PERNOD-RICARD - URD 2021-22 EN

6. Annual consolidated financial statements Notes to the consolidated financial statements

Financial liabilities Note 4.8

IFRS 9 (Financial Instruments) replaced IAS 39 as of 1 July 2018. IAS 32 has been applied since 1 July 2004. IFRS 7 has been applied since 1 July 2007. The amendment approved by the European Union on 22 November 2011 has been applied from 1 July 2011. Borrowings and other financial liabilities are recognised, on the basis of their effective interest rates, in accordance with the amortised cost method. The effective interest rate includes all costs, commissions and fees payable under the contract between the parties. Under this method, costs that are directly attributable to the acquisition or issue of the financial liability are recognised in profit and loss on the basis of the effective interest rate. In accordance with IAS 7 (Statement of cash flows), cash and cash equivalents presented in assets and liabilities in the balance sheet and shown in the consolidated cash flow statements include items that are immediately available as cash or are readily convertible into a known amount of cash and which are subject to an insignificant risk of change in their value. Cash is composed of cash at bank and on hand, short-term deposits with an initial maturity of less than three months and money market mutual funds that are subject to an insignificant risk of change in their value. Cash equivalents are short-term investments with a maturity of less than three months. Bank overdrafts, which are considered to be equivalent to financing, are excluded from cash and cash equivalents. IFRS 16 (Leases) The Group assesses whether a contract is, or contains, a lease if the contract conveys, at inception, the right to control the use of an identified asset for a set period of time in exchange for consideration. The lease liability is initially calculated at the present value of the future lease payments. The discount rates are based on the Group’s borrowing rate plus a spread to take into account country-specific economic environments. They are estimated in each currency using available market data.

They take into account the term of the leases. Lease payments may include fixed or variable payments that depend on a rate or index known at the commencement date of the lease. The period used to calculate the lease liability corresponds to the non-cancellable term of the contract, unless it is reasonably certain that the Group will exercise a renewal option beyond this period. The probability of exercising an option is determined on a lease-by-lease basis, taking into account Management’s intentions. This liability is then calculated at amortised cost using the effective interest rate method. Leases are recognised in the balance sheet from the commencement date. They are presented in “Lease liabilities” with a corresponding entry in “Property, plant and equipment”, depending on the nature of the underlying asset (see Note 4.1 – Property, plant and equipment ). Lease liabilities comprise a current and non-current portion on the basis of the expected future payments. In the income statement, depreciation expenses are recognised on the basis of the use of the underlying asset and interest expenses are presented in financial income/(expense). In the cash flow statement, repayments of lease liabilities are reported under “Lease repayments” in cash flows from financing activities, while interest payments are reported under “Interest paid” in cash flows from operating activities. The Group has chosen not to apply IFRS 16 to leases corresponding to assets with a low unit replacement value or to short-term leases. These leases are recognised directly in expenses. Net financial debt, as defined and used by the Group, corresponds to total gross debt (translated at the closing rate), including lease liabilities and fair value and net foreign currency assets hedged derivatives (hedging of net investments and similar), less cash and cash equivalents.

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Pernod Ricard Universal Registration Document 2021-2022