HERMÈS - 2018 Registration document

Parent company financial statements

Notes to the financial statements

ACCOUNTING RULES AND METHODS

NOTE 1

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 and foreign exchange 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. 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. 1.7 Income tax Since 1 January 1988, the Company has opted for a group tax consolida- tion under French tax law. Under the terms of an agreement between the parent company and the subsidiaries included in the tax consolidation group, the French subsidiaries included in the tax consolidation scope recognise, in their financial statements, a tax expense on the basis of their own tax results. Hermès International, the head of the tax consoli- dation group, recognises the difference between the sum of the taxes of subsidiaries and the tax due on the overall income as a tax credit due to tax consolidation. The tax consolidation scope includes 55 companies.

The parent company annual financial statements are drawn up in accor- dancewiththeprovisionsofFrench lawsandregulations(PlanComptable Général) and with generally accepted accounting principles in France.

1.1 Intangible assets

Intangible assets include 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 their acquisition cost. Depreciation is calculated using the straight-line or declining-balance method, on the basis of the following expected useful lives: s s buildings: straight-line over 20 to 40 years; s s building fixtures and fittings: straight-linemethodover 10 to40 years; s s office furniture and equipment: straight-line or declining-balance method over 4 to 10 years; s s computer equipment: declining-balance method over 3 years; s s 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.

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1.4 Trade receivables

Receivables are recorded at nominal value. A provision for impairment is recognised where there is a risk of non-recovery.

2018 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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