3 Details on the consolidated balance sheet

3.1 Financial assets and financial liabilities

3.1.1 Fair value of financial instruments

The fair value of other financial instruments measured at amortised cost does not differ significantly from their book value.

3.1.2 Valuation methods of financial instruments

No transfer between levels of the fair value hierarchy took place in 2020 or in the previous period.

Level 1 instruments

If a financial instrument is traded in an active market, its fair value is based on listed market prices. In the fair value hierarchy prescribed in IFRS 13, this type of financial instrument is classified as a level 1 instrument. The fair value of these positions corresponds to the current price (e.g. settlement price or closing price) multiplied by the number of units of the financial instruments held.

Level 2 instruments

If there is no active market, the fair value is determined on the basis of valuation models or other generally accepted valuation methods (primarily option pricing and discounted cash flow models). If all the significant inputs can be observed directly or indirectly in the market, the instrument is classified as a level 2 instrument. The valuation models take account of the relevant parameters such as contract specifications, the market price of the underlying asset, foreign exchange rates, yield curves, default risks and volatility.

Level 3 instruments

If at least one significant input cannot be observed directly or indirectly in the market, the instrument is classified as a level 3 instrument. These instruments include private-equity funds and unlisted equity instruments, as well as the contingent purchase price liability. The fair value of private equity funds is determined based on the last available net asset values, less necessary value adjustments according to own assessment. The fair value of unlisted equity instruments is determined primarily based on currently available financial information. Secondarily, depending on the equity security, different multiples based on currently available financial information are used to verify the valuation. If no multiples are applicable, the net asset value is used. The valuation of the contingent purchase price liability is mainly based on the underlying contractual share purchase terms and conditions.

3.1.3 Level 3 financial instruments

Key assumptions for the valuation of level 3 financial instruments vary from investment to investment. The following table shows the effect on the valuation when these assumptions are changed:

In the reporting period 2019, the last tranches of the contingent purchase price payments in connection with the acquisition StarCapital AG and MARS Asset Management GmbH were due and paid. This led to a loss of CHF 0.1 million, which was recognized in the income statement. The contingent purchase price payment from the acquisition of REALWERK AG in 2020 of CHF 0.1 million is included in the balance sheet item «Other financial liabilities» and represents the remaining purchase price liability owed. The valuation is mainly based on the underlying share purchase agreement provisions.

3.1.4 Derivative financial instruments

Derivatives are used exclusively for economic hedging purposes and not as speculative investments. However, if derivatives do not meet the criteria for hedge accounting, they are classified as «Financial investments» and recognized at fair value through profit or loss for financial reporting purposes.

3.2 Trade and other receivables

3.3 Financial investments

3.4 Other assets

^*) The previous-year period has been adjusted. We refer to the statements on the correction of errors in section 4.2.

3.5 Property and equipment

3.6 Goodwill and other intangible assets

The additions to goodwill in the financial year 2019 stem from the acquisition of the 100% investment in adbodmer AG.

Bellevue Group basically examines the value of the goodwill annually, based on the estimated recoverable amount that can be obtained per each single cash-generating unit, or group of such units (depending on allocation). If events or a change of circumstances indicate a possible impairment, the test is carried out more frequently.

The recoverable amount is determined to be the value-in-use and is calculated using the discounted cash flow method. The projected free cash flows for the respective cash-generating units are estimated based on five-year financial plans. The business plans approved by management serve as the basis for these estimates of projected free cash flows. These cash flows are discounted to present value.

The following key parameters and their single components have been taken into account in the discounted cash flow method:

• Income on the average assets under management and the expected return on assets (management and performance fees);
• Transaction-related income;
• Discount rate.

An impairment test was carried out at the end of December 2020. The discount rate used in these calculations was 10.6% (31.12.2019: between 8.9% and 10.0%) and the assumed growth rate was between 1% and 2% (31.12.2019: between 1% and 2%). A further reduction in the assets under management of StarCapital AG in the first half of 2020 and the resulting expected cash flow surpluses compared to the business plan have led to an adjustment of the estimate for the future earnings achievable by StarCapital AG. As a result, the goodwill for StarCapital AG had to be impaired by CHF 5.3 million as of June 30, 2020. The impairment test as of the end of December 2020 resulted in an additional impairment of goodwill of the CGU StarCapital AG of CHF 2.1 million mainly due to the higher cost of equity used. This amount corresponds to the amount by which the carrying amount exceeds the recoverable amount. Assuming that the used growth rates of expected cash inflows (which depend primarily on the return on average assets under management and expected investment returns) would be assumed to be 20% lower or the used discount rate 10% higher, this could lead to an additional goodwill impairment of CHF 4.0 million or CHF 4.5 million, respectively. The goodwill allocated to the cash-generating unit StarCapital AG amounts to CHF 14.4 million as of December 31, 2020. The remaining goodwill (CHF 29.6 million) is attributable to the cash-generating units Bellevue Asset Management AG and adbodmer AG.

At the time of preparation of the consolidated financial statement, Bellevue Group’s management does not assume that a reasonably possible change in a parameter underlying the impairment test would lead to an additional goodwill impairment.

The other intangible assets are amortized over a period of 5 to 15 years and are included in the impairment test described under «Goodwill» (see above).

As of December 31,.2020, the review of the residual values of the StarCapital AG client base resulted in an additional impairment of CHF 0.4 million (as of June 30, 2020, the review of the residual values of the StarCapital AG/MARS Asset Management GmbH client base resulted in an impairment of CHF 1.7 million). The discount rate used for this purpose was currently between 10.7% and 12.1% (December 31, 2019: 11.5%) and the applied growth rate between 1% and 2% (December 31, 2019: 2%).

3.7 Trade and other payables

3.8 Employee benefit plans

There are pension plans for most of the employees at Bellevue Group. These plans provide benefits in the event of death, disability, retirement or termination of employment. There were no unfunded liabilities due to employee pension plans as at the balance sheet date (previous year: no liabilities either). In Switzerland, pension contributions are paid equally by the employer and the employee. The foundation board is composed of an equal number of employee and employer representatives. According to Swiss law and the pension regulations, foundation boards are obliged to act solely in the interest of the foundation and its beneficiaries (active workforce and recipients of pensions). Hence, the employer cannot single-handedly determine the benefits and the funding; all resolutions have to be agreed on by both sides. The members of the foundation board are responsible for defining the investment strategy, for deciding on amendments to the pension regulations, and in particular for determining the funding of the pension benefits.

In the events of death and disability, pension benefits are based on the insured salary. In the event of old age, they are based on pension assets. At the time of retirement, insured persons can choose between a life annuity, which includes a prospective spouse pension, and a lump sum payment. Apart from retirement benefits, pension benefits also include disability and surviving spouse or partner pensions. Furthermore, insured persons can improve their pension situation up to the regulatory maximum by paying in additional amounts, or withdraw money early to acquire property that they occupy themselves. At the time of termination of an employment contract, the vested benefits will be transferred to the pension plan of the new employer or a vested benefits scheme. This type of benefit can result in pension payments fluctuating considerably from year to year.

When determining the benefits, the minimum requirements of the Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision (OPA) and its implementing provisions must be considered. The LOB defines minimum insured salary and minimum retirement assets. The Federal Council determines the minimum interest on these minimum retirement assets at least every two years. In 2020, it amounts to 1% (previous year: 1%).

Due to the nature of the pension plans and the provisions of the OPA, the employer is exposed to actuarial risks. The risks of death, disability and longevity are largely covered by an insurance policy. The major remaining risks include investment risk, interest risk and the risk of the insurer adjusting the premiums.

All employer and employee contributions are determined by the foundation board. The employer is to bear a minimum of 50% of the required contributions. In the case of underfunding, both employer and employee are entitled to pay in amounts to close the funding gap.

The plan assets allocation as at December 31, 2020, as well as at December 31, 2019, do not include shares of Bellevue Group AG. The foundation board issues investment guidelines for the investment of plan assets. These guidelines include tactical asset allocation and benchmarks for comparing the results with a general investment universe. The plan assets are well diversified. In terms of diversification and security, the Swiss pension plan is subject to the provisions of the OPA. As a rule, bonds receive at least a rating of A.

The foundation board regularly reviews the selected investment strategy as to whether it meets the requirements of the pension plan and whether the risk budget is in line with the demographic structure. Adherence to investment guidelines as well as results achieved by investment advisors are reviewed on a quarterly basis. Furthermore, an external consultancy periodically examines the investment strategy with regard to whether it is effective and appropriate.

Defined-benefit obligations are distributed as follows:

The maturity of the obligation is 19.4 years as at December 31, 2020 (previous year: 20.1 years). The expected employer’s contributions for 2021 are estimated at CHF 1.7 million.

Changes to the present value of a defined-benefit obligation

The most important factors influencing the development of pension obligations are assumed interest rate, salary development, pension index and development of life expectancy.

3.9 Share capital/Conditional capital/Authorized capital

The purpose of the conditional capital (in total) according to Art. 3a of the Articles of Association is as follows:

• a sum of up to CHF 50 000 through the exercise of option rights granted to shareholders;
• a sum of up to CHF 50 000 through the exercise of option rights granted to employees and the member of the Board of Directors.

The subscription rights of shareholders are excluded. After acquisition, the new registered shares are subject to the transfer restrictions pursuant to Art. 5 of the Articles of Association. 

The conditional capital amounts to a maximum of CHF 100 000 as of the balance sheet date, which represents approximately 7.4% of the existing share capital.

No such optional rights had been granted as of the balance sheet date.

At the Annual General Meeting on March 24, 2020, the Board of Directors did not propose any renewal of the authorized capital increase provided for in Art. 3b of the Articles of Association (version of March 20, 2018). The corresponding provision of the Articles of Association was deleted without replacement by means of an amendment to the Articles of Association on May 7, 2020.

3.10 Treasury shares