Required: a) Calculate the current ratio, quick ratio, gross profit margin, profit margin, and debt to total assets for both years. Explain whether the ratios are improving or declining. b) Review the cash flow statement, and comment on the basic sources and uses of cash for the year. c) Review the income statement. What was recorded as discontinued operations for the most recent fiscal year? What was managements explanation for this amount? d) What is the functional currency of the company (Hint: refer to Note 2 to the financial statements)? e) Refer to Note 2 to the financial statements. Summarize the various revenue recognition policies of the company.

The following table shows the abbreviations used in the consolidated financial statements. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 - FINANCIAL STAIIEIMIENIS 99 Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group's financial reporting process. Auditor's responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. - Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 96 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 3. USE OF ESTIMATES AND JUDGMENT The application of the Corporation's accounting policies requires management to use estimates and judgments that can have a significant effect on the revenues, expenses, comprehensive income, assets and liabilities recognized and disclosures made in the consolidated financial statements. An accounting estimate and judgement is considered critical if: - the estimate requires us to make assumptions about matters that are highly uncertain at the time the estimate is made; and - we could have reasonably used different estimates in the current period, or changes in the estimate are reasonably likely to occur from period to period that would have a material impact on our financial condition, our changes in financial condition or our results of operations. Management's best estimates regarding the future are based on the facts and circumstances available at the time estimates are made. Management uses historical experience, general economic conditions and trends, as well as assumptions regarding probable future outcomes as the basis for determining estimates. Estimates and their underlying assumptions are reviewed periodically and the effects of any changes are recognized immediately. Actual results will differ from the estimates used, and such differences could be material. Management's budget and strategic plan cover a five-year period and are fundamental information used as a basis for many estimates necessary to prepare financial information. Management prepares a budget and a strategic plan covering a five-year period, on an annual basis, using a process whereby a detailed one-year budget and four-year strategic plan are prepared and then consolidated. Cash flows and profitability included in the budget and strategic plan are based on existing and future contracts and orders, general market conditions, current cost structures, anticipated cost variations and in-force collective agreements. The budget and strategic plan are subject to approval at various levels, including senior management and the Board of Directors. Management uses the budget and strategic plan, as well as additional projections or assumptions, to derive the expected results for periods thereafter. Management then tracks performance as compared to the budget and strategic plan at various levels within the Corporation. Significant variances in actual performance are a key trigger to assess whether certain estimates used in the preparation of financial information must be revised. The following areas require management's most critical estimates and judgments, including the impact of the COVID-19 pandemic and the ongoing conflict between Russia and Ukraine, if any. The sensitivity analyses below should be used with caution as the changes are hypothetical and the impact of changes in each key assumption may not be linear. Aerospace program tooling - The Corporation assesses at each reporting date whether there are any indicators that Aerospace program tooling may be impaired. If any indicators of impairment exist, the Corporation estimates the recoverable amount of the relevant CGU. The assessment of indicators of impairment, and the calculation of recoverable amounts, when indicators exist, requires judgements, which are reviewed in detail as part of the budget and strategic plan process during the fourth quarter of 2022. For purposes of impairment testing, management also exercises judgment to identify independent cash inflows to identify CGUs by family of aircraft. In addition, estimation is required in the determination of the amortization of the Aerospace program tooling. Internal and external factors are considered in assessing whether indicators of impairment exist. If indicators of impairment exist, the recoverable amounts of the relevant CGUs are determined on fair value less costs of disposal, which are determined using forecasted future cash flows. The fair value measurements are categorized within Level 3 of the fair value hierarchy since the inputs used in the discounted cash flow model are Level 3 inputs (inputs that are not based on observable market data). The estimated future cash flows for the first five years are based on the budget and strategic plan. After the initial five years, long-range forecasts prepared by management are used. Internal and external factors are considered by management in exercising judgment in assessing whether indicators of impairment are present that would necessitate a quantitative impairment test. Factors include management's best estimate of future sales under existing firm orders, expected future orders, timing of payments based on expected delivery schedules, revenues from related aftermarket activities, procurement costs based on existing contracts with suppliers, future labor costs, general market conditions, foreign exchange rates, costs to complete the development activities, if any, potential upgrades and derivatives expected over the life of the program based on past experience with previous programs, and applicable long-range forecast income tax rates BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022117 BOMBARDIER INC. CONSOLIDATED STATEMENTS OF INCOME For the fiscal years ended December 31 (in millions of U.S. dollars, except per share amounts) I ransportaton busness to AIstom and recognzed a gan related to the sale tor tIScal year 2021 . I he expenses recorded in discontnued operations for fiscal year 2022 principally relate to change in estimates of a provision for professional fees. (2) As of June 13, 2022, Bombardier proceeded with a Share Consolidation of the Corporation's Class A shares and Class B shares (subordinate voting) at a consolidation ratio of 25 -for-1. As a result, the comparative periods have been retroactively restated to reflect the Share Consolidation. The notes are an integral part of these consolidated financial statements. 