The 2003 consolidated financial statements of Lonza Group AG (Lonza) were not prepared in full conformity with IFRS (International Financial Reporting Standards). In Lonza’s segment reporting, an impairment of CHF 100 million was not allocated to the corresponding segments. According to the applicable IFRS, impairments are to be reported individually per segment and therefore taken into account in calculating the segment results.
Although the incorrectly stated impairment had no impact on the reported consolidated results, it should be noted that segment reporting is a key element for properly assessing the assets and liabilities, financial position and profits and losses of individual business areas and hence for drawing conclusions regarding the main sources of income of the group as a whole.
In addition, the CHF 100 million impairment that Lonza recorded on its income statement included writedowns on inventories in the amount of CHF 29 million. According to IFRS, writedowns on inventories are explicitly deemed not to be impairments. Thus for investors, it was not apparent that the impairment also included significant writedowns on inventories.
Furthermore, Lonza’s 2003 consolidated income statement included “non-recurring items” of CHF 158 million as a subtotal. IFRS permits the use of additional subtotals in the income statement. However, the term “non-recurring” in this instance is inappropriate because the related impairment and restructuring costs are not a matter of a one-time occurrence, but instead are recurring expenses. For example, in 2001 and 2002 Lonza already recorded discontinuance and restructuring costs as “non-recurring” expense or, as it were, a part of its total non-recurring items.
The company’s disclosure in its 2003 consolidated financial statements represents a violation of the provisions of the Listing Rules. Therefore, the Committee of the Admission Board has issued a reprimand with related publication against Lonza.
Periodic financial reporting in compliance with applicable accounting standards represents an integral part of the information that contributes to transparent trading as stipulated by the Stock Exchange Act and the Listing Rules. One of the regulatory tasks of SWX is to ensure enforcement of the transparency rules imposed on issuers.
