Technical recommendations for accounting

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Foundation for professional recommendations on accounting

(Swiss GAAP FER)

Legal form: Foundation, endowment
Purpose: The aim is to create a «Expert Commission for Accounting Recommendations» of a maximum of 30 people and to ensure that personalities from the economy, auditing and accounting, from employer and employee organizations, from universities and the public sector are always present in this expert committee and are appropriately represented by other groups interested in accounting. The commission is tasked with drawing up recommendations for accounting that take Swiss conditions into account and show the companies feasible routes. These recommendations are intended to help harmonize accounting in Switzerland, improve comparability and generally improve the quality of accounting in Switzerland. The expert commission can also comment on individual questions of general interest. The dissemination of the recommendations should be promoted and their application and examination by the auditors should help to increase the acceptance of the annual accounts of Swiss companies abroad.
Chair: Giorgio Behr
Consist: since March 20, 1984
Seat: St. Gallen
Website: www.fer.ch

no founder specified

The specialist recommendations on accounting are Swiss accounting standards that are recognized by the SIX Exchange Regulation and are widely used in private and public law. Since January 1, 2015, listed public companies must also comply with Swiss GAAP FER 31 “Supplementary recommendations for listed companies”. The accounting according to Swiss GAAP FER provides a faithful representation of the asset, financial and earnings position ( true and fair view, fair presentation ).

history

In the mid-1980s, the Swiss Chamber of Trustees (professional association of auditors, tax and fiduciary experts) launched the idea of ​​setting up an independent institution to further develop accounting standards in Switzerland on the initiative of the now retired HSG professor André Zünd should. The declared aim was (and still is) to promote the comparability of the annual accounts and to bring the information content and the accounting concept in Switzerland closer to the international standard.

user

According to its own information, Swiss GAAP FER focus on accounting for small and medium-sized organizations and corporate groups with a national presence. Other users also include non-profit organizations and pension funds. These organizations are provided with a suitable framework for meaningful accounting, which conveys a true and fair view of the asset, financial and earnings situation. Communication with investors, banks and other interested parties should also be promoted. At the same time, the comparability of the annual accounts between the organizations and over time is made easier.

concept

The concept has a modular structure and consists of the following components:

  • the framework;
  • the core FER;
  • further standards;
  • Swiss GAAP FER 30 for corporate groups and Swiss GAAP FER 31 for listed companies.

In principle, the entire set of rules, Swiss GAAP FER, must be observed. Small organizations that do not exceed two of the following criteria for two consecutive years can limit themselves to using the core FER:

  • Balance sheet total of CHF 20 million,
  • Annual sales of CHF 40 million
  • 250 full-time positions on an annual average.

Corporate groups must also apply Swiss GAAP FER 30 “Consolidated Financial Statements”, while listed public companies must also observe Swiss GAAP FER 31 “Additional recommendations for listed companies”.

Core FER (framework concept and Swiss GAAP FER 1-6)

The core FER include the following Swiss GAAP FER:

  • Framework concept (Swiss GAAP FER framework concept)
  • Basics (Swiss GAAP FER 1)
  • Valuation (Swiss GAAP FER 2)
  • Presentation and structure (Swiss GAAP FER 3)
  • Cash flow statement (Swiss GAAP FER 4)
  • Off-balance sheet transactions (Swiss GAAP FER 5)
  • Appendix (Swiss GAAP FER 6)

Compliance with the core FER allows a reliable insight into the asset, financial and earnings position. Not all of the measurement and disclosure requirements that are required for financial statements in accordance with Swiss GAAP FER need to be met.

concept Framework concept

The framework concept, which is binding for all companies, sets out the principles on which accounting according to Swiss GAAP FER is based. The framework concept includes the following elements in particular: purpose and content, objectives of the annual financial statements, principles of the annual financial statements, permissible evaluation concepts and qualitative requirements. In addition, the principles of Swiss GAAP FER are described and the relationship to tax law is explained.

FER 1 Basics

This standard regulates the procedure, the purpose of accounting and the principles according to Swiss GAAP FER. The latter are:

  • Promote meaningful accounting
  • True & Fair View as the foundation
  • Principle-oriented specialist recommendations with a generally applicable framework concept
  • Granting voting rights; Disclosure of the methods chosen
  • Creation of favorable conditions for a possible transition to international standards.

