1. Significant accounting policies

Aduno Holding AG (Aduno Holding or Company) is a company domiciled in Zurich (Switzerland). The consolidated financial statements of the Company for the year ended 31 December 2016 comprise Aduno Holding and its subsidiaries (together referred to as the Group).

Aduno Holding and its subsidiaries offer financial services in the business field of cashless payment solutions and consumer finance services.

The subsidiaries Viseca Card Services SA (Viseca) and Aduno SA (Aduno) operate services for cashless payments. The subsidiary cashgate AG (cashgate) offers consumer finance facilities to private and corporate customers in the Swiss marketplace. The subsidiary Aduno Finance AG (Aduno Finance) acts as centralised treasury operator.

Viseca issues credit cards (card issuing) under the brand of the card schemes (schemes) Mastercard and Visa to private and business consumers for Swiss retail banks, several co-branding partners and on its own account and operates all relevant customer service activities.

Aduno distributes credit and debit card accep­tance contracts to merchants (card acquiring), sells the technical equipment for cashless payment solutions to merchants and operates all relevant services for its customers.

The subsidiaries Vibbek AG as well as Vibbek GmbH are developing software solutions for credit card terminals. The subsidiary AdunoKaution AG (AdunoKaution) and the newly acquired subsidiary SmartCaution SA (SmartCaution) offer rental guarantees to its customers.

The consolidated financial statements were approved by the Board of Directors on 10 April 2017 and will be submitted for final approval by the general meeting on 12 June 2017.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. The consolidated financial statements are presented in Swiss francs, which is the Company’s functional currency. All financial information presented in Swiss francs has been rounded to the nearest thousand, except when otherwise indicated. As a result, rounding differences may appear.

The consolidated financial statements are prepared on the historical cost basis except for derivative financial instruments that are stated at their fair value. Methods to determine fair values are further discussed in Note 32 Financial risk management.

Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests, even if the results in the non-controlling interests have a deficit balance.

Fair value measurements

The basis for the measurement of assets and liabilities is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (exit price) between market participants at the measurement date.

Use of estimates and judgements

The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the following notes:

  • Note 12 – Income tax expenses (e.g. utilisation of tax losses)
  • Note 15 – Receivables from Payment business and Consumer Finance (e.g. recoverability)
  • Note 20 – Goodwill and other intangible assets (e.g. measurement of recoverable amounts of CGUs)
  • Note 30 – Contingent liabilities (e.g. counterparty credit risk of internet transactions) 

Change in accounting estimate

The Group activated the software for its customer loyalty program in 2014 as an intangible asset. The management estimated the useful life of the intangible asset to five years. In 2016 the program was redesigned and relaunched. As a consequence, the estimated useful life of the intangible asset was reassessed and reduced to three years. The reduction from five to three years resulted in additional amortisation of CHF 4.5 million in 2016.

Consolidation of subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

For each business combination, the Group elects to measure any non-controlling interests in the acquiree at acquisition date at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Investment in associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments in associates are accounted for using the equity method and are recognised initially at cost.

The Group’s share of the net income or loss of the associates is reflected in profit or loss.

Eliminations

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation of monetary items are recognised in profit and loss. Foreign currency effects on non-monetary items are recognised according to the fair value changes.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into CHF at exchange rates at year end. The income and expenses of foreign operations are translated to CHF at average exchange rates.

The following significant exchange rates applied:

CHF

Average 2016

Average 2015

Year end 2016

Year end 2015

EUR 1

1.1017

1.0747

1.0866

1.0916

USD 1

0.9988

0.9733

1.0309

0.9991

GBP 1

1.3297

1.4853

1.2658

1.4811

Revenue

Revenue comprise commission income, annual fee income, interest income and other income. Commission income and other income are recognised transaction-based as they occur. Annual fees are recognised on a straight-line basis over the duration of the service commitment and deferred accordingly. The commission income consists of transaction-based charges billed to customers of all business segments. Interest income includes interest earned from short-term loans granted to credit cardholders, long-term consumer credit loans granted to private customers, leasing facilities to private and corporate clients. Interest income is recognised using the effective interest method.

Processing and service expenses

Processing and service expenses comprise transaction-based interchange expenses to card issuers, processing expenses to services partners, card schemes expenses for the usage of the worldwide card scheme environment and other operational service expenses. Processing and service expenses are recognised as occurred.

Distribution, advertising and promotion expenses

The Group offers a variety of reward programs to its customers in its Payment business. These programs are partly run by third parties in which case the incurred loyalty costs are directly accounted as expenses.

The Group offers a loyalty program in which with the card spendings, customers collect points which are accounted in designated loyalty point accounts. Customers can spend their points by converting those to gifts, annual fee rebates as well as to rebate vouchers within the Group’s partner network within the program. The estimated upcoming expenses increase the accrued expenses. In addition, the Group also offers a yearly fee rebate based on the volume of transactions of the customer. According to IFRIC 13, the estimated upcoming expenses are accounted as a reduction of the underlying income and increase the accrued expenses.

The amount allocated to the annual fee rebates is recognised when the rebates are redeemed in the following year and, thus, the company has fulfilled its obligation.

Financial expenses

Interest expenses consist of the refinancing expenses to finance the interest income generating businesses, losses on derivative financial instruments that are recognised in profit or loss, bank charges and expenses for bank guarantees. Interest expenses are recognised using the effective interest method.

Impairment losses from Payment business and Consumer Finance

Impairment losses from the Payment business contain losses arising from bad debts, fraud and chargebacks. Impairment losses in the Consumer Finance business represent mainly the build-up of accruals for incurred but not reported losses.

Other expenses

Other expenses are recognised as they are incurred.

Depreciation and amortisation

Depreciation and amortisation comprises the depreciation of property and equipment and the amortisation of intangible assets. Depreciation and amortisation are recognised in profit or loss following the depreciation and amortisation policy outlined in the respective section for property and equipment or other intangible assets. 

Income tax expenses

Income tax expenses comprise current and deferred income tax. Income tax expenses are recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet liability method, providing the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Earnings per share

The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for treasury shares.

As there are neither convertible bonds nor options or other potential shares outstanding there is no dilutive impact for the shares.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it earns revenues and incurs expenses. The results of the business activities are regularly reviewed by the Group’s chief operating decision maker to decide on resources to be allocated to the segments and assess its performance, for which separate financial information is available.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, postal and bank accounts and fixed-term deposits with an original maturity of less than 90 days from the date of acquisition. They are stated at amortised cost which equals the nominal value.

Receivables Payment business / receivables Consumer Finance

Receivables from cardholders, from merchant activities, from Consumer Finance customers and from others are stated at their amortised cost using the effective interest method less impairment losses.

The allowance accounts in respect of receivables are used to record impairment losses unless the Group is satisfied or unless no recovery of the amount owing is possible, at which point the amount considered irrecoverable is written off against the receivable directly.

When assets are leased out under a finance lease, the present value of the future lease payments is recognised as a receivable. Future interest receivables from the financial lease are not considered in the receivables.

Derivative financial instruments, including hedge accounting

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational and financing activities. In accordance with its treasury policy, the Group does hold or issue derivative financial instruments either for hedge accounting or for economic hedging wtihout applying hedge accounting.  

Derivative financial instruments are recognised initially at fair value. Attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivative financial instruments are measured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

Currency swaps used by the Group do not qualify for hedge accounting; therefore they are accounted for as trading instruments.

The Group designates interest rate swaps as hedging instruments in a hedge of the variability in the interest payments related to variable interest-bearing financial liabilities (cash flow hedge).

The effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. The amount recognised in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss in the same line item as the underlying transaction.

If the hedging instrument no longer meets the criteria for the hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, the hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income remains there until the forecast transaction affects profit or loss.

Financial investments available for sale

Security positions, which are not held for trading purposes, are reported as debt and equity securities available for sale and are measured at fair value. Unrealised gains and losses are recognised in other comprehensive income and reported in other components of equity until the security is sold, or an impairment loss is recognised, at which point the cumulative gain or loss previously recorded in other components of equity is recognised in the income statement in other income.

Equity securities are deemed impaired if there has been a significant or prolonged decline of fair value below the initial cost. A debt instrument is deemed impaired if the creditworthiness of the issuer significantly deteriorates or if there are other indications that an event has a negative impact on the future estimated cash flows related to the debt instrument, i.e. if it is likely that the amount due according to the contractual terms cannot be entirely collected.

Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in-first-out principle. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and selling expenses.

Property and equipment

Items of property and equipment are stated at cost less accumulated depreciation and impairment losses.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. The estimated useful lives are as follows:

 

2016

2015

Furniture

5–10 years

5–10 years

IT & office equipment

3–5 years

3–5 years

Cars

4–5 years

4–5 years

Leasehold improvement

shorter of the useful life or the lease term

shorter of the useful life or the lease term

Buildings

25 years

25 years

Terminals

3 years

3 years

Useful lives and residual values are reviewed annually at the balance sheet date and any adjustments are recognised in profit or loss. Gains or losses arising from the disposal of items of property and equipment are recognised in profit or loss.

Goodwill

The Group measures goodwill at the acquisition date as the excess of the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed and the sum of the fair value of the consideration transferred plus the recognised amount of any non-controlling interests in the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested for impairment annually at the level of the cash-generating unit.

Other intangible assets

Intangible assets are stated at cost less accumulated amortisation and impairment losses.

Intangible assets consist of capitalised software costs, capitalised licences and client relationships, all of which have finite lives. The following intangible assets are amortised on a straight-line basis over their estimated useful lives:

 

2016

2015

Software

generally 3 years specific software 2 to 10 years according to the useful life

generally 3 years specific software 2 to 10 years according to the useful life

Licences

3 years

3 years

Client relationships are amortised according to an average customer lifetime depending on the underlying business. The current recognised client relationships are amortised for 10–15 years, using the digital digressive method according to their useful life.

Amortisation methods, useful lives and residual values are reassessed at the reporting date and adjusted if appropriate.

Capitalised software includes external costs incurred when externally developing or purchasing computer software for internal use. The expenditure capitalised includes mainly external development and consultancy costs that are directly attributable to the external development of implementing and customising software.

Expenditures on internally generated goodwill and brands are recognised in profit or loss as incurred.

Impairment

The recoverable amounts of non-current assets are reviewed for impairment at least once a year. If there is any indication of impairment (triggering event), an impairment test is performed. Goodwill is tested for impairment on an annual basis. If the carrying amount of an asset or its cash-generating unit exceeds the recoverable amount, an impairment loss is recognised in profit or loss.

A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Payables

Payables to counterparties, other trade payables and other payables are stated at amortised cost.

Interest-bearing liabilities

They are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Leasehold restoration provisions

In accordance with the lease agreement and applicable constructive requirements / legal obligation, a provision for leasehold restoration in respect of reinstatement of the original condition of the premises is made when the Group enters into a contractual agreement. A related payment is recognised when the obligation event to restore the premises to the specified condition occurs.

Employee benefits

The post-employment plans qualify as defined benefit plans. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan asset is deducted.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the comprehensive income. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past services or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a ­deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When trea­sury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resul­ting surplus or deficit on the transaction is transferred to / from retained earnings.

Dividends are recognised as a liability at the date they are declared.

New and revised standards and interpretations newly adopted by the Group

The Group applied the following new and revised accounting standards and interpretations for the first time:

  • Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
  • Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
  • Annual Improvements to IFRS’s 2012–2014 Cycle
  • Disclosure Initiative (Amendments to IAS 1)

The above-mentioned standards had no or no significant impact on the financial statements.

New and revised standards and interpretations

The following new and revised standards and interpretations have been issued, but are not yet effective and have not been applied early in these consolidated financial statements. Their impact on the consolidated financial statements of the Group has not yet been systematically analysed. The table reflects a first assessment conducted by the Group's management and the expected effects

 

 

Effective date

Planned application by the Group

IFRS 9 Financial Instruments

 

1 January 2018

Reporting year 2018

IFRS 15 Revenue from Contracts with Customers and related Clarifications to IFRS 15 Revenue from Contracts with Customers

 

1 January 2018

Reporting year 2018

IFRS 16 Leases

***

1 January 2019

Reporting year 2019

 

 

 

 

Revisions and amendments of Standards and Interpretations

 

 

 

 

 

 

 

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

 

The IASB has decided to defer the effective date for these amendments indefinitely

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)

*

1 January 2017

Reporting year 2018

Disclosure Initiative (Amendments to IAS 7)

**

1 January 2017

Reporting year 2018

Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)

*

1 January 2018

Reporting year 2019

* No or no significant impacts are expected on the consolidated financial statements of the Group.

** Mainly additional disclosure and changes in presentation are expected.

***Impact is currently assessed.

IFRS 9 Financial Instruments (effective 1 January 2018)

IFRS 9 introduces new classification and measurement requirements for financial assets and financial liabilities, replaces the current rules for impairment of financial assets with the expected credit loss impairment model and amends the requirements for hedge accounting (separately issued in November 2013). The Group is currently assessing the impact of the new requirements on the Group’s financial statements and is prearranging the implementation of the new Standard. Based on the analysis performed so far, we do not expect significant changes to current classification of our financial assets and financial liabilities due to the new classification criteria except for additional disclosures. The new rules for impairment of financial assets, the expected credit loss under which an entity is required to recognise expected credit losses at inception and to update the amount of expected credit losses recognised at each reporting date to reflect changes in the credit risk of financial instruments, will have an impact on the current impairment amounts of financial assets and will require additional disclosures. The amended requirements for hedge accounting will not have an impact on the Group’s financial statement.

IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

In May 2014, the IASB issued the new standard which specifies how and when revenue is recognised. IFRS 15 replaces several other IFRS standards and interpretations that currently govern revenue recognition under IFRS and provides a single, principles-based five-step model to be applied to all contracts with customers. The five-step cover: identifying the contract(s) with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognising revenue when (or as) the Group satisfies a performance obligation. The standard also requires entities to provide users of financial statements with more informative and relevant disclosures. The impact of the new standard on the Group’s financial statements is currently assessed. Based on preliminary assessment, no material impact is expected except for additional disclosures.

2. Segment reporting

For reporting and managerial purposes, management has divided the Group’s business into four segments. The external segment reporting is based on the internal reporting to the chief operating decision maker, who is responsible for allocating resources, and assesses the financial performance of the business. The Executive Board has been identified as the chief operating decision maker, as it is responsible for the operational management of the entire Group and reviews the management reporting of each business segment on a monthly basis. The Executive Board consists of the Group’s Chief Executive Officer (CEO) as well as Chief Officers for Finance (CFO), Sales (CSO), Marketing (CMO) and Operations (COO).

Payment

The business unit Payment provides services for cashless payments via credit, debit and customer cards to private and corporate customers and runs the relevant transaction and customer services relating to the business. The major part of the business is run through the brands of Mastercard and Visa.

The business unit Payment is operated through Viseca and its subsidiary Aduno as well as through Accarda AG, Vibbek AG, Vibbek GmbH, AdunoKaution AG and SmartCaution SA. The major revenue streams in the business result from interchange fees and commissions, annual fees for cards and services, income from card transactions in foreign currency and interest income.

Consumer Finance

The business unit Consumer Finance sells and operates leasing contract and credit facilities for consumer goods to private and corporate clients. The business unit Consumer Finance is operated by cashgate. The major income streams are interest income, commission income and fees for chargeable services.

Internal Financing

As the central treasury centre of the Group, Internal Financing provides financial services to the other members of the Group. The treasury services include the treatment of payments, the handling of foreign exchange transactions as well as the management of the Group’s brand assets. The major income streams result from foreign currency transactions and interest income.

Corporate Functions

The business unit Corporate Functions contains intercompany con­solidation items as well as the financial result of Aduno Holding.

Segments’ assets and liabilities

The assets and liabilities, revenue and expenses are measured in accordance with the relevant IFRS Standards.

Information about major customers

There is no major customer in any of the business segments ­who­se revenues amount to 10% or more of the segment’s revenues (2015: none).

The following table presents certain information regarding the operating segments, based on management’s evaluation and internal reporting structure, on 31 December 2016 and 2015 and for each of the years ended.

 

Payment

 

Consumer Finance

 

Internal Financing

 

Total operating segments

 

Corporate Functions/ Consolidation

Consolidated

In 1,000 CHF

2016

2015

2016

2015

2016

2015

 

2016

2015

 

2016

2015

2016

2015

Commission income

194,656

185,404

0

0

16,602

14,799

 

211,258

200,203

 

0

0

211,258

200,203

Annual fees

115,726

97,228

0

0

0

0

 

115,726

97,228

 

0

0

115,726

97,228

Interest income

14,988

15,424

88,406

91,324

27,711

29,951

 

131,105

136,699

 

(31,187)

(32,864)

99,918

103,835

Other income

131,369

55,638

7,797

6,639

54,089

54,297

 

193,255

116,574

 

(37,164)

(33,783)

156,091

82,791

Total revenue

456,739

353,694

96,203

97,963

98,402

99,047

 

651,344

550,704

 

(68,351)

(66,647)

582,993

484,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Processing and service expenses

98,585

90,004

1,270

1,004

0

0

 

99,855

91,008

 

(1,146)

(459)

98,709

90,549

Distribution, advertising and promotion expenses

90,732

85,944

19,292

18,214

1

4

 

110,025

104,162

 

(9,760)

(9,536)

100,265

94,626

Interest expenses

13,617

13,093

16,702

19,171

30,093

32,324

 

60,412

64,588

 

(37,769)

(39,706)

22,643

24,882

Impairment losses from Payment and Consumer Finance

2,806

3,944

10,893

11,689

0

0

 

13,699

15,633

 

0

0

13,699

15,633

Personnel expenses

91,968

81,845

18,150

18,369

699

695

 

110,817

100,909

 

0

(66)

110,817

100,843

Other expenses

80,193

51,559

12,440

12,702

4,245

5,094

 

96,878

69,355

 

(24,179)

(19,690)

72,698

49,665

Depreciation

4,177

4,098

625

656

408

412

 

5,210

5,166

 

773

493

5,983

5,659

Amortisation

9,444

9,098

4,416

6,258

7,189

2,648

 

21,049

18,004

 

127

124

21,176

18,128

Total expenses

391,522

339,585

83,788

88,063

42,636

41,177

 

517,945

468,825

 

(71,955)

(68,840)

445,990

399,985

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results from operating activities

65,217

14,109

12,416

9,900

55,766

57,870

 

133,399

81,879

 

3,604

2,193

137,003

84,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from associates

3,393

3,024

0

0

0

0

 

3,393

3,024

 

0

0

3,393

3,024

Profit before income tax

68,610

17,133

12,416

9,900

55,766

57,870

 

136,792

84,903

 

3,604

2,193

140,396

87,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expenses

13,212

3,069

2,623

2,378

6,066

6,693

 

21,901

12,140

 

3

339

21,903

12,479

Profit for the period

55,398

14,064

9,793

7,522

49,700

51,177

 

114,891

72,763

 

3,602

1,854

118,493

74,617

3. Change in scope of consolidation

Acquisition of SmartCaution SA

As per 1 July 2016 Aduno Holding AG purchased 100% of the shares of SmartCaution SA in Geneva, canton of Geneva. The company’s field of activity is to provide rental guarantees to its customers and is integrated in the Group’s Payment segment. The purchase price was set to CHF 9.0 million of which 7 million have been paid in cash. The remaining CHF 2 million is a contingent purchase price consideration.

The following purchase price allocation is final. A goodwill of CHF 1.9 million has been identified and is allocated to the cash generating unit Payment-Issuing. This transaction strengths the rental guarantee portfolio of the Group in the western part of Switzerland and creates synergy effects.

In 1,000 CHF

 

 

Recognised values on acquisition fair value

Cash and cash equivalents

 

 

1,975

Other receivables and other assets

 

 

96

Prepaid expenses and accrued income

 

 

200

Property and equipment

 

 

21

Intangible assets

 

 

7,738

 

 

 

 

Total assets

 

 

10,031

 

 

 

 

Other trade payables

 

 

7

Accrued expense and deferred income

 

 

938

Provisions

 

 

51

Employee benefit obligation

 

 

125

Deferred tax liabilities

 

 

1,824

 

 

 

 

Total liabilities

 

 

2,945

Net identifiable assets and liabilities

 

 

7,086

 

 

 

 

Considerations transferred

 

 

9,000

Goodwill arising from acquisition

 

 

1,914

 

 

 

 

Considerations paid in cash

 

 

7,000

Cash acquired

 

 

1,975

Net cash outflow

 

 

5,025

Included in the Group’s revenues for the year 2016 are CHF 1.0 million arising from the additional business from SmartCaution. A loss of CHF 0.1 million is included in the profit for the year. If the acquisition of SmartCaution had occurred on 1 January 2016, the Group’s consolidated revenue would have been CHF 583.9 million and a consolidated profit after tax of CHF 118.1 million would have arisen. The acquisition incurred acquisition costs for the Group of CHF 0.1 million, which are included in the profit and loss statement under “Other expenses”.

4. Commission income

In 1,000 CHF

2016

2015

Interchange revenue and related revenue

139,735

138,664

Currency exchange commissions

49,109

38,845

Other commission revenue

22,414

22,694

 

 

 

Commission income

211,258

200,203

5. Interest income and interest expense

In 1,000 CHF

2016

2015

Interest income

99,918

103,835

Interest expenses

(22,643)

(24,882)

 

 

 

Interest income, net

77,275

78,953

The interest income contains income from the Group’s Consumer Finance activities and also from credit lines granted to clients in the Payment business.

In the Payment business, credit cardholders are eligible to convert their debit on the credit card into a consumer credit for which the Group then charges interest for the period of the short-term loan.

The interest expenses are the refinancing expenses to finance the open credit lines of the Payment and Consumer Finance businesses.

6. Other income

In 1,000 CHF

2016

2015

Foreign exchange gains or losses, net

43,124

43,525

Income from services

35,864

30,787

Income from terminal sales

2,202

1,836

Other income

74,900

6,643

 

 

 

Other income

156,091

82,791

Foreign exchange gains and losses arise on transactions which are not settled in Swiss francs. Customers in the Group’s Payment business are billed based on a typical exchange rate close to spot rates whereas the Group is billed near the interbank rate (interbank rate plus Group’s credit spread).

As a former member of Visa Europe Ltd., the business unit Payment benefited from selling Visa Europe Ltd. to Visa Inc. The Group received contributions at a total value of CHF 71.7 million, including preferential Visa Inc. shares at a value of CHF 17.3 million as per date of transaction as well as an entitlement to a deferred cash payment of CHF 4.3 million. The contribution of CHF 71.7 million has been recorded as other income.

7. Processing and service expenses

In 1,000 CHF

2016

2015

Interchange expenses

31,348

32,188

Cards processing expenses

36,697

32,843

Service expenses

27,190

23,156

Material expenses

3,474

2,362

 

 

 

Processing and service expenses

98,709

90,549

8. Distribution, advertising and promotion expenses

In 1,000 CHF

2016

2015

Acquisition expenses

69,050

72,216

Rewards and redemption expenses

10,712

3,434

Advertising and promotion expenses

19,388

17,883

Costs for distribution

1,115

1,093

 

 

 

Distribution, advertising and promotion expenses

100,265

94,626

9. Personnel expenses

In 1,000 CHF

2016

2015

Wages and salaries

87,414

80,080

Social security contributions

9,421

7,987

Expenses related to defined benefit plans

6,297

8,279

Other personnel expenses

7,685

4,497

 

 

 

Personnel expenses

110,817

100,843

10. Other expenses

In 1,000 CHF

2016

2015

Audit and professional services

14,764

15,217

IT expenses

18,885

16,322

Telephone and postage

2,305

2,250

Premises expenses

7,634

7,549

Travel and representation

987

1,070

Loss on sale of property and equipment and intangible assets

0

16

Other administration expenses

28,124

7,241

 

 

 

Other expenses

72,698

49,665

The item “Other administration expenses” includes an accrual relating to the outsourcing of business activities between the business units Payment and Internal Finance in the amount of CHF 21.5 million (2015: none).

11. Impairment losses from Payment and Consumer Finance

In 1,000 CHF

2016

2015

Impairment losses on commission income

2,806

3,944

Impairment losses on interest income

10,893

11,689

 

 

 

Impairment losses

13,699

15,633

The impairment losses on commission income is attributable to losses arising from bad debts, fraud and chargebacks in the Payment business, whereas the impairment losses on interest income mainly represents incurred but not reported losses in the Consumer Finance business.

12. Income tax expenses

Expenses recognised in the consolidated statement of comprehensive income

In 1,000 CHF

2016

2015

Current income tax expenses

25,280

16,286

Deferred tax expenses (+) / income (–)

(3,377)

(3,807)

 

 

 

Total income tax expenses

21,903

12,479

Average applicable tax rate

The Group calculated an average applicable income tax rate of 16.4% in 2016 and 13.3% in 2015, which represents the weighted average income tax rate calculated on the basis of the Group’s operating subsidiaries in Switzerland.

Reconciliation of effective tax rate

The average effective income tax rate for 2016 is 15.6% and 14.3% for 2015 and has been derived as shown in the following table.

In 1,000 CHF

2016

2015

Profit before income tax

140,396

87,096

Income tax expenses at the average applicable tax rate

23,022

12,039

Effect from non-taxable income

(335)

(203)

Tax effect on income at different rates

(783)

643

 

 

 

Effective income tax expenses

21,903

12,479

Deferred tax assets and liabilities

The following table shows in which lines of the Group’s balance sheet tax assets and liabilities were recognised on temporary differences between tax base and IFRS carrying amounts.

 

 

 

2016

 

 

2015

In 1,000 CHF

Assets

Liabilities

Net

Assets

Liabilities

Net

Receivables

2,064

(6,188)

(4,124)

1,716

(5,907)

(4,191)

Prepaid expenses

141

(2,742)

(2,601)

0

(2,338)

(2,338)

Property and equipment

0

(370)

(370)

0

(351)

(351)

Intangible assets

2,671

(23,373)

(20,702)

3,319

(22,522)

(19,203)

Financial investments available for sale

0

(295)

(295)

0

0

0

Interest-bearing liabilities

25

(28)

(3)

594

(417)

177

Accrued expense and deferred income

7,961

3,780

11,741

8,195

0

8,195

Provisions

67

(106)

(39)

49

0

49

Employee benefit obligations

8,867

0

8,867

8,211

0

8,211

Other

0

0

-

0

0

0

Tax value of loss carry-forwards recognised

2,964

0

2,964

3,181

0

3,181

Tax assets/(liabilities)

24,761

(29,321)

(4,560)

25,265

(31,535)

(6,269)

Set-off of tax

(17,205)

17,205

-

(17,208)

17,208

0

Net tax assets/(liabilities)

7,556

(12,116)

(4,560)

8,057

(14,326)

(6,269)

Temporary differences of associates, on which no deferred income taxes were recognised as of 31 December 2016, amounted to CHF 20.9 million (prior year: CHF 19 million).

Tax loss carry-forwards

The Group has total tax loss carry-forwards of CHF 14.1 million as per 31 December 2016 (2015: CHF 15.2 million). There are no unrecognised tax losses carry-forwards.

Income taxes directly recognised in in other comprehensive income

An increase of employee benefit obligations of CHF 2.9 million was recognised in other comprehensive income in 2016 (2015: decrease of CHF 3.8 million). Out of this operation, the Group recognised CHF 0.7 million of deferred tax assets in other comprehensive income (2015: CHF 0.8 million of deferred tax liabilities).

A positive change in fair value of financial investment available for sale of CHF 1.5 million was recognised in other comprehensive income in 2016 (2015: none). Out of this operation, the Group recongnised CHF 0.3 million deferred tax liabilities in other comprehensive income (2015: none).

A positive change in fair value of cash flow hedges of CHF 1.8 million was recognised as a reduction in liability in 2016 (2015: negative change of CHF 1.0 million). Out of this operation, the Group recognised deferred tax liability of CHF 0.2 million in other comprehensive income (2015: tax assets of CHF 0.2 million).

Movement in deferred tax assets and liabilities during the year

In 1,000 CHF

2016

2015

Deferred tax assets

 

 

Balance at 1 January

8,057

6,428

Recognised in income

(374)

1,432

Recognised in other comprehensive income

(126)

197

Acquired through business combinations

0

0

 

 

 

Balance at 31 December

7,556

8,057

 

 

 

Deferred tax liabilities

 

 

Balance at 1 January

(14,326)

(15,856)

Recognised in income

3,751

2,375

Recognised in other comprehensive income

282

(845)

Set-off of tax due to merger

0

0

Acquired through business combinations

(1,824)

0

 

 

 

Balance at 31 December

(12,116)

(14,326)

Deferred tax assets and liabilities have changed as follows:

In 1,000 CHF

Balance at 31.12.2015

Recognised in Income statement

Recognised in other comprehensive Income

Change in scope of consolidation

Balance at 31.12.2016

Receivables

(4,191)

278

(210)

0

(4,124)

Prepaid expenses

(2,338)

(263)

0

0

(2,601)

Property and equipment

(351)

(19)

0

0

(370)

Intangible assets

(19,203)

355

0

(1,854)

(20,702)

Financial investments available for sale

0

0

(295)

0

(295)

Interest-bearing liabilities

177

(180)

0

0

(3)

Accrued expense and deferred income

8,195

3,546

0

0

11,741

Provisions

49

(88)

0

0

(39)

Employee benefit obligations

8,211

(35)

661

30

8,867

Tax value of loss carry-forwards recognised

3,181

(217)

0

0

2,964

Tax assets/(liabilities)

(6,269)

3,376

156

(1,824)

(4,560)

In 1,000 CHF

Balance at 31.12.2014

Recognised in Income statement

Recognised in other comprehensive Income

Change in scope of consolidation

Balance at 31.12.2015

Receivables

(4,289)

(56)

154

0

(4,191)

Prepaid expenses

(5,295)

2,957

0

0

(2,338)

Property and equipment

(366)

15

0

0

(351)

Intangible assets

(19,587)

385

0

0

(19,203)

Interest-bearing liabilities

(4)

181

0

0

177

Accrued expense and deferred income

9,500

(1,304)

0

0

8,195

Provisions

60

(11)

0

0

49

Employee benefit obligations

8,532

481

(802)

0

8,211

Other

95

(95)

0

0

0

Tax value of loss carry-forwards recognised

1,927

1,255

0

0

3,181

Tax assets/(liabilities)

(9,428)

3,807

(648)

0

(6,269)

13. Earnings per share

In 1,000 CHF

2016

2015

Profit attributable to owners of the company

118,564

74,900

 

 

 

Issued ordinary shares at 1 January

25,000

25,000

Weighted average number of ordinary shares at 31 December

25,000

25,000

 

 

 

Earnings per share in CHF

4,742.57

2,996.01

Diluted earnings per share

There are neither convertible bonds nor options or other potential shares outstanding and therefore there is no dilutive impact on the earnings.

14. Cash and cash equivalents

In 1,000 CHF

2016

2015

Cash

12

7

Post bank

113

78

Bank

41,364

89,917

 

 

 

Cash and cash equivalents

41,489

90,002

Cash and cash equivalents are mainly held in CHF, EUR and USD. The percentage of these currencies of the total cash and cash equivalents held is shown in the table below.

 

2016

2015

CHF

97.4%

99.2%

EUR

0.9%

0.2%

USD

0.0%

0.1%

Other

1.7%

0.5%

 

 

 

Total

100.0%

100.0%

15. Receivables from Payment and Consumer Finance

In 1,000 CHF

2016

2015

Receivables from card holders

452,704

345,275

Receivables from card schemes

85,439

84,314

Receivables from debt collection

3,604

4,229

Receivables for which fraud is assumed

223

251

Other receivables from Payment business

8,163

3,128

Allowance for doubtful debts

(921)

(1,516)

 

 

 

Total receivables from business unit Payment

549,213

435,681

In 1,000 CHF

2016

2015

Short-term receivables from Consumer Finance

467,674

474,065

Short-term allowance for doubtful debts

(8,818)

(8,939)

Short-term receivables from Consumer Finance

458,856

465,126

 

 

 

Long-term receivables from Consumer Finance

826,625

828,553

Long-term allowance for doubtful debts

(15,963)

(15,965)

Long-term receivables from Consumer Finance

810,662

812,588

 

 

 

Total receivables from Consumer Finance

1,269,519

1,277,714

 

The aging of the receivables contained in the balance sheet that are not individually impaired at the reporting date is as follows:

 

Gross amount

Allowance

Gross amount

Allowance

In 1,000 CHF

2016

2016

2015

2015

Receivables from card holders

 

 

 

 

Not past due

449,127

0

341,556

0

Past due 1–30 days

2,561

0

2,713

0

Past due 31–60 days

619

0

629

0

Past due 61–90 days

279

0

322

0

Past due for more than 90 days

117

0

55

0

Total

452,704

0

345,275

0

 

 

 

 

 

Receivables from debt collection

 

 

 

 

Past due for more than 90 days

3,604

(656)

4,229

(1,226)

Total

3,604

(656)

4,229

(1,226)

 

 

 

 

 

Receivables for which fraud is assumed

 

 

 

 

Past due 1–30 days

213

(91)

196

(58)

Past due 31–60 days

11

(11)

20

(20)

Past due 61–90 days

0

0

26

(26)

Past due for more than 90 days

0

0

9

(9)

Total

223

(102)

251

(113)

 

 

 

 

 

Receivables from card schemes and others

 

 

 

 

Due on sight

88,422

0

87,174

0

Due within 1–3 years

4,311

0

0

0

Past due

870

(163)

268

(177)

Total

93,603

(163)

87,442

(177)

 

 

 

 

 

Receivables from business unit Consumer Finance

 

 

 

 

Past due

28,440

(736)

29,842

(747)

Due on sight

14,297

(373)

8,875

(222)

Due within up to 3 months

130,775

(2,217)

131,313

(2,280)

Due within 4–12 months

294,162

(5,492)

304,035

(5,690)

Total current receivables

467,674

(8,818)

474,065

(8,939)

 

 

 

 

 

Due within 1–3 years

614,775

(11,859)

627,931

(12,072)

Due after more than 3 years

211,850

(4,104)

200,622

(3,893)

Total non-current receivables

826,625

(15,963)

828,553

(15,965)

 

 

 

 

 

Total

1,294,299

(24,780)

1,302,618

(24,904)

Receivables from Payment business

Receivables from cardholders consist of regular open balances on the credit card accounts of credit cardholders. Open balances from cardholders due for more than 90 days are transferred to a dedicated and monitored collection portfolio. The balance of the collection portfolio amounts to CHF 3.6 million (2015: CHF 4.2 million) and is shown under receivables from debt collection.

If a cardholder transaction tends to be fraudulent, the respective balance is transferred to a dedicated fraud portfolio until the case is settled, CHF 0.2 million as per 31 December 2016 (2015: CHF 0.3 million). An adequate allowance is set up for all receivables for which fraud is assumed. The respective balance of all fraudulent transactions under clarification is shown under receivables for which fraud is assumed.

The open settlement balance to the card schemes of CHF 85.4 million (2015: CHF 84.3 million) reflects the transmitted merchant transactions of the last days before closing. The open settlement balances to the card schemes are settled daily. In the history of the company all daily balances to the schemes have been settled as announced by the card schemes. Therefore no allowances for doubtful debts were built.

Receivables from terminal sales are open balances to customers totalling CHF 1.7 million (2015: CHF 1.3 million) and are contained in the other receivables from the Payment business. This is 0.3% (2015: 0.3%) of the total receivables of the Payment business. Allowances for doubtful debts are built according to the aging of the overdue receivables and for receivables overdue for more than 12 months are provided for 100%.

Other receivables from the Payment business also contain receivables related to the currency conversion amounting to CHF 1.9 million (2015: CHF 1.9 million). Such receivables are usually settled within less than one week.

Receivables from Consumer Finance activities

These receivables consist of consumer loans and finance lease receivables from out of the car leasing business. Finance lease receivables are collateralised by the financed cars while consumer loans are not collateralised.

Open balances from the Consumer Finance segment due for more than 90 days are transferred to a dedicated and monitored collection portfolio. Allowances for doubtful debts are built using sophisticated analytical and statistical methods as described below. The total balance is shown as “Allowance for doubtful debts”.

In 1,000 CHF

2016

2015

Receivables from consumer loans

700,772

658,913

Receivables from finance lease

593,527

643,705

 

 

 

Total receivables from business unit Consumer Finance

1,294,299

1,302,618

Receivables from finance lease

In 1,000 CHF

2016

2015

Current receivables from finance lease

 

 

Gross investment in finance lease

287,851

295,423

Unearned finance income

66,224

54,647

 

 

 

Present value of minimum lease payments

221,627

240,776

 

 

 

Non-current receivables from finance lease

 

 

Gross investment in finance lease

408,070

441,993

Unearned finance income

36,171

39,064

 

 

 

Present value of minimum lease payments

371,899

402,929

 

 

 

Gross receivables from finance lease

 

 

Due within up to 1 year

287,851

295,423

Due within 1–5 years

408,070

441,993

Unearned finance income

102,395

93,711

 

 

 

Present value of minimum lease payments

593,527

643,705

Allowances for doubtful debts

Recognised allowances for doubtful debts for the business segments at the reporting date are shown in the following tables.

In 1,000 CHF

2016

2015

Allowance for doubtful debts, business unit Payment

 

 

Balance as of 1 January

(1,516)

(1,913)

(Increase)/decrease

594

397

 

 

 

Balance as of 31 December

(921)

(1,516)

Allowance for doubtful debts on receivables from cardholders is composed of impairment on receivables due to late payment, fraudulent payments and non-recoverable chargeback at both specific and collective level. All individually significant receivables from cardholders are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. The allowance for all three categories is determined according to historical data based on sophisticated analytical methods and evaluation models. The allowance is adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than those suggested by historical trends. Management qualifies the allowance for doubtful debts in the Payment segment as adequate.

In 1,000 CHF

2016

2015

Allowance for doubtful debts, business unit Consumer Finance

 

 

Balance as of 1 January

(24,904)

(16,988)

(Increase) / decrease

124

(7,916)

 

 

 

Balance as of 31 December

(24,780)

(24,904)

Allowance for doubtful debts on receivables from Consumer Finance is composed of impairment on receivables due to late payment and also comprises a portion for those found not to be specifically impaired but are then collectively assessed for any impairment that has been incurred but not yet identified. The Group recognises for allowance in its Consumer Finance business at the time the credit facility or the leasing contract is paid out to the customer.

The collective allowance is determined for clusters of customers by combining historical data based on sophisticated analytical methods and evaluation models considering the particular risks of each cluster. The allowance is adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than those suggested by historical trends. Currently, no specific allowances that are individually significant are recognised on receivables in the Consumer Finance segment. Management qualifies the allowance for doubtful debts in the Consumer Finance segment as adequate.

Except for allowances for fraudulent transactions in the Payment business, all impairments of receivables are due to late payment of customers or those that have been incurred but not yet identified. Based on the Group’s experience, impairments are calculated as a percentage of the overdue balance by customers, including the estimated amount of receivables becoming overdue in the near future.

In the Payment and Consumer Finance business, on average about 98% (2015: 98%) of the receivables outstanding are not past due. Based on past experience, the Group includes the impairment allowance for these receivables in the allowance calculated on the basis of the default risk of the total debts.

16. Inventories

In 1,000 CHF

2016

2015

Raw material

2,306

2,221

Terminals – new

1,651

872

Terminals – used

74

927

 

 

 

Total inventories

4,031

4,020

In 2016 inventory costs of CHF 6.2 million were recognised as an expense (2015: CHF 5.6 million). Write-downs of CHF 1.5 million were recognised on inventories to net realisable value (2015: CHF 0.1 million).

17. Other receivables

In 1,000 CHF

2016

2015

Other receivables from VAT, withholding tax and salary benefits

2,720

7,019

Other receivables from partners

1,410

1,692

Deposits and prepayments

80,549

80,590

Derivative financial instruments, held for trading

49

131

Derivative financial instruments, used for hedging

0

0

Other

4,846

4,876

 

 

 

Total other receivables

89,572

94,308

 

Foreign exchange contracts – trading

In 1,000 CHF

2016

2015

Notional amount

26,856

63,849

Positive fair value

49

131

Negative fair value

(255)

(234)

 

Interest rate swaps – cash flow hedges

In 1,000 CHF

2016

2015

Notional amount

41,000

290,000

Positive fair value

0

0

Negative fair value

(289)

(1,991)

 

Derivative financial instruments

The Group uses only foreign exchange contracts to hedge its foreign exchange risk exposure. As the Group does not comply with all documentation requirements under IAS 39, these derivatives do not qualify for hedge accounting and are therefore classified as “held for trading”.

Cash flow hedges

The Group also uses interest rate swaps to hedge its exposure to interest changes arising from the Payment and Consumer Finance business. These instruments qualify for hedge accounting.

The Group has a permanent requirement to refinance outstanding receivables due by cardholders and consumer finance customers.­ The refinance need is fulfilled with bank loans with durations from one to 90 days and refers to Libor conditions. The Group enters into interest rate swaps to hedge its exposure to fluctuating interest rates on its refinancing. It swaps Libor interest payments into fixed interest payments. The total underlying amount of the contracted swaps as per 31 December 2016 amounted to CHF 41 million (2015: CHF 290 million).

All cash flow hedges of the IRS were assessed to be highly effective as at 31 December 2016 and as at 31 December 2015. A net unrealised gain of CHF 1.8 million (2015: net unrealised loss of CHF 1.0 million), with a related deferred tax liability of CHF 0.2 million (2015: related deferred tax asset of less than CHF 0.2 million) was included in other comprehensive income in respect of these contracts, whereas no (2015: none) hedging reserve was recycled to the statement of comprehensive income.

Cash flows from hedges occurring in the future are disclosed in Note 31, the profit and loss effect being the same as the related cash flow of the underlying hedged item.

    18. Prepaid expenses

    In 1,000 CHF

    2016

    2015

    Prepaid expenses to partners

    23,801

    23,678

    Other

    15,416

    16,780

     

     

     

    Total prepaid expenses

    39,218

    40,458

    In the Payment segment, the Group pays commissions to its distribution partners (mainly the shareholder banks). The commission contains a reimbursement for annual charges for credit cards. The share paid to the partner but not yet consumed is recognised as a prepaid expense to partners.

    Concerning the Consumer Finance activities, the Group recog­nises commissions paid to its sellers and distribution partners. The commission is periodically allocated to the expected duration of the contract.

    19. Property and equipment

    In 1,000 CHF

    Furniture

    IT & office equipment

    Cars

    Leasehold improvement

    Buildings

    Terminals

    Total

    Costs

     

     

     

     

     

     

     

    Balance at 1 January 2016

    3,629

    19,949

    1,237

    12,482

    1,933

    5,926

    45,156

    Acquisitions through business combinations (see Note 3)

    0

    21

    0

    0

    0

    0

    21

    Acquisitions

    122

    5,206

    103

    1,233

    7

    148

    6,820

    Disposals and other changes

    (1,012)

    (5,371)

    (244)

    (450)

    0

    0

    (7,078)

    Effect of movements in foreign exchange

    0

    0

    0

    0

    0

    0

    0

    Balance at 31 December 2016

    2,740

    19,806

    1,096

    13,266

    1,939

    6,075

    44,919

     

     

     

     

     

     

     

     

    Depreciation and impairment losses

     

     

     

     

     

     

     

    Balance at 1 January 2016

    (2,497)

    (7,050)

    (454)

    (4,736)

    (258)

    (3,658)

    (18,653)

    Depreciation charge for the year

    (325)

    (3,679)

    (235)

    (1,400)

    (63)

    (279)

    (5,983)

    Disposals and other changes

    1,183

    5,027

    163

    239

    0

    0

    6,613

    Effect of movements in exchange rates

    0

    0

    0

    0

    0

    0

    0

    Balance at 31 December 2016

    (1,639)

    (5,702)

    (526)

    (5,897)

    (321)

    (3,937)

    (18,022)

     

     

     

     

     

     

     

     

    Carrying amount

     

     

     

     

     

     

     

    At 1 January 2016

    1,132

    12,899

    783

    7,746

    1,675

    2,268

    26,503

    At 31 December 2016

    1,101

    14,104

    570

    7,369

    1,618

    2,138

    26,897

    In 1,000 CHF

    Furniture

    IT & office equipment

    Cars

    Leasehold improvement

    Buildings

    Terminals

    Total

    Costs

     

     

     

     

     

     

     

    Balance at 1 January 2015

    3,528

    14,824

    1,066

    9,968

    1,933

    0

    31,319

    Acquisitions

    101

    6,300

    540

    2,539

    0

    1

    9,481

    Transfers

    0

    0

    0

    0

    0

    5,925

    5,925

    Disposals and other changes

    0

    (1,172)

    (369)

    (25)

    0

    0

    (1,566)

    Effect of movements in foreign exchange

    0

    (3)

    0

    0

    0

    0

    (3)

    Balance at 31 December 2015

    3,629

    19,949

    1,237

    12,482

    1,933

    5,926

    45,156

     

     

     

     

     

     

     

     

    Depreciation and impairment losses

     

     

     

     

     

     

     

    Balance at 1 January 2015

    (2,158)

    (4,493)

    (394)

    (3,681)

    (195)

    0

    (10,921)

    Depreciation charge for the year

    (339)

    (3,731)

    (257)

    (1,080)

    (63)

    (189)

    (5,659)

    Transfers

    0

    0

    0

    0

    0

    (3,469)

    (3,469)

    Disposals and other changes

    0

    1,173

    197

    25

    0

    0

    1,395

    Effect of movements in exchange rates

    0

    1

    0

    0

    0

    0

    1

    Balance at 31 December 2015

    (2,497)

    (7,050)

    (454)

    (4,736)

    (258)

    (3,658)

    (18,653)

     

     

     

     

     

     

     

     

    Carrying amount

     

     

     

     

     

     

     

    At 1 January 2015

    1,371

    10,331

    671

    6,287

    1,737

    0

    20,398

    At 31 December 2015

    1,132

    12,899

    783

    7,746

    1,675

    2,268

    26,503

    Non-cancellable operating lease rentals are payable as follows:

    In 1,000 CHF

    2016

    2015

    Less than one year

    4,271

    4,365

    Between one and five years

    13,339

    17,377

     

     

     

    Total

    17,609

    21,742

    Operating lease includes the Group’s offices in the cantons Zurich, St. Gallen, Ticino, Vaud, Neuchâtel, Geneva and Berne.

    During the year ended 31 December 2016, CHF 4.8 million was recognised as an expense in the consolidated statement of comprehensive income in respect of operating leases (2015: CHF 4.6 million).

    20. Goodwill and other intangible assets

    In 1,000 CHF

    Goodwill

    Software

    Licences

    Client relationships

    Total other intangible assets

    Costs

     

     

     

     

     

    Balance at 1 January 2016

    134,129

    52,295

    2,992

    128,474

    183,761

    Acquisitions through business combinations (see Note 3)

    1,914

    13

    0

    7,726

    7,738

    Acquisitions

    0

    21,085

    0

    0

    21,085

    Disposals and other changes

    0

    (2,470)

    0

    0

    (2,470)

    Balance at 31 December 2016

    136,043

    70,923

    2,992

    136,200

    210,115

     

     

     

     

     

     

    Amortisation and impairment losses

     

     

     

     

     

    Balance at 1 January 2016

    0

    (18,590)

    (576)

    (107,864)

    (127,030)

    Amortisation charges for the period

    0

    (13,353)

    (506)

    (7,317)

    (21,176)

    Disposals and other changes

    0

    2,853

    1

    0

    2,854

    Balance at 31 December 2016

    0

    (29,091)

    (1,081)

    (115,180)

    (145,352)

     

     

     

     

     

     

    Carrying amounts

     

     

     

     

     

    At 1 January 2016

    134,129

    33,705

    2,416

    20,610

    56,731

    At 31 December 2016

    136,043

    41,831

    1,911

    21,020

    64,762

    In 1,000 CHF

    Goodwill

    Software

    Licences

    Client relationships

    Total other intangible assets

    Costs

     

     

     

     

     

    Balance at 1 January 2015

    134,129

    41,912

    5,706

    145,099

    192,718

    Acquisitions

    0

    12,345

    0

    0

    12,345

    Disposals and other changes

    0

    (1,962)

    (2,714)

    (16,625)

    (21,301)

    Balance at 31 December 2015

    134,129

    52,295

    2,992

    128,474

    183,761

     

     

     

     

     

     

    Amortisation and impairment losses

     

     

     

     

     

    Balance at 1 January 2015

    0

    (12,534)

    (2,558)

    (115,111)

    (130,203)

    Amortisation charges for the period

    0

    (8,018)

    (732)

    (9,378)

    (18,128)

    Disposals and other changes

    0

    1,962

    2,714

    16,625

    21,301

    Balance at 31 December 2015

    0

    (18,590)

    (576)

    (107,864)

    (127,030)

     

     

     

     

     

     

    Carrying amounts

     

     

     

     

     

    At 1 January 2015

    134,129

    29,378

    3,148

    29,989

    62,515

    At 31 December 2015

    134,129

    33,705

    2,416

    20,610

    56,731

    Client relationships

    The client relationships recognised through the acquisition of Aduno in 2005 are depreciated using the digital degressive method through 15 years, the period of depreciation ending in 2020, those acquired with Commtrain Card Solutions AG in 2007 are depreciated through 15 years, ending in 2022.

    The acquisitions of the BCV portfolio and Raiffeisen Finanzierungs AG in 2008 resulted in a further increase in the client relationships recognised in the Group’s balance sheet, which is depreciated using the digital degressive method through 7–10 years, ending in 2018 at the latest.

    In 2012, the Group acquired client relationships amounting to CHF 9.0 million for its Consumer Finance business to strengthen its presence in the French-speaking part of Switzerland. Also in 2012, the Group acquired Revi-Lease and recognised the client relationship. These relationships are depreciated using the digital degressive method through their estimated useful life of 10 years until 2022.

    The acquisition of AdunoKaution in 2014 resulted in a further increase of client relationships by CHF 0.7 million. Also in 2014, the Group acquired the client relationship of Banque Cantonale Neuchâteloise amounting to CHF 2.3 million. These are depreciated using the digital degressive method through their estimated useful life until 2024.

    The acquisition of SmartCaution in 2016 resulted in an increase of client relationship by CHF 7.7 million. This is depreciated using the digital degressive method through their estimated useful life until 2031.

    Impairment tests for cash-generating units containing goodwill

    The Group performed impairment tests on goodwill as of 30 September 2016. For the purpose of impairment testing, goodwill is allocated to a cash-generating unit that is expected to benefit from the synergies of the corresponding business combination.

    For the impairment test, the recoverable amount of a cash-generating unit (the higher of the cash-generating unit’s fair value less costs to sell and its value in use) is compared to the carrying amount of the corresponding cash-generating unit.

    Future cash flows are discounted using a pre-tax rate that reflects current market assessments based on the Weighted Average Cost of Capital (WACC) and the Capital Asset Pricing Model (CAPM). The WACC is calculated based on an average of available market betas of a group of companies operating in the same businesses as the respective cash-generating unit as well as the risk-free interest rate.

    Fair value less costs to sell is normally assumed to be higher than the value in use; therefore, fair value less costs to sell is only investigated when value-in-use is lower than the carrying amount of the cash-generating unit.

    The cash flow projections are based on three-year period bud­gets. Cash flows beyond this period are extrapolated using the long-term estimated growth rates stated below.

    Key assumptions used for value-in-use calculations of goodwill amounts per cash-generating unit were as follows:

    2016 In 1,000 CHF

    Carrying amount of goodwill

    Currency

    Discount rate

    Projection period

    Long term growth rate

    Payment business - Issuing

    22,308

    CHF

    10.0%

    2017–2019

    1%

    Payment business - Acquiring

    28,729

    CHF

    8.5%

    2017–2021

    1%

    Consumer Finance

    27,816

    CHF

    9.0%

    2017–2019

    1%

    Internal Financing

    57,190

    CHF

    7.9%

    2017–2019

    1%

    2015 In 1,000 CHF

    Carrying amount of goodwill

    Currency

    Discount rate

    Projection period

    Long term growth rate

    Payment business - Issuing

    20,394

    CHF

    11.1%

    2016–2018

    1%

    Payment business - Acquiring

    28,729

    CHF

    9.5%

    2016–2020

    1%

    Consumer Finance

    27,816

    CHF

    10.2%

    2016–2018

    1%

    Internal Financing

    57,190

    CHF

    9.0%

    2016–2018

    1%

    The estimated recoverable amount for the four cash-generating units exceeds the carrying amount of the cash-generating units. No reasonably possible change in the key assumptions would cause the carrying amount of the cash-generating units to exceed the recoverable amount.

    21. Investments in associates

    Since 2007, the Group owns a 30% participation of Accarda AG. Accarda AG has its principal place of business in Wangen-­Brüttisellen (ZH) and issues, processes and operates store cards and gift cards on behalf of corporate retail customers.

    The following table shows a summary of the full year financial information for the associate Accarda AG, not adjusted for the percentage ownership held by the Group:

    In 1,000 CHF

    2016

    2015

    Total assets

    322,149

    299,856

    Total liabilities

    235,087

    218,906

    Net assets

    87,062

    80,950

     

     

     

    Revenue

    50,325

    47,115

    Profit/(Loss) for the period

    10,839

    10,353

    The Group’s share of the profit of Accarda AG for the period of 1 January to 31 December 2016 amounted to CHF 3.3 million and is accounted in the consolidated profits of the Group (2015: CHF 3.1 million). In 2016, Aduno Holding received a dividend payment of CHF 1.5 million from Accarda AG (2015: CHF 1.5 million).

    Since 2015, the Group owns a 33.3% participation of the 2015 founded SwissWallet AG (founded with a total share capital of TCHF 105 and a “A fond perdu” payment of TCHF 360). SwissWallet AG has its principal place of business in Zurich. SwissWallet is a digital payment solution from the Swiss credit card industry.

    In March 2016 Aduno Holding acquired a 14.3% share stake in Contovista AG. Contovista is developing software for Personal Finance Management and distributing it to banks. The Group is represented in the board of directors of Contovista AG.

     

     

    Contovista AG

    SwissWallet AG

    In 1,000 CHF

    2016

    2015

    2016

    2015

    Total assets

    5,102

    n/a

    2,346

    475

    Total liabilities

    1,232

    n/a

    96

    323

    Net assets

    3,870

     

    2,250

    152

     

     

     

     

     

    Revenue

    1,977

    n/a

    1,005

    161

    Profit/(Loss) for the period

    259

    n/a

    246

    (313)

    22. Financial investments available for sale 

    As a former member of Visa Europe Ltd., the business unit Payment benefited from selling Visa Europe Ltd. to Visa Inc. The Group received contributions at a total value of CHF 71.7 million, including preferential VISA Inc. shares at a value of CHF 17.3 million as per date of transaction. These shares are classified as financial investment available for sale. In 2016 the fair value increased by CHF 1.4 million, which was recorded as unrealised gain on financial investments available for sale in other comprehensive income. 

    23. Payables to counterparties

    In 1,000 CHF

    2016

    2015

    Advances received

    102,992

    104,206

    Payables to merchants

    133,637

    90,111

    Payables to schemes

    48,426

    31,605

    Other

    1,843

    1,245

     

     

     

    Payables to counterparties

    286,898

    227,167

    The Group receives advance payments from customers with issued prepaid credit cards as well as for downpayments for leasing contracts.

    24. Other trade payables

    Other trade payables contain unpaid invoices which were received before the end of the year, but for which the time limit for payment has not yet been reached.

    In 1,000 CHF

    2016

    2015

    Payables related to employees

    16,473

    15,043

    VAT liabilities

    2,176

    3,225

    Derivatives used for hedging

    289

    1,991

    Derivative financial instruments

    255

    234

    Other

    297

    22

     

     

     

    Other payables

    19,489

    20,515

    Other trade payables amounted to CHF 10.4 million as per the end of the reporting period (end of 2015: CHF 12.6 million).

    25. Other payables

    In 1,000 CHF

    2016

    2015

    Payables related to employees

    16,473

    15,043

    VAT liabilities

    2,176

    3,225

    Derivatives used for hedging

    289

    1,991

    Derivative financial instruments

    255

    234

    Other

    297

    22

     

     

     

    Other payables

    19,489

    20,515

    Details for derivative financial instruments are shown in Note 17 Other receivables.

    26. Accrued expenses and deferred income

    In 1,000 CHF

    2016

    2015

    Deferred annual fees

    37,807

    38,140

    Commission payable to partners

    28,370

    21,629

    Deferred revenues arising from loyalty programs

    21,936

    16,759

    Accrued interest expenses

    2,469

    2,507

    Other

    36,770

    13,727

     

     

     

    Accrued expenses and deferred income

    127,351

    92,762

    The position “Other” contains the accrued expenses for other rendered services of partners and other fulfilled services not yet invoiced as well as deferral relating to the outsourcing of business activities between the business units Payment and Internal Finance in the amount of CHF 21.5 million.

    27. Interest-bearing liabilities

    In 1,000 CHF

    2016

    2015

    Other bank liabilities

    8,584

    9,715

    Current portion of syndicated loan

    390,000

    390,000

    Current portion of unsecured bond issues

    449,669

    124,922

    Short-term interest-bearing liabilities

    848,253

    524,637

     

     

     

    Unsecured bond issues

    273,749

    722,634

    Other long-term liabilities

    1,929

    0

    Long-term interest-bearing liabilities

    275,678

    722,634

     

     

     

    Total interest-bearing liabilities

    1,123,930

    1,247,271

    Terms and debt repayment schedule

    In 1,000 CHF

    Currency

    Nominal interest rate

    Year of maturity

    2016 Nominal value

    2016 Carrying amount

    2015 Nominal value

    2015 Carrying amount

    Syndicated loan

    CHF

    0.68%

    2017

    300,000

    300,000

    300,000

    300,000

    Syndicated loan

    CHF

    0.68%

    2017

    90,000

    90,000

    90,000

    90,000

     

     

     

     

     

     

     

     

    Unsecured bond issue

    CHF

    3 M Libor + 35 bp

    2016

    0

    0

    125,000

    124,922

    Unsecured bond issue

    CHF

    3 M Libor1

    2017

    100,000

    99,995

    100,000

    99,977

    Unsecured bond issue

    CHF

    0.00%

    2017

    100,000

    99,987

    100,000

    99,950

    Unsecured bond issue

    CHF

    2.25%

    2017

    250,000

    249,687

    250,000

    249,233

    Unsecured bond issue

    CHF

    1.125%

    2021

    275,000

    273,749

    275,000

    273,474

     

     

     

     

     

     

     

     

    Other bank liabilities

    CHF

    0.78%

    current account

    5,536

    5,536

    5,340

    5,340

    Other bank liabilities

    various

    0.78%

    current account

    3,047

    3,047

    4,375

    4,375

    Other long-term liabilities

    CHF

    0%

    2021

    1,929

    1,929

    0

    0

     

     

     

     

     

     

     

     

    Total

     

     

     

    1,125,512

    1,123,930

    1,249,715

    1,247,271

    1)Floor at 0.0% and Cap at 0.05%

    Syndicated loan

    As per 31 December 2016, the Group has a syndicated loan facility of CHF 1,050 million headed by Zürcher Kantonalbank (ZKB) (31.12.2015: CHF 1,050 million) at its disposal. The interest conditions of the facility are quoted by ZKB at market conditions at the fixing date according to the maturity plus a margin depending on the Company’s credit rating.

    As per 31 December 2016, the syndicated loan amounts to CHF 390 million nominal (31.12.2015: CHF 390 million).

    Unsecured bond issues

    Two bonds were issued in May 2015, thereof a fixed rate bond of CHF 100 million with its maturity in 2017 and with a coupon of 0% with an effective interest rate of 0.038%. The other bond of CHF 100 million disposes of a floating rate based on Libor interest rate with a floor at 0.0% and a cap at 0.05% expiring in 2017 with an effective interest rate of 0.018%.

    Since 27 October 2011, Aduno Holding has an outstanding fixed rate bond of CHF 250 million with a maturity in 2017. The nominal interest rate is set at 2.25% and is paid yearly to the bondholders. The effective interest rate, including all fees paid for this bond, amounts to 2.44%.

    A fixed rate bond of CHF 275 million issued in 2014 with its maturity in 2021 disposes of a nominal interest rate of 1.125%. Including fees, the effective interest rate amounts to 1.241%.

    Other bank liabilities

    As per 31 December 2016, the Group has access to a bilateral credit facility with ZKB of CHF 700 million (31.12.2015: CHF 700 million). The interest rate for this facility is set at the market interest rate based on the maturity plus a fixed credit margin.

    As per 31 December 2016, the total of the other bank liabilities amounts to CHF 8.6 million (31.12.2015: CHF 9.7 million).

    Pledged assets

    No assets were pledged as per 31 December 2016 (2015: none).

    28. Provisions

    In 1,000 CHF

    Legal

    Other

    Total

    Balance at 1 January 2016

    90

    1,208

    1,298

    Provisions made during the period

    260

    485

    745

    Provisions reversed during the period

    (85)

    (100)

    (185)

    Balance at 31 December 2016

    265

    1,593

    1,858

     

     

     

     

    Maturity of provisions

     

     

     

    Current

    170

    0

    170

    Non-current

    95

    1,593

    1,688

    Total

    265

    1,593

    1,858

    In 1,000 CHF

    Legal

    Other

    Total

    Balance at 1 January 2015

    0

    1,176

    1,176

    Provisions made during the period

    90

    32

    122

    Provisions reversed during the period

    0

    0

    0

    Balance at 31 December 2015

    90

    1,208

    1,298

     

     

     

     

    Maturity of provisions

     

     

     

    Current

    90

    100

    190

    Non-current

    0

    1,108

    1,108

    Total

    90

    1,208

    1,298

    The Group is involved in legal proceedings in the course of normal business operations. The Group establishes provisions for pending legal cases if management believes that the Group is more likely than not to face payments and if the amount of such payments can be reasonably estimated.

    Other provisions are mainly dismantling obligations for leasehold improvements in premises rented by the Group. The Group currently has no plans of abandoning these premises and therefore these provisions are considered non-current.

    29. Employee benefit obligations

    The pension plan of the Group is a defined benefit plan. Disability and death benefits are defined as a percentage of the insured salary.

    It provides benefits over the LPP/BVG law, which stipulates the minimum requirement of the mandatory employer’s sponsored pension plan in Switzerland. In particular, annual salaries up to CHF 84,600 (2015: CHF 84,600) must be insured: financing is age-related with contribution rates calculated as a percentage of the pensionable salary increasing with age from 7% to 18%. The conversion rate to calculate the annuity based on the accrued savings capital is 6.8% at normal retirement age (65 for men and 64 for women).

    The plan must be fully funded under LPP/BVG law on a static basis at all times. In case of underfunding, recovery measures must be taken, such as additional financing from the employer or from the employer and employees, or a reduction of benefits or a combination of both.

    The Group is affiliated to the collective foundations Swisscanto Sammelstiftung der Kantonalbanken and CIEPP - Caisse Inter-Entreprises de prévoyance professionnelle. The collective foundations are separate legal entities. The foundations are responsible for the governance of the plans, their boards are composed of an equal number of representatives from the employers and the employees chosen from all affiliated companies.

    The foundation has set up investment guidelines, defining in particular the strategic allocation with margins.

    Additionally, there is a pension committee composed of an equal number of representatives from the Group and the employees of Group. The pension committee is responsible for the set-up of the plan benefits.

    In 2016, the collective foundation Swisscanto Sammelstiftung der Kantonalbanken decided to reduce the conversion rates on the over-mandatory part of the savings capitals over the next years, which led to plan amendments recognised in 2016.

    This defined benefit plan exposes the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

    In 1,000 CHF

    2016

    2015

    Present value of funded obligations

    167,684

    146,578

    Fair value of plan assets

    (125,136)

    (107,138)

    Recognised liability for defined benefit obligations

    42,548

    39,440

    Movements of present value of defined benefit obligations

    In 1,000 CHF

    2016

    2015

    Liability for defined benefit obligations at 1 January

    146,578

    131,737

    Current service cost

    8,815

    7,906

    Past service cost

    (2,833)

    (32)

    Interest expense

    1,315

    1,443

    Benefit payments

    2,428

    2,995

    Employee contributions

    4,495

    4,064

    Insurance premiums

    (1,521)

    (1,703)

    Liabilities assumed through business combinations

    380

    0

    Effect of changes in demographic assumptions

    (6,669)

    0

    Effect of changes in financial assumptions

    7,906

    1,564

    Effect of experience adjustments

    6,790

    (1,396)

     

     

     

    Liability for defined benefit obligations at 31 December

    167,684

    146,578

    Movements of fair value of plan assets

    In 1,000 CHF

    2016

    2015

    Fair value of plan assets at 1 January

    (107,138)

    (90,811)

    Interest income

    (1,000)

    (1,038)

    Return on plan assets (excluding interest income)

    (5,110)

    (3,990)

    Employer contributions

    (6,252)

    (5,943)

    Employee contributions

    (4,495)

    (4,064)

    Benefit payments

    (2,428)

    (2,995)

    Insurance premiums

    1,521

    1,703

    Assets acquired through business combinations

    (234)

    0

     

     

     

    Fair value of plan assets at 31 December

    (125,136)

    (107,138)

    The plan assets include a qualifying insurance policy.

    The plan assets are invested to ensure that the return on plan assets together with the contributions should cover the long-term benefit obligations. In the short-term, however, the pension fund could suffer a shortfall as defined by Swiss law which would eventually trigger restructuring contributions.

    Expense recognised in the statement of comprehensive income

    In 1,000 CHF

    2016

    2015

    Current service cost

    8,815

    7,906

    Past service cost

    (2,833)

    (32)

    Interest on employee benefit obligations

    1,315

    1,443

    Interest on plan assets

    (1,000)

    (1,038)

     

     

     

    Total, included in “Personnel expenses”

    6,297

    8,279

     

     

     

    Effect of changes in demographic assumptions

    (6,669)

    0

    Effect of changes in financial assumptions

    7,906

    1,564

    Effect of experience adjustments

    6,790

    (1,396)

    Return on plan assets (excluding interest income)

    (5,110)

    (3,990)

     

     

     

    Total, included in other comprehensive income

    2,917

    (3,822)

    Actuarial assumptions

    Significant actuarial assumptions at the reporting dates were as follows (expressed as weighted averages):

     

    2016

    2015

    Discount rate at 31 December

    0.60%

    0.90%

    Future salary increases

    1.50%

    1.50%

    Future pension increases

    0.00%

    0.00%

    Life expectancy at age 65 years, insured for a now 45-year-old active member

     

     

    Males

    24.26

    23.31

    Females

    26.29

    25.74

    Life expectancy at age 65 years

     

     

    Males

    22.38

    21.59

    Females

    24.43

    24.06

    Sensitivity analysis  

    The sensitivity analysis below has been determined based on reasonably possible changes of the respective actuarial assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

    • If the discount rate is 25 basis points higher (lower), the defined benefit obligations would decrease by CHF 5.4 million (increase by CHF 5.9 million). In 2015 decrease by CHF 4.6 million and an increase by CHF 5.0 million. 
    • If the expected salary growth rate increases (decreases) by 0.5%, the defined benefit obligations would increase by CHF 1.3 million (decrease by CHF 1.4 million). In 2015 an increase by CHF 1.2 million and a decrease by CHF 1.3 million.
    • If the expected pension growth rate increases by 0.25%, the defined benefit obligations would increase by CHF 4.5 million (2015: CHF 3.9 million).
    • If the life expectancy increases by one year for both men and women, the defined benefit obligations would increase by CHF 2.4 million (2015: CHF 1.9 million).

    The sensitivity analysis presented above may not be representative of the actual change in the defined benefit as it is unlikely that a change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

    Future contributions

    The Group expects to pay CHF 6.5 million in contributions to defined benefit plans in 2017. As per 31 December 2015 the Group expected to pay CHF 6.1 million in 2016.

    Plan assets

     

    2016

    2015

    Asset categories

     

     

    Cash

    0.8%

    2.6%

    Domestic bonds

    26.4%

    32.1%

    Foreign bonds in other currencies

    15.4%

    14.5%

    Swiss shares

    7.6%

    7.1%

    Foreign shares

    23.9%

    21.4%

    Real estate

    12.0%

    11.3%

    Alternative investments

    14.0%

    11.0%

     

     

     

    Total

    100.0%

    100.0%

    The bonds held are predominantly rated A or better.

    Cash as well as most of the investments in bonds and shares have a quoted market price in an active market. Investments in real estate and alternative investments do not typically have a quoted market price in an active market.

    The pension fund does not directly invest in the Group’s own transferable financial instruments.

    The investment strategy has been defined based on an asset-liabilities matching strategy. However, a matching between assets and liabilities is only possible to a certain degree as the duration of the liabilities is relatively long compared to the available assets. Furthermore, available bonds with long durations do not generate a yield high enough to reach the necessary returns on the plan assets. Therefore, the pension fund also needs to invest in property and alternative investments.

    At 31 December 2016, the weighted-average duration of the defined benefit obligations was 18.4 years (2015: 18.4 years).

    30. Contingent liabilities

    In the normal course of business, the Group enters into agreements pursuant to which the Group may be obliged under specified circumstances to indemnify the counterparties with respect to certain matters. These indemnification obligations typically arise in the context of business arrangements where the Group has remitted payments to the merchants for card members’ purchases of goods and services that have not yet been used or delivered. This creates a potential exposure for the Group in the event that the card member is not able to obtain the goods or services due to bankruptcy of the merchant and the Group is obliged to credit the card member for the goods not received or the services not consumed. Historically, this type of exposure has not generated any significant loss for the Group.

    In some leasing contracts in the Consumer Finance business the Group confirms to the customer a minimum residual value of the leased item to the leasing partner, meaning that if the leasing customer returns the leased item to the leasing partner after the leasing period with a lower value than the minimum residual value, the Group is obliged to refund the leasing partner the difference in value.

    31. Share capital and reserves

    Share capital

    On 31 December 2016, the share capital of the parent company Aduno Holding consisted of 25,000 shares with a nominal value of CHF 1,000 each (2015: 25,000 shares). The holders of the shares are entitled to receive dividends as declared and are entitled to one vote per share at the general meeting of the company.

    In 1,000 CHF

    2016

    2015

    Number of issued shares 1 January

    25,000

    25,000

    Number of issued shares 31 December

    25,000

    25,000

     

     

     

    Nominal value in CHF

    1,000

    1,000

    Dividends

    The following dividends were declared and paid by the Group:

    In 1,000 CHF

    Paid in 2016

    Paid in 2015

    Total dividend

    20,000

    20,000

    Dividend per share in CHF

    800

    800

    After 31 December 2016, the Board of Directors proposed a dividend of CHF 1,600 per share, in total CHF 40.0 million for 2016. The dividend proposal of dividends will be forwarded for approval by the general meeting in June 2017.

    Hedging reserve

    As described in Note 17, the Group uses interest rate swaps to hedge its exposure to interest rate changes. The effective portion of these hedges, net of taxes, is accounted in the hedging reserve.

    In 2011 the Group entered into a forward starting swap to fix the interest rate of the bond issue planned and executed in October 2011. The realised negative fair value was accounted in the hedging reserve and is included in the interest expense within the duration of the bond.

    In 1,000 CHF

    2016

    2015

    Positive fair value of cash flow hedges (see Note 17)

    0

    0

    Negative fair value of cash flow hedges (see Note 25)

    (289)

    (1,991)

    Terminated forward starting cash flow hedges

    (52)

    (114)

    Tax effect

    34

    235

     

     

     

    Total hedging reserve

    (306)

    (1,870)

    Derivative on own equity

    In June 2015, the subsidiary Vibbek AG increased its shareholders’ equity by CHF 2 million. The Non-controlling interests (NCI) did not participate in this increase. Consequently, the ownership interest of the Group increased by 7.6% to 74.6%. The NCI increased by CHF 0.7 million and the retained earnings decreased by CHF 0.7 million. The Group granted the NCI holder options to repurchase shares in the amount of 7.6% with a fair value of TCHF 116. This options are disclosed as derivative on own equity instruments in the consolidated statement of changes in equity. This option was excercised in 2016. Consequently the ownership interest of the Group decreased by 7.6% to 67.0%. The NCI decreased by CHF 0.2 million and the retained earnings increased by CHF 0.8 million. The Group has no longer any derivatives on own equity instruments.

    Capital management

    The Board’s policy is to maintain an adequate equity base so as to maintain investors’, creditors’ and market confidence and to sustain the future development of the business. The Board of Directors monitors the return on capital, which the Group defines as the total shareholders’ equity and the development of dividends paid to the shareholders.

    According to the Swiss consumer finance regulations, consumer finance credit balances to private customers have to be underlined with 8% of equity. For the subsidiary cashgate, the company’s target is therefore to always maintain an equity base fulfilling these legally required obligations. A quarterly documentation on the level of equity is reviewed by the management of cashgate on a quarterly basis. Since the acquisition of the Consumer Finance business, this obligation was fulfilled at the end of each month including on 31 December 2016.

    32. Risk management 

    Through its business activities, the Aduno Group is subjected to constant changes and thus also confronted with opportunities and risks that can substantially affect the achievement of its strategic goals and objectives. These opportunities and risks can arise from events, conditions and actions to which the Group is exposed and which it therefore needs to understand and actively manage.

    In recent years the Group has further enhanced its risk management programme. In recent years the Group has expanded its risk management programme (framework) to take into account the complexity of its business divisions and major changes in the business environment.

    Risk

    The Group defines risk as the uncertainties inherent in the achievement of strategic and operational objectives that are associated with all business activities. These uncertainties could result in a shortfall in meeting objectives or the risk of financial losses.

    Risk management

    As a financial services company, the Aduno Group is exposed to various types of risk that are managed actively and systematically.

    The Aduno Group’s risk management approach follows a standardised model that starts with the definition of the risk policy and continues with the identification, management and monitoring of the risks associated with the business activities and finally risk reporting.

    Internal control system

    The internal control system (ICS) of the Group covers all control structures (including roles and responsibilities) and processes that form the basis for achieving the business objectives and ensuring appropriate business operations across all levels of the company. The integrated ICS consists of ex-post oversight as well as planning and management activities.

    Principles of risk management

    Risk Policy

    The risk policy specifies the framework for the risk management and risk profile of the Group. This in particular includes the definition of risk capacity, risk appetite, limits, suitable stress tests as well as quantification and aggregation methodologies to monitor the risk profile.

    The risk policy sets out the objectives of risk management. It involves taking risks in a controlled and deliberate manner to achieve an optimal risk-return ratio. The framework conditions are determined by the company’s business strategy and risk capacity. To this end, the Group aligns the strategic planning process with capital planning and risk budgeting.

    Risk culture

    A risk culture geared towards responsible risk-taking to ensure a deliberate approach to risks is fostered throughout the Group. The management of the  Group is expected to set an example and influence their employees to only take on risks that are compatible with the specified risk appetite. The promotion and compensation of employees also takes their compliance with the risk culture and risk policies into account.

    As the Group’s business operations involve inherent risks that require active management, the Group aims for a high degree of risk awareness.

    The Group consciously enters into risk transactions within its defined risk appetite. To this end, new business activities or changes to existing business activities are systematically evaluated with regard to their risk profile and the risk portfolio is constantly monitored. The Group avoids extreme risks that jeopardise its solvency or its very existence.

    Segregation of duties

    Risk management operates along the “Three-Lines-of-Defence Model”. The first line of defence refers to the functions that own and manage risks and consists of the managers, experts and staff within the business divisions and ensures that the actual risk profile adheres to the approved risk appetite.

    The second line of defence comprises centralised risk control that not only defines the directives that apply to all business divisions when dealing with specified risks but also monitors compliance with these requirements. The second line of defence also provides an aggregated portfolio view to support management in the implementation of effective risk management practices for the Group and ensures regular risk reporting.

    The third line of defence provides independent assurance on the effectiveness of governance, risk management and internal controls, including the manner in which the first and second lines of defence meet risk management and control objectives. The internal and external auditors are responsible for the third line of defence.

    Standardised risk management process

    The risk management process of the Aduno Group contains the following elements: risk identification, risk assessment, risk steering and risk monitoring. All new business activities and changes to existing business activities follow the risk management process. The materiality of changes to the business model is a relevant benchmark in this process.

    Central risk control ensures that the risk management process is carried out effectively.

    Standardised valuation method

    Standardised methods appropriate to the type and scope of business activity are defined for determining the risk profile and risk capacity. Risk assessments are made at risk category, business division and Group level.

    Scenario-based risk assessments are performed to gauge the impact of environmental, business and operational risks on key objectives, whereby the realistic scenarios are based on the time horizon and objectives of the strategic business plan. The robustness of the business model is tested under various stress scenarios.

    Transparency

    Risk Control regularly informs the Board of Directors and Executive Board of the Group about the overall risk situation, any developments in the risk profile and important findings gained through its risk oversight role. In addition, an annual activity report is prepared that provides information about the maturity level of and developments in the risk management system.

    Various reports are prepared for each risk category whereby format, frequency and recipients are tailored to the individual risk to ensure a comprehensive, objective and transparent foundation for decision-makers and oversight committees.

    Risk governance

    Board of Directors

    Overall responsibility for risk management lies with the Board of Directors, who approves the principles for risk management. The Board of Directors receives regular reports about the risk situation of the Group and the status of measures implemented. The Board of Directors monitors an effective implementation of the risk policy and risk strategies as well as the adopted measures.

    The Audit & Risk Committee and the internal auditors support the Board of Directors in the execution of its responsibilities.

    Executive Board

    The Executive Board (ExB) is responsible for the implementation of the risk management standards defined in the risk management regulations and the design, implementation and continuous review of the internal control system (ICS).

    A risk board has been set up at the ExB level that meets quarterly to discuss the structure and effectiveness of the risk management system, the design and monitoring of the risk policy and the management of the Group’s risks.

    Expert committees have been set up to prepare requests for approval for transactions, proposals and recommendations as a decision-making basis for the ExB.

    Risk control

    A central risk control function is responsible for identifying and monitoring risks at an aggregated portfolio level, monitoring compliance with the risk policy and ensuring integrated risk reporting to the Board of Directors and the ExB. Risk control is responsible for the risk measurement methodologies, risk-based approval processes for new business activities, model validation and quality assurance of the implemented risk measurement processes.

    If required, risk control can propose directives for approval by the ExB. Central risk control is responsible for monitoring compliance with the policies and their supporting directives and providing reports or information as requested.

    Control of material risks

    The Group distinguishes the following six risk categories for its business activities:

    Overall risks:

    • External/environmental risk
    • Business risk
    • Operational risk

    Financial risks:

    • Credit risk
    • Liquidity risk
    • Market risk (currency risk, interest risk and equity price risk)

    Reputational damage is not listed as a separate risk category as it generally only arises as a consequence of one of the aforementioned risks. Reputational damage is therefore considered to be consequential damage.

    Environmental, business and operational risks are systematically assessed and either deemed acceptable and within the risk appetite or undesirable and to be reduced with appropriate measures. The measures that are implemented to mitigate risks are monitored through the ICS of the Group.

    External/environmental risk

    The Group defines external/environmental risk as risk arising from the external business environment of the Group that could challenge the business model of the Group or the individual companies.

    Business risk

    The Group defines business risk as the possibility of lower than anticipated profits due to uncertainties arising from the following aspects: management and the quality of information used for taking decisions or deriving strategies.

    Operational risk

    Operational risk refers to the risk of monetary losses resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes information technology risks and all legal and regulatory risks.

    Credit risk

    The key credit risk for the Group is the risk of financial loss that arises if a customer or counterparty to a financial transaction fails to meet its contractual obligations and results primarily from the Group’s receivables from customers.

    The Group’s exposure to credit risk primarily originates from the creditworthiness and credit capacity of each customer and is comprised of receivables which remain unpaid or which are paid later than at their due date.

    Geographically, credit risk is concentrated in Switzerland where the Group mainly operates.

    Receivables from cardholders

    It is in the nature of the credit card business that customers get temporarily into debt with the credit card company. This explains the considerably high volumes of receivables.

    The credit counterparty in the issuing business is a private or corporate consumer using a credit card for purchases or cash transactions. All credit card customers, when applying for a credit card, are individually credit rated before a credit card is issued. If a client does not meet the stringent customer credit rating criteria, no credit card is issued.

    Risk and credit management is a core process in the credit card business and the Group therefore runs sophisticated risk assessment tools and delinquency reports to monitor and assess the risk exposure. All incoming payments of customers are closely watched. If a client defaults for more than 60 days, the receivable will be transferred to a dedicated risk management department to ensure collection of the debts.

    For customers with high risk exposure, collaterals such as bank guarantees are held as security. Customers with low risk exposure are not required to deliver collaterals.

    The Group issues credit cards on behalf of various distribution partners. The Group entered into agreements with some of its partners, so that the partner bears the risk of default for any receivable outstanding from cardholders. If a cardholder becomes delinquent, the outstanding amount is fully paid by the partner.

    If a cardholder has a direct relationship with the Group and not via a partner, the Group bears the default risk. In individual cases the outstanding receivable is collateralised by bank guarantees. The underlying receivables amounted to CHF 10.1million as per 31 December 2016 (2015: CHF 11.9 million). These receivables are fully covered by the bank guarantees.

    Residual amounts overdue for more than 90 days may occur outside the debt collection portfolio, when the assessment has not been completed. The total of these residual amounts stands at CHF 0.1 million as per 31 December 2016 (2015: CHF 0.1 million).

    To avoid a total loss of the receivable, the Group renegotiates the terms of payment for customers who are not able to redeem the receivable in total. The renegotiated amounts are contained in “receivables from debt collection”. Conditions for renegotiated amounts are individually fixed depending on the individual situation of the debtor. The total portfolio with renegotiated payment terms comprises CHF 1.7 million (2015: CHF 1.4 million).

    Receivables overdue for more than 24 months are written off from the balance sheet.

    Receivables from merchant activities

    In the merchant business, the Group generally transfers money to its merchants at the same time as it receives the settlement by its counterparties. The major credit counterparties are the international operating card schemes MasterCard and Visa. The receivables are settled daily. Therefore management assesses the credit risk in the merchant business as very low and receivables are not collateralised.

    Resulting from terminal sales, the Group recognises receivables against commercial customers. To secure the receivables, the Group is able to block the customers’ terminals to ensure the payment of the customers’ debt towards the Group.

    Receivables from Consumer Finance

    In the Consumer Finance business, the Group grants cash credits or finances cars in a financial lease to its customers. The credit counterparty is a private consumer in the cash credit business and a private or corporate customer in the leasing business. The receivables are generally due on a monthly basis, which means that the credit risk steadily decreases over the life of the contract.

    In compliance with the Swiss consumer credit regulations, a solvency check is carried out for all customers on an individual basis to assess the related credit risk when they apply for a cash credit or a leasing facility.

    The solvency check is based on the customer’s historical track record with the Group and requires the customer to deliver personal data on his financial situation such as his employment, his family situation and his personal debt situation. Additionally, a database for private consumer loans, maintained by Swiss banks, is consulted to confirm that no negative records have been recognised for the future customer.

    If a client does not meet the stringent customer credit rating criteria, no credit facility will be approved.

    Risk and credit management is a core process in the Consumer Finance business. Therefore the Group runs sophisticated risk assessment tools and delinquency reports to monitor and assess the risk exposure. All incoming payments from customers are closely watched. If a client defaults for more than 90 days, the overdue receivable will be actively managed to ensure the collection of the debt.

    The receivables from consumer loans are not collateralised. The finance lease receivables are collateralised by the financed cars, the Group applying a margin between the lease amount and the estimated value of the financed car to ensure that the coverage of the receivable is higher than 100%.

    Exposure to credit risk

    The carrying amount of financial assets represents the maximum credit exposure. The maximum credit risk to which the Group is theoretically exposed at 31 December 2016 and 2015 respectively is represented by the carrying amounts stated for financial assets in the balance sheet.

    The maximum exposure to credit risk for receivables from cardholders, Consumer Finance and merchant activities at the reporting date by type of customer is shown in the following tables. Additionally, credit risk can occur from debt collection and from fraud in the Payment business as shown in note 15 and from other receivables.

    In 1,000 CHF

    2016

    2015

    Receivables from card holders

     

     

    Individuals

    412,287

    312,610

    Corporate clients

    40,417

    32,665

     

     

     

    Total

    452,704

    345,275

    In 1,000 CHF

    2016

    2015

    Receivables from card holders

     

     

    Default risk borne by partners

    261,910

    168,199

    Default risk borne by the Group, secured by bank guarantees

    10,117

    11,975

    Default risk borne by the Group

    180,677

    165,101

     

     

     

    Total

    452,704

    345,275

    The collateralisation by partners and bank guarantees is borne by those counterparties in the amount of the receivable. The estimated fair value of the collaterals is estimated to be the same as the nominal value.

    In 1,000 CHF

    2016

    2015

    Receivables from card schemes

     

     

    Mastercard

    66,162

    66,812

    Visa

    18,470

    17,168

    UnionPay

    807

    334

     

     

     

    Total

    85,439

    84,314

    In 1,000 CHF

    2016

    2015

    Receivables from business unit Consumer Finance

     

     

    Individuals – Consumer loans

    681,136

    640,109

    Individuals – Financial lease

    398,533

    429,316

    Corporate clients – Financial lease

    189,850

    208,289

     

     

     

    Total

    1,269,519

    1,277,714

    Receivables from Financial lease are collateralised by the financed cars. Following the Group’s risk policy, the Group estimates that the fair value of the collaterals is approximately the same as the nominal value of the receivable.

    Liquidity risk

    Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Liquidity risk arises if the Group is unable to obtain under economic conditions the funds needed to carry out its operations. The Group monitors its liquidity needs steadily and also maintains liquidity forecasts.

    Management ensures that cash funds and credit lines currently available (Total credit line limit of CHF 1,750 million, 2015: CHF 1,750 million) and funds that will be generated from operating activities (in the last 12 months a monthly average of CHF 1,450 million, 2015: CHF 1,370 million) enable the Group to satisfy its requirements resulting from its operating activities and to fulfil its obligations to repay its debts at their natural due date.

    Maturity of financial liabilities

    2016 In 1,000 CHF

    Carrying amount

    Contractual cash flows

    1 month or less

    2–3 months

    4–12 months

    13–24 months

    25–72 months

    Non-derivative liabilities

     

     

     

     

     

     

     

    Payables to counterparties

    286,898

    286,898

    181,446

    105,452

    0

    0

    0

    Other trade payables

    10,407

    10,407

    10,407

    0

    0

    0

    0

    Short-term interest-bearing liabilities

    848,253

    855,146

    208,773

    0

    646,373

    0

    0

    Other payables

    16,770

    16,770

    5,590

    0

    11,180

    0

    0

    Accrued expenses

    67,609

    67,609

    67,609

    0

    0

    0

    0

    Total current liabilities

    1,229,936

    1,236,830

    473,826

    105,452

    657,553

    0

    0

     

     

     

     

     

     

     

     

    Long-term interest-bearing liabilities

    275,678

    290,469

    0

    0

    3,094

    3,094

    284,281

    Total non-current liabilities

    275,678

    290,469

    0

    0

    3,094

    3,094

    284,281

     

     

     

     

     

     

     

     

    Cash inflow from derivatives

     

    (26,856)

    (26,856)

    0

    0

    0

    0

    Cash outflow from derivatives

     

    27,062

    27,062

    0

    0

    0

    0

    Total derivatives held for trading

    206

    206

    206

    0

    0

    0

    0

     

     

     

     

     

     

     

     

    Cash inflow from IRS

     

    0

    0

    0

    0

    0

    0

    Cash outflow from IRS

     

    389

    22

    68

    233

    66

    0

    Total derivatives used for hedging

    289

    389

    22

    68

    233

    66

    0

    Total estimated cash flow

    1,506,109

    1,527,894

    474,053

    105,520

    660,880

    3,160

    284,281

     

     

    2015 In 1,000 CHF

    Carrying amount

    Contractual cash flows

    1 month or less

    2–3 months

    4–12 months

    13–24 months

    25–72 months

    Non-derivative liabilities

     

     

     

     

     

     

     

    Payables to counterparties

    227,167

    227,167

    121,716

    105,452

    0

    0

    0

    Other trade payables

    12,590

    12,590

    12,590

    0

    0

    0

    0

    Short-term interest-bearing liabilities

    524,637

    525,021

    400,021

    0

    125,000

    0

    0

    Other payables

    15,043

    15,043

    5,014

    0

    10,029

    0

    0

    Accrued expenses

    37,863

    37,863

    37,863

    0

    0

    0

    0

    Total current liabilities

    817,300

    817,684

    577,204

    105,452

    135,029

    0

    0

     

     

     

     

     

     

     

     

    Long-term interest-bearing liabilities

    722,634

    754,813

    0

    0

    8,719

    458,719

    287,375

    Total non-current liabilities

    722,634

    754,813

    0

    0

    8,719

    458,719

    287,375

     

     

     

     

     

     

     

     

    Cash inflow from derivatives

     

    (63,849)

    (63,849)

    0

    0

    0

    0

    Cash outflow from derivatives

     

    63,951

    63,951

    0

    0

    0

    0

    Total derivatives held for trading

    103

    103

    103

    0

    0

    0

    0

     

     

     

     

     

     

     

     

    Cash inflow from IRS

     

    (40)

    0

    (6)

    (14)

    0

    (20)

    Cash outflow from IRS

     

    3,956

    0

    460

    1,319

    200

    1,978

    Total derivatives used for hedging

    1,991

    3,916

    0

    454

    1,304

    200

    1,958

    Total estimated cash flow

    1,542,028

    1,576,516

    577,307

    105,906

    145,052

    458,919

    289,333

    Market Risk

    Market risk is the risk of losses arising from movement in market prices in on-balance and off-balance sheet items. Three of the standard market risk factors cover the risk of price movements in foreign currency, interest rates and equity price risk.

    Foreign currency risk

    The Group’s exposure to foreign currency risk is as follows based on notional amounts. There is no currency risk on Swiss francs (CHF) as it is the functional currency of the company.

     

    Foreign currencies

    2016 In 1,000 CHF

    CHF/EUR

    CHF/USD

    CHF/Other

    Cash and cash equivalents

    368

    15

    700

    Receivables from business unit Payment

    20,244

    9,449

    1,246

    Receivables from business unit Consumer Finance

    0

    0

    0

    Other trade receivables and other receivables

    576

    0

    32

     

     

     

     

    Payables to counterparties

    1,832

    13,264

    2,193

    Other trade payables

    636

    50

    0

    Short-term interest-bearing liabilities

    1,765

    1,282

    0

    Other payables

    0

    0

    0

    Accrued expenses

    18

    0

    0

    Long-term interest-bearing liabilities

    0

    0

    0

     

     

     

     

    Gross balance sheet exposure

    16,937

    (5,132)

    (214)

     

     

     

     

    Derivatives held for trading

    (15,494)

    (10,403)

    (959)

    Derivatives used for hedging

    0

    0

    0

     

     

     

     

    Net exposure

    1,443

    (15,535)

    (1,173)

     

    Foreign currencies

    2015 In 1,000 CHF

    CHF/EUR

    CHF/USD

    CHF/Other

    Cash and cash equivalents

    206

    80

    399

    Receivables from business unit Payment

    21,646

    10,213

    2,048

    Receivables from business unit Consumer Finance

    0

    0

    0

    Other trade receivables and other receivables

    524

    0

    0

     

     

     

     

    Payables to counterparties

    7,184

    9,807

    725

    Other trade payables

    260

    86

    0

    Short-term interest-bearing liabilities

    2,422

    1,641

    311

    Other payables

    0

    0

    0

    Accrued expenses

    17

    0

    0

    Long-term interest-bearing liabilities

    0

    0

    0

     

     

     

     

    Gross balance sheet exposure

    12,493

    (1,241)

    1,411

     

     

     

     

    Derivatives held for trading

    (50,225)

    (12,823)

    (801)

    Derivatives used for hedging

    0

    0

    0

     

     

     

     

    Net exposure

    (37,732)

    (14,064)

    610

    Sensitivity analysis

    The Group has estimated the effects of a strengthening of the Swiss franc against the following currencies. As a measure the Group assumed a volatility for CHF/EUR of 5.9% and for CHF/USD of 9.3%. These assumptions are based on market data from 2016.

    With these assumptions, a strengthening of the Swiss franc against the following currencies at 31 December would have increased profit or loss after tax by the amounts shown below. No changes will occur within the equity of the Group when exchange rates change.

    This analysis assumes that all other variables, in particular interest rates, remain constant.

    In 1,000 CHF

    %

    2016 CHF

    %

    2015 CHF

    CHF/EUR

    5.9

    75

    7.0

    (2,338)

    CHF/USD

    9.3

    (1,272)

    10.8

    (1,338)

     

     

     

     

     

    Total currency sensitivity

     

    (1,196)

     

    (3,676)

    In the case where the Swiss franc declines in value, the same effect vice versa would occur.

    Interest rate risk

    At the reporting date the interest rate profile of the Group’s interest bearing financial instruments after the effects of interest swaps was:

    In 1,000 CHF

    2016

    2015

    Instruments at long-term fixed rates

     

     

    Interest bearing liabilities

    275,000

    625,000

    Instruments with variable or short-term fixed rates

     

     

    Interest bearing liabilities

    840,000

    615,000

    Interest rate swaps

    (41,000)

    (290,000)

    Bank accounts

    (10,512)

    (5,340)

     

     

     

    Total exposure from variable rate instruments

    788,488

    319,660

    Cash flow sensitivity analysis

    Due to the hedging activities, the exposure from variable rate instruments is highly reduced. If interest rates had been 10 basis points lower as per 31 December 2016, the post-tax profit of the Group would have been CHF 0.7 million higher with all other variables held constant (2015: CHF 0.3 million higher).

    If interest rates had been 10 basis points higher, with all other variables held constant, post-tax profit would have been lower for the same amounts as above, arising mainly as a result of higher interest expense on variable borrowings.

    Fair value sensitivity analysis

    The Group uses interest rate swaps to reduce its interest rate risk. If interest rates had been 10 basis points lower, the negative fair value after tax of the hedges would have been CHF 0.7 million higher (2015: CHF 0.2 million higher). If interest rates had been 10 basis points higher, the same but inverted amounts would have occurred. The effects would have been accounted for through other comprehensive income.

    Equity Price Risk

    The Group is exposed to equity price risk, which arises from available for sale equity securities. Currently, the Group holds preferential VISA Inc. shares of VISA. The shares of VISA are listed on the New York Stock Exchange. A 3 percent increase in the Dow Jones Industrial at the reporting date would have increased equity by CHF 0.4 million after tax (2015 none); an equal change in the opposite direction would have decreased equity by CHF 0.4 million after tax (2015 none).

     

    Fair values

    The fair values of financial assets and liabilities together with the carrying amounts shown in the balance sheet are as follows:

    In 1,000 CHF

    Carrying amount

    2016 Fair value

    Carrying amount

    2015 Fair value

    Cash and cash equivalents

    41,489

    41,489

    90,002

    90,002

    Receivables from business unit Payment

    549,213

    549,213

    435,681

    435,681

    Receivables from business unit Consumer Finance

    1,269,519

    1,269,519

    1,277,714

    1,277,714

    Other trade receivables and other receivables

    81,498

    81,498

    87,158

    87,158

    Total loans and receivables

    1,941,718

    1,941,718

    1,890,555

    1,890,555

     

     

     

     

     

    Financial investments available for sale

    18,732

    18,732

    0

    0

    Derivatives held for trading

    49

    49

    131

    131

     

     

     

     

     

    Total financial assets

    1,960,499

    1,960,499

    1,890,687

    1,890,687

     

     

     

     

     

    Payables to counterparties

    286,898

    286,898

    227,167

    227,167

    Other trade payables

    10,407

    10,407

    12,590

    12,590

    Short-term interest-bearing liabilities

    848,253

    853,218

    524,637

    524,087

    Other payables

    16,770

    16,770

    15,043

    15,043

    Accrued expenses

    67,609

    67,609

    37,863

    37,863

    Long-term interest-bearing liabilities

    275,678

    288,008

    722,634

    748,035

    Total financial liabilities at amortised cost

    1,505,614

    1,522,909

    1,539,934

    1,564,785

     

     

     

     

     

    Derivatives held for trading

    (255)

    (255)

    (234)

    (234)

    Derivatives used for hedging

    (289)

    (289)

    (1,991)

    (1,991)

     

     

     

     

     

    Total financial liabilities

    1,505,071

    1,522,366

    1,537,709

    1,562,560

    Basis for the determination of fair value

    The following summarises the significant methods and assumptions used in estimating the fair value of financial instruments reflected in the table above.

    Receivables and payables
    Trade accounts receivable and payable are stated in the balance sheet at their carrying value less impairment allowance. Due to their short-term nature, receivables from card activities are assumed to approximate their fair value.

    The fair value of long-term financial instruments with a maturity or a refinancing profile of more than one year and for which observable market transactions are not available, the fair value is estimated using valuation models such as discounted cash flow techniques. Input parameters into the valuation include expected lifetime credit losses, interest rates, prepayment rates and primary origination or secondary market spreads.

    Non-derivative financial liabilities
    The fair value of financial instruments for disclosure purposes is calculated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

    The difference between the carrying amount and the fair value in the interest-bearing liabilities (short-term as well as long-term) is caused by the unsecured bond issues and amounting to a total of CHF 21.8 million in 2016 (2015: CHF 25.8 million). These unsecured bonds are categorised in level 1 of the fair value hierarchy.

    Interest rates used for determining fair value
    The interest rates used to discount estimated cash flows, where applicable, are based on the market interest rates for the maturity of the debt at the reporting date, and were in the range of –0.80% and –0.65% for the current year and of –0.80% and –0.71% for 2015.

    Financial instruments carried at fair value, fair value hierarchy

    The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows.

    • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date
    • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
    • Level 3: unobservable inputs for the asset or liability

    2016 In 1,000 CHF

    Level 1

    Level 2

    Level 3

    Total

    Financial investments available for sale

    0

    18,732

    0

    18,732

    Derivative financial instruments

    0

    49

    0

    49

    Total financial assets carried at fair value

    0

    18,780

    0

    18,780

     

     

     

     

     

    Derivative financial instruments

    0

    (544)

    0

    (544)

    Total financial liabilities carried at fair value

    0

    (544)

    0

    (544)

    2015 In 1,000 CHF

    Level 1

    Level 2

    Level 3

    Total

    Financial investments available for sale

    0

    0

    0

    0

    Derivative financial instruments

    0

    131

    0

    131

    Total financial assets carried at fair value

    0

    131

    0

    131

     

     

     

     

     

    Derivative financial instruments

    0

    (2,225)

    0

    (2,225)

    Total financial liabilities carried at fair value

    0

    (2,225)

    0

    (2,225)

    Input for Level 2 valuation

    Level 2 fair values for simple over-the-counter derivative financial instruments are based on broker quotes. Those quotes are tested for reasonableness by discounting expected future cash flows using market rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the non-performance risk when appropriate. Level 2 fair values for available for sale financial instruments are based on market prices multiple without any unobservable input.

    The fair value of financial instruments disclosed at fair value is determined as follows

    2016 In 1,000 CHF

    Level 1

    Level 2

    Level 3

    Total

    Cash and cash equivalents

    41,489

    0

    0

    41,489

    Receivables from business unit Payment

    0

    549,213

    0

    549,213

    Receivables from business unit Consumer Finance

    0

    1,269,519

    0

    1,269,519

    Other trade receivables and other receivables

    0

    81,498

    0

    81,498

    Total financial assets

    41,489

    1,900,230

    0

    1,941,718

     

     

     

     

     

    Payables to counterparties

    0

    286,898

    0

    286,898

    Other trade payables

    0

    10,407

    0

    10,407

    Short-term interest-bearing liabilities

    584,780

    268,438

    0

    853,218

    Other payables

    0

    16,770

    0

    16,770

    Accrued expenses

    0

    67,609

    0

    67,609

    Long-term interest-bearing liabilities

    288,008

    0

    0

    288,008

    Total financial liabilities at amortised cost

    872,788

    650,121

    0

    1,522,909

    2015 In 1,000 CHF

    Level 1

    Level 2

    Level 3

    Total

    Cash and cash equivalents

    90,002

    0

    0

    90,002

    Receivables from business unit Payment

    0

    435,681

    0

    435,681

    Receivables from business unit Consumer Finance

    0

    1,277,714

    0

    1,277,714

    Other trade receivables and other receivables

    0

    87,158

    0

    87,158

    Total financial assets

    90,002

    1,800,553

    0

    1,890,555

     

     

     

     

     

    Payables to counterparties

    0

    227,167

    0

    227,167

    Other trade payables

    0

    12,590

    0

    12,590

    Short-term interest-bearing liabilities

    124,450

    399,637

    0

    524,087

    Other payables

    0

    15,043

    0

    15,043

    Accrued expenses

    0

    37,863

    0

    37,863

    Long-term interest-bearing liabilities

    748,035

    0

    0

    748,035

    Total financial liabilities at amortised cost

    872,485

    692,300

    0

    1,564,785

    Offsetting

    An offsetting agreement is in place between Mastercard and different group companies (“offsetting agreement”). In its normal course of business as an acquirer, the Group transfers the purchase price for card transactions to its affiliated partners. Mastercard simultaneously credits the respective amounts to the Group. At the same time, the Group as an issuer of credit cards has an obligation to Mastercard from the card transactions of its cardholders. The offsetting agreement allows the Group to offset the respective credit and debit balances through the payments to or from Mastercard.

    As per 31 December 2016, the outstanding amount in favour of the Group amounted to CHF 66.1 million (2015: CHF 66.8 million) included in “Receivables from business unit Payment, net” while the Group had an outstanding obligation of CHF 39.7 million (2015: CHF 30.9 million) included in “Payables to counterparties”, resulting in a net amount of CHF 26.4 million (2015: CHF 35.9 million) in favour of the Group against Mastercard.

    33. Related parties

    Related parties are the shareholders which have a direct influence on the Group’s activities by delegating a member onto the Group’s Board of Directors, the other members of the Group’s Board of Directors, the Executive Committee, entities controlled by a member of the Group’s Board of Directors and the associates Accarda, SwissWallet AG and Contovista AG.

    The shareholders that are considered as being related parties are as follows:

    Part of share capital in % held at 31 December

    2016

    2015

    Raiffeisen Group

    25.5%

    25.5%

    Zürcher Kantonalbank

    14.7%

    14.7%

    Entris Banking AG

    14.0%

    14.0%

    Migros Bank AG

    7.0%

    7.0%

    BSI SA (Member of EFG International)

    3.6%

    3.6%

    Zuger Kantonalbank

    1.4%

    1.4%

    Freiburger Kantonalbank

    1.0%

    1.0%

     

     

     

    Total related parties

    67.3%

    67.3%

    Transactions with related parties

    The Group does extensive business with its shareholders and other related parties, especially within financing activities and card distribution in the Payment business.

    Income and expense with related parties as stated in the following table is included in the Group’s consolidated statement of comprehensive income.

    In 1,000 CHF

    2016

    2015

    Interest income

    45

    217

    Interest expenses

    4,594

    7,264

    Distribution, advertising and promotion expenses

    14,092

    7,936

    Other expenses

    147

    583

     

     

     

    Total income (–) and expenses (+) with related parties

    18,787

    15,566

    All transactions between the Group and its related parties as well as its associates are entered into at market rates.

    At the closing date, the Group has the following balance sheet exposure with its related parties:

    In 1,000 CHF

    2016

    2015

    Cash and cash equivalents

    39,892

    89,766

    Other receivables and other assets

    49

    131

    Prepaid expenses and accrued income

    9,270

    9,270

    Short-term interest-bearing liabilities

    157,174

    158,305

    Other payables

    525

    1,876

    Accrued expense and deferred income

    2,272

    16,942

     

     

     

    Total exposure to related parties

    209,181

    276,290

    The Group’s balance sheet does not contain provisions for doubtful debts from related parties nor does the consolidated statement of comprehensive income recognise any expenses in respect of bad or doubtful debts due from related parties.

    Transactions with associates

    In 2016 and 2015 respectively, transactions with associates concerned mainly scanning services provided by Accarda AG to the Group as well as fees for consulting services provided to Accarda AG and since 2015 processing services provided by SwissWallet AG to the Group.

    Income and expenses with associates as stated in the following table are included in the Group’s consolidated statement of comprehensive income.

    In 1,000 CHF

    2016

    2015

    Other income

    38

    37

    Processing and service expenses

    897

    221

    Total income (–) and expenses (+) with associated parties

    859

    184

    At the closing date, the Group had the following balance sheet exposure with its associates:

    In 1,000 CHF

    2016

    2015

    Other payables

    540

    70

     

     

     

    Total exposure with associated parties

    540

    70

    Transactions with key management personnel

    The members of the Board of Directors and the Executive Board of the Group and their immediate relatives do not have any ownership interest in the Group’s companies.

    The Group provides short-term remuneration to the members of the Board of Directors and Executive Board. Beside their salaries and pension fund benefits, the members of the Executive Board and directors receive long-term benefits based on the results of the company.

    The key management personnel compensation is as follows:

    In 1,000 CHF

    2016

    2015 represented

    Base salaries and other short-term benefits

    4,876

    4,640

    Long-term benefits

    3,014

    3,035

    Contribution to retirement benefits plan and social security

    856

    860

    Other personnel benefits

    240

    239

     

     

     

    Total compensation to key management

    8,986

    8,774

    In 2016 the Group has reassessed its key management structure. The 2015 figures have been represented accordingly.

    There are no loan agreements in place with key management. However, Viseca issues credit cards for key management. It is in the nature of the credit card business that the customer gets temporarily into debt with Viseca. Furthermore, cashgate offers Consumer Finance loans and leasing, AdunoKaution and SmartCaution offer rental guarantees. In the case of the running business, employees and also key management can apply for those credits and facilities.

    The conditions and the requirements for eventually granted facilities and loans are under normal commercial terms and conditions that would also be provided to unrelated third parties.

    34. Group companies

    In 1,000 CHF

    Country of incorporation

    Currency

    Share capital 2016

    Share capital 2015

    Ownership interest 2016

    Ownership interest 2015

    Aduno Holding AG, Zurich (ZH), parent company

    Switzerland

    CHF

    25,000

    25,000

    -

    -

    Accarda AG, Brüttisellen (ZH)**

    Switzerland

    CHF

    18,500

    18,500

    30%

    30%

    Aduno Finance AG, Stans (NW)

    Switzerland

    CHF

    1,000

    1,000

    100%

    100%

    AdunoKaution AG, Zurich (ZH)

    Switzerland

    CHF

    1,365

    1,365

    100%

    100%

    Aduno SA, Bedano (TI)

    Switzerland

    CHF

    120

    120

    100%

    100%

    cashgate AG, Zurich (ZH)

    Switzerland

    CHF

    35,000

    35,000

    100%

    100%

    Contovista AG, Schlieren (ZH)**

    Switzerland

    CHF

    140

    -

    14.3%

    -

    SmartCaution SA, Geneva (GE)

    Switzerland

    CHF

    500

    -

    100%

    -

    SwissWallet AG, Zurich (ZH)**

    Switzerland

    CHF

    105

    105

    33.3%

    33.3%

    Vibbek AG, Urdorf (ZH)

    Switzerland

    CHF

    1,300

    1,300

    67%

    74.6%

    Vibbek GmbH, Hamburg

    Germany

    EUR

    25

    25

    67%

    74.6%*

    Viseca Card Services SA, Zurich (ZH)

    Switzerland

    CHF

    20,000

    20,000

    100%

    100%

    *   Vibbek GmbH is fully owned by Vibbek AG.
    ** Associates, the Group has significant influence.

    35. Subsequent events

    There are no subsequent events to be reported.

    Zurich, 10 April 2017

    Dr Pierin Vincenz
    Chairman of the Board of Directors

    Martin Huldi
    Chief Executive Officer

    Conrad Auerbach
    Chief Financial Officer