100 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 BOMBARDIER INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the fiscal years ended (in millions of U.S. dollars) capital for more information. (2) Related to the sale of Transportation to Alstom, which closed on January 29, 2021. employee PSU and RSU plans. Refer to Note 28 - Share capital. (4) On June 30, 2021 and September 1, 2021, 4 million (1) of warrants held by Investissement Quebec expired. Refer to Note 28 - Share capital. The notes are an integral part of these consolidated financial statements. BOMBARDIER INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at The notes are an integral part of these consolidated financial statements. On behalf of the Board of Directors Pierre Beaudoin Diane Giard Director Director 102 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 and a post-tax discount rate based on a weighted average cost of capital calculated using market-based inputs, available directly from financial markets or based on a benchmark sampling of representative publicly-traded companies in the aerospace sector. The Corporation assessed whether there were any indicators of impairment for the Global 7500 in the fourth quarter of 2022. Following this assessment, the Corporation concluded there were no indicators of impairment as at December 31, 2022. Valuation of deferred income tax assets - To determine the extent to which deferred income tax assets can be recognized, management estimates the amount of probable future taxable profits that will be available against which deductible temporary differences and unused tax losses can be utilized. Such estimates are made as part of the budget and strategic plan by tax jurisdiction on an undiscounted basis and are reviewed on a quarterly basis. Management exercises judgment to determine the extent to which realization of future taxable benefits is probable, considering factors such as the number of years to include in the forecast period, forecasted gain on closing of transactions, if any, the history of profits and availability of prudent tax planning strategies. See Note 10 - Income taxes for more details. Tax contingencies - Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax expense or recovery already recorded. The Corporation establishes tax provisions for possible consequences of audits by the tax authorities of each country in which it operates. The amount of such provisions is based on various factors, such as experience from previous tax audits and differing interpretations of tax regulations by the taxable entity and the relevant tax authority. Such differences in interpretation may arise for a wide variety of issues depending on the conditions prevailing in the domicile of each legal entity. Retirement and other long-term employee benefits - The actuarial valuation process used to measure pension and other post-employment benefit costs, assets and obligations is dependent on assumptions such as discount rates, compensation and pre-retirement benefit increases, inflation rates, health-care cost trends, as well as demographic factors such as employee turnover, retirement and mortality rates. The impacts from changes in discount rates and, when significant, from key events and other circumstances, are recorded quarterly. Discount rates are used to determine the present value of the expected future benefit payments and represent the market rates for high-quality corporate fixed-income investments consistent with the currency and the estimated term of the retirement benefit liabilities. As the Canadian high-quality corporate bond market, as defined under IFRS, includes relatively few medium-term and long-term maturity bonds, the discount rate for the Corporation's Canadian pension and other post-employment plans is established by constructing a yield curve using three maturity ranges. The first maturity range of the curve is based on observed market rates for AA-rated corporate bonds with maturities of less than five years. In the longer maturity ranges, due to the smaller number of highquality bonds available, the curve is derived using market observations and extrapolated data. The extrapolated data points were created by adding a term-based yield spread over long-term provincial bond yields. This term-based spread is extrapolated between a base spread and a long spread. The base spread is based on the observed spreads between AA-rated corporate bonds and AA-rated provincial bonds for the 4 to 10 years to maturity range. The long spread is determined as the spread required at the point of average maturity of AA-rated provincial bonds in the 11 to 30 years to maturity range such that the average AA-rated corporate bond spread above AA-rated provincial bonds is equal to the extrapolated spread derived by applying the ratio of the observed spreads between A-rated corporate bonds and AA-rated provincial bonds for the 11 to 30 years to maturity range over the 4 to 10 years to maturity range, to the base spread. For maturities longer than the average maturity of AA-rated provincial bonds in the 11 to 30 years to maturity range, the spread is assumed to remain constant at the level of the long spread. Expected rates of compensation increases are determined considering the current salary structure, as well as historical and anticipated wage increases, in the context of current economic conditions. See Note 22 - Retirement benefits for further details regarding assumptions used and sensitivity analysis to changes in critical actuarial assumptions. 118 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 BOMBARDIER INC. CONSOLIDATED FINANCIAL STATEMENTS For the fiscal years ended December 31, 2022 and 2021 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The consolidated financial statements and MD\&A of Bombardier Inc. and all other information in the financial report are the responsibility of management and have been reviewed and approved by the Board of Directors. The consolidated financial statements have been prepared by management in accordance with IFRS as issued by the International Accounting Standards Board. The MD\&A has been prepared in accordance with the requirements of Canadian Securities Administrators. The financial statements and MD\&A include items that are based on best estimates and judgments of the expected effects of current events and transactions. Management has determined such items on a reasonable basis in order to ensure that the financial statements and MD\&A are presented fairly in all material respects. Financial information presented in the MD\&A is consistent with that in the consolidated financial statements. Bombardier Inc.'s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have designed disclosure controls and procedures and internal controls over financial reporting, or have caused them to be designed under their supervision, to provide reasonable assurance that material information relating to Bombardier Inc. has been made known to them; and information required to be disclosed in Bombardier Inc.'s filings is recorded, processed, summarized and reported within the time periods specified in Canadian securities legislation. Bombardier Inc.'s CEO and CFO have also evaluated the effectiveness of Bombardier Inc.'s disclosure controls and procedures and internal controls over financial reporting as of the end of the fiscal year 2022. Based on this evaluation, the CEO and the CFO concluded that the disclosure controls and procedures and internal controls over financial reporting were effective as of that date, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control - Integrated Framework (2013 framework). In addition, based on this assessment, they determined that there were no material weaknesses in internal control over financial reporting as of the end of the fiscal year 2022. In compliance with the Canadian Securities Administrators' National Instrument 52-109, Bombardier Inc.'s CEO and CFO have provided a certification related to Bombardier Inc.'s annual disclosure to the Canadian Securities Administrators, including the consolidated financial statements and MD\&A. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements and MD\&A. The Board of Directors carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors. The Audit Committee meets periodically with management, as well as with the internal and independent auditors, to review the consolidated financial statements, independent auditors' report, MD\&A, auditing matters and financial reporting issues, to discuss internal controls over the financial reporting process, and to satisfy itself that each party is properly discharging its responsibilities. In addition, the Audit Committee has the duty to review the appropriateness of the accounting policies and significant estimates and judgments underlying the consolidated financial statements as presented by management, and to review and make recommendations to the Board of Directors with respect to the independence and the fees of the independent auditors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the consolidated financial statements and MD\&A for issuance to shareholders. The consolidated financial statements have been audited by Ernst \& Young LLP, the independent auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. The independent auditors have full and free access to the Audit Committee to discuss their audit and related matters. Eric Martel President and Chief Executive Officer Bart Demosky Executive Vice President and Chief Financial Officer February 8, 2023 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 - WIANAGEIVIEN1'S REEPORI 93 The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, unless otherwise stated. Basis of consolidation Subsidiaries - Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date control over the subsidiaries ceases. The Corporation consolidates investees, including structured entities when, based on the evaluation of the substance of the relationship with the Corporation, it concludes that it controls the investees. The Corporation controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Corporation's principal subsidiary, whose revenues or assets represent more than 10% of the revenues or more than 10% of the assets, is Learjet Inc. (located in U.S.). Revenues and assets of this subsidiary combined with those of Bombardier Inc. totaled 92% of consolidated revenues and 90% of consolidated assets, for fiscal year 2022 ( 94% and 92% for fiscal year 2021). Joint ventures - Joint ventures are those entities over which the Corporation exercises joint control, requiring unanimous consent of the parties sharing control of relevant activities such as, strategic financial and operating decision making and where the parties have rights to the net assets of the arrangement. The Corporation recognizes its interest in joint ventures using the equity method of accounting. Associates - Associates are entities in which the Corporation has the ability to exercise significant influence over the financial and operating policies. Investments in associates are accounted for using the equity method of accounting. Foreign currency translation The consolidated financial statements are expressed in U.S. dollars, the functional currency of Bombardier Inc. The functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of most foreign subsidiaries is mainly the U.S. dollar. Foreign currency transactions - Transactions denominated