HERMÈS - 2020 Universal registration document

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CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other non-recurring income and expenses 1.15 The item “Other non-recurring income and expenses” in the income statement enables the separate presentation of major non-recurring events that occurred during the financial 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 1.16 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. 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. Provisions 1.18 A provision is a liability of uncertain timing or amount. It is recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation. In addition, a reliable estimate of the amount of the obligation is made based on the information available to the Group when the consolidated financial statements are prepared. Put options granted to holders 1.17 of non-controlling interests

Pension commitments and similar benefits 1.19 In accordance with the laws and practices in each country where it operates, the Group participates in post-employment and other retirement benefit plans for employees and in top-up plans for Senior Executives and senior managers. 1.19.1 DEFINED-CONTRIBUTION PLANS For basic post-employment and other defined-contribution plans, the Group recognises contributions to be paid as expenses when they are due and when provision is booked in this respect, as the Group has no obligations other than the contributions paid. 1.19.2 DEFINED-BENEFIT PLANS Defined-benefit post-employment benefit plans mainly include retirement benefits and supplemental pension plans. The Group’s obligations are calculated annually by an independent actuary using the projected unit credit method. This method is based on actuarial assumptions and takes into account the employee’s probable future length of service, future salary and life expectancy as well as staff turnover and the inflation rate. Actuarial assumptions are reviewed annually. The present value of the obligation is calculated by applying an appropriate discount rate for each country where the obligations are located. It is recognised on a basis pro-rated to the employee’s years of service. When benefits are partly funded in advance by external funds (insurance companies, foundations or other entities), the assets held are measured at fair value, and taken into account in the assessment of the obligation. The expense recognised in the consolidated income statement is the sum of: the current service cost in the period, which constitutes the increase s in obligations arising from the vesting of one additional year of rights; the past service cost, namely the change in the discounted fair value s of the obligation that originates from the modification of a plan or the reduction of a plan; the profit or the loss resulting from plan liquidation, if applicable; s the interest expense, which reflects the increase in the present value s of the obligations during the period; interest on plan assets. s Changes in actuarial assumptions and experience effects give rise to actuarial gains and losses, the total of which is recorded under “Other comprehensive income” over the period during which they were recognised.

366 2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL