2. Operating assets and liabilities

2. Operating assets and liabilities

This section provides additional information on current assets and liabilities that support the ongoing operational liquidity of the Corporation. The section further describes the non-current tangible and intangible assets required at the GF Corporate Companies to provide products and services to their customers. Finally, it provides a summary on the different items of goodwill and the theoretical impact of a capitalization and subsequent amortization of goodwill.

2.1 Accounts receivable

2. Operating assets and liabilities

This section provides additional information on current assets and liabilities that support the ongoing operational liquidity of the Corporation. The section further describes the non-current tangible and intangible assets required at the GF Corporate Companies to provide products and services to their customers. Finally, it provides a summary on the different items of goodwill and the theoretical impact of a capitalization and subsequent amortization of goodwill.

2.1 Accounts receivable

2.1.1 Trade accounts receivable

Trade accounts receivable value-adjusted by region 
in CHF

CHF million

 

2018

 

2017

 

 

 

 

 

Gross values

 

725

 

784

 

 

 

 

 

Individual value adjustments

 

–5

 

–6

Overall value adjustments

 

–23

 

–24

Net values

 

697

 

754

 

 

 

 

 

Europe

 

295

 

349

– Thereof Germany

 

88

 

105

– Thereof Switzerland

 

35

 

31

– Thereof Austria

 

10

 

14

– Thereof Rest of Europe

 

162

 

199

Americas

 

104

 

85

Asia

 

259

 

271

– Thereof China

 

194

 

211

Rest of world

 

39

 

49

Total

 

697

 

754

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:

 

 

 

 

2018

 

 

 

2017

CHF million

 

Receivable after individual value adjustments

 

Overall value adjustment

 

Receivable after individual value adjustments

 

Overall value adjustment

 

 

 

 

 

 

 

 

 

Not yet due

 

557

 

 

 

624

 

 

1 to 30 days overdue

 

76

 

 

 

84

 

 

31 to 90 days overdue

 

52

 

 

 

34

 

 

91 to 180 days overdue

 

19

 

8

 

17

 

8

More than 180 days overdue

 

16

 

15

 

19

 

16

Total

 

720

 

23

 

778

 

24

The individual value adjustments amounted to CHF 5 million (previous year: CHF 6 million). It is assumed that part of the underlying receivables will be paid. Receivables not due are mainly receivables arising from long lasting 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

Accounts receivable are stated at nominal value. Value adjustments for doubtful accounts 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 11 million, CHF 4 million relate to Sweden, CHF 3 million to the USA, CHF 1 million each to Switzerland, Austria, Turkey, and CHF 1 million to other countries.

2.1.3 Other accounts receivable

CHF million

 

2018

 

2017

 

 

 

 

 

Tax credits from indirect taxes

 

30

 

31

Other current accounts receivable

 

32

 

31

Total

 

62

 

62

2.2 Inventories

2.2 Inventories

CHF million

 

2018

 

2017

 

 

 

 

 

Finished goods

 

495

 

499

Raw materials and components

 

242

 

271

Work in progress

 

180

 

163

Gross value of inventories on hand

 

917

 

933

 

 

 

 

 

Valuation adjustments

 

–138

 

–160

Inventories

 

779

 

773

Accounting principles

Goods held for trading are generally stated at average cost and internally manufactured products at standard 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

 

2018

 

2017

 

 

 

 

 

Social security

 

17

 

18

Other non-interest-bearing liabilities

 

39

 

43

Derivative financial instruments

 

2

 

17

Other tax liabilities (e.g. withholding tax)

 

37

 

29

Total

 

95

 

107

– Thereof current

 

56

 

69

– Thereof non-current

 

39

 

38

2.3.2 Derivative financial instruments

 

 

 

 

 

 

2018

 

 

 

 

 

2017

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)

 

463

 

3

 

–2

 

474

 

5

 

–3

Other underlyings

 

2

 

 

 

60

 

 

 

–14

Total

 

465

 

3

 

–2

 

534

 

5

 

–17

GF uses derivative 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

 

2018

 

2017

 

 

 

 

 

Financial instruments (assets)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (excluding fixed-term deposits)

 

504

 

592

 

 

 

 

 

Trade accounts receivable

 

697

 

754

Fixed-term deposits

 

29

 

32

Other accounts receivable 1

 

32

 

31

Accrued income

 

15

 

16

Other financial assets 2

 

91

 

12

Loans and receivables stated at amortized cost

 

864

 

845

 

 

 

 

 

Marketable securities and funds

 

6

 

4

Financial assets recognized in income statement at market value

 

6

 

4

 

 

 

 

 

Derivative financial instruments for hedging purposes

 

3

 

5

 

 

 

 

 

Financial instruments (liabilities)

 

 

 

 

 

 

 

 

 

Trade accounts payable

 

498

 

593

Bonds

 

574

 

524

Other financial liabilities

 

202

 

264

Accrued liabilities and deferred income 3

 

253

 

258

Other current/non-current liabilities 4

 

93

 

90

Liabilities stated at amortized cost

 

1’620

 

1’729

 

 

 

 

 

Derivative financial instruments

 

2

 

17

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. Derivative financial instruments are stated at their replacement value (market 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 2018

 

200

 

1’441

 

563

 

132

 

211

 

182

 

45

 

4

 

24

 

2’602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

2

 

44

 

7

 

5

 

11

 

160

 

5

 

 

 

4

 

236

Disposals

 

–2

 

–159

 

–5

 

–3

 

–10

 

 

 

 

 

 

 

–1

 

–178

Changes in scope of consolidation

 

 

 

–493

 

3

 

–27

 

–19

 

–4

 

 

 

 

 

 

 

–540

Other changes, reclassifications

 

140

 

52

 

–93

 

10

 

11

 

–127

 

–1

 

 

 

4

 

–144

Translation adjustment

 

–5

 

–54

 

–16

 

–3

 

–6

 

–2

 

–2

 

 

 

–1

 

–84

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2018

 

–116

 

–999

 

–311

 

–81

 

–155

 

 

 

 

–10

 

–1’556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

–1

 

–102

 

–18

 

–7

 

–13

 

 

 

 

 

 

 

–2

 

–142

Disposals

 

 

 

93

 

4

 

3

 

10

 

 

 

 

 

 

 

1

 

111

Changes in scope of consolidation

 

 

 

444

 

–1

 

17

 

15

 

 

 

 

 

 

 

 

 

475

Other changes, reclassifications

 

–89

 

3

 

86

 

3

 

 

 

 

 

 

 

 

 

 

 

92

Translation adjustment

 

3

 

36

 

7

 

2

 

4

 

 

 

 

 

 

 

1

 

50

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2018

 

84

 

442

 

252

 

51

 

56

 

182

 

45

 

4

 

14

 

1’046

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

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 cash flows. 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 actual future cash flows can differ considerably from discounted projections.

The overall net carrying amount of property, plant, and equipment decreased by CHF 124 million to CHF 1’046 million (previous year. CHF 1’170 million) due to the divestment of the two iron casting plants in Singen and Mettmann (Germany) including the subsequent asset sale of a relating production equipment. Additions to property, plant, and equipment are mainly due to the acquisition of Precicast Industrial Holding SA (Switzerland). These movements are shown in the line “Changes in scope of consolidation” and explained in more detail in note 4.1.

In the course of the divestments in Singen and Mettmann, land and buildings that were not part of the divestment were reclassified from property, plant, and equipment for own use to investment properties. Also subsequently to the divestment, production equipment in the amount of CHF 58 million was sold to the acquirer of these production entities.

The fair value of investment properties, as determined by internal assessments on the basis of capitalized and current market values, is CHF 101 million (previous year: CHF 62 million).

The movement in assets under construction is mainly due to ongoing investment projects, including a new innovation and production center in Biel (Switzerland) for GF Machining Solutions in the amount of CHF 43 million, the refurbishment of an administration building in Schaffhausen (Switzerland) for GF Piping Systems in the amount of CHF 7 million, ongoing investment into the light metal die-casting plant in Mills River (USA) of the joint venture with GF Casting Solutions and Linamar Corporation in the amount of CHF 35 million, as well as the transfer of completed projects to other categories of property, plant, and equipment.

Accounting principles

Property, plant, and equipment are stated at cost or manufacturing cost less depreciation and impairment. Financing costs of assets under construction are part of the costs of the asset if material. Assets held 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 as liabilities.

Assets are depreciated on a straight-line basis over their estimated useful lives or lease terms:

  • Investment properties and buildings: 30–40 years
  • Building components: 8–20 years
  • Machinery and production equipment: 6–20 years
  • Other equipment (vehicles, IT systems, etc.): 1–5 years
  • Assets under construction are usually not depreciated

When components of larger assets have different useful lives, these are depreciated separately. Useful lives and residual values are reviewed annually on the balance sheet date and 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.

Assets held under the terms of a finance lease are described in note 3.3.

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 amounted to CHF 34 million (previous year: CHF 29 million).

Land use rights increased to CHF 13 million (previous year: CHF 10 million). The main reason was the increase in land use rights for the new plant in Changzhou at GF Machining Solutions. Software also amounted to CHF 13 million (previous year: CHF 10 million). The main reason for this increase was the industrial software and SAP implementation in various companies by GF Piping Systems and GF Machining Solutions. 

Royalties, patents, others in the amount of CHF 8 million (previous year: CHF 9 million), remained almost unchanged compared to the previous year. 

Goodwill

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

Theoretical movements in goodwill

CHF million

 

2018

 

2017

 

 

 

 

 

Cost

 

 

 

 

As of 31 December

 

655

 

608

 

 

 

 

 

Additions from acquisitions

 

77

 

64

Adjustments

 

–4

 

–1

Translation adjustment

 

–26

 

 

As of 1 January

 

608

 

545

 

 

 

 

 

Accumulated amortization

 

 

 

 

As of 31 December

 

–526

 

–510

 

 

 

 

 

Additions regular

 

–38

 

–33

Translation adjustment

 

22

 

–2

As of 1 January

 

–510

 

–475

 

 

 

 

 

Theoretical book values, net

 

 

 

 

As of 31 December

 

129

 

98

As of 1 January

 

98

 

70

Effect on income statement

CHF million

 

2018

 

2017

 

 

 

 

 

Operating result (EBIT)

 

382

 

352

Return on sales (EBIT margin) %

 

8.4

 

8.5

Amortization goodwill

 

–38

 

–33

Theoretical operating result (EBIT) incl. amortization of goodwill

 

344

 

319

Theoretical return on sales (EBIT margin) %

 

7.5

 

7.7

 

 

 

 

 

Net profit

 

279

 

258

Amortization goodwill

 

–38

 

–33

Theoretical net profit incl. amortization of goodwill

 

241

 

225

Effect on balance sheet

CHF million

 

2018

 

2017

 

 

 

 

 

Equity according to balance sheet

 

1’428

 

1’369

Theoretical capitalization of net book value of goodwill

 

129

 

98

Theoretical equity incl. net book value of goodwill

 

1’557

 

1’467

 

 

 

 

 

Equity as % of balance sheet total

 

41.5

 

37.9

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

 

43.6

 

39.6

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 –4 million (previous year: CHF –1 million) is due to the adjustments of the conditional purchase price of GF Casting Solutions SRL, Pitesti of CHF –3.3 million and of Microlution Inc of CHF –0.2 million. The adjustments will be amortized together with the goodwill over the remaining period of amortization.

At the balance sheet date no indications of impairment were found except for the goodwill of Symmedia GmbH and Microlution Inc. These goodwill items were tested for impairment. Both impairment tests revealed that the resulting recoverable amounts based on value in use calculations, exceeded the carrying amounts.

By applying the capital asset pricing model, individual costs of capital were calculated for Symmedia GmbH and Microlution Inc. The calculation required an assessment of the relative market risk of different peer groups as well as the determination of specific risk-free interest rates, an equity market risk premium, the borrowing costs and relevant tax rates.

Since the cash flow projections were based on cash flows after tax, the discount rate has also been determined after tax. The discount rate for Symmedia GmbH was calculated at 7.0% and for Microlution Inc at 9.5%.

It was confirmed that the theoretical goodwill of both companies retained its carrying amount.

Accounting principles: intangible assets

Acquired licenses, patents, and similar rights are capitalized and, with the exception of land use rights, 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 acquisition price plus transaction costs incurred in connection with the business combination less the value of the acquired and re-valued net assets 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 GF Corporate 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 carrying amount of non-current assets (especially property, plant, and equipment, intangible assets, financial asssets 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 cumulatively:

  • 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, accrued liabilities and deferred income and contingent liabilities

2.6 Movements in provisions, accrued liabilities and deferred income and contingent liabilities

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 2018

 

62

 

33

 

18

 

16

 

 

20

 

149

 

63

 

212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase

 

11

 

23

 

8

 

7

 

 

 

11

 

60

 

17

 

77

Use

 

–5

 

–15

 

–2

 

–4

 

 

 

–1

 

–27

 

 

 

–27

Release

 

–1

 

–8

 

–8

 

–5

 

 

 

–9

 

–31

 

–3

 

–34

Changes in scope of consolidation

 

–16

 

 

 

 

 

6

 

 

 

–4

 

–14

 

2

 

–12

Translation adjustment

 

–2

 

–2

 

 

 

 

 

 

 

 

 

–4

 

 

 

–4

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity structure of the provisions 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– current

 

4

 

21

 

2

 

6

 

 

5

 

38

 

 

 

38

– non-current

 

58

 

12

 

16

 

10

 

 

15

 

111

 

63

 

174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity structure of the provisions 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– current

 

4

 

22

 

2

 

11

 

 

6

 

45

 

 

45

– non-current

 

71

 

13

 

18

 

1

 

 

17

 

120

 

47

 

167

Management assumptions and estimates

In the course of their ordinary operating activities, GF 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 level of GF Corporate Companies.

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 62 million (previous year: CHF 75 million).

The non-current provisions in the “Personnel and social security” category in the amount of CHF 58 million (previous year: CHF 71 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 amounted to CHF 33 million (previous year: CHF 35 million). Due to the favorable claims outcome, it was possible to release CHF 8 million. At the same time, new warranty provisions of CHF 23 million had to be set aside, and CHF 15 million were utilized.

38.5% of the warranty provisions are for GF Machining Solutions and 24.0% for GF Casting Solutions. 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 is an estimated cash outflow of more than CHF 6 million expected.

Other provisions
The “Other provisions” category contains provisions for pension plans in the amount of CHF 3 million (previous year: CHF 11 million) and for other operating risks.

2.6.2 Accrued liabilities and deferred income

CHF million

 

2018

 

2017

 

 

 

 

 

Overtime, holiday, bonuses, and sales-related premiums

 

113

 

112

Accrued liabilities/deferred income for commissions and discounts

 

33

 

32

Accrued liabilities/deferred income for annual audit fees

 

4

 

4

Other accrued liabilities and deferred income

 

103

 

110

Total

 

253

 

258

2.6.3 Contingent liabilities

Contingent liabilities amounted to CHF 125 million (previous year: CHF 0 million) and include guarantees to related parties in favor of third parties. The increase compared to the previous year is explained by the reclassification from guarantees in favor of GF Corporate Companies to guarantees in favor of related parties in relation to the divestments in 2018. The contingent liabilities will continously be reduced over a period of five years.