In principle, the entire set of rules, Swiss GAAP FER, must be observed. Small organizations that do not exceed two of the following criteria for two consecutive years can limit themselves to applying the core FER

  1. Balance sheet total of CHF 20 million
  2. Annual sales of CHF 40 million
  3. 250 full-time positions on an annual average.
FER 2 rating

Swiss GAAP FER 2 “Evaluation” contains the evaluation guidelines. The valuation principles for individual balance sheet items are explained in detail and the treatment of any impairment is regulated. Foreign currency transactions and the creation and recording of deferred income taxes are also dealt with.

FER 3 Presentation and structure

It is the task of Swiss GAAP FER 3 “Presentation and structure” to provide a binding (minimum) structure for both the balance sheet and the income statement. The assets side of the balance sheet includes various, explicitly mentioned items of current and fixed assets. The liabilities side is divided into short-term or long-term debt capital and equity. The income statement can be drawn up using either the total cost or cost of sales method.

FER 4 Cash flow statement

Swiss GAAP FER 4 “Cash flow statement” deals with the cash flow through incoming and outgoing payments. The funds “Liquid funds” and “Net liquid funds” are permitted. The cash flow statement is divided into incoming and outgoing payments from operating, investing and financing activities. The technical recommendation also requires the disclosure of matters that do not affect liquidity and contains extensive explanations on the presentation.

FER 5 Off-balance sheet transactions

The company's obligations that are not directly reflected in the balance sheet are regulated in Swiss GAAP FER 5 "Off-balance sheet transactions". Particular attention is paid to contingent obligations and commitments in favor of third parties. (Derivatives are excluded from the core FER and treated separately in the other FER).

FER 6 attachment

Swiss GAAP FER 6 “Appendix” lists the information to be disclosed, in particular the valuation principles used and the valuation principles.

Further Swiss GAAP FER (Swiss GAAP FER 10-41, without FER 14, 21, 26 and 41)

The core FER and the other Swiss GAAP FER apply to both the individual financial statements and the consolidated financial statements. All questions that only concern the consolidated financial statements are dealt with separately in Swiss GAAP FER 30 “consolidated financial statements”. Swiss GAAP FER 30 is therefore only relevant for corporate groups. With Swiss GAAP FER 30, uncertainties as to the extent to which recommendations relate to individual organizations or groups are eliminated. Listed public companies must also comply with Swiss GAAP FER 31 “Supplementary specialist recommendations for listed companies”.

FER 10 Intangible assets

The treatment of intangible assets is regulated in Swiss GAAP FER 10 “Intangible assets”. A distinction is made between acquired and self-developed intangible values. The technical recommendation contains four conditions for the activation of self-developed intangible assets, which must be met cumulatively. The amortization of intangible assets should be carried out systematically over the future useful life. If this cannot be clearly determined, depreciation takes place over five years, in justified cases a maximum of 20 years. Intangible assets are also to be checked periodically for their intrinsic value. The technical recommendation defines the information to be disclosed in the appendix.

FER 11 Income taxes

The treatment of income taxes is the subject of Swiss GAAP FER 11 “Income Taxes”. A distinction is made between current and deferred income taxes. The former are to be calculated at the effective tax rate and the corresponding tax provision shown separately in the balance sheet or in the notes. The annual accrual of deferred income taxes is based on a balance sheet perspective. Deferred income tax liabilities are to be shown separately under provisions, deferred income tax assets under other assets. The deferred income tax expense must be shown separately in the income statement.

FER 13 Leasing transactions

Swiss GAAP FER 13 “Leasing transactions” regulates the presentation of leasing transactions by lessees. A distinction is made between finance leasing and operational leasing. The economic approach is used for finance leasing. Therefore, the four criteria listed in the technical recommendation are of a qualitative nature. Finance leasing is recorded in the consolidated balance sheet and must be shown separately. Operating leasing is not accounted for and must be disclosed in the notes. The profit from the sale of property, plant and equipment associated with the repurchase through a finance lease is to be deferred and dissolved over the term of the leasing contract. A loss from the sale of property, plant and equipment through a finance lease is charged immediately to the result for the period.

FER 15 Related party transactions

The disclosure of information relating to transactions with related parties is regulated in Swiss GAAP FER 15. The definition of related parties is based on the significant influence that they can exert on financial or operational decisions of the reporting company. In addition to inventory sizes (credit / liabilities), significant transactions must also be disclosed.

