1  Basic principles

1.1 Presentation of accounts

The 2018 consolidated semi-annual financial statements were prepared in accordance with International Financial Reporting Standard IAS 34 on Interim Financial Reporting and conform to the Listing Rules as well as Article 17 of the Directive on Financial Reporting (DFR) of SIX Swiss Exchange. The same principles of accounting apply as for the 2017 consolidated financial statements.

Since 1 January 2018, the following new or amended IFRS accounting standards and interpretations have been used in the consolidated financial statements for the first time:

With the exception of IFRS 9 and IFRS 15, the IFRS amendments have no material impact on the consolidated financial statements.

IFRS 9

IFRS 9 sets out the classification and measurement of financial instruments and specifies the requirements for hedge accounting and the amortisation of financial assets.

The impact of IFRS 9 on the relevant balance sheet items was analysed and also quantified in terms of the amortisation of financial assets. This analysis revealed no need for changes to the consolidated financial statements.

IFRS 15

The standard contains new principles for recognising revenue based on the transfer of control.

To date, revenue and income on the sale of development property have been recognised on transfer of ownership of the respective development real estate unit. Effective 1 January 2018 in compliance with IFRS 15, Allreal recognises revenue and income by the percentage of completion (POC) method as of the time the contract of sale of the development real estate unit is notarised. These units are offset against prepayments made by purchasers and reported under the balance sheet item contract assets or contract liabilities.

In accordance with the modified retrospective approach, in cases where the contract of sale had been notarised but ownership had not been transferred as at 31 December 2017, gains on the sale of development real estate are recognised in the 2018 consolidated financial statements under equity with no impact on income. This concerns twelve units in the Kirschblütenweg development in Basel and four units in the Guggach development in Zurich, resulting in a gain of CHF 2.1 million, tax expenses of CHF 0.6 million and capitalised costs of CHF 17.8 million.

Income from realisation Projects & Development continues to be recognised by the percentage of completion (POC) method. In compliance with IFRS 15, positive order balances Projects & Development division are now reported under the balance sheet item contract assets (within current assets) and negative order balances as contract liabilities (within short-term liabilities). This impacted the consolidated financial statements as follows:

The cash flow statement reflected the impacts accordingly. Application of the modified retrospective approach eliminated the need to restate the previous year’s figures.

With the exception of income from renting investment real estate, which is recognised in accordance with IAS 17, and income from the sale of companies, income is presented in the consolidated financial statements in accordance with IFRS 15.

If IFRS 15 had not been applied, the amounts recognised through equity would have been reported in the income statement since ownership of all units whose sale had been notarised was transferred in the first half of 2018. Moreover, as a result of notarisation of the sale of eight units under the project Solistrasse Bülach ZH, reported income from sales Development of CHF 1.9 million would have been capitalised as part of buildings under construction and the gain of CHF 0.2 million would only have been recognised and accrued on transfer of ownership.

Some new or amended IFRS standards and interpretations have been adopted by the IASB, but will only enter into force in a subsequent accounting period. With the exception of the standards described below, no material adjustments are expected.

IFRS 16

The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. Long-term leases for properties fall under the scope of IFRS 16 and are to be recognised for the lessee’s right to use the asset.

A detailed analysis of the impacts of IFRS 16 on the consolidated financial statements has not yet been made; the standard will be applied for the first time in 2019.

Seen over the course of the year, individual business activities of the Allreal Group are subject to fluctuations, in particular in the Projects & Development division – for instance, the planning and execution of construction projects or the sale of development real estate. In the first half of 2018, no unusual events occurred that had a material impact on the assets, financial position and earnings of the Allreal Group.

The 2018 consolidated semi-annual financial statements were approved by the Board of Directors of Allreal Holding AG on 17 August 2018.

1.2 Scope of consolidation

Hammer Retex AG, together with its facility management service operation for third parties, was divested and deconsolidated on 28 March 2018, see 5. In all other respects, the scope of consolidation remained unchanged from 31 December 2017.