HERMES_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.15 Put options granted to non-controlling interest holders In compliance with IAS 32, Financial Instruments: presentation when holders of minority 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: s as a deduction from the “Non-controlling interests”, equal to the book value of the securities subject to the put option; s for the balance, as a deduction against the “Equity attributable to 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. 1.16 Provisions 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. 1.17 Pension plans and other long-term benefits In accordance with the laws and practices in each country where it ope- rates, the Group participates in post-employment and other retirement benefit plans for employees and in top-up plans for executives and senior managers. 1.17.1 Defined-contribution pension plan For basic post-employment and other defined-contribution plans, the Group recognises contributions to be paid as expenses when they are due and when no provision was booked in this respect, as the Group has no obligations other than the contributions paid. 1.17.2 Defined-benefit pension plans For defined-benefit (or post-employment) pension plans, the Group’s obligations are calculated annually by an independent actuary using the projected credit unit method. Thismethod is based on actuarial assump- tions and takes into account the employee’s probable future length of service, future salary and life expectancy as well as staff turnover. Actuarial assumptions are reviewed annually.

The present value of the obligation is calculated by applying an appro- priate 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 aremeasured at fair value, and taken into account in the assessment of the liabilities. The expense recognised in the consolidated statement of profit or loss is the sum of: s the current service cost in the period, which constitutes the increase in obligations arising from the vesting of one additional year of rights; s the past service cost, namely the change in the updated fair value of the obligation that originates from the modification of a plan or the reduction of a plan; s the profit or the loss resulting from liquidation, if applicable; s the interest expense, which reflects the increase in the present value of the obligations during the period; 1.17.3 Other long-term benefits Certain other post-employment benefits, such as life insurance and health insurance benefits (primarily in Japan), or long-termbenefits such as long-service awards (bonuses paid to employees, mainly in France, based on length of service), are also covered by provisions, which are determined using an actuarial calculation that is comparable to that used to calculate provisions for post-employment benefit obligations. The actuarial gains and losses that result from experience adjustments and changes in actuarial assumptions adopted for calculation of these obligations are entered in the consolidated statement of profit or loss for the financial year during which they were recognised. s the financial income on the hedge assets. Changes in actuarial assumptions and experience effects give rise to actuarial gains or losses, the total of which is recordedunder “Other com- prehensive income” over the period during which they were recognised.

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1.18 Income tax

Income tax expense includes:

s the current tax for the financial year of the consolidated companies; s the deferred tax resulting from timing differences: • 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 accoun- ting principles, • arising from consolidation adjustments.

2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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