HERMÈS - 2019 Universal Registration Document

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PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

ACCOUNTING PRINCIPLES AND POLICIES

NOTE 1

Marketable securities Note 1.5 The gross value of marketable securities is their acquisition cost less incidental expenses. Marketable securities are valued at the lower of acquisition cost or market value, calculated separately for each category of securities. In the event that part of a line of securities is sold, proceeds on disposals are calculated using the First-In, First-Out method (FIFO). Treasury shares that are specifically allocated to covering employee share plans or stock options are recorded under marketable securities. An impairment is accrued in an amount representing the difference between the purchase price of the shares and the option exercise price, if the purchase price is more than the exercise price. In the event of a decrease in the stock market price, a provision for impairment is recognised for treasury shares that are not specifically allocated. It is calculated as the difference between the net carrying amount of the shares and the average stock market price for the month immediately preceding the closing date, weighted by the exchanged volumes. exchange Income and expense items expressed in foreign currencies are converted into euros at the hedged exchange rate. Payables, receivables, and cash expressed in currencies outside of the euro zone are shown on the balance sheet at the hedged exchange rate or at the closing rate if they are not hedged. In this case, differences arising from the reconversion of payables and receivables at the closing rate are recorded in the balance sheet. A provision for contingencies is established for the entire value of unrealized foreign exchange losses. Premiums on foreign currency options are recorded through profit or loss on the maturity date. In addition, financial instruments are used in connection with the management of the Company’s treasury investments. Gains and losses on interest rate differentials and any corresponding premiums are recognised on an accrual basis. Note 1.7 Since 1 January 1988, the Company 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 tax consolidation group, the French subsidiaries included in the tax consolidation scope recognise, in their financial statements, an income tax expense on the basis of their own tax results. Hermès International, the head of the tax consolidation group, recognises the difference between the sum of the taxes of subsidiaries and the tax due on the overall income as a tax credit due to tax consolidation. The tax consolidation scope includes 54 companies. Treasury management and foreign Note 1.6 Income tax

The parent company annual financial statements are drawn up in accordance with the provisions of French laws and regulations ( plan comptable général ) and with generally accepted accounting principles in France. Intangible assets Note 1.1 Intangible assets include software and the cost of websites, which are amortised on a straight-line basis over one to six years. Property, plant and equipment Note 1.2 Property, plant and equipment are valued at their acquisition cost. Depreciation is calculated using the straight-line or declining-balance method, on the basis of the following expected useful lives: buildings: straight-line over 20 to 40 years; s building fixtures and fittings: straight-line method over 10 to 40 years; s office furniture and equipment: straight-line or declining-balance s method over 4 to 10 years; computer equipment: declining-balance method over 3 years; s vehicles: straight-line method over 4 years. s Note 1.3 Investment securities are shown in the balance sheet at acquisition cost, excluding incidental expenses. Where the balance sheet value at closing is lower than the carrying amount, a provision for impairment is recorded for the difference. This value is estimated first and foremost at the proportionate share of net assets, which may be corrected, if need be, based on the profitability outlook for the concerned subsidiary. Financial assets Trade receivables Note 1.4 Receivables are recorded at nominal value. A provision for impairment is recognized where there is a risk of non-recovery.

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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