Content
2 accounting policies2.1 general information
2.2 basis of accounting
2.3 changes in accounting policies
2.4 new standards and interpretations
2.5 consolidation
2.6 currency translation
2.7 critical accounting estimates and judgments
2.8 segment reporting
2.9 revenue recognition
2.10 impairment
2.11 income taxes
2.12 cash and cash equivalents
2.13 derivative financial instruments and hedging activities
2.14 inventories
2.15 construction contracts
2.16 trade accounts receivable and other current accounts receivable
2.17 financial assets
2.18 non-current assets held for sale and discontinued operations
2.19 tangible assets
2.20 goodwill and other intangible assets
2.21 investment property
2.22 trade accounts payable
2.23 dividend distribution
2.24 financial liabilities
2.25 leases
2.26 employee benefits
2.27 provisions
2.28 share capital
2 accounting policies
2.1 general information
Orell Füssli Holding Ltd and its subsidiaries (hereinafter the “Orell Füssli Group” or the “Group”) focus their business on three strategic business segments.
The business unit of Industrial Systems covers the production and the sales of machineries and systems for digital printing and encoding of bank notes, passports, security documents, plastic cards and packaging. The head office in Germany and its several subsidiaries abroad serve and support their clients on all continents.
The business unit Banknote and Security Printing is path-breaking by its technology and quality in the area of banknote printing, the production of identification and further documents with high and highest security requirements. Due to extraordinary services, state-of-the-art equipment and extensive experience over many years, Banknote and Security Printing is known worldwide by its clients to be a reliable business partner.
The business unit of Book Retailing occupies a leading position in the German-speaking part of Switzerland with numerous large-format and specialist bookstores and the online shops www.books.ch and www.storyworld.ch. Furthermore, it offers full service for key accounts like companies and public libraries.
Integrated in other business activities, the Publishing business stands as the traditional pillar of the Orell Füssli Group. Focus is laid on non-fiction publishers and topics related to Switzerland. The Group sold its controlling interest in the largest post card publisher in Switzerland, Photoglob Ltd, to the former minority shareholder in the 2010 financial year.
Orell Füssli Holding Ltd is a Swiss public limited company, domiciled in Zurich. The present consolidated financial statements were approved by the Board of Directors on 25 March 2011. The approval of the consolidated financial statements by the shareholders will take place at the Annual General Meeting.
The principal accounting policies being used to prepare the present consolidated financial statements are described below. They have been consistently applied to the presented reporting periods.
2.2 basis of accounting
The consolidated financial statements have been prepared under the historical cost convention, modified by the fair valuation through profit and loss of marketable securities including derivative financial instruments. The consolidated financial statements are presented in thousands of Swiss Francs (CHF ‘000).
When preparing the consolidated financial statements, management needs to make estimates and assumptions which may influence the disclosed income and expenses, assets and liabilities, as well as other disclosed information. Areas involving a wider range of judgment or a higher degree of complexity, and areas where assumptions and estimates are significant to the consolidated financial statements are listed separately in the notes under reference 4.
The consolidated financial statements of the Orell Füssli Group have been prepared in accordance with the International Financial Reporting Standards (IFRS). The consolidated financial statements are further in accordance with Swiss law and the accounting standards of the SIX Swiss Exchange. The accounting policies as stated below have been applied for the presented reporting periods.
2.3 changes in accounting policies
No new standards were enacted in the financial year 2010, but several amendments whose effects on the accounting policies of the Group were not previously described in a concluding way:
IFRS 3 (revised) Business Combinations – Disclosures, and IAS 27 (amendment) Consolidated and Separated Financial Statements (effective from 1 July 2009). The more significant changes in accounting for business combinations address the measurement and accounting of non-controlling interests, step acquisitions, equity transactions, the handling of a loss of control of a subsidiary, of acquisition-related costs, of changes to contingent consideration as a result of subsequent events, the effective settlement of pre-existing relationships, and reacquired rights. The Orell Füssli Group has implemented the amendments with the effective date from 1 January 2010 not including any retrospective adjustments.
IAS 32 (amendment), Classification of Right Issues (effective from 1 February 2010). The amendment specifies that a rights issue offered pro rata to all of an entity’s existing shareholders on the exercise of which the entity will receive a fixed amount of cash or a fixed number of the entity’s own equity instruments is classified as an equity instrument regardless of the currency in which the exercise price is denominated. The amendment has no impact on the Group’s financial statements.
