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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
219
PARENT COMPANY FINANCIAL STATEMENTS
6
NOTE TO THE FINANCIAL STATEMENTS
NOTE 1
ACCOUNTING PRINCIPLES AND METHODS
Generally accepted accounting conventions have been applied, in line
with the principle of prudence, according to the following accounting
assumptions and principles:
s
the Company’s status as an ongoing concern;
s
the consistency of accounting policies from one financial year to
another;
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the accruals and matching principle;
s
the historical cost convention;
and in accordance with ANC regulation 2014-03 and ANC regulation
2016-07 (dated 4 November 2016) relative to the general chart of
accounts.
1.1
Intangible assets
Intangible assets include the purchase of original works of art by living
artists, which allows the Company to benefit from a tax deduction that is
set aside in a reserve, aswell as software and the cost of websites, which
are amortised on a straight-line basis over one to six years.
1.2
Property, plant and equipment
Property, plant and equipment are valued at acquisition cost (purchase
price plus incidental expenses, excluding acquisition costs), except for
assets acquired before 31 December 1959, which are shown in the
statement of financial position at their value in use on that date.
Depreciation is calculated using the straight-line or declining-balance
method, on the basis of the following expected useful lives:
s
buildings: straight-line method over 20 to 30 years;
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building fixtures and fittings: straight-linemethodover 10 to40 years;
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office furniture and equipment: straight-line or declining-balance
method over 4 to 10 years;
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computer equipment: declining-balance method over 3 years;
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vehicles: straight-line method over 4 years.
1.3
Financial assets
Investments in subsidiaries and associates are shown in the statement
of financial position at acquisition cost, excluding incidental expenses.
Where the balance sheet value at closing is lower than the carrying
amount, a provision for impairment is recorded for the difference.
The balance sheet value is determined based on criteria such as the
value of the share of net assets or the earnings prospects of the relevant
subsidiary. These criteria are weighted by the effects of owning these
shares in terms of strategy or synergies, in respect of other investments
held.
1.4
Trade receivables
Trade receivables are recorded at par value. A provision for impairment
is recognised where there is a risk of non-recovery.
1.5
Marketable securities
The gross value of marketable securities is their acquisition cost less
incidental expenses. Marketable securities are valued at the lower of
acquisition cost or market value, calculated separately for each category
of securities.
In the event that part of a line of securities is sold, proceeds on disposals
are calculated using the First-In, First-Out method (FIFO).
Treasury shares that are specifically allocated to covering employee
share plans or stock options are recorded under marketable securities.
A provision is accrued in an amount representing the difference between
the purchase price of the shares and the option exercise price, if the
purchase price is more than the exercise price.
In the event of adecrease in the stockmarket price, aprovision for impair-
ment is recognised for treasury shares that are not specifically allocated.
It is calculated as the difference between the net carrying amount of the
shares and the average stock market price for the month immediately
preceding the closing date, weighted by the exchanged volumes.
1.6
Treasury management
Incomeandexpense itemsexpressed inforeigncurrenciesareconverted
into euros at the hedged exchange rate. Payables, receivables, and cash
expressed in currencies outside of the euro zone are shown on the sta-
tement of financial position at the hedged exchange rate or at the clo-
sing rate if they are not hedged. In this case, differences arising from
the reconversion of payables and receivables at the closing exchange
rate are recorded in the statement of financial position under “Foreign
currency adjustments”. A provision for contingencies is established
for unrealised foreign exchange losses. Premiums on foreign currency
options are recorded through profit or loss on the maturity date.
In addition, financial instruments are used in connection with the mana-
gement of the Company’s treasury investments. Gains and losses on
interest rate differentials and any corresponding premiums are reco-
gnised on an accrual basis.