Integrated Annual Report 2015
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Notes to the Consolidated Financial Statements

1. Basic information and principles of the report

2. Changes in Group structure

3. Summary of significant accounting policies

4. Risk assessment and management

5. Management of capital

6. Trade accounts receivable

7. Other current assets and current financial assets

8. Inventories

9. Property, plant and equipment

10. Other non-current assets and non-current financial assets

11. Goodwill and intangible assets

12. Short-term debt

13. Other current liabilities and provisions

14. Long-term debt

15. Financial instruments

Derivative financial instruments

Where required, the Group hedges foreign currency exchange rate and interest rate risks using derivative financial instruments according to the treasury policy. This policy and the corresponding accounting policies for the Group’s derivative financial instruments are disclosed in Notes 3 and 4. As of December 31, 2015 and 2014, the following derivative financial instruments were outstanding.

a) Contingent FX Forward Transactions

The following instruments were used to hedge foreign exchange rate risks arising from the acquisition of the Sanitec Group (purchase price hedging):

2014 Maturity Strike price Contract amount buy Contractamount sell Fair value 31.12. Calculation method
      MSEK MCHF/MEUR MCHF  
SEK buy/CHF sell 31.08.2015 7.3560 3'900 -530.2 -33.7 Mark-to-Market
SEK buy/EUR sell 31.08.2015 8.9263 4'830 -541.1 -34.9 Mark-to-Market

These two instruments were released as of February 10, 2015 on conclusion of the Sanitec acquisition.

These instruments were designated as a cash flow hedge according to IAS 39.86 et seq. The change in fair value is recognized in the Consolidated Statements of Comprehensive Income.

b) Interest rate swaps

The following instruments were used to hedge interest rate risks arising from the financing of the Sanitec Group acquisition (fixation of the interest rate up to the point of bond take-out):

2014 Trade date Effective date Termination date Notional amount Fixed rate (payer Geberit) Floating rate (receiver Geberit) Fair value 31.12. Calculation method
        MCHF/MEUR % % MCHF  
Interest rate swap CHF 20.11.2014 29.01.2015 29.01.2019 150 0.1020 6 M CHF-LIBOR -0.8 DCF1
Interest rate swap EUR 20.11.2014 29.01.2015 29.01.2021 250 0.5622 6 M EUR-EURIBOR -2.1 DCF1

When the bonds were issued, these instruments were released as planned as of March 19, 2015 (interest rate swap EUR) and March 20, 2015 (interest rate swap CHF) or, as appropriate, recognised as liabilities. Instruments are released in the income statement based on the terms of the underlying bonds.

These instruments were designated as a cash flow hedge according to IAS 39.86 et seq. The change in fair value is recognized in the Consolidated Statements of Comprehensive Income.

c) Cross Currency Interest Rate Hedges

The following instrument was used to hedge foreign exchange rate risks arising from the intercompany financing of subsidiaries:

2015 Maturity Strike price Contract amount buy Contract amount sell Fair value 31.12. Interest rate % Interest rate % Calculation method
      MCHF MUSD MCHF CHF USD  
CHF buy/USD sell 18.12.2016 1.03345 12.4 -12.0 0.4 0.00 2.22 DCF1

The cross currency interest rate swap (CHF buy/USD sell) for MUSD 12.0 was not designated as a cash flow hedge according to IAS 39.86 et seq. The change in fair value of the instrument is recognized directly in the financial result, net.

2014 Maturity Strike price Contract amount buy Contract amount sell Fair value 31.12. Interest rate % Interest rate % Calculation method
1 Discounted Cash Flow
      MCHF MUSD MCHF CHF USD  
CHF buy/USD sell 18.12.2015 1.03345 17.6 -17.0 0.8 0.00 0.80 DCF1

The cross currency interest rate swap (CHF buy/USD sell) for MUSD 17.0 was not designated as a cash flow hedge according to IAS 39.86 et seq. The change in fair value of the instrument is recognized directly in financial result, net.

d) Forward foreign exchange contracts and foreign exchange options

  Contract values Fair value 31.12.   Calculation method
2015 MCZK MEUR MGBP MPLN MDKK MCHF    
Foreign exchange contracts -5.0 -10.0 0.0 -2.0 0.0 0.1   Mark-to-Market
                 
         
2014 MCZK MEUR MGBP MPLN MDKK MCHF    
Foreign exchange contracts -7.6 0.0 -1.2 0.0 -3.0 0.0   Mark-to-Market

The change in fair value of the instruments is booked in financial result, net.

Measurement of financial instruments by categories according to IAS 39

Based on the relevant balance sheet item of financial instruments, the following table shows an allocation of the balance sheet items to the classification by categories according to IAS 39. In addition, a fair value measurement hierarchy was introduced for assets and liabilities that are measured at fair value. Level 1 contains all financial instruments with quoted prices in active markets. Level 2 contains all financial instruments with inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 contains all financial instruments with inputs for determining the assets and liabilities that are not based on observable market data.

