Accounting principles

1 Basis for financial accounting

The interim financial reporting was prepared in accordance with the International Financial Reporting Standards (IFRS) and complies with the requirements of IAS 34 (Interim Financial Reporting). The same accounting principles were applied as for the consolidated financial statement per 31 December 2013 with the exception of the changes mentioned below. The unaudited interim financial reporting should be read together with the audited 2013 consolidated financial statement. Management believes that all the necessary adjustments were made to provide a fair presentation of assets, liabilities, results of operations and cash flows.

In preparing the interim financial reporting in conformity with IFRS, management is required to make estimates and assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of information available to the LLB on the balance sheet date and application of judgement are inherent in the formation of estimates. Actual results in the future could differ from such estimates, and the differences could be material to the financial statements. The IFRS contain guidelines, which require the LLB Group to make estimates and assumptions when preparing the interim financial reporting. Goodwill, intangible assets, pension plans and fair value measurements for financial instruments are all areas which leave large scope for estimate judgements. Assumptions and estimates made with them could be material to the financial statement. Explanations regarding this point are shown under note 19, note 36 and note 42 of the 2013 consolidated financial statement.

Following the resolution of the US taxation dispute, the discussions and negotiations regarding the sale of swisspartners Investment Network AG have recommenced. Within the scope of its new strategy which focuses on the core business, the LLB Group still intends to sell swisspartners Investment Network AG. The pre-conditions for the classification of the company’s assets and liabilities as non-current assets held for sale in accordance with IFRS 5 as per 30 June 2014 were not satisfied. Swisspartners Group has again been fully consolidated since 31 December 2013. The assets and liabilities of the company are again reported in the individual balance sheet positions of the LLB Group. The comparison period is not to be adjusted.

Numerous new standards, amendments and interpretations of existing standards were published to become effective for financial years starting on 1 January 2014 or later. The following new or revised IFRS standards or interpretations are of importance to the LLB Group:

  • IAS 36 “Impairment of Assets” – the IASB amended this standard in May 2013 to clarify the definition of the recoverable amount for non-financial assets. Additional fair value details are required for non-financial assets or cash generating units of the recoverable amount minus the costs of sale for which impairment was made or reversed, provided these were determined on the basis of fair value minus the costs of sale. The amendments have no major influence on the LLB Group’s financial statement.
  • IFRIC Interpretation 21 “Levies” – the IASB issued the IFRIC Interpretation 21 in May 2013 and it came into effect on 1 January 2014. The IFRIC provides criteria for the recognition of a liability when it is the result of a levy for which the date and the amount are not known, and is an integral component of IAS 12 Income Taxes. The implementation of the interpretation has no major influence on the LLB Group’s financial statement.
  • IAS 32, “Financial Instruments: Presentation” – in December 2011, the IASB published the amendments to IAS 32 regarding the classification of financial instruments into financial assets and financial liabilities which were to come into effect for the first time on 1 January 2014. The amendments limit the presentation in the financial statement to those agreements where there is a legally enforceable right to set off financial assets with financial liabilities (netting). These guidelines regulate the classification possibilities in normal business transactions as well as in the event of the default, insolvency or bankruptcy of the counterparty. The implementation of the amendments has no major influence on the LLB Group’s financial statement.
  • IAS 39, “Financial Instruments: Recognition and Measurement” – in June 2013, the IASB published the amendments to IAS 39 regarding the novation of derivatives and the continuation of hedging transactions in the financial statement. These came into effect on 1 January 2014. Under certain circumstances, the amendment provides for a simplification in reporting hedge accounting and the continuation of their reporting in the financial statement. This is possible if the novation occurs with a central counterparty because of legal or regulatory requirements. The implementation of the amendments has no major influence on the LLB Group’s financial statement.
  • IFRS 9, “Financial instruments” – the updated IFRS 9, which sets out revised rules for the recognition and measurement of financial instruments, contains application guidelines for financial liabilities and for the accounting of financial instruments. The standard specifies two measurement classifications for financial assets: amortised cost and fair value. IFRS 9 requires that all financial assets are classified according to the business model of the company for the management of financial assets and the contractual cash flow characteristics of the financial assets. The rules set out in IAS 39 regarding the classification and measurement of financial liabilities are retained, including the individual guidelines for application and implementation. On account of the changed credit risk of a company, gains and losses on financial liabilities designated as at fair value through profit and loss are recognised directly in comprehensive income instead of in the income statement. The first date of effectiveness will probably be for financial years starting on 1 January 2018 or later. The effects of these changes on the LLB Group’s financial reporting are currently being analyzed.
  • IFRS 15, “Revenue from Contracts with Customers” – in May 2014 the IASB together with the FASB published new regulations for recognising revenue that apply to all contracts with customers. These new regulations completely replace the existing US-GAAP and IFRS standards. The new regulations specify a recognition of revenue based on the principle that a company should recognise revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. IFRS 15 contains a five-step model to determine the revenue, whereby the type of transaction or the industry in which the company operates are irrelevant. The standard specifies additional disclosures. The standard’s binding first date of effectiveness will be for financial years starting on or after 1 January 2017. The effects of these changes on the LLB Group’s financial reporting are currently being analyzed.

Within the scope of its annual improvement measures, in December 2013, the IASB issued further improvements to nine IFRS standards, which basically all come into effect per 1 January 2015. The LLB is currently investigating their influence on the Group financial statement.

This interim financial reporting was approved by the Board of Directors at its meeting on 21 August 2014 and released for publication.

2 Changes to the scope of consolidation

There were no changes to the scope of consolidation in the first half of 2014.

3 Foreign currency translation

(XLS:)

Reporting date rate

30.06.2014

31.12.2013

1 USD

0.8872

0.8908

1 EUR

1.2144

1.2270

1 GBP

1.5172

1.4738

 

 

 

Average rate

First half 2014

First half 2013

1 USD

0.8889

0.9348

1 EUR

1.2197

1.2258

1 GBP

1.4876

1.4466

4 Risk management

In the course of its operating activity, the LLB Group is exposed to financial risks such as market risk, liquidity and refinancing risk, credit risk and operational risk. The interim financial statement contains no risk information. We therefore refer to the risk management information provided in the 2013 annual report. There were no significant changes in comparison with 31 December 2013.

5 Events after the balance sheet date

There have been no material events after the balance sheet date which would require disclosure or adjustment of the consolidated interim financial statement for the first half of 2014.

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