1 Accounting policies
Basis of preparation
These unaudited consolidated financial statements include Swisscom Ltd and all subsidiaries directly or indirectly controlled by it via a voting majority or in any other way (hereinafter referred to as Swisscom). The consolidated interim financial statements for the nine months to 30 September 2017 were prepared in accordance with International Accounting Standard “IAS 34 Interim Financial Reporting” and should be read in conjunction with the consolidated financial statements for the financial year ended 31 December 2016. The consolidated interim financial statements were prepared in accordance with the accounting policies described in the 2016 consolidated financial statements and the revised accounting principles adopted on 1 January 2017.
In preparing the consolidated interim financial statements, management is required to make accounting estimates and assumptions. Adjustments are made for changes in accounting estimates and assumptions during the reporting period in which the original estimates and assumptions changed.
Swisscom operates in business areas where the provision of services is not subject to any major seasonal or cyclical fluctuations during the financial year. Income taxes are calculated on the basis of an estimate of the expected income tax rate for the full year. For the consolidated interim financial statements, a CHF/EUR exchange rate of 1.146 was used as the end-of-period rate (31 December 2016: CHF/EUR 1.074) and 1.097 as the average rate for the period (prior year: CHF/EUR 1.094).
Changes in accounting principles
As of 1 January 2017, Swisscom adopted various amendments to existing International Financial Reporting Standards (IFRS) and Interpretations, none of which have a material impact on the consolidated financial statements of Swisscom.
From financial year 2018, IFRS 15 “Revenue from contracts with customers” must be applied. IFRS 15 will have the following major effects on the consolidated financial statements of Swisscom:
- For multi-component contracts (mobile subscription with subsidised mobile device) revenue must be reallocated to the already delivered components (mobile device) meaning that revenue is recognised earlier. Revenue amount remains unchanged over the contractual term.
- Commission paid to retailers (costs of obtaining a contract) as well as costs for routers and set-top boxes (costs to fulfill a contract) are capitalised and recognised as expenses over the contractual term.
Swisscom will apply IFRS 15 through an adjustment to equity in the amount of the cumulative effects from 1 January 2018 (cumulative method). At the time of first adoption, assets and equity will increase due to the capitalisation of contract assets and costs of obtaining a contract. The analysis of the financial effects from applying the new standard is still ongoing. For this reason, it is currently not possible to provide a reliable estimate of the quantitative effects.
See Note 3.22 of the 2016 consolidated financial statements for further information on the changes in the International Financial Reporting Standards and interpretations that must be applied from financial year 2018 or later.