In 2010, the Group entered into an OEM agreement with a global diagnostics company. The agreement comprises the development and supply of a dedicated diagnostic instrument. The related customer-specific development costs were capitalized in the position inventories as part of the production costs. The delivery of the instruments, which takes place over a period of more than 10 years, started in October 2014. The customer requests the units with individual purchase orders.
The Group recognizes the corresponding development costs in cost of sales upon fulfillment of the individual purchase orders. The remaining balance of capitalized development costs amounted to CHF 106.0 million at the end of June 2017 (December 31, 2016: CHF 113.1 million).
Further information regarding this critical accounting estimate and judgment can be found in note 2.2.4 of the consolidated financial statements 2016.