3) Accounting and valuation principles

The accounting and valuation principles used in these interim consolidated financial statements correspond to the methods applied in the consolidated annual financial statements as at 31 December 2010, with the exception of the following new or revised standards and interpretations: IAS 24 (Related Party Disclosures), IAS 32 (Financial Instruments: Presentation, Amendment to IAS 32 on Classification of Rights Issues denominated in a foreign currency), IFRIC 14 (The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction), IFRIC 19 (Extinguishing Financial Liabilities with Equity Instruments) and changes in the context of Annual Improvements Projects 2007 – 2010. The aforementioned new or revised standards have had no material impact on the interim financial statements.

Foreign currencies were converted at the exchange rate of EUR/CHF 1.219 on the balance sheet date and at an average rate of EUR/CHF 1.270. Positions in other currencies are insignificant and were converted using the rates published by the European Central Bank (ECB Fixings). The unrealised exchange rate gains and losses on intragroup transactions are recognised in the consolidated cash flow statement under other income and expenses not affecting cash.

Impairment of assets

Repower Furnizare România S.R.L. (formerly S.C. Elcomex EN S.R.L.), a subsidiary of Repower AG, is a company in Romania whose purpose is to sell electricity and natural gas to small and medium-sized enterprises (SMEs). Due to indications of impairment, Repower Furnizare România S.R.L. was subjected to an impairment test for the 2011 interim financial statements. Repower Furnizare România S.R.L. was identified as a Cash Generating Unit (CGU) for the impairment test.

The CGU consists of the following assets:

  • Property, plant and equipment
  • Intangible assets (goodwill, customers, software)
  • Net current assets

The value of the CGU is provided by the intangible assets, in particular goodwill and customers. The impairment test confirmed the indications. A full impairment loss was recognised for the intangible assets in the amount of TCHF 27,424 arising from the acquisition, since the CGU no longer has any intrinsic value. The impairment loss was recognised in the consolidated statement of comprehensive income under depreciation/amortisation and impairment.

The impairment is mainly attributable to the following events:

  • Significant changes on the market, leading to reduced and at times negative margins
  • Discontinuation of all gas business operations from May 2011

To determine the intrinsic value of the CGU, the carrying amount was compared against the value in use. A fair value less costs to sell cannot be determined since at present there are no reference values for the Romanian market. When calculating the value in use, the current plans authorised by management were taken into account. The cash flow forecasts refer to a period of five years. The residual corporate value was extrapolated using a growth rate of 3%. A discount rate of 6.7% before tax (11.4% after tax) was applied. The main assumption on which the cash flows were calculated is a realistic estimate of gross margin, primarily based on the most recent economic developments.

  CGU assets at 30 June 2011 Before impairment After impairment
  CHF thousands    
  Property, plant and equipment 115 115
  Goodwill 18,720 -
  Customers 8,704 -
  Software 6 6
  Intangible assets 27,430 6
  Short-term receivables 8,211 8,211
  Current liabilities -10,088 -10,088
  Cash and cash equivalents -4 -4
  Net current assets -1,881 -1,881

Parallel to the impairment, lower expectations have resulted in a reduction in liabilities in connection with the full takeover of Repower Furnizare România S.R.L. Consequently, the related liability has declined from TCHF 13,450 to TCHF 396. The reduced liability has added TCHF 13,054 to other operating income.

Correction to prior-year figures

In the 2010 interim financial statements, part of the energy profile business was classified as own use instead of held-for-trading. This led to an error as at 30 June 2010, as a result of which net sales were overstated by CHF 226 million and energy procurement by CHF 222 million. Adjusting the unrealised income lowered income before taxes by CHF 4 million to CHF 18 million as at 30 June 2010 (instead of CHF 22 million). The impact on interim earnings per share is CHF -1.06, which was consequently CHF 4.18 (instead of CHF 5.24).

This correction resulted in an overstatement of CHF 16 million in positive replacement values for held-for-trading positions in the balance sheet as at 30 June 2010. The figure for negative replacement values for held-for-trading positions, on the other hand, is CHF 20 million higher. Equity as at 30 June 2010 was CHF 4 million lower at CHF 871 million.

The prior-year figures in the consolidated statement of comprehensive income, changes in consolidated equity and the consolidated cash flow statements have been adjusted in accordance with the corrected comparative figures. The fault was already rectified in the annual financial statements as at 31 December 2010.


In a news release dated 23 June 2011, Repower announced that a Group company had fallen victim to an embezzlement: An individual who has already been suspended had embezzled funds by circumventing existing control mechanisms and engaging in fraudulent accounting. The fraud resulted in losses to Repower Vendita Italia S.p.A. of around EUR 4-6 million (CHF 5-7 million) over the 2003-2011 period. A loss of around EUR 1 million (CHF 1.3 million) is recognised in the 2011 interim financial statements under other operating expenses. The current status of information is not binding. Repower is in the process of clarifying the facts with external support. As soon as the situation is clear, the prior-year figures will be restated in the financial statements at 31 December 2011.