Hermès - Registration Document 2016

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Total depreciation and amortisation of property, plant and equipment are presented in “Other income and expenses”, except for allocations relative to fixed assets used for production, that are included in “Cost of sales”. The different components of property, plant and equipment are recorded as separate items when their estimated lives, and therefore the periods over which they are depreciated, differ significantly. Where property, plant and equipment is made up of components with different useful lives, these components are recorded as separate items under “Property, plant & equipment”. 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 operating income and expenses”. Finance lease agreements Property acquired under finance lease agreements is capitalised when the lease effectively transfers to the lessee virtually all risks and rewards incident to ownership of such property. The criteria for evaluating these agreements as provided by IAS 17 Leases are based primarily on: 1.7.3 s the lease term as a proportion of the life of the leased assets; s the total future minimum payments in proportion to the fair value of the asset financed; s the specific nature of the leased asset. Finance leases identified in this way, if they are material, are restated in order to show: s on the asset side of the statement of financial position, the original value of the relevant property and the theoretical depreciation the- reon (wherein the original value is the lower of the present value of the minimum lease payment amounts or the fair value of the leased asset at the inception of the lease); s on the liabilities side of the statement of financial position, the cor- responding financial liability; s under financial expenses and depreciation, the minimum lease pay- ments under the agreement, such that the financial expense is allo- cated to periods during the lease term so as to produce a constant periodic interest rate on the remaining balance of the liability for each financial year. Leases that do not meet the criteria of finance leases are treated as operating leases, in which case the rents are recorded in the statement of profit or loss on a straight-line basis over the lease term. s the transfer of ownership at the end of the lease; s the existence of an attractive purchase option;

1.6.2 Associates Goodwill of associates is recognised under “Investments in associates”. When the impairment criteriaasdefinedby IAS39 Financial Instruments: Recognition and Measurement indicate that these investments may be impaired, the amount of such impairment is determined in accordance with the rules defined by IAS 36 Impairment of Assets. Impairment of associates’ goodwill is reversible.

1.7 Intangible assets and property, plant and equipment

In accordance with IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets, only those items whose cost can be reliably deter- mined and from which it is probable that future economic benefits will flow to the Group are recognised as fixed assets. Intangible assets Intangible assets, valued at amortised historical cost, consist primarily of: 1.7.1 s patents, models and brands other than internally generated brands; computer software. Leasehold rights are generally deemed to be fixed assets with an indefi- nite life if their residual value at the end of the lease term is positive. In this case, they are subject to impairment testing to ensure that their net carrying amount is higher than their probable realisable value. It is specified that internally generated brands and items that are similar in substance are not recognised under intangible assets, in accordance with IAS38. All costs incurred in this respect are recognisedas expenses. Other software, either acquired or developed internally, is amortised on a straight-line basis over periods ranging from three to eight years maxi- mum and deemed to be fixed assets with a finite life. Property, plant and equipment Property, plant and equipment is recorded at historical acquisition cost, less accumulated depreciation and recognised impairment losses, and is depreciated, generally using the straight-line method, over the fol- lowing average estimated useful lives: s 1.7.2 s leasehold rights;

5

buildings: 20 to 50 years;

s

s fixtures and furnishings: 10 to 20 years depending on the expected useful life of the related asset and the term of the lease (in particular in the case of store fixtures);

s machinery, plant and equipment: 10 to 20 years;

other: 3 to 10 years maximum.

s

2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

171