FER 16 Pension obligation

This technical recommendation deals with the accounting of the actual economic effects of pension obligations on the organization (employer). Pension obligations are understood to mean all obligations from pension plans and pension institutions that provide for benefits in the event of retirement, death or disability. Since in Switzerland the employee benefits scheme has to be independent, the term pension fund is used in the recommendation to simplify matters. The professional recommendation is not aimed at the pension funds themselves. The recording of the actual economic effects of the pension funds by the organization is not associated with any legally binding effect in favor or to the detriment of a pension fund.

The presentation of the actual economic effects of pension obligations requires clarification as to whether there are other assets (economic benefits) or liabilities (economic obligations) in addition to the contribution payments taken into account by the organization and the associated delimitations. The technical recommendation requires that the difference between the annual economic benefits and obligations be recorded in the income statement.

Since January 1, 2005, Swiss pension funds have been preparing their annual accounts in accordance with Swiss GAAP FER 26. These annual accounts show existing excess and deficit as well as separate employer contribution reserves of organizations and, together with contractual provisions, form a suitable basis for the necessary assessments. Additional calculations by the organization are therefore not necessary, but can be created and used as an option in accordance with internationally recognized regulations.

FER 17 Stocks

Swiss GAAP FER 17 “Inventories” provides for inventories to be valued at acquisition or production cost or at the (lower) realizable realizable value. These costs include all expenses incurred to bring the inventories to their current location or condition. The principle of individual evaluation also applies. The average method as well as FIFO or LIFO are mentioned by name as evaluation procedures. The appendix includes a. to disclose the valuation principles and methods.

FER 18 Property, plant and equipment

Swiss GAAP FER 18 “Property, plant and equipment” defines property, plant and equipment as physical assets that are available to the company for the production of goods, for the provision of services or for investment purposes. Activation criteria are defined. The principle of individual assessment is to be applied. The subsequent valuation must be made at acquisition or production cost less scheduled depreciation (over the useful life). The intrinsic value of property, plant and equipment must be checked in accordance with the provisions of Swiss GAAP FER 20. The disclosures also include a detailed schedule of fixed assets. Investment properties can either be recorded at current values ​​or at cost less depreciation.

FER 20 Impairments

Swiss GAAP FER 20 “Impairment” regulates the point in time at which an impairment test is to be carried out, which methods it is based on and how the effects are to be recorded in the annual financial statements. If there are signs of impairment, the realizable value of the asset must be calculated. If this is below the book value, the difference must be recognized as an impairment in the income statement. The realizable value is the higher of the net market value (sales price) and utility value (present value of future cash flows). The determination of the achievable value has to be done on the basis of the individual asset. Where this does not generate independent cash flows on its own, the calculation is based on the smallest possible group of assets. The impairment must be recognized in profit or loss and explained in the notes. The change in the underlying factors can completely or partially cancel out the previously recorded impairment.

FER 22 Long-term orders

According to Swiss GAAP FER 22 “Long-term orders”, long-term production orders are to be recorded using the percentage of completion method (PoC method). The PoC method must be used under the condition that the requirements listed in section 4 are met cumulatively. This means that pro rata profits are realized over the duration of the long-term contract in the appropriate period. If the requirements are not met, accounting is carried out using the Completed Contract method (CC method). To be disclosed are u. a. the accounting principles used for long-term contracts, the method used to determine the percentage of completion and the amount that was recognized as sales based on the PoC method.

FER 23 Provision

Swiss GAAP FER 23 “Provisions” defines provisions as a probable obligation based on a past event, the amount and / or due date of which is uncertain but can be estimated. Existing provisions are to be reassessed on each balance sheet date. Provisions that are no longer required must be released. A list of provisions must be drawn up that provides information about the individual components and their changes.

FER 24 Equity and transactions with shareholders

Swiss GAAP FER 24 “Equity and transactions with shareholders” regulates the presentation of the inventory or changes in equity as well as the treatment of own shares. The acquisition of own shares is accounted for at acquisition cost. Own shares are to be recorded as a minus item in equity and reported separately. There is no subsequent valuation of these stocks. Excess or shortfall in proceeds in the event of a later sale are not recognized in profit or loss, but as an addition or Reduction of capital reserves (premium) recorded. A detailed statement of equity must also be prepared.

