HERMÈS - 2019 Universal Registration Document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In determining the value in use of assets, assets to which independent cash flows cannot be directly allocated are grouped within a cash-generating unit (CGU) to which they are attached. The recoverable amount of the CGU is measured using the Discounted Cash Flow (DCF) method, applying the following principles: cash flows (after tax) figures are derived from a medium-term s (five-year) business plan developed by the relevant entity; the discount rate is determined based on the Group WACC (8.45% in s 2019 vs. 8.67% in 2018) adjusted for local inflation and any country risks; the recoverable amount is calculated as the sum of cash flows s generated each year and the terminal value, which is determined based on normative cash flows by applying a zero growth rate to infinity. The Hermès Group has defined the following CGUs or groups of CGUs: sales units (branches), distribution, which are treated independently s from one another; separate production activities (Leather production, Silk production); s activities focused on production/distribution of a single type of s product (including: Perfume, Watches, Hermès Precious leathers, etc.); investment property; s associates. s Financial assets and liabilities 1.10 Financial assets include non-consolidated and other investment securities, loans and financial receivables, and the positive fair value of financial derivatives. Financial liabilities include borrowings and debt, bank lines of credit and the negative fair value of financial derivatives. Financial assets and liabilities are presented in the balance sheet under current or non-current assets or liabilities, depending on whether they come due within one year or more, with the exception of trading derivatives, which are recorded under current assets or liabilities. Operating payables and receivables and cash and cash equivalents fall within the scope of IFRS 9 Financial Instruments and are presented separately in the balance sheet.

financial assets recorded at amortised cost; s financial assets at fair value through other comprehensive income, s among which: financial assets at fair value through recyclable equity, • financial assets at fair value through non-recyclable equity. • A. Financial assets and liabilities at fair value through profit or loss These assets are initially recognised at acquisition cost excluding incidental acquisition expenses. At each closing date, they are measured at fair value. Changes in fair value are recorded in the statement of profit or loss under “Other financial income and expenses”. Dividends and interest received on these assets are also recognised in the statement of profit or loss under “Other financial income and expenses”. B. Financial assets at amortised cost Financial assets representing interest or capital repayments at determined dates, which are managed with the intention of collecting cash flows, are classified in this category. These are fixed-term financial assets that the Group acquired with the intention and the capacity to hold until their maturity as well as loans and financial receivables. These instruments are recognised at amortised cost less any impairment. Interest is calculated at the effective interest rate and recorded in the statement of profit or loss under “Other financial income and expenses”. Financial assets representing interest or capital repayments at determined dates, which are managed with the intention of collecting cash flows and then reselling these assets before their maturity, are classified in this category. The financial assets at fair value through recyclable equity include investment securities. At each closing period, they are stated at fair value. Unrealised gains or losses on these financial assets are recorded in other comprehensive income in “Revaluation adjustments”. The profits and losses linked to the cumulative change in fair value in this item are reclassified in gains or losses on disposal. Only any value impairment losses linked to credit risk are recorded directly in profit or loss and may be reversed in the case of an improvement in this risk component. Interest is calculated at the effective interest rate and recorded in the statement of profit or loss under “Other financial income and expenses”. As at 31 December 2019, the Group does not have any financial assets at fair value through recyclable equity, C. Financial assets at fair value through equity Through recyclable equity

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1.10.1 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES AND VALUATION METHODS

In accordance with IFRS 9, financial assets and liabilities are classified and valued upon their recognition in the balance sheet according to three categories determined on the basis of the management model and the characteristics of the contractual cash flows: financial assets and liabilities at fair value through profit or loss; s

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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