LOREAL_Registration_Document_2017

4 2017 Consolidated Financial Statements* NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Inventories Inventories are valued at the lower of cost or net realisable value. Cost is calculated using the weighted average cost method. A provision is made for obsolete and slow-moving inventories on the basis of their probable net realisable value, estimated on the basis of historic and projected data. Trade accounts receivable Accounts receivable from customers are recorded at their nominal value, which corresponds to their fair value. A provision is made for any doubtful receivables based on an assessment of the risk of non-recovery. The Group’s policy is to recommend credit insurance coverage when this is allowed by local regulations. the Active Cosmetics Division, whose goal is to help everyone s in their quest to have healthy and beautiful skin. Its portfolio of highly complementary brands (Vichy, La Roche-Posay, SkinCeuticals, and Roger&Gallet) is designed to keep pace with major skincare trends and recommendations of healthcare professionals. The recent acquisition of the US brand CeraVe has recently added to this portfolio. The non-allocated item includes expenses incurred by the Functional Divisions, fundamental research and the costs of stock options not allocated to the Operational Divisions. It also includes activities that are auxiliary to the Group’s core businesses, such as insurance, reinsurance and banking. As of 1 July 2016, the Asian Travel Retail business of the Consumer Products Division, previously recorded under the Western Europe Zone, was transferred to the Asia, Pacific Zone. All figures for earlier periods have been restated to allow for this change. As of 31 December 2017, The Body Shop ceased to be an Operational Division following the definitive sales agreement signed at the beginning of September 2017 (note 2.3.) The information below has been restated accordingly. The performance of each Operational Division is measured on the basis of operating profit.

Property, plant and equipment are depreciated using the straight-line method, over the following useful lives:

Buildings

10-40 years 5-15 years

Industrial machinery and equipment

Point-of-sales advertising: stands and displays

3 years

Other tangible assets

3-10 years

Depreciation and impairment losses are recorded in the income statement according to the use of the asset. In view of their nature, property, plant and equipment are considered to have a value of zero at the end of the useful lives indicated above.

Segment information 3.1. Segment information 3.1.1

The Group's business activities are organised into four Operational Divisions. In its markets, each Operational Division develops and enhances a range of its own brand of consumer products: the Professional Products Division, which, for over 100 years, s has acquired extensive knowledge of, and provided tailored support solutions for, the hairdressing sector. It has built up a unique brand portfolio which currently includes L'Oréal Professionnel, Kérastase, Redken, Matrix, BIolage, Pureology, Decléor and Carita; the Consumer Products Division, the growth of which is s underpinned by four major global brands (L’Oréal Paris, Garnier, Maybelline New York and NYX Professional Makeup), and by the deployment of its specialised and regional brands (Essie, Niely, Dark and Lovely, etc.); L’Oréal Luxe has built a unique portfolio of prestigious s brands including iconic mainstream, aspirational, alternative and specialist brands (Lancôme, Yves Saint Laurent Beauté, Giorgio Armani Beauty, Kiehl’s, Urban Decay, Biotherm, Ralph Lauren, IT Cosmetics);

Investments in property, plant and equipment and intangible assets

Depreciation, amortisation and provisions

€ millions 2017

Operating profit

Operational assets (1)

Sales 3,350.4 12,118.7 8,471.7 2,082.9 26,023.7

Professional Products Consumer Products

669.4

3,126.1 8,975.6 6,459.8 2,247.9

86.5

160.3 582.1 395.6

2,419.0 1,855.8

626.9 335.6

L’Oréal Luxe

Active Cosmetics

471.2

47.6

68.5

OPERATIONAL DIVISIONS TOTAL

5,415.4

20,809.4

1,096.6

1,206.5

Non-allocated

-739.1

827.3

159.1

107.7

GROUP

26,023.7

4,676.3

21,636.7

1,255.7

1,314.2

Operational assets mainly include goodwill, intangible assets and property, plant and equipment, trade accounts receivable and inventories. (1)

REGISTRATION DOCUMENT / L'ORÉAL 2017

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