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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
173
CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B.
Held-to-maturity financial assets
This category covers fixed-term financial assets, bought with the inten-
tion and ability of holding them until maturity.
These items are recognised at amortised cost. Interest is calculated at
the effective interest rate and recorded in the statement of profit or loss
under “Other financial income and expenses”.
C.
Loans and financial receivables
Loans and financial receivables are valued and recognised at amortised
cost less any impairment.
Interest is calculated at the effective interest rate and recorded in the
statement of profit or loss under “Other financial income and expenses”.
D.
Available-for-sale financial assets
Available-for-sale financial assets include non-consolidated invest-
ments and investment securities. For each closing period, they are
stated at fair value.
Unrealised gains or losses on available-for-sale financial assets are
recorded under other comprehensive income in “Financial instruments
attributable to owners of the parent”.
For available-for-sale financial assets represented by debt securities,
interest is calculated at the effective interest rate and credited to the
statement of profit or loss under “Other financial income and expenses”.
E.
Financial debts
Financial debts are recorded at amortised cost, with separate reporting
of embedded derivatives where applicable.
Interest is calculated at the effective interest rate and recorded in the
statement of profit or loss under “Gross cost of debt” over the duration
of the financial debt.
F.
Financial derivatives
Scope
The scope of financial derivatives applied by the Group corresponds to
the principles set out in IAS 39
Financial Instruments: Recognition and
Measurement.
According to Group rules, consolidated subsidiaries may
not take any speculative financial positions.
In compliance with IAS 39, the Group analyses all its contracts, of both
a financial and non-financial nature, to identify the existence of any
“embedded” derivatives. Any component of a contract that affects the
cash flows of agiven contract in the sameway as a stand-alonederivative
corresponds to the definition of an embedded derivative.
If they meet the conditions set out by IAS 39, embedded derivatives are
accounted for separately from the “host” contract at the inception date.
Recognition and Measurement
Financial derivatives are initially recorded at fair value.
Changes in the fair value of these derivatives are recorded in the state-
ment of profit or loss, unless they are classified as cash flow hedges, as
described below. Changes in the fair value of such hedging instruments
are recorded directly under other comprehensive income in “Financial
instruments attributable to owners of the parent”, excluding the ineffec-
tive portion of the hedge, which is recorded in the statement of profit
or loss under “Other financial income and expenses”. The ineffective
portion of the hedge corresponds to the changes in the fair value of the
hedging instrument in excess of changes in the fair value of the hedged
item. When the hedged cash flows materialise, the amounts previously
recognised in equity are transferred to the statement of profit or loss in
the same way as for the hedged item.
Financial derivatives classified as hedges
The Group uses derivatives to hedge its foreign exchange risks.
Hedge accounting is applicable, in accordance with IAS 39
Financial
Instruments: Recognition and Measurement,
when the following condi-
tions have been met:
1)
the hedge must be supported by appropriate documentation from its
inception;
2)
the effectiveness of the relationship of the hedge must be demons-
trated both prospectively and retrospectively. The income obtained
in this way must be between 80% and 125%.
G.
Cash and cash equivalents
Cash and cash equivalents consist of immediately available cash and
very short-term investments that can be divested within a maximum of
three months at the investment date, with minimal risk of any change
in value. Investments in listed shares, investments for a term of over
threemonths that are not redeemable before thematurity date and bank
accountscoveredbyrestrictions(frozenaccounts)otherthanrestrictions
due to country- or sector-specific regulations (e.g. currency controls) are
not included in cash in the statement of cash flows. Bank overdrafts that
are deemed to be financing arrangements are also excluded from the
cash position.
Shares in funds held for the short term and classified as “Cash equiva-
lents” are recorded at fair value, with changes in fair value recorded in
the statement of profit or loss.
1.9.2
Impairment of financial assets
For each closing period, the Group assesses whether there is any objec-
tive evidence of an asset’s impairment. If so, the Group estimates the
asset’s recoverable value and records any necessary impairment as
appropriate for the category of asset concerned.