2. Operating assets and liabilities

2. Operating assets and liabilities

This section describes the short-term assets and liabilities, i.e. the working capital supporting the operating liquidity of the business. This section also describes the core long-term tangible and intangible assets underpinning GF’s performance and provides a summary of the theoretical movements in goodwill.

2.1 Accounts receivable

2. Operating assets and liabilities

This section describes the short-term assets and liabilities, i.e. the working capital supporting the operating liquidity of the business. This section also describes the core long-term tangible and intangible assets underpinning GF’s performance and provides a summary of the theoretical movements in goodwill.

2.1 Accounts receivable

2.1.1 Trade accounts receivable

Trade accounts receivable value-adjusted by region 
in CHF

CHF million

 

2017

 

2016

 

 

 

 

 

Gross values

 

784

 

696

 

 

 

 

 

Individual value adjustments

 

–6

 

–8

Overall value adjustments

 

–24

 

–22

Net values

 

754

 

666

 

 

 

 

 

Europe

 

349

 

293

– Thereof Germany

 

105

 

88

– Thereof Switzerland

 

31

 

25

– Thereof Austria

 

14

 

13

– Thereof Rest of Europe

 

199

 

167

Americas

 

85

 

90

Asia

 

271

 

243

– Thereof China

 

211

 

180

Rest of world

 

49

 

40

Total

 

754

 

666

As of the balance sheet date, the aging structure of the trade accounts receivable, which are not subject to individual value adjustments, was as follows:

 

 

 

 

2017

 

 

 

2016

CHF million

 

Receivable after individual value adjustments

 

Overall value adjustment

 

Receivable after individual value adjustments

 

Overall value adjustment

 

 

 

 

 

 

 

 

 

Not yet due

 

624

 

 

 

551

 

 

1 to 30 days overdue

 

84

 

 

 

66

 

 

31 to 90 days overdue

 

34

 

 

 

36

 

 

91 to 180 days overdue

 

17

 

8

 

20

 

9

More than 180 days overdue

 

19

 

16

 

15

 

13

Total

 

778

 

24

 

688

 

22

The individual value adjustments amounted to CHF 6 million (previous year: CHF 8 million). It is assumed that part of the underlying receivables will be paid. Receivables not due are mainly receivables arising from long-standing customer relationships. Based on experience, GF does not anticipate any significant defaults. For further information on credit management and trade accounts receivable, see note 3.6 Risk management.

Accounting principles

Short-term accounts receivable are stated at nominal value. Value adjustments for doubtful debts are established based on maturity structure and identifiable solvency risks. Besides individual value adjustments with respect to specific known risks, other value adjustments are recognized based on statistical surveys of default risk.

2.1.2 Income taxes receivable

Of the total income taxes receivable of CHF 9 million, CHF 2 million each relate to Sweden and the USA, and CHF 1 million each to Switzerland, Germany, France, Turkey, and other countries.

2.1.3 Other accounts receivable

CHF million

 

2017

 

2016

 

 

 

 

 

Tax credits from indirect taxes

 

31

 

29

Other current accounts receivable

 

31

 

23

Total

 

62

 

52

2.2 Inventories

2.2 Inventories

CHF million

 

2017

 

2016

 

 

 

 

 

Finished goods

 

499

 

450

Raw materials and components

 

271

 

230

Work in progress

 

163

 

149

Gross value of inventories on hand

 

933

 

829

 

 

 

 

 

Valuation adjustments

 

–160

 

–156

Inventories

 

773

 

673

Accounting principles

Goods held for trading are generally stated at average cost and internally manufactured products at manufacturing cost, including direct labor and materials used, as well as a commensurate share of the related overhead costs. Cash discount deductions are treated as reductions in the purchase cost. If the net realizable value is lower than the above, a corresponding valuation adjustment is made. Inventories with an insufficient turnover rate are partly or fully value-adjusted.

2.3 Liabilities

2.3 Liabilities

2.3.1 Other liabilities

CHF million

 

2017

 

2016

 

 

 

 

 

Social security

 

18

 

14

Other non-interest-bearing liabilities

 

43

 

36

Derivative financial instruments

 

17

 

23

Other tax liabilities (e.g. withholding tax)

 

29

 

27

Total

 

107

 

100

– Thereof current

 

69

 

53

– Thereof non-current

 

38

 

47

2.3.2 Derivative financial instruments

The following table shows the (gross) market value of the derivative financial instruments as of 31 December 2017 and 2016, broken down by investment category.

 

 

 

 

 

 

2017

 

 

 

 

 

2016

CHF million

 

Contract- or nominal value

 

Positive market value

 

Negative market value

 

Contract- or nominal value

 

Positive market value

 

Negative market value

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange (e.g. forward exchange contracts)

 

474

 

5

 

–3

 

367

 

2

 

–6

Other underlyings

 

60

 

 

 

–14

 

67

 

2

 

–17

Total

 

534

 

5

 

–17

 

434

 

4

 

–23

GF uses financial instruments as part of its Corporation-wide risk management approach. Currency risks from accounts receivable, accounts payable, and financing in foreign currencies are partially hedged. The only hedging instruments employed are forward exchange contracts and currency swaps with a maximum maturity of twelve months. The hedging of other underlying assets consists of hedging against price fluctuations relating to the purchase of raw materials and energy.

Accounting principles

Derivative financial instruments are stated at market values. Positive market values are reported in the balance sheet under the item “Marketable securities”, while negative values are recognized under “Other liabilities”. Foreign currency and interest rate risks are hedged by the Corporation using forward exchange contracts and swaps. Foreign currency risks related to highly probable future cash flows from sales in foreign currencies are hedged, using cash flow hedges in particular.

2.3.3 Categories of financial instruments

The following table shows the carrying amount of all financial instruments per category. For details on the market values of the bonds, see note 3.1 (3.1.1 Interest-bearing financial liabilities).

CHF million

 

2017

 

2016

 

 

 

 

 

Financial instruments (assets)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (excluding fixed-term deposits)

 

592

 

511

 

 

 

 

 

Trade accounts receivable

 

754

 

666

Fixed-term deposits

 

32

 

60

Other accounts receivable 1

 

31

 

23

Accrued income

 

16

 

21

Other financial assets 2

 

12

 

8

Loans and receivables stated at amortized cost

 

845

 

778

 

 

 

 

 

Marketable securities

 

3

 

3

Funds

 

1

 

1

Financial assets recognized in income statement at market value

 

4

 

4

 

 

 

 

 

Derivative financial instruments for hedging purposes

 

5

 

4

 

 

 

 

 

Financial instruments (liabilities)

 

 

 

 

 

 

 

 

 

Trade accounts payable

 

593

 

470

Bonds

 

524

 

523

Other financial liabilities

 

264

 

241

Accrued liabilities and deferred income 3

 

258

 

218

Other current/non-current liabilities 4

 

90

 

77

Liabilities stated at amortized cost

 

1’729

 

1’529

 

 

 

 

 

Derivative financial instruments

 

17

 

23

1 The balance sheet item “Other accounts receivable” includes tax credits. For more details, see note 2.1 (2.1.3 Other accounts receivable).

2 Relates to loans to third parties, security deposits, and long-term-invested securities for the settlement of pension liabilities. For more details, see note 5.2.

3 For more details, see note 2.6 (2.6.2 Accrued liabilities and deferred income).

4 The balance sheet item “Other current/non-current liabilities” includes derivative financial instruments. For more details, see note 2.3 (2.3.1 Other liabilities).

The carrying amount of the securities and listed non-controlling interests recognized at their fair value is determined on the basis of the share prices at the balance sheet date. The market value of the foreign exchange contracts on the balance sheet is determined by the replacement value at the balance sheet date.

2.4 Movements in property, plant, and equipment

2.4 Movements in property, plant, and equipment

CHF million

 

Invest- ment properties

 

Machinery and production equipment

 

Buildings

 

Building com- ponents

 

Other equipment

 

Assets under construction

 

Land

 

Un- developed property

 

Assets held under finance leases

 

Property, plant, and equipment for own use

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2017

 

65

 

2’051

 

667

 

150

 

224

 

155

 

43

 

4

 

18

 

3’312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

 

 

41

 

2

 

5

 

8

 

150

 

 

 

 

 

1

 

207

Disposals

 

–1

 

–34

 

–1

 

–1

 

–12

 

 

 

 

 

 

 

 

–48

Changes in scope of consolidation

 

 

 

11

 

9

 

 

 

2

 

2

 

4

 

 

 

 

 

28

Other changes, reclassifications

 

–6

 

60

 

17

 

4

 

6

 

–83

 

–1

 

1

 

 

 

4

Translation adjustment

 

3

 

106

 

26

 

6

 

8

 

2

 

 

 

 

 

 

 

148

As of 31 December 2016

 

69

 

1’867

 

614

 

136

 

212

 

84

 

40

 

3

 

17

 

2’973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

 

 

67

 

7

 

5

 

8

 

83

 

4

 

 

 

5

 

179

Disposals

 

 

 

–42

 

–1

 

–2

 

–7

 

 

 

 

 

 

 

–1

 

–53

Changes in scope of consolidation

 

 

 

5

 

2

 

 

 

1

 

 

 

 

 

 

 

 

 

8

Other changes, reclassifications

 

–2

 

68

 

18

 

3

 

7

 

–98

 

1

 

 

 

 

 

–1

Translation adjustment

 

 

 

–21

 

–9

 

–1

 

–2

 

 

 

–1

 

 

 

–1

 

–35

As of 31 December 2015

 

71

 

1’790

 

597

 

131

 

205

 

99

 

36

 

3

 

14

 

2’875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2017

 

–29

 

–1’473

 

–389

 

–99

 

–171

 

 

 

 

–10

 

–2’142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

–1

 

–94

 

–17

 

–6

 

–12

 

 

 

 

 

 

 

–2

 

–131

Disposals

 

1

 

32

 

1

 

1

 

11

 

 

 

 

 

 

 

 

 

45

Other changes, reclassifications

 

4

 

2

 

–3

 

–2

 

1

 

 

 

 

 

 

 

 

–2

Translation adjustment

 

–1

 

–80

 

–16

 

–4

 

–7

 

 

 

 

 

 

 

 

 

–107

As of 31 December 2016

 

–32

 

–1’333

 

–354

 

–88

 

–164

 

 

 

 

–8

 

–1’947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

–1

 

–91

 

–16

 

–5

 

–12

 

 

 

 

 

 

 

–2

 

–126

Disposals

 

 

 

37

 

1

 

1

 

6

 

 

 

 

 

 

 

1

 

46

Other changes, reclassifications

 

1

 

3

 

–1

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Translation adjustment

 

 

 

12

 

4

 

1

 

1

 

 

 

 

 

 

 

 

 

18

As of 31 December 2015

 

–32

 

–1’294

 

–342

 

–85

 

–159

 

 

 

 

–7

 

–1’887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2017

 

36

 

578

 

278

 

51

 

53

 

155

 

43

 

4

 

8

 

1’170

As of 31 December 2016

 

37

 

534

 

260

 

48

 

48

 

84

 

40

 

3

 

9

 

1’026

As of 31 December 2015

 

39

 

496

 

255

 

46

 

46

 

99

 

36

 

3

 

7

 

988

Management assumptions and estimates

The values of non-current assets and intangible assets are reviewed whenever there are indications that their carrying amount may no longer be recoverable, due to changed circumstances or events. If such a situation arises, the recoverable amount is determined on the basis of expected future inflows. It corresponds to the higher of the discounted value of expected future net cash flows and the expected net selling price. If the recoverable amount is lower than the carrying amount, a corresponding impairment loss is recognized in the income statement. The main assumptions on which these measurements are based include growth rates, margins, and discount rates. The cash inflows actually generated can differ considerably from discounted projections.

The lines “Changes in scope of consolidation” show exclusively the acquisitions, see note 4.1 (4.1.1 Changes in scope of consolidation).

Investments in property, plant, and equipment in 2017 amounted to CHF 207 million (previous year: CHF 179 million). They were made primarily by the GF Automotive division with CHF 102 million (previous year: CHF 88 million) and the GF Piping Systems division with CHF 50 million (previous year: CHF 49 million). Investments in property, plant, and equipment with an effect on liquidity in the 2018–2021 period amount to CHF 94 million. This amount mainly relates to investments for the GF Piping Systems division in the amount of CHF 22 million and the GF Automotive division in the amount of CHF 35 million.

The values in the row “Other changes, reclassifications” are largely due to two movements. First, an investment property of GF Automotive was reclassified as “Property, plant, and equipment for own use”. Second, some of GF Machining Solutions demo machines earmarked for sale were reclassified from “Non-current assets” to “Inventories”.

The fair value of investment properties, as determined by internal experts on the basis of capitalized and current market values, is CHF 62 million (previous year: CHF 61 million).

Accounting principles

Items of property, plant, and equipment are stated at cost or manufacturing cost less depreciation and impairment. Borrowing costs for the financing of assets under construction are part of the costs of the asset if they are material. Assets acquired under finance lease contracts are capitalized at the lower of the present value of the minimum lease payments and fair value. The related outstanding finance lease obligations are presented under liabilities. Assets are depreciated on a straight-line basis over their estimated useful lives or lease terms: investment properties and buildings 30 to 40 years, building components 8 to 20 years, machinery and production equipment 6 to 20 years, and other equipment (vehicles, IT systems, etc.) 1 to 5 years. Assets under construction are usually not depreciated. Assets held under the terms of a finance lease are described in note 3.3 “Leasing”. Where components of larger assets have different useful lives, these components are depreciated separately. Useful lives and residual values are reviewed annually on the balance sheet date and any adjustments are recognized in the income statement. Any gains or losses on the disposal of items of property, plant, and equipment are recognized in the income statement.

The recoverable amount of non-current assets (especially property, plant, and equipment, intangible assets, financial assets as well as the goodwill reported in the sample accounting) is reviewed at least once a year. If there is any indication of an impairment, an impairment test is performed immediately. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the income statement.

2.5 Movements in the intangible assets

2.5 Movements in the intangible assets

The major categories of the intangible assets are subdivided into “Land use rights”, “Software”, and “Royalties, patents, others”.

In the period under review, the intangible assets amount to CHF 29 million (previous year: CHF 25 million).

Land use rights, in the amount of CHF 10 million (previous year: CHF 11 million), and Software, in the amount of CHF 10 million (previous year: CHF 12 million), remained almost unchanged compared with the previous year.

Royalties, patents, others increased to CHF 9 million (previous year: CHF 2 million). The main reasons for the increase are the acquired customer relationships in the amount of CHF 4 million and the brand name of CHF 2 million with the acquisition of Urecon Ltd by GF Piping Systems. CHF 2 million relate to an acquired customer list within the GF Piping Systems division and capitalized R&D costs within the GF Automotive division.

Goodwill

The theoretical capitalization of the goodwill would affect the result of the consolidated financial statements as follows:

Theoretical movements in goodwill

CHF million

 

2017

 

2016

 

 

 

 

 

Cost

 

 

 

 

As of 31 December

 

608

 

545

 

 

 

 

 

Additions from acquisitions

 

64

 

54

Adjustments

 

–1

 

–1

Translation adjustment

 

 

 

–8

As of 1 January

 

545

 

500

 

 

 

 

 

Accumulated amortization

 

 

 

 

As of 31 December

 

–510

 

–475

 

 

 

 

 

Additions regular

 

–33

 

–38

Translation adjustment

 

–2

 

4

As of 1 January

 

–475

 

–441

 

 

 

 

 

Theoretical book values, net

 

 

 

 

As of 31 December

 

98

 

70

As of 1 January

 

70

 

59

Effect on income statement

CHF million

 

2017

 

2016

 

 

 

 

 

Operating result (EBIT)

 

352

 

311

Return on sales (EBIT margin) %

 

8.5

 

8.3

Amortization goodwill

 

–33

 

–38

Theoretical operating result (EBIT) incl. amortization of goodwill

 

319

 

273

Theoretical return on sales (EBIT margin) %

 

7.7

 

7.3

 

 

 

 

 

Net profit

 

258

 

225

Amortization goodwill

 

–33

 

–38

Theoretical net profit incl. amortization of goodwill

 

225

 

187

Effect on balance sheet

CHF million

 

2017

 

2016

 

 

 

 

 

Equity according to balance sheet

 

1’369

 

1’200

Theoretical capitalization of net book value of goodwill

 

98

 

70

Theoretical equity incl. net book value of goodwill

 

1’467

 

1’270

 

 

 

 

 

Equity as % of balance sheet total

 

37.9

 

37.5

Theoretical equity incl. net book value of goodwill as % of balance sheet total (incl. goodwill)

 

39.6

 

38.8

Management assumptions and estimates

For goodwill positions, that are listed in the theoretical movements, an impairment test is performed, if there is any indication that these goodwill positions could be affected from such an impairment. If such indications exist, an impairment test is performed for the goodwill positions offset against equity to determine the recoverable amount. As a basis for the calculation, business plans for the next five years are used. Subsequent years are included in the calculation using a perpetual annuity with a growth assumption of zero. The projections are based on knowledge and experience as well as on current judgments made by management as to the probable economic development of the relevant markets. It is assumed that there are no significant planned changes in the organization of any of the divisions, except for the measures already decided and announced.

Goodwill from acquisitions is offset against the Corporation’s equity at the acquisition date. The theoretical amortization is based on the straight-line method over the useful life of five years. The adjustment in the year under review in the amount of CHF –1 million (previous year: CHF –1 million) is due to the reversal of the conditional purchase price of Sterisol from the year 2013 of CHF –1 million, an adjustment of the conditional purchase price of Microlution Inc of CHF –1 million and the reversal of dividend income of Beijing Jingran Lingyun Gas Equipment Co Ltd und Langfang Shuchang Auto Parts Co Ltd that belongs to the period before the acquisition date amounting to CHF 1 million. This adjustment will be amortized together with the goodwill over the remaining period of amortization.

On the basis of the impairment test made on the balance sheet date, no indications of impairment were found, therefore all goodwill positions have retained their recoverable value. The goodwill of Georg Fischer Hakan Plastik AS and Microlution Inc was tested for impairment in addition. The recoverable amount of both companies equals the value in use, which is determined based on future discounted cash flows.

By applying the capital asset pricing model, a specific rate for the cost of capital was calculated for Georg Fischer Hakan Plastik AS and Microlution Inc. The calculation of this discount rate refers to the data of a relevant peer group. Furthermore, specific values for the risk-free interest rate, the market risk premium, the borrowing costs, and the tax rate were applied.

Since the cash flow projections are based on cash flows after tax, the discount rate has also been determined taking tax effects into account. The discount rate for Georg Fischer Hakan Plastik AS was calculated at 16.1% and for Microlution Inc at 8.1%.

It was confirmed that the theoretical goodwill of both companies retained its recoverable value.

Accounting principles: intangible assets and impairment

Acquired licenses, patents, and similar rights are capitalized and, with the exception of land use rights, are amortized on a straight-line basis over their estimated useful lives of 3 to 15 years. Land use rights are amortized over the duration of the usage rights granted. For this item, useful lives can be up to 50 years. Software is amortized on a straight-line basis over the estimated useful lives of 1 to 5 years.

In the event of business combination, goodwill at the date of acquisition is calculated as follows: the fair value of the net assets, plus transaction costs incurred in connection with the business combination, plus the value of the minority interests in the acquired company, less the value of the acquired net assets carried on the balance sheet.

The positive or negative goodwill resulting from acquisitions is offset in equity against retained earnings at the date of acquisition. Upon the disposal of a portion of the company, the goodwill previously offset in equity is transferred to the income statement. If parts of the purchase price are dependent on future results, they are estimated as accurately as possible at the acquisition date and recognized in the balance sheet. In the event of disparities when the definitive purchase price is settled, the goodwill offset in equity is adjusted accordingly.

The recoverable amount of non-current assets (especially property, plant, and equipment, intangible assets, financial assets as well as the goodwill reported in the sample accounting) is reviewed at least once a year. If there is any indication of an impairment, an impairment test is performed immediately. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the income statement. As the goodwill is already offset with equity at the date of the acquisition, an impairment of the goodwill does not affect the income statement, but leads to a disclosure in the notes only.

Accounting principles: research and development

All research costs are recognized in the income statement in the period in which they were incurred. Development costs are recognized as an asset only to the extent that the following specific recognition criteria are all met accumulative:

  • costs are clearly defined, clearly attributable to the product or process, and can be separately identified and measured reliably
  • the technical feasibility can be demonstrated
  • the company intends to produce and market the product or to use the process
  • a market exists
  • the required internal resources are available
  • the amount recognized is covered by future cash flows

2.6 Movements in provisions and accrued liabilities and deferred income

2.6 Movements in provisions and accrued liabilities and deferred income

2.6.1 Movements in provisions

CHF million

 

Personnel and social security

 

Warranties

 

Legal cases

 

Onerous contracts

 

Restruc- turing provisions

 

Other provisions

 

Provisions

 

Deferred tax liabilities

 

Provisions and deferred tax liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2017

 

75

 

35

 

20

 

12

 

 

23

 

165

 

47

 

212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassifications

 

–1

 

1

 

 

 

 

 

 

 

 

 

 

 

 

Increase

 

10

 

18

 

8

 

7

 

1

 

3

 

47

 

5

 

52

Use

 

–5

 

–11

 

–1

 

–3

 

–1

 

–1

 

–22

 

 

 

–22

Release

 

–2

 

–5

 

–5

 

–3

 

 

 

–2

 

–17

 

–6

 

–23

Changes in scope of consolidation

 

1

 

 

 

 

 

 

 

 

 

 

 

1

 

2

 

3

Translation adjustment

 

5

 

1

 

1

 

1

 

 

 

 

 

8

 

1

 

9

As of 31 December 2016

 

67

 

31

 

17

 

10

 

 

23

 

148

 

45

 

193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassifications

 

1

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

Increase

 

9

 

19

 

9

 

6

 

 

 

4

 

47

 

5

 

52

Use

 

–7

 

–14

 

–3

 

–3

 

 

 

–4

 

–31

 

 

 

–31

Release

 

–3

 

–4

 

–2

 

–1

 

 

 

–5

 

–15

 

–5

 

–20

Translation adjustment

 

–1

 

 

 

 

 

 

 

 

 

 

 

–1

 

 

 

–1

As of 31 December 2015

 

68

 

30

 

13

 

8

 

 

28

 

147

 

45

 

192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity structure of the provisions 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– current

 

4

 

22

 

2

 

11

 

 

 

6

 

45

 

 

 

45

– non-current

 

71

 

13

 

18

 

1

 

 

 

17

 

120

 

47

 

167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity structure of the provisions 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– current

 

5

 

21

 

1

 

10

 

 

6

 

43

 

 

43

– non-current

 

62

 

10

 

16

 

 

 

17

 

105

 

45

 

150

Management assumptions and estimates

In the course of their ordinary operating activities, Corporate Companies can become involved in litigation. Provisions for pending legal proceedings are measured on the basis of the information available and a realistic estimate of the expected outflow of resources. The outcome of these proceedings may result in claims against the Corporation that cannot be met or cannot be met in full through provisions or insurance cover. If there are any contractual obligations for which the unavoidable costs of meeting the obligations exceed the expected economic benefits (e.g. onerous delivery contracts), provisions are made for the agreed amounts over the entire period or over a prudently estimated period. These provisions are based on management assumptions.

The valuation of provisions in all categories is based on actual data if available (e.g. claims that have occurred or been reported) or on the experience of recent years and management estimates. The deferred tax liabilities are based on temporary valuation differences, which are reported in the balance sheet at the Corporate Company level.

Personnel and social security provision
Expenditures not connected with pension plans in the narrow sense, such as awards for length of service and anniversary bonuses are recognized in the “Personnel and social security” category and amounted to CHF 75 million in 2017 (previous year: CHF 67 million).

The non-current provisions in the “Personnel and social security” category in the amount of CHF 71 million (previous year: CHF 62 million) are expected to result in a cash outflow in an average of ten years, the non-current provisions in the other categories are expected to result in a cash outflow within the next two to three years.

Warranty provision

Warranty provisions amount to CHF 35 million (previous year: CHF 31 million). Due to the favorable claims outcome, it was possible to release CHF 5 million. At the same time, new warranty provisions of CHF 18 million had to be set aside, and CHF 11 million were utilized.

34% of the warranty provisions are for GF Machining Solutions and 26% for GF Automotive. They derive from complaints and claims for damages made to the various locations.

Legal cases
Provisions in the “Legal cases” category relate to a number of individual cases involving the divisions. For none of the existing legal cases an estimated cash outflow of more than CHF 6 million is expected.

Other provisions
The “Other provisions” category contains provisions for pension plans in the amount of CHF 11 million and for other operating risks.

2.6.2 Accrued liabilities and deferred income

CHF million

 

2017

 

2016

 

 

 

 

 

Overtime, holiday, bonuses, and sales-related premiums

 

112

 

89

Accrued expenses/deferred income for commissions and discounts

 

32

 

27

Accrued expenses/deferred income for annual audit fees

 

4

 

4

Other accrued expenses and deferred income

 

110

 

98

Total

 

258

 

218