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Screenshot of a breaking news alert e-mail from Q2 2017
SIX Exchange Regulation announced that it has reached an agreement with HOCHDORF Holding AG in connection with a breach of the accounting standards (Swiss GAAP FER) in the 2017 interim financial statements.
The identified deficiencies relate to the treatment of a mandatory convertible bond. As part of the agreement, the company has committed itself to correct the errors in the 2017 Swiss GAAP FER annual as well as in the 2018 interim financial statements and to make a payment of CHF 10,000 to the Swiss Foundation for accounting and reporting recommendations.
In order to finance the acquisition of Pharmalys Laboratories SA in December 2016, HOCHDORF Holding AG issued on 30 March 2017 a mandatory convertible bond which was entirely recognised as equity in the 2017 interim financial statements. However, this mandatory convertible bond should have been split into an equity and a liability component according to Swiss GAAP FER.
As a consequence, the recognised interest expense was too high. These omissions lead to a understated net income and an overstated shareholders’ equity in the 2017 interim financial statements.