HERMÈS - 2019 Universal Registration Document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

B. Financial assets at fair value through recyclable equity For these instruments, the gains or losses recorded for expected losses are recognised in the statement of profit or loss.

Contractual or implicit reversals of inventories are recorded as a deduction from revenue. Credit risk arises from the potential inability of clients to meet their payment obligations. Expected losses linked to credit risk on trade receivables are assessed as soon as they arise and reviewed at each closing. An impairment loss is recognised in the statement of profit or loss when the carrying amount of the asset is higher than its expected recoverable amount. Other non-recurring income and expenses 1.14 The item “Other non-recurring income and expenses” in the statement of profit or loss enables the separate presentation of major non-recurring events that occurred during the year, whose financial impact was material and whose presentation under recurring operating income could affect the understanding of the Group’s economic performance. Operating segments 1.15 In accordance with IFRS 8 Operating Segments, the presented segment information is based on internal reporting used by management to assess the performance of the different business segments. The activity of the Hermès Group is monitored by the main operational decision-maker (“Executive Committee”) by geographical area and by métier . Given the Group’s current structure, organised into geographical areas placed under the responsibility of operational Senior Executives in charge of applying the strategy defined by the Executive Committee, the Group has determined that the geographical areas constitute the operating segments with reference to the fundamental principle of IFRS 8. Put options granted to non-controlling interest 1.16 holders In compliance with IAS 32 Financial instruments: presentation when holders of non-controlling interests have put options to sell their interests to the Group, a financial liability is recognised corresponding to the exercise price of the option. This debt is posted through equity: as a deduction from the “Non-controlling interests”, equal to the s carrying amount of the securities subject to the put option; for the balance, as a deduction against the “Equity attributable to s owners of the parent”. This entry is adjusted at the end of each period in accordance with change in the exercise price of the options and the carrying amount of the non-controlling interests. In the absence of specific IFRS rules, the Group has applied the AMF recommendations issued in November 2009, which involve recording changes in fair value directly in equity.

Inventories and work-in-progress 1.11 Inventories and work-in-progress held by Group companies are valued at the lower of cost (including indirect production costs) or net realisable value. Cost is generally calculated at weighted average cost or standard cost adjusted for variances, according to each category of inventory. The cost of inventories includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, as specified by IAS 2 Inventories. In particular, discounts and collection costs are included in the measurement of inventories. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Impairment is booked to reduce inventories to net realisable value if this is lower than the carrying amount. Impairment is established for each category of inventory (raw materials, work in progress, intermediate products, finished products and merchandise), if the products concerned are damaged or obsolete (season or collection terminated, for example) or based on expected turnover. These impairments are included in the cost of sales. Treasury shares 1.12 Treasury shares are recorded at acquisition cost and deducted from equity. Gains or losses on the disposal of these shares are recognised directly in equity, with no impact on profit or loss. Revenue and trade receivables 1.13 Revenue consists essentially of sales of goods and services produced by the Group’s main business operations. Revenue includes mainly retail sales in the Group’s stores and, to a lesser extent, sales to wholesalers (mainly the concessionaries of stores and distributors in the Perfumes business) and sales to producers (textile printing, tanning, etc.) Retail sales are recorded at the time of purchase by customers. Wholesale and production sales are recorded when control of the goods is transferred, which occurs at the time of delivery. Distributors and concessionaires therefore take control of products until sale to the final customer and thus act as the principal under the provisions of IFRS 15.

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2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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