Change in accounting policies
Swisscom has been applying IFRS 16 “Leases” since 1 January 2019. IFRS 16 generally has the following effects on the reporting of leases:
- The lessee must recognise a right-of-use asset as well as a corresponding lease liability for all leases. For financial reporting purposes, the lessor will continue to differentiate between finance and operating lease arrangements.
- Costs arising from operating leases previously reported as operating expenses must now be recognised as depreciation and interest. This leads to a substantial rise in operating income before depreciation and amortisation (EBITDA). The effect on results at net income level is insignificant.
- Reporting of additional lease liabilities results in an increase in net debt.
- The application of IFRS 16 has no effect on cash flows.
IFRS 16 has the following effects on Swisscom’s financial reporting:
- Swisscom has been applying IFRS 16 since 1 January 2019. The consolidated financial statements for 2018 were not adjusted. As a consequence of the first-time application of IFRS 16, additional lease liabilities and right-of-use assets of around CHF 1.3 billion were reported with effect from 1 January 2019.
- If IFRS 16 had been applied to the results of the 2018 financial year, this would have led to an increase in operating income before depreciation and amortisation (EBITDA) of around CHF 0.2 billion and higher depreciation and interest of around CHF 0.2 billion.
- EBITDA remains a key performance indicator in the reporting of financial results. For comparison purposes, the costs for operating leases for 2018 are reported under EBITDA within segment reporting.
- A new key performance indicator has been introduced: operating free cash flow proxy. It comprises EBITDA less lease expense and capital expenditure. The definition of capital expenditure remains unchanged from the previous year.
- The outlook for the 2019 financial year takes account of the changes resulting from IFRS 16.
Further information regarding IFRS 16 can be found in the notes to the consolidated interim financial statements.