LOREAL_Registration_Document_2017

2017 Consolidated Financial Statements* NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The fair value of free share awards is determined using the following assumptions:

Stock purchase plans

Stock subscription plans

Grant date

April 2011 April 2012 April 2013 April 2014 April 2015 April 2016 April 2017 2.60% 1.43% 0.50% 0.65% -0.02% -0.06% -0.35% 8.54% 8.06% 5.75% 4.46% 1.70% n/a 2.10% 2.14% 1.76% 2.06% 1.52% 1.85% 1.82% €85.68 €93.68 €130.45 €121.35 €177.10 €168.10 €181.75 n/a

Risk-free rate of return

Discount for post-vesting transfer restrictions for French employees

Expected dividends

Share price

Fair value Employees resident in France s Employees not resident in France s

€70.36 €77.07 €112.37 €104.58 €161.49 €154.32 €166.90 €77.67 €84.62 €119.87 €109.99 €164.50 €154.32 €166.90

The expense recorded in 2017, 2016 and 2015 amounted to €126.7 million, €118.8 million and €108.4 million, respectively

Income tax

NOTE 6

4

ACCOUNTING PRINCIPLES The income tax charge includes the current tax expense payable by each consolidated tax entity and the deferred tax expense. Deferred tax is calculated whenever there are temporary differences between the tax basis of assets and liabilities and their basis for consolidated accounting purposes, using the balance sheet liability method. The restatement of assets and liabilities linked to capital lease contracts results in the booking of deferred tax. Deferred tax includes irrecoverable taxation on estimated or confirmed dividends.

Deferred tax is measured using the tax rate enacted at the closing date and which will also apply when the temporary differences reverse. Deferred tax assets generated by tax loss carryforwards are only recognised to the extent it is probable that the entities will be able to generate taxable profit against which they can be utilised. Under the French system of tax consolidation, the taxable profits of some French companies are offset when determining the overall tax charge, which is payable only by L’Oréal, the parent company of the tax Group. Tax consolidation systems also exist outside France.

Detailed breakdown of income tax 6.1.

2017

2016

2015

€ millions

Current tax Deferred tax INCOME TAX

1,096.1 -194.8

1,127.2

1,157.9

86.5

71.6

901.3

1,213.7

1,229.4

REGISTRATION DOCUMENT / L'ORÉAL 2017

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