PERNOD-RICARD_REGISTRATION_DOCUMENT_2017-2018

5

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax is recognised on temporary differences between the tax and book values of assets and liabilities in the consolidated balance sheet and is measured using the balance sheet approach. The effects of changes in tax rates are recognised in shareholders’ equity or in profit and loss in the year in which the change of tax rates is decided. Deferred tax assets are recognised in the balance sheet when it is more likely than not that they will be recovered in future years. Deferred tax assets and liabilities are not discounted to present value. In order to evaluate the Group’s ability to recover these assets, particular account is taken of forecasts of future taxable profits.

Deferred tax assets relating to tax loss carryforwards are only reported when they are likely to be recovered, based on projections of taxable income calculated by the Group at the end of each financial year. All assumptions used, including, in particular, growth in operating profit and financial income (expenses), taking into account interest rates, are reviewed by the Group at the end of the financial year based on data determined by the relevant senior management.

Deferred taxes are broken down by nature as follows:

30.06.2018

30.06.2017

€ million

Margins in inventories

91 96

87 22 90

Fair value adjustments on assets and liabilities

Provisions for pension benefits

140

Deferred tax assets related to losses eligible for carryforward Provisions (other than provisions for pension benefits) and other items

1,314

870 487

736

TOTAL DEFERRED TAX ASSETS Accelerated tax depreciation

2,377

1,556

107

116

Fair value adjustments on assets and liabilities

2,750

1,936

Other items

565

541

TOTAL DEFERRED TAX LIABILITIES

3,421

2,593

Tax loss carryforwards (recognised and not recognised) represented a potential tax saving of €1,165 million on 30 June 2018 and €1,431 million on 30 June 2017. The potential tax savings on 30 June 2018 and 30 June 2017 relate to tax loss carryforwards with the following expiry dates: FY17

Tax effect of loss carryforwards € million Losses recognised Losses not recognised

Year 2017 2018 2019 2020

1 1 1 1

0 1 0 1

2021 and after No expiry date

1,046

21 94

265

TOTAL

1,314

117

FY18

Tax effect of loss carryforwards € million Losses recognised Losses not recognised

Year 2018 2019 2020 2021

1 0 1 2

1 0 0 0

2022 and after No expiry date

682 184 870

190 103 296

TOTAL

For the sake of prudence, the tax asset relating to a foreign exchange loss in the United States for €168 million has not been recognised on the balance sheet and income statement.

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PERNOD RICARD REGISTRATION DOCUMENT 2017/2018