HERMES_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING PRINCIPLES AND POLICIES

NOTE 1

1.1 Accounting Standard The Hermès Group’s consolidated financial statements have been pre- pared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as of 31 December 2017. Under European regulation no. 1606/2002, companies listed on a regu- lated stock exchange in one of the European Union Member States are required to present their consolidated financial statements prepared in accordance with IFRS for financial years commencing on or after 1st January 2005. Mandatory standards, amendments and interpretations applicable as at 1st January 2017 The standards applicable to Hermès from 2017 onwards are as follows: s amendments resulting fromtheannual IFRS improvement procedure, 2014-2016 cycle. These texts had no impact on the Group’s consolidated financial statements. Changes to standards after 31 December 2017 The Group monitors changes to standards that were not yet applicable as of 31 December 2017, notably: s IFRS 9 Financial Instruments that establishes the principles gover- ning recognition and disclosures in matters of financial assets and liabilities. These principles, applicable for periods beginning on or after 1st January 2018, replace those currently set out in IAS 39 Financial Instruments. The impacts of the application of the standard will bear mainly on the recognition of the ineffective portion of deriva- tives classified as cash flow hedges: the change in fair value related to forward currency agreements as well as the time value (premium) of foreign currency options is recognised directly in other elements of comprehensive income in the item “Revaluation adjustments”. When the flows of hedged cash are realized, these amounts previously ente- red in equity are shown in financial income. The expected impact of the application of the standard is not very significant; s IFRS 15 Revenue from Contracts with Customers, which replaces IAS 18 Revenue, applicable in 2018. In view of the nature of the Group’s activities, the implementation of this standard will not have a significant impact on the consolidated financial statements; s IFRS 16 Leases, applicable on or after 1st January 2019. The Group initiated the project for implementation of the standard that concerns almost exclusively the real estate rentals. The inventory of contracts and the collection of the data necessary to precisely estimate the impact on the balance sheet of the first application of IFRS 16 are 1.1.1 s amendments to IAS 12 and IAS 7; 1.1.2

in progress. In consideration of the Group’s activity, the expected impacts will be significant.

1.2 Scope and methods of consolidation The consolidated financial statements include the financial statements of Hermès International and material subsidiaries and associates over which Hermès International directly or indirectly exerts exclusive control, joint control or significant influence. Exclusive control Exclusive control is presumed to exist when the Group holds more than 50% of the voting rights. Nevertheless, it can be considered that a com- pany is under exclusive control when less than 50% is held, provided that the Group holds the power to govern a company’s financial and ope- rational policies in order to derive benefits from its business activities. The financial statements of companies under exclusive control are fully consolidated. Under the full consolidation method, assets, liabilities, income and expenses are combined in full on a line by-line basis. Equity andnetprofitattributabletonon-controlling interestsare identifiedsepa- rately under “Non-controlling interests” in the consolidated statement of financial position and the consolidated statement of profit or loss. Joint control Entities owned by the Group in which the power to govern financial and operating policies is contractually shared with one or more other parties, none of which exercises effective control, are accounted for using the equity method. At this time, the Group does not hold any company under joint control. Significant influence The financial statements of “associates”, or other companies over which the Group has significant influence (which is presumed to exist when the Group’s percentage of control exceeds 20%, or proven if the control percentage is below 20%), are accounted for using the equity method. Newly consolidated and deconsolidated companies Subsidiaries are included in the consolidation scope from the date on which control is effectively transferred to the Group. Divested subsidia- ries are excluded from the scope of consolidation from the date on which the Group ceases to have control. 1.2.1 1.2.2 1.2.3 1.2.4

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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