Annual Report 2021

SoftwareONE Holding AG’s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

Basis of presentation

New and amended standards and interpretations

As at 1 January 2021, the following amendments to IFRS entered into force:

• IFRS 9/IAS 39/IFRS 7/IFRS 4/IFRS 16: Interest Rate Benchmark Reform, Phase 2
• IFRS 16: Leases: Leases: COVID-19 Related Rent Concessions beyond 30 June 2021 – early adopted by SoftwareONE

These amendments did not have a significant effect on the group’s consolidated financial statements. SoftwareONE has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

New standards and interpretations not yet adopted

The IASB has issued a number of potentially relevant changes to IFRS that will be effective in future accounting periods. New standards that are expected to have only a minor impact on the group and the effective date are listed below:

• IFRS 3: Business Combinations: References to the Conceptual Framework – adoption by 1 January 2022
• IAS 37: Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts, Costs of Fulfilling a Contract – adoption by 1 January 2022
• IAS 16: Property, Plant and Equipment: Proceeds before Intended Use – adoption by 1 January 2022
• Annual Improvements Project 2018-2020: Changes to IFRS 1, IFRS 9, IFRS 16, IAS 41 – adoption by 1 January 2022
• IAS 1: Presentation of Financial Statements: Classifications of Liabilities as Current or Non-Current including Deferral of Effective Date – adoption by 1 January 2023
• IAS 1: Presentation of Financial Statements: Disclosure of Accounting Policies – adoption by 1 January 2023
• IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates – adoption by 1 January 2023
• IAS 12: Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction – adoption by 1 January 2023

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.

Change in accounting policies

When another party is involved in providing goods or services to a customer, the group determines whether the nature of its promise is a performance obligation to provide the specified good or service itself (the group is a principal) or to arrange for another party to provide that good or service (the group acts as an agent). Principal vs. agent assessments depend on the specific facts and circumstances and can be very complex and judgmental. As an approved value-added software reseller the group provides consulting services to end customers and advises them on the selection of the suitable end-to-end software or cloud technology solutions (indirect business). In the past SoftwareONE recognized revenue from contracts in this indirect business as a principal on a gross basis as the software license was considered an input into a combined service controlled by the group. Consequently, the transaction price received from the customer was recognized as ‘Revenue from Software & Cloud’ and the corresponding expense as ‘Cost of software purchased’.

In November 2021, the IFRS Interpretations Committee (IFRS IC) discussed a staff paper and subsequently issued a tentative agenda decision in December 2021 on ‘Principal versus Agent: Software Reseller (IFRS 15)’. In the fact pattern submitted to the IFRS IC the software reseller provides pre-sales advice under a distribution agreement between the software manufacturer and the reseller to the end customer prior to the end customer purchasing standard software licenses. The IFRS IC clarified that such pre-sales advice is not an implicit promise in a contract with a customer. At the time of entering into a contract with the customer, the reseller has already provided the advice. There is no further advice to be provided by the reseller and the advice already provided will not be transferred to the customer after contract inception. Accordingly, the IFRS IC tentatively concluded that, in the fact pattern described in the request, the promised goods in the reseller’s contract with the customer are the standard software licenses. Consequently, the software licenses are the only promised goods in the contract and subject to the assessment whether the software reseller is principal or agent in this transaction.

The IFRS IC has only issued a tentative agenda decision and the wording of a final agenda decision may change as a result of feedback received following due process. The staff’s analysis regarding the identification of the specified goods or services was supported by the IFRS IC and confirmed in its tentative agenda decision. In view of these clarifications, management decided to reassess whether the group acts as a principal or an agent for transactions in the indirect business based on a control assessment of the standard software license as the promised goods rather than in combination with an implied promise of providing a service. Management concluded that SoftwareONE does not control the software licenses from the third-party software providers before they are transferred to the customer and therefore acts as an agent for transactions in the indirect business. Consequently, the group has revised its accounting policy for the indirect business. With respect to the direct business there is no change in accounting as these transactions have already been reported on a net basis. For more information on revenue recognition in the indirect and direct business, refer to the revised revenue recognition policy.

SoftwareONE is still assessing whether there are any other potential effects of the clarification by the IFRS IC on its revenue contracts. Given that the IFRS IC has not yet finalized the agenda decision, there may be further changes. In accordance with the IFRS Foundation’s Due Process Handbook an entity is allowed sufficient time to implement any necessary changes following an IFRS IC agenda decision.

As an agent, SoftwareONE recognizes revenue in the net amount that the group is entitled to retain in return for its agent services and end customer invoicing to the software provider, ie, the difference between the consideration received from the customer and cost of software purchased.

For further details on the principal vs. agent assessment, please refer to the section 5.2 Significant judgments.

The comparative period 2020, in which SoftwareONE reported revenue from Software & Cloud (indirect business only) as a principal and therefore as a gross amount in the consolidated income statement, is adjusted. The result of the change in accounting policies for the comparative period is shown in the following table:

Consolidation

Subsidiaries

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated in full.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method of accounting. The cost of a business combination is equal to the fair values at the date of acquisition of assets given, liabilities incurred or assumed, and equity instruments issued by SoftwareONE group, in exchange for control over the acquired company. Any difference between the consideration transferred in the business combination and the net fair value of the identifiable assets, liabilities and contingent liabilities so recognized is treated as goodwill. Goodwill is not amortized but is assessed for impairment annually. Contingent considerations to selling shareholders who become employees and for which payments are automatically forfeited if employment terminates, are not part of the consideration transferred and are accounted as remuneration. Acquisition-related costs are expensed. For each business combination, the group recognizes the non-controlling interests in the acquiree at the non-controlling interests’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets.

If a business combination is achieved in stages (control obtained over an associate or joint venture), the previously held equity interest in an associate or joint venture is remeasured to its acquisition-date fair value and any resulting gain or loss is recognized in the finance result in the income statement.

Non-controlling interests

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder’s share of changes in equity since the date of the combination.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Swiss francs (CHF), which is the group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured.

Monetary assets and liabilities of group companies which are denominated in foreign currencies are translated using closing exchange rates. Exchange rate differences are recorded as income or expense. Non-monetary assets and liabilities are translated at historical exchange rates. Translation differences on non-monetary financial assets and liabilities such as equity securities held at fair value through profit or loss are recognized in the income statement as part of the fair value gain or loss.

Foreign currency translation

When translating foreign currency financial statements into Swiss francs, year-end exchange rates are applied to assets and liabilities, while average rates for the period are applied to income statement accounts. The resulting exchange differences are recognized in other comprehensive income.

Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at closing rate. The resulting exchange differences are recognized in other comprehensive income (OCI).

The following exchange rates were used:

Financial assets

Initial recognition and measurement

The group classifies its financial assets at initial recognition in the following categories: subsequently measured at amortized cost, fair value through OCI and fair value through profit or loss. The classification depends on the financial asset’s contractual cash flow characteristics and the group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the group has applied the practical expedient, the group initially measures a financial asset at its fair value plus transaction costs in the case of a financial asset not at fair value through profit or loss. Trade receivables that do not contain a significant financing component or for which the group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is performed at an instrument level.

SoftwareONE’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets or both.

Financial assets are classified as current if payments are due within one year or less. If not, they are presented as non-current receivables.

Subsequent measurement

For purposes of subsequent measurement, SoftwareONE has financial assets at amortized cost (debt instruments), financial assets at fair value through profit or loss and derivatives designated as hedging instruments.

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in the income statement when the asset is derecognized, modified or impaired.

The group’s financial assets at amortized cost comprise trade and other receivables, loans and cash and cash equivalents.

Cash and cash equivalents

The position includes cash on hand, bank accounts and short-term bank deposits with original maturities of three months or less.

Trade receivables

Trade receivables are initially recorded at a transaction price determined in accordance with IFRS 15 less impairments.

Financial assets

The group has listed equity instruments presented as short-term financial assets which are subsequently measured at fair value through profit or loss, as it had not irrevocably elected to classify those at fair value through OCI at initial recognition. Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognized in the income statement.

Derecognition

The group derecognizes financial assets when:

• the rights to receive cash flows from the asset have expired; or
• the group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third-party under a ‘pass-through’ arrangement; and either (a) the group has transferred substantially all the risks and rewards of the asset, or (b) the group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

Receivables subject to factoring arrangements may be derecognized on sale and these assets are not held to collect contractual cash flows and would be measured at fair value through profit or loss. However, due to their short-term nature, the difference between transaction price and fair value is not considered to be material. Where the factored receivables continue to be recognized in the balance sheet, they are treated as held to collect contractual cash flows and measured at amortized cost.

Impairment of financial assets

The group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include those from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables and contract assets, the group applies a simplified approach in calculating ECLs. Therefore, the group does not track changes in credit risk but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The group has established a provision matrix that is based on its historical credit loss experience and SoftwareONE’s business knowledge, adjusted for forward-looking factors specific to the debtors and the economic environment.

Derivative financial instruments and hedge accounting

The group reviews the currency exposure regularly and covers its risks in two ways:

• The group hedges the net exposure from foreign currency balance sheet positions with forward contracts. Such contracts, however, are not accounted for using hedge accounting.
• Highly probable future transactions are hedged with forward transactions (sales and purchase). These contracts are designated as cash flow hedges. The transactions are expected to affect profit and loss within the next 36 months. At inception of a hedge relationship, the group designates and documents the hedge relationship to apply hedge accounting. The hedge relationship includes the hedging instrument, the hedged item and the nature of the risk being hedged. The hedges are expected to be highly effective.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value through profit or loss except for the effective portion of cash flow hedges, which is recognized in OCI and later reclassified to the income statement when the hedged item affects profit or loss. The ineffective portion is recognized immediately in the income statement.

In case of a positive value, the derivative is recognized as an asset and in case of a negative value, as a liability (classified as non-current when the remaining maturity of the hedged item is more than 12 months and as current when the remaining maturity of the hedged item is less than 12 months).

Tangible assets

Tangible assets are stated at historical cost less depreciation and impairments. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Repair and maintenance costs are recognized in the income statement for the period in which they are incurred.

Depreciation is calculated using the straight-line method over the expected useful life as follows:

• Land is not depreciated. Buildings: max. 33 years
• Furniture, fittings and equipment: max. 5 years
• Leasehold improvements: max. 10 years or shorter duration lease contract
• Vehicles: max. 5 years
• IT equipment: max. 3 years
• Assets under construction: no depreciation

Intangible assets

Purchased intangible assets such as software and customer relationships are measured at cost less accumulated amortization (applying the straight-line method) and any impairment. The useful life is as follows:

• Software: 3–10 years
• Acquired customer relationships: max. 10 years
• Other intangible assets: 3–10 years

Internally generated intangible assets are capitalized only if the identifiable asset is commercially and technically feasible, can be completed, its costs can be measured reliably and will generate probable future economic benefits. In addition to the internal costs (including all attributable direct costs), total costs also include externally contracted development work. Such capitalized intangibles are recognized at cost less accumulated amortization over a useful life of three to 10 years. In-process capitalized development costs are tested annually for impairment.

