5.2 Other financial assets

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CHF million

2020

2019

 

 

 

Non-current loans to associates

 

75

Investment in associates

 

1

Net investment in associates

 

76

 

 

 

Non-current loans and receivables

83

22

Securities for the settlement of pension liabilities

3

3

Other securities

12

9

Other financial assets third parties

98

34

- Thereof former non-current loans to associates

64

 

Other financial assets total

98

110

In 2019, the non-current loans to associates related to loans granted to a management buy-out company (Fondium group) that acquired the two German iron foundries divested in 2018 and where GF retained an ownership of 20%.

In 2020, GF supported an operational and financial restructuring of the Fondium group. The financial restructuring included the sale of all remaining investments in these associates, see also note 4.1 (4.1.1 Additions, disposals and mergers). Consequently, the non-current loans are no longer related to associates but to third parties. In addition to the sale of the investments in the Fondium group, the loan terms were modified. CHF 72 million of subordinated loans before value adjustments were converted into mezzanine financing, which bears a conditional interest of up to 5% but no guaranteed interest and has an expected maturity of 7 to 10 years. For other subordinated loans over CHF 8 million before value adjustments, the maturity was extended to the end of 2024 and the interest was waived.

As a result of these modifications, overall value adjustments of CHF 8 million (previous year: CHF 7 million) were recorded, see note 3.2. In addition, the total change in these loans from CHF 75 million to CHF 64 million is further explained by a net repayment of CHF 4 million as well as impacts from foreign currency movements and interest rates effects.

Management assumptions and estimates

The recoverability of non-current loans and receivables is assessed based on the debtor’s ability to repay on time and in full. In order to build this assessment, management regularly observes the debtor’s adherence to the interest payments and principal amortization schedule. As well as in the case of investments in associates, management also assess the debtor’s ability to continue as a going concern. Assessing the debtor’s going concern assumptions requires the management to assess the viability of the debtor’s business model, which is inherently subject to a higher level of estimation uncertainty.

Accounting principles

Non-current loans and receivables are recognized at amortized cost. In addition, an impairment is recorded in case the assumed present value of expected cash flows is below the carrying value of the non-current loans and receivables.

Investments in associates and non-current loans to associates are assessed for their recoverability holistically (net investment approach). Initially, investments and non-current loans are recorded at their actual values. Subsequently, the value of the investment is increased for the proportionate share in undistributed profits and reduced for the proportionate share in incurred losses as well as dividends obtained. If the value of the investment is reduced to zero, further proportionate shares in losses are allocated to the non-current loans. The value of the investment and the non-current loans are further reduced in case of impairments.

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