asset or non-financial liability on initial recognition or, in the case of other cash flow hedges, it is reclassified in profit or loss for the period in the same period or periods in which the hedged expect- ed future cash flows affects profit/(loss) for the period.

If no more hedged future cash flows are expected, the amount shall be reclassified immediately from the cash flow hedge reserve and the reserve for hedging costs to profit/(loss) for the period.

If hedge accounting cannot be applied, gains or losses, arising from the fair value measurement of a derivative financial instrument, are immediately recognised in income statement. Following the hedging relationships put in place, revenues in for- eign currencies are translated in the consolidated financial state- ments at the corresponding forward rate for the relative hedged volume.

2.11 EMPLOYEE BENEFITS

Short-term employee benefi ts, such as wages, salaries, social security contributions, paid leave and annual le- ave due within twelve months of the consolidated statement of fi nancial position date and all other fringe bene- fi ts are recognised in the year in which the service is rendered by the employee.

Benefits granted to employees, which are payable on or after the termination of employment through defined benefit and contribu- tion plans, are recognised over the vesting period.

DEFINED BENEFIT SCHEMES Defined benefit schemes are retirement plans determined based on employees remuneration and years of service.

The Group obligation to contribute to employees bene- fit plans and the related current service cost are determined by using an actuarial valuation defined as the projected unit credit method. The cumulative net amount of all actuarial gains and loss- es are recognised in equity within other comprehensive income.

The amount recognised as a liability under the defined ben- efit plans is the present value of the related obligation, taking into consideration expenses to be recognised in future periods for em- ployee service in prior periods.

DEFINED CONTRIBUTION SCHEMES Contribution made to a defined contribution plan is recognised as an expense in the income statement in the period in which the em- ployees render the related service.

Up to 31 December 2006 Italian employees were eligible to defined benefit schemes referred as post-employment benefit ( TFR ). With the act n. 296 as of 27 December 2006 and subse- quent decrees ( Pension Reform ) issued in early 2007, the rules and the treatment of TFR scheme were changed. Starting from contribution vested on or after 1 January 2007 and not yet paid at the reporting date, referring to entities with more than 50 employ- ees, Italian post-employment benefits is recognised as a defined contribution plan. The contribution vested up to 31 December 2006 is still recognised as a defined benefit plan and accounted for using actuarial assumptions.

2.12 PROVISION FOR RISKS AND CHARGES

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outfl ow of economic resources will be required to settle the obligation and where the amount of the obligation can be reliably estimated.

Restructuring provision is recognised when the Group has a de- tailed formal restructuring plan and the plan has been imple- mented or the restructuring plan has been publicly announced. Identifiable future operating losses up to the date of a restructur- ing are not included in the provision.

Changes in estimates are recognised in the income state- ment in the period in which they occur.

2.13 SHARE-BASED PAYMENTS

The fair value at grant date of the incentives granted to employees in the form of share-based payments, that are equity settled, is usually included in expenses with a matching increase in equity over the period during which the employees obtain the incentives rights. The amount recognised as an expense is adjusted to refl ect the actual number of incentives for which the continued service conditions are met and the achievement of non-market conditions, so that the fi nal amount recognised as an expense, is based on the number of incen- tives that fulfi l these conditions at the vesting date. In case the incentives granted as share-based paymen- ts whose conditions are not to be considered to maturity, the fair value at the grant date of the share-based payment is measured to refl ect such conditions. With reference to the non-vesting conditions, any difference between amounts at the grant date and the actual amounts will not have any impact on the Consolidated Finan- cial Statements.

The fair value of the amount payable to employees related to share appreciation rights, settled in cash, is recognised as an expense with a corresponding increase in liabilities over the period during which the employees unconditionally become entitled to receive the payment. The liability is measured at year-end and the settle- ment date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognised in prof- it or loss for the year.

2.14 REVENUE RECOGNITION

Based on the fi ve-step model introduced by IFRS 15, the Group recognises revenues after identifying the con- tracts with its clients and the related services to be provided (transfer of goods and/or services), determining the consideration which it believes it is entitled to in exchange for the provision of each of these services and assessing the manner in which these services are provided (at a given time or over time).

Wholesale sales are recognised when goods are dispatched to trade customers, reflecting the transfer of risks and rewards. The provision for returns and discounts is estimated and accounted based on future expectation, taking into consideration historical return trends and is recorded as a variable component of the con- tractual consideration with the concurrent recognition of a liabil- ity for returns and of the corresponding asset in the statement of financial position.

Variable components of the consideration (for example, the effect of returns) are recognised in the financial statements only when it is highly probable that there will be no significant adjust- ment to the amount of revenue recognised in the future.

Retail sales are recognised at the date of transactions with final customers.

Royalties received from licensee are accrued as earned on the basis of the terms of the relevant royalty agreement which is typically based on sales volumes.

Upon receipt of an advance payment from a client, the Group recognises the amount of the advance payment for the ob- ligation to transfer assets in the future under Other current liabil- ities and derecognises this liability by recognising the revenue when the assets are transferred.

The Group recognises the amounts paid to customers as a reduction in revenues when the costs for services cannot be reli- ably estimated or in costs when the costs for services can reliably be estimated.

2.15 BORROWING COSTS

Borrowing costs are recognised on an accrual basis taking in- to consideration interest accrued on the net carrying amount of financial assets and liabilities using the effective interest rate method.

2.16 TAXATION

Tax expense, recognised in the consolidated income statement, represents the aggregated amount related to current tax and deferred tax.

Current taxes are determined in accordance with enforced rules es- tablished by local tax authorities. Current taxes are recognised in the consolidated income statement for the period, except to the ex- tent that the tax arises from transactions or events which are rec- ognised directly either in equity or in other comprehensive income.

CONSOLIDATED FINANCIAL STATEMENTS118 119CONSOLIDATED FINANCIAL STATEMENTS MONCLER GROUP

2021