major multi-year transformation programme (set out in the 2022 Annual Report). During 2025, the Group incurred charges of \u00a344m related to this programme (2024: \u00a3234m). The charges comprise of advisory fees and transformation office costs \u00a352m (2024: \u00a337m) and severance costs \u00a33m (2024: \u00a368m). These were partly offset by an \u00a311m reversal of previously recognised costs for impairments, write-offs and closure costs related to the exit of the Group\u2019s advanced air mobility activities (2024: \u00a3129m) 6 The Group has assessed the carrying value of its assets and reviewed them for potential impairment and impairment reversal triggers. During 2025, there was an impairment reversal of intangible assets of \u00a310m (2024 \u00a3413m), property plant and equipment assets of \u00a346m (2024: \u00a3nil), right of use assets of \u00a3129m (2024: \u00a3nil) and contract assets of \u00a3nil (2024: \u00a3132m). See notes 8, 9, 10 and 11 for further details. Of the \u00a3185m reversed, \u00a3179m (2024: \u00a3132m) was included within cost of sales, and \u00a36m has been included with research and development costs, see note 3 for further details 7 The effect of acquisition accounting includes the amortisation of intangible assets arising on previous acquisitions 8 Includes interest received of \u00a352m (2024: \u00a378m) on interest rate swaps which are not designated into hedge relationships for statutory purposes from interest payable on an underlying basis to fair value movement and \u00a36m (2024: \u00a313m charge) past-service credit on defined benefit schemes 9 An exceptional gain on disposal was recognised as a result of the deconsolidation of Rolls-Royce SMR Limited and the sale of the naval propulsors business during the year. Further details can be found in note 27 10 Represents the impact to the income statement of the gradual reduction in the German Federal corporate income tax rate from 15% to 10%, in 2024 this represented the reduction in the tax rate on authorised surplus pension charges from 35% to 25% in 2024 11 During 2025, the Group recognised deferred tax assets of \u00a3563m (2024: \u00a31,033m) relating to UK tax losses of which \u00a3277m (2024: \u00a3508m) is included in underlying performance and \u00a3286m (2024: \u00a3525m) in non-underlying
5 Taxation
UK
Overseas
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Current tax charge for the year
39
30
730
379
769
409
Current tax charge in respect of Pillar Two
income taxes
2
2
\u2013
\u2013
2
2
Adjustments in respect of prior years
(9)
\u2013
79
(18)
70
(18)
Current tax
32
32
809
361
841
393
Deferred tax charge for the year
726
265
50
3
776
268
Adjustments in respect of prior years
12
17
(25)
(47)
(13)
(30)
Recognition of deferred tax
(563)
(1,033)
\u2013
\u2013
(563)
(1,033)
Derecognition of advance corporation tax
\u2013
162
\u2013
\u2013
\u2013
162
Deferred tax charge resulting from an
decrease in the overseas tax rate
\u2013
\u2013
58
\u2013
58
\u2013
Deferred tax credit resulting from a
decrease in UK tax rate
\u2013
(10)
\u2013
\u2013
\u2013
(10)
Deferred tax
175
(599)
83
(44)
258
(643)
C
harged
/(credited)
in the
income statement
207
(567)
892
317
1,099
(250)
Other tax credits/(charges)
OCI
Equity
Items that will not be Items that will be reclassified
reclassified
2025 2024 2025 2024 2025 2024
Deferred tax:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Movement in
post
-
retirement schemes
115
61
\u2013
\u2013
\u2013
\u2013
Cash flow hedge
\u2013
\u2013
3
(1)
\u2013
\u2013
Net investment hedge
\u2013
\u2013
2
(2)
\u2013
\u2013
Share
-
based payments
\u2013
direct to equity
\u2013
\u2013
\u2013
\u2013
76
71
Other tax credits/(charges)
115
61
5
(3)
76
71
Tax reconciliation
202
5
202
4
\u00a3m
\u00a3m
Profit before taxation
6,935
2,234
Less: share of
profits
of joint ventures and associates (note 1
2
)
(71)
(137)
Profit
before taxation excluding joint ventures and associates
6,864
2,097
Nominal ta
x
charge
a
t UK corporation tax
rate
25%
(2024: 25%)
1,716
524
Overseas rate differences
1
40
27
US state taxes
18
23
Exempt gain on disposal of businesses
2
(185)
\u2013
Tax de
-
grouping charge
3
\u2013
102
Other permanent differences
4
5
12
Tax losses
and other temporary differences not recognised in deferred tax
5
11
3
Derecognition of deferred tax
\u2013
30
Benefit arising from previously unrecognised other temporary differences
6
(
27
)
(
42
)
Recognition of deferred tax
7
(
563
)
(1,033)
Utilisation of previously unrecognised UK tax losses
(31)
\u2013
Adjustments in respect of prior years
57
(48)
Derecognition of advance corporation tax
8
\u2013
162
Increase in deferred taxes resulting from a change in the overseas tax rate
9
58
\u2013
Decrease in deferred taxes resulting from a change in the UK tax rate
10
\u2013
(10)
1,099
(250)
Underlying items (
note 2)
593
282
Non
-
underlying items
506
(532)
1,099
(250)
1 Overseas rate differences mainly relate to tax on profits or losses in countries such as Germany
2 Relates primarily to deconsolidation of Rolls-Royce SMR Limited
3 The tax de-grouping charge in 2024 arose on the dilution of the shareholding in Rolls-Royce SMR Limited to below 75%
4 Includes \u00a32m (2024: \u00a32m) relating to Pillar two income taxes
5 Relates to tax losses not recognised
6 Relates to foreign exchange derivatives
7 The recognition of deferred tax relates to UK tax losses
8 Advance corporation tax was de-recognised in 2024 on the basis that payment of cash dividends will prevent the utilisation
9 Represents the impact to the income statement of the gradual reduction in the German Federal corporate income tax rate from 15% to 10%
10 Represents the impact to the income statement of the reduction in the tax rate on authorised surplus pension charges from 35% to 25% in 2024
Deferred taxation assets and liabilities
2025 2024
\u00a3m \u00a3m
At 1 January
3,429
2,668
Amount
(
charged
)
/
credited
to income statement
(258)
643
Amount credited to OCI
117
59
Amount
credited/(charged)
to hedging reserves
3
(1)
Amount
credited
to equity
76
71
Transferred to assets held for distribution
1
(453)
\u2013
Exchange differences
(9)
(11)
At 31 December
2,905
3,429
Deferred tax assets
2,980
3,660
Deferred tax liabilities
(75)
(231)
2,905
3,429
1 At 31 December 2025, \u00a3453m of deferred tax assets were reclassified to assets held for distribution, see note 27 for further details
The analysis of the deferred tax position is as follows:
Transferred
Recognised to held for
in income Recognised in Recognised in sale and Exchange At
At 1 January statement OCI equity
distribution
1
differences 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
2025
Intangible assets
(613)
(8)
\u2013
\u2013
220
(16)
(417)
Property, plant and equipment
142
(80)
\u2013
\u2013
111
8
181
Other temporary differences
2
874
(7)
5
13
(653)
(1)
231
Net contract liabilities
63
(3)
\u2013
\u2013
\u2013
\u2013
60
Pensions and other post-retirement scheme
benefits
(54)
(23)
115
\u2013
(99)
(3)
(64)
Foreign exchange and commodity financial
assets and liabilities
488
(506)
\u2013
\u2013
(25)
2
(41)
Losses
2,481
420
\u2013
63
(7)
\u2013
2,957
R&D credit
48
(51)
\u2013
\u2013
\u2013
1
(2)
3,429
(258)
120
76
(453)
(9)
2,905
Intangible assets
(431)
(191)
\u2013
\u2013
\u2013
9
(613)
Property, plant and equipment
229
(87)
\u2013
\u2013
\u2013
\u2013
142
Other temporary differences
2
752
77
(3)
62
\u2013
(14)
874
Net contract liabilities
60
3
\u2013
\u2013
\u2013
\u2013
63
Pensions and other post-retirement scheme
benefits
(123)
10
61
\u2013
\u2013
(2)
(54)
Foreign exchange and commodity financial
assets and liabilities
451
40
\u2013
\u2013
\u2013
(3)
488
Losses
1,489
984
\u2013
9
\u2013
(1)
2,481
R&D credit
79
(31)
\u2013
\u2013
\u2013
\u2013
48
Advance corporation tax
3
162
(162)
\u2013
\u2013
\u2013
\u2013
\u2013
2,668
643
58
71
\u2013
(11)
3,429
202
4
1 At 31 December 2025, \u00a3453m of deferred tax assets were reclassified to assets held for distribution, see note 27 for further details
2 Other temporary differences mainly relate to the deferral of relief for interest expenses and share based payments in the UK and revenue recognised earlier under local GAAP compared to
IFRS in Germany. The amount recognised in the income statement includes a \u00a31m credit (2024: \u00a38m credit) relating to share-based payments
3 Prior to 1999 advance corporation tax (\"ACT\") was paid to the UK Tax Authority when cash dividends were paid by the Group. This was a payment on account which was available to offset
against UK corporation tax liabilities. Any unused balance remaining after 1999 can be carried forward indefinitely and utilised against future UK corporation tax liabilities. See page 62 for
further details
Unrecognised deferred tax assets
202
5
202
4
\u00a3m
\u00a3m
Advance corporation tax
1
162
181
UK losses
1
\u2013
629
Foreign exchange and
commodity financial assets and liabilities
\u2013
27
Losses and other unrecognised deferred tax assets
1
13
47
Deferred tax not recognised on unused tax losses and other items on the basis that future
economic benefit is uncertain
175
884
1 At 31 December 2025, the Group reclassified the assets and liabilities relating of certain entities to assets and liabilities associated with assets held for distribution (see note 27 for further details
on this reclassification of assets and liabilities). The unrecognised tax asset related to these entities held for distribution is \u00a366m, of which \u00a319m relates to advance corporation tax
Gross amount and expiry of losses and other deductible temporary differences for which no deferred tax asset has been recognised.
2025
Total gross losses Foreign exchange
and deductible and commodity
temporary financial assets Other
differences UK losses and liabilities losses
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Expiry within five years
\u2013
\u2013
\u2013
\u2013
Expiry within six to 30 years
\u2013
\u2013
\u2013
\u2013
No expiry
53
\u2013
\u2013
53
53
\u2013
\u2013
53
2024
Total gross losses Foreign exchange
and deductible and commodity
temporary financial assets Other
differences UK losses and liabilities losses
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Expiry within five years
75
\u2013
\u2013
75
Expiry within six to 30 years
218
\u2013
\u2013
218
No expiry
2,698
2,515
107
76
2,991
2,515
107
369
Advance corporation tax was derecognised in 2024 following the Group's announcement to reinstate shareholder distributions via cash dividends.
In addition to the gross balances shown above, advance corporation tax of \u00a3162m (2024: \u00a3181m) has not been recognised as a result of the
assessment performed over the time period over which this could be recovered, when taking into account both shadow and surplus advance
corporation tax. The balance of \u00a3162m excludes \u00a319m of advance corporation tax related to entities classified as held for distribution at 31
December 2025, see note 27 for further details. Advance corporation tax has no expiry. See below for developments following the 2025 Autumn
Budget.
Of the total deferred tax asset of \u00a32,980m, \u00a32,819m (2024: \u00a33,099m) relates to the UK and is made up as follows:
- \u00a32,954m (2024: \u00a32,472m) relating to tax losses;
- \u00a3(40)m (2024: \u00a3425m) arising on unrealised losses on derivative contracts;
- \u00a3(95)m (2024: \u00a3202m) relating to other deductible temporary differences, in particular tax depreciation and relief for interest expenses.
The UK deferred tax assets primarily arise in Rolls-Royce plc and have been recognised based on the expectation that the business will generate
taxable profits and tax liabilities in the future against which the losses and deductible temporary differences can be utilised.
Most of the UK tax losses relate to the Civil Aerospace large engine business which makes initial losses through the investment period of a
programme and then makes a profit through its contracts for services. The programme lifecycles are typically in excess of 30 years.
Deferred tax assets are recognised only to the extent it is probable that future taxable profits will be available against which the assets can be
utilised. Where necessary, this is based on management\u2019s assumptions and probability assessments relating to the amounts and timing of future
taxable profits. The Directors continually reassess the appropriateness of recovering deferred tax assets, which includes a consideration of the
level of future profits and the time period over which they are recovered. A recoverability assessment has been undertaken, taking account of
deferred tax liabilities against which the reversal can be offset and using latest UK forecasts, which are mainly driven by the Civil Aerospace large
engine business, to assess the level of future taxable profits.
The recoverability of deferred tax assets has been assessed on the following basis:
\u2013 using the most recent UK profit forecasts, covering the next five years which are consistent with external sources on market conditions;
\u2013 the long-term forecast profit profile of existing large engine programmes which are typically in excess of 30 years from initial investment to
retirement of the fleet, including the aftermarket revenues earned from airline customers;
\u2013 the long-term forecast is adjusted to exclude engine programmes which are in the development stage with no confirmed orders;
\u2013 taking into account the risk that regulatory changes could materially impact demand for our products;
\u2013 consideration that although all Civil Aerospace large engines are compatible with sustainable fuels, there is a risk that in the longer term demand
will shift towards more sustainable products and solutions;
\u2013 the long-term forecast profit and cost profile of the other parts of the UK business;
\u2013 taking into consideration past performance and experience, including the fact that the UK business returned to profitability in 2023; and
\u2013 reflecting the sustained profitability and continued growing financial resilience of the Group, modelling is based on 100% probability of a base
case forecast (2024: 75% base case and 25% downside forecast). It also reflects the fact that the Group\u2019s multi-year transformation continues to
deliver despite the current volatility in macro-economic variables and an external environment that remains challenging, including geopolitical
tensions, the uncertainty introduced by tariffs and supply chain challenges. Delivery against the Group\u2019s strategic initiatives continues to expand
the earnings potential of the business.
The assessment takes into account UK tax laws that, in broad terms, restrict the offset of carried forward tax losses to 50% of current year profits.
In addition, the amounts and timing of future taxable profits incorporate:
\u2013 the impact of significant Civil Aerospace large engine orders in 2025 and improvements in large engine LTSA business plans;
\u2013 latest assessment of the time period over which future probable profits are expected to arise for Civil large engine programmes;
\u2013 the outcomes of strategic initiatives, including contractual margin improvements and cost reduction;
\u2013 the continued growth in Civil Aerospace engine flying hours; and
\u2013 management\u2019s assumptions on the impact of macro-economic factors and climate change on the UK business.
The climate change scenarios previously prepared to assess the viability of our business strategy, decarbonisation plans and approach to
managing climate-related risks remain consistent with those at 31 December 2024. The scale up of sustainable aviation fuel is expected to play a
crucial role in reaching net zero carbon emissions by 2050 and the Group has demonstrated that all the commercial aero engines it produces
are compatible for use with sustainable fuels. The impact that this could have on our costs and customer pricing is factored into the deferred tax
assessment. However, benefits that may arise in the future from the development of breakthrough new technologies are not taken into account.
Based on the assessment, the Group has recognised a total deferred tax asset relating to UK tax losses of \u00a32,954m (2024: \u00a32,472m), which includes
the recognition of a further \u00a3563m (2024: \u00a31,033m) of previously unrecognised deferred tax asset relating to UK tax losses (of which \u00a3286m is
non-underlying and \u00a3277m is underlying). This reflects the conclusions that:
\u2014 based on current financial results and an improved outlook it is probable that the UK business will generate taxable income and tax
liabilities in the future against which these losses can be utilised; and
\u2014 using current forecasts and various scenarios these losses will be used in full within eight-15 years, which is within the expected
programme lifecycles.
As stated above, the ACT balance of \u00a3162m remains unrecognised at 31 December 2025. The Group is closely monitoring developments following
the announcement in the 2025 Autumn Budget that the shadow ACT regime will be repealed, effective from 1 April 2026. The statutory instrument
is not yet published so the legislation is not substantively enacted at the balance sheet date. This will be considered for future accounting periods.
Any future changes in tax law or the structure of the Group could have a significant effect on the use of losses and other deductible temporary
differences, including the period over which they can be used. In view of this and the significant judgement involved, the Board continuously
reassesses this area.
The Group is within the scope of the OECD Pillar Two (Global Minimum Tax) model rules, which came into effect from 1 January 2024. For the
period to 31 December 2025, the Group has continued to apply the mandatory exception to recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes.
The temporary differences associated with investments in subsidiaries, joint ventures and associates, for which a deferred tax liability has not
been recognised, aggregate to \u00a32,825m (2024: \u00a31,558m). No deferred tax liability has been recognised on the potential withholding tax due on
the remittance of undistributed profits as the Group is able to control the timing of such remittances and it is probable that consent will not be
given in the foreseeable future.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-660": { "value": "Reconciliation to statutory results
Underlying
adjustments and Group
Total adjustments to statutory
underlying foreign exchange results
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
2025
Revenue from sale of original equipment
8,
891
212
9,
103
Revenue from aftermarket services
11,168 936 12,104
Total revenue
20,059 1,148 21,207
Gross profit
5,126 1,049 6,175
Commercial and administrative costs
(1,
223
)
(
45
)
(1,
268
)
Research and development costs
(497) 2 (495)
Share of results of joint venture and associates
56 \u2013 56
Operating
profit
3,462 1,006 4,468
Gain
arising on the disposal of
businesses
\u2013 809 809
Profit before financing and taxation
3,
462
1,
815
5,
277
Net financing
(110) 1,768 1,658
Profit before taxation
3,352 3,583 6,935
Taxation
(
593
)
(
506
)
(1,
099
)
Profit for the year
2,759 3,077 5,836
Attributable to:
Ordinary shareholders
2,
764
3,
077
5,
841
NCI
(5) \u2013 (5)
Year
ended 31 December 2024
Revenue from sale of original equipment
8,005
384
8,389
Revenue from aftermarket services
9,843
677
10,520
Total
revenue
17,848
1,061
18,909
Gross
profit
4,091
130
4,221
Commercial and administrative costs
(1,197)
(87)
(1,284)
Research and development costs
(605)
402
(203)
Share of results of joint venture and associates
175
(3)
172
Operating
profit
2,464
442
2,906
Gain arising on the disposal of business
\u2013
16
16
Profit before financing and taxation
2,464
458
2,922
Net financing
(171)
(517)
(688)
Profit/(loss)
before taxation
2,293
(59)
2,234
Taxation
(282)
532
250
Profit for the year
2,011
473
2,484
Attributable to:
Ordinary shareholders
2,048
473
2,521
NCI
(37)
\u2013
(37)
4 Net financing
202
5
202
4
Statutory
Underlying
1
Statutory
Underlying
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest receivable and similar income
2
271
265
269
266
Net fair value gains on foreign currency contracts
1,335
\u2013
\u2013
\u2013
Net fair value gains on
non
-
hedge accounted interest rate swaps
3
\u2013
\u2013
40
\u2013
Financing on post
-
retirement scheme surpluses
32
\u2013
37
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Financing income
2,13
7
265
536
266
In
terest payable
(302)
(240)
(362)
(273)
Net fair value losses on foreign currency contracts
\u2013
\u2013
(631)
\u2013
Net fair value losses on non
-
hedge accounted interest rate swaps
3
(4)
\u2013
\u2013
\u2013
Net fair value losses on revaluation of other investments
accounted for at FVTPL
4
\u2013
\u2013
(24)
(24)
Foreign exchange differences and changes in forecast payments
relating to financial RRSAs
(4)
\u2013
\u2013
\u2013
Net fair value losses on commodity
contracts
(7)
\u2013
(18)
\u2013
Financing on post
-
retirement scheme deficits
(
38
)
\u2013
(39)
\u2013
Cost of undrawn facilities
(
9
)
(9)
(17)
(17)
Other financing charges
(
115
)
(
126
)
(133)
(123)
Financing costs
(4
79
)
(37
5
)
(1,224)
(437)
Net
financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
Analysed as:
Net interest
(
payable
)
/
receivable
(31)
25
(93)
(7)
Net fair value gains
/
(
losses
)
on derivative contracts
1,324
\u2013
(609)
\u2013
Net post
-
retirement scheme financing
(6)
\u2013
(2)
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Net other financing
(12
8
)
(13
5
)
(174)
(164)
Net financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
1 See note 2 for definition of underlying results 2 Includes interest income on cash balances and short-term deposits of \u00a3149m (2024: \u00a3188m) and similar income of \u00a3122m (2024: \u00a381m) on money market funds 3 The consolidated income statement shows the net fair value loss on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies the fair value movements on these interest rates swaps to net interest payable 4 Included in the 2024 financing costs is a \u00a324m charge in relation to the fair value write down of an unlisted investment recorded at fair value through profit or loss (FVTPL)", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-676": { "value": "Disaggregation of revenue from contracts with customers Analysis by type and basis of recognition
Corporate
Civil Power All Other and Inter- Total
Aerospace Defence Systems Businesses segment Underlying
Year ended 31 December
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Original equipment recognised at a point in time
3,
217
409
3,368
\u2013
\u2013
6,
994
Original equipment recognised over time
\u2013
1,819
65
13
\u2013
1,897
Aftermarket services recognised at a point in time
1,617
735
1,348
\u2013
\u2013
3,700
Aftermarket services recognised over time
5,469
1,809
111
\u2013
\u2013
7,389
Total underlying customer contract revenue
10,
303
4,772
4,892
13
\u2013
19,
980
Other underlying revenue
1
79
\u2013
\u2013
\u2013
\u2013
79
Total underlying
revenue
2
10,
382
4,772
4,892
13
\u2013
20,
059
Year ended 31 December 202
4
Original equipment recognised at a point in time
3,105
562
2,871
3
\u2013
6,541
Original equipment recognised over time
\u2013
1,381
71
12
\u2013
1,464
Aftermarket
services recognised at a point in time
1,258
918
1,231
\u2013
\u2013
3,407
Aftermarket services recognised over time
4,594
1,661
98
\u2013
\u2013
6,353
Total underlying customer contract revenue
8,957
4,522
4,271
1
5
\u2013
17,765
Other underlying revenue
1
83
\u2013
\u2013
\u2013
\u2013
83
Total underlying revenue
2
9,040
4,522
4,271
1
5
\u2013
17,848
1 Includes leasing revenue 2 Includes \u00a3259m of revenue recognised in the year relating to performance obligations satisfied in previous years, of which \u00a3253m related to Civil Aerospace long term contracts (2024: \u00a3317m of which \u00a3311m relates to Civil Aerospace long term contracts) 1 During the year to 31 December 2025, revenue recognised within Civil Aerospace, Defence and Power Systems of \u00a32,034m (2024: \u00a31,915m) was received from a single customer
Underlying
adjustments and
adjustments to Group statutory
Total underlying foreign exchange
results
1
\u00a3m
\u00a3m
\u00a3m
Year ended 31 December
202
5
Original equipment recognised at a point in time
6,
994
211
7,
205
Original equipment recognised over time
1,897
1
1,898
Aftermarket services recognised at a point in time
3,700
123
3,823
Aftermarket
services recognised over time
7,389
806
8,195
Total customer contract revenue
19,
980
1,141
21,
121
Other revenue
79
7
86
Total revenue
20,
059
1,148
21,
207
Year ended 31 December 202
4
Original equipment recognised at a point in
time
6,541
384
6,925
Original equipment recognised over time
1,464
\u2013
1,464
Aftermarket services recognised at a point in time
3,407
163
3,570
Aftermarket services recognised over time
6,353
501
6,854
Total customer contract revenue
17,765
1,048
18,813
Other revenue
83
13
96
Total revenue
17,848
1,061
18,909
", "dimensions": { "concept": "ifrs-full:DisclosureOfDisaggregationOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-661": { "value": "Analysis by geographical destination The Group\u2019s revenue by destination of the ultimate operator is as follows:
202
5
202
4
\u00a3m
\u00a3m
United Kingdom
3,103
2,642
Germany
1,
225
1,048
T\u00fcrkiye
442
307
Spain
410
282
Switzerland
362
440
Italy
357
318
France
327
332
Ireland
202
324
Netherlands
199
130
Israel
139
73
Norway
132
96
Poland
107
141
Sweden
95
28
Portugal
82
121
Latvia
54
16
Rest of Europe
192
273
Europe
7,
428
6,571
United
States
5,802
5,477
Canada
529
462
North America
6,331
5,939
South America
300
336
Central America
90
169
United Arab Emirates
543
255
Saudi Arabia
514
428
Qatar
374
196
Rest of Middle East
243
301
Middle East
1,674
1,180
China
1,500
1,400
Japan
733
634
Singapore
558
506
South Korea
404
359
Indonesia
199
125
Philippines
166
130
India
152
147
Taiwan
148
211
Thailand
140
138
Rest of Asia
380
243
Asia
4,380
3,893
Africa
587
406
Australasia
417
415
21,
207
18,909
The carrying amounts of the Group\u2019s non-current assets including investments but excluding financial instruments, deferred tax assets and
post-retirement scheme surpluses/(deficits), by the geographical area in which the assets are located, are as follows:
202
5
202
4
\u00a3m
\u00a3m
United Kingdom
5,
766
4,968
Germany
15
2,326
United States
\u2013
1,481
Other
67
709
5,
848
9,484
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeographicalAreasExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-586": { "value": "
4 Net financing
202
5
202
4
Statutory
Underlying
1
Statutory
Underlying
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest receivable and similar income
2
271
265
269
266
Net fair value gains on foreign currency contracts
1,335
\u2013
\u2013
\u2013
Net fair value gains on
non
-
hedge accounted interest rate swaps
3
\u2013
\u2013
40
\u2013
Financing on post
-
retirement scheme surpluses
32
\u2013
37
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Financing income
2,13
7
265
536
266
In
terest payable
(302)
(240)
(362)
(273)
Net fair value losses on foreign currency contracts
\u2013
\u2013
(631)
\u2013
Net fair value losses on non
-
hedge accounted interest rate swaps
3
(4)
\u2013
\u2013
\u2013
Net fair value losses on revaluation of other investments
accounted for at FVTPL
4
\u2013
\u2013
(24)
(24)
Foreign exchange differences and changes in forecast payments
relating to financial RRSAs
(4)
\u2013
\u2013
\u2013
Net fair value losses on commodity
contracts
(7)
\u2013
(18)
\u2013
Financing on post
-
retirement scheme deficits
(
38
)
\u2013
(39)
\u2013
Cost of undrawn facilities
(
9
)
(9)
(17)
(17)
Other financing charges
(
115
)
(
126
)
(133)
(123)
Financing costs
(4
79
)
(37
5
)
(1,224)
(437)
Net
financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
Analysed as:
Net interest
(
payable
)
/
receivable
(31)
25
(93)
(7)
Net fair value gains
/
(
losses
)
on derivative contracts
1,324
\u2013
(609)
\u2013
Net post
-
retirement scheme financing
(6)
\u2013
(2)
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Net other financing
(12
8
)
(13
5
)
(174)
(164)
Net financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
1 See note 2 for definition of underlying results
2 Includes interest income on cash balances and short-term deposits of \u00a3149m (2024: \u00a3188m) and similar income of \u00a3122m (2024: \u00a381m) on money market funds
3 The consolidated income statement shows the net fair value loss on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies
the fair value movements on these interest rates swaps to net interest payable
4 Included in the 2024 financing costs is a \u00a324m charge in relation to the fair value write down of an unlisted investment recorded at fair value through profit or loss (FVTPL)
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-690": { "value": "4 Net financing
202
5
202
4
Statutory
Underlying
1
Statutory
Underlying
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest receivable and similar income
2
271
265
269
266
Net fair value gains on foreign currency contracts
1,335
\u2013
\u2013
\u2013
Net fair value gains on
non
-
hedge accounted interest rate swaps
3
\u2013
\u2013
40
\u2013
Financing on post
-
retirement scheme surpluses
32
\u2013
37
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Financing income
2,13
7
265
536
266
In
terest payable
(302)
(240)
(362)
(273)
Net fair value losses on foreign currency contracts
\u2013
\u2013
(631)
\u2013
Net fair value losses on non
-
hedge accounted interest rate swaps
3
(4)
\u2013
\u2013
\u2013
Net fair value losses on revaluation of other investments
accounted for at FVTPL
4
\u2013
\u2013
(24)
(24)
Foreign exchange differences and changes in forecast payments
relating to financial RRSAs
(4)
\u2013
\u2013
\u2013
Net fair value losses on commodity
contracts
(7)
\u2013
(18)
\u2013
Financing on post
-
retirement scheme deficits
(
38
)
\u2013
(39)
\u2013
Cost of undrawn facilities
(
9
)
(9)
(17)
(17)
Other financing charges
(
115
)
(
126
)
(133)
(123)
Financing costs
(4
79
)
(37
5
)
(1,224)
(437)
Net
financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
Analysed as:
Net interest
(
payable
)
/
receivable
(31)
25
(93)
(7)
Net fair value gains
/
(
losses
)
on derivative contracts
1,324
\u2013
(609)
\u2013
Net post
-
retirement scheme financing
(6)
\u2013
(2)
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Net other financing
(12
8
)
(13
5
)
(174)
(164)
Net financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
1 See note 2 for definition of underlying results 2 Includes interest income on cash balances and short-term deposits of \u00a3149m (2024: \u00a3188m) and similar income of \u00a3122m (2024: \u00a381m) on money market funds 3 The consolidated income statement shows the net fair value loss on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies the fair value movements on these interest rates swaps to net interest payable 4 Included in the 2024 financing costs is a \u00a324m charge in relation to the fair value write down of an unlisted investment recorded at fair value through profit or loss (FVTPL)", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-685": { "value": "4 Net financing
202
5
202
4
Statutory
Underlying
1
Statutory
Underlying
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest receivable and similar income
2
271
265
269
266
Net fair value gains on foreign currency contracts
1,335
\u2013
\u2013
\u2013
Net fair value gains on
non
-
hedge accounted interest rate swaps
3
\u2013
\u2013
40
\u2013
Financing on post
-
retirement scheme surpluses
32
\u2013
37
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Financing income
2,13
7
265
536
266
In
terest payable
(302)
(240)
(362)
(273)
Net fair value losses on foreign currency contracts
\u2013
\u2013
(631)
\u2013
Net fair value losses on non
-
hedge accounted interest rate swaps
3
(4)
\u2013
\u2013
\u2013
Net fair value losses on revaluation of other investments
accounted for at FVTPL
4
\u2013
\u2013
(24)
(24)
Foreign exchange differences and changes in forecast payments
relating to financial RRSAs
(4)
\u2013
\u2013
\u2013
Net fair value losses on commodity
contracts
(7)
\u2013
(18)
\u2013
Financing on post
-
retirement scheme deficits
(
38
)
\u2013
(39)
\u2013
Cost of undrawn facilities
(
9
)
(9)
(17)
(17)
Other financing charges
(
115
)
(
126
)
(133)
(123)
Financing costs
(4
79
)
(37
5
)
(1,224)
(437)
Net
financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
Analysed as:
Net interest
(
payable
)
/
receivable
(31)
25
(93)
(7)
Net fair value gains
/
(
losses
)
on derivative contracts
1,324
\u2013
(609)
\u2013
Net post
-
retirement scheme financing
(6)
\u2013
(2)
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Net other financing
(12
8
)
(13
5
)
(174)
(164)
Net financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
1 See note 2 for definition of underlying results 2 Includes interest income on cash balances and short-term deposits of \u00a3149m (2024: \u00a3188m) and similar income of \u00a3122m (2024: \u00a381m) on money market funds 3 The consolidated income statement shows the net fair value loss on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies the fair value movements on these interest rates swaps to net interest payable 4 Included in the 2024 financing costs is a \u00a324m charge in relation to the fair value write down of an unlisted investment recorded at fair value through profit or loss (FVTPL)", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-677": { "value": "4 Net financing
202
5
202
4
Statutory
Underlying
1
Statutory
Underlying
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest receivable and similar income
2
271
265
269
266
Net fair value gains on foreign currency contracts
1,335
\u2013
\u2013
\u2013
Net fair value gains on
non
-
hedge accounted interest rate swaps
3
\u2013
\u2013
40
\u2013
Financing on post
-
retirement scheme surpluses
32
\u2013
37
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Financing income
2,13
7
265
536
266
In
terest payable
(302)
(240)
(362)
(273)
Net fair value losses on foreign currency contracts
\u2013
\u2013
(631)
\u2013
Net fair value losses on non
-
hedge accounted interest rate swaps
3
(4)
\u2013
\u2013
\u2013
Net fair value losses on revaluation of other investments
accounted for at FVTPL
4
\u2013
\u2013
(24)
(24)
Foreign exchange differences and changes in forecast payments
relating to financial RRSAs
(4)
\u2013
\u2013
\u2013
Net fair value losses on commodity
contracts
(7)
\u2013
(18)
\u2013
Financing on post
-
retirement scheme deficits
(
38
)
\u2013
(39)
\u2013
Cost of undrawn facilities
(
9
)
(9)
(17)
(17)
Other financing charges
(
115
)
(
126
)
(133)
(123)
Financing costs
(4
79
)
(37
5
)
(1,224)
(437)
Net
financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
Analysed as:
Net interest
(
payable
)
/
receivable
(31)
25
(93)
(7)
Net fair value gains
/
(
losses
)
on derivative contracts
1,324
\u2013
(609)
\u2013
Net post
-
retirement scheme financing
(6)
\u2013
(2)
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Net other financing
(12
8
)
(13
5
)
(174)
(164)
Net financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
1 See note 2 for definition of underlying results 2 Includes interest income on cash balances and short-term deposits of \u00a3149m (2024: \u00a3188m) and similar income of \u00a3122m (2024: \u00a381m) on money market funds 3 The consolidated income statement shows the net fair value loss on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies the fair value movements on these interest rates swaps to net interest payable 4 Included in the 2024 financing costs is a \u00a324m charge in relation to the fair value write down of an unlisted investment recorded at fair value through profit or loss (FVTPL)", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-626": { "value": "4 Net financing
202
5
202
4
Statutory
Underlying
1
Statutory
Underlying
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest receivable and similar income
2
271
265
269
266
Net fair value gains on foreign currency contracts
1,335
\u2013
\u2013
\u2013
Net fair value gains on
non
-
hedge accounted interest rate swaps
3
\u2013
\u2013
40
\u2013
Financing on post
-
retirement scheme surpluses
32
\u2013
37
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Financing income
2,13
7
265
536
266
In
terest payable
(302)
(240)
(362)
(273)
Net fair value losses on foreign currency contracts
\u2013
\u2013
(631)
\u2013
Net fair value losses on non
-
hedge accounted interest rate swaps
3
(4)
\u2013
\u2013
\u2013
Net fair value losses on revaluation of other investments
accounted for at FVTPL
4
\u2013
\u2013
(24)
(24)
Foreign exchange differences and changes in forecast payments
relating to financial RRSAs
(4)
\u2013
\u2013
\u2013
Net fair value losses on commodity
contracts
(7)
\u2013
(18)
\u2013
Financing on post
-
retirement scheme deficits
(
38
)
\u2013
(39)
\u2013
Cost of undrawn facilities
(
9
)
(9)
(17)
(17)
Other financing charges
(
115
)
(
126
)
(133)
(123)
Financing costs
(4
79
)
(37
5
)
(1,224)
(437)
Net
financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
Analysed as:
Net interest
(
payable
)
/
receivable
(31)
25
(93)
(7)
Net fair value gains
/
(
losses
)
on derivative contracts
1,324
\u2013
(609)
\u2013
Net post
-
retirement scheme financing
(6)
\u2013
(2)
\u2013
Net foreign exchange gains
499
\u2013
190
\u2013
Net other financing
(12
8
)
(13
5
)
(174)
(164)
Net financing income/(costs)
1,65
8
(11
0
)
(688)
(171)
1 See note 2 for definition of underlying results 2 Includes interest income on cash balances and short-term deposits of \u00a3149m (2024: \u00a3188m) and similar income of \u00a3122m (2024: \u00a381m) on money market funds 3 The consolidated income statement shows the net fair value loss on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies the fair value movements on these interest rates swaps to net interest payable 4 Included in the 2024 financing costs is a \u00a324m charge in relation to the fair value write down of an unlisted investment recorded at fair value through profit or loss (FVTPL)", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-627": { "value": "5 Taxation
UK
Overseas
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Current tax charge for the year
39
30
730
379
769
409
Current tax charge in respect of Pillar Two
income taxes
2
2
\u2013
\u2013
2
2
Adjustments in respect of prior years
(9)
\u2013
79
(18)
70
(18)
Current tax
32
32
809
361
841
393
Deferred tax charge for the year
726
265
50
3
776
268
Adjustments in respect of prior years
12
17
(25)
(47)
(13)
(30)
Recognition of deferred tax
(563)
(1,033)
\u2013
\u2013
(563)
(1,033)
Derecognition of advance corporation tax
\u2013
162
\u2013
\u2013
\u2013
162
Deferred tax charge resulting from an
decrease in the overseas tax rate
\u2013
\u2013
58
\u2013
58
\u2013
Deferred tax credit resulting from a
decrease in UK tax rate
\u2013
(10)
\u2013
\u2013
\u2013
(10)
Deferred tax
175
(599)
83
(44)
258
(643)
C
harged
/(credited)
in the
income statement
207
(567)
892
317
1,099
(250)
Other tax credits/(charges)
OCI
Equity
Items that will not be Items that will be reclassified
reclassified
2025 2024 2025 2024 2025 2024
Deferred tax:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Movement in
post
-
retirement schemes
115
61
\u2013
\u2013
\u2013
\u2013
Cash flow hedge
\u2013
\u2013
3
(1)
\u2013
\u2013
Net investment hedge
\u2013
\u2013
2
(2)
\u2013
\u2013
Share
-
based payments
\u2013
direct to equity
\u2013
\u2013
\u2013
\u2013
76
71
Other tax credits/(charges)
115
61
5
(3)
76
71
Tax reconciliation
202
5
202
4
\u00a3m
\u00a3m
Profit before taxation
6,935
2,234
Less: share of
profits
of joint ventures and associates (note 1
2
)
(71)
(137)
Profit
before taxation excluding joint ventures and associates
6,864
2,097
Nominal ta
x
charge
a
t UK corporation tax
rate
25%
(2024: 25%)
1,716
524
Overseas rate differences
1
40
27
US state taxes
18
23
Exempt gain on disposal of businesses
2
(185)
\u2013
Tax de
-
grouping charge
3
\u2013
102
Other permanent differences
4
5
12
Tax losses
and other temporary differences not recognised in deferred tax
5
11
3
Derecognition of deferred tax
\u2013
30
Benefit arising from previously unrecognised other temporary differences
6
(
27
)
(
42
)
Recognition of deferred tax
7
(
563
)
(1,033)
Utilisation of previously unrecognised UK tax losses
(31)
\u2013
Adjustments in respect of prior years
57
(48)
Derecognition of advance corporation tax
8
\u2013
162
Increase in deferred taxes resulting from a change in the overseas tax rate
9
58
\u2013
Decrease in deferred taxes resulting from a change in the UK tax rate
10
\u2013
(10)
1,099
(250)
Underlying items (
note 2)
593
282
Non
-
underlying items
506
(532)
1,099
(250)
1 Overseas rate differences mainly relate to tax on profits or losses in countries such as Germany 2 Relates primarily to deconsolidation of Rolls-Royce SMR Limited 3 The tax de-grouping charge in 2024 arose on the dilution of the shareholding in Rolls-Royce SMR Limited to below 75% 4 Includes \u00a32m (2024: \u00a32m) relating to Pillar two income taxes 5 Relates to tax losses not recognised 6 Relates to foreign exchange derivatives 7 The recognition of deferred tax relates to UK tax losses 8 Advance corporation tax was de-recognised in 2024 on the basis that payment of cash dividends will prevent the utilisation 9 Represents the impact to the income statement of the gradual reduction in the German Federal corporate income tax rate from 15% to 10% 10 Represents the impact to the income statement of the reduction in the tax rate on authorised surplus pension charges from 35% to 25% in 2024 Deferred taxation assets and liabilities
2025 2024
\u00a3m \u00a3m
At 1 January
3,429
2,668
Amount
(
charged
)
/
credited
to income statement
(258)
643
Amount credited to OCI
117
59
Amount
credited/(charged)
to hedging reserves
3
(1)
Amount
credited
to equity
76
71
Transferred to assets held for distribution
1
(453)
\u2013
Exchange differences
(9)
(11)
At 31 December
2,905
3,429
Deferred tax assets
2,980
3,660
Deferred tax liabilities
(75)
(231)
2,905
3,429
1 At 31 December 2025, \u00a3453m of deferred tax assets were reclassified to assets held for distribution, see note 27 for further details The analysis of the deferred tax position is as follows:
Transferred
Recognised to held for
in income Recognised in Recognised in sale and Exchange At
At 1 January statement OCI equity
distribution
1
differences 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
2025
Intangible assets
(613)
(8)
\u2013
\u2013
220
(16)
(417)
Property, plant and equipment
142
(80)
\u2013
\u2013
111
8
181
Other temporary differences
2
874
(7)
5
13
(653)
(1)
231
Net contract liabilities
63
(3)
\u2013
\u2013
\u2013
\u2013
60
Pensions and other post-retirement scheme
benefits
(54)
(23)
115
\u2013
(99)
(3)
(64)
Foreign exchange and commodity financial
assets and liabilities
488
(506)
\u2013
\u2013
(25)
2
(41)
Losses
2,481
420
\u2013
63
(7)
\u2013
2,957
R&D credit
48
(51)
\u2013
\u2013
\u2013
1
(2)
3,429
(258)
120
76
(453)
(9)
2,905
Intangible assets
(431)
(191)
\u2013
\u2013
\u2013
9
(613)
Property, plant and equipment
229
(87)
\u2013
\u2013
\u2013
\u2013
142
Other temporary differences
2
752
77
(3)
62
\u2013
(14)
874
Net contract liabilities
60
3
\u2013
\u2013
\u2013
\u2013
63
Pensions and other post-retirement scheme
benefits
(123)
10
61
\u2013
\u2013
(2)
(54)
Foreign exchange and commodity financial
assets and liabilities
451
40
\u2013
\u2013
\u2013
(3)
488
Losses
1,489
984
\u2013
9
\u2013
(1)
2,481
R&D credit
79
(31)
\u2013
\u2013
\u2013
\u2013
48
Advance corporation tax
3
162
(162)
\u2013
\u2013
\u2013
\u2013
\u2013
2,668
643
58
71
\u2013
(11)
3,429
2024 1 At 31 December 2025, \u00a3453m of deferred tax assets were reclassified to assets held for distribution, see note 27 for further details 2 Other temporary differences mainly relate to the deferral of relief for interest expenses and share based payments in the UK and revenue recognised earlier under local GAAP compared to IFRS in Germany. The amount recognised in the income statement includes a \u00a31m credit (2024: \u00a38m credit) relating to share-based payments 3 Prior to 1999 advance corporation tax (\"ACT\") was paid to the UK Tax Authority when cash dividends were paid by the Group. This was a payment on account which was available to offset against UK corporation tax liabilities. Any unused balance remaining after 1999 can be carried forward indefinitely and utilised against future UK corporation tax liabilities. See page 62 for further details Unrecognised deferred tax assets
202
5
202
4
\u00a3m
\u00a3m
Advance corporation tax
1
162
181
UK losses
1
\u2013
629
Foreign exchange and
commodity financial assets and liabilities
\u2013
27
Losses and other unrecognised deferred tax assets
1
13
47
Deferred tax not recognised on unused tax losses and other items on the basis that future
economic benefit is uncertain
175
884
1 At 31 December 2025, the Group reclassified the assets and liabilities relating of certain entities to assets and liabilities associated with assets held for distribution (see note 27 for further details on this reclassification of assets and liabilities). The unrecognised tax asset related to these entities held for distribution is \u00a366m, of which \u00a319m relates to advance corporation tax Gross amount and expiry of losses and other deductible temporary differences for which no deferred tax asset has been recognised.