IFRS 2 (amendment), Share-based Payments – Cash-settled share-based Payment Transactions (effective from 1 January 2010). The amendments clarify how an individual subsidiary in a group should account for some share-based payment arrangements in its own financial statements. The amendments also incorporate guidance previously included in IFRIC 8 and IFRIC 11. As a result, the IASB has withdrawn these interpretations. As the Orell Füssli Group has not implemented any share-based payment plans the adjustment will not have any impact on the Group’s consolidated financial statements.
IAS 39 and IFRIC 9 (amendment), Embedded Derivatives (effective for reporting periods ending on or after 30 June 2009). The amendments specify to what extent an entity would need to assess any embedded derivatives in consideration of the reclassification of hybrid financial instruments. The amendment has no impact on the Group’s financial statements.
IFRIC 19, Guidance on Extinguishing Financial Liabilities with Equity Instruments (effective from 1 July 2010). The interpretation regulates the requirements of IFRS when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. The Orell Füssli Group has not established such kind of transactions.
2.4 new standards and interpretations
In the financial year of 2010, no standard was published by the IASB. Following amendments were issued whose improvements either have no relevance to the Group’s reporting or have not yet been conclusively analysed:
IFRS 7 (Amendment), Financial Instruments: Disclosures (effective from 1 July 2011). The amendments will allow users to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the asset. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The Group adopts the amendments on time.
IAS 12 (Amendment), Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012). The amendment provides a practical solution how to assess whether the recovery of the carrying amount of an asset will be through use or through sale when the asset is measured using the fair value model in IAS 40 “Investment Property”. The amendment has no impact on the Group’s financial statements.
IFRS 9 (new standard), Financial Instruments (effective from 1 January 2013). The standard introduces new regulations on the classification and measurement of financial assets. Publication of IFRS 9 represents the completion of the first part of a three-part project to replace IAS 39 with the aim to improve comparability and to make financial statements easier to understand for investors and other users. The impact of the new standard on the Group’s financial statements has not yet been assessed.
Published in May 2010, the IASB issued a significant number of amendments in the course of the Annual Improvement Project. Most of them are effective from 1 January 2011. The Group will implement these adjustments on time, if necessary.
2.5 consolidation
Subsidiaries
Subsidiaries are all domestic and foreign entities if they are directly or indirectly controlled by Orell Füssli Holding Ltd, the latter holding more than 50% of the votes or being able to control financial and operating policies in any other ways.
Subsidiaries are fully consolidated from the date on which the direct or indirect control passes to Orell Füssli Holding Ltd. They are deconsolidated from the date that control ceases. The purchase method is used to account for the acquisition of subsidiaries by the Group. On the acquisition date all identifiable assets and liabilities of the subsidiary are measured at fair value. The excess of the cost of acquisition over the fair value of the Group’s share in the net assets of the subsidiary acquired is recorded as goodwill.
Effects on inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated in the consolidated financial statements.
Investments in associates
Investments in associates in which Orell Füssli Holding Ltd can exercise significant influence, are accounted for using the equity method. Influence is considered as significant if Orell Füssli Holding Ltd directly or indirectly holds between 20% and 50% of the voting rights or can otherwise significantly influence financial and operating policies.
Investments in associates are initially recognised at cost. Cost may include goodwill. The book value of the investment is subsequently adjusted according to the Group’s share part of the associate’s equity.
Joint ventures
In 2010 and 2009, the Orell Füssli Group did not include any companies as joint ventures in its consolidated financial statements.
2.6 currency translation
The items included in the financial statements of each Group’s entities are measured using the currency of the primary economic environment in which the Group operates (the “functional currency”). Foreign currency transactions are translated into the functional currency using the exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the closing rate on the balance sheet date. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at closing rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses resulting from the translation of equity-like loans are recognised directly in equity.
The consolidated financial statements are presented in Swiss Francs. On preparation of the consolidated financial statements, assets and liabilities of subsidiaries in foreign currencies are converted into Swiss Francs at the closing rate of each balance sheet date. Revenues and expenses are translated at the average currency exchange rate of the financial year. Translation differences have been recognised in the statement of comprehensive income. Translation differences will be recognised in the income statement on disposal of a subsidiary.