Acquired customer relationships are capitalized and amortized over their useful lives. They are assessed for impairment if events or changes in circumstances indicate that their value may be impaired. If the reason for a previously recognized impairment loss no longer applies, the impairment loss is reversed to the recoverable amount.

Impairment test of goodwill and intangibles with indefinite useful life

With regard to impairment testing of goodwill and other intangible assets deemed to have indefinite lives, the group determines the higher of value in use and fair value less costs of disposal of the respective cash generating units to which goodwill and intangibles have been allocated. The calculation of value in use is based on the current budget and business plan approved by the Board of Directors and the expectations regarding the future development of the respective markets, market shares and profitability. The planning period covers five years. Assumptions are made for the subsequent years taking into account macroeconomic trends and historical information adjusted for current developments.

The impairment test is performed at least once a year and additionally when there are indications of impairment in the cash-generating unit. Impairment losses for goodwill are never reversed.

Financial liabilities

Initial recognition and measurement

SoftwareONE classifies financial liabilities at initial recognition as financial liabilities at fair value through profit or loss, financial liabilities subsequently measured at amortized cost or as derivatives designated as hedging instruments in an effective hedge as appropriate.

All financial liabilities are recognized initially at fair value, and in the case of instruments, not subsequently measured at fair value through profit or loss net of directly attributable transaction costs.

The group’s financial liabilities include trade and other payables, accrued expenses, contingent consideration liabilities and other financial liabilities including bank overdrafts and derivative financial instruments.

Subsequent measurement

Contingent consideration liabilities are subsequently measured at fair value through profit or loss.

Derivatives are subsequently measured at fair value with fair value changes in the income statement, except for the effective portion of cash flow hedges that is initially recognized in other comprehensive income.

All other financial liabilities are subsequently measured at amortized cost using the effective interest method.

Trade payables and financial liabilities are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement except to the extent that it relates to items recognized in OCI or directly in equity. In this case, tax is also recognized in OCI or directly in equity respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Periodically, management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognized on deductible temporary differences arising from investments in subsidiaries. They are only recognized to the extent that it is probable that the temporary difference will reverse in the future and there needs to be a sufficient taxable profit available against which the temporary difference can be utilized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Employee benefits

The group operates various post-employment schemes including both defined benefit and defined contribution pension plans.

Defined contribution plans

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognized as employee benefit expenses when they are due. Prepaid contributions are recognized as an asset.

Defined benefit plans

A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Actuarial gains or losses are recognized in OCI. Service costs are presented in personnel expenses. Interest costs and interest on plan assets are netted in finance costs.

Other employee benefits

Obligations to employees not paid at the balance sheet date, such as bonuses, holiday entitlements or compensations are presented as accrued expenses.

Contingent consideration arrangements related to business acquisitions in which payments are contingent on continued employment and thus compensation for future service are recognized as remuneration and accrued amounts presented as earn-out provisions.

Share-based payments

Certain management members and senior employees participate in equity compensation plans. The fair value of all equity-settled compensation awards granted to employees is determined at the grant date and recorded as an expense over the vesting period. The expense for equity compensation awards is part of personnel expense and a corresponding increase in equity is recorded.

Provisions

Provisions are recognized when the group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. If the effect of the time value of money is material, provisions are discounted.

Share capital

Ordinary shares are classified as equity. Dividends on ordinary shares are recorded in equity in the period in which they are approved by the parent company’s shareholders.

Where the group purchases shares of the company, the consideration paid (including any attributable transaction costs) is deducted from equity as treasury shares. Any consideration received from the sale of own shares is recognized in equity, net of any taxes.

Revenue recognition

recognition

Revenue from contracts with customers comprise revenue from the sale of Software & Cloud products as well as the sale of Solutions & Services. Revenue from contracts with customers is recognized when the performance obligation in the contract has been satisfied either at the ‘point in time’ or ‘over time’ as control of the promised good or service is transferred to the customer at an amount that reflects the consideration to which the group expects to be entitled in exchange for those goods or services. The normal credit term is 30 to 90 days upon delivery.

Revenue from Software & Cloud

SoftwareONE enters into contracts with end customers to sell Software & Cloud products of several third-party software providers. Below, software is used as a synonym for Software & Cloud. A distinction is made between two types of software selling arrangements:

• Direct business: As a ‘software advisor’, the group’s obligation in these arrangements is only to arrange for another entity to provide the software license to the end customer. Thus, the performance obligation consists of establishing the business relationship between the software provider and the end customer. When the software is provided to the end customer, SoftwareONE is entitled to receive an agency commission from the software provider and recognizes revenue at this point of time. Hence, SoftwareONE acts as an agent and recognizes revenue at the amount that it retains from its agency services.
• Indirect business: As a ‘value added reseller’, the group provides pre-sales consulting services to end customers and advises them on the selection of the appropriate end-to-end software or cloud technology solution. SoftwareONE is in the contractual relationship between the third-party software provider and the end customer and is commissioned to place orders and manage customer purchases on behalf of the end customer. Even if SoftwareONE provides pre-sales services in connection with the sale of the software licenses to its end customers, the group is not primarily responsible for fulfilling the promise to provide the software or cloud solution. Primary responsibility to provide the products lies with the third-party software provider, while SoftwareONE provides the access to the software license or manages cloud subscriptions. SoftwareONE invoices the end customer and receives the considerations from the end customer. SoftwareONE concluded that it does not control the software from the third-party software providers before they are transferred to the end customer and therefore acts as an agent in these arrangements. Revenue is recognized at the point in time when the access to the software license is transferred to the end customer, generally on delivery of the product key or with signing the contract in the volume license business. The group recognizes revenue in the net amount in the consolidated financial statements, ie, the difference between the consideration received from the end customer and cost of software purchased. For further details on the principal vs. agent assessment, please refer to the section 5.2 Significant judgements.

The group also enters into non-cancellable multi-year licensing contracts with customers. In such contracts, SoftwareONE recognizes revenue at the net amount when it provides access to the software license to the end customer and collects the consideration over the contract duration. As the customer pays in arrears, SoftwareONE is effectively providing financing to the customer. Hence, there are two components in such arrangements: a revenue component (for the notional cash sales price net of the related costs of purchasing the software); and a loan component (for the effect of the deferred payment terms). Interest income on the loan finance component is calculated based on the rate that would be reflected in a separate financing transaction between the group and the end customers at contract inception and is presented under finance income. SoftwareONE uses the practical expedient in IFRS 15 and does not adjust the promised amount of consideration for the effects of a significant financing component if it expects at contract inception that the period between the provision access to the software license to the customer and the receipt of the consideration from the end customer will be one year or less.

Revenue from Solutions & Services

SoftwareONE provides a wide range of technology consulting services but also delivers self-developed on-premise software.

Revenue from technology consulting services is generally recognized over time as the customer simultaneously receives and consumes the benefits provided. SoftwareONE uses an input method based on costs incurred to measure progress towards the stage of completion of the service. The group determined that the input method based on costs incurred in relation to total expected costs is the best method in measuring progress of the consulting services because there is a direct relationship between SoftwareONE’s effort and the transfer of the service to the customer. In addition, in cases where the group provides standardized services (ie managed services), revenue is recognized pro rata over the term of the contract. Payment is due 30 days after the solutions and services have been performed. As a rule, services are priced separately. If this is not the case, the transaction prices are allocated on the basis of the relative individual selling prices.

Revenue from self-developed on-premise software is recognized at the point in time when control of the license is transferred to the customer. Such contracts and related revenues exist only to a limited extent.

Contract balances

• Contract assets
  A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the group performs by transferring services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional.
• Trade receivables
  A trade receivable represents the group’s right to an amount of consideration that is unconditional (in other words only the passage of time is required before payment of the consideration is due).
• Contract liabilities
  A contract liability is the obligation to transfer goods or services to a customer for which the group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the group transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the group performs under the contract.

Transaction price of unsatisfied performance obligations

SoftwareONE uses the practical expedient in IFRS 15.121 and does not disclose information about the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied when the original expected duration of the underlying contract is one year or less. After applying this practical expedient, the remaining performance obligations to be disclosed 31 December 2021 and 2020 are not material.

Leases

Right-of-use assets

The group recognizes right-of-use assets at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. For leased vehicles, SoftwareONE makes use of the option not to separate lease and non-lease components and ancillary costs are therefore included in the calculation of the entire lease component.

Unless the group is reasonably certain of obtaining ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of their estimated useful life and the lease term. The useful life is as follows:

• Buildings: max. 10 years
• Vehicles: max. 5 years
• Other equipment: max. 5 years

Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the group and payments of penalties for terminating a lease if the lease term reflects the group exercising the option to terminate.

The variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the group uses the incremental borrowing rate at the lease commencement date, if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. Lease liabilities are included in the financial liabilities (refer to Note 19 Financial liabilities).

Short-term leases and leases of low-value assets

The group applies the short-term lease recognition exemption to its short-term leases of other machinery and equipment (these are those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (in other words below CHF 5,000). Lease payments on short-term leases and leases of low-value assets are recognized as expenses on a straight-line basis over the lease term.

Acquisitions in 2021

The provisional fair values of the identifiable assets and liabilities as at the date of acquisition were:

Acquisition of Centiq

On 29 September 2021, the group acquired 100% of Dino Newco Ltd, UK, with subsidiaries, in particular Centiq Ltd (‘Centiq’), in the UK. Centiq is a leading certified SAP services partner, an SAP gold service partner and holder of the advanced specialization designation for SAP on Azure with extensive professional and managed services capabilities, particularly in S/4HANA on Microsoft Azure. The acquisition further strengthens SoftwareONE’s fast-growing SAP services practice in Europe and globally with the addition of a team of highly skilled SAP cloud experts.

A contingent consideration arrangement was agreed that could result in additional cash payments to the previous shareholders of Centiq. The earn-out amount is related to a continuing employment of the selling shareholders and is recognized as a personnel expense over the service period of five years and thus not part of the purchase price. For details regarding such earn-out arrangements, refer to Note 18 Provisions.

The goodwill recognized is primarily attributed to the expected synergies and other benefits from combining the assets and activities of Centiq with those of the group. The goodwill is not deductible for income tax purposes. Transaction costs of TCHF 309 are related to this acquisition.

From the date of acquisition, Centiq has contributed TCHF 1,745 of revenue and TCHF -1,402 to the profit for the year.

Acquisition of HeleCloud

On 23 September 2021, SoftwareONE acquired 100% of HeleCloud Ltd, UK (‘HeleCloud’), with subsidiaries in the Netherlands and Bulgaria. HeleCloud is a certified and independent Amazon Web Services (AWS) premier consulting partner and an independent AWS-only system integrator, and managed service provider in EMEA. With this acquisition, SoftwareONE expands and strengthens its AWS capabilities in the EMEA region, adding a team of skilled AWS experts with significant project delivery and managed service capabilities.

A contingent consideration arrangement was agreed that could result in additional cash payments to the previous shareholders of HeleCloud. The earn-out amount is related to a continuing employment of the selling shareholders and is recognized as a personnel expense over the service period of three years and thus not part of the purchase price. For details regarding such earn-out arrangements, refer to Note 18 Provisions.

The goodwill recognized is primarily attributed to the workforce and the expected synergies and other benefits from combining the activities of HeleCloud with those of the group. The goodwill is not deductible for income tax purposes. Transaction costs of TCHF 313 are related to this acquisition.

From the date of acquisition, Centiq has contributed TCHF 4,608 of revenue and TCHF -1,089 to the profit for the year.

Other acquisitions

On 13 September 2021, the group acquired the activities and assets of SE16N Sp zoo and SE16 Consulting Sp zoo, Poland (‘SE16N’), by way of an asset deal. SE16N is a leading SAP technology service provider and SAP S/4HANA specialist and provides a range of comprehensive SAP cloud services to help customers maximize the value of their SAP investments. The acquisition further strengthens SoftwareONE’s fast-growing SAP practice in Europe and globally, adding a team of skilled SAP cloud experts and significant delivery capabilities.

On 14 July 2021, SoftwareONE acquired 100% of ITST Consultoria em Informática Ltda., Brazil ('ITST'), a specialist for professional and managed SAP services, including cloud strategy advisory, architecture assessment, migration and administration. Through this first SAP-related acquisition in Latin America, management expects that ITST will strengthen SoftwareONE’s capabilities in this strategic growth stream.

On 29 April 2021, the group acquired a controlling shareholding of 70% in SynchroNet Corp. (‘SynchroNet’), an AWS-focused cloud specialist in digital workplace solutions. The acquisition expands SoftwareONE’s capabilities in the fast-growing market of cloud-based services for remote working and complements its global AWS services portfolio. SoftwareONE has applied the partial goodwill method. As the fair value of net assets acquired amounts to zero, the initial carrying amount of non-controlling interests is nil.

On 1 March 2021, SoftwareONE acquired 100% of VB Technology Group AG, Switzerland (‘ITPC’), with subsidiaries in Switzerland and India. ITPC is an SAP specialist for S/4HANA transformations, public cloud migrations and related managed services offerings, including monitoring, maintenance and support. Continuing the series of quality SAP cloud acquisitions, ITPC further expands and strengthens the group’s SAP capabilities, underpinning its strategic importance.

With the acquisition of SE16N and ITST, customer base was acquired. The remaining part of the purchase price relates to the skilled workforce and is allocated to goodwill. The purchase price paid for the acquisition of SynchroNet and ITPC relates mainly to the skilled workforce and, therefore, represents goodwill.

For details regarding contingent consideration arrangements recognized as a personnel expense, refer to Note 18 Provisions.

From the date of acquisition, the other acquired companies contributed TCHF 7,581 to revenue and TCHF 276 to the profit for the year.

If all acquisitions had taken place at the beginning of the year, total revenue of SoftwareONE would have been TCHF 982,894 and net profit for the period would have been TCHF 117,683.

The purchase price allocation for all business combinations is still provisional as at 31 December 2021.

Purchase considerations and goodwill

Details of the purchase considerations recognized at acquisition and the derivation of goodwill are as follows:

The cash flow on acquisitions

Acquisitions in 2020

On 9 November 2020, SoftwareONE exercised a call option to acquire the remaining 60% of IG Services SAS, Colombia, following its initial investment of 40% in 2019. In 2021, the group adjusted the purchase accounting. An additional contingent liability was considered in an amount of TCHF 1,593 of which TCHF 1,245 is covered by an indemnity. In addition, a subsequent purchase price adjustment of TCHF -753 was made in 2021. Both adjustments led to a decrease in goodwill of TCHF -405 to TCHF 16,338. There were no other changes in the final fair values of acquired assets and liabilities compared to the provisional amounts disclosed in the Annual Report 2020.

On 31 December 2020, SoftwareONE acquired 100% of Intelligence Partner SL, Spain, with subsidiaries in Brazil and Dubai. On 30 December 2020, the group acquired the activities and assets of Optimum Consulting LLC, an SAP-certified technology consulting company based in the US, by way of an asset deal. On 10 July 2020, SoftwareONE acquired 100% of B-Lay B.V., a leading provider of Software Asset Management advisory and managed services for SAP and Oracle solutions, based in the Netherlands, with subsidiaries in the US and Romania. On 20 May 2020, the group acquired 100% of GorillaStack Pty Ltd, an Australian-based provider of AWS cloud cost management tools. In 2021, the group finalized the purchase accounting and there were no changes in the final fair values of acquired assets and liabilities compared to the provisional amounts disclosed in the Annual Report 2020.

Purchase considerations and goodwill in 2020

Cash flows on acquisitions in 2020

4.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, equity price risk), credit risk and liquidity risk. The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures. The financial derivatives are measured with the aid of standardized mathematical models. The counterparty risk related to those derivatives is considered to be immaterial for the group.

Risk management is carried out by Group Treasury under a policy approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the group’s operating entities. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and investment of excess liquidity.

Market risk

Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

Group Treasury has set up a policy to manage its foreign exchange risk. The group hedges its foreign exchange risk exposure of recognized assets and liabilities and future commercial transactions by derivative contracts.

The group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk which, as per group policy, is not hedged. These differences are recognized in other comprehensive income and accumulated in equity. Translation risk is not considered in the analysis below.

