PERNOD RICARD - 2018-2019 Universal registration document

6.

CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Segment information Note 2

Accounting principles amended following the application of IFRS 15

Net sales The Group’s Net sales is comprised mainly of sales of finished products, and is recognised in the income statement when the control of the products in question is transferred. It is measured at the fair value of the consideration received or due, after deducting trade discounts, volume rebates, certain costs associated with business and promotional activity, and sales-related taxes and duties, notably excise duties. Costs of commercial and promotional activity Pursuant to IAS 15, certain costs of services rendered in connection with sales, such as advertising programmes in conjunction with distributors, listing costs for new products, promotional activities at point of sale, and advertising and promotional expenses, are deducted directly fromNet sales if there is no distinct service whose fair value can be reliablymeasured. Duties and taxes In accordance with IFRS 15, certain import duties, in Asia for instance, are recognised in cost of sales, as these duties are not specifically re-billed to customers (as is the case for social security stamps in France, for example). Discounts In accordance with IFRS 15, early payment discounts are not considered to be financial transactions, but are deducted directly fromnet sales. The Group is focused on a single activity, the production and sale of wines and spirits, and has three operating segments covering three regions, namely America, Europe and Asia/Rest of the World (RoW). Group Management assesses the performance of each operating segment on the basis of net sales and Profit from Recurring Operations, defined as the gross margin after logistics costs, less advertising and promotion investments and structure costs. The segments presented are identical to those used in reporting to General Management, in particular for the performance analysis.

Grossmargin after logistics expenses, Contribution after advertising and promotion expenses, Profit from Recurring Operations andOther operating income and expenses The gross margin after logistics costs corresponds to sales (excluding duties and taxes), less costs of sales and logistics expenses. The contribution after advertising and promotion expenses includes the gross margin after deduction of logistics expenses and advertising and promotion expenses. The Group applies recommendation 2013-R03 of the French accounting standards authority (Autorité des normes comptables – ANC), notably as regards the definition of Profit from Recurring Operations. Profit from Recurring Operations is the contribution after advertising and promotion expenses less trading costs and overheads. This is the indicator used internally to measure the Group’s operational performance. It excludes other operating income and expenses, such as those related to restructuring, capital gains and losses on disposals, impairment of property, plant and equipment and intangible assets, and other non-recurring operating income or expenses. These other operating income and expenses are excluded from Profit from Recurring Operations because the Group believes they have little predictive value due to their occasional nature. They are described in detail in Note 3.1 – Other operating income and expenses .

Items in the income statement and the balance sheet are allocated on the basis of either the destination of sales or profits. Reporting by operating segment follows the same accounting policies as those used for the preparation of the consolidated financial statements. Intra-segment transfers are transacted at market prices.

Asia/Rest of theWorld

At 30.06.2018 restated € million

America

Europe

Total

Income statement items Segment net sales

3,668

5,343 1,779

4,206

13,218 4,496 8,722 5,289 3,860 2,358

O/w intersegment sales

1,183

1,533

Net sales (excluding Group) Gross margin after logistics expenses

2,485

3,564 2,030

2,674

1,629 1,134

1,630 1,224

Contribution after advertising and promotion expenses

1,502

Profit fromRecurring Operations

735

996

626

Other information Current investments

59 29

48 47

283

390 282

Depreciation, amortisation and impairment

206

168

2018-2019

PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT