PERNOD RICARD - Universal Registration Document 2019-2020

6. CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Provisions for pensions and other long-term employee benefits 3.

In accordance with applicable national legislation, the Group’s employee benefit obligations are composed of: long-term post-employment benefits (retirement bonuses, — pensions, medical and healthcare expenses, etc.); long-term benefits payable during the period of employment. — Defined contribution plans Contributions are recognised as expenses as they are incurred. As the Group is not committed beyond the amount of such contributions, no provision is recognised in respect of defined contribution plans. Defined benefit plans For defined benefit plans, the projected unit credit method is used to measure the present value of defined benefit obligations, current service cost and, if applicable, past service cost. The measurement is made at each closing date and the personal data concerning employees is revised at least every three years. The calculation requires the use of economic assumptions (inflation rate and discount rate) and assumptions concerning employees (mainly average salary increase, rate of employee turnover and life expectancy). The assumptions used in FY19 and FY20 and the methods used for their determination are described below. A provision is recorded in the balance sheet for the difference between the actuarial debt of related obligations (actuarial liabilities) and any assets dedicated to funding the plans, measured at their fair value, and includes past service costs and actuarial gains and losses. The Group provides employee benefits such as pensions and retirement bonuses and other post-employment benefits, such as medical care and life insurance: in France, benefit obligations mainly comprise arrangements for — retirement indemnities (non-funded) and supplementary pension benefits (partly funded); in the United States and Canada, benefit obligations include funded — pension plans guaranteed to employees as well as unfunded post-employment medical plans; in Ireland, the United Kingdom and the Netherlands, benefit — obligations mainly consist of pension plans granted to employees. Defined benefit plans in the Group relate mainly to affiliates in the United Kingdom, in North America and in the rest of Europe. Defined benefit plans are subject to an annual actuarial valuation on the basis of assumptions depending on the country. Under these pension and other benefit plan agreements, employees receive at the date of retirement either a capital lump sum payment or an annuity. These amounts depend on the number of years of employment, final salary and the position held by the employee. At 30 June 2020, fully or partly funded benefit obligations totalled €5,335 million, equivalent to 96% of the total benefit obligations.

The cost of defined benefit plans has three components, which are accounted for as follows: the cost of services is recognised in operating profit. It includes: — the cost of services rendered during the period, — the cost of past services resulting from the modification or — reduction of a plan, fully recognised in profit and loss for the the financial component, recorded in financial income (expenses), — comprises the impact of discounting the liabilities, net of the expected return on plan assets, measured using the same discount rate as that used to measure the liabilities; revaluations of liabilities (assets) are recognised as non-recyclable — items of comprehensive income, and consist mainly of actuarial differences, namely the change in plan obligations and assets due to changes in assumptions and to experience gains or losses, the latter representing the difference between the expected impact of some actuarial assumptions applied to previous valuations and the actual impact. Depending on the nature of the texts governing the plans in certain zones, if the hedging assets exceed the commitments entered into the accounts, any assets generated may be limited to the present value of the future reimbursements and the expected decreases in future contributions. period in which the services were performed, gains and losses resulting from liquidations; —

Certain affiliates, mainly those located in North America, also provide their employees with post-employment medical cover. These benefit obligations are unfunded. They are measured using the same assumptions as those used for the pension obligations in the countries in question. Several affiliates, mainly in Europe, also provide their employees with other long-term benefits. Benefit obligations of this type are mainly in respect of long-service awards and jubilee awards.

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Pernod Ricard Universal Registration Document 2019-2020