The present invention relates to a system and a method for developing an engine model. The system broadly comprises a module for generating a state variable model of an engine, which module receives a plurality of inputs to an engine representative of a particular flight condition and generates a set of estimated engine parameters representative of the model. The system further comprises a comparator for comparing the set of estimated engine parameters to a set of measured engine parameters for generating a set of residuals and an artificial neural network module to be trained and to be used in an implementation configuration after training has been completed. The artificial neural network receives the set of residuals and the engine inputs during a training phase and generates a set of estimated residuals representative of the engine condition.