99 COnSOLIdATed FInAnCIAL STATeMenTS98 COnSOLIdATed FInAnCIAL STATeMenTS MONCLER GROUP 2023

subject to changing consumer needs and fashion trends. As a re- sult, it is necessary to consider the recoverability of the cost of in- ventories and the related required provision. Inventory impairment represents management s best estimate for losses arising from the sales of aged products, taking into consideration their saleability through the Group s distribution channels.

ReCOVeRABILITY OF deFeRRed TAx ASSeTS The Group is subject to income taxes in numerous jurisdictions. Judgment is required in determining the provision for income taxes in each territory. The Group recognises deferred tax assets when it is expected that they will be realised within a period that is consis- tent with management estimates and business plans.

PROVISIOn FOR LOSSeS And COnTInGenT LIABILITIeS The Group could be subject to legal and tax litigations arising in the countries where it operates. Litigation is inevitably subject to risk and uncertainties surrounding the events and circumstances asso- ciated with the claims and associated with local legislation and ju- risdiction. In the normal course of business, management requests advice from the Group legal consultants and tax experts. The rec- ognition of a provision is based on management s best estimate when an outflow of resources is probable to settle the obligation and the amount can be reliably estimated. In those circumstances where the outflow of resources is possible or the amount of the ob- ligation cannot be reliably measured, the contingent liabilities are disclosed in the notes to Consolidated Financial Statements.

LeASe LIABILITIeS And RIGHT OF USe ASSeTS The Group recognises the right of use asset and the liability for the lease. The right of use asset is initially valued at cost, and then sub- sequently at cost net of accumulated depreciation and impairment losses, and adjusted to reflect the revaluation of the lease liability.

The Group values the lease liability at the present value of the payments due for unpaid leases at the effective date, discount- ing them using the interest rate determined taking into account the term of the lease contracts, the currency in which they are denom- inated, the characteristics of the economic environment in which the contract was stipulated and the credit adjustment.

The lease liability is subsequently increased by the interest accrued on this liability and decreased by the payments due for the lease made and is revalued in the event of a change in the fu- ture payments due for the lease deriving from a change in the index or rate, in the event of a change in the amount that the Group ex- pects to pay as a guarantee on the residual value or when the Group changes its valuation with reference to the exercise or otherwise of a purchase, extension or cancellation option.

Lease contracts in which the Group acts as a lessee may pro- vide for renewal options with effects, therefore, on the duration of the contract. Relative certainty that this option will (or won t) be ex- ercised can influence, even significantly, the amount of lease liabil- ities and right of use assets.

InCenTIVe SYSTeMS And VARIABLe ReMUneRATIOn For the description of the determination of the fair value of share- based incentive payments for the Moncler Group management, please see paragraph 2.13.

IAS 29 HYPeRInFLATIOn Furthermore, IAS 29, should have been applied for the Turkish sub- sidiary as at 31 december 2023, as well as 31 december 2022, be- cause Turkey met the criteria for a hyperinflationary economy during the year. However, the accounting effects of applying that account- ing standard are not significant and thus have not been considered in the preparation of this Annual Report.

For an estimate of financial liabilities related to the purchase of minority interests and IFRIC 23: uncertainty over income tax treatments see paragraphs 2.20 and 2.16.

1.3 IMPACT OF CLIMATE CHANGE ISSUES

The Group defined a climate strategy aimed at reducing green- house gas (GHG) emissions, with the intention of positively contrib-

uting to the global goal of combating climate change, in line with the requirements of the Paris Agreement on climate. This strategy, inte- grated into the Group s business model, includes medium and long- term objectives.

In particular, the Group committed to reducing absolute CO2e emissions by 70% within Scope 1 and Scope 2 by 2030 (in line with the 1.5°C ambition) and by 52% within Scope 3 (in line with the Well-Below 2°C ambition) per unit of product sold com- pared to 2021.

Furthermore, Moncler Group committed to achieving net ze- ro emissions (net Zero1) along the entire value chain by 2050.

These objectives have been formally approved by the Sci- ence Based Targets initiative (SBTi)2 and deemed consistent with the contribution required of companies to limit the maximum in- crease in global temperature compared to pre-industrial levels.

The main actions undertaken to achieve these objectives include: use of electricity from renewable sources (both purchased

and self-generated); implementation of energy efficiency activities (Building Man-

agement System - BMS, lighting systems, more efficient heating and cooling, improvement of building thermal insula- tion, and promotion of environmental standards for buildings);

adoption of low-impact environmental vehicles in the Group s car fleet;

obtaining Leed certifications for new stores3 and all new cor- porate buildings.

For Scope 3 emissions: the progressive introduction of preferred materials in col-

lections; promotion of regenerative agriculture projects; decarbonization of the supply chain through energy efficien-

cy measures and the adoption of renewable energy sources.

The actions described above are reflected and will be reflected in the Group s Consolidated Financial Statements in terms of new in- vestments and recurring operations (e.g., purchase of origin guar- antee certificates, purchase of certified raw materials, etc.). The Group voluntarily reports on non-financial aspects in both the non-Financial Statement and the CdP Climate Change question- naire, addressing climate change-related business risks as per the requirements of the european Securities and Market Authority (eS- MA) and the recommendations of the Task Force on Climate-relat- ed Financial disclosures (TCFd) of the Financial Stability Board: Governance, Strategy, Risk Management, Metrics, and Objectives.

The impact of climate change has also been evaluated in rela- tion to estimates and assessments made in the financial statements. Medium-term impacts have been taken into account in the business plan projections, which form the basis for the impairment test.

As of the reporting date, there are no significant effects on the figures presented in the Group s Consolidated Financial Statements.

Furthermore, to strengthen the Group s commitment to eSG issues, starting from 2020 Performance Share plan, an eSG Perfor- mance Indicator focused on carbon neutrality has been introduced for all directly managed Group locations worldwide (offices, stores, logistics hub, production sites), on reducing single-use fossil ori- gin plastic, and on recycling nylon production waste, taking into ac- count the Group s inclusion in the dow Jones Sustainability World and europe indices.

1 Achieving net Zero involves the overall balance between greenhouse gas (GHG) emissions produced and those absorbed by ecosystems, throu- gh neutralisation mechanisms. Specifically, to contribute to net Zero, com- panies must reduce emissions and neutralise residual emissions.

2 Promoted by CdP, United nations Global Compact, World Resources In- stitute (WRI) and World Wide Fund for nature (WWF), the Science Based Targets initiative establishes and promotes best-practice in defining science-based targets, as well as assessing companies objectives.

3 excluding Shop-in-shop.