2. Operating assets and liabilities - Corporate Reports 2022

2.1Cash and cash equivalents

CHF million	31.12.2022	31.12.2021

Cash and bank accounts	536	541
Cash on fixed-term deposits	309	343
Checks and drafts	31	48
Cash and cash equivalents	877	932

Accounting principles

Cash and cash equivalents consists of cash on hand, balances on bank accounts and short-term, highly liquid cash equivalents, which are subject to an insignificant risk of change in value and that are readily convertible to cash. Cash equivalents have a maturity of 90 days or less from the balance sheet date.

2.2Trade accounts receivable

CHF million	31.12.2022	31.12.2021

Gross value	693	645
Individual value adjustments	–5	–5
Overall value adjustments	–28	–28
Net value	660	611

Europe	256	237
– Thereof Germany	52	35
– Thereof Switzerland	24	27
– Thereof rest of Europe	180	175
Americas	93	98
Asia	286	251
– Thereof China	179	165
– Thereof rest of Asia	107	85
Rest of world	25	26
Total	660	611

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:

		31.12.2022	31.12.2021
CHF million	Receivable after individual value adjustments	Overall value adjustments	Receivable after individual value adjustments	Overall value adjustments

Not yet due	535		490
1 to 30 days overdue	66		71
31 to 90 days overdue	50		39
91 to 180 days overdue	18	13	18	14
More than 180 days overdue	19	15	21	14
Total	688	28	639	28

The individual value adjustments amounted to CHF 5 million (previous year: CHF 5 million). It is expected 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 3.7.

Accounting principles

Accounts receivable are stated at nominal value. Value adjustments for doubtful accounts are established based on maturity structure and identifiable credit risks. Besides individual value adjustments with respect to specific known risks, other value adjustments are recognized based on historical experience of default risk.

2.3Other accounts receivable

CHF million	31.12.2022	31.12.2021

Tax credits from indirect taxes	33	38
Other current accounts receivable	29	36
Total	62	74

2.4Inventories

CHF million	31.12.2022	31.12.2021

Raw materials and components	307	279
Unfinished goods	164	158
Finished goods	556	522
Gross value	1’027	959

Valuation adjustments	–195	–182
Total	833	776

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.

2.5Other liabilities

CHF million	31.12.2022	31.12.2021

Social security	26	22
Derivative financial instruments	2	2
Other tax liabilities	33	32
Other non-interest-bearing liabilities	32	40
Total	93	96
- Thereof current	65	68
- Thereof non-current	28	28

2.6Property, plant, and equipment

CHF million	Investment properties	Land	Buildings and building components	Machinery and production equipment	Other equipment	Assets under construction	Assets held under finance leases	Property, plant, and equipment

Cost at 1.1.2022	210	50	762	1’480	228	107	22	2’648
Additions	1	1	19	25	8	118	9	180
Disposals	–65	–0	–4	–114	–7		–0	–126
Changes in scope of consolidation		–6	–54	–103	–15	–4	1	–180
Reclassifications	–1	0	26	51	10	–87	–1	0
Translation differences	–7	–2	–20	–47	–7	–6	–1	–83
Cost at 31.12.2022	138	43	729	1’292	218	128	29	2’440

Accumulated depreciation at 1.1.2022	–134		–395	–1’042	–168		–14	–1’619
Additions	–2		–24	–69	–14		–2	–108
Impairment	–1			–0				–0
Disposals	45		2	111	7		0	120
Changes in scope of consolidation			6	20	6			31
Reclassifications	1		–1	–0	0		0	–0
Translation differences	5		10	35	5		1	51
Accumulated depreciation at 31.12.2022	–87		–402	–946	–163		–15	–1’525

Carrying amount at 31.12.2022	51	43	328	346	55	128	15	915

Cost at 1.1.2021	194	44	779	1’446	238	80	24	2’612
Additions	0	2	4	34	6	89	0	135
Disposals	–0	–1	–5	–33	–22		–0	–60
Changes in scope of consolidation		0	1	5	1	0		7
Reclassifications	24	6	–16	40	6	–62	–1	–27
Translation differences	–8	–1	–3	–12	–1	1	–1	–17
Cost at 31.12.2021	210	50	762	1’480	228	107	22	2’648

Accumulated depreciation at 1.1.2021	–121		–391	–1’004	–176	–1	–13	–1’585
Additions	–3		–26	–78	–15		–3	–122
Impairment				–6	–0			–6
Disposals	0		4	31	22		0	57
Changes in scope of consolidation			–0	–0	–0			–1
Reclassifications	–16		15	1	1	1	0	17
Translation differences	5		3	14	1	–0	1	19
Accumulated depreciation at 31.12.2021	–134		–395	–1’042	–168		–14	–1’619