FER 27 Derivative financial instruments

Derivative financial instruments that meet the definition of an asset or liability must be recognized on the balance sheet. Derivative financial instruments for trading purposes are to be valued at current values; Changes in value are recorded in the result for the period. Derivatives for hedging purposes and derivatives that are not held for trading or hedging purposes can be valued at current values ​​or according to the lowest value principle; The resulting changes in value are to be recorded in the result for the period. The amount of open derivatives must be disclosed in the notes. The report must be broken down into interest rates, foreign exchange, equity instruments / corresponding indices and other underlying assets. The purpose of holding derivative financial instruments must be disclosed.

FER 30 Consolidated financial statements

All additional requirements for the consolidated financial statements are contained in Swiss GAAP FER 30 “Consolidated Financial Statements”. The scope of consolidation is defined and the treatment of subsidiary, community and associated organizations as well as participations is regulated. Goodwill must generally be capitalized and usually amortized over five years (in justified cases a maximum of 20 years). As an option, the acquired goodwill can be offset against equity at the time of acquisition if the effects of a theoretical capitalization on equity and the profit or loss for the period are shown in the notes. Additional disclosures relate to group-specific issues, information on the breakdown of net sales and the most important components of the balance sheets of the organizations bought or sold.

FER 31 Additional specialist recommendations for listed companies

The recommendations apply to individual or consolidated financial statements of listed companies. The aim is to increase the informative value of these degrees. Their special features in terms of public accountability and the resulting increased requirements for transparency and international comparability are discussed. In addition to the specialist recommendation, the framework concept and the other specialist recommendations apply. It regulates the first-time application of Swiss GAAP FER, share-related payments, discontinued business areas, earnings per participation right, income taxes, financial liabilities, segment reporting and interim reporting.

Sector-specific Swiss GAAP FER (Swiss GAAP FER 14, 21, 26 and 41)

FER 14 Consolidated financial statements of insurance companies
In addition to and partially changing the specialist recommendations, the special provisions of Swiss GAAP FER 14 apply to the consolidated financial statements of insurance companies. The consolidated financial statements are also made up of four parts. In the income statement, the information must at least be broken down into non-life and life business. The assessment in the balance sheet can either be based on historical or current values. The amount not selected in each case, however, must be disclosed in the notes. The technical recommendation contains further regulations for the valuation of investments. Value adjustments that are no longer required must be reversed and technical provisions must be disclosed individually. Due to the changes in provisions, there are special features with regard to the cash flow statement.
FER 21 Accounting for charitable nonprofits

With this technical recommendation, the aim is to increase the informative value and comparability of the reporting of non-profit organizations (annual accounts and consolidated accounts). The peculiarity of the lack of profitability and fundraising of non-profit organizations is taken into account by supplementing the annual accounts / consolidated accounts with an account on the change in capital and a performance report.

Regardless of their legal form, charitable non-profit organizations within the meaning of Swiss GAAP FER 21 are in particular organizations that - provide charitable, in particular social services regardless of a claim for outsiders and / or membership in the general interest and - publicly approach an indefinite number from donors or receive free donations and / or are financed mostly with public funds. An important feature of a charitable non-profit organization in the sense of this technical recommendation is that the group of service recipients differs from the group of service providers (donors, founders, members, patrons, employees, etc.).

FER 26 Accounting of pension funds

Swiss GAAP FER 26 “Accounting for pension funds” regulates the accounting for pension funds. Financial statements according to Swiss GAAP FER 26 include the balance sheet, the operating account and the notes. Such an annual account covers the legal requirements and does not require an additional invoice.

In the balance sheet, the valuation is based on the actual values. Value fluctuation reserves are possible due to the long-term nature of the pension objectives. The technical recommendation itself does not contain any actuarial provisions and allows both the static and the dynamic method to be used for calculating the pension capital and technical provisions. The structure of the balance sheet and the operating account, as well as the relevant designations, are bindingly prescribed by Swiss GAAP FER 26. In the appendix, information on the fundamentals, the organization, the underwriting risks or the investments and the net result must be disclosed.

FER 41 Billing for building insurers and health insurers

The special recommendations apply to the annual accounts of the building and health insurers according to Art. 12 KVG. In addition, the framework concept and the other specialist recommendations apply (and Swiss GAAP FER 30 for consolidated financial statements). The provisions of this technical recommendation take precedence over those of the other technical recommendations. The overriding principle of Swiss GAAP FER applies, according to which the annual financial statements must give a true and fair view of the asset, financial and earnings position. Provisions for risks in the investments as well as technical equalization and safety provisions are permitted.

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