L'Oréal - 2018 Registration Document

4 2018 Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other operational income and expenses

NOTE 4

ACCOUNTING PRINCIPLES Other income and expenses

severance payments, early retirement payments, the cost of unworked notice periods, the costs of training for employees affected by the restructuring measures, and other costs relating to site closures. Any write-offs of fixed assets or impairment charged against inventories and other assets related directly to these restructuring measures are also recorded as restructuring costs. Operational profit Operational profit is calculated based on operating profit and includes other income and expenses such as capital gains and losses on disposals of property, plant, and equipment and intangible assets, impairment of assets, and restructuring costs.

The Other income and expenses item includes capital gains and losses on disposals of property, plant and equipment and intangible assets, impairment of assets, restructuring costs, and clearly identified, non-recurring income and expense items that are material to the consolidated financial statements. The cost of restructuring operations is fully provisioned if it results from a group obligation towards a third party originating from a decision taken by a competent body which is announced to the third parties concerned before the end of the reporting period. This cost consists mainly of

This item breaks down as follows:

2018

2017

2016 16.2

€ millions

Capital gains and losses on disposals of property, plant and equipment and intangible assets (1)

2.7

3.9

Impairment of property, plant and equipment and intangible assets (2)

-

-

-447.2

Restructuring costs (3)

-85.1 -12.3 -94.7

-262.5

-99.3 -11.0

Other (4)

-17.8

TOTAL -541.3 Including, in 2016, €17.7 million in capital gains on sales of buildings in the Paris region in connection with the geographical concentration of business operations in (1) France. In 2016, the Magic brand and goodwill (€49.0 million (€36.7 million after tax) and €162.7 million respectively), as well as Clarisonic goodwill (€235.5 million) (note 7). (2) Of which: (3) in 2018, the global plan to transform the Professional Products Division (€15.6 million), the reorganisation in Brazil (€26.8 million), various plans to restructure sales forces s and operating structures in Western Europe (€19.3 million), the streamlining of production and the refocussing of the distribution of the Decléor brand (€12.1 million) as well as the closure of the Canton mask production plant in China (€6.0 million) and the discontinuing of various selective brands in Malaysia and Singapore (€4.6 million); in 2017, the repositioning of Clarisonic's distribution activities (€10.0 million), the discontinuance of several Selective Division brands in countries where they are dilutive s (€26.4 million), the reorganisation of activities in Brazil to cope with the difficult economic environment (€50.3 million), the reorganisation of IT structures in Europe (€9.2 million) as well as various projects to rationalise sales teams and operational and administrative structures in Western Europe (€29.4 million), the restructuring of the activities of the Consumer Products Division in China (€58.2 million), the pooling of the “international marketing” Divisions of the Global Selective Divisions on one site (€33.9 million), the launch of the Professional Products Division global transformation plan (€21.8 million), the pooling of accounting activities in several geographic zones (€7.7 million), as well as the continued reorganisation of the French business activities of the four Divisions (€12.4 million); in 2016, the geographical concentration of the French commercial entities of the four Divisions at a single site and the associated reorganisation (€45.4 million), uniting of s Operations and Research & Innovation at a single site (€3.5 million), the rescaling of subsidiaries in Germany and Switzerland (€12.1 million), the discontinuance of the Matrix brand in Brazil (€4.3 million), the ongoing reorganisation of NYX Professional Makeup distribution activities (€3.8 million), the integration of Magic’s corporate support functions with those of L’Oréal China, the reorganisation of Magic distribution activities (€27.2 million), and the streamlining of production of Clarisonic products (€5.2 million). Of which: (4) in 2018, acquisition-related costs (€17.3 million) as well as the downward adjustment of the Atelier Cologne earn-out (-€3.8 million); s in 2017, acquisition-related costs (€12.9 million), as well as adjustments made to the opening balance sheet of Atelier Cologne (€4.5 million); s in 2016, reversals of provisions for contingencies recognised in the opening balance sheet of NYX Professional Makeup, Magic and Niely at the time of the acquisition s (€6.9 million), offset by acquisition-related costs (€20.3 million). -276.3

REGISTRATION DOCUMENT / L'ORÉAL 2018

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