Assets and liabilities of subsidiaries in foreign currencies are converted into Swiss Francs at the closing rate of each balance sheet date while revenues and expenses are translated at the average currency exchange rate of the financial year. The Orell Füssli Group used the following currency exchange rates for the financial year 2010 and 2009:
currency exchange rates
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Closing rate | Annual average rate | |||||||
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2010 | 2009 | 2010 | 2009 | |||||
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EUR at a rate of CHF
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1.2468 | 1.4877 | 1.3833 | 1.5102 | |||||
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USD at a rate of CHF
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0.9408 | 1.0380 | 1.0433 | 1.0857 | |||||
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GBP at a rate of CHF
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1.4554 | 1.6533 | 1.6112 | 1.6958 | |||||
2.7 critical accounting estimates and judgments
The Group makes estimates and assumptions which concern the future. By definition, the estimates will seldom correspond to related actual results. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities in the next financial year are discussed below.
Income taxes
The Group is subject to income taxes in various jurisdictions. Significant judgment is required in determining the provisions for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues on the basis of estimates of whether additional taxes are due. Where the final outcome of these matters differs from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Construction contracts
The determination of revenue and receivable for construction contracts is based on the percentage of completion. Each business unit uses different calculation methods that are based on the completed quantity of a production lot and/or on the portion of the production stages carried out. If total revenues are sufficiently predictable and directly attributable to the percentage of completion, the valuation is carried out by using the completed contract method. Alternatively accumulated cost will be used for the accrual.
Tangible assets
The Orell Füssli Group regularly assesses the useful life of its tangible assets. Such assessment is based on estimates which are substantially based on the technical efficiency, the applicability and the continued use of tangible assets.
Valuation adjustments
For the impairment of receivables, management must estimate the expected cash inflows from doubtful debtors. This is based on experience gained from prior financial years.
For the valuation adjustment of inventories to its net realisable value, management must use methods that require significant estimates. Management uses the range of coverage analyses for semi-finished and finished goods. For the valuation adjustment of produced books, the year of their publication is taken into consideration.
Goodwill impairment
Goodwill is tested for impairment on an annual base. The Orell Füssli Group, therefore, includes estimates of expected future cash flows from the cash generating unit the goodwill refers to. In addition, the present value of such expected future cash flows will be calculated by the use of an estimated discount rate.
Fair value estimation
The fair value of financial instruments traded in active markets such as marketable and available-for-sale securities, is based upon quoted market price at the balance sheet date multiplied by the number of securities at the balance sheet date (level 1). Financial instruments that are not traded in an active market but whose fair value can be directly or indirectly calculated based on other observable market indicators are determined by using this information (level 2). The fair value of financial instruments that are not traded in an active market and whose fair value cannot be calculated based on observable market indicators is determined by using other valuation techniques which require assumptions (level 3). The valuation methods differ pending on the financial instrument and will be disclosed in the notes to the consolidated financial statements if necessary.
Trade accounts receivable and payable are stated in the balances sheet at their carrying value less impairment provision. Due to their short term nature they are assumed to approximate their fair value.
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
For any other financial instrument the discounted cash flow will be used and included in the valuation process.
2.8 segment reporting
A business segment is a group of assets and operations engaged in providing products and services that are subject to risk and returns different from those of other business segments. The business segments serve as basis for the internal reporting to the CODM (chief operating decision maker). The CEO of the Group has been identified as the chief operating decision maker. The internal reporting is in accordance with IFRS and, therefore, follows the same accounting principles as the consolidated financial statements.
The Group’s business activities are designated into three segments: Industrial Systems, Security Printing and Book Retailing. Other business activities include the publishing units as well as infrastructure services. Their size is not material. Information about products and services of each business segment are provided in 4.1 of the notes to the consolidated financial statements.
2.9 revenue recognition
Revenue from sales of tradable, produced and printed goods are recorded as income after their delivery and their acceptance by the client. Revenue is shown net of value-added-tax and any rebates.
Revenue from construction contracts is recognised using the percentage-of-completion method in order to record the portion of total sales for the reporting period.
Revenue from services, which are rendered for a certain period of time and which are invoiced periodically, is recorded in the period in which the service is rendered. Revenue for settling transaction-related services is recorded at the time the service is fully rendered.
Dividend income is recorded in the reporting period in which the right to receive payments is established.
2.10 impairment
Tangible and intangible assets are assessed for impairment. Such assessment occurs on the basis of events of changes of circumstances which indicate that the value of an asset may be impaired. If such indications exist, the recoverable amount will be determined. An impairment loss results, if the book value exceeds the recoverable amount. The recoverable amount is the higher value of either the fair value less selling costs or the present value of expected future cash flows. The impairment is recorded in the income statement. For the purpose of assessing impairment, assets are grouped at the lowest levels for which separate cash flows can be identified.
Further details on the impairment of financial assets will be provided in paragraph 2.17.