2025
Total gross losses Foreign exchange
and deductible and commodity
temporary financial assets Other
differences UK losses and liabilities losses
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Expiry within five years
\u2013
\u2013
\u2013
\u2013
Expiry within six to 30 years
\u2013
\u2013
\u2013
\u2013
No expiry
53
\u2013
\u2013
53
53
\u2013
\u2013
53
2024
Total gross losses Foreign exchange
and deductible and commodity
temporary financial assets Other
differences UK losses and liabilities losses
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Expiry within five years
75
\u2013
\u2013
75
Expiry within six to 30 years
218
\u2013
\u2013
218
No expiry
2,698
2,515
107
76
2,991
2,515
107
369
Advance corporation tax was derecognised in 2024 following the Group's announcement to reinstate shareholder distributions via cash dividends. In addition to the gross balances shown above, advance corporation tax of \u00a3162m (2024: \u00a3181m) has not been recognised as a result of the assessment performed over the time period over which this could be recovered, when taking into account both shadow and surplus advance corporation tax. The balance of \u00a3162m excludes \u00a319m of advance corporation tax related to entities classified as held for distribution at 31 December 2025, see note 27 for further details. Advance corporation tax has no expiry. See below for developments following the 2025 Autumn Budget. Of the total deferred tax asset of \u00a32,980m, \u00a32,819m (2024: \u00a33,099m) relates to the UK and is made up as follows: - \u00a32,954m (2024: \u00a32,472m) relating to tax losses; - \u00a3(40)m (2024: \u00a3425m) arising on unrealised losses on derivative contracts; - \u00a3(95)m (2024: \u00a3202m) relating to other deductible temporary differences, in particular tax depreciation and relief for interest expenses. The UK deferred tax assets primarily arise in Rolls-Royce plc and have been recognised based on the expectation that the business will generate taxable profits and tax liabilities in the future against which the losses and deductible temporary differences can be utilised. Most of the UK tax losses relate to the Civil Aerospace large engine business which makes initial losses through the investment period of a programme and then makes a profit through its contracts for services. The programme lifecycles are typically in excess of 30 years. Deferred tax assets are recognised only to the extent it is probable that future taxable profits will be available against which the assets can be utilised. Where necessary, this is based on management\u2019s assumptions and probability assessments relating to the amounts and timing of future taxable profits. The Directors continually reassess the appropriateness of recovering deferred tax assets, which includes a consideration of the level of future profits and the time period over which they are recovered. A recoverability assessment has been undertaken, taking account of deferred tax liabilities against which the reversal can be offset and using latest UK forecasts, which are mainly driven by the Civil Aerospace large engine business, to assess the level of future taxable profits. The recoverability of deferred tax assets has been assessed on the following basis: \u2013 using the most recent UK profit forecasts, covering the next five years which are consistent with external sources on market conditions; \u2013 the long-term forecast profit profile of existing large engine programmes which are typically in excess of 30 years from initial investment to retirement of the fleet, including the aftermarket revenues earned from airline customers; \u2013 the long-term forecast is adjusted to exclude engine programmes which are in the development stage with no confirmed orders; \u2013 taking into account the risk that regulatory changes could materially impact demand for our products; \u2013 consideration that although all Civil Aerospace large engines are compatible with sustainable fuels, there is a risk that in the longer term demand will shift towards more sustainable products and solutions; \u2013 the long-term forecast profit and cost profile of the other parts of the UK business; \u2013 taking into consideration past performance and experience, including the fact that the UK business returned to profitability in 2023; and \u2013 reflecting the sustained profitability and continued growing financial resilience of the Group, modelling is based on 100% probability of a base case forecast (2024: 75% base case and 25% downside forecast). It also reflects the fact that the Group\u2019s multi-year transformation continues to deliver despite the current volatility in macro-economic variables and an external environment that remains challenging, including geopolitical tensions, the uncertainty introduced by tariffs and supply chain challenges. Delivery against the Group\u2019s strategic initiatives continues to expand the earnings potential of the business. The assessment takes into account UK tax laws that, in broad terms, restrict the offset of carried forward tax losses to 50% of current year profits. In addition, the amounts and timing of future taxable profits incorporate: \u2013 the impact of significant Civil Aerospace large engine orders in 2025 and improvements in large engine LTSA business plans; \u2013 latest assessment of the time period over which future probable profits are expected to arise for Civil large engine programmes; \u2013 the outcomes of strategic initiatives, including contractual margin improvements and cost reduction; \u2013 the continued growth in Civil Aerospace engine flying hours; and \u2013 management\u2019s assumptions on the impact of macro-economic factors and climate change on the UK business. The climate change scenarios previously prepared to assess the viability of our business strategy, decarbonisation plans and approach to managing climate-related risks remain consistent with those at 31 December 2024. The scale up of sustainable aviation fuel is expected to play a crucial role in reaching net zero carbon emissions by 2050 and the Group has demonstrated that all the commercial aero engines it produces are compatible for use with sustainable fuels. The impact that this could have on our costs and customer pricing is factored into the deferred tax assessment. However, benefits that may arise in the future from the development of breakthrough new technologies are not taken into account. Based on the assessment, the Group has recognised a total deferred tax asset relating to UK tax losses of \u00a32,954m (2024: \u00a32,472m), which includes the recognition of a further \u00a3563m (2024: \u00a31,033m) of previously unrecognised deferred tax asset relating to UK tax losses (of which \u00a3286m is non-underlying and \u00a3277m is underlying). This reflects the conclusions that: \u2014 based on current financial results and an improved outlook it is probable that the UK business will generate taxable income and tax liabilities in the future against which these losses can be utilised; and \u2014 using current forecasts and various scenarios these losses will be used in full within eight-15 years, which is within the expected programme lifecycles. As stated above, the ACT balance of \u00a3162m remains unrecognised at 31 December 2025. The Group is closely monitoring developments following the announcement in the 2025 Autumn Budget that the shadow ACT regime will be repealed, effective from 1 April 2026. The statutory instrument is not yet published so the legislation is not substantively enacted at the balance sheet date. This will be considered for future accounting periods. Any future changes in tax law or the structure of the Group could have a significant effect on the use of losses and other deductible temporary differences, including the period over which they can be used. In view of this and the significant judgement involved, the Board continuously reassesses this area. The Group is within the scope of the OECD Pillar Two (Global Minimum Tax) model rules, which came into effect from 1 January 2024. For the period to 31 December 2025, the Group has continued to apply the mandatory exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. The temporary differences associated with investments in subsidiaries, joint ventures and associates, for which a deferred tax liability has not been recognised, aggregate to \u00a32,825m (2024: \u00a31,558m). No deferred tax liability has been recognised on the potential withholding tax due on the remittance of undistributed profits as the Group is able to control the timing of such remittances and it is probable that consent will not be given in the foreseeable future. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-662": { "value": "Deferred taxation assets and liabilities
2025 2024
\u00a3m \u00a3m
At 1 January
3,429
2,668
Amount
(
charged
)
/
credited
to income statement
(258)
643
Amount credited to OCI
117
59
Amount
credited/(charged)
to hedging reserves
3
(1)
Amount
credited
to equity
76
71
Transferred to assets held for distribution
1
(453)
\u2013
Exchange differences
(9)
(11)
At 31 December
2,905
3,429
Deferred tax assets
2,980
3,660
Deferred tax liabilities
(75)
(231)
2,905
3,429
1 At 31 December 2025, \u00a3453m of deferred tax assets were reclassified to assets held for distribution, see note 27 for further details The analysis of the deferred tax position is as follows:
Transferred
Recognised to held for
in income Recognised in Recognised in sale and Exchange At
At 1 January statement OCI equity
distribution
1
differences 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
2025
Intangible assets
(613)
(8)
\u2013
\u2013
220
(16)
(417)
Property, plant and equipment
142
(80)
\u2013
\u2013
111
8
181
Other temporary differences
2
874
(7)
5
13
(653)
(1)
231
Net contract liabilities
63
(3)
\u2013
\u2013
\u2013
\u2013
60
Pensions and other post-retirement scheme
benefits
(54)
(23)
115
\u2013
(99)
(3)
(64)
Foreign exchange and commodity financial
assets and liabilities
488
(506)
\u2013
\u2013
(25)
2
(41)
Losses
2,481
420
\u2013
63
(7)
\u2013
2,957
R&D credit
48
(51)
\u2013
\u2013
\u2013
1
(2)
3,429
(258)
120
76
(453)
(9)
2,905
Intangible assets
(431)
(191)
\u2013
\u2013
\u2013
9
(613)
Property, plant and equipment
229
(87)
\u2013
\u2013
\u2013
\u2013
142
Other temporary differences
2
752
77
(3)
62
\u2013
(14)
874
Net contract liabilities
60
3
\u2013
\u2013
\u2013
\u2013
63
Pensions and other post-retirement scheme
benefits
(123)
10
61
\u2013
\u2013
(2)
(54)
Foreign exchange and commodity financial
assets and liabilities
451
40
\u2013
\u2013
\u2013
(3)
488
Losses
1,489
984
\u2013
9
\u2013
(1)
2,481
R&D credit
79
(31)
\u2013
\u2013
\u2013
\u2013
48
Advance corporation tax
3
162
(162)
\u2013
\u2013
\u2013
\u2013
\u2013
2,668
643
58
71
\u2013
(11)
3,429
2024 1 At 31 December 2025, \u00a3453m of deferred tax assets were reclassified to assets held for distribution, see note 27 for further details 2 Other temporary differences mainly relate to the deferral of relief for interest expenses and share based payments in the UK and revenue recognised earlier under local GAAP compared to IFRS in Germany. The amount recognised in the income statement includes a \u00a31m credit (2024: \u00a38m credit) relating to share-based payments 3 Prior to 1999 advance corporation tax (\"ACT\") was paid to the UK Tax Authority when cash dividends were paid by the Group. This was a payment on account which was available to offset against UK corporation tax liabilities. Any unused balance remaining after 1999 can be carried forward indefinitely and utilised against future UK corporation tax liabilities. See page 62 for further details ", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-663": { "value": "The Group is within the scope of the OECD Pillar Two (Global Minimum Tax) model rules, which came into effect from 1 January 2024. For the period to 31 December 2025, the Group has continued to apply the mandatory exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. ", "dimensions": { "concept": "ifrs-full:DisclosureOfKnownOrReasonablyEstimableInformationAboutExposureToPillarTwoIncomeTaxesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-587": { "value": "
6 Auditors\u2019 remuneration
202
5
202
4
\u00a3m
\u00a3m
Fees
payable to the Company\u2019s auditors for the audit of the Company\u2019s Annual Financial Statements
6.2
7.1
Fees payable to the Company\u2019s auditor and its associates for the audit of the Company\u2019s subsidiaries
pursuant to legislation
5.5
5.3
Total
fees payable for audit services
11.
7
12.4
Fees payable to the Company\u2019s auditor and its associates for other services:
Audit related assurance services
1
0.7
0.7
Other assurance services
2
0.1
0.1
Total fees payable to the Company\u2019s auditor and its associates
3
12.
5
13.2
Fees payable in respect of the Group\u2019s pension schemes:
Audit
0.1
0.1
1 This includes \u00a30.7m (2024: \u00a30.7m) for the review of the half-year report
2 This includes \u00a30.1m (2024: \u00a30.1m) in respect of agreed upon procedures in respect of levies payable and \u00a3nil for sustainability assurance work (2024: \u00a3nil)
3 Audit fees for overseas entities are reported at the average exchange rate for the year
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-588": { "value": "7 Employee information
202
5
202
4
Number
1
Number
1
United Kingdom
22,100
21,900
Germany
9,900
10,000
United
States
5,300
5,300
Italy
1,000
900
Singapore
700
700
Canada
700
700
India
700
600
China
500
500
Israel
300
300
France
200
200
Rest of world
1,200
1,300
Monthly average number of employees
42,600
42,400
Civil
Aerospace
19,400
18,700
Defence
12,800
12,500
Power Systems
10,000
9,900
All Other Businesses
2
200
1,200
Corporate
3
200
100
Monthly average number of employees
42,600
42,400
202
5
202
4
Total
Total
\u00a3m
\u00a3m
Wages, salaries and benefits
3,107
3,056
Social security costs
43
7
369
Share
-
based payments (note 24)
10
4
136
Pensions and other post
-
retirement scheme benefits (note 22)
403
3
87
Group employment costs
4
4,051
3,948
1 Employee numbers have been rounded to the nearest hundred 2 Following the decision to exit the Group\u2019s advanced air mobility activities in 2024 and the relinquishment of control of Rolls-Royce SMR Limited on 4 March 2025 the results of those activities in both 2024 and 2025 have been reported within All Other Business. The employee information above contains two months of Rolls-Royce SMR Limited employee information, following the relinquishment of control of Rolls-Royce SMR Limited in March 2025 the employee information of Rolls-Royce SMR Limited was not included within the monthly average number of employees for the Group 3 Corporate consists of employees who do not provide a shared service to the segments. Where corporate functions provide such a service, employees have been allocated to the segments on an appropriate basis 4 Remuneration of key management personnel is shown in note 26 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-589": { "value": "
8 Goodwill
In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group\u2019s CGUs, or groups of CGUs, that are
expected to benefit from the synergies of the business combination that gave rise to the goodwill as follows:
Rolls-Royce Rolls-Royce
Power Systems Deutschland Ltd &
AG
Co KG
Other
1
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
798
240
63
1,101
Transferred to assets held for sale
2
\u2013
\u2013
(25)
(25)
Exchange differences
(19)
(11)
(1)
(31)
At 31 December 2024
779
229
37
1,045
Transferred from assets held for sale
2
\u2013
\u2013
2
2
Transferred to assets held for distribution
3
(787)
(240)
(2
4
)
(1,0
51
)
Disposal of
business
\u2013
\u2013
(2)
(2)
Disposals
\u2013
\u2013
(10)
(10)
Exchange differences
8
11
\u2013
19
At 31 December 2025
\u2013
\u2013
3
3
Accumulated amortisation and impairment:
At 1 January 2024
\u2013
3
32
35
Impairment
4
\u2013
\u2013
13
13
Transferred to assets held for sale
2
\u2013
\u2013
(12)
(12)
At 31 December 2024
\u2013
3
33
36
Transferred from assets held for sale
2
\u2013
\u2013
2
2
Transferred to assets held for distribution
3
\u2013
(3)
(
23
)
(
26
)
Disposal
of
business
\u2013
\u2013
(2)
(2)
Disposals
\u2013
\u2013
(10)
(10)
At 31 December 2025
\u2013
\u2013
\u2013
\u2013
Net book value at:
At 31 December 2025
\u2013
\u2013
3
3
At 31 December 2024
779
226
4
1,009
1 Goodwill balances that are not considered to be individually significant were also tested for impairment
2 At 31 December 2024 the Group held for sale the goodwill allocated to the naval propulsors & handling business. During the year goodwill with a net book value of \u00a3nil was transferred into
and out of assets held for sale relating to the naval propulsors business and naval handling business respectively. The assets and liabilities of the naval propulsors business were disposed of
on 1 July 2025 and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details
3 At 31 December 2025, \u00a31,051m of cost and \u00a326m of amortisation were reclassified to assets held for distribution. See note 27 for further details
4 During 2024 the Group impaired \u00a313m of goodwill due to the closure of its electrical advanced air mobility activities
The Directors have reviewed the presentation of the Balance Sheet during the year and believe that presenting goodwill separately from the
remaining intangible assets is relevant to an understanding of the entity's financial position and provides more useful information to the users of
the Annual Report and Financial Statements. The comparative balance at 31 December 2024 has also been represented for comparability.
The carrying amount of goodwill allocated across multiple CGUs is not significant in comparison with the Group's total carrying amount of
goodwill.
Goodwill has been tested for impairment during 2025 on the following basis:
\u2013 the carrying values of goodwill have been assessed by reference to the value in use;
\u2013 these have been estimated using cash flows from the most recent forecasts prepared by the Directors, which are consistent with past
experience and external sources of information on market conditions. These forecasts generally cover the next five years. Growth rates for
the period not covered by the forecasts are based on growth rates of 2% which reflects the products, industries and countries in which the
relevant CGU or group of CGUs operate. Inflation has been included based on contractual commitments where relevant. Where general
inflation assumptions have been required, these have been estimated based on externally sourced data. General inflation assumptions of 2%
to 3% have been included in the forecasts, depending on the nature and geography of the flows;
\u2013 the key forecast assumptions for the impairment tests are the discount rate and the cash flow projections, in particular the programme
assumptions (such as sales volumes and product costs), the impact of foreign exchange rates on the relationship between selling prices and
costs, and growth rates. Impairment tests are performed using prevailing exchange rates; and
\u2013 the Group believes there are significant business growth opportunities to come from Rolls-Royce playing a leading role in the transition to
net zero as we develop and deliver the products that will support our customers through the energy transition across multiple markets. At the
same time climate change poses potentially significant risks. The assumptions used by the Directors are based on past experience and external
sources of information. Based on the climate scenarios prepared, the forecasts do not assume a significant deterioration of demand for Civil
Aerospace (including Rolls-Royce Deutschland) programmes given that all commercial aero engines are compatible with sustainable fuels.
Similarly, the majority of the portfolio in Power Systems is now compatible with alternative and more sustainable fuels. The investment required
to ensure our new products will be compatible with net zero operation, and to achieve net zero Scope 1 + 2 GHG emission commitments is
reflected in the forecasts used.
A 1.5\u00b0C scenario has been prepared using key data points from external sources, including Oxford Economic Global Climate Service and Databank
and the International Energy Agency. This scenario has been used as the basis of a sensitivity. It is assumed that governments adopt stricter
product and behavioural standards and measures that result in higher carbon pricing. Under these conditions, it is assumed that markets are
willing to pay for low carbon solutions and that there is an economic return from strategic investments in low carbon alternatives. The sensitivity
has considered the likelihood of demand changes for our products based on their relative fuel efficiency in the marketplace and the probability
of alternatives being introduced earlier than currently expected. The sensitivity also reflects the impact of a broad range of potential costs
imposed by policy or regulatory interventions (through carbon pricing). This sensitivity does not indicate the need for an impairment charge.
The principal assumptions for the impairment testing of goodwill balances that are considered to be individually significant are:
Cash-generating unit (CGU)
or group of CGUs
1 Nominal pre-tax 2 Downside
Primary Key trading assumptions Growth rate scenario
discount rate 3
operating
weighting
segment
e.g. volume of equipment
2025
2024
2025
2024
2025
2024
Rolls-Royce Power Systems Power deliveries; pricing
AG Systems
achieved; cost escalation
10.7
%
10.2%
2
%
2%
2
5
%
25%
e.g. volume of engine
Rolls-Royce Deutschland Civil deliveries, flying hours of
Ltd & Co KG Aerospace installed fleet, cost
escalation
11.7
%
12.6%
2%
2%
25%
25%
1 Trading assumptions are based on current and known future programmes, estimates of market share and long-term economic forecasts
2 Growth rate at which cash flows beyond the five-year forecasts are assumed to grow
3 Weighting of the plausible downside scenario in relation to macro-economic factors
The Directors do not consider that any reasonably possible changes in the key assumptions (including taking consideration of the climate-
related risks above) would cause the value in use of the goodwill to fall below its carrying value.
9 Intangible assets
Certification Development Customer
costs expenditure relationships
Software
1
Other
2
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
:
At 1 January 2024
930
3,763
498
1,004
699
6,894
Additions
\u2013
263
\u2013
96
8
367
Transferred to
assets
held for sale
3
\u2013
(4)
(4)
(1)
\u2013
(9)
Disposals
4
\u2013
(3)
(13)
(77)
(2)
(95)
Exchange differences
(1)
(63)
(12)
(4)
(17)
(97)
At 31 December 2024
929
3,956
469
1,018
688
7,060
Additions
31
222
\u2013
105
6
364
Transferred
from
assets held for sale
3
\u2013
3
4
\u2013
(4)
3
Transferred to assets held for distribution
5
(62)
(1,247)
(56)
(187)
(293)
(
1,845
)
Disposals
6
\u2013
(422)
(415)
(26)
(122)
(985)
Exchange differences
2
62
2
\u2013
16
8
2
At 31 December
2025
900
2,574
4
910
291
4,679
Accumulated amortisation and impairment
:
At 1 January 2024
467
1,976
433
718
357
3,951
Charge for the year
7
27
96
35
78
19
255
Impairment
8
\u2013
(405)
\u2013
\u2013
17
(388)
Transferred to
assets
held for sale
3
\u2013
(4)
(4)
(1)
\u2013
(9)
Disposals
4
\u2013
\u2013
(13)
(69)
(2)
(84)
Exchange differences
(1)
(37)
(10)
(3)
(7)
(58)
At 31 December 2024
493
1,626
441
723
384
3,667
Charge for the year
7
31
107
7
68
22
235
Impairment
9
(3)
(4)
\u2013
\u2013
13
6
Transferred
from
assets held for sale
3
\u2013
3
4
\u2013
(4)
3
Transferred to assets held for distribution
5
(16)
(338)
(33)
(114)
(117)
(618)
Disposals
6
\u2013
(422)
(415)
(23)
(122)
(982)
Exchange differences
1
18
\u2013
\u2013
6
25
At 31 December
2025
506
990
4
654
182
2,336
Net book value
at:
At 31 December
2025
394
1,584
\u2013
256
109
2,343
At 31 December 2024
436
2,330
28
295
304
3,393
1 Includes \u00a3127m (2024: \u00a3100m) of software under course of construction which is not amortised
2 Other intangible assets includes trademarks, brands and the costs incurred testing and analysing engines with the longest time in service (fleet leader engines) to gather technical knowledge
on engine endurance which will improve reliability and enable the Group to reduce the costs of meeting LTSA obligations
3 At 31 December 2024 the Group held for sale the assets and liabilities of the naval propulsors & handling business. During the year intangible assets with a net book value of \u00a3nil were
transferred into and out of assets held for sale relating to the naval propulsors business and naval handling business respectively. The assets and liabilities of the naval propulsors business
were disposed of on 1 July 2025 and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details
4 During 2024 the Group disposed of its lower power range engine business based in Power Systems
5 At 31 December 2025, \u00a31,845m of cost and \u00a3618m of amortisation were reclassified to assets held for distribution, see note 27 for further details
6 During 2025 the majority of disposals relate to the derecognition of assets that are fully amortised and where no future economic benefits are expected from their use or disposal
7 Charged to cost of sales and commercial and administrative costs except development costs, which are charged to research and development costs
8 The 2024 impairment charge included \u00a317m of other impairment (related to IP) resulting from the closure of the Group\u2019s electrical advanced air mobility activities. It also included the reversal
of a Civil Aerospace programme asset impairment recognised in 2020, with \u00a3413m credited to research and development within the non-underlying income statement
9 The 2025 impairment charge includes a partial impairment reversal of a Civil Aerospace \u2013 Trent programme asset that had been fully impaired by 30 June 2020. A reversal of \u00a310m has been
credited, with \u00a34m recognised in cost of sales and \u00a36m in research and development within the non-underlying income statement. See further details below
At 31 December 2025, the Group had expenditure commitments for software of \u00a316m (2024: \u00a328m).
The carrying amount of intangible assets allocated across multiple CGUs is not significant in comparison with the Group's total carrying amount
of intangible assets with indefinite useful lives.
Material intangible assets The carrying amount and the residual life of the material intangible assets (excluding goodwill) for the Group is as follows:
Residual life
1
Net book value
202
5
202
4
\u00a3m
\u00a3m
Trent programme intangible assets
2
1
-
15 years
1,993
2,001
Business aviation programme intangible assets
3
9
-
15 years
\u2013
674
Intangible assets related to Power Systems
4
\u2013
309
1,993
2,984
1 Residual life reflects the remaining amortisation period of those assets where amortisation has commenced. As per page 47, the amortisation period of 15 years will commence on those assets which are not being amortised as the units are delivered 2 Included within the Trent programmes are the Trent 1000, Trent 7000 and Trent XWB 3 At 31 December 2025, \u00a3814m of intangible assets relating to Pearl 700, Pearl 15 and Pearl 10X were reclassified to assets held for distribution, see note 27 for further details 4 At 31 December 2025 intangible assets of \u00a3323m relating to Rolls-Royce Power Systems were reclassified to assets held for distribution Intangible assets (including programme intangible assets) have been reviewed for impairment in accordance with IAS 36 Impairment of Assets. Assessments have considered potential triggers of impairment such as external factors including climate change, significant programme changes and by analysing latest management forecasts against those prepared in 2024 to identify any change in performance. Where a trigger event has been identified, an impairment test has been carried out. Where an impairment test was required, it was performed on the following basis: - The carrying values have been assessed by reference to value in use. These have been estimated using cash flows from the most recent forecasts prepared by the Directors, which are consistent with past experience and external sources of information on market conditions over the lives of the respective programmes; and - The key assumptions underpinning cash flow projections are based on estimates of product performance related estimates, future market share and pricing and cost for uncontracted business. Climate related risks are considered when making these estimates consistent with the assumptions above. An intangible asset impairment reversal of \u00a310m was recognised together with a property, plant and equipment impairment reversal of \u00a346m (see note 10) and a lease right-of-use asset impairment reversal of \u00a3129m (see note 11) being recognised in cost of sales (\u00a3179m) and research and development (\u00a36m) in the year as follows: 1 The equivalent pre-tax nominal discount rate in 2020 when the impairment was recognised was 11.0% The recoverable amount calculated includes passage of time benefits in addition to those from the impairment reversal trigger drivers described above and has resulted in a partial impairment reversal. In making this assessment, the Directors have considered a range of sensitivities in relation to the aftermarket returns, cost increases and discount rates. There have been no other individually material impairment charges or reversals recognised during the year (2024: reversal of \u00a3413m).
Impairment reversal
Intangible Right-of- Property, Pre-tax nominal
Assets use assets plant and Total discount rate at
equipment
30 June 2025
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Civil Aerospace \u2013 Trent programme assets
10
129
46
185
12.0%
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-628": { "value": "8 Goodwill In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group\u2019s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the business combination that gave rise to the goodwill as follows:
Rolls-Royce Rolls-Royce
Power Systems Deutschland Ltd &
AG
Co KG
Other
1
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
798
240
63
1,101
Transferred to assets held for sale
2
\u2013
\u2013
(25)
(25)
Exchange differences
(19)
(11)
(1)
(31)
At 31 December 2024
779
229
37
1,045
Transferred from assets held for sale
2
\u2013
\u2013
2
2
Transferred to assets held for distribution
3
(787)
(240)
(2
4
)
(1,0
51
)
Disposal of
business
\u2013
\u2013
(2)
(2)
Disposals
\u2013
\u2013
(10)
(10)
Exchange differences
8
11
\u2013
19
At 31 December 2025
\u2013
\u2013
3
3
Accumulated amortisation and impairment:
At 1 January 2024
\u2013
3
32
35
Impairment
4
\u2013
\u2013
13
13
Transferred to assets held for sale
2
\u2013
\u2013
(12)
(12)
At 31 December 2024
\u2013
3
33
36
Transferred from assets held for sale
2
\u2013
\u2013
2
2
Transferred to assets held for distribution
3
\u2013
(3)
(
23
)
(
26
)
Disposal
of
business
\u2013
\u2013
(2)
(2)
Disposals
\u2013
\u2013
(10)
(10)
At 31 December 2025
\u2013
\u2013
\u2013
\u2013
Net book value at:
At 31 December 2025
\u2013
\u2013
3
3
At 31 December 2024
779
226
4
1,009
1 Goodwill balances that are not considered to be individually significant were also tested for impairment 2 At 31 December 2024 the Group held for sale the goodwill allocated to the naval propulsors & handling business. During the year goodwill with a net book value of \u00a3nil was transferred into and out of assets held for sale relating to the naval propulsors business and naval handling business respectively. The assets and liabilities of the naval propulsors business were disposed of on 1 July 2025 and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details 3 At 31 December 2025, \u00a31,051m of cost and \u00a326m of amortisation were reclassified to assets held for distribution. See note 27 for further details 4 During 2024 the Group impaired \u00a313m of goodwill due to the closure of its electrical advanced air mobility activities The Directors have reviewed the presentation of the Balance Sheet during the year and believe that presenting goodwill separately from the remaining intangible assets is relevant to an understanding of the entity's financial position and provides more useful information to the users of the Annual Report and Financial Statements. The comparative balance at 31 December 2024 has also been represented for comparability. The carrying amount of goodwill allocated across multiple CGUs is not significant in comparison with the Group's total carrying amount of goodwill. Goodwill has been tested for impairment during 2025 on the following basis: \u2013 the carrying values of goodwill have been assessed by reference to the value in use; \u2013 these have been estimated using cash flows from the most recent forecasts prepared by the Directors, which are consistent with past experience and external sources of information on market conditions. These forecasts generally cover the next five years. Growth rates for the period not covered by the forecasts are based on growth rates of 2% which reflects the products, industries and countries in which the relevant CGU or group of CGUs operate. Inflation has been included based on contractual commitments where relevant. Where general inflation assumptions have been required, these have been estimated based on externally sourced data. General inflation assumptions of 2% to 3% have been included in the forecasts, depending on the nature and geography of the flows; \u2013 the key forecast assumptions for the impairment tests are the discount rate and the cash flow projections, in particular the programme assumptions (such as sales volumes and product costs), the impact of foreign exchange rates on the relationship between selling prices and costs, and growth rates. Impairment tests are performed using prevailing exchange rates; and \u2013 the Group believes there are significant business growth opportunities to come from Rolls-Royce playing a leading role in the transition to net zero as we develop and deliver the products that will support our customers through the energy transition across multiple markets. At the same time climate change poses potentially significant risks. The assumptions used by the Directors are based on past experience and external sources of information. Based on the climate scenarios prepared, the forecasts do not assume a significant deterioration of demand for Civil Aerospace (including Rolls-Royce Deutschland) programmes given that all commercial aero engines are compatible with sustainable fuels. Similarly, the majority of the portfolio in Power Systems is now compatible with alternative and more sustainable fuels. The investment required to ensure our new products will be compatible with net zero operation, and to achieve net zero Scope 1 + 2 GHG emission commitments is reflected in the forecasts used. A 1.5\u00b0C scenario has been prepared using key data points from external sources, including Oxford Economic Global Climate Service and Databank and the International Energy Agency. This scenario has been used as the basis of a sensitivity. It is assumed that governments adopt stricter product and behavioural standards and measures that result in higher carbon pricing. Under these conditions, it is assumed that markets are willing to pay for low carbon solutions and that there is an economic return from strategic investments in low carbon alternatives. The sensitivity has considered the likelihood of demand changes for our products based on their relative fuel efficiency in the marketplace and the probability of alternatives being introduced earlier than currently expected. The sensitivity also reflects the impact of a broad range of potential costs imposed by policy or regulatory interventions (through carbon pricing). This sensitivity does not indicate the need for an impairment charge. The principal assumptions for the impairment testing of goodwill balances that are considered to be individually significant are:
Cash-generating unit (CGU)
or group of CGUs
1 Nominal pre-tax 2 Downside
Primary Key trading assumptions Growth rate scenario
discount rate 3
operating
weighting
segment
e.g. volume of equipment
2025
2024
2025
2024
2025
2024
Rolls-Royce Power Systems Power deliveries; pricing
AG Systems
achieved; cost escalation
10.7
%
10.2%
2
%
2%
2
5
%
25%
e.g. volume of engine
Rolls-Royce Deutschland Civil deliveries, flying hours of
Ltd & Co KG Aerospace installed fleet, cost
escalation
11.7
%
12.6%
2%
2%
25%
25%
1 Trading assumptions are based on current and known future programmes, estimates of market share and long-term economic forecasts 2 Growth rate at which cash flows beyond the five-year forecasts are assumed to grow 3 Weighting of the plausible downside scenario in relation to macro-economic factors The Directors do not consider that any reasonably possible changes in the key assumptions (including taking consideration of the climate- related risks above) would cause the value in use of the goodwill to fall below its carrying value. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-664": { "value": "Cash-generating unit (CGU) or group of CGUs 1 Nominal pre-tax 2 Downside Primary Key trading assumptions Growth rate scenario discount rate 3 operating weighting segment e.g. volume of equipment 202520242025202420252024 Rolls-Royce Power Systems Power deliveries; pricing AG Systems achieved; cost escalation 10.7 % 10.2% 2 % 2% 2 5 % 25% e.g. volume of engine Rolls-Royce Deutschland Civil deliveries, flying hours of Ltd & Co KG Aerospace installed fleet, cost escalation 11.7 % 12.6%2% 2% 25%25% 1 Trading assumptions are based on current and known future programmes, estimates of market share and long-term economic forecasts 2 Growth rate at which cash flows beyond the five-year forecasts are assumed to grow 3 Weighting of the plausible downside scenario in relation to macro-economic factors ", "dimensions": { "concept": "ifrs-full:DescriptionOfCashgeneratingUnit", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-629": { "value": "9 Intangible assets
Certification Development Customer
costs expenditure relationships
Software
1
Other
2
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
:
At 1 January 2024
930
3,763
498
1,004
699
6,894
Additions
\u2013
263
\u2013
96
8
367
Transferred to
assets
held for sale
3
\u2013
(4)
(4)
(1)
\u2013
(9)
Disposals
4
\u2013
(3)
(13)
(77)
(2)
(95)
Exchange differences
(1)
(63)
(12)
(4)
(17)
(97)
At 31 December 2024
929
3,956
469
1,018
688
7,060
Additions
31
222
\u2013
105
6
364
Transferred
from
assets held for sale
3
\u2013
3
4
\u2013
(4)
3
Transferred to assets held for distribution
5
(62)
(1,247)
(56)
(187)
(293)
(
1,845
)
Disposals
6
\u2013
(422)
(415)
(26)
(122)
(985)
Exchange differences
2
62
2
\u2013
16
8
2
At 31 December
2025
900
2,574
4
910
291
4,679
Accumulated amortisation and impairment
:
At 1 January 2024
467
1,976
433
718
357
3,951
Charge for the year
7
27
96
35
78
19
255
Impairment
8
\u2013
(405)
\u2013
\u2013
17
(388)
Transferred to
assets
held for sale
3
\u2013
(4)
(4)
(1)
\u2013
(9)
Disposals
4
\u2013
\u2013
(13)
(69)
(2)
(84)
Exchange differences
(1)
(37)
(10)
(3)
(7)
(58)
At 31 December 2024
493
1,626
441
723
384
3,667
Charge for the year
7
31
107
7
68
22
235
Impairment
9
(3)
(4)
\u2013
\u2013
13
6
Transferred
from
assets held for sale
3
\u2013
3
4
\u2013
(4)
3
Transferred to assets held for distribution
5
(16)
(338)
(33)
(114)
(117)
(618)
Disposals
6
\u2013
(422)
(415)
(23)
(122)
(982)
Exchange differences
1
18
\u2013
\u2013
6
25
At 31 December
2025
506
990
4
654
182
2,336
Net book value
at:
At 31 December
2025
394
1,584
\u2013
256
109
2,343
At 31 December 2024
436
2,330
28
295
304
3,393
1 Includes \u00a3127m (2024: \u00a3100m) of software under course of construction which is not amortised 2 Other intangible assets includes trademarks, brands and the costs incurred testing and analysing engines with the longest time in service (fleet leader engines) to gather technical knowledge on engine endurance which will improve reliability and enable the Group to reduce the costs of meeting LTSA obligations 3 At 31 December 2024 the Group held for sale the assets and liabilities of the naval propulsors & handling business. During the year intangible assets with a net book value of \u00a3nil were transferred into and out of assets held for sale relating to the naval propulsors business and naval handling business respectively. The assets and liabilities of the naval propulsors business were disposed of on 1 July 2025 and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details 4 During 2024 the Group disposed of its lower power range engine business based in Power Systems 5 At 31 December 2025, \u00a31,845m of cost and \u00a3618m of amortisation were reclassified to assets held for distribution, see note 27 for further details 6 During 2025 the majority of disposals relate to the derecognition of assets that are fully amortised and where no future economic benefits are expected from their use or disposal 7 Charged to cost of sales and commercial and administrative costs except development costs, which are charged to research and development costs 8 The 2024 impairment charge included \u00a317m of other impairment (related to IP) resulting from the closure of the Group\u2019s electrical advanced air mobility activities. It also included the reversal of a Civil Aerospace programme asset impairment recognised in 2020, with \u00a3413m credited to research and development within the non-underlying income statement 9 The 2025 impairment charge includes a partial impairment reversal of a Civil Aerospace \u2013 Trent programme asset that had been fully impaired by 30 June 2020. A reversal of \u00a310m has been credited, with \u00a34m recognised in cost of sales and \u00a36m in research and development within the non-underlying income statement. See further details below 10 Property, plant and equipment
Land and Plant and Aircraft and In course of
buildings equipment engines construction Total
Cost
:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
2024
1,883
4,962
1,006
412
8,263
Additions
21
129
108
245
503
Transferred to assets held for sale
1
(33)
(51)
\u2013
(2)
(86)
Disposals/write
-
offs
(23)
(142)
(17)
(4)
(186)
Reclassifications
within PPE
2
46
67
3
(116)
\u2013
Reclassification from right
-
of
-
use assets
11
\u2013
\u2013
\u2013
11
Exchange differences
(23)
(55)
(1)
\u2013
(79)
At 31 December 202
4
1,882
4,910
1,099
535
8,426
Additions
56
1
78
163
273
67
0
Transferred to assets held for distribution
3
(959)
(2,118)
(198)
(453)
(3,728)
Disposal of business
\u2013
(5)
\u2013
\u2013
(5)
Disposals/write
-
offs
(19)
(284)
(5)
(8)
(316)
Reclassifications within PPE
2
4
2
104
1
(
147
)
\u2013
Exchange differences
\u2013
1
(8)
(17)
(24)
At 31 December
2025
1,00
2
2,78
6
1,05
2
18
3
5,02
3
Accumulated depreciation and impairment:
At 1 January 202
4
709
3,384
434
8
4,535
Charge for the year
4
77
249
49
\u2013
375
Impairment
5
2
23
\u2013
\u2013
25
Transferred to assets held for sale
3
(11)
(24)
\u2013
\u2013
(35)
Disposals/write
-
offs
(16)
(123)
(10)
\u2013
(149)
Reclassifications within PPE
2
16
(16)
\u2013
\u2013
\u2013
Exchange differences
(9)
(39)
(1)
\u2013
(49)
At 31 December 202
4
768
3,454
472
8
4,702
Charge for the year
4
7
1
23
9
70
\u2013
380
Impairment
5
\u2013
2
(44)
\u2013
(42)
Transferred to assets held for distribution
3
(376)
(1,457)
(72)
(8)
(1,913)
Disposal of business
\u2013
(2)
\u2013
\u2013
(2)
Disposals/write
-
offs
(14)
(278)
(4)
\u2013
(296)
Exchange differences
(3)
2
(3)
\u2013
(4)
At 31 December
2025
446
1,960
419
\u2013
2,825
Net book value
:
At 31 December
2025
55
6
82
6
63
3
18
3
2,
198
At
31 December 2024
1,114
1,456
627
527
3,724
1 At 31 December 2024 the Group held for sale the assets and liabilities of its naval propulsors & handling business. The assets and liabilities of the naval propulsors business were disposed of during the year and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details 2 Includes reclassifications from assets under construction into the other categories of property, plant and equipment when the assets become available for use 3 At 31 December 2025, \u00a33,728m of cost and \u00a31,913m of depreciation were reclassified to assets held for distribution. See note 27 for further details 4 Depreciation is charged to cost of sales and commercial and administrative costs or included in the cost of inventory as appropriate 5 The carrying values of property, plant and equipment have been assessed during the year in line with IAS 36 Impairment of Assets. Material items of plant and equipment and aircraft and engines are assessed for impairment together with other assets used in individual programmes \u2013 see potential triggers considered in notes 8 and 9. Land and buildings are generally used across multiple programmes and are considered based on future expectations of the use of the site, which includes any implications from climate-related risks. During the year, a partial impairment reversal of \u00a346m has been recognised within cost of sales (2024: \u00a3nil), as outlined within notes 2, 8 and 9 Property, plant and equipment includes:
202
5
202
4
Land and Plant and Aircraft and Land and Plant and Aircraft and
buildings equipment engines buildings equipment engines
Assets held for use in leases where the Group is the
lessor:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
6
36
818
6
36
861
Depreciation
(4)
(23)
(284)
(4)
(22)
(372)
Net
book value
2
13
534
2
14
489
2025 2024
\u00a3m
\u00a3m
Capital expenditure commitments
106
177
Cost of fully depreciated assets
1,300
2,286
The Group\u2019s share of equity accounted entities\u2019 capital commitments is \u00a349m (2024: \u00a369m). 11 Right-of-use assets
Land and Plant and Aircraft and
buildings equipment engines Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
:
At 1 January 202
4
513
194
1,864
2,571
Additions/modifications of leases
28
73
37
138
Transferred to assets held for sale
1
(2)
(1)
\u2013
(3)
Disposals
(8)
(17)
\u2013
(25)
Reclassification to PPE
(11)
\u2013
\u2013
(11)
Exchange differences
(3)
(3)
(4)
(10)
At 31 December 202
4
517
246
1,897
2,660
Additions/modifications of leases
79
50
49
178
Transferred to assets held for
distribution
2
(412)
(101)
(85)
(598)
Disposal of business
(2)
\u2013
\u2013
(2)
Disposals
(11)
(49)
(54)
(114)
Exchange differences
(14)
1
3
(10)
At 31 December
2025
157
147
1,810
2,114
Accumulated depreciation and impairment:
At 1 January 2024
259
109
1,298
1,666
Charge for the year
3
42
43
172
257
Impairment
4
3
2
3
8
Transferred to assets held for sale
1
(2)
\u2013
\u2013
(2)
Disposals
(7)
(17)
\u2013
(24)
Exchange differences
(1)
(2)
(3)
(6)
At 31 December 2024
294
135
1,470
1,899
Charge for the year
3
47
47
193
287
Impairment
4
\u2013
\u2013
(129)
(129)
Transferred to assets held for distribution
2
(224)
(59)
(73)
(356)
Disposal of business
(1)
\u2013
\u2013
(1)
Disposals
(11)
(36)
(54)
(101)
Exchange differences
(6)
2
2
(2)
At 31 December
2025
99
89
1,409
1,597
Net book value
at:
At 31 December
2025
58
58
401
517
At
31 December
2024
223
111
427
761
Right-of-use assets held for use in operating leases where the Group is the
lessor
:
Cost
17
\u2013
1,810
1,827
Depreciation
(8)
\u2013
(1,409)
(1,417)
Net book value at 31 December 202
5
9
\u2013
401
410
Cost
18
\u2013
1,897
1,915
Depreciation
(8)
\u2013
(1,470)
(1,478)
Net book value at 31 December 2024
10
\u2013
427
437
1 At 31 December 2024 the Group held for sale the assets and liabilities of the naval propulsors & handling business. The assets and liabilities of the naval propulsors business were disposed of during the year and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details 2 At 31 December 2025, \u00a3598m of cost and \u00a3356m of depreciation were reclassified to assets held for distribution. See note 27 for further detail on this 3 The Depreciation is charged to cost of sales and commercial and administrative costs as appropriate 4 The carrying values of right-of-use assets have been assessed during the year in line with IAS 36 Impairment of Assets. Material items of plant and equipment and aircraft and engines are assessed for impairment together with other assets used in individual programmes \u2013 see potential triggers considered in notes 8 and 9. Land and buildings are generally used across multiple programmes and are considered based on future expectations of the use of the site (which includes any implications from climate-related risks). During the year, a partial impairment reversal of \u00a3129m has been recognised within cost of sales (2024: charge of \u00a38m) as outlined within notes 2, 8 and 9", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-678": { "value": "9 Intangible assets
Certification Development Customer
costs expenditure relationships
Software
1
Other
2
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
:
At 1 January 2024
930
3,763
498
1,004
699
6,894
Additions
\u2013
263
\u2013
96
8
367
Transferred to
assets
held for sale
3
\u2013
(4)
(4)
(1)
\u2013
(9)
Disposals
4
\u2013
(3)
(13)
(77)
(2)
(95)
Exchange differences
(1)
(63)
(12)
(4)
(17)
(97)
At 31 December 2024
929
3,956
469
1,018
688
7,060
Additions
31
222
\u2013
105
6
364
Transferred
from
assets held for sale
3
\u2013
3
4
\u2013
(4)
3
Transferred to assets held for distribution
5
(62)
(1,247)
(56)
(187)
(293)
(
1,845
)
Disposals
6
\u2013
(422)
(415)
(26)
(122)
(985)
Exchange differences
2
62
2
\u2013
16
8
2
At 31 December
2025
900
2,574
4
910
291
4,679
Accumulated amortisation and impairment
:
At 1 January 2024
467
1,976
433
718
357
3,951
Charge for the year
7
27
96
35
78
19
255
Impairment
8
\u2013
(405)
\u2013
\u2013
17
(388)
Transferred to
assets
held for sale
3
\u2013
(4)
(4)
(1)
\u2013
(9)
Disposals
4
\u2013
\u2013
(13)
(69)
(2)
(84)
Exchange differences
(1)
(37)
(10)
(3)
(7)
(58)
At 31 December 2024
493
1,626
441
723
384
3,667
Charge for the year
7
31
107
7
68
22
235
Impairment
9
(3)
(4)
\u2013
\u2013
13
6
Transferred
from
assets held for sale
3
\u2013
3
4
\u2013
(4)
3
Transferred to assets held for distribution
5
(16)
(338)
(33)
(114)
(117)
(618)
Disposals
6
\u2013
(422)
(415)
(23)
(122)
(982)
Exchange differences
1
18
\u2013
\u2013
6
25
At 31 December
2025
506
990
4
654
182
2,336
Net book value
at:
At 31 December
2025
394
1,584
\u2013
256
109
2,343
At 31 December 2024
436
2,330
28
295
304
3,393
1 Includes \u00a3127m (2024: \u00a3100m) of software under course of construction which is not amortised 2 Other intangible assets includes trademarks, brands and the costs incurred testing and analysing engines with the longest time in service (fleet leader engines) to gather technical knowledge on engine endurance which will improve reliability and enable the Group to reduce the costs of meeting LTSA obligations 3 At 31 December 2024 the Group held for sale the assets and liabilities of the naval propulsors & handling business. During the year intangible assets with a net book value of \u00a3nil were transferred into and out of assets held for sale relating to the naval propulsors business and naval handling business respectively. The assets and liabilities of the naval propulsors business were disposed of on 1 July 2025 and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details 4 During 2024 the Group disposed of its lower power range engine business based in Power Systems 5 At 31 December 2025, \u00a31,845m of cost and \u00a3618m of amortisation were reclassified to assets held for distribution, see note 27 for further details 6 During 2025 the majority of disposals relate to the derecognition of assets that are fully amortised and where no future economic benefits are expected from their use or disposal 7 Charged to cost of sales and commercial and administrative costs except development costs, which are charged to research and development costs 8 The 2024 impairment charge included \u00a317m of other impairment (related to IP) resulting from the closure of the Group\u2019s electrical advanced air mobility activities. It also included the reversal of a Civil Aerospace programme asset impairment recognised in 2020, with \u00a3413m credited to research and development within the non-underlying income statement 9 The 2025 impairment charge includes a partial impairment reversal of a Civil Aerospace \u2013 Trent programme asset that had been fully impaired by 30 June 2020. A reversal of \u00a310m has been credited, with \u00a34m recognised in cost of sales and \u00a36m in research and development within the non-underlying income statement. See further details below At 31 December 2025, the Group had expenditure commitments for software of \u00a316m (2024: \u00a328m). The carrying amount of intangible assets allocated across multiple CGUs is not significant in comparison with the Group's total carrying amount of intangible assets with indefinite useful lives. Material intangible assets The carrying amount and the residual life of the material intangible assets (excluding goodwill) for the Group is as follows:
Residual life
1
Net book value
202
5
202
4
\u00a3m
\u00a3m
Trent programme intangible assets
2
1
-
15 years
1,993
2,001
Business aviation programme intangible assets
3
9
-
15 years
\u2013
674
Intangible assets related to Power Systems
4
\u2013
309
1,993
2,984
1 Residual life reflects the remaining amortisation period of those assets where amortisation has commenced. As per page 47, the amortisation period of 15 years will commence on those assets which are not being amortised as the units are delivered 2 Included within the Trent programmes are the Trent 1000, Trent 7000 and Trent XWB 3 At 31 December 2025, \u00a3814m of intangible assets relating to Pearl 700, Pearl 15 and Pearl 10X were reclassified to assets held for distribution, see note 27 for further details 4 At 31 December 2025 intangible assets of \u00a3323m relating to Rolls-Royce Power Systems were reclassified to assets held for distribution Intangible assets (including programme intangible assets) have been reviewed for impairment in accordance with IAS 36 Impairment of Assets. Assessments have considered potential triggers of impairment such as external factors including climate change, significant programme changes and by analysing latest management forecasts against those prepared in 2024 to identify any change in performance. Where a trigger event has been identified, an impairment test has been carried out. Where an impairment test was required, it was performed on the following basis: - The carrying values have been assessed by reference to value in use. These have been estimated using cash flows from the most recent forecasts prepared by the Directors, which are consistent with past experience and external sources of information on market conditions over the lives of the respective programmes; and - The key assumptions underpinning cash flow projections are based on estimates of product performance related estimates, future market share and pricing and cost for uncontracted business. Climate related risks are considered when making these estimates consistent with the assumptions above. An intangible asset impairment reversal of \u00a310m was recognised together with a property, plant and equipment impairment reversal of \u00a346m (see note 10) and a lease right-of-use asset impairment reversal of \u00a3129m (see note 11) being recognised in cost of sales (\u00a3179m) and research and development (\u00a36m) in the year as follows: 1 The equivalent pre-tax nominal discount rate in 2020 when the impairment was recognised was 11.0% The recoverable amount calculated includes passage of time benefits in addition to those from the impairment reversal trigger drivers described above and has resulted in a partial impairment reversal. In making this assessment, the Directors have considered a range of sensitivities in relation to the aftermarket returns, cost increases and discount rates. There have been no other individually material impairment charges or reversals recognised during the year (2024: reversal of \u00a3413m).
Impairment reversal
Intangible Right-of- Property, Pre-tax nominal
Assets use assets plant and Total discount rate at
equipment
30 June 2025
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Civil Aerospace \u2013 Trent programme assets
10
129
46
185
12.0%
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-630": { "value": "
An intangible asset impairment reversal of \u00a310m was recognised together with a property, plant and equipment impairment reversal of \u00a346m (see
note 10) and a lease right-of-use asset impairment reversal of \u00a3129m (see note 11) being recognised in cost of sales (\u00a3179m) and research and
development (\u00a36m) in the year as follows:
1 The equivalent pre-tax nominal discount rate in 2020 when the impairment was recognised was 11.0%
The recoverable amount calculated includes passage of time benefits in addition to those from the impairment reversal trigger drivers described
above and has resulted in a partial impairment reversal. In making this assessment, the Directors have considered a range of sensitivities in relation
to the aftermarket returns, cost increases and discount rates.
There have been no other individually material impairment charges or reversals recognised during the year (2024: reversal of \u00a3413m).
