Financial Report – Consolidated financial statements

Consolidation scope and principles

Consolidation scope

The consolidated financial statements are presented in euros and include all domestic and foreign com­panies which Zehnder Group AG controls directly or indirectly by either holding more than 50% of the voting rights or by otherwise having the power to control their operating and financial policies. Assets and liabilities as well as revenues and expenses are included at 100% in accordance with the full consolidation method. Minority interests in equity and in net profit of fully consolidated companies are recognised separately.

Holdings with a voting interest of between 20 and 49% (associated companies) are included in accordance with the equity method. Consolidated equity and the financial result for the period are accounted for proportionately.

The following changes were made in the consolidation scope compared to the previous year:

• Founding of Zehnder Hungary Kft. on 26 February 2021 in Hungary;
• Founding of Zehnder Climate Ceiling Solutions GmbH on 8 March 2021 in Germany;
• Completion of the acquisition of the 51% stake in Zhongshan Fortuneway Environmental Technology Co., Ltd. on 28 April 2021 in China;
• Sale by Zehnder (China) Indoor Climate Co., Ltd. of the 49% stake in Eric & Bason Building Environment Technologies Co., Ltd. on 28 April 2021 in China;
• Founding of Zehnder Clean Air Solutions NA, LLC on 11 June 2021 in the USA;
• Merger of Zehnder Group Iç Mekan Iklimlendirme Sanayi Ticaret Ltd Şti with Sanpan Isitma Sistemleri Sanayi ve Ticaret Aş on 2 August 2021 in Turkey;
• Liquidation of Recair GmbH on 16 August 2021 in Germany;
• Purchase of a majority share of 75% in Caladair International SAS and of 100% of Calihce SCI on 28 October 2021 in France.

Consolidation principles

General

Zehnder Group prepares its financial statements in accordance with the existing guidelines of Swiss GAAP FER (Swiss Accounting and Reporting Recommendations).

The consolidated balance sheet and income statement are based on the financial statements of the companies as defined in the consolidation scope for the year ended 31 December.

The data presented in the consolidated financial statements are based on uniform accounting and valuation principles which apply to all Group companies.

Intergroup receivables and payables as well as revenues and expenses are eliminated in the consolidated statements. Intermediate profits in inventories are eliminated as well.

Foreign currency translation

For the year under review, the financial statements of subsidiaries which report in currencies other than the euro were translated into euros (EUR) as follows:

• Balance sheet figures at year-end exchange rates;
• Income statement figures at average exchange rates for the year;
• Cash flow statement figures at average exchange rates for the year.

Differences arising from applying these disparate exchange rates as well as foreign exchange differences on long-term loans of an equity nature to Group companies were booked to the cumulative translation differences of the consolidated equity capital. Foreign currency differences arising from repayments of long-term loans of an equity nature are also booked to consolidated equity capital and are not transferred to the income statement until such time as a disposal takes place.

The principal rates of exchange used for consolidation are shown in the table below.

Capital consolidation

Capital is consolidated to show equity capital as if the Group were one single company. To do this, it is necessary to offset the net worth of consolidated companies against the capital allotted to them.

Capital consolidation is based on the purchase method, whereby the acquisition cost of a Group company is eliminated at the time of acquisition against the fair value of net assets acquired, with the remainder recorded as goodwill that is subsequently offset against equity of the Group.

In a gradual acquisition, where the investment in shares in an associated company is increased so that takeover of control occurs, the values of participations held to date are initially posted as an outflow, taking any goodwill into account. The fair value of this outflow is determined by the terms of acquisition at the time of takeover of control. Any resulting profit or loss is reflected in the result from associated companies. ­A revaluation of the entire shareholding in accordance with the terms of acquisition at the time of takeover of control is subsequently carried out as if it were a new acquisition.