![Show Menu](styles/mobile-menu.png)
![Page Background](./../common/page-substrates/page0173.jpg)
2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
171
CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.6.2
Associates
Goodwill of associates is recognised under “Investments in associates”.
When the impairment criteriaasdefinedby IAS39
Financial Instruments:
Recognition and Measurement
indicate that these investments may be
impaired, the amount of such impairment is determined in accordance
with the rules defined by IAS 36
Impairment of Assets.
Impairment of associates’ goodwill is reversible.
1.7
Intangible assets and property, plant
and equipment
In accordance with IAS 16
Property,
Plant and Equipment and IAS 38
Intangible Assets,
only those items whose cost can be reliably deter-
mined and from which it is probable that future economic benefits will
flow to the Group are recognised as fixed assets.
1.7.1
Intangible assets
Intangible assets, valued at amortised historical cost, consist primarily
of:
s
leasehold rights;
s
patents, models and brands other than internally generated brands;
s
computer software.
Leasehold rights are generally deemed to be fixed assets with an indefi-
nite life if their residual value at the end of the lease term is positive. In
this case, they are subject to impairment testing to ensure that their net
carrying amount is higher than their probable realisable value.
It is specified that internally generated brands and items that are similar
in substance are not recognised under intangible assets, in accordance
with IAS38. All costs incurred in this respect are recognisedas expenses.
Other software, either acquired or developed internally, is amortised on
a straight-line basis over periods ranging from three to eight years maxi-
mum and deemed to be fixed assets with a finite life.
1.7.2
Property, plant and equipment
Property, plant and equipment is recorded at historical acquisition cost,
less accumulated depreciation and recognised impairment losses, and
is depreciated, generally using the straight-line method, over the fol-
lowing average estimated useful lives:
s
buildings: 20 to 50 years;
s
fixtures and furnishings: 10 to 20 years depending on the expected
useful life of the related asset and the term of the lease (in particular
in the case of store fixtures);
s
machinery, plant and equipment: 10 to 20 years;
s
other: 3 to 10 years maximum.
Total depreciation and amortisation of property, plant and equipment
are presented in “Other income and expenses”, except for allocations
relative to fixed assets used for production, that are included in “Cost
of sales”.
The different components of property, plant and equipment are
recorded as separate items when their estimated lives, and therefore
the periods over which they are depreciated, differ significantly. Where
property, plant and equipment is made up of components with different
useful lives, these components are recorded as separate items under
“Property, plant & equipment”.
Gains or losses on disposals of property, plant and equipment represent
the difference between the sale proceeds and the net carrying amount
of the divested asset, and are included in “Other operating income and
expenses”.
1.7.3
Finance lease agreements
Property acquired under finance lease agreements is capitalised when
the lease effectively transfers to the lessee virtually all risks and rewards
incident to ownership of such property. The criteria for evaluating these
agreements as provided by IAS 17
Leases
are based primarily on:
s
the lease term as a proportion of the life of the leased assets;
s
the total future minimum payments in proportion to the fair value of
the asset financed;
s
the transfer of ownership at the end of the lease;
s
the existence of an attractive purchase option;
s
the specific nature of the leased asset.
Finance leases identified in this way, if they are material, are restated
in order to show:
s
on the asset side of the statement of financial position, the original
value of the relevant property and the theoretical depreciation the-
reon (wherein the original value is the lower of the present value of
the minimum lease payment amounts or the fair value of the leased
asset at the inception of the lease);
s
on the liabilities side of the statement of financial position, the cor-
responding financial liability;
s
under financial expenses and depreciation, the minimum lease pay-
ments under the agreement, such that the financial expense is allo-
cated to periods during the lease term so as to produce a constant
periodic interest rate on the remaining balance of the liability for each
financial year.
Leases that do not meet the criteria of finance leases are treated as
operating leases, in which case the rents are recorded in the statement
of profit or loss on a straight-line basis over the lease term.