Annual Report - Sonova Holding AG

Short-term debts
Short-term debts consist of short-term bank debts and
all other interest bearing debts with a maturity of 12 months or
less.
Provisions
Provisions are recognized when the Group has a present
obligation (legal or constructive) as a result of a past event, where
it is probable that an outflow of resources will be required to
settle the obligation, and where a reliable estimate can be made
of the amount of the obligation. If the effect of the time value
of money is material, provisions are determined by discounting
the expected future cash flows. The Group recognizes provisions
for warranty costs to cover any costs arising from the warranty
given on the sale of its products. The provision is calculated
using historical and projected data on warranty rates, service
costs, remaining warranty period and number of hearing aids
on which the warranty is still active. Short-term portions of
warranty provisions are reclassified to short-term provisions
at each reporting date.
Income taxes
Income taxes include current and deferred income taxes.
Phonak is subject to income taxes in numerous jurisdictions and
significant judgement is required in determining the worldwide
provision for income taxes. The multitude of transactions and
calculations imply estimates and assumptions. The Group recognizes
liabilities based on estimates of whether additional taxes
will be due.
Where the final tax outcome is different from the amounts
that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which
such determination is made.
Deferred tax is recorded on the valuation differences
(temporary differences) between the tax bases of assets and
liabilities and their carrying values in the consolidated balance
sheet. Deferred tax assets relating to tax loss carry-forwards
are recognized only to the extent that it is probable that
taxable income will be available against which the tax losses
can be offset.
Provision is made for non-recoverable withholding taxes
only on anticipated dividend distributions from subsidiaries.
No provision is made in respect of possible future dividend distributions
from undistributed earnings, as the parent is able
to control the timing of the reversal of the temporary difference
and such amounts are considered to be permanently reinvested.
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Consolidated Financial Statements
Revenue recognition
Sales are recognized net of sales taxes and discounts upon
delivery of products and reasonably assured collectibility of
the related receivables. Probable returns of products are estimated
and the related revenue is deferred. Intercompany sales
are eliminated.
Sales of services are recognized in the accounting period in
which the services are rendered.
Segment reporting
A business segment is a group of assets and operations
engaged in providing products or services that are subject to risks
and returns that are different from those of other business
segments. A geographical segment is engaged in providing products
or services within a particular economic environment
that are subject to risks and returns that are different from those
of segments operating in other economic environments.
Impairment
Phonak assesses at each reporting date whether there is any
indication that an asset may be impaired. If any such indication
exists, the recoverable amount of the asset is estimated.
The recoverable amount of an asset or a cash-generating unit
is the higher of its fair value less selling costs and its value in use.
Value in use is the present value of the future cash flows
expected to be derived from an asset or cash-generating unit.
If the recoverable amount is lower than the carrying amount,
an impairment loss is recognized. Impairment of financial assets
is described under the section on financial instruments.
For goodwill, an annual impairment test is performed in
the first half of each financial year, even if there is no indication
of impairment (see “business combinations and goodwill” on
page 53).
Related parties
A party is related to an entity if the party directly or indirectly
controls, is controlled by, or is under common control
with the entity, has an interest in the entity that gives it significant
influence over the entity, has joint control over the entity
or is an associate or a joint venture of the entity. In addition,
members of the key management personnel of the entity or close
members of their family are also considered related parties as
are post-employment benefit plans for the benefit of employees
of the entity. No related party exercises control over the Group.