SIX Exchange Regulation Reaches An Agreement with HOCHDORF Holding AG

SIX Exchange Regulation has reached an agreement with HOCHDORF Holding AG in connection with a breach of the accounting standards (Swiss GAAP FER) in the 2017 interim financial statements. The identified deficiencies relate to the treatment of a mandatory convertible bond. As part of the agreement, the company has committed itself to correct the errors in the 2017 Swiss GAAP FER annual as well as in the 2018 interim financial statements and to make a payment of CHF 10,000 to the Swiss Foundation for accounting and reporting recommendations.

In order to finance the acquisition of Pharmalys Laboratories SA in December 2016, HOCHDORF Holding AG issued on 30 March 2017 a mandatory convertible bond which was entirely recognised as equity in the 2017 interim financial statements. However, this mandatory convertible bond should have been split into an equity and a liability component according to Swiss GAAP FER. As a consequence, the recognised interest expense was too high. These omissions lead to a understated net income and an overstated shareholders’ equity in the 2017 interim financial statements.

As part of the agreement, HOCHDORF Holding AG has committed itself to correct and disclose the errors in the 2017 Swiss GAAP FER annual as well as in the 2018 interim financial statements. In addition, the company will make a payment of CHF 10,000 to the Foundation for accounting and reporting recommendations as part of the agreement.

The investigation opened by SIX Exchange Regulation against HOCHDORF Holding AG in connection with the 2017 Swiss GAAP FER interim financial statements has been terminated with the conclusion of the agreement. Furthermore, this agreement results in a more timely public information than would have been the case with a duly completed sanction proceeding.

This and previous publications of agreements in connection with financial reporting can be found at:  https://www.six-exchange-regulation.com/en/home/publications/explorer/communiques.html

Obligations concerning financial reporting

Periodic financial reporting is part of the information required under the Financial Market Infrastructure Act and the Listing Rules to ensure a functional market. As part of this process, issuers must comply with the applicable financial reporting standards.

Information on the field of financial reporting can be found at:

https://www.six-exchange-regulation.com/en/home/issuer/obligations/financial-reporting.html

Relevant accounting standards in assessing the case in question:

According to Swiss GAAP FER-Framework/17, liabilities originate from past transactions or events, if a future cash outflow is probable. According to Swiss GAAP FER-Framework/19, shareholders’ equity is the sum of all assets less the sum of all liabilities. Expenses, according to Swiss GAAP FER- Framework/22, arise through the decrease of assets or the increase of liabilities in the reporting period. Should financial liabilities comprise elements of both equity and liability, the recognition method must be disclosed according to Swiss GAAP FER 31/7.