HERMÈS - 2020 Universal registration document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the discount rate is determined based on the Group WACC (8.10% in s 2020 vs. 8.45% in 2019) 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 (retail branches), which are treated independently from s 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, Metal parts, etc.); investment property; s associates. s Financial assets and liabilities 1.11 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. 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 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. • 1.11.1 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES AND VALUATION METHODS

As for property, plant and equipment, investment property is recognised at its historical acquisition cost less accumulated depreciation and impairment losses recorded. The depreciation and amortisation periods are identical to those of other property, plant and equipment.

Impairment of fixed assets – 1.10 Impairment losses

In accordance with IAS 36 Impairment of Assets , when events or changes in the market environment indicate that there is the risk of an impairment loss on: goodwill; s

intangible assets; s right-of-use assets; s property, plant and equipment; s investment property; s

these assets are required to undergo a detailed review in order to determine whether their net carrying amount is lower than their recoverable amount, which is defined as the higher of fair value (less disposal cost) or value in use. Value in use is the present value of the future cash flows expected to be derived from an asset and from its disposal. If the recoverable amount is lower than the net carrying amount, an impairment loss equal to the difference between these two amounts is recognised. Impairment losses on property, plant and equipment and intangible assets with a finite life may subsequently be reversed if the recoverable amount rises above the net carrying amount (up to the amount of the impairment initially recognised). Impairment of the goodwill of subsidiaries is not reversible. Any impairment charge is included in “Other income and expenses” of operating income. The Group tests for impairment assets with an indefinite life every year during the budget preparation period in order to take the most recent data into account. If internal or external events or circumstances indicate impairment losses, the frequency of impairment testing is revised. 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;

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2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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