L'Oréal - 2018 Registration Document

Corporate Governance RISK FACTORS AND CONTROL ENVIRONMENT

The other Functional Departments The following departments are also involved in Internal Control: the Human Resources Department monitors and supervises s all obligations related to personnel management, specifies the documents to be provided to employees, the remuneration of the workforce and personnel expenses, recruitment, training and appraisal procedures, the rules to be complied with in the area of payroll management and the implementation of the Share & Care programme; the Research and Innovation Department is responsible for s cosmeto-vigilance and the quality of the formulas used in product composition (see “Product quality and safety: a priority” in section 3.3.3.2); the Communications and Public Affairs Department, which s co-ordinates communications initiatives, prepares crisis management principles and ensures that they are applied (see section 2.8.5.3.1 Image and reputation); the Security and Safety Department, which has defined a s security and safety policy for people, travel, property, information and data confidentiality (see section 2.8.5.3.1.Employee health and safety). For the preparation of this report, L’Oréal based itself on the Application Guide for Internal Control of accounting and financial information published by issuers, which is part of the Reference Framework published by the AMF on 22 July 2010. This approach is part of an overall process aimed at making continual progress and improving the Internal Control system that has already been set up. Definition, scope and objectives 2.8.3.1. Internal Control for accounting and finance covers the processes that provide accounting data: the process of producing financial information, the accounts closing process and financial communication actions. The Internal Control system with regard to accounting and financial aspects aims to ensure: compliance with accounting regulations and the correct s application of the principles on which the financial statements are based; application of the guidelines set by the General s Management with regard to financial information; protection of assets; s SYSTEM RELATING TO THE 2.8.3. PREPARATION AND PROCESSING OF FINANCIAL AND ACCOUNTING INFORMATION

quality of the reporting that contributes to the preparation s of the published financial statements and the reliability of their centralised treatment for the Group with a view to their distribution and their use for monitoring purposes; control of the production of financial, general and s management accounting information including fraud prevention. The scope of application of the Internal Control procedures relating to the preparation and processing of financial and accounting information encompasses the parent company and all subsidiaries included in the consolidated financial statements. Organisation of the Finance Department Dedicated teams of specialists ensure the implementation of accounting and financial monitoring, under the supervision of General Management, in the following areas: accounting, consolidation, tax matters, management, financial services and cash flow. In the Administration and Finance Department, the Operational Finance Department prepares the Group’s consolidated financial results: the latter coordinates a global network of management controllers who are responsible for ensuring compliance with the Group’s accounting and management standards in order to ensure appropriate management of the result. The accounting process is managed worldwide by a team of specialists who ensure application of the IFRS and standardisation of the accounting procedures. Finally, the Operations Finance Division runs the Group’s Taxation Division which comprises a network of tax lawyers at corporate level, in the regions and in the Group’s most vulnerable countries, monitors changes in regulations, ensures compliance with the local rules, and oversees the implementation of the Group’s tax policy, and in particular the strict application of the transfer pricing policy and the customs rules. The processing and pooling of cash flows and hedging of currency and interest rate risks are carried out by the Group Corporate Finance Department, which is in charge of identifying commitments and enabling their proper booking. Group standards The Group has put in place a set of accounting policies and standards consistent with IFRS, the consolidated accounting standards. The application of these standards is compulsory for all consolidated subsidiaries in order to provide uniform and reliable financial information. Monitoring process for the 2.8.3.2. organisation of the accounting and finance functions

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REGISTRATION DOCUMENT / L'ORÉAL 2018

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