5.2 Other financial assets
|
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
|
|
Investments in associates |
1 |
2 |
|
|
|
|
|
Non-current loans and receivables |
128 |
80 |
|
Securities for the settlement of pension liabilities |
2 |
3 |
|
Other securities |
6 |
8 |
|
Other financial assets third parties |
136 |
90 |
|
|
|
|
|
Total |
137 |
93 |
The increase in non-current loans and receivables was explained by several factors.
First, a contingent purchase price component resulting from the divestment of GF Linamar LLC of CHF 17 million is included. The payout will depend on the performance of the divested GF Corporate Company in the years 2023 – 2027.
Next, investment properties used for production purpose by one of the divested German iron foundries was transferred in a non-cash transaction to the entity against granting of new mezzanine financing over the amount of CHF 29 million. The transfer was done in order to strengthen the balance sheet and improve the commercial standing of the business. The former iron foundries in Germany and Austria further drew down existing credit lines of CHF 27 million (previous year: CHF 3 million). Thereof CHF 19 million are secured by properties.
Following these transactions and given the substantial increase in market interest rates and discount rates, the valuation of the loans was re-assessed and the value adjustments were increased to CHF 39 million (previous year: CHF 15 million).
Other securities consist mainly of investment securities held in the captive insurance, non-consolidated investments without significant influence, as well as non-current prepayments.
In 2021, GF increased its stake in Oxford Flow Utility & Industries Ltd. to 22.96%. The investment continued to be classified as an investment in associates with the acquired goodwill offset within equity.
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.
In 2022, a material contingent consideration from a divestment resulted, which is linked to the future profitability of the divested business. The contingent consideration was recorded as "Other financial assets" at actual value and was appropriately discounted. The financial asset is re-measured at each subsequent reporting date. Changes in the actual value of contingent consideration are recognized in the consolidated income statement in "Other operating income" or "Operating expenses".
Associates are companies over which the GF Corporation exercises significant influence. Investments in associates are accounted for under the equity method. Any acquired goodwill is offset within equity. The share of results of associates is reported in the consolidated income statement.
Management assumptions and estimates
The recoverability of non-current loans and receivables is assessed based on the debtors’ ability to repay on time and in full. In order to build this assessment, management regularly observes the debtors’ adherence to the interest payments and principal amortization schedule. In the case of investments in associates, management also assesses the debtor’s ability to continue as a going concern. Assessing the going concern assumptions requires management to assess the risk and opportunities of the debtors’ business models, which are inherently subject to a higher level of estimation uncertainty. Such assessments may change in the following year depending on the future development of the debtors’ businesses.
To determine the actual value of the contingent consideration, the sales and EBITDA of the divested business must be estimated and these input factors are not directly observable for the GF Corporation. Changes in these input factors might result in a significantly higher or lower measurement.