Notes to the Consolidated Financial Statements

1. Organization, Business Activities, and Group Companies

Chocoladefabriken Lindt & Sprüngli AG and its subsidiaries manufacture and sell premium chocolate products. The products are sold under the brand names Lindt, Ghirardelli, Caffarel, Hofbauer, Küfferle and since September 2014, Russell Stover, Whitman's and Pangburn's. The Group has twelve manufacturing plants worldwide (six in Europe and six in the United States) and mainly sells in countries within Europe and the NAFTA countries.

The Company is a limited liability company incorporated and domiciled in Kilchberg ZH, Switzerland.

The Company has been listed since 1986 on the SIX Swiss Exchange (ISIN number: registered shares CH0010570759, participation certificates CH0010570767).

These consolidated financial statements were approved for publication by the Board of Directors on March 9, 2015.

The subsidiaries of Chocoladefabriken Lindt & Sprüngli AG as at December 31, 2014 are:

Country Domicile Subsidiary Business activity Percentage of ownership Currency Capital in million
Switzerland Kilchberg Chocoladefabriken Lindt & Sprüngli (Schweiz) AG P &  D 100 CHF 10.0
    Indestro AG 1) M 100 CHF 0.1
    Lindt & Sprüngli (International) AG 1) M 100 CHF 0.2
    Lindt & Sprüngli Financière AG 1) M 100 CHF 5.0
Germany Aachen Chocoladefabriken Lindt & Sprüngli GmbH 1) P & D 100 EUR 1.0
France Paris Lindt & Sprüngli SAS P &D 100 EUR 13.0
Italy Induno Lindt & Sprüngli SpA 1) P & D 100 EUR 5.2
  Luserna Caffarel SpA P & D 100 EUR 2.2
Great Britain London Lindt & Sprüngli (UK) Ltd. 1) D 100 GBP 1.5
USA Stratham, NH Lindt & Sprüngli (USA) Inc. 1) P & D 100 USD 1.0
  San Leandro, CA Ghirardelli Chocolate Company P & D 100 USD 0.1
  Kansas City, MO Russell Stover Candies, LLC. 2) P & D 100 USD 0.1
Spain Barcelona Lindt & Sprüngli (España) SA D 100 EUR 3.0
Austria Vienna Lindt & Sprüngli (Austria) Ges.m.b.H. 1) P & D 100 EUR 4.5
Poland Warsaw Lindt & Sprüngli (Poland) Sp. z o.o. 1) D 100 PLN 17.0
Canada Toronto Lindt & Sprüngli (Canada) Inc. 1) D 100 CAD 2.8
Australia Sydney Lindt & Sprüngli (Australia) Pty. Ltd. 1) D 100 AUD 1.0
Mexico Mexico City Lindt & Sprüngli de México SA de CV 1) D 100 MXN 248.1
Sweden Stockholm Lindt & Sprüngli (Nordic) AB 1) D 100 SEK 0.5
Czech Republic Prague Lindt & Sprüngli (Czechia) s.r.o. 1) D 100 CZK 0.2
Japan Tokyo Lindt & Sprüngli Japan Co., Ltd. D 100 JPY 1,227.0
South Africa Capetown Lindt & Sprüngli (South Africa) (Pty) Ltd. 1) D 100 ZAR 100.0
Hong Kong Hong Kong Lindt & Sprüngli (Asia-Pacific) Ltd. 1) D 100 HKD 180.5
China Shanghai Lindt & Sprüngli (China) Ltd. D 100 CNY 144.5
Russia Moscow Lindt & Sprüngli (Russia) LLC 1) D 100 RUB 10.0
Brazil São Paulo Lindt & Sprüngli (Brazil) Holding Ltda. 3) D 100 BRL 9.0
    Lindt & Sprüngli (Brazil) Comércio de Alimentos S.A. 3),4) D 51 BRL 8.0

D – Distribution, P – Production, M – Management

1) Subsidiaries held directly by Chocoladefabriken Lindt & Sprüngli AG.
2) Acquired in 2014. See note 32.
3) Newly founded in 2014.
4) The Joint Venture with the CRMPAR Holding S.A. is a subsidiary with substantial non-controlling interests and is therefore fully consolidated according to IFRS 10 “Consolidated Financial Statements”. The non-controlling interests are CHF 1.6 million. These are not material for the Group.

2. Accounting Principles

Basis of preparation — The consolidated financial statements of Chocoladefabriken Lindt & Sprüngli AG (“Lindt  & Sprüngli Group” or “Group”) were prepared in accordance with International Financial Reporting Standards (IFRS).

With the exception of the marketable securities, financial assets and the derivative financial instruments, which are recognized at fair value, the consolidated financial statements are based on historical costs.

When preparing the financial statements, Management makes estimates and assumptions that have an impact on the assets and liabilities presented in the annual report, the disclosure of contingent assets and liabilities and the disclosure of income and expenses in the reporting period. The actual results may differ from these estimates.

New ifrs standards and interpretations

New and amended IFRS and interpretations (effective as of January 1, 2014 and thereafter) — The Lindt & Sprüngli Group has applied the following new IFRS standards and interpretations in 2014:

  • Amendment to IAS 32 – “Financial instruments: Presentation” on offsetting of financial assets and financial liabilities;
  • Amendment to IAS 39 – “Financial instruments: Recognition and measurements” on the novation of derivatives and the continuation of hedge accounting; and

None of the new or amended IFRS and interpretations had a significant impact on the Lindt & Sprüngli Group's financial position or performance.

New and amended IFRS and interpretations that are required in future periods

The following standards, amendments and interpretations have already been published and are required in future periods, but have not been early adopted by the Lindt & Sprüngli Group:

  • IFRS 9 – “Financial Instruments” addresses classification, measurement, and recognition of financial assets and financial liabilities. The new standard will fully replace IAS 39 – “Financial instruments: Recognition and measurements” in 2018; and
  • IFRS 15 – “Revenue from contracts with customers” will replace IAS 11 – “Construction Contracts” and IAS 18 – “Revenue” and related interpretations in 2017.

None of these standards are expected to have a significant effect on the consolidated financial statements of the Lindt & Sprüngli Group.

Consolidation method — The consolidated financial statements include the accounts of the parent company and all the entities it controls (subsidiaries) up to December 31 of each year. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns trhough its power over the entity.

Non-controlling interests are shown as a component of equity on the balance sheet and the share of the profit attributable to non-controlling interests is shown as a component of profit for the year in the income statement.

Newly acquired companies are consolidated from the effective date of control using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are recognised in the balance sheet at fair value. Acquisition costs exceeding the Group's share of the fair value of the identifiable net assets are recognised as goodwill. Transaction costs are recognised as an expense in the period in which they are incurred.

Foreign currency translation — The consolidated financial statements are presented in Swiss francs, which is the parent company's functional and reporting currency. In order to hedge against currency risks, the Group engages in currency forwards and options trading. The methods of recognizing and measuring these derivative financial instruments in the Balance Sheet are explained below.

Foreign exchange differences arising from the translation of loans that are held as net investments in a foreign operation are recognized separately in other comprehensive income. The repayment of these loans is not considered as a divestment (partial or full). As a consequence, the respective accumulated currency translation differences are not recycled from other comprehensive income to the income statement.

Foreign exchange rates — The Group applied the following exchange rates:

    Balance Sheet year-end rates Income Statement average rates
CHF   2014 2013 2014 2013
Euro zone 1 EUR 1.20 1.23 1.21 1.23
USA 1 USD 0.99 0.89 0.94 0.92
Great Britain 1 GBP 1.54 1.47 1.51 1.45
Canada 1 CAD 0.85 0.84 0.84 0.89
Australia 1 AUD 0.81 0.79 0.82 0.89
Poland 100 PLN 28.10 29.55 28.94 29.39
Mexico 100 MXN 6.73 6.80 6.87 7.19
Sweden 100 SEK 12.79 13.88 13.32 14.20
Czech Republic 100 CZK 4.34 4.48 4.40 4.71
Japan 100 JPY 0.83 0.85 0.86 0.95
South Africa 100 ZAR 8.55 8.49 8.45 9.59
Hong Kong 100 HKD 12.76 11.48 11.80 11.95
China 100 CNY 15.96 14.71 15.50 14.94
Russia 100 RUB 1.72 2.70 2.29 2.78
Brazil 100 BRL 36.84 37.30

Property, plant, and equipment — Property, plant, and equipment are valued at historical cost, less accumulated depreciation. The assets are depreciated using the straight-line method over the period of their expected useful economic life. Depreciation on assets other than land is calculated using the straight-line method to write down their cost to their residual values. The following useful lives have been applied:

  • Buildings (incl. installations): 5 – 40 years
  • Machinery: 10 –15 years
  • Other fixed assets: 3 – 8 years

Land is not depreciated. Profits and losses from disposals are recorded in the Income Statement.

Intangible assets

Goodwill — Goodwill is the excess of the costs of acquisition over the Group's interest in the fair value of the net assets acquired. Goodwill is not amortized, but is tested for impairment at each balance sheet date instead.

Other intangible assets — “EDP Software” and “customer relationships” are recognized at cost and amortized on a straight line basis over their economic life from the initial date on which the Group can use them. “EDP Software” is amortized over a period of three to five years, “customer relationships” over a period of 10 to 20 years. The economic life of the intangible asset is regularly reviewed. “Brands and intellectual property rights” are not amortized but tested for impairment at each balance sheet date instead. All identifiable intangible assets (such as “brands and intellectual property rights” and “customer relationships”) acquired in the course of a business combination are initially recognized at fair value.

IMPAIRMENT — The Group records the difference between the realizable value and the book value of fixed assets, goodwill or intangible assets as impairment. The valuation is made for an individual asset or, if this is not possible, on a group of assets to which separate sources of cash flows are allocated. In order to establish the future benefits, the expected future cash flows are discounted. Assets with undefined utilization periods as for example goodwill or intangible assets, and which are not in use yet, are not depreciated and are subject to a yearly impairment test. Depreciable assets are tested for their recoverability, if there are signs, that the book value is no longer realizable.

Leasing — The Lindt & Sprüngli Group distinguishes between lease liabilities resulting from finance and operating leases.

Inventories — Inventories are valued at the lower of cost and net realizable value. Costs include all direct material and production costs, as well as overhead, which are incurred in order to bring inventories to their current location and condition. Costs are calculated using the FIFO method. Net realizable value equals the estimated selling price in the ordinary course of business less cost of goods produced and applicable variable selling and distribution expenses.

Cash and cash equivalents — Cash and cash equivalents includes cash on hand, cash in bank, other short-term highly liquid investments with an original maturity period of up to ninety days.

Financial assets — The Group recognizes, measures, impairs (if required), presents and discloses financial assets as required by IAS 39 – “Financial Instruments: Recognition and Measurement”, IAS 32 – “Financial Instruments: Presentation” and IFRS 7 – “Financial Instruments: Disclosures”. Loans and receivables are categorized as short-term assets, unless their remaining post-balance sheet date life exceeds twelve months. Within the reporting period the majority of loans and receivables have been accounted for as short-term commitments; they were included in the balance sheet items “Accounts receivable” and “Other receivables”. Value adjustments are made to outstanding receivables for which repayment is considered doubtful. Purchases and sales of financial assets are recorded on trade-date – the date on which the Group has committed to buy or sell the asset. Investments in financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried “at fair value through profit or loss”. The derecognition of a financial investment occurs at the moment when the right to receive future cash flows from the investment expires or has been transferred to a third party and the Group has transferred substantially all risks and benefits of ownership. Financial investments categorized as “available-for-sale” and “at fair value through profit or loss” are valued at fair value. “Loans and receivables” and “held-to-maturity” investments are valued at amortized cost using the effective interest method. Realized and unrealized profits and losses arising from changes in the fair value of financial investments categorized as “fair value through profit or loss” are reflected in the income statement in the reporting period in which they occur.

The fair value of listed investments is defined by using the current paid or, if not available, bid price. If the market for a financial asset is not active and / or the security is unlisted, the Group can determine the fair value by using valuation procedures. These are based on recent arm's length transactions, reference to similar financial instruments, the discounting of the future cash flows and the application of the option pricing models.

“Available-for-sale financial assets” which have a market value of more than 40% below their original costs or are, for a sustained 18-month period, below their original costs are considered as impaired and the accumulated fair value adjustment in equity will be recognized in the income statement. Impairment losses recognized in the income statement for an investment in an equity instrument classified as “available for sale” shall not be reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as “available for sale” increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss shall be reversed in the income statement.

Provisions — Provisions are recognized when the Group has a legal or constructive obligation arising from a past event, where it is likely that there will be an outflow of resources and a reasonable estimate can be made thereof.

Dividends — In accordance with Swiss law and the Company's Articles of Association, dividends are treated as an appropriation of profit in the year in which they are ratified at the Annual General Meeting and subsequently paid.

Financial liabilities — Financial liabilities are recognized initially when the Group commits to a contract and records the amount of the proceeds (net of transaction costs) received. Borrowings are then valued at amortized cost using the effective interest method. The amortized cost consists of a financial obligation at its initial recording, minus repayment, plus or minus accumulated amortization (the difference possible between the original amount and the amount due at maturity). Gains or losses

are recognized in the income statement as a result of amortization or when a borrowing is written off. A borrowing is written

off when it is repaid, abandoned or when it expires.

Employee benefits — The expense and defined benefit obligations for the significant defined benefit plans and other long-term employee benefits in accordance with IAS 19 (revised) are determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. This method takes into account years of service up to the reporting period and requires the Group to make estimates about demographic variables (such as mortality, turnover) and financial variables (such as future salary increase) that will affect the final cost of the benefits.

The cost of defined benefit plans has three components:

  • service cost recognized in profit and loss;
  • net-interest expense or income recognized in profit and loss; and
  • remeasurement recognized in other comprehensive income.

Service cost includes current service cost, past service cost and gains or losses on settlements. Past service cost is recognized in the period the plan amendment occurs. Curtailment gains and losses are accounted for as past service cost. Contributions from plan participants' or a third party reduce the service cost and are therefore deducted if they are based on the formal terms of the plan or arise from a constructive obligation.

Net interest cost is equal to the discount rate multiplied with the net defined benefit liability (asset) taking into account changes during the year. Remeasurements of the net defined benefit liability (asset) include actuarial gains and losses on the defined benefit obligation from:

  • changes in assumptions and experience adjustments;
  • return on plan assets excluding the interest income on the plan assets that is included in the net interest; and
  • changes in the effect of the asset ceiling (if applicable) excluding amounts included in the net interest.

Remeasurements recorded in other comprehensive income are not recycled.

The Group presents both components of the defined benefit costs in the line item “Employee benefits expense” in its Consolidated Income Statement. Remeasurements are recognized in the OCI. The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Group's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs.

For the other long-term employee benefits the present value of the defined benefit obligation is recognized at the balance sheet date. Changes of the present value are recorded as personnel expenses in the Income Statement.

Revenue recognition — Revenue consists of delivery of goods and services to third parties net of value-added taxes and minus price reductions and all payments to trade partners with the exception of payments for distinctly and clearly identifiable services, rendered by trade partners, which could also be rendered by third parties at comparable costs. Revenue is to be recorded in the income statement once the risks and rewards of the goods are transferred to the buyer. For returns of goods or other types of payments regarding the sales, adequate accruals are recorded.

Interest income is recognized on an accrual basis, taking into consideration the outstanding sums lent and the actual interest rate to be applied.

Dividend income resulting from financial investments is recorded upon legal entitlement to payment of the share owner.

Operating expenses — Operating expenses include marketing, distribution and administrative expenses.

Borrowing costs — Interest expenses incurred from borrowings used to finance the construction of fixed assets are capitalized for the period in which it takes to build the asset for its intended purpose. All other borrowing costs are immediately expensed in the income statement.

Taxes — Taxes are based on the yearly profit and include non-refundable taxes at source levied on the amounts received or paid for dividends, interest and licence fees. These taxes are levied according to a country's directives.

Deferred income taxes are accounted for according to the Balance-Sheet-Liability Method, on temporary differences arising between the tax and IFRS bases of assets and liabilities. In order to calculate the deferred income taxes, the legal tax rate in use at the time or the future tax rate announced is applied.

Deferred tax assets are recorded to the extent that it is probable that future taxable profit is likely to be achieved against which the temporary differences can be offset.

Deferred taxes also arise due to temporary differences from investments in subsidiaries and associated companies. Deferred taxes are not recognized if the following two conditions are met; the parent company is able to manage the timing of the release of temporary differences and, it is probable that the temporary differences are not going to be reversed in the near future.

Research and development costs — Development costs for new products are capitalized if the relevant criteria for capitalization are met. There are no capitalized development costs in these consolidated financial statements.

Share-based payments — The Group grants several employees options on officially listed participation certificates. These options have a blocking period of three to five years and a maximum maturity of seven years. The options expire once the employee leaves the company. Cash settlements are not allowed. The disbursement of these equity instruments is valued at fair value at grant date. The fair value determined at grant date is recorded in a straight-line method over the vesting period. This is based on the estimated number of participation certificates, which entitles a holder to additional benefits. The fair value was defined with the help of the binomial model used to determine the price of the options. The anticipated maturity period included the conditions of the employee option plan, such as the blocking period and the non-transferability.

Accounting for derivative financial instruments and hedging activities — Derivative financial instruments are recorded when the contract is entered into and valued at fair value. The treatment of recognizing the resulting profit or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivative financial instruments as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (securing the cash flow).

At the beginning of the business transaction, the Group documents the relationship between the hedge and the hedged items, as well as its risk management targets and strategies for undertaking the various hedging transactions. Furthermore, the Group also documents its assessment, both at hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

The effective portion of changes in fair value of derivatives which are designated and qualify as cash flow hedges is accounted for in equity. Profit and loss from the ineffective portion of the value adjustment are recognized immediately in the income statement.

Amounts accumulated in equity are recognized in the income statement in the same reporting period when the hedged item affects profit and loss.

Critical accounting estimates and judgments — When preparing the consolidated financial statements in accordance with IFRS, management is required to make estimates and assumptions. The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the given circumstances. Actual values may differ from these estimates. Estimates and assumptions significantly affect the following areas:

  • Pension plans: The calculation of the recognized assets and liabilities from defined benefit plans is based on statistical and actuarial calculations performed by actuaries. The present value of defined benefit liabilities in particular is heavily dependent on assumptions such as the discount rate used to calculate the present value of future pension liabilities, future salary increases and changes in employee benefits. In addition, the Group's independent actuaries use statistical data such as probability of withdrawals of members from the plan and life expectancy in their assumptions.
  • When testing goodwill and other intangible assets with indefinite useful life, parameters such as future discounted cash flows, discount rates and the underlying growth rates are based on estimates and assumptions.
  • The group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining deferred tax assets and deferred tax liabilities or current income tax accruals. There are many transactions and calculations for which the determination of the applicable tax rate and the expected current income tax position.

In the course of restructuring the pension fund schemes within the Lindt & Sprüngli Group in 2013, two non-profit funds were founded. According to IFRS 10 – “Consolidated financial statements” it is not required to consolidate these two funds because amongst other things, the Lindt & Sprüngli Group is not exposed to variable returns.

3. Risk Management

Due to its global activity, the Group is exposed to a number of risks: strategic, operational, and financial. Within the scope of the annual risk management process, the individual risk positions are classified into these three categories, where they are assessed, limited, and assigned to authorities.

