LOREAL_Registration_Document_2017

2017 Consolidated Financial Statements* NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets and liabilities recorded in the balance sheet may be broken down as follows:

31.12.2017

31.12.2016

31.12.2015

Deferred tax assets

Deferred tax liabilities

Deferred tax assets

Deferred tax liabilities

Deferred tax assets

Deferred tax liabilities

€ millions

Temporary differences

520.3

346.9 250.1

536.4

542.0 300.9

537.8

510.4 366.4

Deferred tax liabilities on revaluation of Sanofi

Tax credits and tax loss carry-forwards

10.0

11.9

10.1

DEFERRED TAX TOTAL

530.3

597.0

548.3

842.9

547.9

876.8

Deferred tax assets on temporary differences mainly relate to provisions for pensions and early retirement (€77.2 million, €211.3 million and €196.8 million respectively at the end of 2017, 2016 and 2015) and provisions for liabilities and charges (€138.9 million, €153.4 million and €190.2 million at the end of 2017, 2016 and 2015).

Deferred tax liabilities on temporary differences mainly relate to intangible assets acquired in the context of business combinations other than non-tax-deductible goodwill. Deferred tax assets whose recovery is not considered probable are not recorded in the financial statements; such assets amount to €35.5 million at 31 December 2017 compared with €102.5 million at 31 December 2016 and €79.2 million at 31 December 2015.

4

Intangible assets

NOTE 7

Goodwill 7.1.

ACCOUNTING PRINCIPLES Business combinations are accounted for by the purchase method. The assets, liabilities and contingent liabilities of the Company acquired are measured at fair value at the acquisition date. Any valuation differences identified when the acquisition is carried out are recorded under the corresponding asset and liability items. Any residual difference between the cost of an acquisition and the Group’s interest in the fair value of the identified assets and liabilities is recorded as Goodwill and allocated to the Cash Generating Units expected to benefit from the acquisition or the related synergies. Goodwill generated on the acquisition of an associate is presented in the Investments in associates line. For business combinations carried out after 1 January 2010, the main changes with regard to previously applicable accounting principles are set out below: for each acquisition, the Group chooses whether to s recognise the full amount of goodwill regardless of the ownership interest acquired, or an amount of goodwill corresponding to its interest in the acquired company (previously the only method allowed);

deferred tax assets recognised after the initial s accounting is complete are included in profit or loss, and in contrast to previous practices, the amount of goodwill that would have been recorded had the deferred tax asset been recognised as an identifiable asset at the acquisition date is not deducted; costs incurred in respect of a business combination are s now expensed and no longer included in the cost of the acquisition; the cost of the acquisition, which includes contingent s consideration, is recognised and measured at its acquisition-date fair value. Subsequent changes in fair value, affecting in particular the contingent consideration recorded in liabilities, are taken to Other income and expenses in the income statement and no longer treated as an adjustment to goodwill; any previous interest held in the acquiree prior to the s date control was obtained is now remeasured at its acquisition-date fair value, with the corresponding gain or loss on remeasurement taken to the income; purchase commitments for minority interests are s recognised in financial debt at the acquisition-date fair value. Subsequent changes in fair value of the commitment are recognised by adjusting equity.

REGISTRATION DOCUMENT / L'ORÉAL 2017

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