Carrying amount at 31.12.2021	76	50	367	438	60	107	7	1’029

Additions to property, plant, and equipment for GF Piping Systems included investment in equipment in Schaffhausen (Switzerland) in the amount of CHF 12 million, in Little Rock (USA) in the amount of CHF 10 million and Shawnee (USA) in the amount of CHF 5 million as well as investment in new buildings or expansion of buildings in Yangzhou (China) in the amount of CHF 9 million and in Bani Suwayf (Egypt) in the amount of CHF 9 million. Additions for GF Casting Solutions included investment in equipment in Souzhou (China) in the amount of CHF 14 million, in Shenyang (China) in the amount of CHF 12 million and in Altenmarkt (Austria) in the amount of CHF 9 million as well as investment in buildings or expansion of buildings in Altenmarkt (Austria) in the amount of CHF 3 million. Additions for GF Machining Solutions included investment in the expansion of buildings in Losone (Switzerland) in the amount of CHF 9 million. Additions for GF Corporate Management included investment in renovation of one building in Schaffhausen (Switzerland) in the amount of CHF 14 million.

In 2022, there were additions to property, plant, and equipment with outstanding payments of CHF 11 million and non-cash additions to assets held under finance leases of CHF 9 million.

The movements in "Changes in scope of consolidation" result from acquisitions and divestments explained in more detail in note 4.1. In the previous year, the movements in "Changes in scope of consolidation" under "Accumulated depreciation" resulted from the ownership increase of Langfang Shuchang Auto Parts Co Ltd and Beijing Jingran Lingyun Gas Equipment Co Ltd.

Land includes CHF 4 million of undeveloped properties (previous year: CHF 4 million).

In the previous year, the overall movements in "Reclassifications" were explained by the reclassification of a building from property, plant, and equipment to investment properties in Werdohl (Germany), as well as demo machines earmarked for sale reclassified to inventories.

In investment properties, properties in Singen (Germany) were disposed in a non-cash transaction, see note 5.2. The actual value of investment properties, as determined by internal assessments on the basis of capitalized and current market values, is CHF 100 million (previous year: CHF 117 million).

In the previous year, impairments amounting to CHF 6 million related mostly to obsolescence of equipment due to phase-outs of product groups.

Accounting principles

Property, plant, and equipment are stated at cost or manufacturing cost less depreciation and impairment. The recoverability of property, plant, and equipment 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. 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. See also note 3.2.

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

Investment properties: 30–40 years
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

Land and 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.

Management assumptions and estimates

The recoverability of property, plant, and equipment 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. 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.

2.7Intangible assets

CHF million	Land use rights	Software	Royalties, patents, others	Intangible assets

Cost at 31.12.2022	19	67	12	98
Accumulated amortization at 31.12.2022	–6	–47	–8	–62
Carrying amount at 31.12.2022	13	20	4	36

Cost at 31.12.2021	20	64	14	98
Accumulated amortization at 31.12.2021	–6	–43	–9	–58
Carrying amount at 31.12.2021	14	21	5	40

Accounting principles

Land use rights are amortized on a straight-line basis 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. Acquired royalties, patents, and similar rights are capitalized and amortized on a straight-line basis over their estimated useful lives of 3 to 15 years. The recoverability of intangible assets 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. 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 required internal resources are available
the amount recognized is covered by future cash flows

2.8Goodwill

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

Theoretical movements in goodwill

CHF million	2022	2021

Cost at 1.1.	641	615
Additions from acquisitions	5	41
Adjustments		1
Translation differences	–11	–16
Cost at 31.12.	635	641

Accumulated amortization at 1.1.	–596	–574
Additions regular	–18	–37
Translation differences	13	15
Accumulated amortization at 31.12.	–601	–596

Theoretical carrying amount at 31.12.	34	45

Effect on income statement

CHF million	2022	2021

Operating result (EBIT)	391	278
Return on sales (EBIT margin) %	9.8	7.5
Amortization goodwill	–18	–37
Theoretical operating result (EBIT) incl. amortization/impairment of goodwill	373	241
Theoretical return on sales (EBIT margin) %	9.3	6.5

Net profit	280	200
Amortization goodwill	–18	–37
Theoretical net profit incl. amortization/impairment of goodwill	262	163

Effect on balance sheet

CHF million	31.12.2022	31.12.2021

Equity according to balance sheet	1’656	1’496
Theoretical capitalization of goodwill	34	45
Theoretical equity incl. goodwill	1’690	1’541

Equity as % of balance sheet total	44.8	39.7
Theoretical equity incl. goodwill as % of balance sheet total incl. goodwill	45.3	40.4

The theoretical amortization is based on the straight-line method over the useful life of five years. The addition in 2022 is attributable to the acquisition of VAM Control S.r.l. (CHF 5 million). In the previous year, the additions were mainly related to the acquisitions of F.G.S. Brasil Indústria e Comércio Ltda (CHF 31 million) and Oxford Flow Utility & Industries Ltd (CHF 9 million).

In 2022, no indications of impairment were found.

In 2021, the impairment tests for the former Global Supply Company LLC (merged into Georg Fischer LLC), GF Casting Solutions SRL, and Symmedia GmbH revealed that the resulting recoverable amounts based on value in use calculations exceeded the respective carrying amounts.

Accounting principles

When acquiring a GF Corporate Company or an associate, goodwill as of the date of acquisition is calculated as follows: the acquisition price plus transaction costs incurred in connection with the acquisition less the value of revalued net assets.

The positive or negative goodwill resulting from acquisitions and changes in ownership are offset in equity against retained earnings at the date of acquisition. Upon the disposal of a GF Corporate Company or an associate, 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 recoverability of the goodwill reported in the theoretical movement table 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. As the goodwill is already offset in 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.

Management assumptions and estimates

For goodwill, an impairment test is performed if there is any indication that the theoretical book value is no longer recoverable. As a basis for the calculation, business plans for the next five years are used. 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.

2.9Provisions

CHF million	Personnel	Warranties	Legal	Onerous contracts	Restructuring	Other	Provisions

Balance at 1.1.2022	54	36	9	7	2	17	125
Increase	9	16	4	4	0	4	38
Use	–4	–9	–1	–2	–2	–2	–21
Release	–2	–5	–2	–2		–1	–12
Changes in scope of consolidation	1						1
Translation differences	–3	–1	–0	–0	–0	–1	–5
Balance at 31.12.2022	55	37	9	6	0	17	125
– Thereof current	4	28	2	4	0	7	45
– Thereof non-current	51	10	7	1	0	11	79

Balance at 1.1.2021	56	39	7	9	12	17	140
Increase	7	19	3	3	0	5	37
Use	–5	–12	–1	–1	–10	–3	–32
Release	–2	–8	–1	–4	–0	–1	–16
Changes in scope of consolidation		0	0			0	0
Translation differences	–2	–1	–0	–0	–0	–1	–5
Balance at 31.12.2021	54	36	9	7	2	17	125
– Thereof current	3	24	1	5	2	6	42
– Thereof non-current	50	12	8	1	0	11	83

Personnel

Includes provisions for employee retirement benefits and other service-related employee benefits which are not provided by pension funds or similar institutions, as well as anniversary bonuses and provisions for work accidents. For employee benefits provided by pension funds, refer to note 5.1.

Warranties

Cover expected expenses for warranty benefits such as repairs and replacements. All three divisions provide warranty benefits to their customers: 45% of the provisions relate to GF Piping Systems (previous year: 39%), 27% to GF Casting Solutions (previous year: 28%), and 28% to GF Machining Solutions (previous year: 33%).

Legal

Includes all obligations deriving from legal cases and litigations. None of the individual provisions should lead to an outflow of more than CHF 5 million (previous year: CHF 5 million).

Onerous contracts

Summarizes contracts for which the fulfillment leads to unavoidable costs that exceed the associated economic benefits.

Restructuring

Summarizes provisions for legal and/or constructive obligations deriving from restructurings. A constructive obligation arises when a detailed and formal plan for a restructuring exists and a legitimate expectation of third parties that the obligation will be fulfilled was raised. The use of provision in 2022 and 2021, were related to restructuring and relocation activities in Europe.

Other

Includes all other events that give rise to a provision such as non-warranty claims by customers and risks from business activities not allocated to the warranties, legal, or onerous contract categories.

Accounting principles

Provisions are recognized if a legal or constructive obligation exists as a result of a past event that makes it probable that an outflow of resources will be required to settle this obligation and the amount can be estimated reliably. 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. Possible obligations whose occurrence cannot be assessed on the balance sheet date or obligations whose amount cannot be reliably estimated are disclosed as contingent liabilities.

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 professional expertise of internal and external lawyers and a best estimate of the expected outflow of resources (considering available insurance coverage). The assessment may change in the following year depending on the future development of ongoing legal proceedings. If there are any contractual obligations for which the unavoidable costs of meeting the obligations exceed the expected economic benefits (e.g. onerous contracts), provisions are made for the agreed amounts over the entire period or over a prudently estimated period.

2.10Accrued liabilities and deferred income

CHF million	31.12.2022	31.12.2021

Overtime, holiday, and bonuses	132	119
Accrued liabilities/deferred income for commissions and discounts	59	51
Other accrued liabilities and deferred income	119	103
Total	310	273

2.11Contingent liabilities

Contingent liabilities amounted to CHF 66 million (previous year: CHF 90 million) and include guarantees to third parties.

Consolidated financial statements

2 Operating assets and liabilities

Accounting principles

Accounting principles

Accounting principles

Accounting principles

Management assumptions and estimates

Accounting principles

Theoretical movements in goodwill

Effect on income statement

Effect on balance sheet

Accounting principles

Management assumptions and estimates

Personnel

Warranties

Legal

Onerous contracts

Restructuring

Other

Accounting principles

Management assumptions and estimates