In view of the existing and inevitable strategic and operating risks of the core business, Management's objective is to minimize the impact of the financial risks on the operating and net profit for the reporting period.

Financial Risk Management — The Group is exposed to financial risks. The financial instruments are divided, in accordance with IFRS 7, into the following categories: market risks (exchange rates, interest rates, and commodities), credit risks, and liquidity risks. The central treasury department (Corporate Treasury) is responsible for the coordination of risk management and works closely with the operational Group companies. The decentralized Group structure gives strong autonomy to the individual operational Group companies, particularly with regard to the management of exchange rate and commodity risks. The risk policies issued by the Audit Committee serve as guidelines for the entire risk management.

Centralized systems, specifically for the regular recording and consolidation of the Group-wide foreign exchange and commodity positions, as well as regular internal reporting, ensure that the risk positions can be consolidated and managed in a timely manner despite the Group's decentralized management system. The Group only engages in derivative financial instruments in order to manage existing or future transactions of operating and / or financial assets and liabilities.

Market risks

Exchange rate risks — The Group's reporting currency is the Swiss franc, which is exposed to fluctuations in foreign exchange rates, primarily with respect to the euro, the various dollar currencies, and pound sterling. Foreign exchange rate risk is not generated from sales, since the operational Group companies invoice in their local functional currencies. On the other hand, the Group is exposed to exchange rate risk on trade payables for goods and services. These transactions are hedged to a great extent using forward currency contracts. The operational Group companies transact all currency instruments with Corporate Treasury, which hedges net positions by means of financial instruments with credit-worthy financial institutions (short-term rating A1 / P1).

Since the operational Group companies transact the majority of their transactions in their own functional currencies and any remaining non-functional currency-based transactions are hedged with currency forward contracts, the exchange rate risk at balance sheet date is not material. The changes, in exchange rates, include the fair value of the currency forward contracts since entering into the contract and are recognized in accordance with IAS 39.

Interest rate risks — Corporate Treasury monitors and minimizes interest rate risks from a mismatch of quality, maturity period, and currency of the liquid funds on a continuous basis. Corporate Treasury may use derivative financial instruments in order to manage the interest rate risk of balance sheet assets and liabilities, and future cash flows. As of December 31, 2014 and 31 December, 2013, there were no such transactions.

The most material financial assets as of December 31, 2014 and 2013 are not interest-bearing. These include predominantly cash and cash equivalents in Swiss franc. The acquisition of Russell Stover Candies, LLC caused a reduction of liquid funds and minimized the interest rate risks of the financial assets of the Lindt & Sprüngli Group. Instead, the majority of the interest rate risk related to the financial liabilities of the Lindt & Sprüngli Group has been covered with the issuance of fix rate bonds. The sensitivities on the other positions are not material.

Commodity price risks — The Group's products are manufactured with raw materials (commodities) that are subject to strong price fluctuations due to climatic conditions, seasonal conditions, seasonal demand, and market speculation. In order to mitigate the price and quality risks of the expected future net demand, the manufacturing Group companies enter into contracts with suppliers for the future physical delivery of the raw materials. In exceptional market conditions, commodity futures are also used; however, they are only processed centrally by Corporate Treasury. The commodity futures of cocoa beans of a necessary quality are always traded for physical-delivery agreements. The number of outstanding commodity futures is dependent on the expected production volumes and price development and so can be at various levels throughout the year. Based on the existing contract volume as of December 31, 2014 and 2013, no material sensitivities exist on these positions. The changes in commodity prices include the fair value of the futures since entering into the agreement and are recognized in accordance with IAS 39.

Credit risks

Credit risks occur when a counterparty, such as a supplier, a client or a financial institute is unable to fulfil its contractual duties. This risk is minimized since the operational Group companies have implemented standard processes for defining lending limits for clients and suppliers and monitor adherence to these processes on an ongoing basis. Due to the geographical spread of the turnover and the large number of clients, the Group's concentration of risk is limited. Financial credit risks are limited by investing (liquid funds and / or derivative financial instruments) with various lending institutions holding a short-term A1 / P1-rating only. The maximum risk of loss of balance sheet assets is limited to the carrying values of those assets, as reflected in the notes to the financial statements (including derivative financial instruments).

Liquidity risks

Liquidity risk exists when the Group or a Group company does not settle or meet its financial obligations (untimely repayment of financial debt, payment of interest). The Group's liquidity is ensured by means of regular Group-wide monitoring and planning of liquidity as well as an investment policy coordinated by Corporate Treasury. Liquidity, which the Group defines as the net liquidity position (cash and cash equivalents, marketable securities less bank borrowings), is continually monitored on a company-by-company basis by Corporate Treasury. As of December 31, 2014, the net financial position amounted to CHF -844.2 million (net liquidity of CHF 724 million in 2013). For extraordinary financing needs, adequate credit lines with financial institutes have been arranged.

