Hermès - Registration Document 2016

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING PRINCIPLES AND POLICIES

NOTE 1

1.1 Accounting standards 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 2016. 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 1 January 2005. Mandatory standards, amendments and interpretations applicable as at 1 January 2016 The standards applicable to Hermès from 2016 onwards are as follows: s amendments resulting fromtheannual IFRS improvement procedure, 2010-2012 and 2012-2014 cycles. These texts had no impact on the Group’s consolidated financial statements. Changes to standards after 1 January 2017 The Group monitors changes to standards that were not yet applicable as of 31 December 2016, notably: s IFRS 9 Financial instruments lays down principles governing reco- gnition and disclosures in relation to financial assets and liabilities. These principles would replace those currently set out in IAS 39 Financial instruments, applicable in 2018; the effects of applying this standard are currently being analysed; s IFRS 15 Revenue from contracts with customers, which would replace IAS 18 Revenue, applicable in 2018; In view of the nature of the Group’s activities, the implementation of this standard will have only a very limited impact on the consolidated financial statements; s IFRS 16 Leases, applicable in 2019. In view of the Group’s retail acti- vity, the application of this standard is expected to have a significant impact. This impact is currently being evaluated. 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. 1.1.1 s amendments to IAS 1, IAS 16, IAS 19 and IAS 38; 1.1.2

1.2.1 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. 1.2.2 1.2.3 1.2.4

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1.3 Translation methods of foreign currency items

1.3.1 Conversion of foreign-currency transactions Foreign-currency transactions are recorded on initial recognition in euros, by using the applicable exchange rate at the date of the tran- saction (historical rate). Monetary assets and liabilities denominated in foreign currencies are converted using the closing exchange rate. Foreign currency adjustments are recognised in income or expenses. Non-monetary assets and liabilities denominated in foreign currencies are converted using the exchange rate at the transaction date.

2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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