HERMÈS - 2018 Registration document

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Consolidated financial statements Notes to the consolidated financial statements

1.2 Scope and methods of consolidation The consolidated financial statements include the financial statements of Hermès International and material subsidiaries and associates over which Hermès International directly or indirectly exerts control, joint control or significant influence. 1.2.1 Ccontrol Control is presumed to exist when the Group holds more than 50% of the voting rights. Nevertheless, it can be considered that a company is under exclusive control when less than 50% is held, provided that the Group holds the power to govern a company’s financial and operational policies in order to derive benefits from its business activities. The financial statements of companies under control are fully consoli- dated. Under the full consolidation method, assets, liabilities, income and expenses are combined in full on a line by-line basis. Equity and net profit attributable to non-controlling interests are identified separately under “Non-controlling interests” in the consolidated statement of finan- cial position and the consolidated statement of profit or loss. 1.2.2 Joint control Entities owned by the Group in which the power to govern financial and operating policies is contractually shared with one or more other parties, none of which exercises effective control, are recognised using the equity method. At this time, the Group does not jointly control any company. 1.2.3 Significant influence The financial statements of associates, or other companies over which the Group has significant influence (which is presumed to exist when the Group’s percentage of control exceeds 20%, or proven if the control percentage is below 20%), are recognisedusing the equity method. 1.2.4 Newly consolidated and deconsolidated companies Subsidiaries are included in the consolidation scope from the date on which control is effectively transferred to the Group. Divested subsidia- ries are excluded from the scope of consolidation from the date on which the Group ceases to have control.

1.3.2 Foreign companies’ financial statements Financial statements expressed in foreign currencies are converted in accordance with the following principles: s s items in the statement of financial position are converted at the year- end exchange rate for each currency; s s items in the statement of profit or loss are converted at the average annual exchange rate for each currency; s s items in the statement of cash flows are converted at the average annual exchange rate for each currency; s s the foreign currency adjustment attributable to owners of the parent arising from the impact on equity of the difference between historical exchange rates and year-end exchange rates, and from the use of different exchange rates for the statement of profit or loss and state- ment of financial position, is shown separately in consolidated equity. The same principle is applied to non-controlling interests. Any goodwilland any fair value adjustments arising on the acquisition of a foreign entity are considered to be assets and liabilities of that foreign entity. Therefore, they are expressed in the entity’s functional currency and converted at closing rates. 1.4 Eliminations of intra-group transactions The effect on the statement of profit or loss of intra-group transactions suchasmargins on inventories, gains or losses ondisposals, impairment of shares in consolidated companies, and impairment of loans to conso- lidated companies, has been eliminated. These transactions are also subject to income tax. Dividends and interim dividends received by the Group from consoli- dated companies are eliminated on consolidation. A matching amount is recorded in consolidated reserves. In the case of companies accounted for using the full consolidation method, reciprocal payables and receivables as well as reciprocal income and expenses are fully eliminated. InaccordancewithIAS1 PresentationofFinancialStatements ,theGroup classifies its assets and liabilities on its statement of financial position as current and non-current. An asset or liability is classified as current: s s when the Group plans to realise its assets or pay its liabilities within twelve months or within the Group’s normal operating cycle; s s when the relevant assets or liabilities are held for the purpose of being traded. In particular, IAS 12 Income Taxes specifies that deferred tax balances shall be classified as non-current. 1.5 Structure of the consolidated statement of financial position

1.3 Translation methods of foreign currency items

1.3.1 Conversion of foreign-currency transactions Foreign-currencytransactionsarerecordedoninitialrecognitionineuros, by using the applicable exchange rate at the date of the transaction (historical rate). Monetary assets and liabilities denominated in foreign currencies are converted using the closing exchange rate. Foreign cur- rency adjustments are recognised in income or expenses. Non-monetary assets and liabilities denominated in foreign currencies are converted using the exchange rate at the transaction date.

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2018 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL