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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
175
CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
This entry is adjusted at the end of each period in accordance with
change in the exercise price of the options and the carrying amount of
the non-controlling interests.
In the absence of specific IFRS rules, the Group has applied the AMF
recommendations issued in November 2009, which involve recording
changes in fair value directly in equity.
1.16
Provisions
A provision is a liability of uncertain timing or amount. It is recognised
when the Group has a present obligation (legal or constructive) as a
result of a past event, and it is probable that an outflow of resources will
be required to settle the obligation. In addition, a reliable estimate of the
amount of the obligation is made based on the information available to
the Group when the consolidated financial statements are prepared.
1.17
Pension plans and other long-term benefits
In accordance with the laws and practices in each country where it ope-
rates, the Group participates in post-employment and other retirement
benefit plans for employees and in top-up plans for executives and senior
managers.
1.17.1 Defined contribution pension plans
For basic post-employment and other defined-contribution plans, the
Group recognises contributions to be paid as expenses when they are
due and when no provision was booked in this respect, as the Group has
no obligations other than the contributions paid.
1.17.2 Defined benefit pension plans
For defined-benefit plans, the Group’s obligations are calculated
annually by an independent actuary using the projected credit unit
method. This method is based on actuarial assumptions and takes into
account the employee’s probable future length of service, future salary
and life expectancy as well as staff turnover. Actuarial assumptions are
reviewed annually.
The present value of the obligation is calculated by applying an appro-
priate discount rate for each country where the obligations are located.
It is recognised on a basis pro-rated to the employee’s years of service.
When benefits are partly funded in advance by external funds (insurance
companies, foundations or other entities), the assets held aremeasured
at fair value, and taken into account in the assessment of the liabilities.
The expense recognised in the consolidated statement of profit or loss
is the sum of:
s
the current service cost, which constitutes the increase in obligations
arising from the vesting of one additional year of rights;
s
the past service cost, namely the change in the present fair value of
the obligation that originates from the modification of a plan or the
reduction of a plan;
s
the profit or the loss resulting from liquidation, if applicable;
s
the interest cost, which reflects the increase in the present value of
the obligations during the period;
s
the financial income on plan assets.
Changes in actuarial assumptions and experience effects give rise to
actuarial gains or losses, the total of which is recordedunder “Other com-
prehensive income” over the period during which they were recognised.
1.17.3 Other long-term benefits
Certain other post-employment benefits, such as life insurance and
health insurance benefits (primarily in Japan), or long-termbenefits such
as long-service awards (bonuses paid to employees, mainly in France,
based on length of service), are also covered by provisions, which are
determined using an actuarial calculation that is comparable to that
used to calculate provisions for post-employment benefit obligations.
The actuarial gains and losses that result from experience adjustments
and changes in actuarial assumptions adopted for calculation of these
obligations are entered in the consolidated statement of profit or loss for
the financial year during which they were recognised.
1.18
Income tax
Income tax expense includes:
s
the current tax for the financial year of the consolidated companies;
s
deferred tax resulting from timing differences:
•
between the taxable earnings and accounting income of each
consolidated company,
•
arising from adjustments made to the financial statements of
consolidated companies tobring them into linewithGroupaccoun-
ting principles,
•
arising from consolidation adjustments.
1.18.1 Deferred tax
Deferred tax is calculated on all timing differences existing at finan-
cial year-end (full reserve) at the tax rate in force on that date, or at the
enacted tax rate (or nearly enacted rate) for the subsequent financial
year. Previous deferred tax is revalued using the same method (liability
method).
Themaincategoriesof deferred tax apply to restatementsof internalmar-
gins on inventories, impairment on inventories and timing differences.
Deferred tax assets are recorded to the extent that their future use is
probable given the expected taxable profits. If a recovery risk arises on
some or all of a deferred tax asset, an impairment is recorded.