2 Basis of preparation and significant accounting policies
2.1 Basis of preparation
These unaudited financial statements are the interim condensed consolidated financial statements of Tecan Group Ltd. and its subsidiaries (together referred to as the ‘Group’) for the six-month period ending June 30, 2019. The financial statements are prepared in accordance with International Accounting Standard (IAS) 34 ‘Interim Financial Reporting’ and should be read in conjunction with the consolidated financial statements 2018 as they provide an update of previously reported information. The interim condensed consolidated financial statements were authorized for issue on August 8, 2019.
The preparation of these interim condensed consolidated financial statements requires management to make assumptions and estimates that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of these interim condensed consolidated financial statements. If in the future such assumptions and estimates deviate from the actual circumstances, the original assumptions and estimates will be modified as appropriate in the period in which the circumstances change.
The Group operates in industries where significant seasonal or cyclical variations in total sales are not experienced during the financial year.
Income tax expense is recognized based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Switzerland is implementing the corporate tax reform on federal level, which becomes effective as from January 1, 2020. In addition, in the Canton of Zurich the tax laws are in the process of being adjusted as well with a public vote in fall in order to take account of and compensate for the changes on federal level. The consequences of the Swiss tax reform on the Group’s situation are not reflected in these interim financial statements because the cantonal tax law change is not yet substantively enacted.
2.2 Introduction of new and revised/amended accounting standards and interpretations
The accounting policies used in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the consolidated financial statements 2018, except for the adoption of the following new or revised/amended standards and interpretations, effective as from January 1, 2019:
Standard/interpretation1 |
IAS 19 amended ‘Employee benefits’ – Curtailment or Settlement |
IAS 28 amended ‘Investments in Associates and Joint Ventures’ – Long-term Interests in Associates and Joint Ventures |
IFRS 9 amended ‘Financial Instruments’ – Prepayment Features with Negative Compensation |
IFRS 16 ‘Leases’ |
IFRIC 23 ‘Uncertainty over Income Tax Treatments’ |
Annual Improvements to IFRSs 2015–2017 |
- IAS = International Accounting Standards, IFRS = International Financial Reporting Standards, IFRIC = Interpretations as by the IFRS Interpretations Committee (formerly International Financial Reporting Interpretations Committee)
The impact of these changes on the consolidated financial statements is disclosed below:
2.2.1 . IFRS 16 'Leases'
a) Impact of adopting the new standard
IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
The Group has adopted IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings at January 1, 2019. Accordingly, the comparative information presented for 2018 has not been restated – i.e. it is presented, as previously reported, under IAS 17 ‘Leases’ and related interpretations. The details of changes in accounting policies are disclosed below.
| 31.12.2018 Disclosed in note 27.2 | 01.01.2019 Recognized in |
CHF 1,000 |
|
|
Total operating lease commitments disclosed under IAS 17 | 32,686 | 32,686 |
|
|
|
Explanation of difference between disclosed and recognized: |
|
|
Discounting using the incremental borrowing rate at January 1, 2019 |
| (1,655) |
Less recognition exemption for short-term leases |
| (26) |
Adjustments as a result of a different treatment of extension |
| 17,622 |
|
|
|
Total lease liabilities recognized according to IFRS 16 |
| 48,627 |
|
|
|
Thereof included in position: |
|
|
Current financial liabilities |
| 9,496 |
Non-current financial liabilities |
| 39,130 |
|
|
|
Right-of-use assets |
|
|
Property |
| 45,313 |
Office equipment |
| 61 |
Motor vehicles |
| 3,253 |
|
|
|
Total right-of-use assets recognized according to IFRS 16 |
| 48,627 |
At the initial application date of IFRS 16 the lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 1.1%. The associated right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
- the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’.
b) New accounting policies
Accounting policies applied for leases after the initial application of IFRS 16:
Accounting element | Accounting policy applied |
Commencement date of the lease | The Group recognizes a right-of-use asset and a lease liability at the date the underlying asset is available for use (lease commencement date). |
Lease term, extension and termination options | The Group determines the lease term as the non-cancellable term of the lease, together |
Right-of-use assets | Right-of-use assets are initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of the lease liability. The cost of right-of-use assets includes the amount of lease liabilities recognized, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs incurred, and restoration costs.
Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. |
Lease liabilities | At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of the lease payments (excluding any non-lease components) to be made over the lease term. The lease payments include fixed payments less any incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. |
Discount rate | In calculating the present value of the lease liability the Group is using the interest rate implicit in the lease or, if that rate cannot be determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. |
Short-term leases | The Group applies the short-term lease recognition exemption to its short-term leases of property. These leases have a lease term of 12 months or less from the commencement date and do not contain a purchase option. Lease payments on short-term leases are recognized as expense on a straight-line basis over the lease term. |
c) Amounts recognized in the balance sheet and profit or loss
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:
| Right-of-use assets | Lease liabilities | |||
| Property | Office equipment | Motor vehicles | Total |
|
CHF 1,000 |
|
|
|
|
|
Balance at January 1, 2019 | 45,313 | 61 | 3,253 | 48,627 | (48,627) |
Acquisition through business combination | 2,961 | – | – | 2,961 | (2,961) |
Additions | 43 | – | 300 | 343 | (343) |
Depreciation | (4,281) | (13) | (854) | (5,148) | – |
Interest expense (presented in financial result) | – | – | – | – | (299) |
Payments to lessors | – | – | – | – | 5,159 |
Translation differences | (157) | – | (20) | (177) | 181 |
|
|
|
|
|
|
Balance at June 30, 2019 | 43,879 | 48 | 2,679 | 46,606 | (46,890) |
2.2.2 Other changes
The adoption of the amended standards and the new interpretation did not result in substantial changes to the Group’s accounting policies.
2.3 New standards and interpretations not yet applied
The following new and revised/amended standards and interpretations have been issued, but are not yet effective and are not applied early in these interim condensed consolidated financial statements:
Standard/interpretation1 | Effective date |
Conceptual Framework for Financial Reporting | Reporting year 2020 |
IAS 1 ‘Presentation of Financial Statements’ amended and IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ amended – Definition of Material | Reporting year 2020 |
IFRS 3 ‘Business Combinations’ – Definition of a Business | Reporting year 2020 |
IFRS 10 amended ‘Consolidated Financial Statements’ and IAS 28 amended ‘Investments in Associates and Joint Ventures’ – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture | To be defined |
- IAS = International Accounting Standards, IFRS = International Financial Reporting Standards, IFRIC = Interpretations as by the IFRS Interpretations Committee (formerly International Financial Reporting Interpretations Committee)
The changes, individually and in the aggregate, are not expected to have a significant impact on the balance sheet, results of operations and cash flows of the Group upon adoption.
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