Impairment reversal
Intangible Right-of- Property, Pre-tax nominal
Assets use assets plant and Total discount rate at
equipment
30 June 2025
1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Civil Aerospace \u2013 Trent programme assets
10
129
46
185
12.0%
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationForEachMaterialImpairmentLossRecognisedOrReversedForIndividualAssetOrCashgeneratingUnitExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-590": { "value": "
10 Property, plant and equipment
Land and Plant and Aircraft and In course of
buildings equipment engines construction Total
Cost
:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
2024
1,883
4,962
1,006
412
8,263
Additions
21
129
108
245
503
Transferred to assets held for sale
1
(33)
(51)
\u2013
(2)
(86)
Disposals/write
-
offs
(23)
(142)
(17)
(4)
(186)
Reclassifications
within PPE
2
46
67
3
(116)
\u2013
Reclassification from right
-
of
-
use assets
11
\u2013
\u2013
\u2013
11
Exchange differences
(23)
(55)
(1)
\u2013
(79)
At 31 December 202
4
1,882
4,910
1,099
535
8,426
Additions
56
1
78
163
273
67
0
Transferred to assets held for distribution
3
(959)
(2,118)
(198)
(453)
(3,728)
Disposal of business
\u2013
(5)
\u2013
\u2013
(5)
Disposals/write
-
offs
(19)
(284)
(5)
(8)
(316)
Reclassifications within PPE
2
4
2
104
1
(
147
)
\u2013
Exchange differences
\u2013
1
(8)
(17)
(24)
At 31 December
2025
1,00
2
2,78
6
1,05
2
18
3
5,02
3
Accumulated depreciation and impairment:
At 1 January 202
4
709
3,384
434
8
4,535
Charge for the year
4
77
249
49
\u2013
375
Impairment
5
2
23
\u2013
\u2013
25
Transferred to assets held for sale
3
(11)
(24)
\u2013
\u2013
(35)
Disposals/write
-
offs
(16)
(123)
(10)
\u2013
(149)
Reclassifications within PPE
2
16
(16)
\u2013
\u2013
\u2013
Exchange differences
(9)
(39)
(1)
\u2013
(49)
At 31 December 202
4
768
3,454
472
8
4,702
Charge for the year
4
7
1
23
9
70
\u2013
380
Impairment
5
\u2013
2
(44)
\u2013
(42)
Transferred to assets held for distribution
3
(376)
(1,457)
(72)
(8)
(1,913)
Disposal of business
\u2013
(2)
\u2013
\u2013
(2)
Disposals/write
-
offs
(14)
(278)
(4)
\u2013
(296)
Exchange differences
(3)
2
(3)
\u2013
(4)
At 31 December
2025
446
1,960
419
\u2013
2,825
Net book value
:
At 31 December
2025
55
6
82
6
63
3
18
3
2,
198
At
31 December 2024
1,114
1,456
627
527
3,724
1 At 31 December 2024 the Group held for sale the assets and liabilities of its naval propulsors & handling business. The assets and liabilities of the naval propulsors business were disposed of
during the year and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details
2 Includes reclassifications from assets under construction into the other categories of property, plant and equipment when the assets become available for use
3 At 31 December 2025, \u00a33,728m of cost and \u00a31,913m of depreciation were reclassified to assets held for distribution. See note 27 for further details
4 Depreciation is charged to cost of sales and commercial and administrative costs or included in the cost of inventory as appropriate
5 The carrying values of property, plant and equipment have been assessed during the year in line with IAS 36 Impairment of Assets. Material items of plant and equipment and aircraft and
engines are assessed for impairment together with other assets used in individual programmes \u2013 see potential triggers considered in notes 8 and 9. Land and buildings are generally used
across multiple programmes and are considered based on future expectations of the use of the site, which includes any implications from climate-related risks. During the year, a partial
impairment reversal of \u00a346m has been recognised within cost of sales (2024: \u00a3nil), as outlined within notes 2, 8 and 9
Property, plant and equipment includes:
202
5
202
4
Land and Plant and Aircraft and Land and Plant and Aircraft and
buildings equipment engines buildings equipment engines
Assets held for use in leases where the Group is the
lessor:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
6
36
818
6
36
861
Depreciation
(4)
(23)
(284)
(4)
(22)
(372)
Net
book value
2
13
534
2
14
489
2025 2024
\u00a3m
\u00a3m
Capital expenditure commitments
106
177
Cost of fully depreciated assets
1,300
2,286
The Group\u2019s share of equity accounted entities\u2019 capital commitments is \u00a349m (2024: \u00a369m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-591": { "value": "
11 Right-of-use assets
Land and Plant and Aircraft and
buildings equipment engines Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
:
At 1 January 202
4
513
194
1,864
2,571
Additions/modifications of leases
28
73
37
138
Transferred to assets held for sale
1
(2)
(1)
\u2013
(3)
Disposals
(8)
(17)
\u2013
(25)
Reclassification to PPE
(11)
\u2013
\u2013
(11)
Exchange differences
(3)
(3)
(4)
(10)
At 31 December 202
4
517
246
1,897
2,660
Additions/modifications of leases
79
50
49
178
Transferred to assets held for
distribution
2
(412)
(101)
(85)
(598)
Disposal of business
(2)
\u2013
\u2013
(2)
Disposals
(11)
(49)
(54)
(114)
Exchange differences
(14)
1
3
(10)
At 31 December
2025
157
147
1,810
2,114
Accumulated depreciation and impairment:
At 1 January 2024
259
109
1,298
1,666
Charge for the year
3
42
43
172
257
Impairment
4
3
2
3
8
Transferred to assets held for sale
1
(2)
\u2013
\u2013
(2)
Disposals
(7)
(17)
\u2013
(24)
Exchange differences
(1)
(2)
(3)
(6)
At 31 December 2024
294
135
1,470
1,899
Charge for the year
3
47
47
193
287
Impairment
4
\u2013
\u2013
(129)
(129)
Transferred to assets held for distribution
2
(224)
(59)
(73)
(356)
Disposal of business
(1)
\u2013
\u2013
(1)
Disposals
(11)
(36)
(54)
(101)
Exchange differences
(6)
2
2
(2)
At 31 December
2025
99
89
1,409
1,597
Net book value
at:
At 31 December
2025
58
58
401
517
At
31 December
2024
223
111
427
761
Right-of-use assets held for use in operating leases where the Group is the
lessor
:
Cost
17
\u2013
1,810
1,827
Depreciation
(8)
\u2013
(1,409)
(1,417)
Net book value at 31 December 202
5
9
\u2013
401
410
Cost
18
\u2013
1,897
1,915
Depreciation
(8)
\u2013
(1,470)
(1,478)
Net book value at 31 December 2024
10
\u2013
427
437
1 At 31 December 2024 the Group held for sale the assets and liabilities of the naval propulsors & handling business. The assets and liabilities of the naval propulsors business were disposed of
during the year and the assets of the naval handling business are held for sale at 31 December 2025, see note 27 for further details
2 At 31 December 2025, \u00a3598m of cost and \u00a3356m of depreciation were reclassified to assets held for distribution. See note 27 for further detail on this
3 The Depreciation is charged to cost of sales and commercial and administrative costs as appropriate
4 The carrying values of right-of-use assets have been assessed during the year in line with IAS 36 Impairment of Assets. Material items of plant and equipment and aircraft and engines are
assessed for impairment together with other assets used in individual programmes \u2013 see potential triggers considered in notes 8 and 9. Land and buildings are generally used across multiple
programmes and are considered based on future expectations of the use of the site (which includes any implications from climate-related risks). During the year, a partial impairment reversal
of \u00a3129m has been recognised within cost of sales (2024: charge of \u00a38m) as outlined within notes 2, 8 and 9
", "dimensions": { "concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-592": { "value": "
12 Investments
Composition of the Group
The entities contributing to the Group\u2019s financial results are listed on pages 120 to 125.
Where the Group does not own 100% of the shares of a group undertaking, there are a number of arrangements with the other shareholder(s)
that give the Group the option or potential obligation to acquire the third parties\u2019 shares. These arrangements have been assessed and are not
considered to have a significant value, individually or in aggregate.
The Group does not have any non-wholly owned subsidiaries that have a material non-controlling interest.
Equity accounted and other investments
Equity
accounted
Other
1
Total
Joint ventures
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
479
31
510
Additions
2
17
\u2013
17
Impairment
(4)
\u2013
(4)
Share of retained
profit
3
95
\u2013
95
Reclassification of deferred profit to deferred income
4
(2)
\u2013
(2)
Revaluation of other investments accounted for at FVOCI
\u2013
(2)
(2)
Revaluation of other investments accounted for at FVTPL
5
\u2013
(24)
(24)
Exchange differences
11
\u2013
11
Share of OCI
(4)
\u2013
(4)
At
1 January 2025
592
5
597
Transfer from subsidiary to joint venture
6
732
\u2013
732
Additions
2
56
\u2013
56
Share of
retained loss
3
(32)
\u2013
(32)
Reclassification of deferred profit to deferred income
4
2
\u2013
2
Revaluation of other investments accounted for at FVOCI
\u2013
(1)
(1)
Transferred to assets held for distribution
7
(502)
\u2013
(502)
Exchange differences
(66)
\u2013
(66)
Share of OCI
1
\u2013
1
At 31 December
2025
783
4
787
1 Other investments includes unlisted investments of \u00a3nil (2024: \u00a3nil) and listed investments of \u00a34m (2024: \u00a35m)
2 Additions relates to investments of \u00a352m (2024: \u00a3nil) related to Rolls-Royce SMR Limited following its deconsolidation earlier in March 2025. Of this, \u00a315m was recognised in July 2025 due to
a change in shareholding resulting from an additional equity investment made by \u010cEZ Group (\u010cEZ), a further \u00a337m was recognised in December 2025 due to the purchase of shares by Rolls-
Royce Plc from an existing investor. Further details can be found in note 27. The remaining \u00a34m (2024: \u00a317m) of additions relates to the joint venture, Beijing Aero Engine Services Company
Limited
3 See table below
4 The Group's share of unrealised profit on sales to joint ventures is eliminated against the carrying value of the investment in the entity. Any excess amount, once the carrying value is reduced
to \u00a3nil, is recorded as deferred income
5 During 2024 the Group wrote down the value of an unlisted investment. This charge was recognised within net financing
6 In March 2025, an equity-accounted investment of \u00a3732m was recognised at fair value as a result of the deconsolidation of Rolls-Royce SMR Limited. See note 27 for further details
7 At 31 December 2025, \u00a3502m of investments were reclassified to assets held for distribution. See note 27 for further details
Reconciliation of share of retained (loss)/profit to the income statement and cash flow statement:
2025 2024
\u00a3m
\u00a3m
Share of results of joint ventures and associates
1
71
137
Adjustments for intercompany trading
2
(15)
35
Share of results of joint ventures and associates to the Group
56
172
Dividends paid by joint ventures and associates to the Group (cash flow statement)
(88)
(77)
Share of
retained
(
loss)
/profit
above
(32)
95
1 The results to 31 December 2025 include ten months of the Group\u2019s share of the results of Rolls-Royce SMR Limited
2 During the year, the Group sold spare engines to Rolls-Royce & Partners Finance, a joint venture and subsidiary of Alpha Partners Leasing Limited. The Group\u2019s share of the profit on these
sales is deferred and released to match the depreciation of the engines in the joint venture\u2019s financial statements. In 2025, profit deferred on the sale of engines was higher than (2024: lower
than) the release of that deferred in prior years
The following joint ventures are considered to be individually material to the Group:
Principal location
Activity
Ownership interest
Alpha Partners Leasing Limited (APL)
UK
Aero
-
engine leasing
50.0%
Hong Kong Aero Engine Services Limited (HAESL)
Hong Kong
Aero
-
engine repair and overhaul
50.0%
Singapore Aero Engine
Services Pte Limited (SAESL)
Singapore
Aero
-
engine repair and overhaul
50.0%
Rolls
-
Royce SMR Limited (SMR)
UK
Small modular reactors
57.8
%
Summarised financial information of the Group\u2019s individually material joint ventures is as follows:
APL
HAESL
1
SAESL
1
SMR
2
2025 2024 2025 2024 2025 2024 2025
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue
518
400
3,674
4,017
3,505
2,469
2
Profit/(loss) and total comprehensive
income for the year
168
114
93
70
48
46
(193)
Dividends paid during the year
(14)
(63)
(78)
(69)
\u2013
\u2013
\u2013
Profit/(loss) for the year included the
following:
Depreciation and amortisation
(154)
(150)
(13)
(11)
(16)
(18)
(2)
Interest income
13
12
\u2013
\u2013
5
8
6
Interest expense
(127)
(112)
(8)
(8)
(2)
(1)
\u2013
Income tax
(
expense
)/credit
(62)
(41)
(16)
(17)
(5)
(3)
12
Current assets
34
3
345
\u2013
1,129
\u2013
1,154
70
Non
-
current assets
3
3,776
3,506
\u2013
100
\u2013
133
1,032
Current liabilities
(242)
(360)
\u2013
(895)
\u2013
(950)
(57)
Non
-
current liabilities
3
(2,955)
(2,662)
\u2013
(95)
\u2013
(8)
(243)
Net assets
922
829
\u2013
239
\u2013
329
802
Included in the above:
Cash and cash equivalents
192
190
\u2013
4
\u2013
129
52
Current financial liabilities
4
(114)
(244)
\u2013
(10)
\u2013
\u2013
\u2013
Non
-
current financial liabilities
4
(2,371)
(2,134)
\u2013
(86)
\u2013
(8)
\u2013
Reconciliation to the carrying amount recognised in the Consolidated Financial Statements
Ownership interest
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
57.8%
Group share of net assets above
461
415
\u2013
120
\u2013
165
463
Goodwill
\u2013
\u2013
\u2013
37
\u2013
11
209
Adjustments for intercompany trading
(404)
(386)
\u2013
(7)
\u2013
(4)
\u2013
Included in the balance sheet
57
29
\u2013
150
\u2013
172
672
1 At 31 December 2025, the joint venture investments in HAESL and SAESL were reclassified to assets held for distribution
2 In March 2025, an equity-accounted investment of \u00a3732m was recognised at fair value as a result of the deconsolidation of Rolls-Royce SMR Limited. A notional purchase price allocation (PPA)
exercise has been undertaken that has identified and valued the assets and liabilities of the joint venture as if the Group had acquired a business. The majority of the value of the investment
has been attributed to development expenditure related to Rolls-Royce SMR Limited\u2019s investment in its products. Goodwill, which has not been impaired, relates to the expected future growth
of the business
3 Non-current assets includes \u00a31,006m of intangible assets identified on acquisition relating to development expenditure and non-current liabilities including \u00a3(239)m of associated deferred
tax liabilities
4 Excluding trade payables and other liabilities
The summarised aggregated results of the Group\u2019s share of equity accounted investments is as follows:
Individually material joint
ventures (above)
Other joint ventures
Total
2025 2024 2025 2024 2025 2024
Profit and total comprehensive
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
income for the year
36
115
34
18
70
133
Assets:
Non
-
current assets
2,485
1,870
76
245
2,561
2,115
Current assets
212
1,314
363
632
575
1,946
Liabilities:
1
Current liabilities
(154)
(1,102)
(336)
(536)
(490)
(1,638)
Non
-
current liabilities
(1,619)
(1,382)
(49)
(86)
(1,668)
(1,468)
Group adjustment for goodwill
209
48
\u2013
\u2013
209
48
Adjustment for
intercompany trading
(
404
)
(397)
\u2013
(14)
(404)
(411)
Included in the balance sheet
2
729
351
54
241
783
592
1
Liabilities include borrowings of:
(1,
345
)
(1,241)
(267)
(113)
(1,612)
(1,354)
2 At 31 December 2025, joint venture investments of \u00a3502m were reclassified to assets held for distribution. See note 27 for further details
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-631": { "value": "Composition of the Group The entities contributing to the Group\u2019s financial results are listed on pages 120 to 125. Where the Group does not own 100% of the shares of a group undertaking, there are a number of arrangements with the other shareholder(s) that give the Group the option or potential obligation to acquire the third parties\u2019 shares. These arrangements have been assessed and are not considered to have a significant value, individually or in aggregate. The Group does not have any non-wholly owned subsidiaries that have a material non-controlling interest.", "dimensions": { "concept": "ifrs-full:DisclosureOfCompositionOfGroupExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-593": { "value": "
13 Inventories
2025 2024
\u00a3m \u00a3m
Raw materials
103
544
Work in progress
7
63
1,715
Finished goods
1,98
2
2,833
2,848
5,092
Inventories stated at net realisable value
151
232
Amount of inventory write
-
down
113
56
Reversal of inventory write
-
down
75
15
At 31 December 2025, \u00a32.9bn of inventories were reclassified to assets held for distribution, of which \u00a385m are inventories stated at net realisable
value. See note 27 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-594": { "value": "
14 Trade receivables and other assets
Current
Non-current
1
Total
2
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade receivables
1,33
1
2,917
78
138
1,40
9
3,055
Prepayments
69
9
829
48
89
74
7
918
RRSA prepayment for parts
3
5
69
486
1,20
2
1,182
1,771
1,668
Receivables due on RRSAs
1,
114
1,118
91
119
1,
205
1,237
Amounts owed by joint ventures and
associates
636
894
\u2013
2
636
896
Amounts
due from
parent undertakings
\u2013
\u2013
2,192
337
2,192
337
Other taxation and social security
receivable
103
215
\u2013
2
103
217
Costs to obtain contracts with customers
4
\u2013
11
\u2013
124
\u2013
135
Other receivables and similar assets
5
443
530
72
58
51
5
588
4,895
7,000
3,68
3
2,051
8,
578
9,051
Trade receivables and other
assets are analysed as follows:
Financial instruments (
note
20
):
Trade receivable and similar items
5,
439
5,525
Other non
-
derivative financial assets
409
366
Non
-
financial instruments
2,7
30
3,160
8,
578
9,051
1 Trade receivables and other assets have been presented on the face of the balance sheet in line with the operating cycle of the business. Further disclosure is included in the table above and
relates to amounts not expected to be received in the next 12 months, in line with specific customer payment arrangements, including customers on payment plans
2 At 31 December 2025, \u00a32,561m of trade and other receivables were reclassified to assets held for distribution, see note 27 for further details
3 These amounts reflect the contractual share of EFH flows and original equipment deposits from customers paid to RRSA partners in return for the supply of parts in future periods under long-
term supply contracts. During the year \u00a3597m (2024: \u00a3262m) has been charged to cost of sales in relation to parts supplied and used in the year
4 These are amortised over the term of the related contract in line with engine deliveries, resulting in amortisation of \u00a310m (2024: \u00a38m) in the year. There were no impairment losses
5 Other receivables includes unbilled recoveries relating to completed overhaul activity where the right to consideration is unconditional
The Group has adopted the simplified approach to provide for expected credit losses (ECLs), measuring the loss allowance at a probability
weighted amount incorporated by using credit ratings which are publicly available, or through internal risk assessments derived using the
customer\u2019s latest available financial information.
The ECLs for trade receivables and other financial assets has decreased by \u00a398m to \u00a3141m (2024: decreased by \u00a33m to \u00a3239m).
The assumptions and inputs used for the estimation of the ECLs are shown in the table below:
Trade
2025
Trade
2024
receivables receivables
and other and other
financial Loss Average financial Loss Average
assets allowance ECL rate assets allowance ECL rate
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
%
Credit rating BBB
-
and above
1
682
(
19
)
3%
2,179
(74)
3%
Credit rating below BBB
-
1
531
(
59
)
11
%
28
(4)
14%
Without credit rating
2,
584
(63)
2%
3,586
(161)
4%
3,
79
7
(141)
4%
5,793
(239)
4%
1 During the year, there has been a change to the classification used for investment gradings. In 2024, the ratings were reported using credit ratings C and above, credit ratings C and below
and without credit rating. In 2025, the ratings have been reported using credit rating BBB- and above, credit rating below BBB- and without credit rating
The movements of the Group\u2019s ECLs provision are as follows:
2025 2024
\u00a3m
\u00a3m
At 1 January
(239)
(242)
Increases in loss allowance recognised in the income statement during the year
(83)
(130)
Loss allowance utilised
18
11
Releases of loss allowance previously provided
55
116
Transferred to assets
held for
sale
\u2013
1
Transferred to
asset
s
held for
distribution
1
90
\u2013
Exchange differences
1
8
5
At 31 December
(14
1
)
(239)
1 As of 31 December 2025, \u00a390m of ECL for Trade Receivables were transferred to assets held for distribution, see note 27 for further details
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-679": { "value": "14 Trade receivables and other assets
Current
Non-current
1
Total
2
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade receivables
1,33
1
2,917
78
138
1,40
9
3,055
Prepayments
69
9
829
48
89
74
7
918
RRSA prepayment for parts
3
5
69
486
1,20
2
1,182
1,771
1,668
Receivables due on RRSAs
1,
114
1,118
91
119
1,
205
1,237
Amounts owed by joint ventures and
associates
636
894
\u2013
2
636
896
Amounts
due from
parent undertakings
\u2013
\u2013
2,192
337
2,192
337
Other taxation and social security
receivable
103
215
\u2013
2
103
217
Costs to obtain contracts with customers
4
\u2013
11
\u2013
124
\u2013
135
Other receivables and similar assets
5
443
530
72
58
51
5
588
4,895
7,000
3,68
3
2,051
8,
578
9,051
Trade receivables and other
assets are analysed as follows:
Financial instruments (
note
20
):
Trade receivable and similar items
5,
439
5,525
Other non
-
derivative financial assets
409
366
Non
-
financial instruments
2,7
30
3,160
8,
578
9,051
1 Trade receivables and other assets have been presented on the face of the balance sheet in line with the operating cycle of the business. Further disclosure is included in the table above and relates to amounts not expected to be received in the next 12 months, in line with specific customer payment arrangements, including customers on payment plans 2 At 31 December 2025, \u00a32,561m of trade and other receivables were reclassified to assets held for distribution, see note 27 for further details 3 These amounts reflect the contractual share of EFH flows and original equipment deposits from customers paid to RRSA partners in return for the supply of parts in future periods under long- term supply contracts. During the year \u00a3597m (2024: \u00a3262m) has been charged to cost of sales in relation to parts supplied and used in the year 4 These are amortised over the term of the related contract in line with engine deliveries, resulting in amortisation of \u00a310m (2024: \u00a38m) in the year. There were no impairment losses 5 Other receivables includes unbilled recoveries relating to completed overhaul activity where the right to consideration is unconditional The Group has adopted the simplified approach to provide for expected credit losses (ECLs), measuring the loss allowance at a probability weighted amount incorporated by using credit ratings which are publicly available, or through internal risk assessments derived using the customer\u2019s latest available financial information. The ECLs for trade receivables and other financial assets has decreased by \u00a398m to \u00a3141m (2024: decreased by \u00a33m to \u00a3239m). The assumptions and inputs used for the estimation of the ECLs are shown in the table below:
Trade
2025
Trade
2024
receivables receivables
and other and other
financial Loss Average financial Loss Average
assets allowance ECL rate assets allowance ECL rate
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
%
Credit rating BBB
-
and above
1
682
(
19
)
3%
2,179
(74)
3%
Credit rating below BBB
-
1
531
(
59
)
11
%
28
(4)
14%
Without credit rating
2,
584
(63)
2%
3,586
(161)
4%
3,
79
7
(141)
4%
5,793
(239)
4%
1 During the year, there has been a change to the classification used for investment gradings. In 2024, the ratings were reported using credit ratings C and above, credit ratings C and below and without credit rating. In 2025, the ratings have been reported using credit rating BBB- and above, credit rating below BBB- and without credit rating The movements of the Group\u2019s ECLs provision are as follows:
2025 2024
\u00a3m
\u00a3m
At 1 January
(239)
(242)
Increases in loss allowance recognised in the income statement during the year
(83)
(130)
Loss allowance utilised
18
11
Releases of loss allowance previously provided
55
116
Transferred to assets
held for
sale
\u2013
1
Transferred to
asset
s
held for
distribution
1
90
\u2013
Exchange differences
1
8
5
At 31 December
(14
1
)
(239)
1 As of 31 December 2025, \u00a390m of ECL for Trade Receivables were transferred to assets held for distribution, see note 27 for further details", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-665": { "value": "14 Trade receivables and other assets
Current
Non-current
1
Total
2
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade receivables
1,33
1
2,917
78
138
1,40
9
3,055
Prepayments
69
9
829
48
89
74
7
918
RRSA prepayment for parts
3
5
69
486
1,20
2
1,182
1,771
1,668
Receivables due on RRSAs
1,
114
1,118
91
119
1,
205
1,237
Amounts owed by joint ventures and
associates
636
894
\u2013
2
636
896
Amounts
due from
parent undertakings
\u2013
\u2013
2,192
337
2,192
337
Other taxation and social security
receivable
103
215
\u2013
2
103
217
Costs to obtain contracts with customers
4
\u2013
11
\u2013
124
\u2013
135
Other receivables and similar assets
5
443
530
72
58
51
5
588
4,895
7,000
3,68
3
2,051
8,
578
9,051
Trade receivables and other
assets are analysed as follows:
Financial instruments (
note
20
):
Trade receivable and similar items
5,
439
5,525
Other non
-
derivative financial assets
409
366
Non
-
financial instruments
2,7
30
3,160
8,
578
9,051
1 Trade receivables and other assets have been presented on the face of the balance sheet in line with the operating cycle of the business. Further disclosure is included in the table above and relates to amounts not expected to be received in the next 12 months, in line with specific customer payment arrangements, including customers on payment plans 2 At 31 December 2025, \u00a32,561m of trade and other receivables were reclassified to assets held for distribution, see note 27 for further details 3 These amounts reflect the contractual share of EFH flows and original equipment deposits from customers paid to RRSA partners in return for the supply of parts in future periods under long- term supply contracts. During the year \u00a3597m (2024: \u00a3262m) has been charged to cost of sales in relation to parts supplied and used in the year 4 These are amortised over the term of the related contract in line with engine deliveries, resulting in amortisation of \u00a310m (2024: \u00a38m) in the year. There were no impairment losses 5 Other receivables includes unbilled recoveries relating to completed overhaul activity where the right to consideration is unconditional The Group has adopted the simplified approach to provide for expected credit losses (ECLs), measuring the loss allowance at a probability weighted amount incorporated by using credit ratings which are publicly available, or through internal risk assessments derived using the customer\u2019s latest available financial information. The ECLs for trade receivables and other financial assets has decreased by \u00a398m to \u00a3141m (2024: decreased by \u00a33m to \u00a3239m). The assumptions and inputs used for the estimation of the ECLs are shown in the table below:
Trade
2025
Trade
2024
receivables receivables
and other and other
financial Loss Average financial Loss Average
assets allowance ECL rate assets allowance ECL rate
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
%
Credit rating BBB
-
and above
1
682
(
19
)
3%
2,179
(74)
3%
Credit rating below BBB
-
1
531
(
59
)
11
%
28
(4)
14%
Without credit rating
2,
584
(63)
2%
3,586
(161)
4%
3,
79
7
(141)
4%
5,793
(239)
4%
1 During the year, there has been a change to the classification used for investment gradings. In 2024, the ratings were reported using credit ratings C and above, credit ratings C and below and without credit rating. In 2025, the ratings have been reported using credit rating BBB- and above, credit rating below BBB- and without credit rating The movements of the Group\u2019s ECLs provision are as follows:
2025 2024
\u00a3m
\u00a3m
At 1 January
(239)
(242)
Increases in loss allowance recognised in the income statement during the year
(83)
(130)
Loss allowance utilised
18
11
Releases of loss allowance previously provided
55
116
Transferred to assets
held for
sale
\u2013
1
Transferred to
asset
s
held for
distribution
1
90
\u2013
Exchange differences
1
8
5
At 31 December
(14
1
)
(239)
1 As of 31 December 2025, \u00a390m of ECL for Trade Receivables were transferred to assets held for distribution, see note 27 for further details", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-632": { "value": "
Current
Non-current
1
Total
2
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade receivables
1,33
1
2,917
78
138
1,40
9
3,055
Prepayments
69
9
829
48
89
74
7
918
RRSA prepayment for parts
3
5
69
486
1,20
2
1,182
1,771
1,668
Receivables due on RRSAs
1,
114
1,118
91
119
1,
205
1,237
Amounts owed by joint ventures and
associates
636
894
\u2013
2
636
896
Amounts
due from
parent undertakings
\u2013
\u2013
2,192
337
2,192
337
Other taxation and social security
receivable
103
215
\u2013
2
103
217
Costs to obtain contracts with customers
4
\u2013
11
\u2013
124
\u2013
135
Other receivables and similar assets
5
443
530
72
58
51
5
588
4,895
7,000
3,68
3
2,051
8,
578
9,051
Trade receivables and other
assets are analysed as follows:
Financial instruments (
note
20
):
Trade receivable and similar items
5,
439
5,525
Other non
-
derivative financial assets
409
366
Non
-
financial instruments
2,7
30
3,160
8,
578
9,051
", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-595": { "value": "
15 Contract assets and liabilities
Current
Non-current
1
Total
2
2025 2024 2025 2024 2025 2024
Contract assets
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Contract assets with customers
200
886
83
4
598
1,03
4
1,484
Participation fee contract assets
18
38
123
291
141
329
218
924
95
7
889
1,17
5
1,813
1 Contract assets have been presented on the face of the balance sheet in line with the operating cycle of the business. Further disclosure of contract assets is provided in the table above,
which shows within current the element of consideration that will become unconditional in the next year
2 Contract assets are classified as non-financial instruments
The balance includes \u00a3930m (2024: \u00a3955m) Civil Aerospace LTSA assets and \u00a335m (2024: \u00a3381m) Defence LTSA assets. At 31 December 2025,
\u00a3546m of contract assets and \u00a3176m of participation fees were reclassified to assets held for distribution. See note 27 for further details.
During the year, the Civil Aerospace balance decreased by \u00a326m to \u00a3930m, driven by an \u00a318m increase due to revenue recognised (when
performance obligations have been completed during the year) being greater than the amount invoiced on those contracts that have a contract
asset balance which is offset by a decrease due to contract assets of \u00a344m reclassified to held for distribution during the year, see note 27 for
further details. Revenue recognised relating to performance obligations satisfied in previous years was \u00a3(36)m which reduced the contract asset
(2024: reduction of \u00a342m) in Civil Aerospace.
No impairment losses in relation to these contract assets (2024: none) have arisen during the year.
Participation fee contract assets decreased by \u00a3188m (2024: increased by \u00a3102m). Movements were primarily due to contract assets being
reclassified to assets held for distribution of \u00a3(176)m (2024: \u00a3nil), amortisation of \u00a3(20)m (2024: \u00a3(23)m) and the Civil Aerospace programme asset
impairment reversal of \u00a3nil (2024: \u00a3132m), offset by foreign exchange on consolidation of \u00a38m (2024: \u00a3(7)m).
The absolute value of ECLs for contract assets has increased by \u00a31m to \u00a312m (2024: increased by \u00a35m to \u00a311m).
Current
Non
-
current
1
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Contract liabilities
5,4
50
6,309
6,
896
9,447
12,34
6
15,756
Contract liabilities are analysed as follows:
Financial instruments (
note
20
)
1,423
1,280
Non
-
financial instruments
10,92
3
14,476
12,346
15,756
1 Contract liabilities have been presented on the face of the balance sheet in line with the operating cycle of the business. Contract liabilities are further split according to when the related
performance obligation is expected to be satisfied and, therefore, when revenue is estimated to be recognised in the income statement
During the year, \u00a35,652m (2024: \u00a35,048m) of the opening contract liability was recognised as revenue.
Contract liabilities have decreased by \u00a33,410m. The movement in the Group balance is primarily due to \u00a34,248m of contract liabilities that were
reclassified to liabilities associated with assets held for distribution during the year, see note 27 for further details.
Civil aerospace contract liabilities decreased by \u00a31,338m primarily driven by \u00a31,914m of contract liabilities reclassified to liabilities associated with
assets held for distribution. This was partly offset by an increase of \u00a3576m which was mainly a result of growth in LTSA liabilities of \u00a3231m (2025:
\u00a311,370m, 2024: \u00a311,139m) driven almost wholly by large engines, with customer invoicing in 2025 (based on EFH) being in advance of revenue
recognised (based on costs incurred completing performance obligations).
Defence contract liabilities decreased by \u00a31,262 primarily driven by \u00a31,442m of contract liabilities reclassified to liabilities associated with assets
held for distribution. This was partly offset by an increase of \u00a3180m from receipt of deposits in advance of performance obligations.
Power Systems contact liabilities decreased by \u00a3778m primarily driven by \u00a3868m of contract liabilities reclassified to liabilities associated with
assets held for distribution. This was partly offset by an increase of \u00a390m from receipt of deposits in advance of performance obligations.
The contract liability movement includes a decrease of \u00a3(289)m (2024: decrease of \u00a3354m) as a result of revenue being recognised in relation to
performance obligations satisfied in previous years.
", "dimensions": { "concept": "rollsroyceplc:DisclosureOfContractAssetsAndLiabilities", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-596": { "value": "
16 Cash and cash equivalents
2025 2024
\u00a3m
\u00a3m
Cash at bank and in hand
457
713
Money
market funds
2,359
1,900
Short
-
term deposits
2,902
2,961
Cash and cash equivalents per the balance sheet
5,718
5,574
Cash and cash equivalents included within assets held for
distribution
1
526
\u2013
Overdrafts (note 1
7
)
\u2013
(2)
Overdrafts within
l
iabilities
associated with assets
held for
distribution
1
(
3
)
\u2013
Cash and cash equivalents per cash flow statem
ent (page
34
)
6,24
1
5,572
1 At 31 December 2025, \u00a3526m of cash and cash equivalents were reclassified to assets held for distribution and \u00a33m of overdrafts were reclassified to liabilities associated with assets held for
distribution, see note 27 for further details
Cash and cash equivalents at 31 December 2025 includes \u00a318m (2024: \u00a3245m) that is not available for general use by the Group, which entirely
(2024: \u00a344m) relates to cash held in non-wholly owned subsidiaries and joint arrangements.
Balances are presented on a net basis when the Group has both a legal right of offset and the intention to either settle on a net basis or realise
the asset and settle the liability simultaneously. There is no offsetting of financial instruments in the Group's statement of financial position as at
31 December 2025 and 2024.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-633": { "value": "
17 Borrowings and lease liabilities
Current
Non
\u2013
current
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Unsecured
Overdrafts
\u2013
2
\u2013
\u2013
\u2013
2
Bank loans
\u2013
4
\u2013
3
\u2013
7
3.625% Notes 2025 $1,000m
1
\u2013
795
\u2013
\u2013
\u2013
795
3.375% Notes 2026 \u00a3375m
2
372
\u2013
\u2013
364
372
364
4.625% Notes 2026
\u20ac750m
3
654
\u2013
\u2013
620
654
620
5.75% Notes 2027 $1,000m
3
\u2013
\u2013
741
795
741
795
5.75% Notes 2027 \u00a3545m
\u2013
\u2013
543
543
543
543
1.625% Notes 2028
\u20ac550m
1
\u2013
\u2013
470
442
470
442
Other loans
\u2013
\u2013
10
9
10
9
Total unsecured
1,026
801
1,764
2,776
2,790
3,577
Lease liability \u2013 Land and buildings
17
44 84 405
101
449
Lease liability
\u2013
Aircraft and engines
300
209
5
0
6
784
806
993
Lease liability \u2013 Plant and equipment
28
43 32 70
60
113
Total lease liabilities
3
45
296
6
2
2
1,259
967
1,555
Total borrowings and lease liabilities
1,371
1,097
2,386
4,035
3,757
5,132
All outstanding items described as loan notes above are listed on the London Stock Exchange
1 These notes are the subject of cross-currency interest rate swap agreements under which the Group has undertaken to pay \ufb02oating rates of GBP interest, which form a fair value hedge. They
are also subject to interest rate swap agreements under which the Group has undertaken to pay fixed rates of interest, which are classified as fair value through profit and loss
2 These notes are the subject of interest rate swap agreements under which the Group has undertaken to pay \ufb02oating rates of interest, which form a fair value hedge. They are also subject to
interest rate swap agreements under which the Group has undertaken to pay fixed rates of interest, which are classified as fair value through profit and loss
3 These notes are the subject of cross-currency interest rate swap agreements under which the Group has undertaken to pay fixed rates of GBP interest, which form a cash flow hedge
At 31 December 2025, \u00a312m of borrowings and \u00a3503m of lease liabilities were reclassified to liabilities associated with assets held for distribution,
see note 27 for further details.
During the year to 31 December 2025, the Group repaid a loan note of $1bn in October 2025 in line with its maturity date.
The Group has access to the following undrawn committed borrowing facilities at the end of the year:
2025
2024
\u00a3m
\u00a3m
Expiring within one year
\u2013
\u2013
Expiring after one year
2,500
2,500
Total undrawn facilities
2,500
2,500
Further details can be found in the going concern statement on page 21.
In December 2025 the Group signed a new \u00a32.5bn Revolving Credit Facility maturing December 2030 and cancelled the existing facility. These
facilities have not been drawn during the year and remain undrawn at 31 December 2025.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-597": { "value": "17 Borrowings and lease liabilities
Current
Non
\u2013
current
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Unsecured
Overdrafts
\u2013
2
\u2013
\u2013
\u2013
2
Bank loans
\u2013
4
\u2013
3
\u2013
7
3.625% Notes 2025 $1,000m
1
\u2013
795
\u2013
\u2013
\u2013
795
3.375% Notes 2026 \u00a3375m
2
372
\u2013
\u2013
364
372
364
4.625% Notes 2026
\u20ac750m
3
654
\u2013
\u2013
620
654
620
5.75% Notes 2027 $1,000m
3
\u2013
\u2013
741
795
741
795
5.75% Notes 2027 \u00a3545m
\u2013
\u2013
543
543
543
543
1.625% Notes 2028
\u20ac550m
1
\u2013
\u2013
470
442
470
442
Other loans
\u2013
\u2013
10
9
10
9
Total unsecured
1,026
801
1,764
2,776
2,790
3,577
Lease liability \u2013 Land and buildings
17
44 84 405
101
449
Lease liability
\u2013
Aircraft and engines
300
209
5
0
6
784
806
993
Lease liability \u2013 Plant and equipment
28
43 32 70
60
113
Total lease liabilities
3
45
296
6
2
2
1,259
967
1,555
Total borrowings and lease liabilities
1,371
1,097
2,386
4,035
3,757
5,132
18 Leases
Leases as lessee
The net book value of right-of-use assets at 31 December 2025 was \u00a3517m (2024: \u00a3761m), with a lease liability of \u00a3967m (2024: \u00a31,555m), per notes
11 and 17, respectively. Leases that have not yet commenced to which the Group is committed have a future liability of \u00a3214m (2024: \u00a32m) and
consist of mainly plant and equipment and properties. The consolidated income statement shows the following amounts relating to leases:
2025
2024
\u00a3m
\u00a3m
Land and buildings depreciation and impairment
1
(47)
(45)
Plant and equipment depreciation
and impairment
2
(47)
(45)
Aircraft and engine
s
depreciation
and impairment
3
(64)
(175)
Total depreciation and impairment charge for right
-
of
-
use assets
(158)
(265)
Adjustment of amounts payable under residual value guarantees within lease liabilities
3, 4
\u2013
6
Expense relating to short
-
term leases of 12 months or less recognised as an expense on a straight
-
line basis
2
(31)
(38)
Expense relating to variable lease payments not included in lease liabilities
3, 5
(8)
(8)
Total operating costs
(197)
(305)
Interest expense
6
(74)
(83)
Total lease expense
(271)
(388)
Income from sub
-
leasing right
-
of
-
use assets
30
29
Total
amount recognised in income statement
(241)
(359)
1 Included in cost of sales and commercial and administration costs depending on the nature and the use of the right-of-use asset
2 Included in cost of sales, commercial and administration costs, or research and development depending on the nature and use of the right-of-use asset
3 Included in cost of sales
4 Where the cost of meeting residual value guarantees is less than that previously estimated, as costs have been mitigated or liabilities waived by the lessor, the lease liability has been
remeasured. Where the value of this remeasurement exceeds the value of the right-of use asset, the reduction in the lease liability is credited to cost of sales
5 Variable lease payments primarily arise on a small number of contracts where engine lease payments are dependent upon utilisation rather than a periodic charge
6 Included in financing costs
The total cash outflow for leases in 2025 was \u00a3345m (2024: \u00a3421m). Of this, \u00a3306m related to leases reflected in the lease liability, \u00a331m to short-
term leases where lease payments are expensed on a straight-line basis and \u00a38m for variable lease payments where obligations are only due when
the assets are used. The timing difference between income statement charge and cash flow relates to costs incurred at the end of leases for
residual value guarantees and restoration costs that are recognised within depreciation over the term of the lease, the most significant amounts
relate to engine leases.
Engine leases in the Civil Aerospace business often include clauses that require the engines to be returned to the lessor with specific levels of
usable life remaining or cash payments to the lessor. The costs of meeting these requirements are included in the lease payments. The amounts
payable are calculated based upon an estimate of the utilisation of the engines over the lease term, whether the engine is restored to the required
condition by performing an overhaul at our own cost or through the payments of amounts specified in the contract and any new contractual
arrangements arising when the current lease contracts end. Amounts due can vary depending on the level of utilisation of the engines, overhaul
activity prior to the end of the contract, and decisions taken on whether ongoing access to the assets is required at the end of the lease term.
The lease liability at 31 December 2025 included \u00a3292m relating to the cost of meeting these residual value guarantees in the Civil Aerospace
business. Up to \u00a3127m is payable in the next 12 months and \u00a3165m is due over the following five years.
Leases as lessor
The Group acts as lessor for engines to Civil Aerospace customers when they require engines to support their fleets. Lease agreements with the
lessees provide protection over the assets. Usage in excess of specified limits and damage to the engine while on lease are covered by variable
lease payment structures. Lessee bankruptcy risk is managed through ongoing monitoring of airline credit rating and, where applicable, the Cape
Town Convention on International Interests in Mobile Equipment (including a specific protocol relating to aircraft equipment); an international
treaty that creates common standards for the registration of lease contracts and establishes various legal remedies for default in financing
agreements, including repossession and the effect of particular states\u2019 bankruptcy laws. Engines are only leased once the Group confirm that
appropriate insurance documentation is established that covers the engine assets to pre-agreed amounts. All such contracts are operating leases.
The Group also leases out a small number of properties, or parts of properties, where there is excess capacity under operating leases.
2025
2024
\u00a3m
\u00a3m
Operating lease income
1, 2
91
99
1 Includes variable lease payments received of \u00a373m (2024: \u00a383m) that do not depend on an index or a rate
2 Items of property, plant and equipment subject to an operating lease are disclosed in note 10
Total non-cancellable future operating lease rentals (undiscounted) are \u00a363m (2024: \u00a371m) with \u00a311m (2024: \u00a310m) due within one year, \u00a339m (2024:
\u00a338m) between one to five years and \u00a313m (2024: \u00a323m) after five years.
In a limited number of circumstances, the Group sublets properties that are treated as a finance lease when the arrangement transfers substantially
all the risks and rewards of ownership of the asset. At 31 December 2025, the total undiscounted lease payments receivable is \u00a332m (2024: \u00a337m)
on annual lease income of \u00a35m (2024: \u00a35m). The discounted finance lease receivable at 31 December 2025 is \u00a325m (2024: \u00a329m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-691": { "value": "17 Borrowings and lease liabilities
Current
Non
\u2013
current
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Unsecured
Overdrafts
\u2013
2
\u2013
\u2013
\u2013
2
Bank loans
\u2013
4
\u2013
3
\u2013
7
3.625% Notes 2025 $1,000m
1
\u2013
795
\u2013
\u2013
\u2013
795
3.375% Notes 2026 \u00a3375m
2
372
\u2013
\u2013
364
372
364
4.625% Notes 2026
\u20ac750m
3
654
\u2013
\u2013
620
654
620
5.75% Notes 2027 $1,000m
3
\u2013
\u2013
741
795
741
795
5.75% Notes 2027 \u00a3545m
\u2013
\u2013
543
543
543
543
1.625% Notes 2028
\u20ac550m
1
\u2013
\u2013
470
442
470
442
Other loans
\u2013
\u2013
10
9
10
9
Total unsecured
1,026
801
1,764
2,776
2,790
3,577
Lease liability \u2013 Land and buildings
17
44 84 405
101
449
Lease liability
\u2013
Aircraft and engines
300
209
5
0
6
784
806
993
Lease liability \u2013 Plant and equipment
28
43 32 70
60
113
Total lease liabilities
3
45
296
6
2
2
1,259
967
1,555
Total borrowings and lease liabilities
1,371
1,097
2,386
4,035
3,757
5,132
All outstanding items described as loan notes above are listed on the London Stock Exchange 1 These notes are the subject of cross-currency interest rate swap agreements under which the Group has undertaken to pay \ufb02oating rates of GBP interest, which form a fair value hedge. They are also subject to interest rate swap agreements under which the Group has undertaken to pay fixed rates of interest, which are classified as fair value through profit and loss 2 These notes are the subject of interest rate swap agreements under which the Group has undertaken to pay \ufb02oating rates of interest, which form a fair value hedge. They are also subject to interest rate swap agreements under which the Group has undertaken to pay fixed rates of interest, which are classified as fair value through profit and loss 3 These notes are the subject of cross-currency interest rate swap agreements under which the Group has undertaken to pay fixed rates of GBP interest, which form a cash flow hedge At 31 December 2025, \u00a312m of borrowings and \u00a3503m of lease liabilities were reclassified to liabilities associated with assets held for distribution, see note 27 for further details. During the year to 31 December 2025, the Group repaid a loan note of $1bn in October 2025 in line with its maturity date. The Group has access to the following undrawn committed borrowing facilities at the end of the year:
2025
2024
\u00a3m
\u00a3m
Expiring within one year
\u2013
\u2013
Expiring after one year
2,500
2,500
Total undrawn facilities
2,500
2,500
Further details can be found in the going concern statement on page 21. In December 2025 the Group signed a new \u00a32.5bn Revolving Credit Facility maturing December 2030 and cancelled the existing facility. These facilities have not been drawn during the year and remain undrawn at 31 December 2025. 20 Financial instruments Carrying values and fair values of financial instruments Financial instrument disclosures include all financial assets and financial liabilities held by the Group at the reporting date, including those classified within assets and within liabilities associated with assets held for distribution and disclosed separately on the balance sheet in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Financial instruments included within the disposal groups classified as held for distribution are expected to transfer to the buyer(s) on completion of the disposal, and as such may not be available to the Group following this transaction. For further information on financial assets and liabilities classified as held for distribution, see note 27. 1 In the event of counterparty default relating to derivative financial assets and derivative financial liabilities, offsetting would apply and financial assets and liabilities held with the same counterparty would net off. If this occurred with every counterparty, total financial assets would be \u00a3343m (2024: \u00a326m) and liabilities \u00a3250m (2024: \u00a31,657m) Fair values equate to book values for both 2025 and 2024, with the following exceptions:
Basis for
Assets
Amortised
Liabilities
Total
determining FVPL FVOCI cost FVPL Other
2025
Notes
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other non
-
current asset investments
12
A
\u2013
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
14
B/C
\u2013
10
7,222
\u2013
\u2013
7,232
Other non
-
derivative financial assets
14
B
\u2013
\u2013
484
\u2013
\u2013
484
Other assets
D
/F
18
\u2013
14
\u2013
\u2013
32
Derivative financial assets
1
C
773
\u2013
\u2013
\u2013
\u2013
773
Cash and cash equivalents
16
B
2,424
\u2013
3,820
\u2013
\u2013
6,244
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(2,802)
(2,802)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,470)
(1,470)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(680)
\u2013
(680)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(5)
(5)
Other liabilities
H
\u2013
\u2013
\u2013
\u2013
(214)
(214)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,917)
(6,917)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,522)
(2,522)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,423)
(1,423)
3,215
14
11,540
(680)
(15,353)
(1,264)
Other non
-
current asset investments
12
A
\u2013
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
14
B/C
\u2013
9
5,516
\u2013
\u2013
5,525
Other non
-
derivative financial assets
14
B
\u2013
\u2013
366
\u2013
\u2013
366
Other assets
D
/F
21
\u2013
16
\u2013
\u2013
37
Derivative financial assets
1
C
298
\u2013
\u2013
\u2013
\u2013
298
Cash and cash equivalents
16
B
1,900
\u2013
3,674
\u2013
\u2013
5,574
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(3,577)
(3,577)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,555)
(1,555)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(2,054)
\u2013
(2,054)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(7)
(7)
Other
liabilities
H
\u2013
\u2013
\u2013
\u2013
(198)
(198)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,205)
(6,205)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,642)
(2,642)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,280)
(1,280)
2,219
14
9,572
(2,054)
(15,464)
(5,713)
2024
Basis for
2025
2024
Fair
determining Book value Fair value Book value value
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other assets
F
1
4
15
16
16
Borrowings
E
(2,780)
(2,778)
(3,559)
(3,540)
Borrowings
F
(2
2
)
(23)
(18)
(21)
Financial RRSAs
H
(5)
(5)
(7)
(7)
The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. There have been no transfers during the year from or to Level 3 valuation. Fair values have been determined with reference to available market information at the balance sheet date, using the methodologies described below. A These primarily comprise unconsolidated companies where fair value approximates to the book value. Listed investments are valued using Level 1 methodology B Fair values are assumed to approximate to cost either due to the short-term maturity of the instruments or because the interest rate of the investments is reset after periods not exceeding six months. Money market funds are valued using Level 1 methodology C Fair values of derivative financial assets and liabilities and trade receivables held to collect or sell are estimated by discounting expected future contractual cash \ufb02ows using prevailing interest rate curves. For commodity derivatives forward, commodity prices are used to determine expected future cash flows. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. These financial instruments are included on the balance sheet at fair value, derived from observable market prices (Level 2) D Other assets are included on the balance sheet at fair value, derived from observable market prices or latest forecast (Level 2/Level 3). At 31 December 2025, Level 3 assets totalled \u00a311m (2024: \u00a314m) E Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated using quoted prices (Level 1) F Other assets and borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated by discounting contractual future cash flows. (Level 2) G The fair value of lease liabilities are estimated by discounting future contractual cash flows using either the interest rate implicit in the lease or the Group\u2019s incremental cost of borrowing (Level 2) H The fair value of RRSAs and other liabilities are estimated by discounting expected future cash flows. The contractual cash flows are based on future trading activity, which is estimated based on latest forecasts (Level 3) IFRS 13 Fair Value Measurement defines a three level valuation hierarchy: Level 1 \u2014 quoted prices for similar instruments; Level 2 \u2014 directly observable market inputs other than Level 1 inputs; and Level 3 \u2014 inputs not based on observable market data Carrying value of other financial assets and liabilities
Foreign
exchange Commodity Interest rate Total Financial
contracts contracts
contracts
1
derivatives RRSAs Other Total
\u00a3m \u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m \u00a3m
Non
-
current assets
467
6
32
505
\u2013
1
8
52
3
Current assets
257 6 5 268 \u2013 14 282
Assets
724 12 37 773 \u2013 32 805
Current liabilities
(193)
(19)
(24)
(236)
(1)
(3
5
)
(27
2
)
Non
-
current liabilities
(382) (17) (45) (444) (4) (179) (627)
Liabilities
(575) (36) (69) (680) (5) (214) (899)
149
(24)
(32)
93
(5)
(18
2
)
(9
4
)
Non
-
current assets
10
1
110
121
\u2013
5
126
Current assets
25
4
148
177
\u2013
32
209
Assets
35
5
258
298
\u2013
37
335
Current liabilities
(539)
(18)
\u2013
(557)
\u2013
(62)
(619)
Non
-
current liabilities
(1,364)
(22)
(111)
(1,497)
(7)
(136)
(1,640)
Liabilities
(1,903)
(40)
(111)
(2,054)
(7)
(198)
(2,259)
(1,868)
(35)
147
(1,756)
(7)
(161)
(1,924)
2025 2024 1 Includes the foreign exchange impact of cross-currency interest rate swaps Derivative financial instruments The Group uses various \ufb01nancial instruments to manage its exposure to movements in foreign exchange rates. The Group uses commodity swaps to manage its exposure to movements in the price of commodities (jet fuel, base metals, gas and power). To hedge the currency risk associated with a borrowing denominated in a foreign currency, the Group has currency derivatives designated as part of fair value or cash flow hedges. The Group uses interest rate swaps and forward rate agreements to manage its exposure to movements in interest rates.
Movements in the fair values of derivative financial assets and liabilities were as follows:
Foreign exchange Commodity Interest rate instruments \u2013 hedge Interest rate instruments \u2013 non-
instruments
instruments
accounted
1
hedge accounted
Total
2025 2024 2025 2024 2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
(1,868)
(2,035)
(35)
(19)
54
45
93
131
(1,756)
(1,878)
Movements in fair
value hedges
\u2013
\u2013
\u2013
\u2013
(33)
(32)
\u2013
\u2013
(33)
(32)
Movements in cash
flow hedges
\u2013
\u2013
\u2013
\u2013
(40)
(23)
\u2013
\u2013
(40)
(23)
Movements in other
derivative contracts
2
1,335
(631)
(7)
(18)
\u2013
\u2013
(4)
40
1,324
(609)
Contracts settled
682
798
18
2
(50)
64
(52)
(78)
598
786
At 31 December
149
(1,868)
(24)
(35)
(69)
54
37
93
93
(1,756)
1 Includes the foreign exchange impact of cross-currency interest rate swaps
2 Included in net financing
Financial risk and RRSAs and other financial assets and liabilities
The Group has financial liabilities arising from financial RRSAs that are valued at each reporting date using the amortised cost method. This
involves calculating the present value of the forecast cash \ufb02ows of the arrangements using the internal rate of return at the inception of the
arrangements as an appropriate discount rate. Other liabilities includes royalties payable to airframers where the present value of the liability is
calculated using the Group\u2019s average borrowing rate as that reflects the nature of the balance in line with the effective interest method. In each
case, below the fair value of the assets and liabilities reflect a level 3 valuation.
Movements in the carrying values were as follows:
Financial RRSAs
Other \u2014 assets Other \u2014 liabilities
2025 2024 2025 2024 2025 2024
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
(7)
(17)
14
25
(198)
(163)
Exchange adjustments included in OCI
6
1
(3)
\u2013
3
(5)
Additions
\u2013
\u2013
\u2013
\u2013
(29)
(34)
Financing charge
1
\u2013
\u2013
\u2013
(11)
(16)
(9)
Excluded from
underlying profit
:
Changes in forecast payments
1
(4)
\u2013
\u2013
\u2013
\u2013
\u2013
Cash
paid
\u2013
9
\u2013
\u2013
17
12
Other
\u2013
\u2013
\u2013
\u2013
9
1
At
31 December
(5)
(7)
11
14
(214)
(198)
1 Included in net financing
Effect of hedging instruments on the financial position and performance
To manage the risk of changes in the fair values of fixed rate borrowings (the hedged items), the Group has entered into fixed-to-floating interest
rate swaps and cross currency interest rate swaps (the hedging instruments), which, for accounting purposes, are designated as fair value hedges.
The impact of fair value hedges on the financial position and performance of the Group is as follows:
Hedged item
1
Hedging instrument
2
FV FV FV Hedge
adjustment adjustment Carrying Carrying movement ineffective-
in the since Carrying amount amount in the ness in the Weighted Weighted
Nominal period inception amount Nominal asset liability period
period
3
average FX average
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
rate
interest rate
At 31 December
2025
SONIA +
Sterling
(375)
(8)
3
(372)
375
\u2013
(3)
9
\u2013
1.00
0.89
SONIA +
Euro
(484)
(28)
14
(470)
484
\u2013
(23)
31
4
1.14
1.09
At 31 December
2024
SONIA +
Sterling
(375)
(3)
11
(364)
375
\u2013
(12)
3
\u2013
1.00
0.89
SONIA +
USD
(658)
(25)
(137)
(795)
658
128
\u2013
25
\u2013
1.52
1.47
SONIA +
Euro
(484)
13
42
(442)
484
\u2013
(54)
(11)
2
1.14
1.09
1 Hedged items are included in borrowings in the balance sheet
2 Hedging instruments are included in other financial assets or liabilities in the balance sheet
3 Hedge ineffectiveness is included in net financing in the income statement
To manage the foreign exchange rate risk in cash flows on fixed rate non-GBP borrowings (the hedged items), the Group has entered into fixed- to-fixed cross-currency interest rate swaps (the hedging instruments) to hedge the cash flows into GBP, which, for accounting purposes, are designated as cash flow hedges. The impact of cash flow hedges on the financial position and performance of the Group is as follows:
Hedged
item
Hedging instrument
1
H
edg
ing
reserve
s
FV Carrying FV Hedge
movement amount movement ineffective Weighted Weighted Amount Recycled Closing cash
in the asset/ in the ness in the average average recognised to net flow hedge
Nominal period Nominal (liability) period
period
2
FX interest in OCI financing reserve
At 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
rate
rate
\u00a3m
\u00a3m
\u00a3m
2025
USD
(772)
56
772
(22)
(59)
(2)
1.29
5.33
55
(53)
(7)
Euro
(677)
(23)
677
(21)
24
\u2013
1.11
5.45
(17)
26
(1)
At 31 December
2024
USD
(772)
(15)
772
37
9
(6)
1.29
5.33
(19)
15
(9)
Euro
(677)
28
677
(45)
(28)
\u2013
1.11
5.45
36
(38)
(10)
1 Hedging instruments are included in other financial assets or liabilities in the balance sheet 2 Hedge ineffectiveness is included in net financing in the income statement Risk management policies and hedging activities The principal \ufb01nancial risks to which the Group is exposed are: foreign currency exchange rate risk; liquidity risk; credit risk; interest rate risk; and commodity price risk. The Board has approved policies for the management of these risks. Foreign currency exchange rate risk \u2012 The Group has significant cash \ufb02ows (most significantly USD, followed by the euro) denominated in currencies other than the functional currency of the relevant trading entity. To manage its exposures to changes in values of future foreign currency cash \ufb02ows, so as to maintain relatively stable long-term foreign exchange rates on settled transactions, the Group enters into derivative forward foreign currency transactions. In addition, the Group enters in to fixed-to-floating cross-currency interest rate swaps to manage its exposure to changes in fair value as a result of foreign exchange risk. See below. The Group economically hedges its GBP/USD exposure by forecasting highly probable net USD receipts up to five years forward. Hedges are taken out within prescribed maximum and minimum hedge positions set out in the Group FX Policy. The maximum and minimum policy bands decline gradually over the five-year horizon and are calculated as a percentage of forecast net income. A similar policy is operated for the Group\u2019s EUR/USD exposure. For accounting purposes, these derivative contracts are not designated in hedging relationships. The Group also has exposures to cash flows on EUR and USD denominated fixed rate borrowings. To manage its exposures to changes in values of future foreign currency cash flows, the Group has entered into fixed-to-fixed cross-currency interest rate swaps, which, for accounting purposes, are designated as cash flow hedges. The swaps have similar critical terms to the hedged items, such as the initial exchange amounts, payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is established as 1:1. Possible sources of ineffectiveness in the cash flow hedge relationship are changes in the credit risk of either party to the interest rate swap. Another possible source of ineffectiveness would be if the notional of the borrowings is less than the notional of the derivative, for example, in the event of a partial repayment of hedged debt prior to its maturity. The Group regards its interests in overseas subsidiary companies as long-term investments. The Group aims to match its translational exposures by matching the currencies of assets and liabilities. Liquidity risk \u2012 The Group\u2019s policy is to hold \ufb01nancial investments and maintain undrawn committed facilities at a level sufficient to ensure that the Group has available funds to meet its medium-term capital and funding obligations and to meet any unforeseen obligations and opportunities. The Group holds cash and short-term investments, which, together with the undrawn committed facilities, enable the Group to manage its liquidity risk. Credit risk \u2012 The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties of its \ufb01nancial instruments. The effective monitoring and controlling of credit risk is a key component of the Group\u2019s risk management activities. The Group has credit policies covering both trading and \ufb01nancial exposures. Credit risks arising from treasury activities are managed by a central treasury function in accordance with the Group credit policy. The objective of the policy is to diversify and minimise the Group\u2019s exposure to credit risk from its treasury activities by ensuring the Group transacts strictly with \u2018BBB\u2019 or higher rated financial institutions based on pre-established limits per financial institution. At the balance sheet date, there were no significant concentrations of credit risk to individual customers or counterparties. The Group\u2019s revenue is generated from customers located across multiple geographical locations (see note 2). These customers are typically: airframers and airline operators relating to Civil Aerospace; government defence departments for the UK and US; and multiple smaller entities for Power Systems. Whilst there are a limited number of customers related to Civil Aerospace and Defence, they are spread across various geographical locations. The maximum exposure to credit risk at the balance sheet date is represented by the carrying value of each \ufb01nancial asset, including derivative \ufb01nancial instruments.
Interest rate risk \u2012 The Group\u2019s interest rate risk is primarily in relation to its \ufb01xed rate borrowings (fair value risk), \ufb02oating rate borrowings and
cash and cash equivalents (cash \ufb02ow risk). Interest rate derivatives are used to manage the overall interest rate pro\ufb01le of the Group. The fixed or
floating rate interest rate decision on long-term borrowings is determined for each new agreement at the point it is entered into. The aggregate
interest rate position of the Group is reviewed regularly and can be revised at any time in order to react to changes in market conditions or
circumstances.
The Group also has exposures to the fair values of non-derivative \ufb01nancial instruments such as EUR, GBP and USD fixed rate borrowings. To
manage the risk of changes in these fair values, the Group has entered into fixed-to-floating interest rate swaps and cross-currency interest rate
swaps, which, for accounting purposes, are designated as fair value hedges. The swaps have similar critical terms to the hedged items, such as
the reference rate, reset dates, notional amounts, payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio
is established as 1:1. Possible sources of ineffectiveness in the fair value hedge relationship are changes in the credit risk of either party to the
interest rate swap and, for cross-currency interest rate swaps, the cross-currency basis risk as this risk is present in the hedging instrument only.
Another possible source of ineffectiveness would be if the notional of the borrowings is less than the notional of the derivative, for example in
the event of a partial repayment of hedged debt prior to its maturity.
The Group has exposure to changes in cash flows due to changes in interest rates. To manage this risk, the Group has entered into floating-to-
fixed interest rate swaps to hedge a proportion of its floating rate exposure to fixed rates. The swaps have similar critical terms to the floating leg
of swaps that form part of the fair value hedges, such as the reference rate, reset dates, notional amounts, payment dates and maturities. For
accounting purposes, these derivative contracts are generally not designated as hedging instruments.
Commodity price risk \u2012 The Group has exposures to the price of jet fuel, base metals, gas and power arising from business operations. To minimise
its cash \ufb02ow exposures to changes in commodity prices, the Group enters into derivative commodity transactions. During 2025, the Group entered
into a Virtual Power Purchase Arrangement, which had a fair value of \u00a33m at 31 December 2025. The commodity hedging policy is similar to the
Group FX policy, in that the Group forecasts highly probable exposures to commodities, and takes out hedges within prescribed maximum and
minimum levels as set out in the policy. The maximum and minimum policy bands decline gradually over time. For accounting purposes, these
derivative contracts are generally not designated in hedging relationships.
Other price risk \u2012 The Group\u2019s cash equivalent balances represent investments in money market instruments, with a term of up to three months.
The Group does not consider that these are subject to signi\ufb01cant price risk.
Derivative financial instruments
The nominal amounts, analysed by year of expected maturity, and fair values of derivative financial instruments are as follows:
Expected maturity
Fair value
Between Between
Nominal Within one one and two and After five
amount year two years five years years Assets Liabilities
At
31 December
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Foreign exchange contracts:
Non
-
hedge accounted
21,850
7,559
5,516
8,775
\u2013
724
(575)
Interest rate contracts:
Fair value hedges
859
375
\u2013
484
\u2013
\u2013
(26)
Cash flow hedges
1,449
677
772
\u2013
\u2013
\u2013
(43)
Non
-
hedge accounted
859
375
\u2013
484
\u2013
37
\u2013
Commodity contracts:
Non
-
hedge accounted
392
146
110
126
10
12
(36)
25,409
9,132
6,398
9,869
10
773
(680)
At
31 December 2024
Foreign exchange contracts:
Non
-
hedge accounted
20,728
8,018
5,781
6,929
\u2013
35
(1,903)
Interest rate contracts:
Fair value hedges
1,517
658
375
484
\u2013
128
(66)
Cash flow hedges
1,449
\u2013
677
772
\u2013
37
(45)
Non
-
hedge accounted
1,517
658
375
484
\u2013
93
\u2013
Commodity contracts:
Non
-
hedge accounted
330
137
108
85
\u2013
5
(40)
25,541
9,471
7,316
8,754
\u2013
298
(2,054)
As described above, all derivative \ufb01nancial instruments are entered into for risk management purposes, although these may not be designated
into hedging relationships for accounting purposes.
Currency analysis
Foreign exchange contracts are denominated in the following currencies:
Nominal amount of currencies purchased forward
Sterling USD Euro Other Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Currencies sold forward:
Sterling
\u2013
1
49
39
7
195
USD
16,11
8
\u2013
4,541
371
21,0
30
Euro
10
317
\u2013
107
43
4
Other
At 31 December 202
4
4
4
176
7
191
Currencies sold forward:
Sterling
\u2013
882
41
59
982
USD
14,654
\u2013
4,419
287
19,360
Euro
35
290
\u2013
26
351
Other
3
1
31
\u2013
35
The nominal value of interest rate and commodity contracts are denominated in the following currencies:
2025 2024
\u00a3m
\u00a3m
Sterling
1,304
1,915
USD
1,063
1,719
Euro
1,192
1,179
Non-derivative financial instruments are denominated in the following currencies:
Sterling USD Euro Other Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Other non-current asset investments
\u2013
4
\u2013
\u2013
4
Trade receivables and similar items
2,558
3,903
662
109
7
,232
Other non-derivative financial assets
60
354
64
6
484
Other assets
\u2013
18
14
\u2013
32
Cash and cash equivalents
2,922
911
2,235
176
6,244
Assets
5,540
5,
190
2,975
291
13,996
Borrowings
(918)
(746)
(1,133)
(
5
)
(2,80
2
)
Lease liabilities
(251)
(976)
(45)
(198)
(1,470)
Financial RRSAs
\u2013
(5)
\u2013
\u2013
(5)
Other liabilities
(31)
(183)
\u2013
\u2013
(214)
Trade payables and similar items
(1,21
4
)
(
4,853
)
(765)
(85)
(
6,917
)
Other non-derivative financial liabilities
(39
2
)
(1,896)
(187)
(47)
(2,52
2
)
Contract liabilities
\u2013
(1,423)
\u2013
\u2013
(1,423)
Liabilities
(2,806)
(10,
082
)
(2,130)
(33
5
)
(15,
353
)
2,734
(4,8
92
)
84
5
(4
4
)
(1,3
57
)
At 31 December 2024
Other non-current investments
\u2013
5
\u2013
\u2013
5
Trade receivables and similar items
638
4,346
460
81
5,525
Other non-derivative financial assets
73
242
40
11
366
Other assets
\u2013
21
16
\u2013
37
Cash and cash equivalents
2,250
1,283
1,867
174
5,574
Assets
2,961
5,897
2,383
266
11,507
Borrowings
(908)
(1,594) (1,072) (3) (3,577)
Lease liabilities
(237)
(1,074) (49) (195) (1,555)
Financial RRSAs
\u2013
(6)
(1)
\u2013
(7)
Other liabilities
(39)
(159)
\u2013
\u2013
(198)
Trade payables and similar items
(1,006)
(4,701) (423) (75) (6,205)
Other non-derivative financial liabilities
(350)
(2,084) (158) (50) (2,642)
Contract liabilities
\u2013
(1,280)
\u2013
\u2013
(1,280)
Liabilities
(2,540)
(10,898) (1,703) (323) (15,464)
421
(5,001)
680
(57)
(3,957)
Currency exposures The Group\u2019s actual currency exposures on financial instruments after taking account of derivative foreign currency contracts, which are not designated as hedging instruments for accounting purposes are as follows:
Sterling USD Euro Other Total
Functional currency of Group operations
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Sterling
\u2013
\u2013
1
3
4
USD
(7)
\u2013
\u2013
\u2013
(7)
Euro
2
4
\u2013
(3)
3
Other
At 31 December 2024
33
36
78
\u2013
147
Sterling
\u2013
\u2013
\u2013
1
1
USD
(11)
\u2013
\u2013
(2)
(13)
Euro
\u2013
7
\u2013
15
22
Other
55
37
68
\u2013
160
Ageing beyond contractual due date of financial assets
Up to three Between three
months months and one More than one
Within terms overdue year overdue year overdue Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Other non-current asset investments
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
6,854
257
74
47
7,232
Other non-derivative financial assets
480
3
\u2013
1
484
Other assets
25
\u2013
7
\u2013
3
2
Derivative financial assets
773
\u2013
\u2013
\u2013
773
Cash and cash equivalents
6,244
\u2013
\u2013
\u2013
6,244
14,
380
260
81
48
14,
769
At 31 December 2024
Other non-current asset investments
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
5,075
324
82
44
5,525
Other non-derivative financial assets
331
32
\u2013
3
366
Other assets
28
9
\u2013
\u2013
37
Derivative financial assets
298
\u2013
\u2013
\u2013
298
Cash and cash equivalents
5,574
\u2013
\u2013
\u2013
5,574
11,311
365
82
47
11,805
Contractual maturity analysis of non-derivative financial liabilities
Gross values
Between one Between two
Within one year and two years and five years After five years Carrying value
At 31 December 2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Borrowings
(1,146)
(1,371) (490) (19) (2,802)
Lease liabilities
(454)
(293) (496) (1,050) (1,470)
Financial RRSAs
\u2013
\u2013 (1) (3) (5)
Other liabilities
(35)
(19) (28) (131) (214)
Trade payables and similar items
(6,734)
(71) (56) (56) (6,917)
Other non-derivative financial liabilities
(1,807)
(131) (294) (291) (2,522)
Contract liabilities
(1,423)
\u2013
\u2013
\u2013
(1,423)
(11,599) (1,885) (1,365) (1,550) (15,353)
At 31 December 2024
Borrowings
(961)
(1,109) (1,893) (16) (3,577)
Lease liabilities
(365)
(324) (533) (1,189) (1,555)
Financial RRSAs
(1)
\u2013
(1)
(4) (7)
Other liabilities
(61)
(11) (25) (101) (198)
Trade payables and similar items
(6,054)
(21) (67) (63) (6,205)
Other non-derivative financial liabilities
(1,700)
(316) (297) (329) (2,642)
Contract liabilities
(1,280)
\u2013
\u2013
\u2013
(1,280)
(10,422) (1,781) (2,816) (1,702) (15,464)
Expected maturity analysis of derivative financial instruments
Gross values
Within one Between one Between two After five Carrying
year and two years and five years years value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
31 December 2025
Derivative financial assets:
Cash inflows
5,682
4,460
7,783
\u2013
Cash outflows
(5,433)
(4,260)
(7,505)
\u2013
Other net cash flows
1
29
16
8
\u2013
278
216
286
\u2013
773
Derivative financial liabilities:
Cash inflows
2,596
1,850
1,479
\u2013
Cash outflows
(3,001)
(2,059)
(1,552)
\u2013
Other net cash flows
1
(24)
(11)
(6)
\u2013
(429)
(220)
(79)
\u2013
(680)
At 31 December 2024
Derivative financial assets:
Cash inflows
1,940
605
1,089
\u2013
Cash outflows
(1,780)
(592)
(1,054)
\u2013
Other net cash flows
1
66
25
24
\u2013
226
38
59
\u2013
298
Derivative financial liabilities:
Cash inflows
6,988
5,866
7,154
\u2013
Cash outflows
(7,959)
(6,524)
(7,850)
\u2013
Other net cash flows
1
(30)
(11)
(11)
\u2013
(1,001)
(669)
(707)
\u2013
(2,054)
1 Derivative financial assets and liabilities that are settled on a net cash basis Interest rate risk In respect of income-earning \ufb01nancial assets and interest-bearing \ufb01nancial liabilities, the following table indicates their effective interest rates. The value shown is the carrying amount before taking account of swaps.
2025
2024
Floating Floating
Fixed rate rate Total Fixed rate rate Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
1
\u2013
6,244
6,244
\u2013
5,574
5,574
Borrowings
(2,785)
(1
7
)
(2,80
2
)
(3,563)
(14)
(3,577)
Lease liabilities
(1,2
37
)
(233)
(1,47
0
)
(1,298)
(257)
(1,555)
(4,0
22
)
5,99
4
1,9
72
(4,861)
5,303
442
Weighted average interest rates
Borrowings
4.4%
4.7%
4.0%
5.0%
Lease liabilities
2
4.8%
5.0%
4.9%
5.8%
1 Cash and cash equivalents comprises bank balances and term deposits and earn interest based on short-term floating market interest rates 2 Interest rates for lease liabilities are considered to be the discount rates at the balance sheet date None (2024: none) of the Group\u2019s borrowings are subject to \ufb01nancial covenants and there are no rating triggers contained in any of the Group\u2019s facilities that could require the Group to accelerate or repay any facility for a given movement in the Group\u2019s credit rating. \u00a399m (2024: \u00a3106m) of the Group\u2019s lease liabilities include a customary loan-to-value covenant that is applicable if the credit rating of the Company is sub-investment grade. The Group has several contractual cures available in the event the stipulated loan-to-value ratio is exceeded. Failure by the Group to satisfy its contractual obligations under the covenant gives rights to the lessor to terminate its lease and claim termination amounts for the outstanding lease balance. At 31 December 2025 none (2024: none) of these were in breach. Sensitivity Analysis
2025 2024
Sensitivities at
31
December
(all other
variables held constant)
\u2013
impact on profit after tax and equity
\u00a3m
\u00a3m
Sterling 10% weaker against the USD
(1,598)
(1,506)
Sterling 10% stronger against the USD
1,307
1,232
Euro 10% weaker against the USD
(318)
(358)
Euro 10% stronger against the USD
260
293
Sterling 10% weaker against the Euro
(27)
(27)
Sterling 10% stronger against the Euro
22
22
Commodity prices 10% lower
(26)
(20)
Commodity prices 10% higher
26
20
Interest rates 50 basis points lower
(24)
(40)
Interest rates 50 basis points higher
24
39
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-680": { "value": "18 Leases Leases as lessee The net book value of right-of-use assets at 31 December 2025 was \u00a3517m (2024: \u00a3761m), with a lease liability of \u00a3967m (2024: \u00a31,555m), per notes 11 and 17, respectively. Leases that have not yet commenced to which the Group is committed have a future liability of \u00a3214m (2024: \u00a32m) and consist of mainly plant and equipment and properties. The consolidated income statement shows the following amounts relating to leases:
2025
2024
\u00a3m
\u00a3m
Land and buildings depreciation and impairment
1
(47)
(45)
Plant and equipment depreciation
and impairment
2
(47)
(45)
Aircraft and engine
s
depreciation
and impairment
3
(64)
(175)
Total depreciation and impairment charge for right
-
of
-
use assets
(158)
(265)
Adjustment of amounts payable under residual value guarantees within lease liabilities
3, 4
\u2013
6
Expense relating to short
-
term leases of 12 months or less recognised as an expense on a straight
-
line basis
2
(31)
(38)
Expense relating to variable lease payments not included in lease liabilities
3, 5
(8)
(8)
Total operating costs
(197)
(305)
Interest expense
6
(74)
(83)
Total lease expense
(271)
(388)
Income from sub
-
leasing right
-
of
-
use assets
30
29
Total
amount recognised in income statement
(241)
(359)
1 Included in cost of sales and commercial and administration costs depending on the nature and the use of the right-of-use asset 2 Included in cost of sales, commercial and administration costs, or research and development depending on the nature and use of the right-of-use asset 3 Included in cost of sales 4 Where the cost of meeting residual value guarantees is less than that previously estimated, as costs have been mitigated or liabilities waived by the lessor, the lease liability has been remeasured. Where the value of this remeasurement exceeds the value of the right-of use asset, the reduction in the lease liability is credited to cost of sales 5 Variable lease payments primarily arise on a small number of contracts where engine lease payments are dependent upon utilisation rather than a periodic charge 6 Included in financing costs The total cash outflow for leases in 2025 was \u00a3345m (2024: \u00a3421m). Of this, \u00a3306m related to leases reflected in the lease liability, \u00a331m to short- term leases where lease payments are expensed on a straight-line basis and \u00a38m for variable lease payments where obligations are only due when the assets are used. The timing difference between income statement charge and cash flow relates to costs incurred at the end of leases for residual value guarantees and restoration costs that are recognised within depreciation over the term of the lease, the most significant amounts relate to engine leases. Engine leases in the Civil Aerospace business often include clauses that require the engines to be returned to the lessor with specific levels of usable life remaining or cash payments to the lessor. The costs of meeting these requirements are included in the lease payments. The amounts payable are calculated based upon an estimate of the utilisation of the engines over the lease term, whether the engine is restored to the required condition by performing an overhaul at our own cost or through the payments of amounts specified in the contract and any new contractual arrangements arising when the current lease contracts end. Amounts due can vary depending on the level of utilisation of the engines, overhaul activity prior to the end of the contract, and decisions taken on whether ongoing access to the assets is required at the end of the lease term. The lease liability at 31 December 2025 included \u00a3292m relating to the cost of meeting these residual value guarantees in the Civil Aerospace business. Up to \u00a3127m is payable in the next 12 months and \u00a3165m is due over the following five years. Leases as lessor The Group acts as lessor for engines to Civil Aerospace customers when they require engines to support their fleets. Lease agreements with the lessees provide protection over the assets. Usage in excess of specified limits and damage to the engine while on lease are covered by variable lease payment structures. Lessee bankruptcy risk is managed through ongoing monitoring of airline credit rating and, where applicable, the Cape Town Convention on International Interests in Mobile Equipment (including a specific protocol relating to aircraft equipment); an international treaty that creates common standards for the registration of lease contracts and establishes various legal remedies for default in financing agreements, including repossession and the effect of particular states\u2019 bankruptcy laws. Engines are only leased once the Group confirm that appropriate insurance documentation is established that covers the engine assets to pre-agreed amounts. All such contracts are operating leases. The Group also leases out a small number of properties, or parts of properties, where there is excess capacity under operating leases.
2025
2024
\u00a3m
\u00a3m
Operating lease income
1, 2
91
99
1 Includes variable lease payments received of \u00a373m (2024: \u00a383m) that do not depend on an index or a rate 2 Items of property, plant and equipment subject to an operating lease are disclosed in note 10 Total non-cancellable future operating lease rentals (undiscounted) are \u00a363m (2024: \u00a371m) with \u00a311m (2024: \u00a310m) due within one year, \u00a339m (2024: \u00a338m) between one to five years and \u00a313m (2024: \u00a323m) after five years. In a limited number of circumstances, the Group sublets properties that are treated as a finance lease when the arrangement transfers substantially all the risks and rewards of ownership of the asset. At 31 December 2025, the total undiscounted lease payments receivable is \u00a332m (2024: \u00a337m) on annual lease income of \u00a35m (2024: \u00a35m). The discounted finance lease receivable at 31 December 2025 is \u00a325m (2024: \u00a329m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfMaturityAnalysisOfOperatingLeasePaymentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-666": { "value": "18 Leases Leases as lessee The net book value of right-of-use assets at 31 December 2025 was \u00a3517m (2024: \u00a3761m), with a lease liability of \u00a3967m (2024: \u00a31,555m), per notes 11 and 17, respectively. Leases that have not yet commenced to which the Group is committed have a future liability of \u00a3214m (2024: \u00a32m) and consist of mainly plant and equipment and properties. The consolidated income statement shows the following amounts relating to leases:
2025
2024
\u00a3m
\u00a3m
Land and buildings depreciation and impairment
1
(47)
(45)
Plant and equipment depreciation
and impairment
2
(47)
(45)
Aircraft and engine
s
depreciation
and impairment
3
(64)
(175)
Total depreciation and impairment charge for right
-
of
-
use assets
(158)
(265)
Adjustment of amounts payable under residual value guarantees within lease liabilities
3, 4
\u2013
6
Expense relating to short
-
term leases of 12 months or less recognised as an expense on a straight
-
line basis
2
(31)
(38)
Expense relating to variable lease payments not included in lease liabilities
3, 5
(8)
(8)
Total operating costs
(197)
(305)
Interest expense
6
(74)
(83)
Total lease expense
(271)
(388)
Income from sub
-
leasing right
-
of
-
use assets
30
29
Total
amount recognised in income statement
(241)
(359)
1 Included in cost of sales and commercial and administration costs depending on the nature and the use of the right-of-use asset 2 Included in cost of sales, commercial and administration costs, or research and development depending on the nature and use of the right-of-use asset 3 Included in cost of sales 4 Where the cost of meeting residual value guarantees is less than that previously estimated, as costs have been mitigated or liabilities waived by the lessor, the lease liability has been remeasured. Where the value of this remeasurement exceeds the value of the right-of use asset, the reduction in the lease liability is credited to cost of sales 5 Variable lease payments primarily arise on a small number of contracts where engine lease payments are dependent upon utilisation rather than a periodic charge 6 Included in financing costs The total cash outflow for leases in 2025 was \u00a3345m (2024: \u00a3421m). Of this, \u00a3306m related to leases reflected in the lease liability, \u00a331m to short- term leases where lease payments are expensed on a straight-line basis and \u00a38m for variable lease payments where obligations are only due when the assets are used. The timing difference between income statement charge and cash flow relates to costs incurred at the end of leases for residual value guarantees and restoration costs that are recognised within depreciation over the term of the lease, the most significant amounts relate to engine leases. Engine leases in the Civil Aerospace business often include clauses that require the engines to be returned to the lessor with specific levels of usable life remaining or cash payments to the lessor. The costs of meeting these requirements are included in the lease payments. The amounts payable are calculated based upon an estimate of the utilisation of the engines over the lease term, whether the engine is restored to the required condition by performing an overhaul at our own cost or through the payments of amounts specified in the contract and any new contractual arrangements arising when the current lease contracts end. Amounts due can vary depending on the level of utilisation of the engines, overhaul activity prior to the end of the contract, and decisions taken on whether ongoing access to the assets is required at the end of the lease term. The lease liability at 31 December 2025 included \u00a3292m relating to the cost of meeting these residual value guarantees in the Civil Aerospace business. Up to \u00a3127m is payable in the next 12 months and \u00a3165m is due over the following five years. Leases as lessor The Group acts as lessor for engines to Civil Aerospace customers when they require engines to support their fleets. Lease agreements with the lessees provide protection over the assets. Usage in excess of specified limits and damage to the engine while on lease are covered by variable lease payment structures. Lessee bankruptcy risk is managed through ongoing monitoring of airline credit rating and, where applicable, the Cape Town Convention on International Interests in Mobile Equipment (including a specific protocol relating to aircraft equipment); an international treaty that creates common standards for the registration of lease contracts and establishes various legal remedies for default in financing agreements, including repossession and the effect of particular states\u2019 bankruptcy laws. Engines are only leased once the Group confirm that appropriate insurance documentation is established that covers the engine assets to pre-agreed amounts. All such contracts are operating leases. The Group also leases out a small number of properties, or parts of properties, where there is excess capacity under operating leases.
2025
2024
\u00a3m
\u00a3m
Operating lease income
1, 2
91
99
1 Includes variable lease payments received of \u00a373m (2024: \u00a383m) that do not depend on an index or a rate 2 Items of property, plant and equipment subject to an operating lease are disclosed in note 10 Total non-cancellable future operating lease rentals (undiscounted) are \u00a363m (2024: \u00a371m) with \u00a311m (2024: \u00a310m) due within one year, \u00a339m (2024: \u00a338m) between one to five years and \u00a313m (2024: \u00a323m) after five years. In a limited number of circumstances, the Group sublets properties that are treated as a finance lease when the arrangement transfers substantially all the risks and rewards of ownership of the asset. At 31 December 2025, the total undiscounted lease payments receivable is \u00a332m (2024: \u00a337m) on annual lease income of \u00a35m (2024: \u00a35m). The discounted finance lease receivable at 31 December 2025 is \u00a325m (2024: \u00a329m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfMaturityAnalysisOfFinanceLeasePaymentsReceivableExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-634": { "value": "18 Leases Leases as lessee The net book value of right-of-use assets at 31 December 2025 was \u00a3517m (2024: \u00a3761m), with a lease liability of \u00a3967m (2024: \u00a31,555m), per notes 11 and 17, respectively. Leases that have not yet commenced to which the Group is committed have a future liability of \u00a3214m (2024: \u00a32m) and consist of mainly plant and equipment and properties. The consolidated income statement shows the following amounts relating to leases:
2025
2024
\u00a3m
\u00a3m
Land and buildings depreciation and impairment
1
(47)
(45)
Plant and equipment depreciation
and impairment
2
(47)
(45)
Aircraft and engine
s
depreciation
and impairment
3
(64)
(175)
Total depreciation and impairment charge for right
-
of
-
use assets
(158)
(265)
Adjustment of amounts payable under residual value guarantees within lease liabilities
3, 4
\u2013
6
Expense relating to short
-
term leases of 12 months or less recognised as an expense on a straight
-
line basis
2
(31)
(38)
Expense relating to variable lease payments not included in lease liabilities
3, 5
(8)
(8)
Total operating costs
(197)
(305)
Interest expense
6
(74)
(83)
Total lease expense
(271)
(388)
Income from sub
-
leasing right
-
of
-
use assets
30
29
Total
amount recognised in income statement
(241)
(359)
1 Included in cost of sales and commercial and administration costs depending on the nature and the use of the right-of-use asset 2 Included in cost of sales, commercial and administration costs, or research and development depending on the nature and use of the right-of-use asset 3 Included in cost of sales 4 Where the cost of meeting residual value guarantees is less than that previously estimated, as costs have been mitigated or liabilities waived by the lessor, the lease liability has been remeasured. Where the value of this remeasurement exceeds the value of the right-of use asset, the reduction in the lease liability is credited to cost of sales 5 Variable lease payments primarily arise on a small number of contracts where engine lease payments are dependent upon utilisation rather than a periodic charge 6 Included in financing costs The total cash outflow for leases in 2025 was \u00a3345m (2024: \u00a3421m). Of this, \u00a3306m related to leases reflected in the lease liability, \u00a331m to short- term leases where lease payments are expensed on a straight-line basis and \u00a38m for variable lease payments where obligations are only due when the assets are used. The timing difference between income statement charge and cash flow relates to costs incurred at the end of leases for residual value guarantees and restoration costs that are recognised within depreciation over the term of the lease, the most significant amounts relate to engine leases. Engine leases in the Civil Aerospace business often include clauses that require the engines to be returned to the lessor with specific levels of usable life remaining or cash payments to the lessor. The costs of meeting these requirements are included in the lease payments. The amounts payable are calculated based upon an estimate of the utilisation of the engines over the lease term, whether the engine is restored to the required condition by performing an overhaul at our own cost or through the payments of amounts specified in the contract and any new contractual arrangements arising when the current lease contracts end. Amounts due can vary depending on the level of utilisation of the engines, overhaul activity prior to the end of the contract, and decisions taken on whether ongoing access to the assets is required at the end of the lease term. The lease liability at 31 December 2025 included \u00a3292m relating to the cost of meeting these residual value guarantees in the Civil Aerospace business. Up to \u00a3127m is payable in the next 12 months and \u00a3165m is due over the following five years. Leases as lessor The Group acts as lessor for engines to Civil Aerospace customers when they require engines to support their fleets. Lease agreements with the lessees provide protection over the assets. Usage in excess of specified limits and damage to the engine while on lease are covered by variable lease payment structures. Lessee bankruptcy risk is managed through ongoing monitoring of airline credit rating and, where applicable, the Cape Town Convention on International Interests in Mobile Equipment (including a specific protocol relating to aircraft equipment); an international treaty that creates common standards for the registration of lease contracts and establishes various legal remedies for default in financing agreements, including repossession and the effect of particular states\u2019 bankruptcy laws. Engines are only leased once the Group confirm that appropriate insurance documentation is established that covers the engine assets to pre-agreed amounts. All such contracts are operating leases. The Group also leases out a small number of properties, or parts of properties, where there is excess capacity under operating leases.
2025
2024
\u00a3m
\u00a3m
Operating lease income
1, 2
91
99
1 Includes variable lease payments received of \u00a373m (2024: \u00a383m) that do not depend on an index or a rate 2 Items of property, plant and equipment subject to an operating lease are disclosed in note 10 Total non-cancellable future operating lease rentals (undiscounted) are \u00a363m (2024: \u00a371m) with \u00a311m (2024: \u00a310m) due within one year, \u00a339m (2024: \u00a338m) between one to five years and \u00a313m (2024: \u00a323m) after five years. In a limited number of circumstances, the Group sublets properties that are treated as a finance lease when the arrangement transfers substantially all the risks and rewards of ownership of the asset. At 31 December 2025, the total undiscounted lease payments receivable is \u00a332m (2024: \u00a337m) on annual lease income of \u00a35m (2024: \u00a35m). The discounted finance lease receivable at 31 December 2025 is \u00a325m (2024: \u00a329m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasePrepaymentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-598": { "value": "
19 Trade payables and other liabilities
Current
Non-current
Total
1
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade payables
1,039
1,526
40
\u2013
1,079
1,526
Accru
ed liabilities
1,7
70
2,552
9
7
109
1,8
67
2,661
Customer discounts
2
1,08
8
1,035
631
866
1,71
9
1,901
Payables due on RRSAs
1
,800
1,529
14
11
1,
814
1,540
Deferred receipts from RRSA workshare
partners
35
55
747
757
782
812
Amounts owed to joint ventures and associates
555
492
\u2013
\u2013
555
492
Government grants
3
38
26
8
24
46
50
Other taxation and social security
36
54
\u2013
\u2013
36
54
Other payables
4
3
55
740
16
1
198
5
1
6
938
6,
716
8,009
1,6
9
8
1,965
8,
414
9,974
Trade payables and other
liabilities are analysed as follows:
Financial instruments (
note
20
):
Trade payables and similar items
5,
299
6,205
Other non
-
derivative financial liabilities
2,0
89
2,642
Non
-
financial instruments
1,0
2
6
1,127
8,
414
9,974
1 At 31 December 2025, \u00a32,216m of trade payables and other liabilities were reclassified to liabilities associated with assets held for distribution, see note 27 for further details
2 Customer discounts include customer concession credits. Revenue recognised comprises sales to the Group\u2019s customers after such items. Customer concession credits are discounts given to
a customer upon the sale of goods or services. A liability is recognised to correspond with the recognition of revenue when the performance obligation is met, as set out on page 42. The
largest element of the balance, approximately \u00a31.2bn (2024: \u00a31.4bn) arises when the Civil business delivers its engines to an airframer. A concession is often payable to the end customer (e.g.
an airline) on delivery of the aircraft from the airframer. The concession amounts are known and the payment date is reasonably certain, hence there is no significant judgement or uncertainty
associated with the timing of these amounts
3 During the year, \u00a35m, (2024: \u00a3102m) of government grants were released to the income statement
4 Other payables includes payroll liabilities and HM Government UK levies
The Group\u2019s payment terms with suppliers vary based on the products and services being sourced, the competitive global markets the Group
operates in and other commercial aspects of suppliers\u2019 relationships. Industry average payment terms vary between 90 to 120 days. The Group
offers reduced payment terms to its smaller suppliers, who are typically on 75-day payment terms, so that they are paid in 30 days.
In line with civil aviation industry practice, the Group offers a SCF programme in partnership with banks to enable suppliers (including joint
ventures who are on 90-day standard payment terms) to receive their payments sooner. This SCF programme is available to suppliers at their
discretion and does not change the Group\u2019s rights and obligations with the suppliers or the timing of payment by the Group to settle its liabilities
arising from transactions with these suppliers.
At 31 December 2025, \u00a3646m (2024: \u00a3594m) of trade payables and other liabilities were within the scope of SCF arrangements of which suppliers
had drawn \u00a3536m (2024: \u00a3506m), with \u00a3227m (2024: \u00a3243m) drawn by joint ventures. In some cases the Group settles the costs incurred by joint
ventures as a result of them utilising SCF arrangements and, during the year to 31 December 2025, the Group incurred costs of \u00a39m (2024: \u00a39m).
