PERNOD RICARD - 2018-2019 Universal registration document

6.

CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Analysis of effective tax rate – Net profit fromcontinuing operations before tax

30.06.2019

30.06.2018

€ million

Operating profit Financial results Taxable profit

2,296 (301)

2,375 (310)

1,994

2,064

Theoretical tax charge at the effective income tax rate in France  (1)

(687)

(711)

Impact of tax rate differences by jurisdiction Tax impact of variations in exchange rates

276

228 (1) (9)

1

Re-estimation of deferred tax assets linked to tax rate changes

86

Impact of tax losses used/not used

2

1

Impact of reduced/increased tax rates on taxable results

0

0

Taxes on distributions

24

(47) (44)

Other impacts

(94)

EFFECTIVE TAXCHARGE EFFECTIVE TAXRATE

(392) 20%

(582) 28%

At the standard rate of 34.43%. (1) The US tax reform, known as the “Tax Cuts and Jobs Act” of 22 December 2017, resulted in a revaluation of deferred tax assets and liabilities following the reduction of the US federal tax rate, resulting in a tax gain of €55 million in the year ended 30 June 2018. Deferred tax is recognised on time 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.

Following the invalidation by the French Constitutional Council of the dividend tax system (known as the “3% tax”) in October 2017, the Group recognised income related to the reimbursement of the tax, estimated at €71 million in the year ended 30 June 2018.

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:

30.06.2019

30.06.2018

€ million

Unrealised margins in inventories

87 22

99

Fair value adjustments on assets and liabilities

21

Provisions for pension benefits

90

94

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

870 487

908 468

TOTALDEFERREDTAXASSETS

1,556

1,590

Accelerated tax depreciation

116

124

Fair value adjustments on assets and liabilities

2,218

2,339

Pension and other hedging assets

259

294

TOTALDEFERREDTAX LIABILITIES

2,593

2,756

171

2018-2019

PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT