HERMES_REGISTRATION_DOCUMENT_2017

PARENT COMPANY FINANCIAL STATEMENTS

NOTE TO THE FINANCIAL STATEMENTS

ACCOUNTING RULES AND METHODS

NOTE 1

1.4 Trade receivables

Generally accepted accounting conventions have been applied, in line with the principle of prudence, according to the following accounting assumptions and principles:

Receivables are recorded at nominal value. A provision for impairment is recognised where there is a risk of non-recovery.

s the Company’s status as an ongoing concern;

s the consistency of accounting policies from one financial year to another;

1.5 Marketable securities 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. A provision 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 adecrease in the stockmarket price, aprovision for impair- ment 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. 1.6 Treasury management Incomeandexpense itemsexpressed inforeigncurrenciesareconverted into euros at the hedged exchange rate. Payables, receivables, and cash expressed in currencies outside of the euro zone are shown on the sta- tement of financial position at the hedged exchange rate or at the clo- sing rate if they are not hedged. In this case, differences arising from the reconversion of payables and receivables at the closing exchange rate are recorded in the statement of financial position A provision for contingencies is established for unrealised foreign exchange losses. Premiums on foreign currency options are recorded through profit or loss on the maturity date. In addition, financial instruments are used in connection with the mana- gement of the Company’s treasury investments. Gains and losses on interest rate differentials and any corresponding premiums are reco- gnised on an accrual basis .

s the accruals and matching principle;

the historical cost convention; and in accordance with ANC regulation 2014-03 and ANC regulation 2016-07 relative to the general chart of accounts and ANC regulation 2015-05 relative to financial instruments and hedging operations came into force on 01/01/2017, with no significant impact on the Company’s statutory financial statements.

s

1.1 Intangible assets

Intangible assets include software and the cost of websites, which are amortised on a straight-line basis over one to six years.

1.2 Property, plant and equipment Property, plant and equipment are valued at acquisition cost (purchase price plus incidental expenses, excluding acquisition costs), except for assets acquired before 31 December 1959, which are shown in the statement of financial position at their value in use on that date. Depreciation is calculated using the straight-line or declining-balance method, on the basis of the following expected useful lives: s building fixtures and fittings: straight-linemethodover 10 to40 years; s office furniture and equipment: straight-line or declining-balance method over 4 to 10 years; s computer equipment: declining-balance method over 3 years; 1.3 Financial assets Investments in subsidiaries and associates are shown in the statement of financial position at acquisition cost, excluding incidental expenses. Where the balance sheet value at closing is lower than the carrying amount, a provision for impairment is recorded for the difference. The balance sheet value is determined based on criteria such as the value of the share of net assets or the earnings prospects of the relevant subsidiary. These criteria are weighted by the effects of owning these shares in terms of strategy or synergies, in respect of other investments held. s buildings: straight-line over 20 to 30 years; s vehicles: straight-line method over 4 years.

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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