LOREAL_Registration_Document_2017

2 Corporate governance *

RISK FACTORS AND CONTROL ENVIRONMENT

The other Functional Departments The following departments are also involved in Internal Control: the Human Resources Department monitors and supervises s all obligations related to personnel management, specifies the documents to be provided to employees, the remuneration of the workforce and personnel expenses, recruitment, training and evaluation procedures, the rules to be complied with in the area of payroll management and the implementation of the Share & Care programme; the Research and Innovation Department is responsible in s particular for cosmeto-vigilance and the quality of the formulas used in product composition (see chapter 3 Cosmetovigilance and impact on safety assessment); the Communications and Public Affairs Department, which s co-ordinates communications initiatives, prepares crisis management principles and ensures that they are applied (see paragraph 2.8.5.3.1 Image and reputation ); the Security and Safety Department, which has defined a s security and safety policy for people, travel, property, information and data confidentiality (see paragraph 2.8.5.3.1. Employee safety ). For the preparation of this report, L’Oréal based itself on the Application Guide for Internal Control of accounting and financial information published by issuers, which is part of the Reference Framework published by the AMF on 22 July 2010. This approach is part of an overall process aimed at making continual progress and improving the Internal Control system that has already been set up. Definition, scope and objectives 2.8.3.1. Internal Control for accounting and finance covers the processes that provide accounting data: the process of producing financial information, the accounts closing process and financial communication actions. The Internal Control system with regard to accounting and financial aspects aims to ensure: compliance with accounting regulations and the correct s application of the principles on which the financial statements are based; application of the guidelines set by the General s Management with regard to financial information; protection of assets; s quality of the reporting that contributes to the preparation s of the published financial statements and the reliability of their centralised treatment for the Group with a view to their distribution and their use for monitoring purposes; SYSTEM RELATING TO THE 2.8.3. PREPARATION AND PROCESSING OF FINANCIAL AND ACCOUNTING INFORMATION

control of the production of financial, general and s management accounting information including fraud prevention. The scope of application of the Internal Control procedures relating to the preparation and processing of financial and accounting information encompasses the parent company and all subsidiaries included in the consolidated financial statements.

Monitoring process for the 2.8.3.2.

organisation of the accounting and finance functions

Organisation of the Finance Department Dedicated teams of specialists ensure the implementation of accounting and financial monitoring, under the supervision of General Management, in the following areas: accounting, consolidation, tax matters, management, financial services and treasury. In the Administration and Finance Department, the preparation of the Group’s consolidated financial results is the responsibility of the Operational Finance Department. The tax function, consisting of a network of tax lawyers at corporate level, in the zones and in the 17 countries of the Group that are the most exposed, monitors the changes in regulations, ensures compliance with the local rules, and oversees the implementation of the Group’s tax policy, and in particular the strict application of the transfer pricing policy and the customs rules. The presence of management controllers at each level of the organisation helps to reinforce the Internal Control system. This network of management controllers of the subsidiaries is led by the Operational Management Department. The processing and pooling of cash flows and hedging of currency and interest rate risks are carried out by the Group Corporate Finance Department, which is in charge of identifying commitments and enabling their proper booking. Group standards The Group has put in place a set of accounting policies and standards consistent with IFRS, the consolidated accounting standards. The application of these standards is compulsory for all consolidated subsidiaries in order to provide uniform and reliable financial information. These accounting policies are regularly updated, taking into account the changes in regulations and accounting principles: they set out the principles required for harmonised accounting s treatment of transactions. They specify in particular the methods of recording balance sheet items and of identification and valuation of off-balance sheet commitments. The Group’s Accounting Department monitors, on an ongoing basis, new accounting standards currently under preparation, with a view to alerting the General Management and anticipating their effects on the Group’s financial statements; the chart of accounts, which is common to all subsidiaries, s provides the definitions and the methodology for the preparation of the reporting required for the preparation of the financial statements.

REGISTRATION DOCUMENT / L'ORÉAL 2017

110