These costs were included within cost of sales.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-667": { "value": "19 Trade payables and other liabilities
Current
Non-current
Total
1
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade payables
1,039
1,526
40
\u2013
1,079
1,526
Accru
ed liabilities
1,7
70
2,552
9
7
109
1,8
67
2,661
Customer discounts
2
1,08
8
1,035
631
866
1,71
9
1,901
Payables due on RRSAs
1
,800
1,529
14
11
1,
814
1,540
Deferred receipts from RRSA workshare
partners
35
55
747
757
782
812
Amounts owed to joint ventures and associates
555
492
\u2013
\u2013
555
492
Government grants
3
38
26
8
24
46
50
Other taxation and social security
36
54
\u2013
\u2013
36
54
Other payables
4
3
55
740
16
1
198
5
1
6
938
6,
716
8,009
1,6
9
8
1,965
8,
414
9,974
Trade payables and other
liabilities are analysed as follows:
Financial instruments (
note
20
):
Trade payables and similar items
5,
299
6,205
Other non
-
derivative financial liabilities
2,0
89
2,642
Non
-
financial instruments
1,0
2
6
1,127
8,
414
9,974
1 At 31 December 2025, \u00a32,216m of trade payables and other liabilities were reclassified to liabilities associated with assets held for distribution, see note 27 for further details 2 Customer discounts include customer concession credits. Revenue recognised comprises sales to the Group\u2019s customers after such items. Customer concession credits are discounts given to a customer upon the sale of goods or services. A liability is recognised to correspond with the recognition of revenue when the performance obligation is met, as set out on page 42. The largest element of the balance, approximately \u00a31.2bn (2024: \u00a31.4bn) arises when the Civil business delivers its engines to an airframer. A concession is often payable to the end customer (e.g. an airline) on delivery of the aircraft from the airframer. The concession amounts are known and the payment date is reasonably certain, hence there is no significant judgement or uncertainty associated with the timing of these amounts 3 During the year, \u00a35m, (2024: \u00a3102m) of government grants were released to the income statement 4 Other payables includes payroll liabilities and HM Government UK levies The Group\u2019s payment terms with suppliers vary based on the products and services being sourced, the competitive global markets the Group operates in and other commercial aspects of suppliers\u2019 relationships. Industry average payment terms vary between 90 to 120 days. The Group offers reduced payment terms to its smaller suppliers, who are typically on 75-day payment terms, so that they are paid in 30 days. In line with civil aviation industry practice, the Group offers a SCF programme in partnership with banks to enable suppliers (including joint ventures who are on 90-day standard payment terms) to receive their payments sooner. This SCF programme is available to suppliers at their discretion and does not change the Group\u2019s rights and obligations with the suppliers or the timing of payment by the Group to settle its liabilities arising from transactions with these suppliers. At 31 December 2025, \u00a3646m (2024: \u00a3594m) of trade payables and other liabilities were within the scope of SCF arrangements of which suppliers had drawn \u00a3536m (2024: \u00a3506m), with \u00a3227m (2024: \u00a3243m) drawn by joint ventures. In some cases the Group settles the costs incurred by joint ventures as a result of them utilising SCF arrangements and, during the year to 31 December 2025, the Group incurred costs of \u00a39m (2024: \u00a39m). These costs were included within cost of sales. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-635": { "value": "19 Trade payables and other liabilities
Current
Non-current
Total
1
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade payables
1,039
1,526
40
\u2013
1,079
1,526
Accru
ed liabilities
1,7
70
2,552
9
7
109
1,8
67
2,661
Customer discounts
2
1,08
8
1,035
631
866
1,71
9
1,901
Payables due on RRSAs
1
,800
1,529
14
11
1,
814
1,540
Deferred receipts from RRSA workshare
partners
35
55
747
757
782
812
Amounts owed to joint ventures and associates
555
492
\u2013
\u2013
555
492
Government grants
3
38
26
8
24
46
50
Other taxation and social security
36
54
\u2013
\u2013
36
54
Other payables
4
3
55
740
16
1
198
5
1
6
938
6,
716
8,009
1,6
9
8
1,965
8,
414
9,974
Trade payables and other
liabilities are analysed as follows:
Financial instruments (
note
20
):
Trade payables and similar items
5,
299
6,205
Other non
-
derivative financial liabilities
2,0
89
2,642
Non
-
financial instruments
1,0
2
6
1,127
8,
414
9,974
1 At 31 December 2025, \u00a32,216m of trade payables and other liabilities were reclassified to liabilities associated with assets held for distribution, see note 27 for further details 2 Customer discounts include customer concession credits. Revenue recognised comprises sales to the Group\u2019s customers after such items. Customer concession credits are discounts given to a customer upon the sale of goods or services. A liability is recognised to correspond with the recognition of revenue when the performance obligation is met, as set out on page 42. The largest element of the balance, approximately \u00a31.2bn (2024: \u00a31.4bn) arises when the Civil business delivers its engines to an airframer. A concession is often payable to the end customer (e.g. an airline) on delivery of the aircraft from the airframer. The concession amounts are known and the payment date is reasonably certain, hence there is no significant judgement or uncertainty associated with the timing of these amounts 3 During the year, \u00a35m, (2024: \u00a3102m) of government grants were released to the income statement 4 Other payables includes payroll liabilities and HM Government UK levies The Group\u2019s payment terms with suppliers vary based on the products and services being sourced, the competitive global markets the Group operates in and other commercial aspects of suppliers\u2019 relationships. Industry average payment terms vary between 90 to 120 days. The Group offers reduced payment terms to its smaller suppliers, who are typically on 75-day payment terms, so that they are paid in 30 days. In line with civil aviation industry practice, the Group offers a SCF programme in partnership with banks to enable suppliers (including joint ventures who are on 90-day standard payment terms) to receive their payments sooner. This SCF programme is available to suppliers at their discretion and does not change the Group\u2019s rights and obligations with the suppliers or the timing of payment by the Group to settle its liabilities arising from transactions with these suppliers. At 31 December 2025, \u00a3646m (2024: \u00a3594m) of trade payables and other liabilities were within the scope of SCF arrangements of which suppliers had drawn \u00a3536m (2024: \u00a3506m), with \u00a3227m (2024: \u00a3243m) drawn by joint ventures. In some cases the Group settles the costs incurred by joint ventures as a result of them utilising SCF arrangements and, during the year to 31 December 2025, the Group incurred costs of \u00a39m (2024: \u00a39m). These costs were included within cost of sales.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-681": { "value": "
Current
Non-current
Total
1
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade payables
1,039
1,526
40
\u2013
1,079
1,526
Accru
ed liabilities
1,7
70
2,552
9
7
109
1,8
67
2,661
Customer discounts
2
1,08
8
1,035
631
866
1,71
9
1,901
Payables due on RRSAs
1
,800
1,529
14
11
1,
814
1,540
Deferred receipts from RRSA workshare
partners
35
55
747
757
782
812
Amounts owed to joint ventures and associates
555
492
\u2013
\u2013
555
492
Government grants
3
38
26
8
24
46
50
Other taxation and social security
36
54
\u2013
\u2013
36
54
Other payables
4
3
55
740
16
1
198
5
1
6
938
6,
716
8,009
1,6
9
8
1,965
8,
414
9,974
Trade payables and other
liabilities are analysed as follows:
Financial instruments (
note
20
):
Trade payables and similar items
5,
299
6,205
Other non
-
derivative financial liabilities
2,0
89
2,642
Non
-
financial instruments
1,0
2
6
1,127
8,
414
9,974
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-686": { "value": "
Current
Non-current
Total
1
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade payables
1,039
1,526
40
\u2013
1,079
1,526
Accru
ed liabilities
1,7
70
2,552
9
7
109
1,8
67
2,661
Customer discounts
2
1,08
8
1,035
631
866
1,71
9
1,901
Payables due on RRSAs
1
,800
1,529
14
11
1,
814
1,540
Deferred receipts from RRSA workshare
partners
35
55
747
757
782
812
Amounts owed to joint ventures and associates
555
492
\u2013
\u2013
555
492
Government grants
3
38
26
8
24
46
50
Other taxation and social security
36
54
\u2013
\u2013
36
54
Other payables
4
3
55
740
16
1
198
5
1
6
938
6,
716
8,009
1,6
9
8
1,965
8,
414
9,974
Trade payables and other
liabilities are analysed as follows:
Financial instruments (
note
20
):
Trade payables and similar items
5,
299
6,205
Other non
-
derivative financial liabilities
2,0
89
2,642
Non
-
financial instruments
1,0
2
6
1,127
8,
414
9,974
", "dimensions": { "concept": "ifrs-full:DisclosureOfGovernmentGrantsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-692": { "value": "
Current
Non-current
Total
1
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Trade payables
1,039
1,526
40
\u2013
1,079
1,526
Accru
ed liabilities
1,7
70
2,552
9
7
109
1,8
67
2,661
Customer discounts
2
1,08
8
1,035
631
866
1,71
9
1,901
Payables due on RRSAs
1
,800
1,529
14
11
1,
814
1,540
Deferred receipts from RRSA workshare
partners
35
55
747
757
782
812
Amounts owed to joint ventures and associates
555
492
\u2013
\u2013
555
492
Government grants
3
38
26
8
24
46
50
Other taxation and social security
36
54
\u2013
\u2013
36
54
Other payables
4
3
55
740
16
1
198
5
1
6
938
6,
716
8,009
1,6
9
8
1,965
8,
414
9,974
Trade payables and other
liabilities are analysed as follows:
Financial instruments (
note
20
):
Trade payables and similar items
5,
299
6,205
Other non
-
derivative financial liabilities
2,0
89
2,642
Non
-
financial instruments
1,0
2
6
1,127
8,
414
9,974
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-668": { "value": "
Carrying values and fair values of financial instruments
Financial instrument disclosures include all financial assets and financial liabilities held by the Group at the reporting date, including those
classified within assets and within liabilities associated with assets held for distribution and disclosed separately on the balance sheet in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Financial instruments included within the disposal groups
classified as held for distribution are expected to transfer to the buyer(s) on completion of the disposal, and as such may not be available to the
Group following this transaction. For further information on financial assets and liabilities classified as held for distribution, see note 27.
1 In the event of counterparty default relating to derivative financial assets and derivative financial liabilities, offsetting would apply and financial assets and liabilities held with the same
counterparty would net off. If this occurred with every counterparty, total financial assets would be \u00a3343m (2024: \u00a326m) and liabilities \u00a3250m (2024: \u00a31,657m)
Fair values equate to book values for both 2025 and 2024, with the following exceptions:
Basis for
Assets
Amortised
Liabilities
Total
determining FVPL FVOCI cost FVPL Other
2025
Notes
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other non
-
current asset investments
12
A
\u2013
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
14
B/C
\u2013
10
7,222
\u2013
\u2013
7,232
Other non
-
derivative financial assets
14
B
\u2013
\u2013
484
\u2013
\u2013
484
Other assets
D
/F
18
\u2013
14
\u2013
\u2013
32
Derivative financial assets
1
C
773
\u2013
\u2013
\u2013
\u2013
773
Cash and cash equivalents
16
B
2,424
\u2013
3,820
\u2013
\u2013
6,244
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(2,802)
(2,802)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,470)
(1,470)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(680)
\u2013
(680)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(5)
(5)
Other liabilities
H
\u2013
\u2013
\u2013
\u2013
(214)
(214)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,917)
(6,917)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,522)
(2,522)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,423)
(1,423)
3,215
14
11,540
(680)
(15,353)
(1,264)
Other non
-
current asset investments
12
A
\u2013
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
14
B/C
\u2013
9
5,516
\u2013
\u2013
5,525
Other non
-
derivative financial assets
14
B
\u2013
\u2013
366
\u2013
\u2013
366
Other assets
D
/F
21
\u2013
16
\u2013
\u2013
37
Derivative financial assets
1
C
298
\u2013
\u2013
\u2013
\u2013
298
Cash and cash equivalents
16
B
1,900
\u2013
3,674
\u2013
\u2013
5,574
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(3,577)
(3,577)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,555)
(1,555)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(2,054)
\u2013
(2,054)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(7)
(7)
Other
liabilities
H
\u2013
\u2013
\u2013
\u2013
(198)
(198)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,205)
(6,205)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,642)
(2,642)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,280)
(1,280)
2,219
14
9,572
(2,054)
(15,464)
(5,713)
202
4
Basis for
2025
2024
Fair
determining Book value Fair value Book value value
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other assets
F
1
4
15
16
16
Borrowings
E
(2,780)
(2,778)
(3,559)
(3,540)
Borrowings
F
(2
2
)
(23)
(18)
(21)
Financial RRSAs
H
(5)
(5)
(7)
(7)
The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm\u2019s-length transaction. There have been no transfers during the year from or to Level 3 valuation. Fair values have been determined
with reference to available market information at the balance sheet date, using the methodologies described below.
A These primarily comprise unconsolidated companies where fair value approximates to the book value. Listed investments are valued using Level 1 methodology
B Fair values are assumed to approximate to cost either due to the short-term maturity of the instruments or because the interest rate of the investments is reset after periods not exceeding six
months. Money market funds are valued using Level 1 methodology
C Fair values of derivative financial assets and liabilities and trade receivables held to collect or sell are estimated by discounting expected future contractual cash \ufb02ows using prevailing interest
rate curves. For commodity derivatives forward, commodity prices are used to determine expected future cash flows. Amounts denominated in foreign currencies are valued at the exchange
rate prevailing at the balance sheet date. These financial instruments are included on the balance sheet at fair value, derived from observable market prices (Level 2)
D Other assets are included on the balance sheet at fair value, derived from observable market prices or latest forecast (Level 2/Level 3). At 31 December 2025, Level 3 assets totalled \u00a311m (2024:
\u00a314m)
E Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is
estimated using quoted prices (Level 1)
F Other assets and borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of
borrowings is estimated by discounting contractual future cash flows. (Level 2)
G The fair value of lease liabilities are estimated by discounting future contractual cash flows using either the interest rate implicit in the lease or the Group\u2019s incremental cost of borrowing
(Level 2)
H The fair value of RRSAs and other liabilities are estimated by discounting expected future cash flows. The contractual cash flows are based on future trading activity, which is estimated based
on latest forecasts (Level 3)
IFRS 13 Fair Value Measurement defines a three level valuation hierarchy:
Level 1 \u2014 quoted prices for similar instruments;
Level 2 \u2014 directly observable market inputs other than Level 1 inputs; and
Level 3 \u2014 inputs not based on observable market data
Carrying value of other financial assets and liabilities
Foreign
exchange Commodity Interest rate Total Financial
contracts contracts
contracts
1
derivatives RRSAs Other Total
\u00a3m \u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m \u00a3m
Non
-
current assets
467
6
32
505
\u2013
1
8
52
3
Current assets
257 6 5 268 \u2013 14 282
Assets
724 12 37 773 \u2013 32 805
Current liabilities
(193)
(19)
(24)
(236)
(1)
(3
5
)
(27
2
)
Non
-
current liabilities
(382) (17) (45) (444) (4) (179) (627)
Liabilities
(575) (36) (69) (680) (5) (214) (899)
149
(24)
(32)
93
(5)
(18
2
)
(9
4
)
Non
-
current assets
10
1
110
121
\u2013
5
126
Current assets
25
4
148
177
\u2013
32
209
Assets
35
5
258
298
\u2013
37
335
Current liabilities
(539)
(18)
\u2013
(557)
\u2013
(62)
(619)
Non
-
current liabilities
(1,364)
(22)
(111)
(1,497)
(7)
(136)
(1,640)
Liabilities
(1,903)
(40)
(111)
(2,054)
(7)
(198)
(2,259)
(1,868)
(35)
147
(1,756)
(7)
(161)
(1,924)
202
5
202
4
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-687": { "value": "Carrying values and fair values of financial instruments Financial instrument disclosures include all financial assets and financial liabilities held by the Group at the reporting date, including those classified within assets and within liabilities associated with assets held for distribution and disclosed separately on the balance sheet in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Financial instruments included within the disposal groups classified as held for distribution are expected to transfer to the buyer(s) on completion of the disposal, and as such may not be available to the Group following this transaction. For further information on financial assets and liabilities classified as held for distribution, see note 27. 1 In the event of counterparty default relating to derivative financial assets and derivative financial liabilities, offsetting would apply and financial assets and liabilities held with the same counterparty would net off. If this occurred with every counterparty, total financial assets would be \u00a3343m (2024: \u00a326m) and liabilities \u00a3250m (2024: \u00a31,657m) Fair values equate to book values for both 2025 and 2024, with the following exceptions:
Basis for
Assets
Amortised
Liabilities
Total
determining FVPL FVOCI cost FVPL Other
2025
Notes
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other non
-
current asset investments
12
A
\u2013
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
14
B/C
\u2013
10
7,222
\u2013
\u2013
7,232
Other non
-
derivative financial assets
14
B
\u2013
\u2013
484
\u2013
\u2013
484
Other assets
D
/F
18
\u2013
14
\u2013
\u2013
32
Derivative financial assets
1
C
773
\u2013
\u2013
\u2013
\u2013
773
Cash and cash equivalents
16
B
2,424
\u2013
3,820
\u2013
\u2013
6,244
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(2,802)
(2,802)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,470)
(1,470)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(680)
\u2013
(680)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(5)
(5)
Other liabilities
H
\u2013
\u2013
\u2013
\u2013
(214)
(214)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,917)
(6,917)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,522)
(2,522)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,423)
(1,423)
3,215
14
11,540
(680)
(15,353)
(1,264)
Other non
-
current asset investments
12
A
\u2013
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
14
B/C
\u2013
9
5,516
\u2013
\u2013
5,525
Other non
-
derivative financial assets
14
B
\u2013
\u2013
366
\u2013
\u2013
366
Other assets
D
/F
21
\u2013
16
\u2013
\u2013
37
Derivative financial assets
1
C
298
\u2013
\u2013
\u2013
\u2013
298
Cash and cash equivalents
16
B
1,900
\u2013
3,674
\u2013
\u2013
5,574
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(3,577)
(3,577)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,555)
(1,555)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(2,054)
\u2013
(2,054)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(7)
(7)
Other
liabilities
H
\u2013
\u2013
\u2013
\u2013
(198)
(198)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,205)
(6,205)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,642)
(2,642)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,280)
(1,280)
2,219
14
9,572
(2,054)
(15,464)
(5,713)
2024
Basis for
2025
2024
Fair
determining Book value Fair value Book value value
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other assets
F
1
4
15
16
16
Borrowings
E
(2,780)
(2,778)
(3,559)
(3,540)
Borrowings
F
(2
2
)
(23)
(18)
(21)
Financial RRSAs
H
(5)
(5)
(7)
(7)
The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. There have been no transfers during the year from or to Level 3 valuation. Fair values have been determined with reference to available market information at the balance sheet date, using the methodologies described below. A These primarily comprise unconsolidated companies where fair value approximates to the book value. Listed investments are valued using Level 1 methodology B Fair values are assumed to approximate to cost either due to the short-term maturity of the instruments or because the interest rate of the investments is reset after periods not exceeding six months. Money market funds are valued using Level 1 methodology C Fair values of derivative financial assets and liabilities and trade receivables held to collect or sell are estimated by discounting expected future contractual cash \ufb02ows using prevailing interest rate curves. For commodity derivatives forward, commodity prices are used to determine expected future cash flows. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. These financial instruments are included on the balance sheet at fair value, derived from observable market prices (Level 2) D Other assets are included on the balance sheet at fair value, derived from observable market prices or latest forecast (Level 2/Level 3). At 31 December 2025, Level 3 assets totalled \u00a311m (2024: \u00a314m) E Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated using quoted prices (Level 1) F Other assets and borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated by discounting contractual future cash flows. (Level 2) G The fair value of lease liabilities are estimated by discounting future contractual cash flows using either the interest rate implicit in the lease or the Group\u2019s incremental cost of borrowing (Level 2) H The fair value of RRSAs and other liabilities are estimated by discounting expected future cash flows. The contractual cash flows are based on future trading activity, which is estimated based on latest forecasts (Level 3) IFRS 13 Fair Value Measurement defines a three level valuation hierarchy: Level 1 \u2014 quoted prices for similar instruments; Level 2 \u2014 directly observable market inputs other than Level 1 inputs; and Level 3 \u2014 inputs not based on observable market data Carrying value of other financial assets and liabilities
Foreign
exchange Commodity Interest rate Total Financial
contracts contracts
contracts
1
derivatives RRSAs Other Total
\u00a3m \u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m \u00a3m
Non
-
current assets
467
6
32
505
\u2013
1
8
52
3
Current assets
257 6 5 268 \u2013 14 282
Assets
724 12 37 773 \u2013 32 805
Current liabilities
(193)
(19)
(24)
(236)
(1)
(3
5
)
(27
2
)
Non
-
current liabilities
(382) (17) (45) (444) (4) (179) (627)
Liabilities
(575) (36) (69) (680) (5) (214) (899)
149
(24)
(32)
93
(5)
(18
2
)
(9
4
)
Non
-
current assets
10
1
110
121
\u2013
5
126
Current assets
25
4
148
177
\u2013
32
209
Assets
35
5
258
298
\u2013
37
335
Current liabilities
(539)
(18)
\u2013
(557)
\u2013
(62)
(619)
Non
-
current liabilities
(1,364)
(22)
(111)
(1,497)
(7)
(136)
(1,640)
Liabilities
(1,903)
(40)
(111)
(2,054)
(7)
(198)
(2,259)
(1,868)
(35)
147
(1,756)
(7)
(161)
(1,924)
2025 2024 1 Includes the foreign exchange impact of cross-currency interest rate swaps", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsDesignatedAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-682": { "value": "Carrying values and fair values of financial instruments Financial instrument disclosures include all financial assets and financial liabilities held by the Group at the reporting date, including those classified within assets and within liabilities associated with assets held for distribution and disclosed separately on the balance sheet in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Financial instruments included within the disposal groups classified as held for distribution are expected to transfer to the buyer(s) on completion of the disposal, and as such may not be available to the Group following this transaction. For further information on financial assets and liabilities classified as held for distribution, see note 27. 1 In the event of counterparty default relating to derivative financial assets and derivative financial liabilities, offsetting would apply and financial assets and liabilities held with the same counterparty would net off. If this occurred with every counterparty, total financial assets would be \u00a3343m (2024: \u00a326m) and liabilities \u00a3250m (2024: \u00a31,657m) Fair values equate to book values for both 2025 and 2024, with the following exceptions:
Basis for
Assets
Amortised
Liabilities
Total
determining FVPL FVOCI cost FVPL Other
2025
Notes
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other non
-
current asset investments
12
A
\u2013
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
14
B/C
\u2013
10
7,222
\u2013
\u2013
7,232
Other non
-
derivative financial assets
14
B
\u2013
\u2013
484
\u2013
\u2013
484
Other assets
D
/F
18
\u2013
14
\u2013
\u2013
32
Derivative financial assets
1
C
773
\u2013
\u2013
\u2013
\u2013
773
Cash and cash equivalents
16
B
2,424
\u2013
3,820
\u2013
\u2013
6,244
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(2,802)
(2,802)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,470)
(1,470)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(680)
\u2013
(680)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(5)
(5)
Other liabilities
H
\u2013
\u2013
\u2013
\u2013
(214)
(214)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,917)
(6,917)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,522)
(2,522)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,423)
(1,423)
3,215
14
11,540
(680)
(15,353)
(1,264)
Other non
-
current asset investments
12
A
\u2013
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
14
B/C
\u2013
9
5,516
\u2013
\u2013
5,525
Other non
-
derivative financial assets
14
B
\u2013
\u2013
366
\u2013
\u2013
366
Other assets
D
/F
21
\u2013
16
\u2013
\u2013
37
Derivative financial assets
1
C
298
\u2013
\u2013
\u2013
\u2013
298
Cash and cash equivalents
16
B
1,900
\u2013
3,674
\u2013
\u2013
5,574
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(3,577)
(3,577)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,555)
(1,555)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(2,054)
\u2013
(2,054)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(7)
(7)
Other
liabilities
H
\u2013
\u2013
\u2013
\u2013
(198)
(198)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,205)
(6,205)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,642)
(2,642)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,280)
(1,280)
2,219
14
9,572
(2,054)
(15,464)
(5,713)
2024
Basis for
2025
2024
Fair
determining Book value Fair value Book value value
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other assets
F
1
4
15
16
16
Borrowings
E
(2,780)
(2,778)
(3,559)
(3,540)
Borrowings
F
(2
2
)
(23)
(18)
(21)
Financial RRSAs
H
(5)
(5)
(7)
(7)
The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. There have been no transfers during the year from or to Level 3 valuation. Fair values have been determined with reference to available market information at the balance sheet date, using the methodologies described below. A These primarily comprise unconsolidated companies where fair value approximates to the book value. Listed investments are valued using Level 1 methodology B Fair values are assumed to approximate to cost either due to the short-term maturity of the instruments or because the interest rate of the investments is reset after periods not exceeding six months. Money market funds are valued using Level 1 methodology C Fair values of derivative financial assets and liabilities and trade receivables held to collect or sell are estimated by discounting expected future contractual cash \ufb02ows using prevailing interest rate curves. For commodity derivatives forward, commodity prices are used to determine expected future cash flows. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. These financial instruments are included on the balance sheet at fair value, derived from observable market prices (Level 2) D Other assets are included on the balance sheet at fair value, derived from observable market prices or latest forecast (Level 2/Level 3). At 31 December 2025, Level 3 assets totalled \u00a311m (2024: \u00a314m) E Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated using quoted prices (Level 1) F Other assets and borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated by discounting contractual future cash flows. (Level 2) G The fair value of lease liabilities are estimated by discounting future contractual cash flows using either the interest rate implicit in the lease or the Group\u2019s incremental cost of borrowing (Level 2) H The fair value of RRSAs and other liabilities are estimated by discounting expected future cash flows. The contractual cash flows are based on future trading activity, which is estimated based on latest forecasts (Level 3) IFRS 13 Fair Value Measurement defines a three level valuation hierarchy: Level 1 \u2014 quoted prices for similar instruments; Level 2 \u2014 directly observable market inputs other than Level 1 inputs; and Level 3 \u2014 inputs not based on observable market data Carrying value of other financial assets and liabilities
Foreign
exchange Commodity Interest rate Total Financial
contracts contracts
contracts
1
derivatives RRSAs Other Total
\u00a3m \u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m \u00a3m
Non
-
current assets
467
6
32
505
\u2013
1
8
52
3
Current assets
257 6 5 268 \u2013 14 282
Assets
724 12 37 773 \u2013 32 805
Current liabilities
(193)
(19)
(24)
(236)
(1)
(3
5
)
(27
2
)
Non
-
current liabilities
(382) (17) (45) (444) (4) (179) (627)
Liabilities
(575) (36) (69) (680) (5) (214) (899)
149
(24)
(32)
93
(5)
(18
2
)
(9
4
)
Non
-
current assets
10
1
110
121
\u2013
5
126
Current assets
25
4
148
177
\u2013
32
209
Assets
35
5
258
298
\u2013
37
335
Current liabilities
(539)
(18)
\u2013
(557)
\u2013
(62)
(619)
Non
-
current liabilities
(1,364)
(22)
(111)
(1,497)
(7)
(136)
(1,640)
Liabilities
(1,903)
(40)
(111)
(2,054)
(7)
(198)
(2,259)
(1,868)
(35)
147
(1,756)
(7)
(161)
(1,924)
2025 2024 1 Includes the foreign exchange impact of cross-currency interest rate swaps ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-636": { "value": "Carrying values and fair values of financial instruments Financial instrument disclosures include all financial assets and financial liabilities held by the Group at the reporting date, including those classified within assets and within liabilities associated with assets held for distribution and disclosed separately on the balance sheet in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Financial instruments included within the disposal groups classified as held for distribution are expected to transfer to the buyer(s) on completion of the disposal, and as such may not be available to the Group following this transaction. For further information on financial assets and liabilities classified as held for distribution, see note 27. 1 In the event of counterparty default relating to derivative financial assets and derivative financial liabilities, offsetting would apply and financial assets and liabilities held with the same counterparty would net off. If this occurred with every counterparty, total financial assets would be \u00a3343m (2024: \u00a326m) and liabilities \u00a3250m (2024: \u00a31,657m) Fair values equate to book values for both 2025 and 2024, with the following exceptions:
Basis for
Assets
Amortised
Liabilities
Total
determining FVPL FVOCI cost FVPL Other
2025
Notes
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other non
-
current asset investments
12
A
\u2013
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
14
B/C
\u2013
10
7,222
\u2013
\u2013
7,232
Other non
-
derivative financial assets
14
B
\u2013
\u2013
484
\u2013
\u2013
484
Other assets
D
/F
18
\u2013
14
\u2013
\u2013
32
Derivative financial assets
1
C
773
\u2013
\u2013
\u2013
\u2013
773
Cash and cash equivalents
16
B
2,424
\u2013
3,820
\u2013
\u2013
6,244
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(2,802)
(2,802)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,470)
(1,470)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(680)
\u2013
(680)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(5)
(5)
Other liabilities
H
\u2013
\u2013
\u2013
\u2013
(214)
(214)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,917)
(6,917)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,522)
(2,522)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,423)
(1,423)
3,215
14
11,540
(680)
(15,353)
(1,264)
Other non
-
current asset investments
12
A
\u2013
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
14
B/C
\u2013
9
5,516
\u2013
\u2013
5,525
Other non
-
derivative financial assets
14
B
\u2013
\u2013
366
\u2013
\u2013
366
Other assets
D
/F
21
\u2013
16
\u2013
\u2013
37
Derivative financial assets
1
C
298
\u2013
\u2013
\u2013
\u2013
298
Cash and cash equivalents
16
B
1,900
\u2013
3,674
\u2013
\u2013
5,574
Borrowings
17
E/F
\u2013
\u2013
\u2013
\u2013
(3,577)
(3,577)
Lease liabilities
17
G
\u2013
\u2013
\u2013
\u2013
(1,555)
(1,555)
Derivative financial liabilities
1
C
\u2013
\u2013
\u2013
(2,054)
\u2013
(2,054)
Financial RRSAs
H
\u2013
\u2013
\u2013
\u2013
(7)
(7)
Other
liabilities
H
\u2013
\u2013
\u2013
\u2013
(198)
(198)
Trade payables and similar items
19
B
\u2013
\u2013
\u2013
\u2013
(6,205)
(6,205)
Other non-derivative financial
liabilities
19
B
\u2013
\u2013
\u2013
\u2013
(2,642)
(2,642)
Contract liabilities
15
B
\u2013
\u2013
\u2013
\u2013
(1,280)
(1,280)
2,219
14
9,572
(2,054)
(15,464)
(5,713)
2024
Basis for
2025
2024
Fair
determining Book value Fair value Book value value
fair value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Other assets
F
1
4
15
16
16
Borrowings
E
(2,780)
(2,778)
(3,559)
(3,540)
Borrowings
F
(2
2
)
(23)
(18)
(21)
Financial RRSAs
H
(5)
(5)
(7)
(7)
The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. There have been no transfers during the year from or to Level 3 valuation. Fair values have been determined with reference to available market information at the balance sheet date, using the methodologies described below. A These primarily comprise unconsolidated companies where fair value approximates to the book value. Listed investments are valued using Level 1 methodology B Fair values are assumed to approximate to cost either due to the short-term maturity of the instruments or because the interest rate of the investments is reset after periods not exceeding six months. Money market funds are valued using Level 1 methodology C Fair values of derivative financial assets and liabilities and trade receivables held to collect or sell are estimated by discounting expected future contractual cash \ufb02ows using prevailing interest rate curves. For commodity derivatives forward, commodity prices are used to determine expected future cash flows. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. These financial instruments are included on the balance sheet at fair value, derived from observable market prices (Level 2) D Other assets are included on the balance sheet at fair value, derived from observable market prices or latest forecast (Level 2/Level 3). At 31 December 2025, Level 3 assets totalled \u00a311m (2024: \u00a314m) E Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated using quoted prices (Level 1) F Other assets and borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is estimated by discounting contractual future cash flows. (Level 2) G The fair value of lease liabilities are estimated by discounting future contractual cash flows using either the interest rate implicit in the lease or the Group\u2019s incremental cost of borrowing (Level 2) H The fair value of RRSAs and other liabilities are estimated by discounting expected future cash flows. The contractual cash flows are based on future trading activity, which is estimated based on latest forecasts (Level 3) IFRS 13 Fair Value Measurement defines a three level valuation hierarchy: Level 1 \u2014 quoted prices for similar instruments; Level 2 \u2014 directly observable market inputs other than Level 1 inputs; and Level 3 \u2014 inputs not based on observable market data Carrying value of other financial assets and liabilities
Foreign
exchange Commodity Interest rate Total Financial
contracts contracts
contracts
1
derivatives RRSAs Other Total
\u00a3m \u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m \u00a3m
Non
-
current assets
467
6
32
505
\u2013
1
8
52
3
Current assets
257 6 5 268 \u2013 14 282
Assets
724 12 37 773 \u2013 32 805
Current liabilities
(193)
(19)
(24)
(236)
(1)
(3
5
)
(27
2
)
Non
-
current liabilities
(382) (17) (45) (444) (4) (179) (627)
Liabilities
(575) (36) (69) (680) (5) (214) (899)
149
(24)
(32)
93
(5)
(18
2
)
(9
4
)
Non
-
current assets
10
1
110
121
\u2013
5
126
Current assets
25
4
148
177
\u2013
32
209
Assets
35
5
258
298
\u2013
37
335
Current liabilities
(539)
(18)
\u2013
(557)
\u2013
(62)
(619)
Non
-
current liabilities
(1,364)
(22)
(111)
(1,497)
(7)
(136)
(1,640)
Liabilities
(1,903)
(40)
(111)
(2,054)
(7)
(198)
(2,259)
(1,868)
(35)
147
(1,756)
(7)
(161)
(1,924)
2025 2024 1 Includes the foreign exchange impact of cross-currency interest rate swaps ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-637": { "value": "Derivative financial instruments The Group uses various \ufb01nancial instruments to manage its exposure to movements in foreign exchange rates. The Group uses commodity swaps to manage its exposure to movements in the price of commodities (jet fuel, base metals, gas and power). To hedge the currency risk associated with a borrowing denominated in a foreign currency, the Group has currency derivatives designated as part of fair value or cash flow hedges. The Group uses interest rate swaps and forward rate agreements to manage its exposure to movements in interest rates. Movements in the fair values of derivative financial assets and liabilities were as follows:
Foreign exchange Commodity Interest rate instruments \u2013 hedge Interest rate instruments \u2013 non-
instruments
instruments
accounted
1
hedge accounted
Total
2025 2024 2025 2024 2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
(1,868)
(2,035)
(35)
(19)
54
45
93
131
(1,756)
(1,878)
Movements in fair
value hedges
\u2013
\u2013
\u2013
\u2013
(33)
(32)
\u2013
\u2013
(33)
(32)
Movements in cash
flow hedges
\u2013
\u2013
\u2013
\u2013
(40)
(23)
\u2013
\u2013
(40)
(23)
Movements in other
derivative contracts
2
1,335
(631)
(7)
(18)
\u2013
\u2013
(4)
40
1,324
(609)
Contracts settled
682
798
18
2
(50)
64
(52)
(78)
598
786
At 31 December
149
(1,868)
(24)
(35)
(69)
54
37
93
93
(1,756)
1 Includes the foreign exchange impact of cross-currency interest rate swaps 2 Included in net financing Derivative financial instruments The nominal amounts, analysed by year of expected maturity, and fair values of derivative financial instruments are as follows:
Expected maturity
Fair value
Between Between
Nominal Within one one and two and After five
amount year two years five years years Assets Liabilities
At
31 December
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Foreign exchange contracts:
Non
-
hedge accounted
21,850
7,559
5,516
8,775
\u2013
724
(575)
Interest rate contracts:
Fair value hedges
859
375
\u2013
484
\u2013
\u2013
(26)
Cash flow hedges
1,449
677
772
\u2013
\u2013
\u2013
(43)
Non
-
hedge accounted
859
375
\u2013
484
\u2013
37
\u2013
Commodity contracts:
Non
-
hedge accounted
392
146
110
126
10
12
(36)
25,409
9,132
6,398
9,869
10
773
(680)
At
31 December 2024
Foreign exchange contracts:
Non
-
hedge accounted
20,728
8,018
5,781
6,929
\u2013
35
(1,903)
Interest rate contracts:
Fair value hedges
1,517
658
375
484
\u2013
128
(66)
Cash flow hedges
1,449
\u2013
677
772
\u2013
37
(45)
Non
-
hedge accounted
1,517
658
375
484
\u2013
93
\u2013
Commodity contracts:
Non
-
hedge accounted
330
137
108
85
\u2013
5
(40)
25,541
9,471
7,316
8,754
\u2013
298
(2,054)
As described above, all derivative \ufb01nancial instruments are entered into for risk management purposes, although these may not be designated into hedging relationships for accounting purposes. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-638": { "value": "Financial risk and RRSAs and other financial assets and liabilities The Group has financial liabilities arising from financial RRSAs that are valued at each reporting date using the amortised cost method. This involves calculating the present value of the forecast cash \ufb02ows of the arrangements using the internal rate of return at the inception of the arrangements as an appropriate discount rate. Other liabilities includes royalties payable to airframers where the present value of the liability is calculated using the Group\u2019s average borrowing rate as that reflects the nature of the balance in line with the effective interest method. In each case, below the fair value of the assets and liabilities reflect a level 3 valuation. Movements in the carrying values were as follows:
Financial RRSAs
Other \u2014 assets Other \u2014 liabilities
2025 2024 2025 2024 2025 2024
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
(7)
(17)
14
25
(198)
(163)
Exchange adjustments included in OCI
6
1
(3)
\u2013
3
(5)
Additions
\u2013
\u2013
\u2013
\u2013
(29)
(34)
Financing charge
1
\u2013
\u2013
\u2013
(11)
(16)
(9)
Excluded from
underlying profit
:
Changes in forecast payments
1
(4)
\u2013
\u2013
\u2013
\u2013
\u2013
Cash
paid
\u2013
9
\u2013
\u2013
17
12
Other
\u2013
\u2013
\u2013
\u2013
9
1
At
31 December
(5)
(7)
11
14
(214)
(198)
1 Included in net financing ", "dimensions": { "concept": "rollsroyceplc:DisclosureOfFinancialRiskAndRevenueSharingArrangementsRRSAsAndOtherFinancialAssetsAndLiabilities", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-639": { "value": "Effect of hedging instruments on the financial position and performance To manage the risk of changes in the fair values of fixed rate borrowings (the hedged items), the Group has entered into fixed-to-floating interest rate swaps and cross currency interest rate swaps (the hedging instruments), which, for accounting purposes, are designated as fair value hedges. The impact of fair value hedges on the financial position and performance of the Group is as follows:
Hedged item
1
Hedging instrument
2
FV FV FV Hedge
adjustment adjustment Carrying Carrying movement ineffective-
in the since Carrying amount amount in the ness in the Weighted Weighted
Nominal period inception amount Nominal asset liability period
period
3
average FX average
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
rate
interest rate
At 31 December
2025
SONIA +
Sterling
(375)
(8)
3
(372)
375
\u2013
(3)
9
\u2013
1.00
0.89
SONIA +
Euro
(484)
(28)
14
(470)
484
\u2013
(23)
31
4
1.14
1.09
At 31 December
2024
SONIA +
Sterling
(375)
(3)
11
(364)
375
\u2013
(12)
3
\u2013
1.00
0.89
SONIA +
USD
(658)
(25)
(137)
(795)
658
128
\u2013
25
\u2013
1.52
1.47
SONIA +
Euro
(484)
13
42
(442)
484
\u2013
(54)
(11)
2
1.14
1.09
1 Hedged items are included in borrowings in the balance sheet 2 Hedging instruments are included in other financial assets or liabilities in the balance sheet 3 Hedge ineffectiveness is included in net financing in the income statement To manage the foreign exchange rate risk in cash flows on fixed rate non-GBP borrowings (the hedged items), the Group has entered into fixed- to-fixed cross-currency interest rate swaps (the hedging instruments) to hedge the cash flows into GBP, which, for accounting purposes, are designated as cash flow hedges. The impact of cash flow hedges on the financial position and performance of the Group is as follows:
Hedged
item
Hedging instrument
1
H
edg
ing
reserve
s
FV Carrying FV Hedge
movement amount movement ineffective Weighted Weighted Amount Recycled Closing cash
in the asset/ in the ness in the average average recognised to net flow hedge
Nominal period Nominal (liability) period
period
2
FX interest in OCI financing reserve
At 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
rate
rate
\u00a3m
\u00a3m
\u00a3m
2025
USD
(772)
56
772
(22)
(59)
(2)
1.29
5.33
55
(53)
(7)
Euro
(677)
(23)
677
(21)
24
\u2013
1.11
5.45
(17)
26
(1)
At 31 December
2024
USD
(772)
(15)
772
37
9
(6)
1.29
5.33
(19)
15
(9)
Euro
(677)
28
677
(45)
(28)
\u2013
1.11
5.45
36
(38)
(10)
1 Hedging instruments are included in other financial assets or liabilities in the balance sheet 2 Hedge ineffectiveness is included in net financing in the income statement ", "dimensions": { "concept": "ifrs-full:DisclosureOfHedgeAccountingExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-640": { "value": "Risk management policies and hedging activities The principal \ufb01nancial risks to which the Group is exposed are: foreign currency exchange rate risk; liquidity risk; credit risk; interest rate risk; and commodity price risk. The Board has approved policies for the management of these risks. Foreign currency exchange rate risk \u2012 The Group has significant cash \ufb02ows (most significantly USD, followed by the euro) denominated in currencies other than the functional currency of the relevant trading entity. To manage its exposures to changes in values of future foreign currency cash \ufb02ows, so as to maintain relatively stable long-term foreign exchange rates on settled transactions, the Group enters into derivative forward foreign currency transactions. In addition, the Group enters in to fixed-to-floating cross-currency interest rate swaps to manage its exposure to changes in fair value as a result of foreign exchange risk. See below. The Group economically hedges its GBP/USD exposure by forecasting highly probable net USD receipts up to five years forward. Hedges are taken out within prescribed maximum and minimum hedge positions set out in the Group FX Policy. The maximum and minimum policy bands decline gradually over the five-year horizon and are calculated as a percentage of forecast net income. A similar policy is operated for the Group\u2019s EUR/USD exposure. For accounting purposes, these derivative contracts are not designated in hedging relationships. The Group also has exposures to cash flows on EUR and USD denominated fixed rate borrowings. To manage its exposures to changes in values of future foreign currency cash flows, the Group has entered into fixed-to-fixed cross-currency interest rate swaps, which, for accounting purposes, are designated as cash flow hedges. The swaps have similar critical terms to the hedged items, such as the initial exchange amounts, payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is established as 1:1. Possible sources of ineffectiveness in the cash flow hedge relationship are changes in the credit risk of either party to the interest rate swap. Another possible source of ineffectiveness would be if the notional of the borrowings is less than the notional of the derivative, for example, in the event of a partial repayment of hedged debt prior to its maturity. The Group regards its interests in overseas subsidiary companies as long-term investments. The Group aims to match its translational exposures by matching the currencies of assets and liabilities. Liquidity risk \u2012 The Group\u2019s policy is to hold \ufb01nancial investments and maintain undrawn committed facilities at a level sufficient to ensure that the Group has available funds to meet its medium-term capital and funding obligations and to meet any unforeseen obligations and opportunities. The Group holds cash and short-term investments, which, together with the undrawn committed facilities, enable the Group to manage its liquidity risk. Credit risk \u2012 The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties of its \ufb01nancial instruments. The effective monitoring and controlling of credit risk is a key component of the Group\u2019s risk management activities. The Group has credit policies covering both trading and \ufb01nancial exposures. Credit risks arising from treasury activities are managed by a central treasury function in accordance with the Group credit policy. The objective of the policy is to diversify and minimise the Group\u2019s exposure to credit risk from its treasury activities by ensuring the Group transacts strictly with \u2018BBB\u2019 or higher rated financial institutions based on pre-established limits per financial institution. At the balance sheet date, there were no significant concentrations of credit risk to individual customers or counterparties. The Group\u2019s revenue is generated from customers located across multiple geographical locations (see note 2). These customers are typically: airframers and airline operators relating to Civil Aerospace; government defence departments for the UK and US; and multiple smaller entities for Power Systems. Whilst there are a limited number of customers related to Civil Aerospace and Defence, they are spread across various geographical locations. The maximum exposure to credit risk at the balance sheet date is represented by the carrying value of each \ufb01nancial asset, including derivative \ufb01nancial instruments. Interest rate risk \u2012 The Group\u2019s interest rate risk is primarily in relation to its \ufb01xed rate borrowings (fair value risk), \ufb02oating rate borrowings and cash and cash equivalents (cash \ufb02ow risk). Interest rate derivatives are used to manage the overall interest rate pro\ufb01le of the Group. The fixed or floating rate interest rate decision on long-term borrowings is determined for each new agreement at the point it is entered into. The aggregate interest rate position of the Group is reviewed regularly and can be revised at any time in order to react to changes in market conditions or circumstances. The Group also has exposures to the fair values of non-derivative \ufb01nancial instruments such as EUR, GBP and USD fixed rate borrowings. To manage the risk of changes in these fair values, the Group has entered into fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which, for accounting purposes, are designated as fair value hedges. The swaps have similar critical terms to the hedged items, such as the reference rate, reset dates, notional amounts, payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is established as 1:1. Possible sources of ineffectiveness in the fair value hedge relationship are changes in the credit risk of either party to the interest rate swap and, for cross-currency interest rate swaps, the cross-currency basis risk as this risk is present in the hedging instrument only. Another possible source of ineffectiveness would be if the notional of the borrowings is less than the notional of the derivative, for example in the event of a partial repayment of hedged debt prior to its maturity. The Group has exposure to changes in cash flows due to changes in interest rates. To manage this risk, the Group has entered into floating-to- fixed interest rate swaps to hedge a proportion of its floating rate exposure to fixed rates. The swaps have similar critical terms to the floating leg of swaps that form part of the fair value hedges, such as the reference rate, reset dates, notional amounts, payment dates and maturities. For accounting purposes, these derivative contracts are generally not designated as hedging instruments. Commodity price risk \u2012 The Group has exposures to the price of jet fuel, base metals, gas and power arising from business operations. To minimise its cash \ufb02ow exposures to changes in commodity prices, the Group enters into derivative commodity transactions. During 2025, the Group entered into a Virtual Power Purchase Arrangement, which had a fair value of \u00a33m at 31 December 2025. The commodity hedging policy is similar to the Group FX policy, in that the Group forecasts highly probable exposures to commodities, and takes out hedges within prescribed maximum and minimum levels as set out in the policy. The maximum and minimum policy bands decline gradually over time. For accounting purposes, these derivative contracts are generally not designated in hedging relationships. Other price risk \u2012 The Group\u2019s cash equivalent balances represent investments in money market instruments, with a term of up to three months. The Group does not consider that these are subject to signi\ufb01cant price risk.
Interest rate risk
In respect of income-earning \ufb01nancial assets and interest-bearing \ufb01nancial liabilities, the following table indicates their effective interest rates.
The value shown is the carrying amount before taking account of swaps.
2025
2024
Floating Floating
Fixed rate rate Total Fixed rate rate Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
1
\u2013
6,244
6,244
\u2013
5,574
5,574
Borrowings
(2,785)
(1
7
)
(2,80
2
)
(3,563)
(14)
(3,577)
Lease liabilities
(1,2
37
)
(233)
(1,47
0
)
(1,298)
(257)
(1,555)
(4,0
22
)
5,99
4
1,9
72
(4,861)
5,303
442
Weighted average interest rates
Borrowings
4.4%
4.7%
4.0%
5.0%
Lease liabilities
2
4.8%
5.0%
4.9%
5.8%
1 Cash and cash equivalents comprises bank balances and term deposits and earn interest based on short-term floating market interest rates
2 Interest rates for lease liabilities are considered to be the discount rates at the balance sheet date
None (2024: none) of the Group\u2019s borrowings are subject to \ufb01nancial covenants and there are no rating triggers contained in any of the Group\u2019s
facilities that could require the Group to accelerate or repay any facility for a given movement in the Group\u2019s credit rating.
\u00a399m (2024: \u00a3106m) of the Group\u2019s lease liabilities include a customary loan-to-value covenant that is applicable if the credit rating of the Company
is sub-investment grade. The Group has several contractual cures available in the event the stipulated loan-to-value ratio is exceeded. Failure by
the Group to satisfy its contractual obligations under the covenant gives rights to the lessor to terminate its lease and claim termination amounts
for the outstanding lease balance. At 31 December 2025 none (2024: none) of these were in breach.
Sensitivity Analysis
2025 2024
Sensitivities at
31
December
(all other
variables held constant)
\u2013
impact on profit after tax and equity
\u00a3m
\u00a3m
Sterling 10% weaker against the USD
(1,598)
(1,506)
Sterling 10% stronger against the USD
1,307
1,232
Euro 10% weaker against the USD
(318)
(358)
Euro 10% stronger against the USD
260
293
Sterling 10% weaker against the Euro
(27)
(27)
Sterling 10% stronger against the Euro
22
22
Commodity prices 10% lower
(26)
(20)
Commodity prices 10% higher
26
20
Interest rates 50 basis points lower
(24)
(40)
Interest rates 50 basis points higher
24
39
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-669": { "value": "
Foreign currency exchange rate risk \u2012 The Group has significant cash \ufb02ows (most significantly USD, followed by the euro) denominated in
currencies other than the functional currency of the relevant trading entity. To manage its exposures to changes in values of future foreign
currency cash \ufb02ows, so as to maintain relatively stable long-term foreign exchange rates on settled transactions, the Group enters into derivative
forward foreign currency transactions. In addition, the Group enters in to fixed-to-floating cross-currency interest rate swaps to manage its
exposure to changes in fair value as a result of foreign exchange risk. See below.
The Group economically hedges its GBP/USD exposure by forecasting highly probable net USD receipts up to five years forward. Hedges are
taken out within prescribed maximum and minimum hedge positions set out in the Group FX Policy. The maximum and minimum policy bands
decline gradually over the five-year horizon and are calculated as a percentage of forecast net income. A similar policy is operated for the Group\u2019s
EUR/USD exposure. For accounting purposes, these derivative contracts are not designated in hedging relationships.