in foreign currencies are initially recorded in the functional currency of the related entity using the exchange rates in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the closing exchange rates. Any resulting exchange difference is recognized in income except for exchange differences related to retirement benefits asset and liability, as well as financial liabilities designated as hedges of the Corporation's net investments in foreign operations, which are recognized in OCl. Non-monetary assets and liabilities denominated in foreign currencies and measured at historical cost are translated using historical exchange rates, and those measured at fair value are translated using the exchange rate in effect at the date the fair value is determined. Revenues and expenses are translated using the average exchange rates for the period or the exchange rate at the date of the transaction for significant items. Foreign operations - Assets and liabilities of foreign operations whose functional currency is other than the U.S. dollar are translated into U.S. dollars using closing exchange rates. Revenues and expenses, as well as cash flows, are translated using the average exchange rates for the period. Translation gains or losses are recognized in OCl and are reclassified in income on disposal or partial disposal of the investment in the related foreign operation. 106 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 Defined contribution plans Contributions to defined contribution plans are recognized in net income as incurred or are either capitalized as part of labor costs and included in inventories and in certain PP\&E and intangible assets during their construction. The benefit cost recorded in net income is allocated to labor costs based on the function of the employee accruing the benefits. Other long-term employee benefits - The accounting method is similar to the method used for defined benefit plans, except that all actuarial gains and losses are recognized immediately in income. Other long-term employee benefits are included in other liabilities. Property, plant and equipment PP\&E are carried at cost less accumulated amortization and impairment losses. The cost of an item of PP\&E includes its purchase price or manufacturing cost, borrowing costs as well as other costs incurred in bringing the asset to its present location and condition. If the cost of certain components of an item of PP\&E is significant in relation to the total cost of the item, the total cost is allocated between the various components, which are then separately depreciated over the estimated useful lives of each respective component. The amortization of PP\&E is computed on a straight-line basis over the following useful lives: The amortization method and useful lives are reviewed on a regular basis, at least annually, and changes are accounted for prospectively. The amortization expense and impairments are recorded in cost of sales, SG\&A or R&D expenses based on the function of the underlying asset or in special items. Amortization of assets under construction begins when the asset is ready for its intended use. When a significant part is replaced or a major inspection or overhaul is performed, its cost is recognized in the carrying amount of the PP\&E if the recognition criteria are satisfied, and the carrying amount of the replaced part or previous inspection or overhaul is derecognized. All other repair and maintenance costs are charged to income when incurred. Intangible assets Internally generated intangible assets include development costs (such as aircraft prototype design and testing costs) and internally developed or modified application software. These costs are capitalized when certain criteria such as proven technical feasibility are met. The costs of internally generated intangible assets include the cost of materials, direct labour, manufacturing overheads and borrowing costs and exclude costs which were not necessary to create the asset, such as identified inefficiencies. Acquired intangible assets include the cost of development activities carried out by vendors for which the Corporation controls the underlying output from the usage of the technology. Intangible assets are recorded at cost less accumulated amortization and impairment losses and include aerospace program tooling, as well as other intangible assets such as goodwill and courseware. Other intangible assets are included in other assets. Amortization of aerospace program tooling begins at the date of completion of the first aircraft of the program. Amortization of other intangibles begins when the asset is ready for its intended use. Amortization expense is recognized as follows: (1) As at December 31,2022 , the remaining number of units to fully amortize the aerospace program tooling is expected to be produced over the next 11 years. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 113 Provisions Provisions are recognized when the Corporation has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the cost can be reliably estimated. These liabilities are presented as provisions when they are of uncertain timing or amount. Provisions are measured at their present value. Product warranties - A provision for assurance type warranties is recorded in cost of sales when the revenue for the related product is recognized. The interest component associated with product warranties, when applicable, is recorded in financing expense. The cost is estimated based on a number of factors, including the historical warranty claims and cost experience, the type and duration of warranty coverage, the nature of products sold and in service and counter-warranty coverage available from the Corporation's suppliers. Claims for reimbursement from third parties are recorded if their realization is virtually certain. Product warranties typically range from one to five years. Credit and residual value guarantees - Credit and residual value guarantees related to the sale of commercial aircraft are recorded at the amount the Corporation expects to pay under these guarantees when the revenue for the related product is recognized. Subsequent to