2.11 income taxes
Income taxes are recorded on the basis of the applicable tax rate of the individual countries and expensed in the period in which they occur. Tax effects resulting from tax losses are recognised as deferred tax assets if it is probable that future taxable profit will be available against which the tax losses could be used.
Deferred tax liabilities are recognised in the balance sheet based upon temporary differences between tax base of assets and liabilities and their carrying amount if they will result in future taxable profits. Deferred tax assets are recognised in the balance sheet based upon temporary differences if they will result in deductible amounts in determining taxable profits, provided that taxable profits will be available in future periods for which the temporary difference can be used.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset will be realised or the liability will be settled.
Current tax liabilities and receivables can be offset against each other provided they refer to the same taxable unit, the same tax authority and if there is a legally enforceable right to offset them. Deferred tax liabilities and receivables can be offset against each other if the same circumstances apply.
Current and deferred taxes are recorded in the income statement as tax income or expense, except for deferred taxes which were added or deducted through the purchase or sale of a subsidiary.
2.12 cash and cash equivalents
Cash and cash equivalents include cash in hand, cash in banks and short-term fixed deposits with a contractual maturity period of three months or less.
2.13 derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is concluded and are subsequently remeasured at their fair value. The methods of calculation depend on whether the derivative is designated as a hedging instrument. The Orell Füssli Group utilises derivative financial instruments only to hedge future cash flows, however. The Group does not apply hedge accounting, but rather recognises all gains and losses immediately in the income statement. These instruments will be accounted for at fair value through profit and loss and will be adjusted – also through profit and loss – throughout the term of the contract.
2.14 inventories
Inventories include raw materials, auxiliary material and supplies, semi-finished products, finished products and trading goods. Inventories are stated at the lower of cost or net realisable value. Cost is determined on the basis of the weighted average cost calculation. The cost of semi-finished and finished products contains direct production costs including materials and manufacturing costs, as well as overhead costs. The net realisable value is the estimated selling price in the ordinary course of business less the production and distribution costs. For the net realisable value of finished products, the range of coverage analyses is used, and for produced books the year of their publication.
2.15 construction contracts
Construction contracts are medium-term and long-term orders which are generally governed by a contract for work and labour. Construction contracts are recognised using the percentage-of-completion method (PoC method). The PoC method measures the stage of completion of the contract activity in percentages; this allows the determination of revenue for the reporting period and to recognise it as a receivable. Each business unit uses different calculation methods that are based on the completed quantity of a production lot and/or on the portion of the production stages carried out. Expected losses on construction contracts are immediately recognised as an expense.
2.16 trade accounts receivable and other current accounts receivable
Trade accounts receivable and other current accounts receivable are measured at amortised cost less allowances. Doubtful accounts are individually measured and impaired. Indications for such impairment are substantial financial problems of the customer, a declaration of bankruptcy or a financial reorganisation is likely or a delay in payment for over 30 days occurs. In addition to these individual measurements a general allowance based on past experience is made.
As the Orell Füssli Group has a large number of internationally dispersed customers, there is no material concentration of credit risk. It is in the division of security printing where such concentration is most likely. However, the credit-worthiness of these debtors is high, since the most significant customers are national bank institutions or public authorities.
Provisions for doubtful accounts receivable are recognised in a special account. The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated cash flows, discounted by using the effective yield method. A trade receivable will be eliminated against the provision account if it cannot be collected.
An increase of the provision for doubtful accounts receivable will be recognised as other operating expense in the income statement, while any recovery of such provision will result in a decrease of the operational expense accordingly.
2.17 financial assets
Financial assets are designated to the following four categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale investments. The designation depends on the purpose for which the financial asset was purchased. Management determines the categories of its financial assets at initial recognition and re-evaluates the designation at each balance sheet date.
Financial assets at fair value through profit or loss
The designation is split in two sub-categories: financial assets held for trading and those which management designated at their fair value through profit or loss at inception. A financial asset is held for trading if it is principally purchased for the purpose of selling in the short term. Derivatives are categorised as held for trading unless they are used for hedge accounting. Financial assets at fair value through profit or loss are categorised as current assets, if they are either held for trading or if they are realised within 12 months of the balance sheet date.
Loans and receivables
Loans and receivables are non-derivative financial assets with defined payments and not quoted in an active market. They are classified as current assets if their maturity does not exceed 12 months after the balance sheet date. Otherwise they are included in non-current assets.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities, for which the Group has the positive intention and ability to hold to maturity. In 2010 and 2009, the Orell Füssli Group did not hold any financial investment of this category.
Available-for-sale investments
Available-for-sale investments are non-derivative financial assets which are either designated as available-for-sale investment or which are not designated to any of the other categories. They are included in non-current assets, unless management has decided to sell them within 12 months after the balance sheet date.
All purchases and sales of financial assets are recorded on the trading date. Trading date is the date on which the Group commits itself to the purchase or the sale of the asset.
Financial assets not measured at fair value through profit or loss are initially recorded at fair value plus transaction costs. Financial assets at fair value through profit or loss are initially measured at the actual price paid. The related transaction costs are recorded directly in the income statement. Financial assets are derecognised if the contractual rights to the cash flows from the financial asset expire or are transferred and the Group has substantially transferred all the risk and rewards of ownership of the financial asset.
Financial assets at fair value through profit or loss are subsequently measured at fair value with changes in fair value recorded in the income statement. Available-for-sale investments are subsequently measured at fair value and unrealised profits and losses resulting from changes in the fair value of available-for-sale investments are recorded in the statement for other comprehensive income. For sales or impairments of available-for-sale investments, the accumulated fair value adjustments in equity are recycled to the income statement. If the fair value is not determinable, available-for-sale investments are recorded at cost less impairment.
For each category of financial assets and liabilities a three-level fair value disclosure hierarchy is established and included in note 4.12. Level 1 includes financial instruments whose fair values derive directly from quoted prices in an active market for identical instruments. Level 2 includes financial instruments whose fair values can be directly or indirectly calculated with the support of other observable market indicators. Level 3 includes financial instruments whose fair values cannot be calculated based on observable market indicators but by using other valuation techniques which require assumptions. In 2010 and 2009, the Orell Füssli Group held a cooperative participation. These participations are measured at cost less impairment as their fair value cannot be evaluated.
Loans and receivables as well as held-to-maturity investments are measured at amortised costs using the effective yield method. The Group assesses at each balance sheet date whether there is objective evidence of an impairment risk. In such cases, management estimates the fair value. The recoverable amount of loans and receivables corresponds to the present value of the expected cash flows resulting from the financial asset. An impairment loss is recorded in the income statement when the book value is higher than the estimated recoverable amount of the financial asset. If, in a subsequent period, the impairment loss of loans and receivables becomes smaller and this can be objectively allocated to an event that occurred after the impairment was recorded, the reversal amount is recognised in the income statement of that period, to a maximum of the previously recognised impairment loss.
2.18 non-current assets held for sale and discontinued operations
Non-current assets and disposal groups are classified as “held for sale” if their carrying amounts will be recovered principally through a sale transaction rather than through continued use. Such assets are measured at the lower of their carrying amount or fair value less sales costs. They are disclosed separately in current assets.
Discontinued operations are disclosed as a separate item in the income statement if they are material. The Orell Füssli Group did not identify any discontinued operations in 2010 or 2009.
2.19 tangible assets
Tangible assets comprise machinery, technical installations, moveable property, leasehold improvements, vehicles, IT and systems, property, buildings and fixed facilities.
Tangible assets are initially measured at cost. Costs include the purchase price of the tangible asset plus directly related costs which occur for bringing the asset to the location and in condition necessary for it to be capable of operating in the manner intended by management. Costs include also estimated costs for dismantling and removal of tangible assets including the restoration of the site. Further, effective borrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalised according to the revised standard IAS 23R.
Tangible assets are subsequently depreciated using the straight-line method over the period of their useful life. An exception to the straight-line method of depreciation is machinery and technical installations directly used for production purposes; their depreciation is carried out on the basis of their performance over the period of their useful life. Land property is not depreciated. The period of depreciation may be adjusted according to operational necessity. Depreciation begins once the tangible asset is ready for use. The estimated useful lives of each fixed asset category are as follows:
estimated useful live of each fixed asset category
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in years
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Estimated useful lives |
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Machinery and technical installations
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5–10 | ||
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Buildings
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30–40 | ||
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Fixed facilities
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15–40 | ||
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Movable property, leasehold improvements, vehicles
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4–10 | ||
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IT and systems
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3–5 | ||
Buildings under construction are fixed assets which are not yet finished or not yet operational. They are measured at accumulated costs and are not depreciated.
Replacement investments and improvements of tangible assets are recognised in the balance sheet if additional economic use is likely.
Expenditures for repairs and maintenance of buildings and technical installations are recorded as expenses in the income statement when they occur.