The Group also has exposures to cash flows on EUR and USD denominated fixed rate borrowings. To manage its exposures to changes in values
of future foreign currency cash flows, the Group has entered into fixed-to-fixed cross-currency interest rate swaps, which, for accounting
purposes, are designated as cash flow hedges. The swaps have similar critical terms to the hedged items, such as the initial exchange amounts,
payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is established as 1:1. Possible sources of
ineffectiveness in the cash flow hedge relationship are changes in the credit risk of either party to the interest rate swap. Another possible source
of ineffectiveness would be if the notional of the borrowings is less than the notional of the derivative, for example, in the event of a partial
repayment of hedged debt prior to its maturity.
The Group regards its interests in overseas subsidiary companies as long-term investments. The Group aims to match its translational exposures
by matching the currencies of assets and liabilities.
Interest rate risk \u2012 The Group\u2019s interest rate risk is primarily in relation to its \ufb01xed rate borrowings (fair value risk), \ufb02oating rate borrowings and cash and cash equivalents (cash \ufb02ow risk). Interest rate derivatives are used to manage the overall interest rate pro\ufb01le of the Group. The fixed or floating rate interest rate decision on long-term borrowings is determined for each new agreement at the point it is entered into. The aggregate interest rate position of the Group is reviewed regularly and can be revised at any time in order to react to changes in market conditions or circumstances. The Group also has exposures to the fair values of non-derivative \ufb01nancial instruments such as EUR, GBP and USD fixed rate borrowings. To manage the risk of changes in these fair values, the Group has entered into fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which, for accounting purposes, are designated as fair value hedges. The swaps have similar critical terms to the hedged items, such as the reference rate, reset dates, notional amounts, payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is established as 1:1. Possible sources of ineffectiveness in the fair value hedge relationship are changes in the credit risk of either party to the interest rate swap and, for cross-currency interest rate swaps, the cross-currency basis risk as this risk is present in the hedging instrument only. Another possible source of ineffectiveness would be if the notional of the borrowings is less than the notional of the derivative, for example in the event of a partial repayment of hedged debt prior to its maturity. The Group has exposure to changes in cash flows due to changes in interest rates. To manage this risk, the Group has entered into floating-to- fixed interest rate swaps to hedge a proportion of its floating rate exposure to fixed rates. The swaps have similar critical terms to the floating leg of swaps that form part of the fair value hedges, such as the reference rate, reset dates, notional amounts, payment dates and maturities. For accounting purposes, these derivative contracts are generally not designated as hedging instruments. Commodity price risk \u2012 The Group has exposures to the price of jet fuel, base metals, gas and power arising from business operations. To minimise its cash \ufb02ow exposures to changes in commodity prices, the Group enters into derivative commodity transactions. During 2025, the Group entered into a Virtual Power Purchase Arrangement, which had a fair value of \u00a33m at 31 December 2025. The commodity hedging policy is similar to the Group FX policy, in that the Group forecasts highly probable exposures to commodities, and takes out hedges within prescribed maximum and minimum levels as set out in the policy. The maximum and minimum policy bands decline gradually over time. For accounting purposes, these derivative contracts are generally not designated in hedging relationships. Other price risk \u2012 The Group\u2019s cash equivalent balances represent investments in money market instruments, with a term of up to three months. The Group does not consider that these are subject to signi\ufb01cant price risk. Interest rate risk In respect of income-earning \ufb01nancial assets and interest-bearing \ufb01nancial liabilities, the following table indicates their effective interest rates. The value shown is the carrying amount before taking account of swaps.
2025
2024
Floating Floating
Fixed rate rate Total Fixed rate rate Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents
1
\u2013
6,244
6,244
\u2013
5,574
5,574
Borrowings
(2,785)
(1
7
)
(2,80
2
)
(3,563)
(14)
(3,577)
Lease liabilities
(1,2
37
)
(233)
(1,47
0
)
(1,298)
(257)
(1,555)
(4,0
22
)
5,99
4
1,9
72
(4,861)
5,303
442
Weighted average interest rates
Borrowings
4.4%
4.7%
4.0%
5.0%
Lease liabilities
2
4.8%
5.0%
4.9%
5.8%
1 Cash and cash equivalents comprises bank balances and term deposits and earn interest based on short-term floating market interest rates 2 Interest rates for lease liabilities are considered to be the discount rates at the balance sheet date None (2024: none) of the Group\u2019s borrowings are subject to \ufb01nancial covenants and there are no rating triggers contained in any of the Group\u2019s facilities that could require the Group to accelerate or repay any facility for a given movement in the Group\u2019s credit rating. \u00a399m (2024: \u00a3106m) of the Group\u2019s lease liabilities include a customary loan-to-value covenant that is applicable if the credit rating of the Company is sub-investment grade. The Group has several contractual cures available in the event the stipulated loan-to-value ratio is exceeded. Failure by the Group to satisfy its contractual obligations under the covenant gives rights to the lessor to terminate its lease and claim termination amounts for the outstanding lease balance. At 31 December 2025 none (2024: none) of these were in breach. Sensitivity Analysis
2025 2024
Sensitivities at
31
December
(all other
variables held constant)
\u2013
impact on profit after tax and equity
\u00a3m
\u00a3m
Sterling 10% weaker against the USD
(1,598)
(1,506)
Sterling 10% stronger against the USD
1,307
1,232
Euro 10% weaker against the USD
(318)
(358)
Euro 10% stronger against the USD
260
293
Sterling 10% weaker against the Euro
(27)
(27)
Sterling 10% stronger against the Euro
22
22
Commodity prices 10% lower
(26)
(20)
Commodity prices 10% higher
26
20
Interest rates 50 basis points lower
(24)
(40)
Interest rates 50 basis points higher
24
39
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-670": { "value": "Liquidity risk \u2012 The Group\u2019s policy is to hold \ufb01nancial investments and maintain undrawn committed facilities at a level sufficient to ensure that the Group has available funds to meet its medium-term capital and funding obligations and to meet any unforeseen obligations and opportunities. The Group holds cash and short-term investments, which, together with the undrawn committed facilities, enable the Group to manage its liquidity risk. ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-671": { "value": "
Credit risk \u2012 The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties of its \ufb01nancial
instruments. The effective monitoring and controlling of credit risk is a key component of the Group\u2019s risk management activities. The Group has
credit policies covering both trading and \ufb01nancial exposures. Credit risks arising from treasury activities are managed by a central treasury
function in accordance with the Group credit policy. The objective of the policy is to diversify and minimise the Group\u2019s exposure to credit risk
from its treasury activities by ensuring the Group transacts strictly with \u2018BBB\u2019 or higher rated financial institutions based on pre-established limits
per financial institution. At the balance sheet date, there were no significant concentrations of credit risk to individual customers or
counterparties. The Group\u2019s revenue is generated from customers located across multiple geographical locations (see note 2). These customers
are typically: airframers and airline operators relating to Civil Aerospace; government defence departments for the UK and US; and multiple
smaller entities for Power Systems. Whilst there are a limited number of customers related to Civil Aerospace and Defence, they are spread across
various geographical locations. The maximum exposure to credit risk at the balance sheet date is represented by the carrying value of each
\ufb01nancial asset, including derivative \ufb01nancial instruments.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-641": { "value": "Currency analysis Foreign exchange contracts are denominated in the following currencies:
Nominal amount of currencies purchased forward
Sterling USD Euro Other Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Currencies sold forward:
Sterling
\u2013
1
49
39
7
195
USD
16,11
8
\u2013
4,541
371
21,0
30
Euro
10
317
\u2013
107
43
4
Other
At 31 December 202
4
4
4
176
7
191
Currencies sold forward:
Sterling
\u2013
882
41
59
982
USD
14,654
\u2013
4,419
287
19,360
Euro
35
290
\u2013
26
351
Other
3
1
31
\u2013
35
The nominal value of interest rate and commodity contracts are denominated in the following currencies:
2025 2024
\u00a3m
\u00a3m
Sterling
1,304
1,915
USD
1,063
1,719
Euro
1,192
1,179
Non-derivative financial instruments are denominated in the following currencies:
Sterling USD Euro Other Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Other non-current asset investments
\u2013
4
\u2013
\u2013
4
Trade receivables and similar items
2,558
3,903
662
109
7
,232
Other non-derivative financial assets
60
354
64
6
484
Other assets
\u2013
18
14
\u2013
32
Cash and cash equivalents
2,922
911
2,235
176
6,244
Assets
5,540
5,
190
2,975
291
13,996
Borrowings
(918)
(746)
(1,133)
(
5
)
(2,80
2
)
Lease liabilities
(251)
(976)
(45)
(198)
(1,470)
Financial RRSAs
\u2013
(5)
\u2013
\u2013
(5)
Other liabilities
(31)
(183)
\u2013
\u2013
(214)
Trade payables and similar items
(1,21
4
)
(
4,853
)
(765)
(85)
(
6,917
)
Other non-derivative financial liabilities
(39
2
)
(1,896)
(187)
(47)
(2,52
2
)
Contract liabilities
\u2013
(1,423)
\u2013
\u2013
(1,423)
Liabilities
(2,806)
(10,
082
)
(2,130)
(33
5
)
(15,
353
)
2,734
(4,8
92
)
84
5
(4
4
)
(1,3
57
)
At 31 December 2024
Other non-current investments
\u2013
5
\u2013
\u2013
5
Trade receivables and similar items
638
4,346
460
81
5,525
Other non-derivative financial assets
73
242
40
11
366
Other assets
\u2013
21
16
\u2013
37
Cash and cash equivalents
2,250
1,283
1,867
174
5,574
Assets
2,961
5,897
2,383
266
11,507
Borrowings
(908)
(1,594) (1,072) (3) (3,577)
Lease liabilities
(237)
(1,074) (49) (195) (1,555)
Financial RRSAs
\u2013
(6)
(1)
\u2013
(7)
Other liabilities
(39)
(159)
\u2013
\u2013
(198)
Trade payables and similar items
(1,006)
(4,701) (423) (75) (6,205)
Other non-derivative financial liabilities
(350)
(2,084) (158) (50) (2,642)
Contract liabilities
\u2013
(1,280)
\u2013
\u2013
(1,280)
Liabilities
(2,540)
(10,898) (1,703) (323) (15,464)
421
(5,001)
680
(57)
(3,957)
Currency exposures
The Group\u2019s actual currency exposures on financial instruments after taking account of derivative foreign currency contracts, which are not
designated as hedging instruments for accounting purposes are as follows:
Sterling USD Euro Other Total
Functional currency of Group operations
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Sterling
\u2013
\u2013
1
3
4
USD
(7)
\u2013
\u2013
\u2013
(7)
Euro
2
4
\u2013
(3)
3
Other
At 31 December 2024
33
36
78
\u2013
147
Sterling
\u2013
\u2013
\u2013
1
1
USD
(11)
\u2013
\u2013
(2)
(13)
Euro
\u2013
7
\u2013
15
22
Other
55
37
68
\u2013
160
", "dimensions": { "concept": "rollsroyceplc:DisclosureOfCurrencyAnalysis", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-683": { "value": "Currency exposures The Group\u2019s actual currency exposures on financial instruments after taking account of derivative foreign currency contracts, which are not designated as hedging instruments for accounting purposes are as follows:
Sterling USD Euro Other Total
Functional currency of Group operations
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Sterling
\u2013
\u2013
1
3
4
USD
(7)
\u2013
\u2013
\u2013
(7)
Euro
2
4
\u2013
(3)
3
Other
At 31 December 2024
33
36
78
\u2013
147
Sterling
\u2013
\u2013
\u2013
1
1
USD
(11)
\u2013
\u2013
(2)
(13)
Euro
\u2013
7
\u2013
15
22
Other
55
37
68
\u2013
160
Sensitivity Analysis
2025 2024
Sensitivities at
31
December
(all other
variables held constant)
\u2013
impact on profit after tax and equity
\u00a3m
\u00a3m
Sterling 10% weaker against the USD
(1,598)
(1,506)
Sterling 10% stronger against the USD
1,307
1,232
Euro 10% weaker against the USD
(318)
(358)
Euro 10% stronger against the USD
260
293
Sterling 10% weaker against the Euro
(27)
(27)
Sterling 10% stronger against the Euro
22
22
Commodity prices 10% lower
(26)
(20)
Commodity prices 10% higher
26
20
Interest rates 50 basis points lower
(24)
(40)
Interest rates 50 basis points higher
24
39
", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-642": { "value": "Ageing beyond contractual due date of financial assets
Up to three Between three
months months and one More than one
Within terms overdue year overdue year overdue Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 31 December 2025
Other non-current asset investments
4
\u2013
\u2013
\u2013
4
Trade receivables and similar items
6,854
257
74
47
7,232
Other non-derivative financial assets
480
3
\u2013
1
484
Other assets
25
\u2013
7
\u2013
3
2
Derivative financial assets
773
\u2013
\u2013
\u2013
773
Cash and cash equivalents
6,244
\u2013
\u2013
\u2013
6,244
14,
380
260
81
48
14,
769
At 31 December 2024
Other non-current asset investments
5
\u2013
\u2013
\u2013
5
Trade receivables and similar items
5,075
324
82
44
5,525
Other non-derivative financial assets
331
32
\u2013
3
366
Other assets
28
9
\u2013
\u2013
37
Derivative financial assets
298
\u2013
\u2013
\u2013
298
Cash and cash equivalents
5,574
\u2013
\u2013
\u2013
5,574
11,311
365
82
47
11,805
", "dimensions": { "concept": "rollsroyceplc:DisclosureOfAgeingBeyondContractualDueDateOfFinancialAssets", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-643": { "value": "Contractual maturity analysis of non-derivative financial liabilities
Gross values
Between one Between two
Within one year and two years and five years After five years Carrying value
At 31 December 2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Borrowings
(1,146)
(1,371) (490) (19) (2,802)
Lease liabilities
(454)
(293) (496) (1,050) (1,470)
Financial RRSAs
\u2013
\u2013 (1) (3) (5)
Other liabilities
(35)
(19) (28) (131) (214)
Trade payables and similar items
(6,734)
(71) (56) (56) (6,917)
Other non-derivative financial liabilities
(1,807)
(131) (294) (291) (2,522)
Contract liabilities
(1,423)
\u2013
\u2013
\u2013
(1,423)
(11,599) (1,885) (1,365) (1,550) (15,353)
At 31 December 2024
Borrowings
(961)
(1,109) (1,893) (16) (3,577)
Lease liabilities
(365)
(324) (533) (1,189) (1,555)
Financial RRSAs
(1)
\u2013
(1)
(4) (7)
Other liabilities
(61)
(11) (25) (101) (198)
Trade payables and similar items
(6,054)
(21) (67) (63) (6,205)
Other non-derivative financial liabilities
(1,700)
(316) (297) (329) (2,642)
Contract liabilities
(1,280)
\u2013
\u2013
\u2013
(1,280)
(10,422) (1,781) (2,816) (1,702) (15,464)
", "dimensions": { "concept": "ifrs-full:MaturityAnalysisForNonderivativeFinancialLiabilities", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-644": { "value": "Expected maturity analysis of derivative financial instruments
Gross values
Within one Between one Between two After five Carrying
year and two years and five years years value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
31 December 2025
Derivative financial assets:
Cash inflows
5,682
4,460
7,783
\u2013
Cash outflows
(5,433)
(4,260)
(7,505)
\u2013
Other net cash flows
1
29
16
8
\u2013
278
216
286
\u2013
773
Derivative financial liabilities:
Cash inflows
2,596
1,850
1,479
\u2013
Cash outflows
(3,001)
(2,059)
(1,552)
\u2013
Other net cash flows
1
(24)
(11)
(6)
\u2013
(429)
(220)
(79)
\u2013
(680)
At 31 December 2024
Derivative financial assets:
Cash inflows
1,940
605
1,089
\u2013
Cash outflows
(1,780)
(592)
(1,054)
\u2013
Other net cash flows
1
66
25
24
\u2013
226
38
59
\u2013
298
Derivative financial liabilities:
Cash inflows
6,988
5,866
7,154
\u2013
Cash outflows
(7,959)
(6,524)
(7,850)
\u2013
Other net cash flows
1
(30)
(11)
(11)
\u2013
(1,001)
(669)
(707)
\u2013
(2,054)
1 Derivative financial assets and liabilities that are settled on a net cash basis ", "dimensions": { "concept": "rollsroyceplc:DisclosureOfExpectedMaturityAnalysisOfDerivativeFinancialInstruments", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-688": { "value": "Sensitivity Analysis
2025 2024
Sensitivities at
31
December
(all other
variables held constant)
\u2013
impact on profit after tax and equity
\u00a3m
\u00a3m
Sterling 10% weaker against the USD
(1,598)
(1,506)
Sterling 10% stronger against the USD
1,307
1,232
Euro 10% weaker against the USD
(318)
(358)
Euro 10% stronger against the USD
260
293
Sterling 10% weaker against the Euro
(27)
(27)
Sterling 10% stronger against the Euro
22
22
Commodity prices 10% lower
(26)
(20)
Commodity prices 10% higher
26
20
Interest rates 50 basis points lower
(24)
(40)
Interest rates 50 basis points higher
24
39
", "dimensions": { "concept": "ifrs-full:SensitivityAnalysisForEachTypeOfMarketRisk", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-599": { "value": "
21 Provisions for liabilities and charges
At 1 Charged to Transfers to At 31
January income held for Exchange December
2025
statement
1
Reversed Utilised distribution differences 2025
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Onerous contracts
1,433
433
(
694
)
(
187
)
(72)
1
914
Warranty and guarantees
354
179
(25)
(93)
(404)
7
18
Trent 1000 wastage costs
36
\u2013
\u2013
(3
5
)
\u2013
(1)
\u2013
Employer liability claims
25
1
(4)
(2)
(9)
\u2013
11
Transformation and restructuring
62
10
(16)
(35)
(18)
1
4
Tax related interest and penalties
16
2
(1)
\u2013
(8)
\u2013
9
Claims and litigation
25
30
(12)
(7)
(18)
\u2013
18
Other
43
2
2
(3)
(7)
(
33
)
(1)
21
1,994
677
(
755
)
(
366
)
(56
2
)
7
99
5
Current liabilities
589
2
40
Non
-
current liabilities
1,405
755
1 The charge to the income statement within net financing includes \u00a327m (2024: \u00a347m) as a result of the unwinding of the discounting of provisions previously recognised and \u00a316m (2024: \u00a336m)
as a result of changes in discount rates during the year
Onerous contract
Onerous contract provisions are recorded when the direct costs to fulfil a contract are assessed as being greater than the expected recoverable
amount. Onerous contract provisions are measured on a fully costed basis. During the year, additional contract losses for the Group of \u00a3433m
(2024: \u00a3558m) have been recognised. These are mainly a result of increases in the estimate of future LTSA costs due to prolonged supply chain
challenges and inflationary cost increases. Contract losses of \u00a3694m (2024: \u00a3374m) previously recognised have been reversed following
improvements to the forecast revenue, cost estimates and time on wing across various engine programmes as a result of operational
improvements, contractual renegotiations and extensions. During the year \u00a3187m (2024: \u00a3218m) of the provisions has been utilised. The Group
continues to monitor onerous contract provisions for changes in the market and revises the provision as required. The value of the remaining
onerous contract provisions reflect, in each case, the single most likely outcome. The provisions are expected to be utilised over the term of the
customer contracts, typically within eight to 15 years.
IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires a company to recognise any impairment loss that has occurred on assets
used in fulfilling the contract before recognising a separate provision for an onerous contract. No impairments were required for any of the assets
solely used in the fulfilment of onerous contracts.
At 31 December 2025, \u00a372m of the onerous contract provision was transferred to assets held for distribution. See note 27 for further details.
Warranty and guarantees
Provisions for warranty and guarantees relate to products sold and are calculated based on an assessment of the remediation costs related to
future claims based on past experience. The provision generally covers a period of up to three years. At 31 December 2025, \u00a3404m of the
warranties and guarantees provision was transferred to assets held for distribution, see note 27 for further details.
Trent 1000 wastage costs
During the year, the Group has utilised the remaining \u00a335m (2024: \u00a382m) of the Trent 1000 wastage costs provision. This represents customer
disruption costs and remediation shop visit costs.
Employer liability claims
The provision relating to employer healthcare liability claims is as a result of an historical insolvency of the previous provider and is expected to
be utilised over the next 30 years. At 31 December 2025, \u00a39m of the employer liability provision was transferred to assets held for distribution,
see note 27 for further details.
Transformation and restructuring
The Group announced a major multi-year transformation programme in 2023. During the year \u00a335m (2024: \u00a335m) was utilised and \u00a316m reversed
(2024: \u00a312m). As part of these plans a further \u00a33m (2024: \u00a32m) has been charged directly to the income statement that had not been provided for.
The remaining provision is expected to be utilised by 31 December 2027. At 31 December 2025, \u00a318m of the transformation and restructuring
provision was transferred to assets held for distribution, see note 27 for further details.
Tax related interest and penalties
Provisions for tax related interest and penalties relate to uncertain tax positions in some of the jurisdictions in which the Group operates. Utilisation
of the provisions will depend on the timing of resolution of the issues with the relevant tax authorities. At 31 December 2025, \u00a38m of the tax related
interest and penalties provision was transferred to assets held for distribution, see note 27 for further details.
Claims and litigation
Provisions for claims and litigation represent ongoing matters where the outcome for the Group may be unfavourable.
The balance also includes the best estimate of any retained exposure by the Group\u2019s captive insurance company for any claims that have been
incurred but not yet reported to the Group, as that entity retains a portion of the exposures it insures on behalf of the remainder of the Group.
Such exposures include policies for aviation claims, employer liabilities and healthcare claims. Significant delays can occur in the notification and
settlement of claims, and judgement is involved in assessing outstanding liabilities, the ultimate cost and timing of which cannot be known with
certainty at the balance sheet date. The insurance provisions are based on information currently available, however, it is inherent in the nature
of the business that ultimate liabilities may vary if the frequency or severity of claims differs from estimated. At 31 December 2025, \u00a318m of the
claims and litigation provision was transferred to assets held for distribution, see note 27 for further details.
Other
Other items are individually immaterial. The value of any remaining provisions reflects the single most likely outcome in each case. At 31 December
2025, \u00a333m of other provisions were transferred to assets held for distribution, see note 27 for further details.
There were no provisions held for customer financing at 31 December 2025 (2024: \u00a3nil). Provisions are held to cover potential calls on guarantees
provided over asset values and/or financing when it is considered probable by management that the exposure will crystallise. The Group discloses
contingent liabilities for customer financing arrangements where the payment is not probable. See note 25 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-645": { "value": "21 Provisions for liabilities and charges
At 1 Charged to Transfers to At 31
January income held for Exchange December
2025
statement
1
Reversed Utilised distribution differences 2025
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Onerous contracts
1,433
433
(
694
)
(
187
)
(72)
1
914
Warranty and guarantees
354
179
(25)
(93)
(404)
7
18
Trent 1000 wastage costs
36
\u2013
\u2013
(3
5
)
\u2013
(1)
\u2013
Employer liability claims
25
1
(4)
(2)
(9)
\u2013
11
Transformation and restructuring
62
10
(16)
(35)
(18)
1
4
Tax related interest and penalties
16
2
(1)
\u2013
(8)
\u2013
9
Claims and litigation
25
30
(12)
(7)
(18)
\u2013
18
Other
43
2
2
(3)
(7)
(
33
)
(1)
21
1,994
677
(
755
)
(
366
)
(56
2
)
7
99
5
Current liabilities
589
2
40
Non
-
current liabilities
1,405
755
1 The charge to the income statement within net financing includes \u00a327m (2024: \u00a347m) as a result of the unwinding of the discounting of provisions previously recognised and \u00a316m (2024: \u00a336m) as a result of changes in discount rates during the year Onerous contract Onerous contract provisions are recorded when the direct costs to fulfil a contract are assessed as being greater than the expected recoverable amount. Onerous contract provisions are measured on a fully costed basis. During the year, additional contract losses for the Group of \u00a3433m (2024: \u00a3558m) have been recognised. These are mainly a result of increases in the estimate of future LTSA costs due to prolonged supply chain challenges and inflationary cost increases. Contract losses of \u00a3694m (2024: \u00a3374m) previously recognised have been reversed following improvements to the forecast revenue, cost estimates and time on wing across various engine programmes as a result of operational improvements, contractual renegotiations and extensions. During the year \u00a3187m (2024: \u00a3218m) of the provisions has been utilised. The Group continues to monitor onerous contract provisions for changes in the market and revises the provision as required. The value of the remaining onerous contract provisions reflect, in each case, the single most likely outcome. The provisions are expected to be utilised over the term of the customer contracts, typically within eight to 15 years. IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires a company to recognise any impairment loss that has occurred on assets used in fulfilling the contract before recognising a separate provision for an onerous contract. No impairments were required for any of the assets solely used in the fulfilment of onerous contracts. At 31 December 2025, \u00a372m of the onerous contract provision was transferred to assets held for distribution. See note 27 for further details. Warranty and guarantees Provisions for warranty and guarantees relate to products sold and are calculated based on an assessment of the remediation costs related to future claims based on past experience. The provision generally covers a period of up to three years. At 31 December 2025, \u00a3404m of the warranties and guarantees provision was transferred to assets held for distribution, see note 27 for further details. Trent 1000 wastage costs During the year, the Group has utilised the remaining \u00a335m (2024: \u00a382m) of the Trent 1000 wastage costs provision. This represents customer disruption costs and remediation shop visit costs. Employer liability claims The provision relating to employer healthcare liability claims is as a result of an historical insolvency of the previous provider and is expected to be utilised over the next 30 years. At 31 December 2025, \u00a39m of the employer liability provision was transferred to assets held for distribution, see note 27 for further details. Transformation and restructuring The Group announced a major multi-year transformation programme in 2023. During the year \u00a335m (2024: \u00a335m) was utilised and \u00a316m reversed (2024: \u00a312m). As part of these plans a further \u00a33m (2024: \u00a32m) has been charged directly to the income statement that had not been provided for. The remaining provision is expected to be utilised by 31 December 2027. At 31 December 2025, \u00a318m of the transformation and restructuring provision was transferred to assets held for distribution, see note 27 for further details. Tax related interest and penalties Provisions for tax related interest and penalties relate to uncertain tax positions in some of the jurisdictions in which the Group operates. Utilisation of the provisions will depend on the timing of resolution of the issues with the relevant tax authorities. At 31 December 2025, \u00a38m of the tax related interest and penalties provision was transferred to assets held for distribution, see note 27 for further details. Claims and litigation Provisions for claims and litigation represent ongoing matters where the outcome for the Group may be unfavourable. The balance also includes the best estimate of any retained exposure by the Group\u2019s captive insurance company for any claims that have been incurred but not yet reported to the Group, as that entity retains a portion of the exposures it insures on behalf of the remainder of the Group. Such exposures include policies for aviation claims, employer liabilities and healthcare claims. Significant delays can occur in the notification and settlement of claims, and judgement is involved in assessing outstanding liabilities, the ultimate cost and timing of which cannot be known with certainty at the balance sheet date. The insurance provisions are based on information currently available, however, it is inherent in the nature of the business that ultimate liabilities may vary if the frequency or severity of claims differs from estimated. At 31 December 2025, \u00a318m of the claims and litigation provision was transferred to assets held for distribution, see note 27 for further details. Other Other items are individually immaterial. The value of any remaining provisions reflects the single most likely outcome in each case. At 31 December 2025, \u00a333m of other provisions were transferred to assets held for distribution, see note 27 for further details. There were no provisions held for customer financing at 31 December 2025 (2024: \u00a3nil). Provisions are held to cover potential calls on guarantees provided over asset values and/or financing when it is considered probable by management that the exposure will crystallise. The Group discloses contingent liabilities for customer financing arrangements where the payment is not probable. See note 25 for further details. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-646": { "value": "22 Post-retirement benefits The Group operates a number of defined benefit and defined contribution schemes: \u2013 the UK defined benefit scheme is funded, with the assets held in a separate UK trust. The scheme closed to future accrual on 31 December 2020 for all active members and there are no new defined benefit accruals in the UK scheme. In August 2025 the scheme completed a Buy- in, with the purchase of a bulk insurance annuity policy, with the effect that the majority of scheme liabilities are now covered by this policy. For further details see below; \u2013 the Group also operates a large trust-based defined contribution scheme for current employees in the UK (Rolls-Royce Retirement Savings Trust). Pension contributions are generally paid as a salary sacrifice under which employees agree to a reduction in gross contractual pay in return for the Group making additional pension contributions on their behalf. As a result, there is a decrease in wages and salaries and a corresponding increase in pension costs of \u00a3106m (2024: \u00a388m) in the year; and \u2013 overseas defined benefit schemes are a mixture of funded and unfunded plans and provide benefits in line with local practice. Additionally, in the US, and to a lesser extent in some other countries, the Group\u2019s employment practices include the provision of healthcare and life insurance benefits for retired employees. These healthcare schemes are unfunded. The valuations of the defined benefit schemes are based on the results of the most recent funding valuation from 31 March 2023, where relevant, updated by the scheme actuaries to 31 December 2025. Virgin Media A UK High Court legal ruling that took place in June 2023 between Virgin Media Limited and NTL Pension Trustees II Limited, found that certain historic rule amendments were invalid if they were not accompanied by actuarial certifications. The ruling was subject to an appeal with a judgement delivered on 25 July 2024. The Court of Appeal unanimously upheld the decision of the High Court and concluded that the pre-April 2013 conditions applied to amendments to both future and past service. Whilst this ruling was in respect of another scheme, its relevance and hence the potential impact of this to the RRUKPF scheme, and other UK schemes was unclear. On 5 June 2025 the Government announced that in light of this uncertainty, it would introduce legislation to give potentially affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic rule amendments met the necessary standards. As a result of this Government intervention the Group does not anticipate any scheme amendments or additional liabilities. Buy-in of Rolls-Royce UK Pension Fund In August 2025, the Trustee of the Rolls-Royce UK Pension Fund entered into a Buy-in transaction with Pension Insurance Corporation plc (PIC), whereby the Fund purchased a bulk purchase annuity policy in exchange for consideration of \u00a34.3bn. This was paid from the Fund's existing assets, with no additional funding required by the Group. This transaction resulted in substantially all the benefits and liabilities under the Fund being insured. The Buy-in was undertaken in anticipation of entering into a Buy-out during 2026, upon which the liabilities and management of bought out benefits will be transferred to PIC. A charge of \u00a3517m has been recognised within the line \u2018Actuarial gains/(losses) recognised in OCI\u2019 in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2025 comprising around \u00a3450m relating to the impact of the Buy-in. Following the transaction, the bulk purchase annuity policy has been treated as an asset of the Fund and has been valued on the same basis as the liabilities to which it relates, as until a Buy-out takes place, the legal responsibility to pay relevant benefits remains with the Trustee. The Company and the Trustee of the UK pension scheme agreed on 2 February 2026 to terminate and wind up the UK scheme. See further details in note 1. Overseas Schemes During the year, Rolls-Royce Deutschland replaced a number of their existing defined benefit schemes with a new company pension scheme to offer payment options at time of retirement. The new system, which is similar in structure to the UK defined contribution scheme but with a guarantee from the Company regarding investment returns in accordance with German legislation, significantly reduces interest risks and longevity risks for the employer for future commitments. A past service credit of \u00a310m has been recognised within non-underlying operating profit in respect of these changes. Amounts recognised in the income statement
2025 2024
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
Defined benefit schemes:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Current service cost and administrative expenses
6 42 48
5
37
42
Past-service cost/(credit) and settlement loss
1
4 (10) (6) 14
\u2013
14
10 32 42
19
37
56
Defined contribution schemes
251 104 355
228
101
329
Operating cost
261
136 397 247
138
385
Net
financing (credit)/charge in respect
of defined benefit schemes
(32)
38
6
(35)
37
2
Total income statement charge
229
174
403
212
175
387
1 Following the signing of the framework agreement with PIC, adjustments have been made to align the methodology for the calculation of certain benefits with those required by the insurer. These have resulted in an additional past service charge of \u00a3(4)m being recognised in the income statement in 2025. A past service credit of \u00a310m has also been recognised in the year in respect of the changes to the Rolls-Royce Deutschland schemes detailed above. In 2024 a past service charge of \u00a314m was recognised in respect of the UK scheme as a result of further work carried out by the pension scheme administrators and the Scheme Actuary in 2024 to review all relevant data points and make further changes to member records and required payments under the Barber judgement which sought to equalise normal retirement ages between men and women The operating cost is charged as follows:
Defined
Defined benefit
contribution
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost of sales
37
30
252
227
289
257
Commercial and administrative costs
(3
)
20
50
51
47
71
Research and development costs
8
6
53
51
61
57
42
56
355
329
397
385
Net financing comprises:
202
5
202
4
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financing on scheme obligations
214
64
278
200
61
261
Financing on scheme assets
(246)
(26)
(272)
(235)
(24)
(259)
Net financing (income)/charge in respect of defined benefit
schemes
(32)
38
6
(35)
37
2
Financing income on scheme surpluses
(32)
\u2013
(32)
(35)
(2)
(37)
Financing cost on scheme deficits
\u2013
38
38
\u2013
39
39
Amounts recognised in OCI in respect of defined benefit schemes
202
5
202
4
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
Actuarial gains and losses arising from:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Demographic assumptions
1
(121)
\u2013
(121)
19
(10)
9
Financial assumptions
2
97
63
160
617
56
673
Experience adjustments
3
(9)
1
(8)
(8)
(14)
(22)
(Loss)/return
on scheme assets excluding financing income
4
(484)
9
(475)
(633)
(5)
(638)
(517)
73
(444)
(5)
27
22
1 For the UK Scheme, this reflects latest available CMI mortality projections, and a charge of around \u00a3100m in relation to the Buy-in of the UK scheme due to updates to the assumptions relating to transfer values, and alignments made to insurer factors post Buy-in 2 Actuarial gains and losses arising from financial assumptions arise primarily due to changes in discount rate and inflation 3 This reflects an experience loss as a result of realised inflation being higher than expected over the period meaning that actual and projected increases are now higher than previously expected 4 Includes an asset remeasurement loss estimated at \u00a3350m recognised in respect of the Buy-in of the UK Scheme that took place during the year Amounts recognised in the balance sheet in respect of defined benefit schemes
202
5
202
4
UK Overseas UK Overseas
schemes
schemes
1
Total schemes schemes Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Present value of funded obligations
(4,040)
(19
7
)
(4,23
7
)
(3,958)
(986)
(4,944)
Fair value of scheme assets
4,324 188 4,512
4,737
531
5,268
Net
asset/(liability) on funded schemes
284 (9) 275
779
(455)
324
Present value of unfunded obligations
\u2013 (19) (19)
\u2013
(515)
(515)
Net asset/(liability) recognised in the balance
sheet
2
284 (28) 256
779
(970)
(191)
Post
-
retirement scheme surpluses
3
284 2 286
779
11
790
Post
-
retirement scheme deficits
\u2013 (30) (30)
\u2013
(981)
(981)
1 At 31 December 2025, \u00a3862m of net pension deficits (comprising \u00a3372m assets and \u00a3(1,234)m liabilities) relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details 2 The surplus in the UK scheme is recognised as, on an ultimate wind-up when there are no longer any remaining members, the Group would be entitled to receive any surplus and, has the power to determine how any remaining surplus is used 3 The decrease in the net asset in the UK Schemes is largely as a result of the Buy-in of the scheme in August 2025, which has resulted in a charge estimated at \u00a3450m being recognised within the line \u2018Actuarial gains/(losses) recognised in OCI\u2019 in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2025 Overseas schemes are located in the following countries:
202
5
202
4
Assets Obligations Net Assets Obligations Net
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Canada
188
(215)
(27)
193
(225)
(32)
Germany
1
\u2013 \u2013 \u2013
56
(664)
(608)
US pensions schemes
1
\u2013 \u2013 \u2013
282
(297)
(15)
US healthcare schemes
1
\u2013 \u2013 \u2013
\u2013
(312)
(312)
Other
\u2013 (1) (1)
\u2013
(3)
(3)
Net asset/(liability) recognised in th
e balance sheet
188 (216) (28)
531
(1,501)
(970)
1 At 31 December 2025, \u00a3862m of net pension liabilities (comprising \u00a3372m assets and \u00a3(1,234)m liabilities) predominantly relating to the German and US schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details Defined benefit schemes Assumptions Significant actuarial assumptions for UK schemes at the balance sheet date were as follows:
202
5
202
4
Discount rate
5.60%
5.50%
Inflation assumption (RPI)
3.05%
3.30%
Inflation assumption
(CPI)
2.70%
2.90%
Transfer take
-
up assumption (employed deferred/deferred)
20%/15%
20%/15%
Bridging Pension Option (BPO)
take
-
up
assumption (employed deferred/deferred)
40%/25%
40%/25%
Life expectancy from age 65: current male pensioner
21.1 years
20.8 years
future male pensioner currently aged 45
21.8 years
21.5 years
current female pensioner
23.0 years
22.8 years
future female pensioner currently aged 45
24.2 years
24.1 years
Discount rates are determined by reference to the market yields on AA rated corporate bonds. The rate is determined by using the profile of forecast benefit payments to derive a weighted average discount rate from the yield curve. The inflation assumption is determined by the market-implied assumption based on the yields on long-term index-linked government securities. The mortality assumptions adopted for the UK pension schemes are derived from the SAPS S3 'All' actuarial tables, with future improvements in line with the CMI 2024 core projections updated to reflect use of an \u2018A\u2019 parameter of 0.25% for future improvements and long-term improvements of 1.25%. Where appropriate, these are adjusted to take account of the scheme's actual experience. The assumption for transfers and the BPO is based on actual experience and actuarial advice, and has been updated for changes following the Buy-in of the scheme. Other assumptions have been set on advice from the actuary, having regard to the latest trends in scheme experience, the assumptions used in the most recent funding valuation and any updates required to insurer factors. The rate of increase of pensions in payment is based on the rules of the scheme, combined with the inflation assumption where the increase is capped. Assumptions for overseas schemes are less significant and are based on advice from local actuaries. The principal assumptions are:
202
5
202
4
Discount rate
4.70%
4.50%
Inflation assumption
2.00%
2.10%
Long
-
term healthcare cost trend rate
4.75%
4.75%
Male life expectancy from age 65: current pensioner
20.8 years
20.5 years
future pensioner currently aged 45
23.1 years
22.5 years
Changes in present value of defined benefit obligations
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
(3,958)
(1,501)
(5,459)
(4,537)
(1,540)
(6,077)
Exchange
differences
\u2013
13
1
3
\u2013
38
38
Current service cost
\u2013
(41)
(41)
\u2013
(37)
(37)
Past
-
service
(
cost
)/credit
1
(4)
10
6
(14)
\u2013
(14)
Finance
(
cost
)/credit
(214)
(64)
(278)
(200)
(61)
(261)
Contributions by employe
es
\u2013
(14)
(14)
\u2013
(13)
(13)
Benefits paid out
169
83
252
165
80
245
Transferred to held for distribution
2
\u2013
1,234
1
,
234
\u2013
\u2013
\u2013
Actuarial
(losses)/
gains
3
(33)
64
31
628
32
660
At
31 December
(4,040)
(21
6
)
(4,25
6
)
(3,958)
(1,501)
(5,459)
Funded schemes
(4,040)
(19
7
)
(4,23
7
)
(3,958)
(986)
(4,944)
Unfunded schemes
\u2013
(19)
(19)
\u2013
(515)
(515)
1 Following the signing of the framework agreement with the UK scheme\u2019s Trustee, which was signed alongside the Buy-in agreement, adjustments have been made to align the methodology for the calculation of certain benefits with the pricing methodology used by the insurer. These have resulted in an additional past service charge of \u00a34m being recognised in the income statement in 2025. A past service credit of \u00a310m has also been recognised in the year in respect of the changes to the Rolls-Royce Deutschland schemes detailed above. In 2024 a past service charge of \u00a314m was recognised in respect of the UK scheme as a result of further work carried out by the pension scheme administrators and the Scheme Actuary in 2024 to review all relevant data points and make further changes to member records and required payments under the Barber judgement which sought to equalise normal retirement ages between men and women 2 At 31 December 2025, \u00a31,234m of pension obligations relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details 3 The actuarial loss of \u00a3(33)m relating to the UK schemes includes a charge of around \u00a3(100)m in respect of the Buy-in of the UK scheme detailed above The defined benefit obligations are in respect of:
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
Active plan participants
1
(1,243)
(12
1
)
(1,36
4
)
(1,277)
(731)
(2,008)
Deferred plan participants
(1,067)
(10)
(1,077)
(1,064)
(98)
(1,162)
Pensioners
(1,730)
(85)
(1,815)
(1,617)
(672)
(2,289)
Weighted average duration of obligations (years)
13
13
13
14
12
13
1 Although the UK scheme closed to future accrual on 31 December 2020, members who became deferred as a result of the closure and remain employed by the Group retain some additional benefits compared to other deferred members. The obligations for these members are shown as active plan participants Changes in fair value of scheme assets
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
4,737
531
5,268
5,304
520
5,824
Exchange
differences
\u2013
(20)
(20)
\u2013
(13)
(13)
Administrative expenses
(6)
(1)
(
7
)
(5)
(1)
(6)
Financing
246
26
2
72
235
24
259
(Loss)/ r
eturn on plan assets excluding financing
1
(484)
9
(4
75
)
(633)
(5)
(638)
Contributions by employe
r
\u2013
84
84
1
73
74
Contributions by employe
es
\u2013
14
14
\u2013
13
13
Benefits paid out
(169)
(83)
(
252
)
(165)
(80)
(245)
Transferred to held for
distribution
2
\u2013
(372)
(372)
\u2013
\u2013
\u2013
At 31 December
4,324
188
4,512
4,737
531
5,268
Total
(loss)/return
on scheme assets
(238)
35
(203)
(398)
19
(379)
1 Includes an asset remeasurement net loss estimated at \u00a3350m recognised in respect of the Buy-in of the UK Scheme that took place in the year. For further details see page 86 2 At 31 December 2025, \u00a3372m of pension assets relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details Fair value of scheme assets at 31 December
2025
2024
UK Overseas UK Overseas
schemes
1
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sovereign debt
\u2013
53
53
3,335
140
3,475
Corporate debt instruments
\u2013
5
7
5
7
1,860
248
2,108
Interest rate swaps
\u2013
\u2013
\u2013
197
\u2013
197
Inflation swaps
\u2013
\u2013
\u2013
92
\u2013
92
Cash and similar instruments
2
\u2013
\u2013
\u2013
(1,176)
\u2013
(1,176)
Liability driven investment (LDI) portfolio
s
\u2013
110
110
4,308
388
4,696
Listed equities
\u2013
50
50
\u2013
54
54
Unlisted equities
4
1
5
25
\u2013
25
Corporate debt instruments
\u2013
\u2013
\u2013
379
\u2013
379
Cash
2
80
2
28
2
25
11
36
Buy
-
in insurance policy
3
4,040
\u2013
4,040
\u2013
\u2013
\u2013
Other
\u2013
25
25
\u2013
78
78
At 31 December
4,324
188
4,512
4,737
531
5,268
1 Following the Buy-in in August 2025, described on page 86, the Group entered into a bulk purchase annuity policy with PIC for consideration of \u00a34.3bn. The consideration was paid by transferring certain existing RRUKPF\u2019s assets and cash to PIC 2 UK cash and similar instruments include repurchase agreements on UK Government bonds amounting to \u00a3nil (2024: \u00a3(1,203)m) 3 Following the transaction, the bulk purchase annuity policy has been treated as an asset of the scheme and has been valued on the same basis as the liabilities to which it relates, as until a Buy-out takes place, the legal responsibility to pay benefits remains with the Trustee The investment strategy for the UK scheme is controlled by the Trustee in consultation with the Group. The scheme assets do not include any of the Group\u2019s own financial instruments, nor any property occupied by, or other assets used by, the Group (2024: none). Future contributions The Group expects to contribute approximately \u00a381m to its overseas defined benefit schemes in 2026 (2025: \u00a384m). In the UK, any cash funding of RRUKPF is based on a statutory triennial funding valuation process. The Group and the Trustee negotiate and agree the actuarial assumptions used to value the liabilities (Technical Provisions); assumptions which may differ from those used for accounting set out above. Once each valuation is signed, a Schedule of Contributions (SoC) must be agreed which sets out the cash contributions to be paid. The most recent valuation, as at 31 March 2023, agreed by the Trustee in October 2023, showed that the RRUKPF was estimated to be 115% funded on the Technical Provisions basis. All cash due has been paid in full and the current SoC does not require any cash contributions to be made by the Group. Following the Buy-in of the scheme in August 2025 substantially all the scheme liabilities have been insured and it is expected that no further funding will be required by the Group: any further liabilities arising are expected to be funded from the scheme\u2019s existing assets. Sensitivities The calculations of the defined benefit obligations are sensitive to the assumptions set out above. A number of the overseas schemes are unfunded. For the most significant funded schemes, the investment strategies hedge the risks from interest rates and inflation measured on a proxy solvency basis. UK Scheme The following table summarises how the estimated impact of a change in a significant assumption would affect the UK defined benefit obligation at 31 December 2025, while holding all other assumptions constant. This sensitivity analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The UK scheme previously hedged interest rate and inflation risk based on UK Government bond yields without any adjustment for any credit spread, however as a result of the Buy-in that took place in August 2025, most of the scheme\u2019s assets were either liquidated or transferred to PIC during the year. The majority of the assets at 31 December 2025 represent the value of the bulk purchase annuity policy, which aligns exactly to the liabilities to which it relates, hence any movement in the assets will result in an equal and opposite movement in the liabilities. The sensitivity analysis set out below has been determined based on a method that estimates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period
2025 2024
\u00a3m
\u00a3m
Reduction in the discount rate of 0.25%
1
Obligation
s
(140)
(145)
Plan assets (
B
uy
-
in policy)
140
\u2013
Plan assets (LDI portfolio)
\u2013
179
Increase in inflation of 0.25%
1
Obligation
s
(55)
(55)
Plan assets (
B
uy
-
in policy)
55
\u2013
Plan assets (LDI
portfolio)
\u2013
73
Increase of 1% in transfer value assumption
Obligations
(20)
(25)
Plan assets (
B
uy
-
in policy)
20
\u2013
One year increase in life expectancy
Obligations
(125)
(125)
Plan assets (
B
uy
-
in policy)
125
\u2013
1 The differences between the sensitivities on obligations and plan assets in 2024 arise largely due to differences in the methods used to value the obligations for accounting purposes and the adopted proxy solvency basis Overseas Schemes
2025 2024
\u00a3m
\u00a3m
Reduction in the discount rate of 0.25%
Obligations
(
7
)
(
46
)
Increase in inflation of 0.25%
Obligations
(1)
(10)
", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-600": { "value": "22 Post-retirement benefits The Group operates a number of defined benefit and defined contribution schemes: \u2013 the UK defined benefit scheme is funded, with the assets held in a separate UK trust. The scheme closed to future accrual on 31 December 2020 for all active members and there are no new defined benefit accruals in the UK scheme. In August 2025 the scheme completed a Buy- in, with the purchase of a bulk insurance annuity policy, with the effect that the majority of scheme liabilities are now covered by this policy. For further details see below; \u2013 the Group also operates a large trust-based defined contribution scheme for current employees in the UK (Rolls-Royce Retirement Savings Trust). Pension contributions are generally paid as a salary sacrifice under which employees agree to a reduction in gross contractual pay in return for the Group making additional pension contributions on their behalf. As a result, there is a decrease in wages and salaries and a corresponding increase in pension costs of \u00a3106m (2024: \u00a388m) in the year; and \u2013 overseas defined benefit schemes are a mixture of funded and unfunded plans and provide benefits in line with local practice. Additionally, in the US, and to a lesser extent in some other countries, the Group\u2019s employment practices include the provision of healthcare and life insurance benefits for retired employees. These healthcare schemes are unfunded. The valuations of the defined benefit schemes are based on the results of the most recent funding valuation from 31 March 2023, where relevant, updated by the scheme actuaries to 31 December 2025. Virgin Media A UK High Court legal ruling that took place in June 2023 between Virgin Media Limited and NTL Pension Trustees II Limited, found that certain historic rule amendments were invalid if they were not accompanied by actuarial certifications. The ruling was subject to an appeal with a judgement delivered on 25 July 2024. The Court of Appeal unanimously upheld the decision of the High Court and concluded that the pre-April 2013 conditions applied to amendments to both future and past service. Whilst this ruling was in respect of another scheme, its relevance and hence the potential impact of this to the RRUKPF scheme, and other UK schemes was unclear. On 5 June 2025 the Government announced that in light of this uncertainty, it would introduce legislation to give potentially affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic rule amendments met the necessary standards. As a result of this Government intervention the Group does not anticipate any scheme amendments or additional liabilities. Buy-in of Rolls-Royce UK Pension Fund In August 2025, the Trustee of the Rolls-Royce UK Pension Fund entered into a Buy-in transaction with Pension Insurance Corporation plc (PIC), whereby the Fund purchased a bulk purchase annuity policy in exchange for consideration of \u00a34.3bn. This was paid from the Fund's existing assets, with no additional funding required by the Group. This transaction resulted in substantially all the benefits and liabilities under the Fund being insured. The Buy-in was undertaken in anticipation of entering into a Buy-out during 2026, upon which the liabilities and management of bought out benefits will be transferred to PIC. A charge of \u00a3517m has been recognised within the line \u2018Actuarial gains/(losses) recognised in OCI\u2019 in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2025 comprising around \u00a3450m relating to the impact of the Buy-in. Following the transaction, the bulk purchase annuity policy has been treated as an asset of the Fund and has been valued on the same basis as the liabilities to which it relates, as until a Buy-out takes place, the legal responsibility to pay relevant benefits remains with the Trustee. The Company and the Trustee of the UK pension scheme agreed on 2 February 2026 to terminate and wind up the UK scheme. See further details in note 1.