initial recognition, changes in the value of these guarantees are recorded in other expense (income), except for the changes in value arising from a change in interest rates, which are recorded in financing expense or financing income. In connection with the sale of the CRJ business, credit and residual value guarantees provisions are included in a back-to-back agreement with MHI. Credit guarantees provide support through contractually limited payments to the guaranteed party to mitigate default-related losses. Credit guarantees are triggered if customers do not perform during the term of the financing. Residual value guarantees provide protection, through contractually limited payments, to the guaranteed parties in cases where the market value of the underlying asset falls below the guaranteed value. In most cases, these guarantees are provided as part of a financing arrangement. Restructuring provisions - Restructuring provisions are recognized only when the Corporation has an actual or a constructive obligation. The Corporation has a constructive obligation when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs and an appropriate timeline. Furthermore, the affected employees or worker councils must have been notified of the plan's main features. Onerous contracts - If it is more likely than not that the unavoidable costs of meeting the obligations under a firm contract exceed the economic benefits expected to be received under it, a provision for onerous contracts is recorded in cost of sales, except for the interest component, which is recorded in financing expense. Unavoidable costs include the costs that relate directly to the contract such as anticipated cost overruns, expected costs associated with late delivery penalties and technological problems, as well as allocations of costs that relate directly to the contract. Provisions for onerous contracts are measured at the lower of the expected cost of fulfilling the contract and the expected cost of terminating the contract. Termination benefits - Termination benefits are usually paid when employment is terminated before the normal retirement date or when an employee accepts voluntary redundancy in exchange for these benefits. The Corporation recognizes termination benefits when it is demonstrably committed, through a detailed formal plan without possibility of withdrawal, to terminate the employment of current employees. Environmental costs - A provision for environmental costs is recorded when environmental claims or remedial efforts are probable and the costs can be reasonably estimated. Legal asset retirement obligations and environmental costs of a capital nature that extend the life, increase the capacity or improve the safety of an asset or that mitigate, or prevent environmental contamination that has yet to occur, are included in PP\&E and are generally amortized over the remaining useful life of the underlying asset. Costs that relate to an existing condition caused by past operations and that do not contribute to future revenue generation are expensed and included in cost of sales. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 115 BOMBARDIER INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the fiscal years ended December 31 (in millions of U.S. dollars) \begin{tabular}{|c|c|c|c|c|c|} \hline & Notes & & 2022 & & 2021 \\ \hline \multicolumn{6}{|l|}{ Operating activities } \\ \hline Net loss from continuing operations & & $ & (128) & $ & (249) \\ \hline Net income (loss) from discontinued operations (1) & & & (20) & & 5,319 \\ \hline \multicolumn{6}{|l|}{ Non-cash items } \\ \hline Amortization (2) & 20,21 & & 415 & & 417 \\ \hline Impairment of PP\&E and intangible assets & 6,7,20,21 & & 3 & & 3 \\ \hline Deferred income taxes (recovery) & 10 & & (123) & & (125) \\ \hline Losses (gains) on disposals of PP\&E and intangible assets & 6 & & (1) & & 1 \\ \hline Gains on disposal of businesses (1) & & & - & & (5,334) \\ \hline Share-based expense & 29 & & 18 & & 14 \\ \hline Losses (gains) on repayment of long-term debt & 7,8 & & (1) & & 212 \\ \hline Net change in non-cash balances & 30 & & 909 & & (547) \\ \hline Cash flows from operating activities - total & & & 1,072 & & (289) \\ \hline Cash flows from operating activities - discontinued operations (1) & & & - & & (621) \\ \hline Cash flows from operating activities - continuing operations & & & 1,072 & & 332 \\ \hline \multicolumn{6}{|l|}{ Investing activities } \\ \hline Additions to PP\&E and intangible assets & & & (355) & & (237) \\ \hline Proceeds from disposals of PP\&E and intangible assets & & & 18 & & 5 \\ \hline Proceeds from sale of Alstom shares & & & & & 611 \\ \hline Deconsolidation of cash and cash equivalents related to Transportation (1) & & & - & & (279) \\ \hline Net proceeds from disposal of business (1) & & & - & & 2,868 \\ \hline Changes to restricted cash & 18 & & 43 & & (459) \\ \hline Other & & & (31) & & (9) \\ \hline Cash flows from investing activities - total & & & (325) & & 2,50013 \\ \hline Cash flows from investing activities - discontinued operations (1) & & & (21) & & 2,589 \\ \hline Cash flows from investing activities - continuing operations & & & (304) & & (89) \\ \hline \multicolumn{6}{|l|}{ Financing activities } \\ \hline Net proceeds from issuance of long-term debt & & & - & & 2,180 \\ \hline Repayments of long-term debt & 27 & & (1,058) & & (5,421) \\ \hline Net change in short-term borrowings related to Transportation (1) & & & - & & 365 \\ \hline Payment of lease liabilities (3) & & & (24) & & (24) \\ \hline Dividends paid - Preferred shares & 28 & & (20) & & (20) \\ \hline Issuance of Class B shares & & & 10 & & 5 \\ \hline Purchase of Class B shares held in trust under the PSU and RSU plans & 28 & & (38) & & (51) \\ \hline Repurchase of Class B shares & 28 & & (2) & & - \\ \hline Other & & & & & 1 \\ \hline Cash flows from financing activities - total & & & (1,132) & & (2,965) \\ \hline Cash flows from financing activities - discontinued operations (1) & & & - & & 240 \\ \hline Cash flows from financing activities - continuing operations & & & (1,132) & & (3,205) \\ \hline Effect of exchange rates on cash