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 2012 with the exception of the changes mentioned below. The unaudited interim financial reporting should be read together with the audited 2012 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.

The discussions regarding the sale of swisspartners Investment Network AG have been suspended for the time being. Within the scope of its new strategy which focuses on the core business, the LLB Group still intends to sell swisspartners Investment Network AG. Since the pre-conditions for the classification of the companys assets and liabilities as non-current assets held for sale in accordance with IFRS 5 are no longer fully satisfied as per 30 June 2013, swisspartners Group has again been fully consolidated from 30 June 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.

As a result of the announcement of the sale of the subsidiary, Jura Trust AG, as part of the «Focus2015» strategic initiative, and the corresponding sales endeavours, the assets and liabilities of Jura Trust AG are reported in the consolidated balance sheet and the notes to the balance sheet at 30 June 2013 as non-current assets held for sale in accordance with IFRS 5. The assets and liabilities of the company are not reported in the individual balance sheet positions of the LLB Group, but rather are summarised in the balance sheet items «Non-current assets held for sale» and «Liabilities classified as held for sale». The comparison period is not to be adjusted.

Numerous new standards, amendments and interpretations of existing standards were published which are to become effective for financial years starting on 1 January 2013 or later. The following new or revised IFRS standards or interpretations are of importance to the LLB Group:

  • IAS 19 (revised) «Employee Benefits»; the amendments to IAS 19 announced in June 2011 by IASB were implemented by the LLB on 1 January 2013. The amendments improve the accounting requirements for pensions and other forms of post-employment benefits. The revised standard replaces the interest cost on defined benefit obligation and the expected return on plan assets with a net interest cost based on the net defined benefit asset or liability and the discount rate. IAS 19 (revised) eliminates the corridor method, according to which actuarial gains and losses could be amortised gradually. The revised IAS now stipulates the recognition of the complete cash value of the pension obligation after deduction of the plan assets. In the past, the LLB has never utilised the corridor method, but always reported actuarial gains and losses directly in equity or in other comprehensive income. The opening balance sheet per 1 January 2012 and the comparison figures are presented as if IAS 19 (revised) had already been applied in the past. The introduction of IAS 19 (revised) reduces the benefit plan obligation per 1 January 2012 by net CHF 9.8 million, and increases equity by CHF 9.8 million. This is largely attributable to transition costs unrecognised in the past and the risk sharing to be considered under IAS 19 (revised). Personnel expenses for the first half of 2012 were adjusted according to IAS 19 (revised). This resulted in a CHF 0.8 million higher level of personnel expenses than published in the 2012 consolidated interim financial reporting.
    On 1 January 2014, the LLB will introduce a new remuneration model. This encompasses a higher level of variability in salaries as well as the inclusion of the variable salary component in the pension plan. The Foundation Board of the Personnel Pension Foundation of LLB AG approved the new remuneration model in April 2013. The new remuneration model necessitates an increase in the benefit obligation and a one-time personnel expense of CHF 2.9 million, as well as an additional annual expense of CHF 1.4 million. Both of these effects were recognised fully in the income statement per 30 June 2013.
    The closure of LLB (Switzerland) Ltd., as part of the announced «Focus2015» strategy, caused a decrease in the benefit obligation and a one-time reduction in personnel expenses of CHF 3.9 million, which was recognised fully in the income statement per 30 June 2013.
  • IFRS 10 «Consolidated Financial Statements»; this new IFRS standard presented in May 2011 introduced a new definition of control. It was implemented by the LLB from 1 January 2013. It is to be determined according to the new control definition when one entity should consolidate another. An investor controls a company (investee) when the investor is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The standard also contains guidance in cases where it is difficult to determine control. In October 2012, the IASB published an amendment to IFRS 10, which contains an exception to consolidation in the case of certain investment companies. The LLB does not conform to the definition of an investment company, therefore these changes have no effect on the LLBs consolidated financial statement. Based on the control concept defined in IFRS 10, the LLB does not have to consolidate any of its participations in any way differently than previously. IFRS 10 has no effect on the LLBs consolidated interim financial reporting.
  • IFRS 11 «Joint Arrangements»; the IASB published this standard in May 2011, and it was implemented by the LLB on 1 January 2013, the first effective date. The new standard has no effect on the LLBs consolidated interim financial reporting.
  • IFRS 13 «Fair Value Measurement»; the IFRS standard was published in May 2011 by the IASB and was implemented by the LLB from 1 January 2013. IFRS 13 defines a single source of guidance for all fair value measurements under IFRS. The fair value measurement is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard explicitly states that the fair value measurement represents a market-based and not a specific company valuation. In addition, IFRS 13 specifies new disclosure obligations and extended existing disclosure requirements, which are described in note 15 «Fair Value Measurement» in this consolidated interim financial reporting. The implementation of IFRS 13 did not cause any change in equity and had no effect on the LLBs income statement or balance sheet per 30 June 2013.
  • IFRS 9, «Financial Instruments» (for financial years beginning on 1 January 2015); 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 effects of these changes on the LLBs financial reporting are currently being analyzed.
  • IAS 1, «Presentation of Financial Statements»; the IASB published this revised standard in June 2011 and it was implemented by the LLB on 1 January 2013, the first effective date. In essence, the revised standard specifies that the items in other comprehensive income must be divided into two groups. Items that could be reclassified (or «recycled») to profit and loss at a future date, and items that could not be reclassified to profit and loss at a future date. The presentation of other comprehensive income was adjusted accordingly. The amendment merely affects the presentation of other comprehensive income, but has no influence on the consolidated interim financial reporting of the LLB Group.
  • Within the scope of its annual improvement measures, in May 2012 the IASB issued six amendments to five IFRS standards. The LLB implemented all these amendments on 1 January 2013. They had no major influence on the consolidated interim financial reporting.

2 Changes to the scope of consolidation

The Future Foundation of Liechtensteinische Landesbank AG with its registered office in Vaduz, Liechtenstein, was fully consolidated in the LLB Group for the first time with effect from 1 January 2013. No consolidation was carried out up to 31 December 2012 on account of the negligibleness from the perspective of the LLB Group. Consulting Partners Ltd. with registered office in Tortola, BVI and Quodatis AG with registered office in Triesen, Liechtenstein, both wholly-owned subsidiaries of the fully consolidated swisspartners Investment Network AG with registered office in Zurich, Switzerland, were liquidated and were eliminated from the scope of consolidation from 30 June 2013.

3 Foreign currency translation

(XLS:)

Reporting date rate

30.06.2013

31.12.2012

30.06.2012

1 USD

0.946

0.913

0.949

1 EUR

1.231

1.207

1.201

1 GBP

1.437

1.484

1.488

 

 

 

 

Average rate

First half
2013

Second half
2012

First half
2012

1 USD

0.935

0.942

0.928

1 EUR

1.226

1.204

1.205

1 GBP

1.447

1.503

1.464

4 Risk management

In the course of its operative 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 management information. We therefore refer to the risk management information provided in the 2012 annual report. There were no significant changes as per 31 December 2012.

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 financial statement for the first half of 2013.

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