HERMÈS - 2019 Universal Registration Document

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CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.2.2 JOINT CONTROL Entities owned by the Group in which the power to govern financial and operating policies is contractually shared with one or more other parties, none of which exercises effective control, are recognised using the equity method. At this time, the Group does not jointly control any company. 1.2.3 SIGNIFICANT INFLUENCE The financial statements of associates, or other companies over which the Group has significant influence (which is presumed to exist when the Group’s percentage of control exceeds 20%, or proven if the control percentage is below 20%), are recognised using the equity method. 1.2.4 NEWLY CONSOLIDATED AND DECONSOLIDATED COMPANIES Subsidiaries are included in the consolidation scope from the date on which control is effectively transferred to the Group. Divested subsidiaries are excluded from the scope of consolidation from the date on which the Group ceases to have control. Translation methods of foreign currency items 1.3 1.3.1 CONVERSION OF FOREIGN-CURRENCY TRANSACTIONS Foreign-currency transactions are recorded on initial recognition in euros, by using the applicable exchange rate at the date of the transaction (historical rate). Monetary assets and liabilities denominated in foreign currencies are converted using the closing exchange rate. Foreign currency adjustments are recognised in income or expenses. Non-monetary assets and liabilities denominated in foreign currencies are converted using the exchange rate at the transaction date. 1.3.2 FOREIGN COMPANIES’ FINANCIAL STATEMENTS Financial statements expressed in foreign currencies are converted in accordance with the following principles: items in the statement of balance sheet are converted at the s year-end exchange rate for each currency; items in the statement of profit or loss are converted at the average s annual exchange rate for each currency; items in the statement of cash flows are converted at the average s annual exchange rate for each currency; the foreign currency adjustment attributable to owners of the parent s arising from the impact on equity of the difference between historical exchange rates and year-end exchange rates, and from the use of different exchange rates for the statement of profit or loss and balanc sheet, is shown separately in consolidated equity. The same principle is applied to non-controlling interests.

Any goodwill and any fair value adjustments arising on the acquisition of a foreign entity are considered to be assets and liabilities of that foreign entity. Therefore, they are expressed in the entity’s functional currency and converted at closing rates. Eliminations of intra-group transactions 1.4 The effect on the statement of profit or loss of intra-group transactions such as margins on inventories, gains or losses on disposals, impairment of shares in consolidated companies, and impairment of loans to Dividends and interim dividends received by the Group from consolidated companies are eliminated on consolidation. A matching amount is recorded in consolidated reserves. In the case of companies accounted for using the full consolidation method, reciprocal payables and receivables as well as reciprocal income and expenses are fully eliminated. Structure of the consolidated balance sheet 1.5 In accordance with IAS 1 Presentation of Financial Statements, the Group classifies its assets and liabilities on its balance sheet as current and non-current. An asset or liability is classified as current: when the Group plans to realise its assets or pay its liabilities within s twelve months or within the Group’s normal operating cycle; when the relevant assets or liabilities are held for the purpose of s being traded. In particular, IAS 12 Income Taxes specifies that deferred tax balances shall be classified as non-current. Business combinations, in the event that the Group gains control over one or several other activities, are accounted for using the purchase method. Business combinations completed on or after 1 January 2010 are measured and recognised in accordance with revised IFRS 3: the consideration transferred (acquisition cost) is measured at the fair value of the assets delivered, the equity issued and the liabilities incurred on the date of the transfer. The identifiable assets and liabilities of the Company that are acquired are measured at fair value on the acquisition date. The costs that can be directly attributed to the acquisition are recorded as an expense. The resulting valuation adjustments are recognised under the related assets and liabilities, including the share attributable to non-controlling interests, and not just the share of net assets acquired. The residual difference, which is the difference between the transferred counterparty and the share of net assets and liabilities measured at fair value, is recognised under goodwill. consolidated companies, has been eliminated. These transactions are also subject to income tax. Business combinations 1.6 1.6.1 SUBSIDIARIES

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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