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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
174
CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A.
Financial assets recorded at amortised cost
Impairment is equal to the difference between the asset’s net carrying
amount and the discounted value of projected future cash flows expec-
ted to be generated as determined using the original effective interest
rate of the financial instrument. Any impairment loss is included in the
statement of profit or loss under “Other financial income and expenses”.
If the impairment loss decreases in a subsequent period, it is reversed
and recorded as income.
B.
Available-for-sale financial assets
If there is a significant long-term decrease in the fair value of available-
for-sale financial assets, the unrealised loss is reclassified fromequity to
income. If, in a subsequent period, the fair value of an available-for-sale
financial asset increases, the increase in value is recorded in equity
for equity instruments, while for debt instruments, the impairment pre-
viously recorded is reversed and transferred to the statement of profit
or loss.
1.10
Inventories
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.
The cost of inventories includes all costs of purchase, costs of conver-
sion and other costs incurred in bringing the inventories to their present
location and condition, as specified by IAS 2
Inventories
. In particular,
discounts and collection costs are included in the measurement of
inventories.
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.
Impairment is booked to reduce inventories to net realisable value if this
is lower than the carrying amount. These impairments are included in
the cost of sales.
1.11
Treasury shares
Treasury shares are recorded at acquisition cost and are deducted from
equity. Gains or losses on the disposal of these shares are recognised
directly in equity, with no impact on profit or loss.
1.12
Revenue and trade receivables
Revenue consists of sales of retail goods, sales of goods and services
produced by the Group’s main business operations, and income from
royalties, licences and operating subsidies.
Revenue is recognised:
s
when the major risks and benefits incident to ownership of goods are
transferred to the buyer;
s
when the amount of revenue can be measured reliably;
s
when any volume or trade discounts and other benefits on sales are
deducted from revenue (separability principle);
s
when, at the transaction date, it is probable that the amount of the
sale will be recovered.
In general, sales of goods are accounted for on delivery, sales of services
are accounted for on completion.
Credit risk arises from the potential inability of clients to meet their pay-
ment obligations. When there is objective evidence of impairment, the
value of these obligations is adjusted at each closing period. An impair-
ment expense is recognised in the statement of profit or loss when the
carrying amount of the asset is higher than its recoverable amount.
1.13
Other non-recurring income and expenses
“Other non-recurring operating income and expenses” in the statement
of profit or loss relates to major events which occurred during the year
and produced amaterial financial impact. This item is presented separa-
tely from recurring operating income because it could give a misleading
view of the Group’s performance.
1.14
Operating segments
In accordance with IFRS 8
Operating Segments,
the presented seg-
ment information is based on internal reporting used by management to
assess the performance of the different business segments.
The activity of the Hermès Group is monitored by the main operational
decision-maker (“Executive Committee”) by geographical area and by
sector.
Given the Group’s current structure, organised into geographical areas
placed under the responsibility of operational Senior Executives in
charge of applying the strategy defined by the Executive Committee, the
Group has determined that the geographical areas constitute the ope-
rating segments with reference to the fundamental principle of IFRS 8.
1.15
Put options granted to non-controlling
interest holders
In compliance with IAS 32
Financial instruments: Presentation,
when
the non-controlling interest holders hold put options on their share in
the Group, a financial liability corresponding to the exercise price of the
option is recorded. This debt is posted through equity:
s
as a deduction from the “Non-controlling interests”, equal to the book
value of the securities that are the subject of the put option;
s
for the remainder, as a deduction against the “Equity attributable to
owners of the parent”.