Half-Year Report 2022

2 Basis of preparation and changes to the group’s accounting policies

Basis of presentation

The interim condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the group’s annual financial statements as at 31 December 2021 approved by the Board of Directors on 2 March 2022.

New standards, interpretations and amendments adopted by the group

The accounting policies applied in these interim condensed consolidated financial statements are the same as those applied in the group’s consolidated financial statements as at and for the year ended 31 December 2021 except for changes effective from 1 January 2022 and the change in presentation of revenue disclosed further below.

As at 1 January 2022, the following amendments to the International Financial Reporting Standards (IFRS) entered into force:

• IFRS 3: Business Combinations: References to the Conceptual Framework
• IAS 37: Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts, Costs of Fulfilling a Contract
• IAS 16: Property, Plant and Equipment: Proceeds before Intended Use
• Annual Improvements Project 2018-2020: Changes to IFRS 1, IFRS 9, IFRS 16, IAS 41

These amendments do not have a significant impact on the group. SoftwareONE has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Change in accounting policies

The comparative information for the six months ended 30 June 2021 presented in these interim financial statements has been amended to reflect the changes in accounting policies disclosed in the Annual Report 2021 under the heading ‘Change in  accounting policies’. In December 2021, the IFRS Interpretations Committee (IFRS IC) issued a tentative agenda decision on ‘Principal versus Agent: Software Reseller (IFRS 15)’ about whether a reseller of software licenses is acting as principal or agent for the purposes of recognizing revenue under IFRS 15 Revenue from Contracts with Customers. As an addendum to its April 2022 meeting, the IFRS IC issued the final agenda decision 'Principal versus Agent: Software Reseller (IFRS 15)' on 30 May 2022.

In view of the clarifications from the draft agenda decision management re-assessed and concluded in 2021 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, SoftwareONE recognizes revenue from Software & Cloud 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. During the assessment in the first half of 2022 whether there are any other potential effects of the clarification by the IFRS IC on its revenue contracts, SoftwareONE identified a type of service contracts in Solutions & Services in which SoftwareONE also acts as an agent and, therefore, recognizes revenue in the net amount.

The comparative period for the six months ending 30 June 2021, in which SoftwareONE reported revenue from Software & Cloud (indirect business only) and the identified service contracts as a principal based on a gross amount in the interim condensed consolidated income statement, is adjusted. The result of the change in accounting policies for the comparative period is shown in the following table:

The assessment of the implications of the agenda decision on some revenue contracts is still ongoing and management expects that there could be other potential effects of the clarification by the IFRS IC on contracts with customers. The Group plans to complete this assessment in the second half of 2022.

Disclosure of additional information on business line performance in the segment reporting

The identification of the group's reporting segments has not changed. However, starting 2022, SoftwareONE internally also reports EBITDA by business lines to the Chief Operating Decision Maker. The view presents a breakdown of total revenue, gross profit, contribution margin and EBITDA for the business lines Software & Cloud, Solutions & Services and Corporate to measure the individual success of the business lines. For additional information on business line performance, refer to Note 11 Segment Reporting.

Impact of the Ukraine war on the interim condensed consolidated financial statements

In light of the invasion of Ukraine by Russian forces and the changed political and economic environment in Russia, which does not offer potential to operate with stability in this market in the mid-term, SoftwareONE decided in March 2022 to suspend a significant part of its sales and business operations in Russia. As a consequence of this decision, SoftwareONE LLC, Russia, was sold to a third-party on 20 May 2022. For more information, refer to Note 3 Changes in the scope of consolidation.

On the basis of the information available in the reporting period, an analysis of the effects on the accounting of SoftwareONE was carried out as at 30 June 2022, in particular with respect to the expected credit losses on trade receivables and contract assets. SoftwareONE has determined additional expected credit losses of CHF 4,6 million for receivables of customers in Russia that are recorded in these interim condensed consolidated financial statements.

Foreign currency translation

The following exchange rates were used:

Seasonality of operations

The results of SoftwareONE group are subject to significant seasonality effects. Total revenue peaks towards the end of the second quarter as a result of year-end campaigns by Microsoft, our most important software vendor, whose fiscal year ends on 30 June, and towards the end of the fourth quarter of the financial year, driven by the IT budget cycle of many of our customers.