IFRS 9, IFRS 7 simplified method for receivables and contract assets disclosures

Swisscom Ltd – Annual report – 31 December 2020

Industry: telecoms

3 Operating assets and liabilities (extract)

3.1 Operating net working capital (extract)

Movements in operating assets and liabilities

Trade receivables

Other operating assets and liabilities

Contract assets and liabilities

Contract assets of Swisscom Switzerland primarily include deferrals arising in connection with the sale of bundled offerings in the mobile-phone area. In part, mobile handsets are sold on a subsidised basis, together with a mobile contract in a bundled offering. As a result of the allocation of revenue over the pre-delivered components (mobile handset), revenues are recognised earlier than the invoicing thereof. This results in contract assets deriving from this business being recognised. Contractual liabilities above all cover deferrals from payments for prepaid cards and prepaid Swisscom Switzerland subscription fees. In 2020, an amount of CHF 228 million was recorded as revenue which had been recognised as a contract liability as of 31 December 2019. Swisscom avails itself of the rules of IFRS 15.121 regarding the disclosure of the transaction price allocated to the performance obligation that are unsatisfied. The exemption is not applied in the case of mobile-phone contracts with the sale of a subsidised mobile handset and a minimum contract term. These contracts incorporate revenue of CHF 513 million (2021: CHF 370 million; 2022: CHF 143 million).

Accounting policies

Operating assets and liabilities

Total operating assets and liabilities used in the normal course of business are disclosed as current items in the balance sheet.

Trade receivables

Trade and other receivables are measured at amortised cost less impairment losses. Impairment losses on trade receivables are recognised, depending on the nature of the underlying transaction, in the form of individual valuation allowances or portfolio-based general valuation allowances which cover the anticipated default risk. As regards portfolio-based general valuation allowances, financial assets are grouped together based on homogeneous credit risk attributes, reviewed collectively for impairment and, whenever required, impairment losses are recognised. In addition to the contractually foreseen payment conditions, historical default rates and current information and expectations are taken into consideration in determining the expected future cash flows from the portfolio. Impairment losses for trade receivables are recognised as other operating expenses.

2.5 Financial risk management (extract)

Credit risks (extract)

Financial risks from operating activities

Credit risks on trade receivables, contract assets and other receivables arise from the Group’s operating activities. Credit risks from other receivables are insignificant. As an initial step, Swisscom divides the credit risks from operating activities between Swisscom Switzerland and Fastweb. Default risks are principally impacted by the individual attributes of the customers. They are also influenced by the default risk of customer groups and industry sectors. Swisscom has a receivables management system in place to minimise default losses. New customers are reviewed for their creditworthiness and maximum payment targets are set for customer groups. As regards their creditworthiness, customers are divided into groups for the purposes of monitoring default risk. In the process a differentiation is made between individual and business customers, among other things. In addition, the ageing structure of the receivables is taken into account, as is the industry segment in which a business customer is active. The split of trade receivables and contract assets by operating segment is as follows:

As at 31 December 2020, the maturities of trade receivables and contract assets as well as any applicable related valuation allowances may be analysed as follows:

As at 31 December 2019, the maturities of trade receivables and contract assets as well as any applicable related valuation allowances may be analysed as follows:

Movements in valuation allowances for trade receivables and contract assets may be analysed as follows: