12 Financial instruments and fair value disclosures
12.1 Classes of financial instruments
| Cash and cash equivalents | Other current financial assets | Trade and other receivables | Non-current financial assets | Total assets | Current financial liabilities | Trade and other | Non-current financial liabilities | Total liabilities 2020 |
CHF 1'000 |
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Derivatives not designated as hedging instruments |
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Currency forwards | - | 2,478 | - | - | 2,478 | (694) | - | - | (694) |
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Financial instruments measured at fair value through OCI (FVOCI) |
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Unquoted equity investment | - | - | - | 4,325 | 4,325 | - | - | - | - |
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Financial instruments measured at amortized costs1 |
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Cash and cash equivalents | 128,440 | - | - | - | 128,440 | - | - | - | - |
Time deposits | 20,000 | 320,000 | - | - | 340,000 | - | - | - | - |
Receivables | - | - | 122,911 | - | 122,911 | - | - | - | - |
Rent and other deposits | - | - | 600 | 1,026 | 1,626 | - | - | - | - |
Bank loans | - | - | - | - | - | - | - | (734) | (734) |
Payables and accrued expenses | - | - | - | - | - | - | (88,600) | - | (88,600) |
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Other |
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Lease liabilities | - | - | - | - | - | (10,416) | - | (27,575) | (37,991) |
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Total financial instruments | 148,440 | 322,478 | 123,511 | 5,351 | 599,780 | (11,110) | (88,600) | (28,309) | (128,019) |
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Reconciling items2 | - | - | 11,936 | - | 11,936 | - | (16,981) | - | (16,981) |
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Balance at December 31, 2020 | 148,440 | 322,478 | 135,447 | 5,351 | 611,716 | (11,110) | (105,581) | (28,309) | (145,000) |
- The carrying amount of financial instruments measured at amortized costs is a reasonable approximation of their fair value due to their short-term nature. Bank loans are the only exception due to their long-term nature (fair value of TCHF 722).
- Receivables/payables arising from VAT/other non-income taxes and social security.
| Cash and cash equivalents | Other current financial assets | Trade and other receivables | Non-current financial assets | Total assets 2021 | Current financial liabilities | Trade | Non-current financial liabilities | Total liabilities 2021 |
CHF 1'000 |
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Derivatives not designated as hedging instruments |
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Currency forwards | - | 152 | - | - | 152 | (1’639) | - | (38) | (1’677) |
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Derivatives designated as hedging instruments |
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Currency forwards | - | 319 | - | - | 319 | - | - | - | - |
Deal contingent forward | - | 1’730 | - | - | 1'730 | - | - | - | - |
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Financial instruments measured at fair value through OCI (FVOCI) |
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Unquoted equity investment | - | - | - | 4’388 | 4’388 | - | - | - | - |
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Financial instruments measured at amortized costs1 |
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Cash and cash equivalents | 195’146 | - | - | - | 195’146 | - | - | - | - |
Time deposits | 20’000 | 320’000 | - | - | 340’000 | - | - | - | - |
Receivables | - | - | 110’987 | - | 110’987 | - | - | - | - |
Rent and other deposits | - | - | 533 | 1’081 | 1’614 | - | - | - | - |
Current bank liabilities | - | - | - | - | - | (49) | - | - | (49) |
Bank loans | - | - | - | - | - | - | - | (691) | (691) |
Payables and accrued expenses | - | - | - | - | - | - | (83’283) | - | (83’283) |
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Other |
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Lease liabilities | - | - | - | - | - | (10’816) | - | (23’644) | (34’460) |
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Total financial instruments | 215’146 | 322’201 | 111’520 | 5’469 | 654’336 | (12’504) | (83’283) | (24’373) | (120’160) |
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Reconciling items2 | - | - | 15’848 | - | 15’848 | - | (18’957) | - | (18’957) |
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Balance at June 30, 2021 | 215’146 | 322’201 | 127’368 | 5’469 | 670’184 | (12’504) | (102’240) | (24’373) | (139’117) |
- The carrying amount of financial instruments measured at amortized costs is a reasonable approximation of their fair value due to their short-term nature. Bank loans are the only exception due to their long-term nature (fair value of TCHF 688).
- Receivables/payables arising from VAT/other non-income taxes and social security.
12.2 FAIR VALUE HIERARCHY (LEVEL) AND VALUATION TECHNIQUES USED
Position | Note | Level | Data source | Model |
Currency forwards |
| Level 2 | Financial data vendor | (Forward rate - [spot rate +/- SWAP points]) * amount in |
Deal contingent forward | 12.3 | Level 3 | Financial data vendor plus contractual contingent charge (0.00224) | ([Forward rate + contingent charge] - [spot rate +/- SWAP points]) * amount in foreign currency |
Unquoted equity investment | 12.4 | Level 3 | n/a | Market sales multiples |
Bank loans | 12.1/2 | Level 2 | Financial data vendor | The fair value is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments |
There have been no transfers between the levels in 2020 and 2021.
12.3 HEDGE ACCOUNTING
In connection with the acquisition of Paramit, the Group entered into a deal contingent forward agreement to purchase USD 677 million and into a normal plain vanilla forward to purchase another USD 150 million (total USD 827 million, representing about 91% of the estimated purchase price without contingent consideration). The hedging agreements with an average forward rate of 0.9201 CHF/USD have matured at the day of the closing of the acquisition (after the balance sheet date on August 2, 2021). At this day the purchase price in USD was transferred to the seller and a bridge loan in CHF was granted by a bank to the Group until the final financing structure of the transaction would be ready.
As the targeted transaction was considered as highly probable at June 30, 2021 and all other conditions were met, the Group is applying cash flow hedge accounting. The proportion of the gain or loss on the hedging instrument that is determined to be effective is recognized in other comprehensive income and allocated to the cash flow hedge reserve. Upon the closing of the transaction the amount of the cash flow hedge reserve is added or deducted from the goodwill. Any remaining gain or loss of the hedging instrument is hedge ineffectiveness (mainly the contingent charge of the deal contingent forward) that is recognized immediately in profit or loss. The ineffective part relating to the cash flow hedge amounts to CHF 1.5 million and is included in finance cost.
12.4 UNQUOTED EQUITY INVESTMENT (LEVEL 3)
End of 2020, the Group acquired an unquoted equity instrument for CHF 4.3 million. Total changes in fair value recognized during the period in other comprehensive income amount to CHF 0.1 million. A decrease in the forecasted sales of 10% would adversely impact the fair value by estimated CHF 0.4 million.
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