2.20 goodwill and other intangible assets
Intangible assets comprise goodwill and other intangible assets, such as rights, licences and software. Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the acquisition date. Goodwill related to the acquisition of a subsidiary is included in intangible assets. Goodwill is not amortised, but tested annually for impairment. Goodwill is measured at its initial cost less accumulated impairment losses. A negative goodwill is fully recorded in the income statement.
All other intangible assets have an identifiable useful life. They are measured at costs less accumulated amortisation and impairment. Costs of rights, licences and software are the result of the purchase price plus directly related costs. Development costs for internally developed software are recognised as an asset if certain criteria such as technical feasibility and availability of adequate resources are fulfilled, if the company’s intention is to finalise the software development and to use or sell the software, if the company will generate probable future economic benefits, and if the costs can be measured reliably. Rights, licences and software are amortised using the straight-line method over the contractually agreed duration. Internally developed software is amortised using the straight-line method over a maximum period of three years.
2.21 investment property
Property is classified as investment property, if it is held to earn rentals and/or for capital appreciation, and not for use in the production or supply of goods or services or for administrative purposes of the Group. Investment property is measured at cost less accumulated depreciation and impairments in line with tangible assets. They are depreciated using the straight-line method over a period of 15 to 40 years.
2.22 trade accounts payable
Trade accounts payable are recognised at fair value and subsequently measured at amortised cost.
2.23 dividend distribution
Shareholder’s claims to dividend distribution are recorded as liability in the period in which the dividends are approved by the company’s shareholders.
2.24 financial liabilities
Financial liabilities comprise borrowings, finance lease liabilities and other financial liabilities. Initially, financial liabilities are measured at fair value net of transaction costs incurred, and subsequently, they are stated at amortised costs; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the liability using the effective yield method.
Financial liabilities are classified as current unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months.
2.25 leases
Leases of assets, in which substantially all the risk and rewards incidental to ownership are transferred to the lessee are classified as finance leases. Finance leases are initially recognised in the balance sheet at the lower of fair value of the leased asset or the present value of the minimal lease payments. The leased asset is depreciated over the useful life of the lease term, whichever is shorter. The corresponding financial obligations are recorded as liabilities.
Leases of assets, in which substantially all risks and reward incidental to ownership are effectively held and use by the lessor are classified as operating leases. Lease payments under an operational lease are recorded in the income statement on a straight-line basis over the lease term.
2.26 employee benefits
In Switzerland, Germany, France and Italy there are pension plans which cover the risks of age, death and disability. Financing occurs by means of equal employee and employer contributions as well as returns from the investments made by the pension fund. The Group has both defined benefit and defined contribution plans.
A defined benefit plan defines an amount of pension benefit that an employee will receive on retirement, usually dependant on one or more factors, such as age, years of service and compensation.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligation to pay additional contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee services in the current and prior years.
The liability recognised in the balance sheet with respect to the defined benefit plans represents the value of the defined benefit obligation (DBO) on the balance sheet date less the fair value of the plan assets, adjusted for unrecognised actuarial profits and losses and past service costs. The DBO is calculated periodically by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the expected future cash outflow, using the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.
According to the corridor approach, the net cumulative unrecognised actuarial gains and losses in excess of the greater of 10% of the fair value of plan assets are recorded in the income statement over the employees’ expected remaining working lives. Other actuarial gains and losses are not recognised.
Past-service costs are recognised immediately in the income statement, unless the changes to the pension plan are conditional on the employee remaining for a specified period of time (vesting period). In this case, the past-service costs are recorded in the income statement on a straight-line basis over the vesting period.
Contributions to defined contribution plans are recorded in the income statement, if the employee renders the corresponding services, normally in the year of payment of the contributions.
The Orell Füssli Group does not foresee any option plan or other share-based payments either for employees, management or board members.
2.27 provisions
Provisions are recognised if the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that a cash outflow will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. No provisions are recorded for future operational losses.
If the effect of the time value of money is significant, provisions are determined by discounting future cash flows.
2.28 share capital
Ordinary shares are classified as part of the shareholders’ equity. When the Group purchases Orell Füssli Holding Ltd shares (treasury shares), the consideration paid, including any direct attributable incremental costs, is deducted from equity. If treasury shares are subsequently sold or issued, any consideration is included in equity.
The Group applies a policy of treating transactions with minority interests as transactions with treasury shares. Therefore consideration paid for purchases of minority interests as well as consideration received from sales of minority interests are recorded in equity. Any differences between consideration received/paid and minority interests presented in the balance sheet are recorded in equity (economic entity model).