and cash equivalents & & & 1 & & (21) \\ \hline Net decrease in cash and cash equivalents & & & (384) & & (775) \\ \hline Cash and cash equivalents at beginning of year (4) & 13 & & 1,675 & & 2,450 \\ \hline Cash and cash equivalents at end of year & 13 & $ & 1,291 & $ & 1,675 \\ \hline \multicolumn{6}{|l|}{ Supplemental information (5)(6)} \\ \hline \multicolumn{6}{|l|}{ Cash paid for } \\ \hline Interest & & $ & 521 & $ & 656 \\ \hline \multirow{2}{*}{\multicolumn{6}{|c|}{\begin{tabular}{l} Income taxes \\ Cash received for \end{tabular}}} \\ \hline & & & & & \\ \hline Interest & & $ & 23 & $ & 18 \\ \hline Income taxes & & $ & - & $ & 1 \\ \hline \end{tabular} (1) Transportation business was classified as discontinued operations. On January 29, 2021, the Corporation closed the sale of the Transportation business to Alstom. (2) Includes \$28 million of amortization charge related to right-of-use of assets for fiscal year 2022 (\$28 million for fiscal year 2021). (3) Lease payments related to the interest portion, short-term leases, low value assets and variable lease payments not included in lease liabilities are classified as cash outflows from operating activities. The total cash outflows for fiscal year 2022 amounted to $53 million ( $49 million for fiscal year 2021). (4) For the purpose of the statement of cash flows, cash and cash equivalents comprise the cash related to Transportation reclassified as assets held for sale as at December 31, 2020 (5) Amounts paid or received for interest are reflected as cash flows from operating activities, except if they were capitalized in PP\&E or intangible assets, in which case they are reflected as cash flows from investing activities. Amounts paid or received for income taxes are reflected as cash flows from operating activities. (6) Interest paid comprises interest on long-term debt after the effect of hedges, if any, excluding up-front costs paid related to the negotiation of debts or credit facilities, interest paid on lease liabilities and interest paid on extended payment terms for trade payables. Interest received comprises interest received related to cash and cash equivalents and investments in securities. The notes are an integral part of these consolidated financial statements. 104 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the fiscal years ended December 31, 2022 and 2021 (Tabular figures are in millions of U.S. dollars, unless otherwise indicated) 1. BASIS OF PREPARATION Bombardier Inc. ("the Corporation" or "our" or "we") is incorporated under the laws of Canada. The Corporation is a manufacturer of business aircraft, as well as certain major aircraft structural components, and is a provider of related services. On September 16, 2020, the Transportation business was classified as discontinued operations. On January 29, 2021, the Corporation closed the sale of the Transportation business to Alstom. Following the sale, the Corporation carries out its operations under one segment. On June 13, 2022, Bombardier proceeded with a share consolidation of the Corporation's Class A shares and Class B shares (subordinate voting) at a consolidation ratio of 25 -for-1 (the "Share Consolidation"). As a result, the numbers for the average basic and diluted shares outstanding, the EPS, and the number of PSUs, RSUs, DSUs, stock options and warrants for all periods presented in the annual consolidated financial statements have been restated to reflect the effect of the Share Consolidation. The Corporation's consolidated financial statements for fiscal years 2022 and 2021 were authorized for issuance by the Board of Directors on February 8, 2023. Statement of compliance The Corporation's consolidated financial statements are expressed in U.S. dollars and have been prepared in accordance with IFRS, as issued by the IASB. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022105 Key audit matter Assessing indicators of impairment of Global 7500 aircraft program tooling As at December 31, 2022, the net carrying value of aerospace program tooling amounted to $3,873 million, of which a significant portion related to the Global 7500 CGU. As stated in Note 3 of the notes to the consolidated financial statements, the Group assesses at each reporting date whether there are potential indicators of impairment. If there are events that indicate a risk of impairment of Global 7500 program tooling, management performs a quantitative impairment test to determine their recoverable amount, defined as fair value less costs to sell. We believe that determining if there are any indicators of impairment for Global 7500 aircraft program tooling is a key audit matter given management's estimates and judgements required in making this determination. Internal and external factors are considered by management in assessing whether indicators of impairment are present that would necessitate a quantitative impairment test. Factors include management's best estimate of future sales under existing firm orders, expected future orders, timing of payments based on expected delivery schedules, revenues from related services, procurement costs based on existing contracts with suppliers, future labour costs, potential upgrades and derivatives and post-tax discount rates. Key audit matter To evaluate the Group's assessment of potential indicators of impairment of the Global 7500 program tooling, our audit procedures included the following, among others: - Obtaining an understanding of management's impairment assessment process; - Assessing the completeness of internal or external factors identified by management that could be considered as indicators of impairment on the Global 7500 program tooling; - Comparing actual results to the assumptions for the year ended December 31, 2022, used in the impairment test performed during the year ended December 31, 2021; - Assessing whether there are relevant changes in assumptions underlying the factors used by management to determine indicators of impairment; - Evaluating the accuracy of the information presented in Note 3 of the notes to the consolidated financial statements. Other information Management is responsible for the other information. The other information comprises: - Management's discussion and analysis - The information, other than the consolidated financial statements and our auditor's report thereon, in the Financial Report Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management's Discussion \& Analysis and the Financial Report prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 - AUDII'OR'S'REF'ORII 95 INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF BOMBARDIER INC. Opinion We have audited the consolidated financial statements of Bombardier Inc. and its subsidiaries (the Group), which comprise the consolidated statements of financial position as at December 31, 2022 and 2021, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements. 