Overseas Schemes
During the year, Rolls-Royce Deutschland replaced a number of their existing defined benefit schemes with a new company pension scheme to
offer payment options at time of retirement. The new system, which is similar in structure to the UK defined contribution scheme but with a
guarantee from the Company regarding investment returns in accordance with German legislation, significantly reduces interest risks and
longevity risks for the employer for future commitments. A past service credit of \u00a310m has been recognised within non-underlying operating
profit in respect of these changes.
Amounts recognised in the income statement
2025 2024
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
Defined benefit schemes:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Current service cost and administrative expenses
6 42 48
5
37
42
Past-service cost/(credit) and settlement loss
1
4 (10) (6) 14
\u2013
14
10 32 42
19
37
56
Defined contribution schemes
251 104 355
228
101
329
Operating cost
261
136 397 247
138
385
Net
financing (credit)/charge in respect
of defined benefit schemes
(32)
38
6
(35)
37
2
Total income statement charge
229
174
403
212
175
387
1 Following the signing of the framework agreement with PIC, adjustments have been made to align the methodology for the calculation of certain benefits with those required by the insurer.
These have resulted in an additional past service charge of \u00a3(4)m being recognised in the income statement in 2025. A past service credit of \u00a310m has also been recognised in the year in
respect of the changes to the Rolls-Royce Deutschland schemes detailed above. In 2024 a past service charge of \u00a314m was recognised in respect of the UK scheme as a result of further work
carried out by the pension scheme administrators and the Scheme Actuary in 2024 to review all relevant data points and make further changes to member records and required payments
under the Barber judgement which sought to equalise normal retirement ages between men and women
The operating cost is charged as follows:
Defined
Defined benefit
contribution
Total
2025 2024 2025 2024 2025 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost of sales
37
30
252
227
289
257
Commercial and administrative costs
(3
)
20
50
51
47
71
Research and development costs
8
6
53
51
61
57
42
56
355
329
397
385
Net financing comprises:
202
5
202
4
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financing on scheme obligations
214
64
278
200
61
261
Financing on scheme assets
(246)
(26)
(272)
(235)
(24)
(259)
Net financing (income)/charge in respect of defined benefit
schemes
(32)
38
6
(35)
37
2
Financing income on scheme surpluses
(32)
\u2013
(32)
(35)
(2)
(37)
Financing cost on scheme deficits
\u2013
38
38
\u2013
39
39
Amounts recognised in OCI in respect of defined benefit schemes
202
5
202
4
UK Overseas UK Overseas
schemes schemes Total schemes schemes Total
Actuarial gains and losses arising from:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Demographic assumptions
1
(121)
\u2013
(121)
19
(10)
9
Financial assumptions
2
97
63
160
617
56
673
Experience adjustments
3
(9)
1
(8)
(8)
(14)
(22)
(Loss)/return
on scheme assets excluding financing income
4
(484)
9
(475)
(633)
(5)
(638)
(517)
73
(444)
(5)
27
22
1 For the UK Scheme, this reflects latest available CMI mortality projections, and a charge of around \u00a3100m in relation to the Buy-in of the UK scheme due to updates to the assumptions relating
to transfer values, and alignments made to insurer factors post Buy-in
2 Actuarial gains and losses arising from financial assumptions arise primarily due to changes in discount rate and inflation
3 This reflects an experience loss as a result of realised inflation being higher than expected over the period meaning that actual and projected increases are now higher than previously
expected
4 Includes an asset remeasurement loss estimated at \u00a3350m recognised in respect of the Buy-in of the UK Scheme that took place during the year
Amounts recognised in the balance sheet in respect of defined benefit schemes
202
5
202
4
UK Overseas UK Overseas
schemes
schemes
1
Total schemes schemes Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Present value of funded obligations
(4,040)
(19
7
)
(4,23
7
)
(3,958)
(986)
(4,944)
Fair value of scheme assets
4,324 188 4,512
4,737
531
5,268
Net
asset/(liability) on funded schemes
284 (9) 275
779
(455)
324
Present value of unfunded obligations
\u2013 (19) (19)
\u2013
(515)
(515)
Net asset/(liability) recognised in the balance
sheet
2
284 (28) 256
779
(970)
(191)
Post
-
retirement scheme surpluses
3
284 2 286
779
11
790
Post
-
retirement scheme deficits
\u2013 (30) (30)
\u2013
(981)
(981)
1 At 31 December 2025, \u00a3862m of net pension deficits (comprising \u00a3372m assets and \u00a3(1,234)m liabilities) relating to overseas schemes were reclassified to liabilities associated with assets held
for distribution. See note 27 for further details
2 The surplus in the UK scheme is recognised as, on an ultimate wind-up when there are no longer any remaining members, the Group would be entitled to receive any surplus and, has the
power to determine how any remaining surplus is used
3 The decrease in the net asset in the UK Schemes is largely as a result of the Buy-in of the scheme in August 2025, which has resulted in a charge estimated at \u00a3450m being recognised within
the line \u2018Actuarial gains/(losses) recognised in OCI\u2019 in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2025
Overseas schemes are located in the following countries:
202
5
202
4
Assets Obligations Net Assets Obligations Net
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Canada
188
(215)
(27)
193
(225)
(32)
Germany
1
\u2013 \u2013 \u2013
56
(664)
(608)
US pensions schemes
1
\u2013 \u2013 \u2013
282
(297)
(15)
US healthcare schemes
1
\u2013 \u2013 \u2013
\u2013
(312)
(312)
Other
\u2013 (1) (1)
\u2013
(3)
(3)
Net asset/(liability) recognised in th
e balance sheet
188 (216) (28)
531
(1,501)
(970)
1 At 31 December 2025, \u00a3862m of net pension liabilities (comprising \u00a3372m assets and \u00a3(1,234)m liabilities) predominantly relating to the German and US schemes were reclassified to
liabilities associated with assets held for distribution. See note 27 for further details
Defined benefit schemes
Assumptions
Significant actuarial assumptions for UK schemes at the balance sheet date were as follows:
202
5
202
4
Discount rate
5.60%
5.50%
Inflation assumption (RPI)
3.05%
3.30%
Inflation assumption
(CPI)
2.70%
2.90%
Transfer take
-
up assumption (employed deferred/deferred)
20%/15%
20%/15%
Bridging Pension Option (BPO)
take
-
up
assumption (employed deferred/deferred)
40%/25%
40%/25%
Life expectancy from age 65: current male pensioner
21.1 years
20.8 years
future male pensioner currently aged 45
21.8 years
21.5 years
current female pensioner
23.0 years
22.8 years
future female pensioner currently aged 45
24.2 years
24.1 years
Discount rates are determined by reference to the market yields on AA rated corporate bonds. The rate is determined by using the profile of
forecast benefit payments to derive a weighted average discount rate from the yield curve.
The inflation assumption is determined by the market-implied assumption based on the yields on long-term index-linked government securities.
The mortality assumptions adopted for the UK pension schemes are derived from the SAPS S3 'All' actuarial tables, with future improvements in
line with the CMI 2024 core projections updated to reflect use of an \u2018A\u2019 parameter of 0.25% for future improvements and long-term improvements
of 1.25%. Where appropriate, these are adjusted to take account of the scheme's actual experience.
The assumption for transfers and the BPO is based on actual experience and actuarial advice, and has been updated for changes following the
Buy-in of the scheme.
Other assumptions have been set on advice from the actuary, having regard to the latest trends in scheme experience, the assumptions used in
the most recent funding valuation and any updates required to insurer factors. The rate of increase of pensions in payment is based on the rules
of the scheme, combined with the inflation assumption where the increase is capped.
Assumptions for overseas schemes are less significant and are based on advice from local actuaries. The principal assumptions are:
202
5
202
4
Discount rate
4.70%
4.50%
Inflation assumption
2.00%
2.10%
Long
-
term healthcare cost trend rate
4.75%
4.75%
Male life expectancy from age 65: current pensioner
20.8 years
20.5 years
future pensioner currently aged 45
23.1 years
22.5 years
Changes in present value of defined benefit obligations
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
(3,958)
(1,501)
(5,459)
(4,537)
(1,540)
(6,077)
Exchange
differences
\u2013
13
1
3
\u2013
38
38
Current service cost
\u2013
(41)
(41)
\u2013
(37)
(37)
Past
-
service
(
cost
)/credit
1
(4)
10
6
(14)
\u2013
(14)
Finance
(
cost
)/credit
(214)
(64)
(278)
(200)
(61)
(261)
Contributions by employe
es
\u2013
(14)
(14)
\u2013
(13)
(13)
Benefits paid out
169
83
252
165
80
245
Transferred to held for distribution
2
\u2013
1,234
1
,
234
\u2013
\u2013
\u2013
Actuarial
(losses)/
gains
3
(33)
64
31
628
32
660
At
31 December
(4,040)
(21
6
)
(4,25
6
)
(3,958)
(1,501)
(5,459)
Funded schemes
(4,040)
(19
7
)
(4,23
7
)
(3,958)
(986)
(4,944)
Unfunded schemes
\u2013
(19)
(19)
\u2013
(515)
(515)
1 Following the signing of the framework agreement with the UK scheme\u2019s Trustee, which was signed alongside the Buy-in agreement, adjustments have been made to align the methodology for
the calculation of certain benefits with the pricing methodology used by the insurer. These have resulted in an additional past service charge of \u00a34m being recognised in the income statement
in 2025. A past service credit of \u00a310m has also been recognised in the year in respect of the changes to the Rolls-Royce Deutschland schemes detailed above. In 2024 a past service charge of
\u00a314m was recognised in respect of the UK scheme as a result of further work carried out by the pension scheme administrators and the Scheme Actuary in 2024 to review all relevant data
points and make further changes to member records and required payments under the Barber judgement which sought to equalise normal retirement ages between men and women
2 At 31 December 2025, \u00a31,234m of pension obligations relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details
3 The actuarial loss of \u00a3(33)m relating to the UK schemes includes a charge of around \u00a3(100)m in respect of the Buy-in of the UK scheme detailed above
The defined benefit obligations are in respect of:
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
Active plan participants
1
(1,243)
(12
1
)
(1,36
4
)
(1,277)
(731)
(2,008)
Deferred plan participants
(1,067)
(10)
(1,077)
(1,064)
(98)
(1,162)
Pensioners
(1,730)
(85)
(1,815)
(1,617)
(672)
(2,289)
Weighted average duration of obligations (years)
13
13
13
14
12
13
1 Although the UK scheme closed to future accrual on 31 December 2020, members who became deferred as a result of the closure and remain employed by the Group retain some additional
benefits compared to other deferred members. The obligations for these members are shown as active plan participants
Changes in fair value of scheme assets
2025
2024
UK Overseas UK Overseas
schemes
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At
1 January
4,737
531
5,268
5,304
520
5,824
Exchange
differences
\u2013
(20)
(20)
\u2013
(13)
(13)
Administrative expenses
(6)
(1)
(
7
)
(5)
(1)
(6)
Financing
246
26
2
72
235
24
259
(Loss)/ r
eturn on plan assets excluding financing
1
(484)
9
(4
75
)
(633)
(5)
(638)
Contributions by employe
r
\u2013
84
84
1
73
74
Contributions by employe
es
\u2013
14
14
\u2013
13
13
Benefits paid out
(169)
(83)
(
252
)
(165)
(80)
(245)
Transferred to held for
distribution
2
\u2013
(372)
(372)
\u2013
\u2013
\u2013
At 31 December
4,324
188
4,512
4,737
531
5,268
Total
(loss)/return
on scheme assets
(238)
35
(203)
(398)
19
(379)
1 Includes an asset remeasurement net loss estimated at \u00a3350m recognised in respect of the Buy-in of the UK Scheme that took place in the year. For further details see page 86
2 At 31 December 2025, \u00a3372m of pension assets relating to overseas schemes were reclassified to liabilities associated with assets held for distribution. See note 27 for further details
Fair value of scheme assets at 31 December
2025
2024
UK Overseas UK Overseas
schemes
1
schemes
Total
schemes
schemes
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sovereign debt
\u2013
53
53
3,335
140
3,475
Corporate debt instruments
\u2013
5
7
5
7
1,860
248
2,108
Interest rate swaps
\u2013
\u2013
\u2013
197
\u2013
197
Inflation swaps
\u2013
\u2013
\u2013
92
\u2013
92
Cash and similar instruments
2
\u2013
\u2013
\u2013
(1,176)
\u2013
(1,176)
Liability driven investment (LDI) portfolio
s
\u2013
110
110
4,308
388
4,696
Listed equities
\u2013
50
50
\u2013
54
54
Unlisted equities
4
1
5
25
\u2013
25
Corporate debt instruments
\u2013
\u2013
\u2013
379
\u2013
379
Cash
2
80
2
28
2
25
11
36
Buy
-
in insurance policy
3
4,040
\u2013
4,040
\u2013
\u2013
\u2013
Other
\u2013
25
25
\u2013
78
78
At 31 December
4,324
188
4,512
4,737
531
5,268
1 Following the Buy-in in August 2025, described on page 86, the Group entered into a bulk purchase annuity policy with PIC for consideration of \u00a34.3bn. The consideration was paid by
transferring certain existing RRUKPF\u2019s assets and cash to PIC
2 UK cash and similar instruments include repurchase agreements on UK Government bonds amounting to \u00a3nil (2024: \u00a3(1,203)m)
3 Following the transaction, the bulk purchase annuity policy has been treated as an asset of the scheme and has been valued on the same basis as the liabilities to which it relates, as until a
Buy-out takes place, the legal responsibility to pay benefits remains with the Trustee
The investment strategy for the UK scheme is controlled by the Trustee in consultation with the Group. The scheme assets do not include any of
the Group\u2019s own financial instruments, nor any property occupied by, or other assets used by, the Group (2024: none).
Future contributions
The Group expects to contribute approximately \u00a381m to its overseas defined benefit schemes in 2026 (2025: \u00a384m).
In the UK, any cash funding of RRUKPF is based on a statutory triennial funding valuation process. The Group and the Trustee negotiate and agree the
actuarial assumptions used to value the liabilities (Technical Provisions); assumptions which may differ from those used for accounting set out above.
Once each valuation is signed, a Schedule of Contributions (SoC) must be agreed which sets out the cash contributions to be paid. The most recent
valuation, as at 31 March 2023, agreed by the Trustee in October 2023, showed that the RRUKPF was estimated to be 115% funded on the Technical
Provisions basis. All cash due has been paid in full and the current SoC does not require any cash contributions to be made by the Group. Following
the Buy-in of the scheme in August 2025 substantially all the scheme liabilities have been insured and it is expected that no further funding will be
required by the Group: any further liabilities arising are expected to be funded from the scheme\u2019s existing assets.
Sensitivities
The calculations of the defined benefit obligations are sensitive to the assumptions set out above. A number of the overseas schemes are
unfunded. For the most significant funded schemes, the investment strategies hedge the risks from interest rates and inflation measured on a
proxy solvency basis.
UK Scheme
The following table summarises how the estimated impact of a change in a significant assumption would affect the UK defined benefit obligation
at 31 December 2025, while holding all other assumptions constant. This sensitivity analysis may not be representative of the actual change in the
defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may
be correlated.
The UK scheme previously hedged interest rate and inflation risk based on UK Government bond yields without any adjustment for any credit
spread, however as a result of the Buy-in that took place in August 2025, most of the scheme\u2019s assets were either liquidated or transferred to PIC
during the year. The majority of the assets at 31 December 2025 represent the value of the bulk purchase annuity policy, which aligns exactly to
the liabilities to which it relates, hence any movement in the assets will result in an equal and opposite movement in the liabilities.
The sensitivity analysis set out below has been determined based on a method that estimates the impact on the defined benefit obligation as a
result of reasonable changes in key assumptions occurring at the end of the reporting period
2025 2024
\u00a3m
\u00a3m
Reduction in the discount rate of 0.25%
1
Obligation
s
(140)
(145)
Plan assets (
B
uy
-
in policy)
140
\u2013
Plan assets (LDI portfolio)
\u2013
179
Increase in inflation of 0.25%
1
Obligation
s
(55)
(55)
Plan assets (
B
uy
-
in policy)
55
\u2013
Plan assets (LDI
portfolio)
\u2013
73
Increase of 1% in transfer value assumption
Obligations
(20)
(25)
Plan assets (
B
uy
-
in policy)
20
\u2013
One year increase in life expectancy
Obligations
(125)
(125)
Plan assets (
B
uy
-
in policy)
125
\u2013
1 The differences between the sensitivities on obligations and plan assets in 2024 arise largely due to differences in the methods used to value the obligations for accounting purposes and the
adopted proxy solvency basis
Overseas Schemes
2025 2024
\u00a3m
\u00a3m
Reduction in the discount rate of 0.25%
Obligations
(
7
)
(
46
)
Increase in inflation of 0.25%
Obligations
(1)
(10)
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-601": { "value": "
23 Share capital
Equity
Ordinary
shares of Nominal
20p each value
Millions
\u00a3m
At
1 January and 31 December 2024
1,6
91
338
At 31 December
2025
1,691
338
Rights, preferences and restrictions
Each member has one vote for each ordinary share held. Holders of ordinary shares are entitled to receive the Company\u2019s Annual Report; attend
and speak at general meetings of the Company; to appoint one or more proxies or, if they are corporations, corporate representatives; and to
exercise voting rights. The ordinary shares are not listed.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-647": { "value": "23 Share capital
Equity
Ordinary
shares of Nominal
20p each value
Millions
\u00a3m
At
1 January and 31 December 2024
1,6
91
338
At 31 December
2025
1,691
338
Rights, preferences and restrictions Each member has one vote for each ordinary share held. Holders of ordinary shares are entitled to receive the Company\u2019s Annual Report; attend and speak at general meetings of the Company; to appoint one or more proxies or, if they are corporations, corporate representatives; and to exercise voting rights. The ordinary shares are not listed. ", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-602": { "value": "
24 Share-based payments
Effect of share-based payment transactions on the Group\u2019s results and financial position
2025 2024
\u00a3m
\u00a3m
Total expense recognised for equity
-
settled share
-
based payment transactions
98
95
Total cost
recogn
ised for cash
-
settled share
-
based payment
transactions
6
41
Share
-
based payments recognised in the consolidated income statement
104
136
Liability for cash
-
settled share
-
based payment transactions
\u2013
59
A description of the share-based payment plans is included in the Directors' Remuneration Report on pages 104 to 105 of Rolls-Royce Holdings
plc 2025 Annual Report.
Movements in the Group\u2019s share-based payment plans during the year
ShareSave Free LTIP Incentive Matching
Shares
Plan
Shares
Weighted
average
exercise
Number price Number Number Number Number
Millions
Pence
Millions
Millions
Millions
Millions
Outstanding at 1 January 2024
53.4
107
\u2013
101.0
17.2
\u2013
Granted
\u2013
\u2013
6.2
22.8
5.0
\u2013
Forfeited
(2.3)
110
(0.2)
(5.7)
(0.5)
\u2013
Exercised
(0.5)
104
\u2013
(25.4)
(5.6)
\u2013
Outstanding at 31 December 202
4
50.6
107
6.0
92.7
16.1
\u2013
Granted
\u2013
\u2013
\u2013
10.6
0.5
0.6
Forfeited
(0.2)
118
(0.7)
(3.7)
\u2013
\u2013
Exercised
(50.
3
)
107
(2.3)
(35.3)
(5.6)
\u2013
Outstanding at 31 December
2025
0.1
111
3.0
64.3
11.0
0.6
Exercisable at 31 December
2025
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
Exercisable at 31 December
2024
0.1
\u2013
\u2013
\u2013
\u2013
\u2013
The weighted average share price at the date share options were exercised was 728p (2024: 420p). The closing price at 31 December 2025 was
1,150p (2024: 569p).
The weighted average remaining contractual life for the share options as at 31 December 2025 was six months (2024: one month) and all
outstanding share options have a maturity date in 2026.
Fair values of share-based payment plans
The weighted average fair value per share of equity-settled share-based payment plans granted during the year, estimated at the date of grant,
are as follows:
2025
2024
Free Shares
n/a
494p
LTIP
759p
361p
Incentive plan
802p
378p
Matching Shares
1,089p
n/a
Vesting period of share-based payment plans
The vesting period for the share-based payment plans are between 6 months to 63 months. See the details below.
Vesting period
LTIP
6 to 59 months
Incentive Plan(IP)
7 to 47 months
Sharesave
39 or 63 months
Free shares
12 or 36 months
Matching Shares
24 or 36 months
Long-term incentive plan
The fair value of shares awarded is calculated using a pricing model that takes account of the non-entitlement to dividends (or equivalent) during
the vesting period and the market-based performance condition based on expectations about volatility and the correlation of share price returns
in the group of FTSE 100 and S&P Global Industrials Index companies and which incorporates into the valuation the interdependency between
share price performance and TSR vesting where market-based conditions are applicable. This adjustment decreases the fair value of the award
relative to the share price at the date of grant.
ShareSave
The fair value of the options granted is calculated using a pricing model that assumes that participants will exercise their options at the beginning
of the six-month window if the share price is greater than the exercise price. Otherwise, it assumes that options are held until the expiration of
their contractual term. This results in an expected life of the mid-point between the start of the exercise window and the date of expiration.
Incentive plan
The fair value of shares awarded is calculated as the share price on the date of the award, on the basis that awards are entitled to receive dividends
(or equivalents).
Free shares
In 2024, every Rolls-Royce employee was gifted 150 shares. The awards were granted under two plans; the 'Rolls-Royce Share Purchase Plan' for
UK employees and the 'Rolls-Royce Global Employee Share Purchase Plan' for non-UK employees; both being equity-settled schemes. The fair
value of shares awarded under the free shares scheme is calculated as the share price on the date of the award, on the basis that awards are
entitled to receive dividends (or equivalents).
Matching shares
Rolls-Royce launched the \u2018Your Shares: Matched\u2019 plan during the year. Every participant receives the free matching shares with a value of up to
\u00a350 each month based on the number of investment shares they purchase. There are no performance conditions attached to the shares. The fair
value of the free matching shares awarded under these plans is calculated using the share price on the date of the award. Non-vesting conditions
are taken into consideration with a percentage discount applied based on the assumption of the expected forfeiture rates of the matching shares.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-603": { "value": "
25 Contingent liabilities
In January 2017, after full cooperation, the Company concluded deferred prosecution agreements (DPA) with the Serious Fraud Office and the
US Department of Justice and a leniency agreement with the Minist\u00e9rio P\u00fablico Federal, the Brazilian federal prosecutor. The terms of both DPAs
have now expired. The Company has also met all of its obligations under a two-year leniency agreement with Brazil\u2019s Comptroller General (CGU),
signed in October 2021, relating to historical matters. In April 2024, the CGU confirmed that the Company would no longer be subject to
compliance monitorship. Certain authorities are investigating members of the Group for matters relating to misconduct in relation to historical
matters. The Group is responding appropriately. Action may be taken by further authorities against the Group or individuals. In addition, the
Group could still be affected by actions from other parties, including customers, customers\u2019 financiers and the Company\u2019s current and former
investors, including certain potential claims in respect of the Group\u2019s historical ethics and compliance disclosures which have been notified to
the Group. The Directors are not currently aware of any matters that are likely to lead to a material financial loss over and above the penalties
imposed to date but cannot anticipate all the possible actions that may be taken or their potential consequences.
The Group has, in the normal course of business, entered into arrangements in respect of export finance, performance bonds, grant funding,
countertrade obligations and minor miscellaneous items, which could result in potential outflows if the requirements related to those
arrangements are not met. Various Group undertakings are party to legal actions and claims (including with tax authorities) which arise in the
ordinary course of business, some of which are for substantial amounts.
In connection with the sale of its products the Group will, on some occasions, provide financing support for its customers, generally in respect of
civil aircraft. The Group's commitments relating to these financing arrangements are spread over many years, they relate to a number of
customers, a broad product portfolio and are generally secured on the asset subject to the financing. These include commitments of $339m
(2024: $405m) (on a discounted basis) to provide facilities to enable customers to purchase aircraft (of which approximately $67m could be called
during 2026). These facilities may only be used if the customer is unable to obtain financing elsewhere and are priced at a premium to the market
rate. Significant events impacting the international aircraft financing market, the failure by customers to meet their obligations under such
financing agreements, or inadequate provisions for customer financing liabilities may adversely affect the Group's financial position.
Customer financing provisions would be made to cover guarantees provided for asset value and/or financing were it probable that a payment
would be made. These would be measured on a discounted basis at the Group\u2019s borrowing rate to reflect the time span over which these exposures
could arise. The values of aircraft providing security are based on advice from a specialist aircraft appraiser. There were no provisions for
customer financing provisions at 31 December 2025 or 31 December 2024.
The Group has responded appropriately to the Russia-Ukraine conflict to comply with international sanctions and export control regime, and to
continue to implement the business decision to exit from Russia. The Group could be subject to action by impacted customers, suppliers and
other contract parties.
While the outcome of the above matters cannot precisely be foreseen, the Directors do not expect any of these arrangements, legal actions or
claims, after allowing for provisions already made, to result in signi\ufb01cant loss to the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-672": { "value": "25 Contingent liabilities In January 2017, after full cooperation, the Company concluded deferred prosecution agreements (DPA) with the Serious Fraud Office and the US Department of Justice and a leniency agreement with the Minist\u00e9rio P\u00fablico Federal, the Brazilian federal prosecutor. The terms of both DPAs have now expired. The Company has also met all of its obligations under a two-year leniency agreement with Brazil\u2019s Comptroller General (CGU), signed in October 2021, relating to historical matters. In April 2024, the CGU confirmed that the Company would no longer be subject to compliance monitorship. Certain authorities are investigating members of the Group for matters relating to misconduct in relation to historical matters. The Group is responding appropriately. Action may be taken by further authorities against the Group or individuals. In addition, the Group could still be affected by actions from other parties, including customers, customers\u2019 financiers and the Company\u2019s current and former investors, including certain potential claims in respect of the Group\u2019s historical ethics and compliance disclosures which have been notified to the Group. The Directors are not currently aware of any matters that are likely to lead to a material financial loss over and above the penalties imposed to date but cannot anticipate all the possible actions that may be taken or their potential consequences. The Group has, in the normal course of business, entered into arrangements in respect of export finance, performance bonds, grant funding, countertrade obligations and minor miscellaneous items, which could result in potential outflows if the requirements related to those arrangements are not met. Various Group undertakings are party to legal actions and claims (including with tax authorities) which arise in the ordinary course of business, some of which are for substantial amounts. In connection with the sale of its products the Group will, on some occasions, provide financing support for its customers, generally in respect of civil aircraft. The Group's commitments relating to these financing arrangements are spread over many years, they relate to a number of customers, a broad product portfolio and are generally secured on the asset subject to the financing. These include commitments of $339m (2024: $405m) (on a discounted basis) to provide facilities to enable customers to purchase aircraft (of which approximately $67m could be called during 2026). These facilities may only be used if the customer is unable to obtain financing elsewhere and are priced at a premium to the market rate. Significant events impacting the international aircraft financing market, the failure by customers to meet their obligations under such financing agreements, or inadequate provisions for customer financing liabilities may adversely affect the Group's financial position. Customer financing provisions would be made to cover guarantees provided for asset value and/or financing were it probable that a payment would be made. These would be measured on a discounted basis at the Group\u2019s borrowing rate to reflect the time span over which these exposures could arise. The values of aircraft providing security are based on advice from a specialist aircraft appraiser. There were no provisions for customer financing provisions at 31 December 2025 or 31 December 2024. The Group has responded appropriately to the Russia-Ukraine conflict to comply with international sanctions and export control regime, and to continue to implement the business decision to exit from Russia. The Group could be subject to action by impacted customers, suppliers and other contract parties. While the outcome of the above matters cannot precisely be foreseen, the Directors do not expect any of these arrangements, legal actions or claims, after allowing for provisions already made, to result in signi\ufb01cant loss to the Group. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-648": { "value": "25 Contingent liabilities In January 2017, after full cooperation, the Company concluded deferred prosecution agreements (DPA) with the Serious Fraud Office and the US Department of Justice and a leniency agreement with the Minist\u00e9rio P\u00fablico Federal, the Brazilian federal prosecutor. The terms of both DPAs have now expired. The Company has also met all of its obligations under a two-year leniency agreement with Brazil\u2019s Comptroller General (CGU), signed in October 2021, relating to historical matters. In April 2024, the CGU confirmed that the Company would no longer be subject to compliance monitorship. Certain authorities are investigating members of the Group for matters relating to misconduct in relation to historical matters. The Group is responding appropriately. Action may be taken by further authorities against the Group or individuals. In addition, the Group could still be affected by actions from other parties, including customers, customers\u2019 financiers and the Company\u2019s current and former investors, including certain potential claims in respect of the Group\u2019s historical ethics and compliance disclosures which have been notified to the Group. The Directors are not currently aware of any matters that are likely to lead to a material financial loss over and above the penalties imposed to date but cannot anticipate all the possible actions that may be taken or their potential consequences. The Group has, in the normal course of business, entered into arrangements in respect of export finance, performance bonds, grant funding, countertrade obligations and minor miscellaneous items, which could result in potential outflows if the requirements related to those arrangements are not met. Various Group undertakings are party to legal actions and claims (including with tax authorities) which arise in the ordinary course of business, some of which are for substantial amounts. In connection with the sale of its products the Group will, on some occasions, provide financing support for its customers, generally in respect of civil aircraft. The Group's commitments relating to these financing arrangements are spread over many years, they relate to a number of customers, a broad product portfolio and are generally secured on the asset subject to the financing. These include commitments of $339m (2024: $405m) (on a discounted basis) to provide facilities to enable customers to purchase aircraft (of which approximately $67m could be called during 2026). These facilities may only be used if the customer is unable to obtain financing elsewhere and are priced at a premium to the market rate. Significant events impacting the international aircraft financing market, the failure by customers to meet their obligations under such financing agreements, or inadequate provisions for customer financing liabilities may adversely affect the Group's financial position. Customer financing provisions would be made to cover guarantees provided for asset value and/or financing were it probable that a payment would be made. These would be measured on a discounted basis at the Group\u2019s borrowing rate to reflect the time span over which these exposures could arise. The values of aircraft providing security are based on advice from a specialist aircraft appraiser. There were no provisions for customer financing provisions at 31 December 2025 or 31 December 2024. The Group has responded appropriately to the Russia-Ukraine conflict to comply with international sanctions and export control regime, and to continue to implement the business decision to exit from Russia. The Group could be subject to action by impacted customers, suppliers and other contract parties. While the outcome of the above matters cannot precisely be foreseen, the Directors do not expect any of these arrangements, legal actions or claims, after allowing for provisions already made, to result in signi\ufb01cant loss to the Group. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-604": { "value": "
26 Related party transactions
2025 2024
\u00a3m
\u00a3m
Sale of goods and services
1
8,
679
7,702
Purchases of goods and services
1
(9,141)
(8,725)
Lease payments to joint ventures and associates
(157)
(241)
Guarantees of non
-
wholly owned subsidiaries\u2019 borrowings
3
4
Dividends received from joint
ventures and associates
88
77
Other income received from joint ventures and associates
38
7
1 Sales of goods and services to related parties and purchases of goods and services from related parties, including joint ventures and associates, are included at the average exchange rate,
consistent with the statutory income statement
Included in sales of goods and services to related parties are sales of spare engines amounting to \u00a3153m (2024: \u00a348m). Profit recognised in the
year on such sales amounted to \u00a360m (2024: \u00a362m), including profit on current year sales and recognition of profit deferred on similar sales in
previous years. Cash receipts relating to the sale of spare engines amounted to \u00a3134m (2024: \u00a348m).
Included in cost of sales in the income statement are interest costs of \u00a39m (2024: \u00a39m) incurred during the year which have been settled by the
Group on behalf of joint ventures.
The aggregated balances with joint ventures are shown in notes 14 and 19. Transactions with Group pension schemes are shown in note 22.
Key management personnel are deemed to be the Directors (page 26) and the members of the Executive Team. Remuneration for key management
personnel is shown below:
2025 2024
\u00a3
m
\u00a3m
Salaries and short
-
term benefits
3
5
29
Included in the above:
Post
-
retirement schemes
1
1
Share
-
based payments
12
13
More detailed information regarding the Directors' remuneration, shareholdings, pension entitlements, share options and other long-term
incentive plans is shown in the Directors' Remuneration Report on pages 100 to 109 of Rolls-Royce Holdings plc 2025 Annual Report. The charge
for share-based payments above is based on when the award is charged to the income statement in accordance with IFRS 2 Share-based
payments, rather than when the shares vest, which is the basis used in the Directors' Remuneration Report.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-649": { "value": "26 Related party transactions
2025 2024
\u00a3m
\u00a3m
Sale of goods and services
1
8,
679
7,702
Purchases of goods and services
1
(9,141)
(8,725)
Lease payments to joint ventures and associates
(157)
(241)
Guarantees of non
-
wholly owned subsidiaries\u2019 borrowings
3
4
Dividends received from joint
ventures and associates
88
77
Other income received from joint ventures and associates
38
7
1 Sales of goods and services to related parties and purchases of goods and services from related parties, including joint ventures and associates, are included at the average exchange rate, consistent with the statutory income statement Included in sales of goods and services to related parties are sales of spare engines amounting to \u00a3153m (2024: \u00a348m). Profit recognised in the year on such sales amounted to \u00a360m (2024: \u00a362m), including profit on current year sales and recognition of profit deferred on similar sales in previous years. Cash receipts relating to the sale of spare engines amounted to \u00a3134m (2024: \u00a348m). Included in cost of sales in the income statement are interest costs of \u00a39m (2024: \u00a39m) incurred during the year which have been settled by the Group on behalf of joint ventures. The aggregated balances with joint ventures are shown in notes 14 and 19. Transactions with Group pension schemes are shown in note 22. Key management personnel are deemed to be the Directors (page 26) and the members of the Executive Team. Remuneration for key management personnel is shown below:
2025 2024
\u00a3
m
\u00a3m
Salaries and short
-
term benefits
3
5
29
Included in the above:
Post
-
retirement schemes
1
1
Share
-
based payments
12
13
More detailed information regarding the Directors' remuneration, shareholdings, pension entitlements, share options and other long-term incentive plans is shown in the Directors' Remuneration Report on pages 100 to 109 of Rolls-Royce Holdings plc 2025 Annual Report. The charge for share-based payments above is based on when the award is charged to the income statement in accordance with IFRS 2 Share-based payments, rather than when the shares vest, which is the basis used in the Directors' Remuneration Report.", "dimensions": { "concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-673": { "value": "Key management personnel are deemed to be the Directors (page 26) and the members of the Executive Team. Remuneration for key management personnel is shown below:
2025 2024
\u00a3
m
\u00a3m
Salaries and short
-
term benefits
3
5
29
Included in the above:
Post
-
retirement schemes
1
1
Share
-
based payments
12
13
More detailed information regarding the Directors' remuneration, shareholdings, pension entitlements, share options and other long-term incentive plans is shown in the Directors' Remuneration Report on pages 100 to 109 of Rolls-Royce Holdings plc 2025 Annual Report. The charge for share-based payments above is based on when the award is charged to the income statement in accordance with IFRS 2 Share-based payments, rather than when the shares vest, which is the basis used in the Directors' Remuneration Report.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-605": { "value": "
27 Business disposals and businesses held for sale and distribution
Disposals
Rolls-Royce SMR Limited
An investment from \u010cEZ Group (\u010cEZ) was received by Rolls-Royce SMR Limited on 4 March 2025 and Rolls-Royce Holdings plc\u2019s indirect
shareholding in Rolls-Royce SMR Limited was diluted from 70.5% at 31 December 2024 to 61.7%. When the new investment was received the
Group relinquished control of Rolls-Royce SMR Limited, as a result of changes in shareholder matters, and the subsidiary was deconsolidated.
This followed detailed consideration of the criteria within IFRS 10 Consolidated Financial Statements in relation to the Group\u2019s ability to take
decisions that affect the returns of the business without the support of other shareholders. The Group\u2019s investment in Rolls-Royce SMR Limited
was recognised at its fair value of \u00a3732m on 4 March 2025 and a profit on disposal of \u00a3679m was recognised in the Group\u2019s income statement.
In July 2025, Rolls-Royce Holdings plc\u2019s indirect shareholding in Rolls-Royce SMR Limited was further diluted to 55.3%. This was due to a second
equity investment being made by \u010cEZ into Rolls-Royce SMR Limited which resulted in an additional \u00a315m profit on disposal being recognised in
the year. In December 2025 the Group made a further investment into Rolls-Royce SMR Limited increasing Rolls-Royce Holdings plc\u2019s indirect
shareholding to 57.8%.
Naval propulsors & handling business
On 18 September 2024, the Group signed a sale and disposal agreement for its naval propulsors & handling business with Fairbanks Morse
Defense. On 1 July 2025 the sale of the naval propulsors business completed with the sale of the naval handling business anticipated in 2026.
Naval
2025
propulsors Rolls-Royce
business
SMR Limited
Total
\u00a3m
\u00a3m
\u00a3m
Proceeds
Net cash consideration at prevailing exchange rate and at effective hedged rate
172
\u2013
172
Cash and cash equivalents disposed
\u2013
(81)
(81)
Net cash consideration
172
(81)
91
Disposal costs paid
(7)
(4)
(11)
Net cash inflow/
(
outflow
)
on disposal per cash flow statement
165
(85)
80
Goodwill
12
\u2013
12
Property, plant and equipment
45
3
48
Right
-
of
-
use assets
1
1
2
Inventor
ies
19
\u2013
19
Trade receivables and other assets
62
47
109
Trade payables and other liabilities
(67)
(56)
(123)
Provisions for liabilities and charges
(3)
\u2013
(3)
Borrowings and lease liabilities
(1)
\u2013
(1)
Net assets/(liabilities) disposed
68
(5)
63
Profit/(loss) on disposal before disposal costs and accounting adjustments
104
(76)
28
Disposal costs
(7)
\u2013
(7)
Derecognition of NCI
\u2013
23
23
Accounting adjustment
-
recognition of R
olls
-
R
oyce
SMR
Limited
at fair value
\u2013
732
732
Accounting adjustments
-
dilution of
the Group\u2019s
share of R
olls
-
Royce
SMR
Limited
\u2013
15
15
Cumulative currency translation gain
18
\u2013
18
Profit
on
disposal of business
es
per income statement
115
694
809
Tax on disposal
1
(28)
\u2013
(28)
1 The deconsolidation of Rolls-Royce SMR Limited from the Group during 2025 is treated as non-taxable, following the tax de-grouping charge recognised in 2024 when the Group\u2019s shareholding
fell below 75%. Taxation on disposal is included within taxation in the consolidated income statement
Assets held for sale and distribution At 31 December 2024, the Group had classified the assets and liabilities related to its naval propulsors & handling business as held for sale as, in line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the business was available for sale in its current condition and the sale was considered highly probable. On 18 September 2024, the Group and Fairbanks Morse Defense signed a sale and disposal agreement. On 1 July 2025 the sale of the naval propulsors business to Fairbanks Morse Defense took place. At 31 December 2025 the assets and liabilities of the naval handling business continued to be disclosed as held for sale. They were measured at the lower of their carrying value or fair value less costs to sell as summarised below. The completion of the naval handling business disposal is anticipated in 2026. At 31 December 2025, the Group classified the assets and liabilities of entities that are part of its legal entity review programme as held for distribution. The programme involves multiple legal entities that fall mainly within North American, German and UK geographical sub-groups and whose results are presented within all three of the Group\u2019s segments. In line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations the entities were considered available for distribution in their current condition and completion of the transactions was considered highly probable. The programme was approved by the Directors during 2025 and is being executed through a series of transaction steps that are expected to complete during 2026. Assets held for sale and assets held for distribution are measured at their carrying value. Assets and liabilities associated with assets held for sale and assets and liabilities associated with assets held for distribution are summarised in the table below.
2025
2024
Legal entity Naval
review handling
programme
business
Total
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Goodwill
1,025
\u2013
1,025
13
Intangible assets
1,227
\u2013
1,227
\u2013
Property, plant and equipment
1,815
3
1,818
51
Right
-
of
-
use assets
242
\u2013
242
1
Investment in associates and joint ventures
502
\u2013
502
\u2013
Other financial assets
33
\u2013
33
\u2013
Deferred tax assets
480
\u2013
480
\u2013
Inventor
ies
2,880
1
2,881
24
Trade receivables and other assets
2,5
61
11
2,572
64
Contract assets
7
22
\u2013
722
\u2013
Taxation recoverable
30
\u2013
30
\u2013
Cash and cash equivalents
526
\u2013
526
\u2013
Assets held for sale
and distribution
12,
043
15
12,058
153
Borrowings and lease liabilities
(515)
\u2013
(515)
(1)
Other financial liabilities
(1
85
)
\u2013
(185)
\u2013
Trade payables and other liabilities
(2,216)
(
1
9
)
(2,235)
(96)
Contract liabilities
(4,2
48
)
\u2013
(4,248)
\u2013
Tax Liabilities
(302)
\u2013
(302)
\u2013
Provisions for liabilities and charges
(562)
\u2013
(562)
(3)
Deferred tax liabilities
(27)
\u2013
(27)
\u2013
Post
-
retirement scheme deficits
(862)
\u2013
(862)
\u2013
Liabilities associated with assets held for sale
and distribution
(8,9
17
)
(
1
9
)
(8,936)
(100)
Net
assets/(liabilities) held for
sale
and distribution
3,1
26
(
4
)
3,122
53
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-674": { "value": "27 Business disposals and businesses held for sale and distribution Disposals Rolls-Royce SMR Limited An investment from \u010cEZ Group (\u010cEZ) was received by Rolls-Royce SMR Limited on 4 March 2025 and Rolls-Royce Holdings plc\u2019s indirect shareholding in Rolls-Royce SMR Limited was diluted from 70.5% at 31 December 2024 to 61.7%. When the new investment was received the Group relinquished control of Rolls-Royce SMR Limited, as a result of changes in shareholder matters, and the subsidiary was deconsolidated. This followed detailed consideration of the criteria within IFRS 10 Consolidated Financial Statements in relation to the Group\u2019s ability to take decisions that affect the returns of the business without the support of other shareholders. The Group\u2019s investment in Rolls-Royce SMR Limited was recognised at its fair value of \u00a3732m on 4 March 2025 and a profit on disposal of \u00a3679m was recognised in the Group\u2019s income statement. In July 2025, Rolls-Royce Holdings plc\u2019s indirect shareholding in Rolls-Royce SMR Limited was further diluted to 55.3%. This was due to a second equity investment being made by \u010cEZ into Rolls-Royce SMR Limited which resulted in an additional \u00a315m profit on disposal being recognised in the year. In December 2025 the Group made a further investment into Rolls-Royce SMR Limited increasing Rolls-Royce Holdings plc\u2019s indirect shareholding to 57.8%. Naval propulsors & handling business On 18 September 2024, the Group signed a sale and disposal agreement for its naval propulsors & handling business with Fairbanks Morse Defense. On 1 July 2025 the sale of the naval propulsors business completed with the sale of the naval handling business anticipated in 2026.
Naval
2025
propulsors Rolls-Royce
business
SMR Limited
Total
\u00a3m
\u00a3m
\u00a3m
Proceeds
Net cash consideration at prevailing exchange rate and at effective hedged rate
172
\u2013
172
Cash and cash equivalents disposed
\u2013
(81)
(81)
Net cash consideration
172
(81)
91
Disposal costs paid
(7)
(4)
(11)
Net cash inflow/
(
outflow
)
on disposal per cash flow statement
165
(85)
80
Goodwill
12
\u2013
12
Property, plant and equipment
45
3
48
Right
-
of
-
use assets
1
1
2
Inventor
ies
19
\u2013
19
Trade receivables and other assets
62
47
109
Trade payables and other liabilities
(67)
(56)
(123)
Provisions for liabilities and charges
(3)
\u2013
(3)
Borrowings and lease liabilities
(1)
\u2013
(1)
Net assets/(liabilities) disposed
68
(5)
63
Profit/(loss) on disposal before disposal costs and accounting adjustments
104
(76)
28
Disposal costs
(7)
\u2013
(7)
Derecognition of NCI
\u2013
23
23
Accounting adjustment
-
recognition of R
olls
-
R
oyce
SMR
Limited
at fair value
\u2013
732
732
Accounting adjustments
-
dilution of
the Group\u2019s
share of R
olls
-
Royce
SMR
Limited
\u2013
15
15
Cumulative currency translation gain
18
\u2013
18
Profit
on
disposal of business
es
per income statement
115
694
809
Tax on disposal
1
(28)
\u2013
(28)
1 The deconsolidation of Rolls-Royce SMR Limited from the Group during 2025 is treated as non-taxable, following the tax de-grouping charge recognised in 2024 when the Group\u2019s shareholding fell below 75%. Taxation on disposal is included within taxation in the consolidated income statement Assets held for sale and distribution At 31 December 2024, the Group had classified the assets and liabilities related to its naval propulsors & handling business as held for sale as, in line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the business was available for sale in its current condition and the sale was considered highly probable. On 18 September 2024, the Group and Fairbanks Morse Defense signed a sale and disposal agreement. On 1 July 2025 the sale of the naval propulsors business to Fairbanks Morse Defense took place. At 31 December 2025 the assets and liabilities of the naval handling business continued to be disclosed as held for sale. They were measured at the lower of their carrying value or fair value less costs to sell as summarised below. The completion of the naval handling business disposal is anticipated in 2026. At 31 December 2025, the Group classified the assets and liabilities of entities that are part of its legal entity review programme as held for distribution. The programme involves multiple legal entities that fall mainly within North American, German and UK geographical sub-groups and whose results are presented within all three of the Group\u2019s segments. In line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations the entities were considered available for distribution in their current condition and completion of the transactions was considered highly probable. The programme was approved by the Directors during 2025 and is being executed through a series of transaction steps that are expected to complete during 2026. Assets held for sale and assets held for distribution are measured at their carrying value. Assets and liabilities associated with assets held for sale and assets and liabilities associated with assets held for distribution are summarised in the table below.
