HERMÈS - 2019 Universal Registration Document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Free share allocation plans 1.21 Free share allocation plans are recognised as expenses at fair value in the “Other income and expenses” section, with a corresponding increase in equity. This fair value is spread over the vesting period. The estimate of the fair value is calculated on the basis of the share price on the date that the corresponding management decision is made subject to the deduction of the amount of the advance dividends over the vesting period, taking into account the assumption of a turnover rate for beneficiaries. Use of estimates 1.22 The preparation of the consolidated financial statements under IFRS sometimes requires the Group to make estimates in valuing assets and liabilities and income and expenses recognised during the year. The Group bases these estimates on historical experience and on a variety of assumptions, which it deems to be the most reasonable and probable in the current economic environment. The main items that require the use of assessments and estimates are as follows: depreciation and amortisation periods for property, plant and s equipment and intangible assets (see Notes 1.8, 13 and 15); leases (see Notes 1.7 and 14) ; s impairment of inventories (see Notes 1.11 and 20); s provisions (see Notes 1.17 and 26); s post-employment and other employee benefit obligations (see Notes s 1.18 and 28); income taxes (see Notes 1.19 and 10); s share-based payments (see Notes 1.21 and 33). s Subsequent events 1.23 No significant events have occurred since the closing date at 31 December 2019.

1.19.2 TAX CONSOLIDATION Since 1 January 1988, Hermès International has opted for a group tax consolidation under French tax law. Under the terms of an agreement between the parent company and the subsidiaries included in the Group tax consolidation, projected and actual tax savings or liabilities generated by the Group are recognised in the statement of profit or loss in the year in which they arise. Earnings per share 1.20 In accordance with IAS 33 Earnings per share, basic earnings per share is calculated by dividing the net income attributable to owners of the parent by the average number of ordinary shares outstanding during the period. The net earnings per share are calculated on the basis of the weighted average number of ordinary shares outstanding during the financial year. The weighted average number of ordinary shares outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, less the treasury shares, adjusted by the number of ordinary shares bought back or issued during the period multiplied by a time-weighting factor. The weighted average number of shares outstanding during the financial year as well as those from previous financial years are adjusted in order to account, if relevant, for operations involving the free distribution of shares and the reduction of the share’s par value occurring during the financial year, as well as for treasury shares. Diluted earnings per share is adjusted for the effects of all potentially dilutive shares. The calculation is based on assumptions regarding the conversion of convertible instruments, exercise of options or equity warrants and issues of new shares. The diluted earnings per share are restated for the shares that are to be created as part of the share subscription plans decided upon by the Executive Management.

5

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

313