94 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 Government assistance and refundable advances Government assistance, including wage subsidies and investment tax credits, is recognized when there is a reasonable assurance that the assistance will be received and that the Corporation will comply with all relevant conditions. Government assistance related to the acquisition of inventories, PP\&E and intangible assets is recorded as a reduction of the cost of the related asset. Government assistance related to incurred expenses is recorded as a reduction of the related expenses. Wage subsidies are recorded as a reduction of inventories or the related wage expenses. Government refundable advances are recorded as a financial liability if there is reasonable assurance that the amount will be repaid. Government refundable advances are adjusted if there is a change in the number of aircraft to be delivered and the timing of delivery of aircraft. Government refundable advances provided to the Corporation to finance research and development activities on a risk-sharing basis are considered part of the Corporation's operating activities and are therefore presented as cash flows from operating activities in the statement of cash flows. Special items Special items comprise items which do not reflect the Corporation's core performance or where their separate presentation will assist users of the consolidated financial statements in understanding the Corporation's results for the period. Such items include, among others, the impact of restructuring charges, business disposals and significant impairment charges and reversals. Income taxes The Corporation applies the liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences of temporary differences between the carrying amounts of assets and liabilities and their respective tax bases, and for tax losses carried forward. Deferred income tax assets and liabilities are measured using the substantively enacted tax rates that will be in effect for the year in which the differences are expected to reverse. Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences and unused tax losses can be utilized. Deferred income tax assets and liabilities are recognized directly in income, OCl or equity based on the classification of the item to which they relate. Earnings per share Basic EPS is computed based on net income attributable to equity holders of Bombardier Inc. less dividends on preferred shares, including taxes, divided by the weighted-average number of Class A Shares (multiple voting) and Class B Shares (subordinate voting) outstanding during the fiscal year. Diluted EPS are computed using the treasury stock method, giving effect to the exercise of all dilutive elements. Financial instruments A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial assets of the Corporation include cash and cash equivalents, trade and other receivables, aircraft loans, investments in securities, receivable from MHI, receivables from ACLP, investments in financing structures, restricted cash and derivative financial instruments with a positive fair value. Financial liabilities of the Corporation include trade and other payables, long-term debt, lease subsidies, lease liabilities, liabilities related to RASPRO assets, government refundable advances, credit and residual value guarantees payable, vendor non-recurring costs and derivative financial instruments with a negative fair value. Financial instruments are recognized in the consolidated statement of financial position when the Corporation becomes a party to the contractual obligations of the instrument. On initial recognition, financial instruments are recognized at their fair value plus, in the case of financial instruments not at FVTP\&L, transaction costs that are directly attributable to the acquisition or issue of financial instruments. Subsequent to initial recognition, financial instruments are measured according to the category to which they are classified, which are: a) financial instruments classified as FVTP\&L, b) financial instruments designated as FVTP\&L, c) FVOCl financial assets, or 108 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 - Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor's report is Zahid Fazal. Epret * young 4P Ernst \& Young LLP Montral, Canada February 8, 2023 (1) CPA auditor, public accountancy permit no. A122227 BOMB ARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022 - AUUII'OR'S'REF'ORI 97 Consolidation - From time to time, the Corporation participates in structured entities where voting rights are not the dominant factor in determining control. In these situations, management may use a variety of complex estimation processes involving both qualitative and quantitative factors to determine whether the Corporation is exposed to, or has rights to, significant variable returns. The quantitative analyses involve estimating the future cash flows and performance of the investee and analyzing the variability in those cash flows. The qualitative analyses involve consideration of factors such as the purpose and design of the investee and whether the Corporation is acting as an agent or principal. There is a significant amount of judgment exercised in evaluating the results of these analyses as well as in determining if the Corporation has power to affect the investee's returns, including an assessment of the impact of potential voting rights, contractual agreements and de facto control. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022119 The Corporation hedges its foreign currency exposure using foreign exchange contracts. There is an economic relationship between the hedged items and the hedging instruments as the terms of the foreign exchange contracts match the terms of the expected highly probable forecast transaction (i.e. notional amount and expected payment date). To test the hedge effectiveness, the Corporation uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in the fair value of the hedged items attributable to the hedged risks. The hedge ineffectiveness can arise due to the time value of money, under a spot designation, as the expected timing between the forecasted transaction and the forward contract are not aligned, due to different indexes, and changes to the forecasted amount of cash flow of hedged items and hedging instruments. The Corporation has established a hedge ratio of 1:1. The portion of gains or losses on the hedging instrument that is determined to be an effective hedge is recorded as an adjustment of the cost or revenue of the related hedged item. Gains and losses on derivatives not designated in a hedge relationship and gains and losses on the ineffective portion of effective hedges are recorded in cost of sales or financing expense or financing income for the interest component of the derivatives or when the derivatives were entered into for interest rate management purposes. Hedge accounting is discontinued prospectively when it is determined that the hedging instrument is no longer effective as a hedge, the hedging instrument is terminated or sold, or upon the sale or early termination of the hedged item. Leases accounting When the Corporation is the lessee - Leases are recognized as a right-of-use asset in PP\&E and a corresponding lease liability in other financial liabilities at the date at which the leased asset is available for use by the Corporation. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Right-of-use assets are subject to impairment. The lease liability is measured at the present value of lease payments to be made over the lease term, discounted using the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily available. Lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Corporation and payment of penalties for termination of a lease when the lease term reflects the lessee exercising a termination option. Each lease payment is allocated between the repayment of the principal portion of lease liability and the interest portion. The interest expense is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period and is recorded in financing expense. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the consolidated statement of income. The Corporation periodically enters into sale and leaseback transactions whereby the Corporation sells an asset to a lessor and immediately leases it back. In a sale and leaseback transaction the transfer of an asset is recognized as a sale when the customer has obtained control of the asset, otherwise the Corporation continues to recognize the transferred asset on the statement of financial position and records a financial liability equal to the proceeds transferred. When the transfer of an asset satisfies the Corporation's revenue recognition policy to be accounted for as a sale, a partial recognition of the profit from the sale is recorded in revenue immediately after the sale, which is equivalent to the proportion of the asset not retained by the Corporation through the lease. The proportion of the asset retained by the Corporation through the lease is recognized as a right-of-use asset and the lease liability is generally measured as the present value of future lease payments. The portion of the proceeds related to the retained interest is classified as cash flow related to financing activities whereas the remainder is treated either as cash flow from operating activities or cash flow from investing activities depending on the nature of the asset sold. BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2022111 c) Financial instruments classified as FVTP\&L Receivables from ACLP, investments in financing structures and certain receivable from MHI are all required to be classified as FVTP\&L. Subsequent changes in fair value of such financial instruments are recorded in other expense (income), except for the fair value changes arising from a change in interest rates or when the instrument is held for investing purposes which are recorded in financing expense or financing income. Derivative financial instruments - Derivative financial instruments are mainly used to manage the Corporation's exposure to foreign exchange market risks, generally through forward foreign exchange contracts. Derivative financial instruments include derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contracts. Derivative financial instruments are classified as FVTP\&L, unless they are designated as hedging instruments for which hedge accounting is applied (see below). Changes in the fair value of derivative financial instruments not designated in a hedging relationship, excluding embedded derivatives, are recognized in cost of sales or financing expense or financing income, based on the nature of the exposure. Embedded derivatives of the Corporation include call options. Call options that are not closely related to the host contract are measured at fair value, with the initial value recognized as an increase of the related long-term debt and amortized to net income using the effective interest method. Upon initial recognition, the fair value of the foreign exchange instruments not designated in a hedge relationship is recognized in cost of sales. Subsequent changes in fair value of embedded derivatives are recorded in cost of sales, other expense (income) or financing expense or financing income, based on the nature of the exposure. d) FVOCl financial assets Investments in securities are classified as FVOCl. Investments in securities, excluding equity instruments, are accounted for at fair value with unrea