HERMÈS - 2020 Universal registration document

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PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

ACCOUNTING PRINCIPLES AND POLICIES

NOTE 1

The 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.

computer equipment: declining-balance method over 3 years; s vehicles: straight-line method over 4 years. s

Financial assets 1.4 Investment securities are shown in the balance sheet at acquisition cost, excluding incidental expenses. Where the balance sheet value at the closing date is lower than the carrying amount, a provision for impairment is recorded for the difference. This value is estimated at the proportionate share of net assets, which may be corrected, if need be, based on the profitability outlook for the concerned subsidiary. If the subsidiary’s net position is negative, an impairment for receivables due and a provision for risks and expenses may also be recognized. Receivables 1.5 Receivables are recorded at nominal value. A provision for impairment is recognised where there is a risk of non-recovery. Marketable securities 1.6 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. Treasury and foreign exchange transactions 1.7 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.

Impacts of the Covid-19 pandemic 1.1 The health crisis led to store closures throughout 2020, in compliance with various government instructions and a drastic decline in international travel. The Group’s production sites, which are mainly located in France, were temporarily shut down in the first half of the year, with the exception of the Hermès Parfums du Vaudreuil site, which started production of hydroalcoholic gel. Production then gradually resumed with the organisation and resources required to protect employees. True to its values, the Group has preserved jobs and maintained the basic salaries of its employees worldwide without having recourse to the exceptional governmental subsidies provided in various countries. In addition, in 2021 the Group will pay a bonus of €1,250 to all employees for their commitment and contribution to results. In this context, the Company’s revenue for the financial year 2020 amounted to €318 million, close to that of financial year 2019 (€315 million). The main consequences of the health crisis on the Company’s results are presented below: personal protective equipment for employees returning to the sites s has been paid for and recorded under sales and administrative expenses; the exceptional bonus of €1,250 per employee was provisioned in the s financial statements at the end of the year; the Company made several exceptional donations totalling s €16 million recognised under “Other purchases and external expenses”. In general, cost control and the agility of the teams made it possible to limit the financial impact of the health crisis while preserving jobs. Intangible assets 1.2 Intangible assets include software and the cost of websites, which areamortised on a straight-line basis over one to six years. Property, plant and equipment 1.3 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 method 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;

410 2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL