Consolidated financial statements
5 Other disclosures
This section provides other information and disclosures not included in other sections, for example, information about employee benefits obligations and other non-current financial assets. It also includes an overview of the balance sheet-related deferred tax assets and liabilities and the events occurring after the balance sheet date.
The table shows the employee benefit obligations as well as the employee benefit expenses.
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2022 |
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Employee benefit plans |
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CHF million |
Patronage funds |
without surplus/deficit |
with surplus |
with deficit |
without own assets |
Total |
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Balance at 1.1.2022 |
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10 |
37 |
47 |
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Contributions to employee benefit plans |
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2 |
27 |
1 |
1 |
31 |
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Increase/decrease in economic benefit of surplus/deficit |
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|
–4 |
3 |
–1 |
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Payments of contributions to employee benefit plans |
|
–2 |
–27 |
–1 |
–1 |
–31 |
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Translation differences |
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|
–1 |
–2 |
–3 |
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Balance at 31.12.2022 |
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5 |
38 |
43 |
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Surplus/deficit according to FER 26 |
28 |
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34 |
–6 |
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56 |
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Employee benefits within personnel expenses |
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2 |
27 |
–3 |
4 |
30 |
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2021 |
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Employee benefits within personnel expenses |
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2 |
26 |
–6 |
4 |
25 |
Employee benefit plans in Switzerland are overfunded by CHF 34 million (previous year: CHF 99 million). The decrease is mainly due to the negative performance of the investments.
The employee benefit plan in the UK is underfunded by CHF 6 million (previous year: CHF 8 million). The amount of the underfunding depends significantly on the value of the securities and on the discount rate and the expected mortality rate used in the calculation of the pension liabilities. The total economic obligation, which represents the expected cash outflow in the medium term, amounts to CHF 5 million (previous year: CHF 10 million).
The recognized economic obligation from the employee benefit plan with no assets of their own, i.e. unfunded plans, amounted to CHF 38 million (previous year: CHF 37 million) and primarily concerns plans in Germany and Sweden. The CHF 3 million increase in the economic obligation is included in the pension fund expenses for the period.
Changes in the recognized economic obligations from employee benefit plans and the employer-paid contributions for the year under review amounted to CHF 30 million (previous year: CHF 25 million) and are included in personnel expenses.
Accounting principles
The employee benefit plans of the GF Corporation comply with the legislation in force in each country. Employee benefit plans are mostly institutions and foundations that are independent of the GF Corporation. They are usually financed by both employee and employer contributions.
The economic impact of the employee benefit plans is assessed each year. Surpluses or deficits are determined by means of the annual statements of each specific benefit plan, which are based either on Swiss GAAP FER 26 (Swiss benefit plans) or on the accepted methods in each foreign country (foreign plans). An economic benefit is capitalized if it is permitted and intended to use the surplus to reduce the employer contributions. Any employer contribution reserves are also capitalized. An economic obligation is recognized as a liability if the conditions for a provision are met. They are reported under "Employee benefit obligations". Changes in the economic benefit or economic obligation, as well as the contributions incurred for the period, are recognized in "Personnel expenses" in the income statement.
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CHF million |
31.12.2022 |
31.12.2021 |
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Investments in associates |
1 |
2 |
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Non-current loans and receivables |
128 |
80 |
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Securities for the settlement of pension liabilities |
2 |
3 |
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Other securities |
6 |
8 |
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Other financial assets third parties |
136 |
90 |
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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.
Income tax expenses
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2022 |
2021 |
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CHF million |
Total |
Thereof current taxes |
Thereof deferred taxes |
Total |
Thereof current taxes |
Thereof deferred taxes |
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Effective income tax expense reconciliation |
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Profit before taxes |
354 |
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253 |
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Statutory tax rate in % |
14 |
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14 |
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Income tax expense at statutory tax rate |
50 |
48 |
1 |
35 |
37 |
–2 |
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Effect of income taxed at different rates 1 |
28 |
45 |
–17 |
20 |
26 |
–6 |
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Non-tax deductible expenses/tax exempted income |
–5 |
–5 |
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–3 |
–3 |
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Use of unrecognized tax loss carryforwards |
–12 |
–16 |
4 |
–7 |
–8 |
1 |
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Effect of non-recognition of tax losses in current year |
5 |
5 |
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6 |
6 |
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Derecognition of previously capitalized tax loss carryforwards |
2 |
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2 |
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Tax adjustments related to previous periods, net |
1 |
1 |
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–1 |
–1 |
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Non-creditable foreign withholding tax |
6 |
6 |
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4 |
4 |
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Other effects |
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–1 |
1 |
–1 |
–2 |
1 |
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Effective income tax expense |
74 |
83 |
–9 |
53 |
59 |
–6 |
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Effective income tax rate in % |
21 |
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21 |
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1 The GF Corporation operates worldwide and is subject to income tax in many different tax jurisdictions. The effect of income taxed at different rates may vary from year to year due to varying results of the individual GF Corporate Companies and changes in local tax rates.
The table shows the main elements that cause the GF Corporation’s effective tax rate to differ from the statutory tax rate. The statutory tax rate is the ordinary tax rate applicable in the canton of Schaffhausen in Switzerland, where GF Corporation is headquartered. The above reconciliation starts with the statutory tax rate as it provides more meaningful information than a weighted average tax rate.
In December 2021, the OECD published model rules to introduce a global minimum tax of 15% for multinational companies with consolidated sales of more than EUR 750 million. Meanwhile, many jurisdictions have taken action to amend their local tax laws accordingly by 2024. As a result, multinational companies may be subject to additional taxes. Based on current knowledge, the 15% global minimum tax will likely have little or no direct impact on GF.
Accounting principles
Income taxes include current and deferred taxes. 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.
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 necessary to critically assess the probability of future taxable profits that can be offset. This assessment depends on a variety of influencing factors and developments.
Deferred tax assets and liabilities
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2022 |
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2021 |
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CHF million |
Tax assets |
Tax liabilities |
net |
Tax assets |
Tax liabilities |
net |
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Investment properties |
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13 |
–13 |
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20 |
–20 |
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Property, plant, and equipment |
15 |
35 |
–20 |
24 |
40 |
–16 |
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Intangible assets |
7 |
3 |
4 |
8 |
3 |
6 |
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Tax loss carryforwards |
5 |
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5 |
11 |
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11 |
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Inventories |
32 |
14 |
18 |
29 |
12 |
17 |
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Provisions |
9 |
3 |
6 |
10 |
6 |
4 |
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Other interest-bearing liabilities |
1 |
1 |
0 |
1 |
2 |
–1 |
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Other non-interest-bearing liabilities |
25 |
1 |
24 |
21 |
2 |
19 |
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Other balance sheet items |
10 |
3 |
7 |
9 |
2 |
7 |
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Total before offsetting |
104 |
73 |
31 |
112 |
86 |
26 |
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Offsetting |
–34 |
–34 |
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–41 |
–41 |
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Total after offsetting |
70 |
39 |
31 |
71 |
44 |
26 |
As of 31 December 2022, tax loss carryforwards of CHF 21 million (previous year: CHF 46 million) were capitalized, resulting in a deferred tax asset of CHF 5 million (previous year: CHF 11 million).
The unrecognized tax loss carryforwards in 2022 totaling CHF 124 million (previous year: CHF 141 million) have a potential tax relief effect of CHF 28 million (previous year: CHF 34 million), of which CHF 58 million (previous year: CHF 93 million) can be utilized for an indefinite period. CHF 1 million is to expire within one year (previous year: CHF 1 million).
Temporary differences associated with investments in subsidiaries, for which no deferred tax liabilities have been recognized, amounted to CHF 563 million as of 31 December 2022 (previous year: CHF 557 million).
Accounting principles
Deferred tax assets and liabilities are offset within GF Corporate Companies when there is a legally enforceable right to offset current tax assets against current tax liabilities and the deferred taxes related to the same fiscal authority. Deferred tax assets and liabilities are calculated based on the actually expected income tax rates for each GF Corporate Company. 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 GF Corporation and where it is probable that the temporary difference will not be reversed in the foreseeable future.
Related parties include associates, members of the Board of Directors and the Executive Committee, pension funds, and similar institutions.
Transactions with associates
There were no significant transactions with associates in the year under review or in the previous year. Hence, no material receivables or payables were outstanding.
Transactions with members of the Board of Directors and the Executive Committee
Total compensation of the Board of Directors and Executive Committee is broken down as follows:
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CHF 1'000 |
2022 |
2021 |
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Cash compensation |
7’319 |
6’718 |
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Pension funds |
552 |
521 |
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Social security |
634 |
608 |
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Share-based compensation 1 |
3’637 |
3’784 |
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Other compensation |
12 |
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Total compensation |
12’154 |
11’631 |
1 The disclosed value corresponds to the regulation of the Compensation Report.
A total of 392’684 shares (previous year adjusted for share split: 356’540) were held by the Board of Directors, the Executive Committee, as well as parties related to them, corresponding to 0.5% of issued shares (previous year: 0.4%).
No member of the Board of Directors or the Executive Committee or any persons related to them received any fees or other compensation for additional services to GF or its GF Corporate Companies in 2022 or in 2021.
Neither GF nor any GF Corporate Company granted any guarantees, loans, advances, or credit facilities to members of the Board of Directors or the Executive Committee or to any persons related to them in 2022 or 2021.
Significant shareholders
An overview can be found in the Corporate Governance Report (GF share and shareholders).
Transactions with pension funds and similar institutions
The GF Corporation holds current accounts with some of its related pension funds and similar institutions. As of the end of the financial year, it had a liability of CHF 0 million (previous year: CHF 2 million). As in the previous year, the current accounts bear an interest of 1%. Furthermore, contributions of CHF 2 million were made to similar institutions (previous year: CHF 2 million).
The consolidated financial statements were approved and authorized for publication by the Board of Directors on 27 February 2023. They must also be approved at the Annual Shareholders’ Meeting.
There were no events between 31 December 2022 and 27 February 2023 that would require an adjustment to the carrying amounts of assets and liabilities and equity or would need to be disclosed under this heading.