4 Significant estimates, judgments and errors

4.1 Estimates, assumptions and the exercising of discretion by management

In applying the accounting principles, management must make estimates, assumptions and discretionary decisions that influence the level of reported assets and liabilities, expense and income, as well as the disclosure of contingent assets and liabilities. Bellevue Group is convinced that in all material respects these consolidated financial statements provide a true and fair view of its financial position, its results of operations and its cash flows. Management reviews its estimates and assumptions on an ongoing basis and adjusts them according to new findings and conditions. This may, among other things, have a material impact on the following positions of the consolidated financial statements.

Discontinued operations

On August 20, 2019, Bellevue Group AG and KBL European Private Bankers (new: Quintet Private Bank) signed an agreement on the sale of Bank am Bellevue AG (new: Quintet Private Bank (Switzerland) AG). As Bank am Bellevue AG represented a separate and material line of business of Bellevue Group, it is presented as a discontinued operation. Bellevue Group had to make assumptions and estimates regarding the allocation between continuing and discontinued operations. For details please refer to the notes to the consolidated financial statements, Section 7 «Discontinued operations».

Income taxes

Bellevue Group AG and its subsidiaries are liable for income tax in most related countries. The current tax assets and current tax liabilities reported as at the balance sheet date as well as the resulting current tax expense for the period under review are based on estimates and assumptions and may therefore differ from the amounts determined in the future by the tax authorities.

Provisions

A provision is recorded if, as the result of a past event, Bellevue Group has a current liability as at the balance sheet date that will probably lead to an outflow of funds and if the amount of the liability can be reliably estimated. When determining whether a provision should be recorded and whether the amount is appropriate, best possible estimates and assumptions as at the balance sheet date are applied. These estimates and assumptions may be subject to change according to new findings and conditions.

Level 3 financial instruments (fair value)

Level 3 financial instruments are valued based on the inputs that are not based on observable market data. For details to the valuation methods applied for level 3 financial instruments refer to the notes to the consolidated financial statements on note 3.1.2 «Fair value financial instruments».

For details to the effect of significant changes on the assumptions behind the classification method for level 3 financial instruments refer the notes to the consolidated financial statements on note 3.1.3 «Level 3 financial instruments».

Pension plan

Management sets the actuarial assumptions and determines whether a pension plan surplus can be capitalized as an economic benefit for Bellevue Group. Pension costs are also subject to estimates and assumptions. The management believes that the assumptions and estimates which have been made are appropriate.

Review of goodwill and other intangible assets for impairment

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).

Established that an event or any circumstances cause a reduction in value of the goodwill, examinations will be performed more frequently.

The Group’s approach to determine the key assumptions and related growth expectations is based on management’s knowledge and reasonable expectations of future business, using internal and external market information, planned business initiatives and other reasonable intentions of management. For that purpose, the Group uses historical information by taking into consideration the current and expected market situations.

Changes in key assumptions: deviations of future actual results achieved vs. forecasted/planned key assumptions, as well as future changes of any of the key assumptions based on a future different assessment of the development of relevant markets, and/or the businesses, may occur. Such deviations may result from changes in the market environment and the related profitability, required types and intensity of personnel resources, general and company specific driven personnel cost development and/or changes in the implementation of known or addition of new business initiatives and/or other internal and/or external factors. These changes may cause the value of the business to alter and therefore either increase or reduce the difference between the carrying value in the balance sheet and the unit’s recoverable amount or may even lead to a partial impairment of goodwill.

4.2 Correction of the consolidated financial statements 2019 according to IAS 8

Following the publication of the consolidated financial statements 2019, Bellevue Group AG determined that personnel expenses were overstated due to incorrect accounting accrual in the financial year 2019.

According to IFRS, incorrect postings in the financial statements of a company have to be corrected in the period in which they are detected. Consequently, the comparative periods are to be adjusted (restatement). The facts of the case are described in detail below.

Under IAS 19 «Employee Benefits», compensation costs with a specific service period (service condition) must be spread over the term of the period. This resulted in a cut-off error in the consolidated income statement 2019. The correction will increase net profit after tax in 2019 by CHF 2.6 million to CHF 14.0 million and equally shareholders’ equity by CHF 2.6 million to CHF 198 million. Earnings per share increased from CHF 0.85 to CHF 1.04 in the Annual Report 2019. 

Impact on the consolidated Annual Report 2019:

The correction has no impact on net cash flow from operating activities or net cash flow from investing and financing activities.