2025
2024
Legal entity Naval
review handling
programme
business
Total
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Goodwill
1,025
\u2013
1,025
13
Intangible assets
1,227
\u2013
1,227
\u2013
Property, plant and equipment
1,815
3
1,818
51
Right
-
of
-
use assets
242
\u2013
242
1
Investment in associates and joint ventures
502
\u2013
502
\u2013
Other financial assets
33
\u2013
33
\u2013
Deferred tax assets
480
\u2013
480
\u2013
Inventor
ies
2,880
1
2,881
24
Trade receivables and other assets
2,5
61
11
2,572
64
Contract assets
7
22
\u2013
722
\u2013
Taxation recoverable
30
\u2013
30
\u2013
Cash and cash equivalents
526
\u2013
526
\u2013
Assets held for sale
and distribution
12,
043
15
12,058
153
Borrowings and lease liabilities
(515)
\u2013
(515)
(1)
Other financial liabilities
(1
85
)
\u2013
(185)
\u2013
Trade payables and other liabilities
(2,216)
(
1
9
)
(2,235)
(96)
Contract liabilities
(4,2
48
)
\u2013
(4,248)
\u2013
Tax Liabilities
(302)
\u2013
(302)
\u2013
Provisions for liabilities and charges
(562)
\u2013
(562)
(3)
Deferred tax liabilities
(27)
\u2013
(27)
\u2013
Post
-
retirement scheme deficits
(862)
\u2013
(862)
\u2013
Liabilities associated with assets held for sale
and distribution
(8,9
17
)
(
1
9
)
(8,936)
(100)
Net
assets/(liabilities) held for
sale
and distribution
3,1
26
(
4
)
3,122
53
", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-650": { "value": "27 Business disposals and businesses held for sale and distribution Disposals Rolls-Royce SMR Limited An investment from \u010cEZ Group (\u010cEZ) was received by Rolls-Royce SMR Limited on 4 March 2025 and Rolls-Royce Holdings plc\u2019s indirect shareholding in Rolls-Royce SMR Limited was diluted from 70.5% at 31 December 2024 to 61.7%. When the new investment was received the Group relinquished control of Rolls-Royce SMR Limited, as a result of changes in shareholder matters, and the subsidiary was deconsolidated. This followed detailed consideration of the criteria within IFRS 10 Consolidated Financial Statements in relation to the Group\u2019s ability to take decisions that affect the returns of the business without the support of other shareholders. The Group\u2019s investment in Rolls-Royce SMR Limited was recognised at its fair value of \u00a3732m on 4 March 2025 and a profit on disposal of \u00a3679m was recognised in the Group\u2019s income statement. In July 2025, Rolls-Royce Holdings plc\u2019s indirect shareholding in Rolls-Royce SMR Limited was further diluted to 55.3%. This was due to a second equity investment being made by \u010cEZ into Rolls-Royce SMR Limited which resulted in an additional \u00a315m profit on disposal being recognised in the year. In December 2025 the Group made a further investment into Rolls-Royce SMR Limited increasing Rolls-Royce Holdings plc\u2019s indirect shareholding to 57.8%. Naval propulsors & handling business On 18 September 2024, the Group signed a sale and disposal agreement for its naval propulsors & handling business with Fairbanks Morse Defense. On 1 July 2025 the sale of the naval propulsors business completed with the sale of the naval handling business anticipated in 2026.
Naval
2025
propulsors Rolls-Royce
business
SMR Limited
Total
\u00a3m
\u00a3m
\u00a3m
Proceeds
Net cash consideration at prevailing exchange rate and at effective hedged rate
172
\u2013
172
Cash and cash equivalents disposed
\u2013
(81)
(81)
Net cash consideration
172
(81)
91
Disposal costs paid
(7)
(4)
(11)
Net cash inflow/
(
outflow
)
on disposal per cash flow statement
165
(85)
80
Goodwill
12
\u2013
12
Property, plant and equipment
45
3
48
Right
-
of
-
use assets
1
1
2
Inventor
ies
19
\u2013
19
Trade receivables and other assets
62
47
109
Trade payables and other liabilities
(67)
(56)
(123)
Provisions for liabilities and charges
(3)
\u2013
(3)
Borrowings and lease liabilities
(1)
\u2013
(1)
Net assets/(liabilities) disposed
68
(5)
63
Profit/(loss) on disposal before disposal costs and accounting adjustments
104
(76)
28
Disposal costs
(7)
\u2013
(7)
Derecognition of NCI
\u2013
23
23
Accounting adjustment
-
recognition of R
olls
-
R
oyce
SMR
Limited
at fair value
\u2013
732
732
Accounting adjustments
-
dilution of
the Group\u2019s
share of R
olls
-
Royce
SMR
Limited
\u2013
15
15
Cumulative currency translation gain
18
\u2013
18
Profit
on
disposal of business
es
per income statement
115
694
809
Tax on disposal
1
(28)
\u2013
(28)
1 The deconsolidation of Rolls-Royce SMR Limited from the Group during 2025 is treated as non-taxable, following the tax de-grouping charge recognised in 2024 when the Group\u2019s shareholding fell below 75%. Taxation on disposal is included within taxation in the consolidated income statement
Assets held for sale and distribution
At 31 December 2024, the Group had classified the assets and liabilities related to its naval propulsors & handling business as held for sale as, in
line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the business was available for sale in its current condition and
the sale was considered highly probable. On 18 September 2024, the Group and Fairbanks Morse Defense signed a sale and disposal agreement.
On 1 July 2025 the sale of the naval propulsors business to Fairbanks Morse Defense took place.
At 31 December 2025 the assets and liabilities of the naval handling business continued to be disclosed as held for sale. They were measured at
the lower of their carrying value or fair value less costs to sell as summarised below. The completion of the naval handling business disposal is
anticipated in 2026.
At 31 December 2025, the Group classified the assets and liabilities of entities that are part of its legal entity review programme as held for
distribution. The programme involves multiple legal entities that fall mainly within North American, German and UK geographical sub-groups and
whose results are presented within all three of the Group\u2019s segments. In line with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations the entities were considered available for distribution in their current condition and completion of the transactions was considered
highly probable. The programme was approved by the Directors during 2025 and is being executed through a series of transaction steps that are
expected to complete during 2026.
Assets held for sale and assets held for distribution are measured at their carrying value. Assets and liabilities associated with assets held for sale
and assets and liabilities associated with assets held for distribution are summarised in the table below.
2025
2024
Legal entity Naval
review handling
programme
business
Total
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Goodwill
1,025
\u2013
1,025
13
Intangible assets
1,227
\u2013
1,227
\u2013
Property, plant and equipment
1,815
3
1,818
51
Right
-
of
-
use assets
242
\u2013
242
1
Investment in associates and joint ventures
502
\u2013
502
\u2013
Other financial assets
33
\u2013
33
\u2013
Deferred tax assets
480
\u2013
480
\u2013
Inventor
ies
2,880
1
2,881
24
Trade receivables and other assets
2,5
61
11
2,572
64
Contract assets
7
22
\u2013
722
\u2013
Taxation recoverable
30
\u2013
30
\u2013
Cash and cash equivalents
526
\u2013
526
\u2013
Assets held for sale
and distribution
12,
043
15
12,058
153
Borrowings and lease liabilities
(515)
\u2013
(515)
(1)
Other financial liabilities
(1
85
)
\u2013
(185)
\u2013
Trade payables and other liabilities
(2,216)
(
1
9
)
(2,235)
(96)
Contract liabilities
(4,2
48
)
\u2013
(4,248)
\u2013
Tax Liabilities
(302)
\u2013
(302)
\u2013
Provisions for liabilities and charges
(562)
\u2013
(562)
(3)
Deferred tax liabilities
(27)
\u2013
(27)
\u2013
Post
-
retirement scheme deficits
(862)
\u2013
(862)
\u2013
Liabilities associated with assets held for sale
and distribution
(8,9
17
)
(
1
9
)
(8,936)
(100)
Net
assets/(liabilities) held for
sale
and distribution
3,1
26
(
4
)
3,122
53
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-606": { "value": "
28 Derivation of summary funds flow statement
202
5
202
4
Impact Impact of
of Impact of other non-
Cash hedge acquisition underlying Funds Funds
flow
book
accounting
items
flow
flow
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Operating
profit/(loss)
4,468
(797)
16
(225)
3,462
2,464
Loss on disposal of property, plant and equipment
1
18
\u2013
\u2013
\u2013
18
32
(Profit)/loss on disposal of intangible assets
1
(2)
\u2013
\u2013
\u2013
(2)
6
Joint venture trading
1
32
\u2013
\u2013
\u2013
32
(95)
Depreciation, amortisation and impairment
737
\u2013
(16)
179
900
853
Movement in provisions
(486)
78
\u2013
118
(290)
(167)
Increase in inventories
2
(684)
\u2013
\u2013
\u2013
(684)
(323)
Movement in prepayments to RRSAs for parts
90
(19)
\u2013
\u2013
71
(219)
Movement in cost to obtain contracts
(44)
\u2013
\u2013
\u2013
(44)
(18)
Movement in trade receivables/payables and other
assets/liabilities
2
(31)
(166)
\u2013
4
3
(154)
164
Revaluation of trading assets
2
214
(18)
\u2013
\u2013
196
(14)
Realised derivatives in financing
532
-
\u2013
\u2013
532
652
Movement in Civil LTSA balance
123
378
\u2013
\u2013
501
910
Movement in contract assets/liabilities (excluding Civil LTSA)
2
584
(11)
\u2013
\u2013
573
(201)
Settlement of excess derivatives
(148)
\u2013
\u2013
\u2013
(148)
(146)
Interest received
269
\u2013
\u2013
\u2013
269
269
Contributions to defined benefit schemes in excess of
underlying operating profit charge
1
(42)
\u2013
\u2013
5
(37)
(31)
Cash flows on other financial assets and liabilities held for
operating purposes
(578)
532
\u2013
\u2013
(46)
(24)
Share
-
based payments
1
104
\u2013
\u2013
\u2013
104
136
Other
1
\u2013
\u2013
\u2013
\u2013
\u2013
(5)
Income tax
(590)
\u2013
\u2013
35
(555)
(381)
Cash from operating activities
4,
56
6
(23)
\u2013
1
5
5
4,698
3,86
2
Capital element of lease payments
(232)
23
\u2013
\u2013
(209)
(275)
Capital expenditure
(978)
\u2013
\u2013
\u2013
(978)
(876)
Investment
s
(7)
\u2013
\u2013
37
30
16
Interest paid
(262)
\u2013
\u2013
\u2013
(262)
(298)
Other
3
1
8
4
\u2013
\u2013
(1
9
2)
(8)
(6)
Free cash flow
3,271
\u2013
\u2013
\u2013
3,271
2,423
1 Included in other operating cash flows in the summarised free cash flow on page 7
2 Included in working capital (excluding Civil LTSA balance) in the summarised free cash flow on page 7
3 Other includes M&A related costs, exceptional transformation and restructuring costs
Free cash flow is a measure of the financial performance of the businesses\u2019 cash flows which is consistent with the way in which performance is
communicated to the Board. Free cash flow is cash flows from operating activities, adjusted to include capital expenditure and movements in
investments, capital elements of lease payments, interest paid, cash received on maturity of share-based payment schemes and amounts paid
relating to the settlement of excess derivatives. It excludes amounts spent/received on business acquisitions/disposals, and other material
exceptional or one-off cash flows. Cash flows from operating activities is our statutory equivalent. The Board considers that free cash flow reflects
cash generated from the Group\u2019s underlying trading.
The reconciliation between free cash flow and cash flow from operating activities can be found on page 139.
", "dimensions": { "concept": "rollsroyceplc:DisclosureOfDerivationOfSummaryFundsFlowStatement", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-607": { "value": "
Subsidiaries
As at 31 December 2025, the companies listed below and on the following pages were indirectly held by Rolls-Royce plc, except those
indicated as being held directly by Rolls-Royce plc. The financial year end of each company is 31 December unless otherwise indicated.
% of
Class of class
Company name
Address
shares
held
Aerospace Transmission Technologies
Adelheidstrasse 40, D-88046, Friedrichshafen, Germany
Capital Stock
50
GmbH *
1
Amalgamated Power Engineering
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Deferred
100
Limited
2
Ordinary
100
Bristol Siddeley Engines
Limited *
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Brown Brothers & Company, Limited
Inchinnan Drive, Inchinnan, United Kingdom, PA4 9AF
Ordinary
100
C A Parsons & Company Limited
Kings Place, 90 York Way, London N1 9FX,
United Kingdom
Ordinary
100
Derby Specialist Fabrications Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Europea Microfusioni Aerospaziali
Zona Industriale AS1, 83040 Morra de Sanctis, Avellino, Italy
Ordinary
100
S.p.A.
*
Heaton Power Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
John Thompson Cochran Limited
2
Inchinnan Drive, Inchinnan, United Kingdom, PA4 9AF
6%
100
Cumulative
Preference 100
Ordinary
Karl Maybach
-
Hilfe GmbH i.l.
3
Maybachplatz 1, 88045, Friedrichshafen, Germany
Capital Stock
100
Kinolt Immo SA
Rue de l\u2019Avenir 61, 4460, Grace
-
Hollogne, Belgium
Ordinary
100
Kinolt Sistemas de UPS SpA
Bucarest No 17 Oficina, No 33, Previdencia, Santiago, Chile
Ordinary
100
Kinolt UK Ltd
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
LLC Rolls
-
Royce Solutions Rus
2
Shabolovka Street 2, 119049, Moscow, Russian Federation
Ordinary
100
MTU Cooltech Power Systems Co., Building No. 2, No. 1633 Tianchen Road, Quingpu District,
Equity
50
Limited
1
Shanghai, China
MTU India Private Limited
4
6th Floor, RMZ Galleria, S/Y No. 144 Bengaluru, Bangalore,
Ordinary
100
Kamataka 560 064, India
MTU Polska Sp. z o.o.
ul. Ho\u017ca 86, lokal 410, 00
-
682
Warsawa, Polska
Ordinary
100
NEI International Combustion Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
NEI Mining Equipment Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
NEI
Nuclear Systems Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
NEI Parsons Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
NEI Peebles Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
NEI Power Projects Limited
3
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Nightingale Insurance Limited *
PO Box 33, Dorey Court, Admiral Park, St Peter Port GY1 4AT,
Ordinary
100
Guernsey
No
-
Break
Power Limited
3
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Powerfield Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
PT Rolls-Royce
Secure Building Blok B, Jl. Raya Protokol Halim,
Ordinary
100
Perdanakusuma, Jakarta, 13610, Indonesia
PT Rolls Royce Solutions Indonesia
Secure Building Blok B, Jl. Raya Protokol Halim,
Ordinary
100
Perdanakusuma, Jakarta, 13610, Indonesia
Rolls-Royce (Ireland) Unlimited Ulster International Finance, 1st Floor, IFSC House IFSC Dublin,
Ordinary
100
Company
5
Dublin, Co. Dublin, D01R2P9, Ireland
Rolls-Royce (Thailand) Company
101
True Digital Park, Pegasus Building, 5th Floor, Unit 558
Ordinary
100
Limited Sukhumvit Road, Bangchak, Pharakhanong, Bangkok, 10260,
Rolls-Royce Aero Engine Services
Thailand
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Limited *
3
Rolls
-
Royce Australia Pty Limited
5
Suite
14.03, Level 14, 130 Pitt St, Sydney NSW 2000, Australia
Ordinary
100
Rolls-Royce Australia Services Pty
Suite 14.03, Level 14, 130 Pitt St, Sydney NSW 2000, Australia
Ordinary
100
Limited
5
Rolls-Royce Brasil Limitada *
Rua Jose Versolato, No. 111, Torre B, Sala 2502, Centro, S\u00e3o
Quotas
100
Bernando do Campo, Sao P
\u00e3
ulo, CEP 09750
-
730, Brazil
Rolls-Royce Canada Limited
9500
C\u00f4te de Liesse, Lachine, Qu\u00e9bec H8T 1A2, Canada
Common
100
Stock
Rolls-Royce Chile SpA
5
 Rosario Norte #407 Depto. #1601 Comuna Las Condes Ciudad
Ordinary
100
Santiago, Chile
Rolls-Royce China Holding Limited *
305
Indigo Building 1, 20 Jiuxianqiao Road, Beijing, 100016,
Ordinary
100
Rolls-Royce Commercial Aero Engines
China
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Limited *
3
Rolls-Royce Controls and Data Services
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Limited *
Rolls-Royce Corporation
5
 Corporation Service Company, 251 Little Falls Drive, Common 100
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce Crosspointe LLC
5
 Corporation Service Company, 251 Little Falls Drive,
Partnership
100
Wilmington,
Delaware 19808
, United States
% of
Class of class
Company name
Address
shares
held
Rolls-Royce Defense Products and Corporation Service Company, 251 Little Falls Drive, Common 100
Solutions Inc.
5
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce Defense Services Inc.
5
Corporation Service Company, 251 Little Falls Drive, Common 100
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce Deutschland Ltd & Co KG
Eschenweg 11, 15827
Blankenfelde-Mahlow OT Dahlewitz,
Partnership
100
Germany
Rolls
-
Royce
Electrical Norway AS
*
Jarleveien 8A, 7041, Trondheim, Norway
Ordinary
100
Rolls-Royce Energy Angola, Limitada
5
Municipality of Ingombota, Angola
Casa no. 174, Largo Leite Duarte, Bairro Miramar, Luanda,
Quota
100
Rolls-Royce Energy Systems Inc.
2, 5
 Corporation Service Company, 251 Little Falls Drive, Common 100
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce Engine Services Holdings Corporation Service Company, 251 Little Falls Drive, Common 100
Co.
5
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce Engine Services Limitada Bldg. 06 Berthaphil Compound, Jose Abad Santos Avenue,
Capital Stock
100
Inc.
3, 5
Clark Special Economic Zone, Clark, Pampanga, Philippines
Rolls-Royce Erste Beteiligungs GmbH *
Eschenweg 11, 15827
Blankenfelde-Mahlow OT Dahlewitz,
Capital Stock
100
Germany
Rolls-Royce Finance Company Limited
3
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Deferred
100
Ordinary
100
Rolls-Royce Finance Holdings Co.
5
Corporation Service Company, 251 Little Falls Drive, Common 100
Wilmington,
Delaware 19808
, United States
Stock
Rolls
-
Royce Fuel Cell Systems Limited *
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls-Royce General Partner (Ireland)
29 Earlsfort Terrace, Dublin 2, Dublin, D02AY28 Ireland
Ordinary
100
Limited
*
Rolls
-
Royce General Partner Limited *
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Rolls-Royce High Temperature Corporation Service Company, 2710 Gateway Oaks Drive, Suite
Ordinary
100
Composites Inc.
5
150N,
Sacramento, California 95833, United States
Rolls
-
Royce Holdings Canada Inc.
*
9500
C\u00f4te de Liesse, Lachine, Qu\u00e9bec H8T 1A2, Canada
Common C
100
Rolls
-
Royce Hungary Kft.
\u201cv.a.\u201d *
3
Kacsa utca 15
-
23. 1. \u00e9p. Fsz. , Budapest , 1027 , Hungary
Cash shares
100
Rolls
-
Royce India Limited
4
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls-Royce India Private Limited
5
 Birla Tower West, 2nd Floor 25, Barakhamba Road, New Delhi,
Equity
100
110001,
India
Rolls-Royce Industrial & Marine Power
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Limited
Rolls-Royce Industrial Power (India)
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Limited
4
Rolls-Royce Industrial Power
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Engineering (Overseas Projects)
Limited
Rolls
-
Royce Industries Limited *
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls
-
Royce International Limited
*
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls-Royce Japan Co., Limited
31st Floor, Kasumigaseki Building, 3-2-5 Kasumigaseki,
Ordinary
100
Rolls
-
Royce Leasing Limited
*
Chiyoda
-
Ku, Tokyo, 100
-
6031, Japan
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls-Royce Malaysia Sdn. Bhd.
5
 Unit A-3-6 TTDI Plaza, Jalan Wan Kadir 3, Taman Tun Dr Ismail,
Ordinary
100
6000
Kuala Lumpur, Malaysia
Rolls-Royce Military Aero Engines
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Limited *
4
Rolls-Royce New Zealand Limited Deloitte Centre, Level 20, 1 Queen Street, Auckland, 10103,
Ordinary
100
New Zealand
Rolls-Royce North America (USA) Corporation Service Company, 251 Little Falls Drive, Common 100
Holdings Co.
5
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce North America Holdings Corporation Service Company, 251 Little Falls Drive, Common 100
Inc.
5
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce North America Inc.
5
 Corporation Service Company, 251 Little Falls Drive, Common 100
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce North America Ventures Corporation Service Company, 251 Little Falls Drive, Common 100
Inc.
5
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce North American Corporation Service Company, 251 Little Falls Drive, Common 100
Technologies Inc.
5
Wilmington,
Delaware 19808
, United States
Stock
Rolls-Royce Oman LLC
5
 Bait Al Reem, Business Office #131, Building No 81, Way No
Ordinary
100
3409,
Block No 234, Al Thaqafa Street, Al Khuwair, PO Box 20,
Rolls-Royce Operations (India) Private
Postal Code 103, Oman
Birla Tower West, 2nd Floor, 25 Barakhamba Road, New Delhi,
Ordinary
100
Limited
2, 4, 5
110001,
India
Rolls-Royce Overseas Holdings Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Ordinary A
100
*
6
% of
Class of class
Company name
Address
shares
held
Rolls-Royce Overseas Investments
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Limited
7
Rolls
-
Royce Placements Limited
3
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Rolls-Royce Power Engineering Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls
-
Royce Power Systems AG
Maybachplatz 1, 88045, Friedrichshafen, Germany
Ordinary
100
Rolls-Royce Retirement Savings Trust
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Limited *
2, 4
Rolls
-
Royce Saudi Arabia Limited
3010
\u2013
Al Arid, Riyadh 13332
\u2013
7663, Saudi Arabia
Cash shares
100
Rolls-Royce Singapore Pte. Ltd.
5
6 Shenton Way, #33-00 OUE, Downtown Singapore 068809,
Ordinary
100
Singapore
Rolls-Royce Solutions (Suzhou) Co. Ltd 9 Long Yun Road, Suzhou Industrial Park, Suzhou 215024,
Ordinary
100
Jiang Su, China
Rolls-Royce Solutions Africa (Pty) 36 Marconi Street, Montague Gardens, Cape Town, 7441, South
Capital Stock
100
Limited
Africa
Rolls-Royce Solutions America Inc.
100
West Tenth Street, Wilmington - Delaware DE 19808,
Ordinary
100
United States
Rolls
-
Royce Solutions Asia Pte. Limited
10 Tukang
Innovation Drive, Singapore 618302
Ordinary
100
Rolls
-
Royce Solutions Augsburg GmbH
Dasinger Strasse 11, 86165, Augsburg, Germany
Capital Stock
100
Rolls
-
Royce Solutions Benelux B.V.
Merwedestraat 86, 3313 CS, Dordrecht, Netherlands
Ordinary
100
Rolls
-
Royce Solutions Brasil Limitada
Via Anhanguera, KM 29203, 05276
-
000 Sao P
\u00e3
ulo
\u2013
SP, Brazil
Quotas
100
Rolls-Royce Solutions Enerji Deniz Ve Hatira Sokak, No. 5, \u00d6merli Mahellesi, 34555 Arnavutk\u00f6y,
Ordinary
100
Savunma Anonim \u015eirketi
Istanbul,
T\u00fcrkiye
Rolls-Royce Solutions France S.A.S.
Immeuble Colorado, 8/10 rue de Rosa Luxembourg-Parc des
Ordinary
100
Bellevues 95610, Erangy
-
sur
-
Oise, France
Rolls
-
Royce Solutions GmbH
Maybachplatz 1, 88045, Friedrichshafen, Germany
Capital Stock
100
Rolls-Royce Solutions Hong Kong 14/F, Chinabest International Centre, 8 Kwai On Road, Kwai
Ordinary
100
Limited
Chung, N.T., Hong Kong
Rolls
-
Royce Solutions Ib\u00e9rica s.l.u.
Paseo de las Flores 46, 28823 Coslada, Madrid, Spain
Ordinary
100
Rolls
-
Royce Solutions Israel Limited
6 Meir Ariel St., Natanya, Israel
Ordinary
100
Rolls
-
Royce Solutions Italia S.r.l.
Via Aurelia Nord, 328, 19021 Arcola (SP), Italy
Capital Stock
100
Rolls-Royce Solutions Japan Co.
14-3, Nishitenma 4-chome, Kita-ku, Osaka 530-0047, Japan
Ordinary
100
Limited
Rolls-Royce Solutions Korea Limited
Unit 301, The Square, 9 Mulgeum-ro, Mulgeum-eup, Yangsan-
Ordinary
100
si, Gyeongsangnam
-
do 50657, Republic of Korea
Rolls-Royce Solutions Li\u00e8ge Holding
Rue de l\u2019Avenir 61, 4460, Grace-Hollogne, Belgium
Ordinary
100
S.A.
Rolls
-
Royce Solutions Li\u00e8ge S.A.
Rue de l\u2019Avenir 61, 4460, Grace
-
Hollogne, Belgium
Ordinary
100
Rolls-Royce Solutions Magdeburg
Friedrich-List-Strasse 8, 39122 Magdeburg, Germany
Capital Stock
100
GmbH
Rolls-Royce Solutions Malaysia Sdn. Office no. B329, Spaces Platinum Sentral, Lot G02-G07, Level 3
Ordinary
100
Bhd. Platinum Sentral, Jalan Stesen Sentral 2, 50470 Kuala Lumpur,
Rolls-Royce Solutions Mexico City S.A.
Malaysia
Xochicalco 620, Colonia Letran Valle, Delegacion Benito Common 100
de C.V.
2
Juarez, Mexico City 03650, Mexico
Shares
Rolls-Royce Solutions Middle East FZE
S3B5SR06, Jebel Ali Free Zone, South P.O. Box 61141, Dubai,
Ordinary
100
Rolls
-
Royce Solutions Ruhstorf GmbH
United Arab Emirates
Rotthofer Strasse 8, 94099 Ruhstorf a.d. Rott, Germany
Capital Stock
100
Rolls-Royce Solutions South Africa (Pty) 36 Marconi Street, Montague Gardens, Cape Town, 7441, South
Ordinary
100
Limited
Africa
Rolls-Royce Solutions Trading and REGUS Service Office, Office No. 1034, Shoumoukh Tower, 10th
Ordinary
49
Contracting LLC
8
Floor, Tower B, C-Ring Road, Al Sadd, PO Box 207207, Doha,
Qatar
Rolls
-
Royce Solutions UK Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls
-
Royce Solutions Willich GmbH
Konrad
-
Zuse
-
Str. 3, 47877, Willich, Germany
Capital Stock
100
Rolls
-
Royce Sp z.o.o.
*
Opolska 100 31
-
323, Krakow, Poland
Ordinary
100
Rolls-Royce Submarines Limited *
United Kingdom
Atlantic House, Raynesway, Derby, Derbyshire DE21 7BE,
Ordinary
100
Rolls-Royce Technical Support Sarl
Site Motoristes Vendor-Village , 46 avenue Jean Monnet,
Ordinary
100
31770,
Colomiers, France
Rolls-Royce Total Care Services Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Rolls Royce Turkey G\u00fc\u00e7 \u00c7\u00f6z\u00fcmleri San. Cumhuriyet Mah. Yakac\u0131k D-100 Kuzey Yanyol Cad. No: 25
Cash shares
100
ve Tic.Ltd.\u015eti.
Kartal, Istanbul, T\u00fcrkiye
Rolls-Royce UK Pension Fund Trustees
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Limited *
2
Rolls-Royce Zweite Beteiligungs GmbH
Eschenweg 11, 15827
Blankenfelde-Mahlow OT Dahlewitz,
Capital Stock
100
Germany
*
*
*
% of
Class of class
Company name
Address
shares
held
Ross Ceramics Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Servowatch Systems Limited
3
Kings Place, 90 York Way, London N1 9FX, United
Kingdom
Ordinary
100
Sharing in Growth UK Limited
9
 Moor Lane, Allenton, Derby, England, DE24 9HY, United Limited by 100
Kingdom
guarantee
Spare IPG 20 Limited
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Spare IPG 21 Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Spare IPG 24 Limited
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Spare IPG 32 Limited
Kings Place, 90 York Way, London N1 9FX,
United Kingdom
Ordinary
100
Spare IPG 4 Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Team Italia Marine S.R.L.
Kampanien, Via Luigi Einaudi 114/B, 61032 Fano, Pesaro and
Ordinary
100
Urbino, Italy
The Bushing
Company Limited
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Timec 1487 Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Turbine Surface Technologies Limited * Unit 13a, Little Oak Drive, Sherwood Park, Annesley, Ordinary A Nil
1
Nottinghamshire NG15 0DR, United Kingdom
Ordinary B
100
Vessel Lifter Inc.
2, 5
 Corporation Service Company, 1201 Hays Street, Tallahassee, Common 100
Florida 32301, United States
Stock
Vinters Defence Systems Limited
2
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
Vinters Engineering Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Vinters International Limited
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Vinters Limited *
Moor Lane, Derby, Derbyshire DE24 8BJ, United Kingdom
Ordinary
100
Vinters-Armstrongs (Engineers) Limited
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary
100
2
Vinters
-
Armstrongs Limited
5
Kings Place, 90 York Way, London N1 9FX, United Kingdom
Ordinary B
100
Yocova Private Ltd
*
Kings Place, 90
York Way, London N1 9FX, United Kingdom
Ordinary
100
Yocova PTE. Ltd. *
2
6 Shenton Way, #33-00 OUE, Downtown Singapore 068809,
Ordinary
100
Singapore
On 8 January 2026, Rolls-Royce Holdings plc contributed its 100% direct holding in Rolls-Royce Group Limited to the Company, so
Rolls-Royce Group Limited is now a wholly-owned direct subsidiary of the Company.
* Owned directly by the Company
1 Although the interest held is 50%, the Company controls the entity (see note 1 to the Consolidated Financial Statements) and, as a result, consolidates the entity and records a
non-controlling interest
2 Dormant entity
3 Entity in liquidation
4 Reporting year end is 31 March 2026
5 On 1 January 2026, the Company transferred its interest in a parent company of this entity, Rolls-Royce Overseas Holdings Limited, to Rolls-Royce US Holdings Limited. As a
result, this entity is no longer a subsidiary of the Company
6 On 1 January 2026, the Company transferred its interest in this entity to Rolls-Royce US Holdings Limited. Therefore, the entity is no longer a subsidiary of the Company
7 On 1 January 2026, Rolls-Royce Overseas Holdings Limited transferred its interest in this entity to the Company. Therefore, the entity is now a direct subsidiary of the Company
8 Although the interest held is 49%, the Company controls the entity (see note 1 to the Consolidated Financial Statements) and, as a result, consolidates the entity and records a
non-controlling interest
9 The entity is not included in the consolidation, as the Company does not have a beneficial interest in the net assets of the entity
10 The entity is accounted for as a joint operation (see note 1 to the Consolidated Financial Statements)
11 Reporting year end is 30 June 2026
12 Entity is accounted for as a joint venture as approval is required from the other shareholder for operationally running the affairs of the entity
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-608": { "value": "
Joint Ventures and Associates
% of Group
class interest
Company name
Address
Class of shares
held
held %
Aero Gearbox International SAS 18 Boulevard Louis Sequin, 92700 Colombes,
Ordinary
50
50
10
France
Airtanker Services Limited *
Airtanker Hub, RAF Brize Norton, Carterton,
Ordinary
23.5
23.5
Oxfordshire OX18 3LX, United Kingdom
Alpha Leasing (US) (No.2) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.4) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.5) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.6) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.7) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.8) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Partners Leasing Limited 1 Brewer\u2019s Green, London SW1H 0RH, United Ordinary A 100 50
Kingdom
Ordinary B
Nil
Beijing Aero Engine Services No.12 Jinhang Middle Road, Shunyi District,
Capital
50
50
Company Limited * (Tianzhu Comprehensive Bonded Zone Bonded
Function Zone 2), Beijing , China
CFMS Limited
43 Queen Square, Bristol BS1 4QP, United
Limited by
\u2013
33.3
Kingdom
guarantee
Clarke Chapman Portia Port Maritime Centre, Port of Liverpool, Liverpool L21 Ordinary A 100 50
Services Limited
2
1LA, United Kingdom
Ordinary B
Nil
Egypt Aero Management Maintenance and Technical Works Company
Ordinary
50
50
Services
3, 5
Building, Room No. 204, Second Floor, Airport
Road, El Nozha, Cairo
EPI Europrop International
Pelkovenstr. 147, 80992 M\u00fcnchen, Germany
Capital Stock
28
28
GmbH
*
Eurojet Turbo GmbH *
Lilienthalstrasse 2b, 85399 Halbergmoos,
Ordinary
33
33
Germany
Force MTU Power Systems Mumbai Pune Road, Akurdi, Pune, Maharashtra
Capital Stock
49
49
Private Limited
411035,
India
Genistics Holdings Limited *
11
 Moor Lane, Derby, Derbyshire DE24 8BJ, United Ordinary A 100 50
Kingdom
Ordinary B
Nil
Glacier L.P.
66 Wellington Street West, Toronto Dominion,
Partnership
49.9
49.9
Bank Tower, Suite 300, Toronto, ON M5K 1E6,
Canada
Global Aerospace Centre for
1000
Marie-Victorin Boulevard, Longueuil
Ordinary
50
50
Icing and Environmental Qu\u00e9bec J4G 1A1, Canada
Research Inc.
10
Hoeller Electrolyzer GmbH
3, 12
Alter Holzhafen, 23966 Wismar, Germany
Ordinary
54.2
54.2
Hong Kong Aero Engine 33rd Floor, One Pacific Place, 88 Queensway,
Ordinary
50
50
Services Limited
5
Hong Kong
International Aerospace Survey No. 3 Kempapura Village, Varthur Hobli,
Ordinary
50
50
Manufacturing Private Limited
4,
Bangalore, KA 560037, India
5, 10
ITP Next Generation Turbines Parque Tecnologico Edificio 300, 48170, Ordinary A Nil 25
SL
*
Zamudio, Vizcaya, Spain
Ordinary B
100
Light Helicopter Turbine
Suite 119, 9238
Madison Boulevard, Madison,
Partnership
\u2013
50
Engine Company Alabama 35758, United States
(unincorporated partnership)
5
Manse Opus Management Third Floor Queensberry House, 3 Old Limited by
33.3
33.3
Company Limited *
4
Kingdom
Burlington Street, London 3 W1S 3AE, United guarantee
MEST Co., Limited
97 Bukjeonggongdan 2-gil, Yangsan-si,
Normal
46.8
46.8
Gyeongsangnam-do, 50571, Republic of Korea
MTU Power Systems Sdn. Bhd.
32 Floor, UBN Tower 10 Jalan P Ramlee, 50250
Ordinary A 100 49
Kuala Lumpur, Malaysia Ordinary B Nil
MTU Turbomeca Rolls-Royce Am S\u00f6ldnermoos 17, 85399 Hallbergmoos,
Capital Stock
25
25
ITP GmbH * Germany
MTU Turbomeca Rolls-Royce Am S\u00f6ldnermoos 17, 85399 Hallbergmoos,
Capital Stock
33.3
33.3
GmbH
*
Germany
MTU Yuchai Power Company No 7 Danan Road, Yuzhou, Yulin, Guangxi, China,
Capital Stock
50
50
Limited
537005,
China
*
*
% of Group
class interest
Company name
Address
Class of shares
held
held %
N3 Engine Overhaul Services Gerhard-H\u00f6ltje-Strasse 1, D-99310, Arnstadt,
Capital Stock
50
50
GmbH & Co KG Germany
N3 Engine Overhaul Services Gerhard-H\u00f6ltje-Strasse 1, D-99310, Arnstadt,
Capital Stock
50
50
Verwaltungsgesellschaft Mbh
Germany
Rolls Laval Heat Exchangers Moor Lane, Derby, Derbyshire DE24 8BJ, United
Ordinary
50
50
Limited
*
2
Kingdom
Rolls-Royce & Partners Finance 66 Wellington Street West, Toronto Dominion,
Partnership
\u2013
50
(US) (No 2) LLC
5
Bank Tower, Suite 300, Toronto, ON M5K 1E6,
Canada
Rolls-Royce & Partners Finance 66 Wellington Street West, Toronto Dominion,
Partnership
\u2013
50
(US) LLC
5
Bank Tower, Suite 300, Toronto, ON M5K 1E6,
Canada
Rolls-Royce SMR Limited *
12
 Moor Lane, Derby, Derbyshire DE24 8BJ, United
Ordinary
57.8
57.8
Kingdom
SAFYRR Propulsion Limited *
2
 Moor Lane, Derby, Derbyshire DE24 8BJ, United Ordinary A Nil 50
Kingdom
Ordinary B
100
Singapore Aero Engine
11 Calshot Road, 509932, Singapore
Ordinary
50
50
Services Private Limited
5
Techjet Aerofoils Limited
5, 10
Tefen Industrial Zone, PO Box 16, 24959, Israel
Ordinary A
50 50
Ordinary B
50
TRT Limited *
2 Bramble Way, Clover Nook Industrial Estate ,
Ordinary A Nil 50
Somercotes, Derbyshire, England, DE55 4RH, Ordinary B 100
United Kingdom
1 C
Nil
Turbo-Union GmbH *
Lilienthalstrasse 2b, 85399 Halbergmoos,
Capital Stock
40
40
Germany
X R Aero Components Limited *
Xujiawan, Beijiao, Xian 710021, Shaanxi, China
Ordinary
49
49
10
* Owned directly by the Company
1 Although the interest held is 50%, the Company controls the entity (see note 1 to the Consolidated Financial Statements) and, as a result, consolidates the entity and records a
non-controlling interest
2 Dormant entity
3 Entity in liquidation
4 Reporting year end is 31 March 2026
5 On 1 January 2026, the Company transferred its interest in a parent company of this entity, Rolls-Royce Overseas Holdings Limited, to Rolls-Royce US Holdings Limited. As a
result, this entity is no longer a subsidiary of the Company
6 On 1 January 2026, the Company transferred its interest in this entity to Rolls-Royce US Holdings Limited. Therefore, the entity is no longer a subsidiary of the Company
7 On 1 January 2026, Rolls-Royce Overseas Holdings Limited transferred its interest in this entity to the Company. Therefore, the entity is now a direct subsidiary of the Company
8 Although the interest held is 49%, the Company controls the entity (see note 1 to the Consolidated Financial Statements) and, as a result, consolidates the entity and records a
non-controlling interest
9 The entity is not included in the consolidation, as the Company does not have a beneficial interest in the net assets of the entity
10 The entity is accounted for as a joint operation (see note 1 to the Consolidated Financial Statements)
11 Reporting year end is 30 June 2026
12 Entity is accounted for as a joint venture as approval is required from the other shareholder for operationally running the affairs of the entity
", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fact-651": { "value": "Joint Ventures and Associates
% of Group
class interest
Company name
Address
Class of shares
held
held %
Aero Gearbox International SAS 18 Boulevard Louis Sequin, 92700 Colombes,
Ordinary
50
50
10
France
Airtanker Services Limited *
Airtanker Hub, RAF Brize Norton, Carterton,
Ordinary
23.5
23.5
Oxfordshire OX18 3LX, United Kingdom
Alpha Leasing (US) (No.2) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.4) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.5) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.6) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.7) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) (No.8) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Leasing (US) LLC
5
 Corporation Service Company, 251 Little Falls
Partnership
\u2013
50
Drive, Wilmington,
Delaware 19808
, United States
Alpha Partners Leasing Limited 1 Brewer\u2019s Green, London SW1H 0RH, United Ordinary A 100 50
Kingdom
Ordinary B
Nil
Beijing Aero Engine Services No.12 Jinhang Middle Road, Shunyi District,
Capital
50
50
Company Limited * (Tianzhu Comprehensive Bonded Zone Bonded
Function Zone 2), Beijing , China
CFMS Limited
43 Queen Square, Bristol BS1 4QP, United
Limited by
\u2013
33.3
Kingdom
guarantee
Clarke Chapman Portia Port Maritime Centre, Port of Liverpool, Liverpool L21 Ordinary A 100 50
Services Limited
2
1LA, United Kingdom
Ordinary B
Nil
Egypt Aero Management Maintenance and Technical Works Company
Ordinary
50
50
Services
3, 5
Building, Room No. 204, Second Floor, Airport
Road, El Nozha, Cairo
EPI Europrop International
Pelkovenstr. 147, 80992 M\u00fcnchen, Germany
Capital Stock
28
28
GmbH
*
Eurojet Turbo GmbH *
Lilienthalstrasse 2b, 85399 Halbergmoos,
Ordinary
33
33
Germany
Force MTU Power Systems Mumbai Pune Road, Akurdi, Pune, Maharashtra
Capital Stock
49
49
Private Limited
411035,
India
Genistics Holdings Limited *
11
 Moor Lane, Derby, Derbyshire DE24 8BJ, United Ordinary A 100 50
Kingdom
Ordinary B
Nil
Glacier L.P.
66 Wellington Street West, Toronto Dominion,
Partnership
49.9
49.9
Bank Tower, Suite 300, Toronto, ON M5K 1E6,
Canada
Global Aerospace Centre for
1000
Marie-Victorin Boulevard, Longueuil
Ordinary
50
50
Icing and Environmental Qu\u00e9bec J4G 1A1, Canada
Research Inc.
10
Hoeller Electrolyzer GmbH
3, 12
Alter Holzhafen, 23966 Wismar, Germany
Ordinary
54.2
54.2
Hong Kong Aero Engine 33rd Floor, One Pacific Place, 88 Queensway,
Ordinary
50
50
Services Limited
5
Hong Kong
International Aerospace Survey No. 3 Kempapura Village, Varthur Hobli,
Ordinary
50
50
Manufacturing Private Limited
4,
Bangalore, KA 560037, India
5, 10
ITP Next Generation Turbines Parque Tecnologico Edificio 300, 48170, Ordinary A Nil 25
SL
*
Zamudio, Vizcaya, Spain
Ordinary B
100
Light Helicopter Turbine
Suite 119, 9238
Madison Boulevard, Madison,
Partnership
\u2013
50
Engine Company Alabama 35758, United States
(unincorporated partnership)
5
Manse Opus Management Third Floor Queensberry House, 3 Old Limited by
33.3
33.3
Company Limited *
4
Kingdom
Burlington Street, London 3 W1S 3AE, United guarantee
MEST Co., Limited
97 Bukjeonggongdan 2-gil, Yangsan-si,
Normal
46.8
46.8
Gyeongsangnam-do, 50571, Republic of Korea
MTU Power Systems Sdn. Bhd.
32 Floor, UBN Tower 10 Jalan P Ramlee, 50250
Ordinary A 100 49
Kuala Lumpur, Malaysia Ordinary B Nil
MTU Turbomeca Rolls-Royce Am S\u00f6ldnermoos 17, 85399 Hallbergmoos,
Capital Stock
25
25
ITP GmbH * Germany
MTU Turbomeca Rolls-Royce Am S\u00f6ldnermoos 17, 85399 Hallbergmoos,
Capital Stock
33.3
33.3
GmbH
*
Germany
MTU Yuchai Power Company No 7 Danan Road, Yuzhou, Yulin, Guangxi, China,
Capital Stock
50
50
Limited
537005,
China
* *
% of Group
class interest
Company name
Address
Class of shares
held
held %
N3 Engine Overhaul Services Gerhard-H\u00f6ltje-Strasse 1, D-99310, Arnstadt,
Capital Stock
50
50
GmbH & Co KG Germany
N3 Engine Overhaul Services Gerhard-H\u00f6ltje-Strasse 1, D-99310, Arnstadt,
Capital Stock
50
50
Verwaltungsgesellschaft Mbh
Germany
Rolls Laval Heat Exchangers Moor Lane, Derby, Derbyshire DE24 8BJ, United
Ordinary
50
50
Limited
*
2
Kingdom
Rolls-Royce & Partners Finance 66 Wellington Street West, Toronto Dominion,
Partnership
\u2013
50
(US) (No 2) LLC
5
Bank Tower, Suite 300, Toronto, ON M5K 1E6,
Canada
Rolls-Royce & Partners Finance 66 Wellington Street West, Toronto Dominion,
Partnership
\u2013
50
(US) LLC
5
Bank Tower, Suite 300, Toronto, ON M5K 1E6,
Canada
Rolls-Royce SMR Limited *
12
 Moor Lane, Derby, Derbyshire DE24 8BJ, United
Ordinary
57.8
57.8
Kingdom
SAFYRR Propulsion Limited *
2
 Moor Lane, Derby, Derbyshire DE24 8BJ, United Ordinary A Nil 50
Kingdom
Ordinary B
100
Singapore Aero Engine
11 Calshot Road, 509932, Singapore
Ordinary
50
50
Services Private Limited
5
Techjet Aerofoils Limited
5, 10
Tefen Industrial Zone, PO Box 16, 24959, Israel
Ordinary A
50 50
Ordinary B
50
TRT Limited *
2 Bramble Way, Clover Nook Industrial Estate ,
Ordinary A Nil 50
Somercotes, Derbyshire, England, DE55 4RH, Ordinary B 100
United Kingdom
1 C
Nil
Turbo-Union GmbH *
Lilienthalstrasse 2b, 85399 Halbergmoos,
Capital Stock
40
40
Germany
X R Aero Components Limited *
Xujiawan, Beijiao, Xian 710021, Shaanxi, China
Ordinary
49
49
10
* Owned directly by the Company 1 Although the interest held is 50%, the Company controls the entity (see note 1 to the Consolidated Financial Statements) and, as a result, consolidates the entity and records a non-controlling interest 2 Dormant entity 3 Entity in liquidation 4 Reporting year end is 31 March 2026 5 On 1 January 2026, the Company transferred its interest in a parent company of this entity, Rolls-Royce Overseas Holdings Limited, to Rolls-Royce US Holdings Limited. As a result, this entity is no longer a subsidiary of the Company 6 On 1 January 2026, the Company transferred its interest in this entity to Rolls-Royce US Holdings Limited. Therefore, the entity is no longer a subsidiary of the Company 7 On 1 January 2026, Rolls-Royce Overseas Holdings Limited transferred its interest in this entity to the Company. Therefore, the entity is now a direct subsidiary of the Company 8 Although the interest held is 49%, the Company controls the entity (see note 1 to the Consolidated Financial Statements) and, as a result, consolidates the entity and records a non-controlling interest 9 The entity is not included in the consolidation, as the Company does not have a beneficial interest in the net assets of the entity 10 The entity is accounted for as a joint operation (see note 1 to the Consolidated Financial Statements) 11 Reporting year end is 30 June 2026 12 Entity is accounted for as a joint venture as approval is required from the other shareholder for operationally running the affairs of the entity ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:X57JK1U580XATGR67572", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } } } }