1.1 Segment information 

Segment information

Reconciliation to the segment information

Geographical information

Information about major customers

There are no single customers whose sales amount to 10% or more of the sales of the Corporation.

Accounting principles

In accordance with the management structure and the reporting to the Executive Committee and the Board of Directors, the reportable segments are the three operating divisions of GF Piping Systems, GF Automotive, and GF Machining Solutions.

GF Piping Systems is a leading supplier of piping systems made of plastics and metal. The division focuses on system solutions, high-quality components for the safe transport of water, chemicals, and gas, as well as corresponding services.

GF Automotive is a technologically pioneering development partner and manufacturer of lightweight casting solutions and systems made of aluminum, magnesium, and iron for the global automotive industry as well as for industrial applications.

GF Machining Solutions is one of the world’s leading providers of complete solutions to the tool and mold making industry and to manufacturers of precision components. The portfolio includes milling, wire cutting and EDM machines as well as spindle systems, laser texturing, additive manufacturing, as well as automation and digitalization solutions.

Business units within these segments have been aggregated as a single reportable segment because they manufacture similar products with comparable production processes and supply them to similar customer groups using similar distribution methods. Segment accounting is prepared up to the level of operating result (EBIT) as this is the key figure used for management purposes. All operating assets and liabilities that are directly attributable or can be allocated on a reasonable basis to the segments are reported in the corresponding divisions. No distinction is made between the accounting policies of the segment reporting and those of the consolidated financial statements.

1.2 Sales and other operating income

1.2.1 Products, services and most important revenue sources

Accounting principles

Billings for goods and services are recognized as sales when they are delivered or when the principal risks and benefits incidental to ownership are transferred.

An assessment as to whether the principal risks and opportunities were transferred for a particular delivery is made separately for each sales transaction on the basis of the contractual agreement underlying the transaction. The transfer of legal ownership alone does not necessarily result in the transfer of the principal risks and opportunities. This is the case, for instance, if:

• –the recipient of the delivery makes a claim against insufficient quality of the delivered item that exceeds a normal warranty claim
• –the receipt of the proceeds depends on the resale of the goods by the buyer
• –the installation of the goods at the recipient is an essential part of the contract
• –the buyer has the right to return the item for a contractually specified reason and the likelihood of such a return cannot be assessed with any certainty
  

Services rendered are booked as sales depending on the degree of their completion if the result of the service can be reliably assessed.

Sales are stated before value-added tax, sales tax, and after the deduction of discounts and credits. Appropriate warranty provisions are recognized for anticipated claims.

1.2.2 Other operating income

1.3 Expenses

1.3.1 Operating expenses

1.3.2 Personnel expenses

In accordance with a plan defined by the Board of Directors, Georg Fischer registered shares are granted to members of the Executive Committee and members of the Senior Management as a long-term financial incentive. Taking into account the registered shares granted to members who left the firm during the year under review, the expenses related to the long-term incentive plan recognized in the personnel expenses amount to CHF 9.7 million.

1.4 Income taxes

Management assumptions and estimates

Current tax liabilities are calculated based on an interpretation of the tax regulations in place in the relevant countries. The adequacy of such an interpretation is assessed by the tax authorities in the course of the final assessment or tax audits. This can result in material changes to tax expense. Furthermore, in order to determine whether tax loss carryforwards may be capitalized, it is first necessary to assess critically the probability that there will be future taxable profits against which to offset them. This assessment depends on a variety of influencing factors and developments. The carrying amounts of current and deferred tax assets and liabilities are disclosed in the consolidated balance sheet.

The difference between the expected income tax expense and the effective income tax expense recorded in the financial statements can be explained as follows:

The expected income tax rate of the Corporation amounts to 20% (previous year: 22%) and corresponds to the weighted average tax rate which is based on the profit/loss before taxes and the income tax rate of each individual Corporate Company. The change of the expected income tax rate is due to the variation in profitability and the change of the tax rate of different Corporate Companies. The expected income tax rate based on the ordinary result also amounts to 20% (previous year: 22%).

The unrecognized tax loss carryforwards in 2017 totalling CHF 159 million (previous year: CHF 185 million) have a potential tax relief effect of CHF 44 million (previous year: CHF 49 million), whereas CHF 135 million (previous year: CHF 146 million) expiry is unlimited. To expire within one year is CHF 2 million only.

As of 31 December 2017, based on the above mentioned estimates, tax loss carryforwards of CHF 18 million (previous year: CHF 20 million) were activated resulting in a deferred tax asset of CHF 4 million (previous year: CHF 5 million). In doing so, the country-specific tax related regulations and opportunities were respected.

The tax implication of the recently enacted US tax reform on the year-end closing 2017 is considered not to be material.

Accounting principles

The recognition of tax loss carryforwards is assessed on an annual basis and is based on current assumptions and estimates of the management. Tax loss carryforwards are recognized only to the extent that, within the next two to three years, sufficient taxable profit is expected to be available to allow the deferred tax asset to be utilized. In countries or Corporate Companies where such utilization is not probable, tax loss carryforwards are not recognized.

Taxes are accrued for all tax obligations, irrespective of their due date. Current income taxes are calculated on the taxable profit. Deferred taxes are calculated by applying the balance sheet liability method for any temporary difference between the carrying amount according to Swiss GAAP FER and the tax basis of assets and liabilities. Tax loss carryforwards are recognized only to the extent that it is probable that future taxable profits or deferred tax liabilities will be available against which they can be offset. The calculation of deferred taxes is based on the country-specific tax rates. Tax assets and liabilities are offset if they concern the same taxable entity and tax authority and if there exists an offset entitlement for current taxes. No deferred tax is provided for temporary differences on investments in subsidiaries where the timing of the reversal of the temporary difference is controlled by the Corporation and it is probable that the temporary difference will not reverse in the foreseeable future.

1.5 Earnings per share

There was no dilution of earnings per share in either the year under review or the previous year.

Accounting principles

Earnings per share is calculated by dividing the portion of net profit attributable to Georg Fischer Ltd shareholders by the weighted average number of shares outstanding in the reporting period. Diluted earnings per share takes into account any potential additional shares that may result, for instance, from exercised options or conversion rights.