SIX Exchange Regulation reprimands Addex Therapeutics Ltd for several errors in its 2014 IFRS annual financial statements and its 2015 IFRS interim financial statements.

Addex Therapeutics Ltd breached the requirements of IFRS in its 2014 annual financial statements and the 2015 interim financial statements in the following ways:

In the 2014 annual financial statements (published on 29 April 2015), Addex Therapeutics Ltd failed to disclose its defeat in a French court of first instance on 9 March 2015 as a material event after the reporting date and consequently, no mention of this event was included in the contingent liability or critical accounting estimates and assumptions notes. As a result, readers of the financial statements found out about this court ruling only in the 2015 interim financial statements by when the French tax authorities, on the basis of the court ruling, had claimed the amount of EUR 1.2 million from the escrow account, that   had been set up in 2012 to cover this contingent liability. Moreover, the disclosures on the defined benefit pension obligation contained some errors.

In the 2015 interim financial statements, an arithmetic error in the income statement led to the operating loss line being overstated by CHF 89,901 (or 3%) as the net income of CHF 89,901 had not been deducted from the total operating expense of CHF 2,896,955. The net loss, however, was correctly stated. Furthermore, the disclosures on the segment reporting, the financial result and on the defined benefit pension obligation were also incorrect.

After considering the severity of the errors, the degree of fault as well as the fact that the company has  not been sanctioned during the last three years, SIX Exchange Regulation issued a sanction notice reprimanding Addex Therapeutics Ltd. The company has accepted the sanction notice and has corrected the errors in its 2015 annual financial statements or will correct them in its 2016 interim financial statements, respectively.

Previous sanctions in the area of financial reporting can be found at:

https://www.six-exchange-regulation.com/en/home/publications/explorer/sanction-decisions.html

Appendix regarding the accounting standards

Periodic financial reporting is part of the information required under the Stock Exchange 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 about financial reporting can be found at:

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

The following accounting standards were relevant for the assessment of the case in question According to IAS 37p86, unless the possibility of any outflow in settlement is remote, a company must disclose a brief description of the nature of a contingent liability for each class of contingent liability at the reporting date, together with an estimate of its financial effect and the uncertainties relating to the amount or timing of any outflow. Additionally, in IAS 10p3, events after the reporting period are described, among other things, as unfavorable events that occur between the end of the reporting period and the date when the financial statements are authorized for issue. The company must update the disclosures in its  financial statements to reflect such events, even when the information does not affect the amounts recognized (IAS 10p19 or IAS 10p21).

In accordance the with qualitative characteristics (QC) 12 of the Conceptual Framework for Financial Reporting issued by the International Accounting Standards Board (IASB) in September 2010, financial reports represent economic phenomena in words and numbers. To serve its purpose, financial reporting must be as complete, neutral and free from error as possible.