Hermès // 2021 Universal Registration Document

5

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL, PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS, AND LEASES

NOTE 7 Goodwill 7.1

Accounting principles Business combinations, carried out in the event that the Group gains control over one or several other activities, are accounted for using the acquisition method: the consideration transferred (acquisition cost) is measured at the s fair value of the assets delivered and liabilities incurred at the date of the exchange; the identifiable assets and liabilities of the Company acquired are s measured at fair value on the acquisition date; the costs that can be directly attributed to the acquisition are s recorded as an expense. This valuation is carried out within no more than a year following the date of acquisition and in the currency of the acquired entity. The resulting valuation adjustments are recognised under the related assets and liabilities, including the share attributable to non-controlling interests. The residual difference, which is the

difference between the transferred counterparty and the share of net assets and liabilities measured at fair value, is recognised under goodwill. Any goodwill and any fair value adjustments arising on the acquisition of a foreign entity are considered to be assets and liabilities of that foreign entity. Therefore, they are expressed in the entity’s functional currency and converted at closing rates. Any previous investment held in the acquired company before a takeover is remeasured at its fair value at the acquisition date and the corresponding income or loss is recognised in the income statement under “Other income and expenses”. The goodwill is not amortised but must be subject to an impairment test, the principles of which are presented in Note 7.5. Any resulting impairment losses are recognised in “Other income and expenses” in operating income. They are not reversible.

The goodwill is allocated by cash-generating units, which are presented in Note 7.5.

Exchange rate impact

31/12/2020

Increases

Decreases

31/12/2021

Metal parts CGU Retail Japan CGU TOTAL NET VALUES

27 15 42

- - -

- - -

-

27 15 42

(0) (0)

Intangible assets and property, plant and equipment 7.2

Accounting principles Intangible assets

fixtures and furnishings: between 10 and 20 years depending on s the expected useful life of the asset in question, and within the limit of the lease term, in the case of fixtures installed at the time of leasing in stores for which the Group is a tenant; industrial machinery, plant and equipment: 10 to 20 years; s other: 3 to 10 years maximum. s Where property, plant and equipment is made up of components with different useful lives, these are recorded as separate items. Gains or losses on disposals of property, plant and equipment represent the difference between the sale proceeds and the net carrying amount of the divested asset, and are included in “Other income and expenses”. Accounting principles relating to the impairment losses on property, plant and equipment and intangible assets are presented in Note 7.5.

Intangible assets mainly comprise acquired software (including their implementation costs), as well as the Group’s e-commerce website development costs. They are amortised on a straight-line basis over their probable useful life, generally between three and five years. It is specified that internally generated brands and items that are similar in substance are not recognised under intangible assets, in accordance with IAS 38. Property, plant and equipment Property, plant and equipment are recorded at historical acquisition cost, less accumulated depreciation and recognised impairment losses. They are depreciated, generally using the straight-line method, over the following average estimated useful lives: buildings: 20 to 50 years; s

380 2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL