Information about this report
Aduno Holding AG is a company domiciled in Zurich (Switzerland) which, together with its subsidiaries (together the Group), offer financial services in the business field of cashless payment solutions, consumer finance and leasing.
As a result of the bonds issued (Bonds CHF domestic), Aduno Holding AG is listed in Switzerland on the Swiss Reporting Standard of SIX Swiss Exchange with ISIN number CH0246921537.
The consolidated financial statements were approved by the Board of Directors on 23 April 2020 and will be submitted to the General Meeting scheduled for 16 June 2020 for final approval.
Key accounting policies
These consolidated financial statements give a true and fair view of the Aduno Group’s financial performance and financial position. They have been prepared in accordance with all existing accounting guidelines (Swiss GAAP FER). The consolidated financial statements are based on the financial statements of the Group companies prepared in accordance with uniform accounting principles as at 31 December. They follow the principle of historical cost unless a standard prescribes a different measurement basis for a financial statement item or a different measurement basis is applied if this is provided as an option. The relevant accounting policies for understanding the consolidated financial statements are set out in the specific notes to the financial statements.
Assets are reviewed each year for indications of impairment. If there are any indications, the recoverable amount is determined and if this exceeds the carrying amount, an appropriate posting is made in the income statement.
The consolidated financial statements are presented in Swiss francs, the Company’s functional currency. Unless noted otherwise, all financial data in Swiss francs have been rounded to the nearest thousand. This may result in rounding differences.
Group companies include those companies that are directly or indirectly controlled by Aduno Holding AG. Control is defined as the power to govern the financial and operating policies of an entity so as to benefit from them. This is usually the case when the Group holds more than half of the voting rights in an entity’s share capital. Group companies are consolidated from the date on which control is transferred to the Group. Subsidiaries held for sale are excluded from the scope of consolidation from the date on which control ceases.
Capital consolidation is based on the purchase method. This means that the purchase price or carrying amount of the interests is offset against the Group’s share in the revalued equity of the consolidated companies at the time of acquisition or first-time consolidation. Any goodwill from the purchase of interests is capitalised and amortised over five years. All intercompany transactions, balances and unrealised gains and losses from transactions between Group companies are eliminated in full.
Non-controlling interests in equity and the Group's profit for the period are shown separately in the balance sheet and income statement. Changes in ownership interests in subsidiaries are booked as equity transactions with non-controlling interests, provided that control is retained. In the case of a direct buyout of non-controlling interests, Swiss GAAP FER 24 (equity and transactions with shareholders) is applied, i.e. the transaction is valued at net market value and booked in equity with no impact on profit or loss.
Changes in the scope of consolidation during 2019
The following changes to the scope of consolidation took place in the reporting year:
The detailed information can be found under section 4.2.
Foreign currency translation
Foreign currency transactions in Group companies
The foreign currency transactions and items contained in the separate financial statements of the consolidated companies are translated as follows Foreign currency transactions are translated into the posting currency at the exchange rate as at the transaction date (spot rate). At year-end, monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate on the reporting date and booked to the income statement.
Translation of financial statements to be consolidated
The consolidated financial statements are presented in Swiss francs. Assets and liabilities of Group companies with a different currency are translated at year-end rates (closing rates), equity at historical rates, and the income statement and cash flow statement at average rates for the year. The translation differences that arise are booked to equity instead of being recognised in profit or loss. If a foreign Group company is sold, the associated cumulative foreign currency differences are transferred to the income statement.
The following principal exchange rates have been used:
Effects of the switch to Swiss GAAP FER
As at 1 January 2019, the Aduno Group switched its financial reporting from IFRS to Swiss GAAP FER. In past years the International Financial Reporting Standards (IFRS) were applied. In view of the increasing complexity and ongoing adjustments of the IFRS and the associated reporting workload, the Group decided to switch its financial reporting.
The date of the switch was 1 January 2019. Accordingly, in its first consolidated financial statements under Swiss GAAP FER the Group presents the two balance sheets as at 31 December 2019 and as at 31 December 2018 and the two income statements for the 2019 and 2018 half-years in accordance with Swiss GAAP FER. All provisions of the standards in force at the time of the switch have been applied in full and retroactively.
Reconciliation for equity
Reconciliation for profit and income
Assumptions and estimations of the management
In order to prepare the consolidated financial statements in accordance with Swiss GAAP FER, the management must make estimations, evaluations and assumptions that have an impact on the application of accounting and valuation methods and on the amounts shown for assets, liabilities, income and expenses. The estimations and associated assumptions are based on previous experience and various other factors deemed useful. The actual results may differ from these estimations.
The estimations and underlying assumptions are regularly reviewed. Changes in estimations relating to the financial reporting are recognised in the periods currently under review and future periods affected.
Assessments made by management when applying Swiss GAAP FER that have a significant effect on the financial statements, and estimates with a high risk of being adjusted in the following year, are presented in the notes.
This section describes the operational performance of the Aduno Group. The segment reporting sets out the segment results used at the most senior level of management to guide the Company.
1.1 Segment reporting
External segment reporting is based on the internal reporting that is used by the Executive Board to guide the Company. The Executive Board is comprised of the CEO (Chief Executive Officer) of the Group, the CFO (Chief Financial Officer), the CMO (Chief Marketing Officer) and the COO (Chief Operations Officer).
For the purposes of financial reporting and organisation, the management has divided the Group’s business activities into three segments:
The following table contains information about the business segments that are based on the management’s evaluation and the internal reporting structure as at 31 December in each case.
1.2 Further information on selected income statement items
Additional information on commission income
Additional information on other income
1.3 Operating expenses
Expenses are recognised on an accrual basis, i.e. at the time they are incurred. The table below provides information on selected expense items.
1.4 Earnings per share
As there are no convertible bonds, subscription rights or other potential shares outstanding, the shares are not diluted.
2 Operational assets and liabilities
The following section sets out the items in current and non-current assets of relevance to the business activity of the Aduno Group. The notes on the assets are focused on the receivables of the Payment and Consumer Finance businesses, goodwill and intangible assets. This section also contains a presentation of the changes in provisions and off-balance sheet transactions and notes on selected, operationally relevant items.
2.1 Receivables from the business unit Payment
Management of credit risk in the Payment business
It is in the nature of the credit card business that customers get temporarily into debt with the credit card company.
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 assigned an individual credit rating before a credit card is issued. If a customer 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 risk exposure. All incoming payments of customers are closely monitored.
The Group issues credit cards on behalf of various distribution partners. The Group has 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 paid in full by the partner.
If a cardholder has a direct relationship with the Group and not via a partner, the Group bears the default risk.
Receivables from cardholders and others are measured at fair value. The effective interest rate method is used for customers with an instalment facility or customers in default.
Impairment losses are booked to the allowance accounts for receivables unless the Group is of the view that the amount owed is not recoverable. In this case the amount deemed uncollectible is written off directly against the receivable.
Expected credit loss model
Allowances for doubtful accounts are calculated on the basis of the expected credit loss (ECL) model. Receivables are placed into one of the three stages on the basis of which the ECL is calculated.
At each reporting date, credit risk is assessed to see whether it has increased significantly. The assessment considers both quantitative and qualitative factors. Where the impairment has not already been identified, a receivable from the Payment business is allocated to Stage 2 when it is 60 days past due. Receivables are transferred from Stage 2 back to Stage 1 if their credit risk is no longer considered to be significantly increased. The Group allocates a customer to Stage 3 after debt management reminders have proved unsuccessful and the customer has had to be transferred to the pre-collection and legal collection processes. The transfer decision is made on a case-by-case basis for each customer and generally occurs when payments are 90–120 days past due. Contracts of customers in the collection process are terminated, so that the customer can no longer be improved from Stage 3. Receivables in Stage 3 that are older than 2 years are written off. Based on past experience, the Group forecasts that the receivables will not generate any further significant cash flow.
The loss allowance is adjusted based on management’s judgement as to whether actual losses are likely to fall above or below historical trends given current economic and loan conditions. Management deems the loss allowance for doubtful debts for the business unit Payment to be adequate.
2.2. Receivables from the business unit Consumer Finance
The receivables from the business unit Consumer Finance set out below ceased to be included in the consolidated balance sheet as at 31 December 2019 due to the sale of cashgate AG.
In the business unit Consumer Finance, the Group granted its customers cash loans or financed vehicles via finance leases. The counterparty to a loan was a private customer in the case of cash loans and a private or corporate customer in the case of leasing transactions.
Finance lease receivables were collateralised by the vehicles being financed; no security was held for consumer loans.
The allowance for doubtful debts from the business unit Consumer Finance was composed of impairments on receivables that were already past due plus a group of receivables that were not yet past due, but which had been collectively assessed and were expected to generate an impairment.
Receivables from Consumer Finance customers were calculated using the effective interest method and valued at amortised cost after impairment losses.
Impairment losses were booked to the allowance accounts for receivables unless the Group is of the view that the amount owed was not recoverable. In this case the amount deemed uncollectible was written off directly against the receivable.
Expected credit loss model
Allowances for doubtful accounts were calculated on the basis of the expected credit loss (ECL) model. Receivables were placed into one of the three stages on the basis of which the ECL was calculated (see section 2.1 for a full explanation).
2.3 Property and equipment
Property and equipment are carried at cost less accumulated amortisation and impairment losses. Depreciation is calculated using the straight-line method over the estimated useful life. The estimated useful lives are as follows:
Useful lives and residual values are reviewed annually on the reporting date and any impairment losses recognised in the income statement.
2.4 Goodwill and intangible assets
In the case of software of Contovista AG, a new code was developed in the course of 2019 as part of the modularisation and the change in the programming language used, replaced the old code capitalised when the acquisition was made. This means the old code is no longer in use and had to be written down, resulting in an additional write-off of CHF 14.6 million.
As part of the annual impairment test of the intangible assets license agreement, customer relationship and co-branding agreement, a one-time individual value adjustment of CHF 91.7 million was necessary. The intangible assets were assessed using the same methodology as that used for capitalisation from the purchase price allocation of Accarda AG. The basis of calculation was lower than when the assets were originally capitalized, due to market developments in the retail business and growth prospects.
Net assets acquired in an acquisition are measured at current values. The excess of the cost of acquisition over the revalued net assets is recognised as goodwill. Goodwill is amortised over a period of five years.
Intangible assets are carried at cost less accumulated amortisation and impairment losses.
Internally generated intangible assets are not capitalised.
Intangible assets acquired as part of an acquisition that were already recognised in the acquired company are classified and reported as acquired intangible assets. The customer relationships acquired in an acquisition are measured at current values and recognised as intangible assets from sales price allocation.
Intangible assets are amortised on a straight-line basis over their estimated useful lives. Customer relationships are amortised using the arithmetic declining balance method. The ordinary amortisation rates are as follows:
Useful lives and residual values are reviewed annually on the reporting date and any impairment losses recognised in the income statement.
Goodwill and intangible assets are tested for impairment at each reporting date. If there are indications that goodwill or intangible assets may be impaired in value, the recoverable amount is calculated. If the carrying amount of the asset exceeds the recoverable amount, an impairment loss is recognised in the income statement.
If the asset does not generate independent cash flows on its own, the recoverable amount is determined for the smallest possible group of assets (cash-generating unit; CGU) to which the asset belongs. If impairments have to recognised, they are first charged to the goodwill associated with the CGU. The remainder of the impairment loss is allocated pro rata to other assets based on their carrying amounts.
Additions as a result of the reversal impairment losses on intangible assets other than goodwill are recognised in the income statement. A reversal of an impairment loss on goodwill is not added back.
2.5 Financial assets
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.
2.7 Other operative assets and liabilities
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.
Other includes prepaid vendor invoices for licences and software maintenance contracts, and the input tax credit from the FTA. Prepaid expenses for unbilled service revenues are also included.
Accrued expenses and deferred income
In the annual fees, the fees charged to customers once a year are deferred pro rata temporis.
The commission liabilities include accrued compensation which is paid to the distribution partners in January.
The accrual from loyalty programs includes the liability from the surprize programme, in which points are collected when the credit or pre-paid card is used, which can then be redeemed at a later date using vouchers or through discounts.
Other includes outstanding vendor invoices for projects and accruals for payments to banks.
Payables to counterparties
The Group receives advance payments from customers with issued prepaid credit cards. In the previous year 2018, the advance payments included the cashgate-advance payments.
The purpose of accruals and deferrals of assets and liabilities is to book expenses and income at the time they arise. This also means that all expenses used to generate a certain level of income are recognised according to when income is incurred.
2.8 Off-balance liabilities
The guarantees to 3rd parties are bank guarantees. The leases are mainly for offices and parking spaces. The liabilities from long-term rental agreements were extended by five years at the end of 2019. The change from 2018 to 2019 is due to this extension. Investment obligations are primarily contracts with suppliers in the Payment segment. Investment obligations from contracts already concluded fell. This was mainly due to the fact that the remaining term of the contracts was shortened by one year.
Contingent liabilities and other obligations not to be reported in the balance sheet are measured and disclosed on each reporting date. The measurement is based on the amount of the future, unilateral irrevocable payments and costs, less any promised consideration.
3 Financing and risk management
The following describes the guidelines and procedures that are applied in managing the capital structure and financial risks. The Aduno Group seeks to ensure that it has an appropriate equity base in order to retain the trust of investors, creditors and the market and to continue the Group’s expansion.
3.1. Interest-bearing liabilities
Changes in interest-bearing liabilities are mainly changes to cash flows from financing activities and are disclosed in the consolidated cash flow statement.
Terms and debt repayment schedule
With the sale of cashgate AG, the syndicated loan agreement for CHF 600 million under Zürcher Kantonalbank was also repaid.
Other bank liabilities
As at 31 December 2019, the Group had access to a bilateral credit line with Zürcher Kantonalbank of CHF 800 million (31 December 2018: CHF 800 million). The interest rate for the credit facility is set at the market interest rate plus a fixed credit margin. As at 31 December 2019, CHF 0.0 million (31 December 2018: CHF 7.6 million) of this credit line had been utilised.
Interest-bearing financial liabilities are generally recorded at nominal value. Non-current financial liabilities (bonds) are recognized at amortized cost.
3.2 Share capital and reserves
As at 31 December 2019 the share capital of parent company Aduno Holding consisted of 25,000 registered shares with a par value of CHF 1,000 each (31 December 2018: 25,000 registered shares with a par value of CHF 1,000 each). Shareholders are entitled to receive the declared dividends and to exercise one vote per share at the Company’s Annual General Meeting.
The statutory reserves not available for distribution amounted to CHF 5.0 million as at 31 December 2019 (31. December 2018: CHF 5.0 million).
The following dividends were declared and paid by the Group:
After 31 December 2019, the Board of Directors proposed dividends of CHF 4,800 per registered share, making a total of CHF 120.0 million for 2019. The proposed dividend will be submitted for approval to the General Meeting to be held in June 2020.
The Board’s policy is to maintain an adequate equity base so as to maintain the confidence of investors, creditors and the market 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 shareholders.
3.3 Risk management
As a financial services provider the Aduno Group is subject to constant change and thus confronted with opportunities and risks that can have a decisive influence on its ability to achieve its strategies and goals.
Overall responsibility for risk management lies with the Board of Directors, which 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 the effective implementation of the risk policy and risk strategies as well as the adopted measures. The Audit and Risk Committee and the internal auditors support the Board of Directors in the execution of its responsibilities.
The Executive Board 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 Executive Board 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. In order to support the Executive Board expert committees have been set up to prepare requests for approval, proposals and recommendations as a decision-making basis for the Excutive Board.
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 Executive Board. Risk control is responsible for 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 Executive Board. Central risk control is responsible for monitoring compliance with the policies and their supporting directives and providing reports or information as requested.
The following risks have been identified as significant risks for the Aduno Group:
The overall risks include environmental, business and operational risks, which are systematically identified and either accepted or mitigated using suitable measures within the scope of risk affinity. These measures are reported as controls in the Aduno Group’s ICS.
Financial risks: Credit risk
The Aduno Group is exposed to the risk of counterparty default as a result of its operating activities. This risk exists mainly in relation to receivables from customers of the Group and depends primarily on the individual characteristics of each customer. Geographically, credit risk is concentrated in Switzerland where the Group mainly operates.
The default risk is limited to the carrying amount of the financial assets. The maximum credit risk, to which the Group is theoretically exposed at 31 December 2019 and 2018 respectively, is represented by the carrying amounts stated for financial assets in the balance sheet. Additionally, credit risk can occur from debt collection and from fraud in the Payment business as shown in note 2.1.
Financial risks: 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 closely monitors its liquidity needs and also maintains liquidity forecasts and validates its validation models.
Management ensures that cash funds and credit lines currently available and funds that will be generated from operating activities 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.
Financial risks: Market risk
Market risk is the risk of losses arising from movements in market prices in on-balance and off-balance sheet items. The definition includes risks from interest rate instruments and equities, and foreign currency risks.
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational and financing activities.
The positive and negative values of derivatives are recognised in other receivables and other liabilities.
The Group has a permanent requirement to refinance outstanding receivables due from cardholders and consumer finance customers. The refinancing need is fulfilled with bank loans with durations from one to 90 days and is aligned to Libor conditions. In addition, the Group can enter into interest rate swaps and thereby exchange Libor-based interest payments for fixed-rate ones to hedge against fluctuating interest rates. As at 31 December 2019 no receivables were hedged with interest rate swaps (31 December 2018: CHF 0.0 million).
Risks in the preparation of the financial statements
To ensure that the consolidated financial statements comply with the applicable accounting standards and that reporting is correct, the Aduno Group has set up effective internal control and management systems which are regularly reviewed. When accounting and measuring, estimates and assumptions are made about the future. These are based on the knowledge of the respective employees and are critically reviewed on a regular basis. If there is a material measurement uncertainty for an item that could lead to a material adjustment of the carrying amounts, this measurement uncertainty must be revealed in the notes. As at the reporting date, the Company was unaware of any such risks that could lead to a significant correction of the financial performance and financial position presented in the annual financial statements.
4 Group structure
This section sets out the structure of the Aduno Group including significant changes and resulting effects on the consolidated financial statements. It also contains disclosures on related party transactions.
4.1 Change in scope of consolidation
Acquisition of subsidiaries
As at 24 July 2019, on the basis of the sale announcement by minority shareholders on 20 June 2019, the Group acquired the remaining 30% of Contovista AG for CHF 12.4 million and now has full ownership of Contovista AG. The buy-out of non-controlling interests is shown in the statement of changes in equity. The surcharge of CHF 7.5 million was booked to equity, as the net assets of Contovista AG were not remeasured and this is equivalent to a transaction with shareholders in their capacity as shareholders and can therefore be recognised with no impact on profit.
Sale of subsidiaries
The 100% investment in the Loyalty Group including Sanavena GmbH was sold on 30 October 2019. The sale produced a loss of CHF 1.0 million.
As at 27 September 2019 the Group sold its 55% investment in Zaala AG. The sale resulted in a gain of CHF 0.1 million, which was recognised in non-operating profit.
As at 4 March 2019 the Group sold its 60% investment in Paycoach AG. The sale resulted in a gain of CHF 1.2 million.
The following table shows the consolidated balance sheet as at the date of sale of the Loyalty Group, including Sanavena GmbH, Zaala AG and Paycoach AG.
Effect of disposal on the financial position of the Group
Discontinued business units
The Consumer Finance business unit, which included cashgate AG, was sold, which means that cashgate AG was sold to Cembra Money Bank AG on 2 September 2019. The sales price amounted to CHF 275 million.
The gain on disposal of CHF 155.5 million, which is calculated from the sales price less shareholders' equity of CHF 120 million, was booked to the non-operating income.
The income statement for the first eight months of 2019 and the balance sheet as at 31 August 2019 of cashgate AG is shown below.
Income statement for the first 8 months
Balance sheet as at 31.08.2019
Sale of at-equity companies
On 13 December 2019 the 33% investment in SwissWallet AG was sold. This sale produced a loss of CHF 1.2 million, which is reported in non-operating profit.
On 9 May 2019 the Group sold its 20% investment in Loyalty Services AG. The sale resulted in a loss of CHF 0.1 million.
4.2 Group companies
Consolidation of subsidiaries
The consolidated financial statements are based on individual financial statements of all subsidiaries prepared in accordance with uniform principles. Subsidiaries are entities controlled by the Group. Control is assumed to exist if the Group holds more than half of the voting rights in the subsidiary or it has control in another way. Consolidation is based on the purchase method. Group-internal balance sheet assets and liabilities and unrealised gains and losses or income and expenses from Group-internal transactions are eliminated when preparing the consolidated financial statements.
Investments in associates
Associates are recognised in the balance sheet using the equity method and initially at fair value. Associates are those entities in which the Group has significant influence on their financial and business policy but does not control them. The Group’s share in the profit or loss of the associate is included in the income statement.
4.3 Related parties
Related parties are defined as parties that can exercise significant influence, directly or indirectly, over the Group’s financial or operating decisions. They include shareholders with significant influence, members of the Group’s Board of Directors and the members of the Executive Committee. Organisations which are directly or indirectly controlled by the same related parties are also considered to be related.
Entities in which the Group has a significant equity interest are also deemed to be related parties. In the two reporting periods these are the associates SwissWallet AG (2019: up to and including 13 December 2019) and Loyalty Services AG (2019: up to and including 9 May 2019).
The following shareholders are regarded as related parties:
All transactions between the Group and its related parties as well as its associates are entered into at market rates.
Transactions with related parties (excluding associates)
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 expenses with related parties as stated in the following table is included in the Group’s consolidated statement of comprehensive income.
At the closing date, the Group had the following balance sheet exposure with its related parties:
1) In the previous year's figure, a correction of CHF 17.9 million was made concerning the transaction "Remuneration to banks" in the position Distribution, advertising and promotion expenses.
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
The transactions with associates mainly comprise processing expenses for services provided by SwissWallet AG to the Group (up to 13 December 2019).
The income and expenses relating to associates shown in the following table are included in the Group’s consolidated income statement.
At the closing date, there were no transactions by the Group with associates in the balance sheet.
Transactions with key management personnel
Viseca issues credit cards to key management personnel. It is in the nature of the credit card business for customers to have temporary liabilities with Viseca. In the normal course of business, employees and key management personnel may also request these services. They are granted normal terms and conditions that are also applied to other third parties.
5 Other information
This section presents information that has not been disclosed in previous sections of the report. This includes, for example, notes on employee benefits and income taxes.
5.1 Employee benefits
The Group is affiliated with Sammelstiftung der Kantonalbanken, which is a collective foundation of cantonal banks. The collective foundation is a separate legal entity. The foundation is responsible for managing the pension plan; its board of trustees comprises an equal number of employer and employee representatives from all affiliated companies.
The Swisscanto Sammelstiftung is not the only risk carrier, since Swisscanto is not a foundation with a full insurance guarantee. However, the payment of special contributions to finance a deficit is only applied if other measures do not promise success.
Economic benefit/economic obligation and pension expense
As at 31 December 2019, the collective foundation’s coverage ratio was 107.5% (2018: 101.1%). The following table shows the economic benefit and the economic obligation and the corresponding changes in the pension expense.
Employer contribution reserve
Accarda AG holds employer contribution reserves:
Summary of pension costs
The economic impact of the employee benefit plans on the Aduno Group is evaluated annually. Surpluses and deficits are calculated on the basis of the annual financial statements of the corresponding pension funds, which are based on Swiss GAAP FER 26. An economic benefit is capitalised if it is eligible and it is the intention to use the surplus of the pension plan assets to reduce the Group’s future pension expense. In the event of a deficit, an economic obligation must be recognised if the conditions for the recognition of a provision are met.
Existing employer contribution reserves, which can be used as contributions at any time and have been withdrawn by the pension fund as employer contribution reserves, must be recognised as an asset under financial assets to the extent of the economic benefit, freely available reserves on the other hand are not activated. If the Group has granted the pension fund a conditional waiver of use, the asset will be impaired.
Changes in the value of recognised economic benefits or obligations from pension plans and employer contribution reserves are recognised in the income statement under personnel expenses.
5.2 Income taxes
Income taxes recognised in the income statement
Income taxes comprise:
Analysis of the income tax burden
The Group operates throughout Switzerland and is therefore taxed in many different tax jurisdictions. The Group’s expected tax rate is calculated as a weighted average of the tax rates of the relevant tax jurisdictions.
Tax losses carried forward
As at 31 December 2019, deferred tax assets of CHF 0.1 million were recognised on tax loss carryforwards of CHF 0.7 million.
Income taxes comprise all profit-related current and deferred income taxes. Current income taxes are calculated on the taxable gain or loss. Deferred income taxes are calculated on the basis of a balance sheet-oriented perspective of temporary differences between the figures determined in accordance with Swiss GAAP FER and the figures in the tax balance sheets. No deferred taxes are recognised when goodwill is initially recognised. Furthermore, no deferred taxes are recognised for temporary differences relating to interests if the timing of the temporary differences is controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred taxes are calculated on the basis of the tax rates expected to be applicable which have been legally agreed on the reporting date or for which the decision process has essentially been concluded.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will allow the asset to be recovered. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable for the respective tax benefit to be realised.
Deferred tax assets and liabilities are offset within the legal entities if there is a legally enforceable right to offset current tax assets and liabilities and if the deferred taxes relate to the same tax authority.
6. Events after the reporting date
Since the extensive spread of COVID-19 and its international implications did not happen until 2020, it is deemed a non-bookable event after the reporting date of 31 December 2019.
However, in the weeks ahead to the publication of the report, the Aduno Group recorded a significant decline in transaction volumes in various areas - especially in the restaurant and tourism sectors. At present, it is not yet possible to foresee the overall extent of these declines, but a noticeable drop in sales is expected in 2020.
Zurich, 23 April 2020
Chairman of the Board of Directors
Chief Executive Officer
Chief Financial Officer a.i.