  Carrying amount as of 31.12.2015 Loans and receivables Financial assets at fair value Fair value measurement hierarchy
  MCHF MCHF MCHF  
Financial assets        
Cash and cash equivalents 459.6 459.6 0.0  
Trade accounts receivable 130.6 130.6 0.0  
Other current assets 90.2 90.2 0.0  
Other non-current assets 5.2 5.0 0.2 Level 2
Derivative financial instruments 0.5 0.0 0.5 Level 2
Total 686.1 685.4 0.7  

  Carrying amount as of 31.12.2015 Financial liabilities at amortized cost Financial liabilities at fair value Fair value measurement hierarchy
  MCHF MCHF MCHF  
Financial liabilities        
Short-term debt 3.7 3.7 0.0  
Trade accounts payable 105.5 105.5 0.0  
Bonds 831.4 831.4 0.0  
Syndicated bank loan 295.7 295.7 0.0  
Other financial liabilities 8.4 8.4 0.0  
Derivative financial instruments 0.0 0.0 0.0  
Total 1,244.7 1,244.7 0.0  

  Carrying amount as of 31.12.2014 Loans and receivables Financial assets at fair value Fair value measurement hierarchy
  MCHF MCHF MCHF  
Financial assets        
Cash and cash equivalents 749.7 749.7 0.0  
Trade accounts receivable 125.3 125.3 0.0  
Other current assets 55.1 55.1 0.0  
Other non-current assets 6.2 5.9 0.3 Level 2
Derivative financial instruments 0.8 0.0 0.8 Level 2
Total 937.1 936.0 1.1  

  Carrying amount as of 31.12.2014 Financial liabilities at amortized cost Financial liabilities at fair value Fair value measurement hierarchy
  MCHF MCHF MCHF  
Financial liabilities        
Short-term debt 3.9 3.9 0.0  
Trade accounts payable 62.3 62.3 0.0  
Other financial liabilities 6.6 6.6 0.0  
Derivative financial instruments 71.5 0.0 71.5 Level 2
Total 144.3 72.8 71.5  

Fair value measurement hierarchy:

Level 1: quoted prices in active markets for identical assets
Level 2: observable prices, either directly or indirectly
Level 3: input factors that are not based on observable market data

Maturity analysis of financial instruments

The following table shows the carrying amount of all contractually defined future (not discounted) interest and amortization payments of derivative and non-derivative financial instruments as of the balance sheet date:

  Carrying amount   Maturity
  31.12.2015   2016 2017 2018 2019 2020 and later
  MCHF   MCHF MCHF MCHF MCHF MCHF
Short-term debt 3.7   3.9 0.0 0.0 0.0 0.0
Trade accounts payable 105.5   105.5 0.0 0.0 0.0 0.0
Bonds 831.4   4.2 4.2 4.2 154.2 700.2
Syndicated bank loan (term loan facility) 295.7   2.2 2.2 297.8 0.0 0.0
Other financial liabilities 8.4   0.5 2.7 2.1 1.7 3.1
Total non-derivative financial liabilities 1,244.7   116.3 9.1 304.1 155.9 703.3
               
Derivative financial liabilities 0.0   0.0 0.0 0.0 0.0 0.0
Derivative financial assets -0.5   23.9 0.0 0.0 0.0 0.0
Total derivative financial instruments -0.5   23.9 0.0 0.0 0.0 0.0
               
Total 1,244.2   140.2 9.1 304.1 155.9 703.3

  Carrying amount   Maturity
  31.12.2014   2015 2016 2017 2018 2019 and later
  MCHF   MCHF MCHF MCHF MCHF MCHF
Short-term debt 3.9   4.1 0.0 0.0 0.0 0.0
Trade accounts payable 62.3   62.3 0.0 0.0 0.0 0.0
Other financial liabilities 6.6   0.4 2.6 2.1 1.3 1.5
Total non-derivative financial liabilities 72.8   66.8 2.6 2.1 1.3 1.5
               
Derivative financial liabilities 71.5   1,183.7 0.0 0.0 0.0 0.0
Derivative financial assets -0.8   19.7 0.0 0.0 0.0 0.0
Total derivative financial instruments 70.7   1,203.4 0.0 0.0 0.0 0.0
               
Total 143.5   1,270.2 2.6 2.1 1.3 1.5

16. Retirement benefit plans

17. Participation plans

18. Deferred tax assets and liabilities

19. Other non-current liabilities and provisions

20. Contingencies

21. Capital stock and treasury shares

22. Earnings per share

23. Other operating expenses, net

24. Financial result, net

25. Income tax expenses

26. Operative Leasing

27. Research and development cost

28. Cashflow figures

29. Segment reporting

30. Related party transactions

31. Foreign exchange rates

32. Subsequent events

33. Group companies as of December 31, 2015