Periodic financial reporting and the accounting provisions form an integral part of the information that contributes to transparent trading in accordance with the provisions of the Stock Exchange Act and the Listing Rules. One of the tasks of the SWX is to enforce the transparency provisions that apply to issuers.
Kudelski used the Swiss GAAP FER in connection with its consolidated accounts for 2001. The Swiss GAAP FER are recognized as accounting standards by the Admission Board of the SWX (see Art. 67 of the Listing Rules). The group auditors' report on the consolidated accounts for 2001, produced by PricewaterhouseCoopers Ltd, did not contain any qualification regarding the use of accounting provisions.
In the spring and summer of 2002, various media reports and a study produced by the investment bank Goldman Sachs accused Kudelski of using "aggressive" accounting methods. According to these reports, Kudelski entered receivables from clients as loans and increased its cash flow with financial transactions, and if this were taken into account, the reported operating cash flow of CHF 55m would transform into a negative cash flow of CHF 3.6m.
The enquiries made by the SWX in view of these reports focused mainly on customer loans and their disclosure and treatment in the cash flow statement. From an accounting point of view, only actual cash flows should be entered in the cash flow statement as inflows and outflows. In principle, financial transactions that do not result in any payments should not be taken into account in the cash flow statement.
In the course of its enquiries, the SWX has not discovered any violations of the provisions of the Listing Rules and therefore declines to initiate a sanctions procedure. After the publication of the consolidated accounts for 2001, there was a change in the circumstances that formed the basis for reporting a customer loan of CHF 30.9m as a long-term financial asset. Once it transpired that it would not be possible to use the loan as planned, it was repaid in the course of the 2002 financial year. Accordingly, Kudelski's balance sheet and cash flow statement were adjusted retroactively as of 31 December 2001. In consultation with the SWX, the operating cash flow for 2001 was reduced by CHF 30.9m to CHF 25.5m. The customer loan in question was subsequently transferred from non-current to current assets. The repayment of the loan in 2002 had a positive effect on the company's operating cash flow for the 2002 financial year; it increased the operating cash flow by CHF 30.9m. These adjustments had no effect on the reported annual profit for 2001 or the overall change in the cash flow statement. They simply reflect the early repayment of a customer loan in 2002 that was not expected at the time the balance sheet was drawn up (March 2001).