The tables below present relevant maturity groupings as at December 31, 2014 and 2013, of the contractual maturity date:

CHF million < 3 months Between 3 and 12 months Between 1 and 3 years Over 3 years 2014 Total
Bond 0.1 5.3 260.9 775.0 1,041.3
Loans 1.2 0.1 1.3
Accounts payable 184.9 5.2 190.1
Other accounts payable 39.0 1.2 40.2
Derivative assets – 4.4 – 8.7 – 0.5 – 13.6
Derivative liabilities 9.5 2.7 20.6 32.8
Bank and other borrowings 17.8 0.4 18.2
Total contractually fixed payments 246.9 6.1 282.2 775.1 1,310.3
CHF million < 3 months Between 3 and 12 months Between 1 and 3 years Over 3 years 2013 Total
Loans 0.9 0.1 1.0
Other long-term borrowings 2.9 8.0 10.9
Accounts payable 177.9 3.6 181.5
Other accounts payable 39.1 1.4 0.1 40.6
Derivative assets – 5.0 – 11.3 – 16.3
Derivative liabilities 1.4 1.2 1.0 3.6
Bank and other borrowings 3.8 2.2 6.0
Total contractually fixed payments 217.3 – 2.9 4.9 8.1 227.3

4. Capital Management

The goal of the Group with regards to capital management is to support the business with a sustainable and risk adjusted capital basis and to achieve an accurate return on the invested capital. The Group assesses the capital structure on an ongoing basis and makes adjustments in view of the business activities and the changing economical environment.

The Group monitors its capital based on the ratio of shareholders' equity in percentage to total assets, which was 53.8% as of December 31, 2014 (67.9% in 2013).

The goals and procedures as of December 31, 2014, related to capital management have not been changed compared to the previous year.

5. Segment information: According to geographic segments

The management of the Group is organized by means of companies of individual countries. For the definition of business segments to be disclosed, the Group has aggregated companies of individual countries on the basis of similar economic structures (foreign exchange risks, growth perspectives, element of an economic area), similar products and trade landscapes, and economic attributes (gross profit margins).

The three segments to be disclosed are:

  • Business segment “Europe”, consisting of the European companies and business units.
  • Business segment “NAFTA”, consisting of the companies in the USA, Canada, and Mexico.
  • Business segment “All other segments”, consisting of the companies in Australia, Japan, South Africa, Hong Kong, China and Brazil as well as the business units distributors and duty-free.

The Group considers the operating result as the segment result. Transactions between segments are valued and recorded in accordance with the cost-plus method.

Segment income

  Segment Europe Segment NAFTA All other segments Total
CHF million 2014 2013 2014 2013 2014 2013 2014 2013
Sales 2,003.1 1,870.5 1,259.4 876.2 393.8 359.9 3,656.3 3,106.6
Less sales between segments 258.9 216.2 12.0 7.9 270.9 224.1
Third party sales 1,744.2 1,654.3 1,247.4 868.3 393.8 359.9 3,385.4 2,882.5
Operating profit 259.4 249.4 165.6 109.4 49.3 45.3 474.3 404.1
Net financial result             – 1.8 – 2.8
Income before taxes             472.5 401.3
Taxes             – 129.9 – 98.3
Net income             342.6 303.0

The following countries achieved the highest sales Group-wide in 2014:

  • USA CHF 1,080.2 million (CHF 709.1 million in 2013)
  • Germany CHF 518.9 million (CHF 501.1 million in 2013)
  • France CHF 380.6 million (CHF 362.9 million in 2013)

Balance sheet and other information

  Segment Europe Segment NAFTA All other segments Total
CHF million 2014 2013 2014 2013 2014 2013 2014 2013
Assets 1) 3,401.2 3,193.9 2,015.4 554.5 164.9 132.3 5,581.5 3,880.7
Liabilities 1) 2,120.8 989.7 344.6 152.3 114.4 104.0 2,579.8 1,246.0
Investments 151.2 154.8 58.3 32.2 25.1 4.4 234.6 191.4
Depreciation and amortization 76.4 70.9 31.1 25.0 2.4 2.6 109.9 98.5
Impairment 3.5 0.1 0.1 0.3 0.2 0.3 3.8 0.7

1) Positions in assets of CHF –7.6 million (CHF 4.7 million in 2013) and in liabilities of CHF 52.3 million (CHF 60.1 million in 2013) which cannot be clearly allocated to a particular segment are disclosed in the category “All other segments”.

The following countries held the greatest portion of fixed and intangible assets Group-wide in 2014:

  • USA CHF 1,279.2 million (CHF 214.6 million in 2013)
  • Germany CHF 263.9 million (CHF 227.7 million in 2013)
  • Switzerland CHF 169.6 million (CHF 165.1 million in 2013)
  • Italy CHF 123.8 million (CHF 128.5 million in 2013)

6. Financial Instruments, FAIR VALUE, AND hIERARCHY LEVELS

The following table shows the carrying values and fair values of financial instruments recognized in the consolidated balance sheet, analyzed by categories and hierarchy levels at year-end:

    2014 2013
CHF million Level 1) Carrying amount Fair value Carrying amount Fair value
Financial assets          
Fair value through profit or loss          
Derivatives 1 3.3 3.3 7.9 7.9
Derivatives 2 10.2 10.2 8.4 8.4
Marketable securities and short-term financial assets 1 / 2 0.2 0.2 11.1 11.1
Total fair value through profit or loss   13.7 13.7 27.4 27.4
Held to maturity          
Deposit 2 100.0 100.0
Total held to maturity   100.0 100.0
Available for sale          
Investments third parties 3 2.3 2.3 2.3 2.3
Total available for sale   2.3 2.3 2.3 2.3
Total cash and cash equivalents, loans and receivables 2)   1,160.7 1,160.7 1,303.1 1,353.6
Total financial assets   1,176.7 1,176.7 1,432.8 1,483.3
Financial liabilities          
Fair value through profit or loss          
Derivatives 1 1.0 1.0
Derivatives 2 31.8 31.8 3.6 3.6
Total fair value through profit or loss   32.8 32.8 3.6 3.6
Bonds 1 996.6 996.6
Loans 3)   1.3 1.3 1.0 1.0
Other non-current liabilities   11.2 11.2 10.9 10.9
Accounts payable   190.1 190.1 181.5 181.5
Other accounts payable   41.8 41.8 40.6 40.6
Bank and other borrowings 3)   18.3 18.3 6.0 6.0
Total loans and payables 3)   1,259.3 1,259.3 240.0 240.0
Total financial liabilities   1,292.1 1,292.1 243.6 243.6

1) Level 1 – The fair value measurement of same financial instruments is based on quoted prices in active markets. Level 2 – The fair value measurement of same financial instruments is based on observable market data, other than quoted prices in Level 1. Level 3 – Valuation technique using non-observable data. For financial instruments with a short term maturity date it is expected that the carrying amounts are a reasonable approximation of the respective fair values.
2) Contains cash and cash equivalents, accounts receivable, other receivables, and loans to third parties.
3) See note 17.

7. Property, plant, and equipment

7. Property, plant, and equipment
CHF million Land / buildings Machinery Other fixed assets Construction in progress 2014 Total
Acquisition costs as at January 1, 2014 742.8 967.4 182.2 135.2 2,027.6
Additions 49.8 80.0 15.1 78.7 223.6
Retirements – 0.8 – 5.2 – 2.3 – 8.3
Transfers 53.5 44.0 3.4 – 101.3 – 0.4
Acquisition of subsidiary (note 32) 65.3 18.3 8.2 1.4 93.2
Currency translation 17.1 13.4 0.8 2.7 34.0
Acquisition costs as at December 31, 2014 927.7 1,117.8 207.4 116.7 2,369.6
Accumulated depreciation as at January 1, 2014 382.0 645.7 146.6 1,174.3
Additions 31.0 54.6 15.2 100.9
Impairments 3.5 0.1 0.2 3.8
Retirements – 0.7 – 4.5 – 2.1 – 7.3
Currency translation 4.3 5.4 0.3 10.0
Accumulated depreciation as at December 31, 2014 420.1 701.3 160.1 1,281.5
Net fixed assets as at December 31, 2014 507.6 416.5 47.3 116.7 1,088.1
CHF million Land / buildings Machinery Other fixed assets Construction in progress 2013 Total
Acquisition costs as at January 1, 2013 706.6 928.8 166.8 65.9 1,868.1
Additions 29.9 34.7 14.6 98.1 177.4
Retirements – 4.0 – 9.9 – 1.8 – 15.7
Transfers 13.3 12.7 2.5 – 28.6 – 0.1
Currency translation – 3.0 1.1 0.1 – 0.2 – 2.0
Acquisition costs as at December 31, 2013 742.8 967.4 182.2 135.2 2,027.6
Accumulated depreciation as at January 1, 2013 359.9 602.7 134.1 1,096.7
Additions 27.9 50.1 14.1 92.1
Impairments 0.2 0.5 0.7
Retirements – 3.8 – 9.8 – 1.7 – 15.3
Transfers – 0.6 0.6 – 0.1 – 0.1
Currency translation – 1.6 1.6 0.2 0.2
Accumulated depreciation as at December 31, 2013 382.0 645.7 146.6 1,174.3
Net fixed assets as at December 31, 2013 360.8 321.7 35.6 135.2 853.3

Advance payments of CHF 50.6 million (CHF 35.8 million in 2013) are included in the position construction in progress. The insurance value of property, plant, and equipment amounts to CHF 3,026.6 million (CHF 2,240.9 million in 2013). No mortgages exist on land and buildings.

The impairment charge of CHF 3.8 million (CHF 0.7 million in 2013) consists of writedowns of land and buildings of CHF 3.5 million (CHF 0.2 million in 2013) and of machinery and other fixed assets of CHF 0.3 million (CHF 0.5 million in 2013).

