5 5.6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note contents NOTE 1 Accounting principles 291 NOTE 2 Main events of the period 293 NOTE 3 Operating items – Segment information 294 NOTE 4 Other operational income and expenses 301 NOTE 5 Number of employees, personnel costs and employee benefits 302 NOTE 6 Income tax 309 NOTE 7 Intangible assets 311 NOTE 8 Investments accounted for under the equity method 321 NOTE 9 Financial assets and liabilities – Cost of debt 322 NOTE 10 Derivatives and exposure to market risks 326 NOTE 11 Equity – Earnings per share 330 NOTE 12 Provisions for liabilities and charges – Contingent liabilities and material ongoing disputes 334 NOTE 13 Sustainable development and the climate 337 NOTE 14 Off-balance sheet commitments 338 NOTE 15 Transactions with related parties 338 NOTE 16 Fees accruing to auditors and members of their networks payable by the Group 339 NOTE 17 Subsequent events 339 NOTE 1. Accounting principles The consolidated financial statements of L’Oréal and its subsidiaries (“the Group”) published for 2021, have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted in the European Union as of 31 December 2021. On 9  February 2022, the Board of Directors closed the consolidated financial statements at 31 December 2021. The financial statements will not become final until they have been approved by the Annual General Meeting of shareholders to be held on 21 April 2022. The Group did not anticipate any standards or interpretations not mandatorily applicable in 2021. The Group is currently reviewing a decision of the IFRS  IC: In  April 2021, a decision relating to IAS  38 “Intangible Assets” was published. It addressed the matter of how to account for the costs of configuring or customising software accessed via the cloud under a “Software as a service” (SaaS) agreement. At 31 December 2021, this analysis has not yet been finalised due to the operational complexity of implementing this decision. Amendments and interpretations applied in 2021: Dec ision relating to IAS 19 “Employee Benefits” regarding the attribution of employee benefits to periods of service. The method traditionally used to recognise obligations arising from defined benefit pension schemes involved attributing the rights on a straight-line basis over the entire career of the beneficiaries. The IFRS  IC recommended adjusting this method for defined benefit schemes that had the following characteristics: • dependent on the length of service with the Company; • capped at a specified number of years of service; • payable from retirement age. For this type of scheme, the decision published in late May  2021 states that rights vested over the period prior to retirement age should be attributed on a straight-line basis by limiting its duration to the specified number of years of service at which rights are capped. Impact at Group level is focused on France and stands at €137.4 mill ion gross and €102.2 million after tax, recorded as an increase in shareholders’ equity. The impact on the income statement for the period is marginal. Amendments and interpretation applied in 2020: IFRS 16 "Leases" At 31 December 2020, the Group completed its analysis of the IFRS  Interpretation Committee (IC) decision dated 26  November  2019. This decision relates to the duration of certain leases (indefinite term or short initial contractual term which is automatically renewable) as well as to the depreciation period for fixtures and fittings that are inseparable from the leased asset. This decision does not have a significant impact at the Group level. The Group applied the amendment to IFRS  16, adopted by the European Union on 12 October 2020 and on 31 March 2021, relating to Covid-19-related rent relief reducing lease payments due on or before 30 June 2022. The amendments allow changes in terms of rent relief to be recognized immediately in income rather than spread over the term of the contract. The impact is not material at the Group level. L ’ ORÉAL I UNIVERS AL REGISTRATION DOCUMENT 2021 291 2021 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements