HERMÈS - 2020 Universal registration document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Earnings per share 1.21 In accordance with IAS 33 Earnings per share , basic earnings per share are calculated by dividing the net income attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year, less the average number of shares held by Hermès International (treasury shares) which are deducted from equity. Diluted earnings per share corresponds to the ratio between the net income attributable to owners of the parent and the weighted average number of shares outstanding during the financial year, excluding the shares held by Hermès International (treasury shares) which are deducted from equity, adjusted for the dilutive effect generated by the allocation of free shares. Free share allocation plans 1.22 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 decision is made by Executive Management, 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 1.23 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 financial 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: income taxes (see Notes 1.20 and 10); s depreciation and amortisation periods for property, plant and s equipment and intangible assets (see Notes 1.9, 13 and 15); leases (see Notes 1.8 and 14); s impairment of inventories (see Notes 1.12 and 20); s financial instruments (see notes 1.11 and 25); s provisions (see Notes 1.18 and 26); s post-employment and other employee benefit obligations (see s Notes 1.19 and 28); share-based payments (see Notes 1.22 and 33). s Subsequent events 1.24 No significant events have occurred since the closing date at 31 December 2020.

1.19.3 OTHER LONG-TERM BENEFITS Other long-term benefits, such as long-service awards, long-service bonuses and long-term bonuses, are also the subject of provisions which are determined by performing an actuarial calculation comparable to that carried out for provisions for retirement. The actuarial gains and losses that result from experience adjustments and changes in actuarial assumptions adopted for calculation of these obligations are entered under “Other income and expenses” in the consolidated income statement for the financial year during which they were recognised. Income taxes 1.20 Income tax expense includes: the current tax for the financial year of the consolidated companies; s tax uncertainties recognised in accordance with IFRIC 23; s the deferred tax resulting from timing differences: s between the taxable earnings and accounting income of each • consolidated company, arising from adjustments made to the financial statements of the • consolidated companies to bring them in line with Group accounting principles, arising from consolidation adjustments. • 1.20.1 DEFERRED TAXES Deferred tax is calculated on all timing differences existing at financial year-end (full reserve) at the tax rate in force on that date, or at the enacted tax rate (or nearly enacted rate) for the subsequent financial year. Previous deferred tax is revalued using the same method (liability method). The main categories of deferred tax apply to restatements of internal margins on inventories, impairment on inventories and timing differences. Deferred tax assets are recorded to the extent that their future use is probable given the expected taxable profits. If a non-recovery risk arises on some or all of a deferred tax asset, an impairment is recorded. Foreign currency differences arising from the conversion of deferred tax income or expenses are recognised in the income statement in deferred tax income or expenses. Discounting is not applied to deferred tax. 1.20.2 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 parent company income statement in the year in which they arise.

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2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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