Hermès // 2021 Universal Registration Document

5

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Monitoring the value of fixed assets 7.5

Accounting principles In accordance with IAS 36, impairment tests on assets with an indefinite useful life are carried out annually during the budget period or more regularly if events or changes in the market environment show signs of impairment. For assets with a finite useful life, tests are carried out if there is an indication of impairment. These impairment tests consist of comparing the net carrying amount with the recoverable amount of all property, plant and equipment and/or intangible assets of each cash-generating unit (CGU). The Hermès Group has defined the following CGUs or groups of CGUs: Hermès sales units (retail branches), which are treated s independently from one another; production units (leather goods, Textiles, Perfume and Beauty, s Watches, Tanneries and Precious Leathers, Metal parts, etc.); other Group brands (Saint-Louis, John Lobb, etc.); s investment property; s associates. s

The recoverable amount of each CGU is determined using the Discounted Cash Flow (DCF) method, applying the following principles: after tax cash flow figures are derived from a medium-term s (five-year) business plan developed by the relevant entity; the after-tax discount rate is determined on the basis of the s Group’s weighted average cost of capital (8.29% in 2021, compared with 8.10% in 2020), adjusted by a risk premium, if necessary, according to the geographical area and activity of the entity concerned; the recoverable amount is calculated as the sum of cash flows s generated each year during the budget period and the terminal value, which is determined based on normative cash flows by applying a growth rate to infinity. The assumptions used in terms of business growth and terminal values are reasonable and consistent with available market data. If the recoverable amount is lower than the net carrying amount, an impairment loss equal to the difference between these two amounts is recognised.

The amount of any impairment losses relating to the various fixed assets is shown in Notes 7.1, 7.2 and 7.3.

386 2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL