HERMÈS - 2020 Universal registration document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Structure of the consolidated balance sheet 1.6 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 12 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 the provisions of 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. This valuation is carried out within no more than a year following the date of acquisition and in the currency of the acquired entity. This period is applicable to the valuation of identifiable assets and liabilities, to the transferred counterparty and to the non-controlling interests. Any previous investment held in the acquired company before a takeover is remeasured at its fair value at the acquisition date and the corresponding income or loss is recognized in the income statement under “Other income and expenses”. Changes in the percentage of interests in a fully consolidated company are recognized as transactions between shareholders. Consequently, in transactions with non-controlling interests, any difference between the fair value of the consideration paid (or received) and the carrying amount of the non-controlling interests acquired (or sold) is recognized directly in equity. The valuation of identifiable intangible assets recognised at the time of a business combination is based mainly on the work of independent experts, taking into account sector-specific criteria that enable such valuations to be subsequently monitored. Business combinations 1.7 1.7.1 SUBSIDIARIES

In accordance with IFRS 3 revised, goodwill is not amortised. Goodwill is reviewed annually, when the budget is drawn up, to ensure that the residual net value does not exceed the recoverable amount in respect of the expected return on the investment in the related subsidiary (determined on the basis of expected discounted future cash flows). If internal or external events or circumstances bring to light indications of a loss of value, the frequency of the impairment tests may be revised (see Note 1.10). Impairment of the goodwill of subsidiaries is not reversible. Any impairment charge is included in “Other income and expenses” of operating income. The loss of exclusive control over a fully consolidated company gives rise to a disposal gain on all the shares held at the date of loss of control. Any residual investment in the company is then recognized at its fair value at the date of loss of control, either as an equity-accounted investment (see 1.3.2 and 1.3.3) or, if the Group does not retain significant influence or joint control, as a financial asset falling within the scope of IFRS 9. 1.7.2 ASSOCIATES In accordance with IAS 28, the item “Net income from associates” shown in the income statement includes the following: Upon the acquisition of securities of equity-accounted companies, goodwill of associates is included in the carrying amount of securities recognised in “Investments in associates”. Impairment of associates’ goodwill is reversible. If the Group’s share in the losses of an associate exceeds the carrying amount of its holding in the company, then the Group will no longer recognise its share in subsequent losses. When the share reaches zero, additional losses are only the subject of a provision when the Group has a legal or implicit obligation in this respect, or has made payments on behalf of the associate. Leases 1.8 The Hermès Group owns most of its manufacturing facilities and is tenant of most of the stores and offices in the cities where it operates. In accordance with IFRS 16, real estate leases with fixed rents are recognised in assets through a right-of-use asset and in liabilities through a lease liability corresponding to the present value of future payments. Right-of-use assets are equal to the amount of the lease liability adjusted for the amount of prepaid rent, incentives received from the lessors, initial direct costs incurred in securing the lease and, where applicable, restoration costs, at the contract’s commencement date. share of the Group’s income in these companies; s income on disposal of shares in these companies; s provisions for risk. s

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2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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