The following table details the group’s sensitivity to the major currencies with all the other variables held constant.

Interest rate risk

The group’s interest-bearing instruments with variable interest are cash, bank overdrafts, bank loans and a multiple currency revolving credit facility (undrawn as at 31 December 2021 and 2020). Currently, there is no material exposure to interest rate risk. Also refer to Note 19 Financial liabilities.

Equity price risk

The group holds a short-term investment in listed shares. The asset is subject to fluctuation in share price. Changes in fair value are recognized in profit and loss as they arise.  A sensitivity analysis was performed. A 10% fluctuation in share price leads to fluctuations in pre-tax earnings of TCHF +/– 20,876 (prior year: TCHF +/– 14,194).

Credit risk

Group Treasury and the group Credit & Collection Department are responsible for managing and analyzing the credit risk for all new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and contract assets. Risk control assesses the credit quality of the customers, taking into account its financial position, past experience and other factors. No collateral is required. Individual risk limits are set based on internal or external ratings in accordance with guidelines set by the Board. The utilization of credit limits is regularly monitored.

There is no concentration of credit risk with respect to trade receivables, as the group has a large number of customers that are internationally diversified. 47% of trade receivables are covered through credit insurance (prior year: 47%).

The remaining part is not insured for one of the following reasons:

• From end customers with top rating (based on internal and credit insurance assessment): 22% (prior year: 20%)
• Too small to be insured: 3% (prior year: 3%)
• No insurance available: 28% (prior year: 30%)

Refer to Note 12 Trade receivables for information about the credit risk exposure on the group’s trade receivables and contract assets using a provision matrix.

Liquidity risk

Cash flow forecasting is performed in the operating entities of the group and aggregated by Group Treasury. Group Treasury monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn borrowing facilities (for details see further below) at all times.

The table below analyzes the group’s non-derivative financial liabilities and derivative financial liabilities according to relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, ie undiscounted interest and principal payments:

The group maintains a CHF 470 million multiple currency revolving credit facility. The agreement was signed in 2019. In 2020, SoftwareONE exercised an option to increase the initial facility (CHF 400 million) by CHF 70 million. Additionally, the tenor of the facility was extended from 30 September 2022 to 30 September 2023. In 2021, SoftwareONE executed the remaining extension option and extended the credit facility from 30 September 2023 to 30 September 2024. Thus, the facility contains no more remaining extension options. Interest would be payable at a base rate plus a margin ranging from 50 to 60 basis points initially, depending on the currency, and thereafter adjusted for changes in the leverage ratio of the group. As at 31 December 2021 and 2020, the credit facility was not used. Each drawdown within the facility would have a tenor ranging from one week up to the maturity of the credit facility. The facility is subject to loan covenants (leverage ratio: net debt/earnings before net financial items, taxes, depreciation and amortization). A potential breach of covenant triggers measures which are standard in such circumstances. Under the agreement, the covenants are monitored on a regular basis by the treasury department and half yearly reported to management and lending banks to ensure compliance with the agreement. Transaction costs of TCHF 1,330 were capitalized in 2019 and amortized pro rata over the commitment period.

As at 31 December 2021, the group had total committed and uncommitted credit lines (including factoring) of TCHF 963,559 (prior year: TCHF 998,062) available, of which 21% (prior year: 21%) was drawn. From the drawn amount, TCHF 35,231 are covered by financial covenants, which are fulfilled as at 31 December 2021 (prior year: TCHF 47,737).

4.2 Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Surplus cash held by the operating entities over and above working capital requirements are transferred to Group Treasury whenever the legal environment permits. Group Treasury invests surplus cash in interest-bearing current accounts or short-term time deposits to provide sufficient headroom as determined by the abovementioned forecasts.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

Capital is measured based on the group’s consolidated financial statements and monitored closely on an ongoing basis. Management's target for the period under review was to strengthen the capital base to sustain and support further development of the business. This goal was achieved through the positive operating results of the group and the increase in equity.

The equity ratio for the period ended 31 December 2021 and the prior year were as follows:

The equity ratio for 2021 increased slightly compared to the previous year, which is mainly due to the net income for the period.

4.3 Categories of financial instruments and fair value estimation

instruments

Categories of financial instruments

The following table discloses the carrying amounts and fair values, as required, of the group’s financial instruments by class and category:

Financial assets consist of an investment in listed equity instruments for which the group recognized a fair value gain of TCHF 67,812 in finance income in 2021 (prior year: gain of TCHF 84,197).

Fair value estimation

The carrying amounts of cash and cash equivalents, trade and other receivables and trade and other payables with a remaining term of up to 12 months, as well as other current financial assets and liabilities, represent a reasonable approximation of their fair values, due to the short-term maturities of these instruments.

The fair value of financial assets (equity instruments) is based on observable price quotations at the reporting date. The fair value of derivatives is determined on the basis of input factors observed directly or indirectly on the market. The fair value of foreign exchange forward contracts is based on forward exchange rates.

Financial instruments carried at fair value are analyzed by valuation method. The fair value hierarchy has been defined as follows:

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices for identical assets or liabilities at the balance sheet date.

Level 2: The fair value measurements are those derived from valuation techniques using inputs for the asset or liability that are observable market data, either directly or indirectly. Such valuation techniques include the discounted cash flow method and option pricing models. For example, the fair value of interest rate and currency swaps is determined by discounting estimated future cash flows, and the fair value of forward foreign exchange contracts is determined using the forward exchange market at the end of the reporting period.

Level 3: The fair value measurements are those derived from valuation techniques using significant inputs for the asset or liability that are not based on observable market data.

The following table discloses valuation classes for financial instruments measured at fair value:

There have been no transfers between the different hierarchy levels in 2021 and 2020.

The change in carrying values associated with 'Level 3' contingent consideration liabilities are set forth below:

The most significant contingent consideration liabilities relate to the acquisition of the customer base of CompuCom and the acquisition of Intelligence Partner.

CompuCom (fair value as at 31 December 2021: TCHF 5,212; prior year: TCHF 6,266)
The purchase price for the customer base of CompuCom acquired in 2015 is fully based on variable payments that depend on the future revenues generated from those customers over a period of 10 years. During 2021, the group recognized an unrealized fair value loss of TCHF 613 (prior year: gain of TCHF 5,904). The most significant unobservable input used to determine the fair value of the CompuCom contingent consideration is the cash flow forecast, which is mainly based on future gross profit. The development of the future gross profit and the contingent consideration is linear. Thus, a change of +/– 10% in gross profit development leads to a change of cash outflow by +/– 10%, ie TCHF 521 (prior year: TCHF +/– 627).

Intelligence Partner (fair value as at 31 December 2021: TCHF 3,264; prior year: TCHF 3,417)
The contingent consideration liability of Intelligence Partner depends on the EBITDAs of the years 2021 to 2023 and an additional 'catch-up' year if necessary. The development of the future EBITDAs and the contingent consideration is not linear and is capped at a maximum of TEUR 3,150. As in the prior year, SoftwareONE estimates that the maximum amount will be paid.

4.4 Transfer of financial assets

The group enters into transactions in which it transfers trade receivables under factoring agreements and, as a result, may either be eligible to derecognize the transferred receivables in their entirety or must continue to recognize the transferred receivables to the extent of any continuing involvement, depending on certain criteria. These criteria are presented in Note 2 Summary of significant accounting policies.

The amount of the receivables sold as at 31 December 2021 is TCHF 170,260 (prior year: TCHF 151,619). This amount is fully derecognized from the balance sheet. Moreover, liabilities to factoring partners for forwarding incoming payments from customers of TCHF 3,991 (previous year: TCHF 5,210) are recognized under financial liabilities.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates may differ from the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

5.1 Significant estimates

Income taxes (Note 10)

The group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes.

In particular, the deferred tax assets on unused tax losses require estimates of the amount and dates of future taxable income as well as the future tax planning strategies. If the group expects not to realize the unused tax losses, these are not recognized.

Contingent consideration liabilities related to business acquisitions and the acquisition of customer relationships (Note 4.3, 16 and 19)

Contingent consideration liabilities reflect potential future payments following the acquisition of customer relationships and businesses. The calculation of the future payments is based on different variable input factors. These future cash flows were estimated at initial recognition. These assumptions are reviewed at each reporting date and changes impact profit and loss.

Defined benefit obligations (Note 20)

The present value of the defined benefit obligations depends on actuarial assumptions including the discount rate. Any changes in these assumptions will impact the carrying amount of defined benefit obligations. Additional information is disclosed in Note 20 Defined benefit liabilities.

Contingent liabilities and indemnification assets related to purchase price allocations (Note 13 and 18)

COMPAREX, acquired in 2019, has several ongoing dispute cases which could lead to future cash outflows. Occasional dispute cases also exist for InterGrupo, Intelligence Partner and ITST. In the course of the purchase price allocation, these contingent liabilities were measured at fair value on the acquisition date and presented as provisions. At each reporting date, such contingent liabilities are valued at the higher amount that would result in accordance with IAS 37 or the amount initially recognized less the cumulative amount of liabilities settled, cancelled or expired. Part of the risks are covered through indemnity clauses. The resulting indemnification assets were measured at fair value on the acquisition date on the same basis as the indemnified liability.

5.2 Significant judgments

#judgements

Revenue recognition – principal versus agent assessment in indirect business (Note 6)

In accounting for revenue for software license agreements, there is considerable scope for discretion in assessing the principal/agent status. When another party is involved in providing goods or services to a customer, the assessment of whether the group acts as a principal or an agent is judgmental and addresses the questions of whether the nature of its promise is a performance obligation to provide the good or service itself (the group is a principal) or to commissioning another party to provide the good or service (the group acts as an agent). Under IFRS 15, an entity can be a principal only if it has control of a promised good or service before it is transferred to a customer. In the indirect software business, SoftwareONE only provides the access to the software license to the end customers, while the primary responsibility to provide the products lies with the third-party software provider. Thus, the group is not primarily responsible for fulfilling the promise to provide the software or cloud solutions and does not control the software license before it is transferred to the end customer. As a consequence, management concluded that SoftwareONE acts as an agent for transactions in the indirect business. As an agent, SoftwareONE recognizes revenue in the net amount that the group is entitled to retain in return for its agency services and end customer invoicing to the software provider, ie, the difference between the consideration received from the customer and cost of software purchased.

SoftwareONE generates its revenue from Software & Cloud by arranging software license agreements between software providers and end customers and managing cloud subscriptions for them (point in time), providing Solutions & Services to customers (over time) and generates revenue related to the resale or sale of self-developed on-premise software (point in time, presented in Solutions & Services).

For management purposes, SoftwareONE is organized by geographical areas. The breakdown of revenue below follows the regional clusters by the group’s operating segments, refer to Note 28 Segment reporting.

