HERMÈS - 2018 Registration document

Consolidated financial statements Notes to the consolidated financial statements

ACCOUNTING PRINCIPLES AND POLICIES

NOTE 1

1.1 Accounting Standards The Hermès Group’s consolidated financial statements have been pre- pared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as of 31 December 2018.

s s IFRIC 22 Foreign currency transactions and advance consideration , with no impact for the Group. These texts had no impact on the Group’s consolidated financial statements. 1.1.2 Standards, amendments and interpretations applicable by early adoption at 1 January 2018 IFRIC23 Uncertaintyover incometaxtreatments ,applicableat1January 2019, specifies the accounting of uncertain tax positions relating to income tax. The Group decided to early adopt this interpretation of IAS 12 Income taxes , with effect from 1 January 2018. This adoption has not had any impact on the valuation of tax liabilities. Uncertain tax lia- bilities previously included in provisions were reclassified in current tax liabilities. Taking account of the non-material impact on the statement of financial position, the 2017 comparatives were not restated. IFRS 16 Leases , applicable at 1 January 2019. In application of this standard, lease agreements with fixed rents will be recognised in assets by recording a right-of-use and in liabilities by a debt corresponding to the present value of future payments. Most of the lease agreements are real estate leases. The Group has finalised the phase of contract collection and is working on simulations of the impact on the financial statements and the detailed procedures of application of the standard at the transition date, i.e. 1 January 2019. IFRS 16 will be applied retrospectively to each prior period for which the financial information is presented, in compliance with IAS 8 Accounting policies , changes in accounting estimates and errors. The amount of liabilities is noticeably dependent on the assumptions used (discount rate and contract term). The discount rate used corres- ponds to the theoretical rate of external indebtedness for the currency of the contract, at the time of its initial negotiation, on a per country basis. The lease term is determined on a contract by contract basis, wit- hout taking into account options for early termination or lease extension, except in specific cases. The two capitalisation exemptions proposed by the standard (contracts with a term of less than 12 months and lease of low value assets) will be used. The rents of these lease contracts will be recognised directly in expenses. The impact on the statement of financial position linked to the first-time application of IFRS 16 will be approximately €1 billion. The impact on results of the application of IFRS 16 will be insignificant. 1.1.3 Mandatory standards, amendments and interpretations applicable as at 1 January 2019

1.1.1 Mandatory standards, amendments and interpretations applicable as at 1 January 2018

The standards applicable to Hermès from 2018 onwards are as follows: s s IFRS 9 Financial Instruments lays down the principles governing reco- gnition and disclosures in matters of financial assets and liabilities. These principles replace those previously set out in IAS 39 Financial instruments . The Group is mainly concerned by the change in the treatment of hedge accounting (see Note 1.9). The impact of this new standard concerning the time value of options and the swap point of forward currency contracts led to the reclassifica- tion, at 1 January 2018, of €34 million net of deferred tax from the item “Consolidated reserves” to “Revaluation adjustments”. On the other hand, the impact on income of the comparative period was not material (approximately €9 million). Consequently, this has not been restated. The Group is also concerned by the change in the accounting treatment of investment securities and their revaluation through profit or loss or optionally through non-recyclable equity. The option for revaluation through equity was irrevocably used for the securities held in the portfolio at 31 December 2017. Lastly, changes brought by IFRS 9 concerning impairment of trade recei- vables (“expected loss” model) do not have a material impact, as the client risk is low due to the nature of the “Retail sales” activity and the Group’s insurance policy coverage for the “Wholesale” activity when local conditions allow. Details on the accounting principles and policies related to this newstan- dard are provided in Note 1.9 here below. s s IFRS 15 Revenue from contracts with customers , will replace IAS 18 Revenue . This standard was applied early by the Group at 1 January 2018, and has not had a material impact on the consolidated financial statements, given the nature of the Group’s «Retail» activity (see Note 1.12). s s amendments to IAS 28 and IFRS 1 included in the 2014-2016 cycle of annual improvements to IFRS, and IAS 40 and IFRS 2. These amendments will not have any impact on the Group;

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2018 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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