Hermès // 2022 UNIVERSAL REGISTRATION DOCUMENT

5

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.4 Working capital requirements

Accounting principles Inventories and work‑in‑progress

Trade receivables Trade receivables are recognised on the balance sheet at their par value, which corresponds to their fair value. Credit risk arises from the potential inability of customers to meet their payment obligations. Expected losses linked to credit risk on trade receivables are assessed as soon as they arise and reviewed at each closing (see note 9). They are recognised in “Other income and expenses”. Other receivables and payables The “Other receivables and payables” item of the change in working capital requirement mainly includes tax and social security receivables and payables. Transactions in foreign currencies Transactions in foreign currencies are recorded on initial recognition, using the applicable exchange rate at the date of the transaction (historical rate). Monetary assets and liabilities denominated in foreign currencies are converted using the closing rate. Foreign currency adjustments are recognised in income or expenses.

Inventories and work‑in‑progress held by Group companies are valued at the lower of cost (including indirect production costs) or net realisable value: cost is generally calculated at weighted average cost or standard cost adjusted for variances, according to each category of inventory. The cost of inventories includes all costs of purchase, processing and all other costs incurred in bringing the inventories to their present location and condition, as specified by IAS2 Inventories ; s net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. s Impairment is booked to reduce inventories to net realisable value if this is lower than the carrying amount. Impairment is established for each category of inventory (raw materials, work‑in‑progress, intermediate products, finished products and merchandise), if the products concerned are damaged or obsolete (season or collection terminated, for example) or based on expected turnover. These impairments are included in the cost of sales.

4.4.1 INVENTORIES AND WORK‑IN‑PROGRESS

31/12/2021

31/12/2022

Gross Impairment

Net

Gross Impairment

Net

In millions of euros

Retail, intermediate and finished goods Raw materials and work‑in‑progress

1,614

485 311 795

1,129

1,442

483 314 797

959 489

960

650

803

TOTAL

2,574

1,779

2,246

1,449

Net impairment gain/(loss) on retail, intermediate and finished goods inventories Net impairment gain/(loss) on impairment of raw material and work‑in‑progress

0

49

6

(15)

No inventories were pledged as collateral to secure financial liabilities.

4.4.2 TRADE RECEIVABLES AND OTHER CURRENT ASSETS

31/12/2022

31/12/2021

Gross

Impairment

Net

Net

In millions of euros

Trade and other receivables

386

3

383

333

Of which:

not yet due s past due s

267 119

0 3

267 116

222 111

Current tax receivables Other current assets Other non‑current assets

19

-

19

58

265

2 0 6

263

257

39

39

22

TOTAL

709

704

670

2022 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

410