Revenue is broken down as follows:

SoftwareONE distinguishes between indirect and direct business when generating revenue from Software & Cloud:

Other personnel expenses include expenses for the Management Equity Plan to an amount of TCHF 9,079 (prior year: TCHF 19,964) and other share-based payment programs to an amount of TCHF 7,981 (prior year: TCHF 5,302), refer to Note 25 Share-based payments. In addition, remuneration for earn-out payments to an amount of TCHF 26,888 (prior year: TCHF 4,084) are shown as other personnel expenses.

The increase in other operating expenses of TCHF 17,192 is related to higher administrative expenses (TCHF 7,261), ie for M&A-related costs and other consulting costs, as well as information technology expenses (TCHF 4,591) due to an increasing use of cloud applications.

Other finance income includes a fair value gain of TCHF 67,812 from the valuation of equity instruments (prior year: gain of TCHF 84,197) and TCHF 1,759 income from significant finance components (prior year: TCHF 2,136).

Other finance expenses include TCHF 1,986 factoring expenses (prior year: TCHF 2,658).

In 2020, SoftwareONE exercised the call option to acquire the remaining 60% shares of IG Services SAS. Since the company was fully consolidated from this point in time, the investment in joint ventures was derecognized and resulted in a fair value gain of TCHF 6,442.

The foreign exchange differences, net result 2021 excludes unrealized losses on derivatives designated as instruments to hedge foreign currency risks to the amount of TCHF 1,251 (prior year: unrealized gains of TCHF 41) recognized in OCI and to be reclassified to the income statement in future periods. In 2021, losses of TCHF 1,564 (prior year: gains of TCHF 971) have been reclassified to profit and loss, refer to Note 14 Derivative financial instruments.

Tax expenses comprise the following positions:

The tax on the group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

The group’s expected average tax rate is the aggregate obtained by applying the expected tax rate for each individual jurisdiction to its respective result before taxes. The weighted average expected tax rate was 20.0% (prior year: 21.3%).

The group has not recognized deferred tax assets of TCHF 2,992 (prior year: TCHF 1,887) in respect of losses for the period ended 31 December 2021 amounting to TCHF 12,685 (prior year: TCHF 9,466).

The impact from tax rate changes compared to 2021 is mainly related to tax rate changes in Switzerland and Colombia.

Other effects in 2021 are mainly related to tax provisions and withholding taxes on intercompany transactions. Other effects in 2020 were mainly related to tax benefits on the taxable impairment on investments in subsidiaries which was partially offset by the write-off on withholding tax receivables on group internal transactions.

Deferred income tax

Deferred tax income of TCHF 1,942 (prior year: expense TCHF 705) is recorded in other comprehensive income on actuarial losses on defined benefit liabilities and on hedge accounting, refer to Note 20 Defined benefit liabilities and Note 14 Derivative financial instruments.

Deferred tax assets and liabilities are based on the temporary differences between group valuation and tax bases.

For some group companies, dividend payments are subject to a withholding tax which cannot be fully recovered in Switzerland. The company has not recognized deferred tax liabilities associated with investments in subsidiaries where the group can control the reversal of the temporary differences and where it is not probable that the temporary differences will reverse in the foreseeable future.

The aggregate amount of temporary differences associated with investments in subsidiaries for which no deferred tax liabilities have been recognized amounts to TCHF 41,338 (prior year: TCHF 46,357).

The movement of available tax loss carryforwards is as follows:

Tax loss carryforwards as at 31 December 2020 included tax losses in the amount of TCHF 92,161 (no expiry date) originating from the Austrian permanent establishment of COMPAREX AG in Germany. In 2020, the Austrian permanent establishment of COMPAREX AG was dissolved. It is legally uncertain if these tax loss carryforwards were transferred to the head office of COMPAREX AG. Therefore, no deferred tax asset was recognized. As at 31 December 2021, the amount is reduced to TCHF 25,062 and no deferred tax asset was recognized.

Deferred tax assets of TCHF 13,995 (prior year: TCHF 8,987) were recorded in respect of available tax loss carryforwards of TCHF 52,099 (prior year: TCHF 37,494).

Tax losses, for which no deferred tax asset was recognized will expire as follows:

Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days.

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (ie, geographical region and customer rating and coverage by letters of credit or other forms of credit insurance). The calculation reflects the probability weighted outcome and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.

The provision matrix is initially based on the group’s historical observed default rates. The group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (ie, gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At each reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.

The group applies the expected credit loss model under IFRS 9 and reviews its receivables periodically to determine an adequate impairment provision. Loss allowances are recognized based on lifetime ECLs at the reporting date. The aging of the receivables for the year 2021 and 2020 are as follows:

Movements on the group’s provision for impairment of trade receivables are as follows:

Contract assets are initially recognized for services as receipt of consideration is conditional on successful completion of the service. Upon completion of the service and acceptance by the customer, the amounts recognized as contract assets are reclassified to trade receivables.

Other receivables mainly include VAT and other sales tax receivables.

Indemnification assets are related to the acquisition of COMPAREX group to the amount of TCHF 4,303 (prior year: TCHF 5,591) and others to the amount of TCHF 2,283 (prior year: TCHF 469). In 2021, the group received payments for an amount of TCHF 1,896 from the previous shareholder of COMPAREX group (prior year: TCHF 4,724). The underlying risks that have been classified as contingent liabilities are recorded as provisions, refer to Note 18 Provisions.

In other current receivables an impairment of TCHF 0 is considered (prior year: TCHF 577).

In 2021 and 2020, no ineffectiveness was recognized in the income statement.

As at 31 December 2021, there were no contractual commitments for the purchase of tangible assets and no impairment was required.

As at 31 December 2020, there were no contractual commitments for the purchase of tangible assets and no impairment was required.