Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements a COVID-19 related rent concession from a lessor is a lease modification. As a result of this Joint operations and joint Investments in joint arrangements are classified as either joint operations or joint ventures election the Group accounts for any change in lease payments resulting from the COVID-19 ventures depending on the contractual rights and obligations of each investor. related rent concession the same way it would account for the change under IFRS 16, if the changes were not a lease modification. These changes did not have a material impact to the The Group has joint operations and as a joint operator accounts for the assets, liabilities, Group’s financial statements. revenues and expenses in relation to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses. ed The Group has a joint venture and accounts for that investment using the equity method, with All other amendments listed above did not have any material impact on the amounts recogniz in prior periods and are not expected to significantly affect the current or future periods. the investment initially recognized at cost and subsequently adjusted to recognize the share of the profit or loss of the investee after the date of acquisition. (2.4) Method of consolidation Subsidiaries Subsidiaries are all entities over which the Group has control. The Group controls an entity when (2.5) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Group is exposed to, or has rights to, variable returns from its involvement with the entity the chief operating decision-maker. The chief operating decision-maker, who is responsible for and has the ability to affect those returns through its power over the entity. Subsidiaries are fully allocating resources and assessing performance of the operating segments, has been identified consolidated from the date when control is transferred to the Group. They are deconsolidated as the Executive Board (EB) that makes strategic decisions. With the Group’s Multi-Channel- from the date that control ceases. Service (MCS) approach, all products and services are relevant for all customers and the EB steers the business on Group level as one unit. Consequently, the Group operates in only one The Group applies the acquisition method to account for business combinations. The single operating segment. The single operating segment disclosure is accordingly set out in the consideration transferred for the acquisition of a subsidiary is the fair values of the assets balance sheet, income statement, statement of comprehensive income, statement of changes in transferred, the liabilities incurred to the former owners of the acquiree and the equity interests equity and the cash flow statement. Breakdown of the segment information in terms of products, issued by the Group. The consideration transferred includes the fair value of any asset or liability services and geographical areas is provided in note (34). resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the (2.6) Foreign currency translation acquiree at the non-controlling interest’s proportionate share of the recognized amounts of Functional and presentation Items included in the financial statements of each of the Group’s companies are measured using acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. currency the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Swiss francs, which is the The excess of the consideration transferred for the amount of any non-controlling interest in the functional and presentation currency of the Group. acquiree and the fair value at the acquisition date of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates consideration transferred, non-controlling interest recognized and previously held interest prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the measured is less than the fair value of the net assets of the subsidiary acquired in the case of a settlement of such transactions and from the translation at year-end exchange rates of monetary bargain purchase, the difference is recognized directly in the income statement. assets and liabilities denominated in foreign currencies, excluding long-term intercompany Intercompany transactions, balances and unrealized gains and losses on transactions between accounts receivables and payables, are recognized in the income statement. Foreign exchange Group companies are eliminated. Accounting policies of subsidiaries are changed, where gains and losses relating to long-term intercompany foreign currency loans are regarded as part necessary, to ensure consistency with the policies adopted by the Group. of the net investment in the foreign entity and are recognized in OCI. Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is remeasured to its Translation differences on non-monetary items, such as equities held at fair value through profit fair value at the date when control is lost, with the change in carrying amount being recognized or loss, are reported as part of the fair value gain or loss. in ‘other income and expenses (net)’ in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint Translation on consolidation The results and financial position of all the Group’s companies that have a functional currency venture or financial asset. In addition, any amounts previously recognized in ‘other different from the Group’s presentation currency are translated on consolidation into the Group’s comprehensive income (OCI)’ in respect of that entity are accounted for as if the Group had presentation currency as follows: directly disposed of the related assets or liabilities. This may mean that amounts previously • assets and liabilities at the closing spot exchange rates at the balance sheet date recognized in OCI are reclassified to ‘other income and expenses (net)’ in profit or loss. (closing rate) and • income and expense items at year-to-date sales-weighted average exchange rates Associates Associates are all entities over which the Group has significant influence but not control, (average rate) (to provide a reasonable approximation of the cumulative effect of the generally representing a shareholding of between 20% and 50% of the voting rights. rates prevailing on the transaction dates). Investments in associates are accounted for using the equity method of accounting and are Gains and losses arising from the translation of the financial statements of foreign operations are initially recognized at cost. recognized in OCI. On the foreign operation’s disposal, applicable exchange differences are reclassified to the income statement and recognized as part of the gain or loss on disposal. When a foreign operation 2020 Financial Report | 20 2020 Financial Report | 21