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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
176
CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency differences arising from the conversion of deferred tax
income or expenses are recognised in the statement of profit or loss in
deferred tax income or expenses.
Discounting is not applied to deferred tax.
1.18.2 Tax consolidation
Since 1 January 1988, Hermès International has opted for a group tax
consolidation under French tax law. Under the terms of an agreement
between the parent company and the subsidiaries included in the Group
tax consolidation, projected and actual tax savings or liabilities gene-
rated by the Group are recognised in the statement of profit or loss in the
year in which they arise.
1.19
Adjustment of depreciation, amortisation
and impairment
The impact of accounting entries booked net of deferred tax solely to
comply with tax legislation is eliminated from the consolidated financial
statements.
Theseadjustmentsmainly relate to restrictedprovisionsandaccelerated
depreciation in French companies, and to impairment of inventories and
doubtful receivables in foreign companies.
1.20
Earnings per share
In accordance with IAS 33
Earnings per Share,
basic earnings per share
is calculated by dividing the net income attributable to owners of the
parent by the average number of ordinary shares outstanding during
the period.
The net earnings per share are calculated on the basis of the weighted
average number of shares outstanding during the financial year.
The weighted average number of ordinary shares outstanding during
the period is the number of ordinary shares outstanding at the begin-
ning of the period, less the treasury shares, adjusted by the number of
ordinary shares bought back or issued during the period multiplied by a
time-weighting factor.
The weighted average number of shares outstanding during the financial
year as well as those from previous financial years are adjusted in order
to account, if relevant, for operations involving the free distribution of
shares and the reduction of the share’s par value occurring during the
financial year, as well as of treasury shares.
Diluted earnings per share is adjusted for the effects of all potentially
dilutive shares. The calculation is based on assumptions regarding the
conversion of convertible instruments, exercise of options or equity war-
rants and issues of new shares.
The diluted earnings per share are restated for the shares that are to
be created as part of the share subscription plans decided upon by the
Executive Management.
1.21
Option plans and similar
Stock subscription or purchase option plans or bonus share allocation
plans are recognised as expenses at fair value in the “Other income
and expenses” section, with a corresponding increase in equity. This fair
value is spread over the vesting period.
For the bonus share allocation plans, the estimate of the fair value is
calculated on the basis of the share price on the date that the corres-
ponding management decision is made and subject to the deduction of
the amount of the advance dividends over the vesting period, as well as
a non-assignability discount, where relevant.
1.22
Use of estimates
The preparation of the consolidated financial statements under IFRS
sometimes requires the Group to make estimates in valuing assets and
liabilities and income and expenses recognised during the year. The
Group bases these estimates on historical experience and on a variety
of assumptions, which it deems to be the most reasonable and probable
in the current economic environment.
The main items that require the use of assessments and estimates are
as follows:
s
depreciation and amortisation periods for property, plant and equip-
ment and intangible assets (see Notes 1.7, 11 and 12);
s
impairment of inventories (see Notes 1.10 and 17);
s
provisions (see Notes 1.16 and 23);
s
post employment and other employee benefit obligations (see
Notes 1.17 and 25);
s
income taxes (see Notes 1.18 and 8);
s
share-based payments (see Notes 1.21 and 30).
1.23
Events after the closing
No significant event has occurred since the closing as at 31 December
2016.