Notes to the consolidated financial statements
Basis of preparation
The consolidated financial statements of dormakaba Group (“dormakaba”) include the operations of dormakaba Holding AG and all direct and indirect subsidiaries in which dormakaba controls more than 50% of votes or otherwise has the power to govern the financial and operating policies. Investments in associates where dormakaba exercises significant influence, but does not have control (normally with an interest between 20% and 50%), and in joint ventures are considered for using the equity method of accounting.
The unaudited consolidated half-year financial statements cover the period from 1 July 2022 until 31 December 2022 and are prepared in accordance with the rules of the Swiss GAAP FER 31 (“Complementary Recommendation for Listed Public Companies”) relating to interim financial reporting (Generally Accepted Accounting Principles/ FER = Fachempfehlungen zur Rechnungslegung).
The consolidated half-year report should be read in conjunction with the consolidated financial statements compiled for the financial year ended 30 June 2022, as it represents an update of the last complete financial statements and therefore does not contain all information and disclosures required in year-end consolidated financial statements. The consolidated financial statements are prepared in accordance with Swiss GAAP FER and comply with the provisions of the listing rules of the SIX Swiss Stock Exchange as well as the Swiss company law.
The operational performance and the market development are described in the chapter business performance and should be read in conjunction with this consolidated half-year report.
Income tax expense is recognized based upon the best estimate of the weighted average annual income tax rate expected for the full financial year. The preparation of the consolidated half-year financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and disclosure of contingent liabilities at the date of the consolidated half-year financial statements. If in future such estimates and assumptions, which are based on management’s best judgment at the date of the consolidated half-year financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the reporting period in which the circumstances change.
dormakaba treats transactions with minority interests that do not result in a loss of control as transactions with equity owners of dormakaba. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and minority interests to reflect their relative interests in the subsidiary.
Changes to the operating model and Group internal IT cost recharge concept
As part of its new corporate strategy Shape4Growth, dormakaba changed its operating model as per 1 January 2022 to enable a stronger focus on its customers, to increase operational efficiency, to gain scale and to increase transparency and accountability.
The transition into the new operating model contains the following major elements:
- Global Operations and Marketing & Products organizations are separated in the new operating model and established as Global Functions. Their financial contribution to the Group’s financial performance is allocated to the respective sales Region; either directly attributable or allocated on a reasonable basis.
- Other Organizational Changes reflect the geographical and other structural shifts of responsibility. The change in Region Americas stems mainly from the centralization of the Safe Locks business (share of former AS EMEA segment) while the performance of the Region Asia Pacific is impacted by the assignment of the Market Middle East (former AS EMEA segment). The impact of the above changes on Region Europe & Africa are partly offset by the additional responsibility for Legic SmartCard and Connect technologies (previously reported in segment “other”).
- Global Research and Development costs contain the development costs for global products, and are organized as a Global Function (Product Development) and disclosed separately in the new operating model.
Further details on the structural changes, financial performance measurements and steering concept are disclosed within the segment reporting in the consolidated financial statements compiled for the financial year ended 30 June 2022.
In alignment with the corporate strategy Shape4Growth the principles for internal IT cost allocation were simplified as per 1 July 2022. While in the past the charges to the segments were based on consumed services within a catalogue, the new concept reflects IT cost by user as a share of the total costs. The changed concept therefore increases the transparency of the segment performance and the functional costs, taking the full IT costs per employee into consideration. To reflect this change in the internal accounting policy, the functional costs in the consolidated income statement as well as the financial performance of the individual segments in the segment reporting were restated.
A bridge of the previous year published former segment reporting and the consolidated income statement to the restated information in this report are disclosed in the chapter restatement of prior year financial information.