SIX Exchange Regulation has reached an agreement with Orascom Development Holding Ltd in connection with a breach of International Financial Reporting Standards (IFRS) in the 2011 annual financial statements.
The identified deficiency relates to losses of two financial investments which were not recognised in profit or loss. The company will correct the error in the 2012 half-year financial statements and will make a payment of CHF 15,000 to the IFRS Foundation as part of the agreement.
Orascom Development Holding Ltd infringed the valuation rules for financial instruments pursuant to IAS 39 in the IFRS 2011 annual financial statements in the case of two financial investments classified as available for sale. The infringement concerns the fact that no impairment has been recognised in profit or loss despite a significant decrease in the fair values of 61% and 63%, respectively, below cost of the two financial investments.
Hence, the company is infringing not only the requirements of IAS 39 but also its own accounting principles which already require an impairment to be recognised in profit or loss in the case of a fair value decline of 20%. As a result of this error, the operating loss for 2011 was reduced by CHF 35 million (45%). This operating loss should have amounted to CHF 111 million for the 2011 business year, if the unrealised losses of the two financial investments were correctly recorded in profit or loss.
Orascom Development Holding Ltd will disclose the error in the 2012 half-year financial statement and at the same time, it will voluntarily early apply the new IFRS regulations concerning financial instruments ahead of time. Furthermore, as part of the agreement reached with SIX Exchange Regulation, a payment of CHF 15,000 will be made to the IFRS Foundation.
The investigation against Orascom Development Holding Ltd is concluded with an agreement being reached as this course of action resulted in a more timely public disclosure than would have been the case with a duly completed sanction procedure.
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