Since July 2023, net sales have mainly comprised services and technology royalties.
Expenses relating to the advertisement and promotion of products to customers and consumers are recognised as expenses for the financial year in which the advertisement or promotional initiative takes place.
Research and innovation costs are recognised in expenses in the period in which they are incurred.
Issuance costs of borrowings are expensed immediately in the financial year in which they are incurred.
The Company has opted for the French tax group regime. French subsidiaries included in the scope of tax consolidation recognise an income tax charge in their own accounts on the basis of their own taxable profits and losses.
L’Oréal, as the parent company of the tax group, recognises as tax income the difference between the aggregate tax charges recognised by the subsidiaries and the tax due on the basis of consolidated taxable profit or loss of the tax group.
Established by the OECD and transposed in December 2023 in France, the Pillar 2 global tax reform aims to establish a minimum taxation of multinational groups at 15% and is applicable from the 2024 financial year (see note 8).
Intangible assets are recorded in the balance sheet at purchase cost, including acquisition costs.
Technical merger losses are allocated to the corresponding underlying assets and amortised where appropriate.
The value of newly acquired trademarks is calculated based on a multi-criteria approach taking into consideration their reputation and their future contribution to profits.
In accordance with regulation No. 2004-06 on assets, certain trademarks have been identified as amortisable regarding their estimated useful life.
Non-amortisable trademarks are tested for impairment at least once a year on the basis of the valuation model used at the time of their acquisition. An impairment is recorded where appropriate. Initial trademark registration costs are recorded as expenses.
Patents are amortised over a period ranging from 2 to 10 years.
Business goodwill is not amortised. It is impaired whenever the present value of future cash flows is less than the carrying amount. Impairment tests are conducted at least once a year, even when there is no evidence of impairment loss.
Software of material value is amortised using the straight-line method over its probable useful life, generally between three and eight years.
Other intangible assets are usually amortised over periods not exceeding 20 years.
Property, plant and equipment are recognised at purchase cost, including acquisition expenses. The useful lives of property, plant and equipment are as follows:
| Duration (years) | |
|---|---|
| Buildings | Buildings Duration (years)20-50 |
| Fixtures and fittings | Fixtures and fittings Duration (years)5-10 |
| Industrial machinery and equipment | Industrial machinery and equipment Duration (years)10 |
| Other property, plant and equipment | Other property, plant and equipment Duration (years)3-10 |
Both straight-line and declining-balance depreciation is calculated over the actual useful lives of the assets concerned. Exceptionally, industrial machinery and equipment is depreciated using the straight-line method over a period of 10 years, with all additional depreciation classified as accelerated tax-driven depreciation. Exceptional depreciation may be recognised where events and circumstances lead to a review of the asset’s useful life.
These items are recognised in the balance sheet at purchase cost, excluding incidental expenses.
Their value is assessed annually by reference to their value in use, which is mainly based on the current and forecast profitability of the subsidiary concerned and the share of shareholders’ equity owned. If the value in use falls below the carrying amount, an impairment is recognised.
Loans and other receivables are valued at their nominal amount and those denominated in foreign currencies are translated at the exchange rate prevailing at the end of the financial year. If necessary, impairments are also recognised against them to reflect their value in use at the end of the financial year.
Treasury shares acquired in connection with buyback programmes with a view to being cancelled are recognised in other long-term investments.
At the end of the financial year, other long-term investments are compared with their probable sale price and a provision for impairment recognised where appropriate.
Trade accounts receivable and other receivables are recorded at their nominal value. Where appropriate, an impairment is recognised based on an assessment of the risk of non-recovery.
