SIX Exchange Regulation, the independent oversight body that regulates trading on the SIX Swiss Exchange, has reprimanded Valartis Group AG, a Baar-based wealth and asset management firm, for several errors in its annual International Financial Reporting Standards (IFRS) financial statements for 2011, principally overstating its per share losses by 7%.
IFRS has been strengthened since the financial crisis of 2008 and Valartis Group AG was sanctioned for falling short of the rules. Specifically, the wealth and asset management firm made an erroneous presentation of earnings per share in 2011, said SIX Exchange Regulation, plus incomplete disclosures regarding goodwill impairment testing, as well as the incorrect disclosure of the classification of derivatives, which could have impacted any corporate investors.
The following violations of IFRS were identified in Valartis Group AG's annual IFRS financial statements for 2011:
• Due to a calculation error the loss per share from continuing operations was overstated by CHF 0.50 or 7%. Additionally, earnings per share from the discontinued operation were neither presented nor disclosed.
• Regarding the impairment test to ensure recoverability of goodwill among other disclosures the assumptions related to the expected net margin and the determination of multiplication factors were not disclosed. These are considered particularly important disclosures due to the significant discount on book value compared to the market capitalisation of Valartis Group AG. The error affects goodwill in the amount of CHF 27 million or 73% of the entire goodwill amount.
• The classification of derivative fair values was incorrectly disclosed as quoted prices even though the valuation was merely based on observable inputs. The error in the notes to the annual financial statements pertains to derivative assets in the amount of CHF 9.3 million (89%) and the entire portfolio of derivative liabilities in the amount of CHF 5.9 million.
After considering the severity of the errors, the degree of fault, as well as the fact that the company has not been sanctioned during the last three years, SIX Exchange Regulation decided to issue a sanction notice against Valartis Group AG, warning them to ensure no repetition occurs. The company has accepted the sanction notice and says it will correct the errors in accordance with the requirements of IFRS in its annual financial statements for 2012.