The net book value of capitalized assets, under financial lease, amounted to CHF 1.4 million (CHF 1.8 million in 2013). Operating lease commitments are not capitalized.

8. Intangible Assets

8. Intangible Assets
CHF million EDP software and consultancy Brands and intellectual property rights Customer relationships Goodwill Other Intangible Assets 2014 Total
Acquisition costs as at January 1, 2014 70.4 5.3 75.7
Additions 8.1 2.9 11.0
Retirements – 1.7 – 1.7
Transfers 0.4 0.4
Acquisition of subsidiary (note 32) 459.9 121.5 716.1 1,297.5
Currency translation 0.8 – 0.1 10.8 63.6 – 0.1 75.0
Acquisition costs as at December 31, 2014 78.0 459.8 132.3 779.7 8.0 1,457.9
Accumulated depreciation as at January 1, 2014 55.1 55.1
Additions 6.1 2.8 0.1 9.0
Retirements – 1.7 – 1.7
Currency translation 0.8 0.2 1.0
Accumulated depreciation as at December 31, 2014 60.3 3.0 0.1 63.4
Net intangible assets as at December 31, 2014 17.7 459.8 129.3 779.7 7.9 1,394.5
CHF million EDP software and consultancy Brands and intellectual property rights Customer relationships Goodwill Other Intangible Assets 2013 Total
Acquisition costs as at January 1, 2013 63.2 63.2
Additions 8.8 5.3 14.0
Retirements – 0.7 – 0.7
Transfers 0.1 0.1
Currency translation – 0.8 – 0.8
Acquisition costs as at December 31, 2013 70.4 5.3 75.7
Accumulated depreciation as at January 1, 2013 50.0 50.0
Additions 6.4 6.4
Retirements – 0.7 – 0.7
Transfers 0.1 0.1
Currency translation – 0.7 – 0.7
Accumulated depreciation as at December 31, 2013 55.1 55.1
Net intangible assets as at December 31, 2013 15.3 5.3 20.6

Research and development expenditures amounted to CHF 9.5 million (CHF 8.3 million in 2013) and are expensed as incurred.

An impairment test of goodwill and other intangible assets with infinite life (i.e. "Brands and intellectual property rights") relating to the acquisition of Russell Stover Candies, LLC (i.e. cash generating unit) in 2014 has been conducted. The recoverable amount was determined based on future discounted cash flows, planning assumptions over the next years plus a residual value. The calculation of the recoverable amount is mainly sensitive to sales growth, EBIT margin and discount rate. The gross margin is based on historical data and expected data for the Group and the industry.

As the assumptions applied for the purchase price allocation (see note 32) have basically not changed since the acquisition date, the same discount rate of 7.7% after taxes and essentially the same assumptions of a 5% sales growth in the next years and a terminal growth rate of 3% and the usual group wide operating profit margins were applied for the calculation of the recoverable amount.

The recoverable amount for goodwill and intangible assets with infinite life is higher than the carrying amount.

9. Financial Assets

9. Financial Assets
CHF million 2014 2013
Pension fund assets 1) 1,208.5 1,016.9
Loans to third parties 4.9
Investments third parties (available for sale) 2.3 2.3
Total 1,215.7 1,019.2

1) See note 18.

10. Deferred tax assets and liabilities

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

The net value of deferred tax liabilities is as follows:

CHF million 2014 2013
At January 1 279.7 16.3
Deferred income tax expense – 8.8 – 11.8
Tax charged to comprehensive income 40.5 274.4
Currency translation – 0.9 0.8
At December 31 310.5 279.7

Deferred tax assets and liabilities were generated from the following balance sheet positions:

CHF million 2014 2013
Deferred tax assets    
Property, plant, and equipment 13.9 4.7
Intangible assets
Pension assets and liabilities 37.3 17.5
Receivables 7.8 7.9
Inventories 22.4 12.4
Payables and accruals 68.7 38.7
Other 4.6 5.1
Deferred tax assets gross 154.8 86.3
Netting – 93.7 – 64.4
Total 61.1 21.9
Deferred tax liabilities    
Property, plant, and equipment 43.6 42.5
Intangible assets 31.8
Pension assets and liabilities 362.5 304.9
Receivables 7.6 1.9
Inventories 4.5 4.3
Payables and accruals 14.5 11.0
Derivative assets and liabilities 0.3 0.8
Other 0.4 0.6
Deferred tax liabilities gross 465.2 366.0
Netting – 93.7 – 64.4
Total 371.6 301.6
Net deferred tax 310.5 279.7

Tax Loss Carry-forwards

Deferred tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The expiration of tax loss carry-forwards are:

CHF million 2014 2013
Between one and five years 2.8 12.2
Between six and ten years 14.7 24.2
Over ten years 1.6 8.0
Total 19.1 44.4

Tax loss carry-forwards utilized in 2014 amounted to CHF 10.2 million (CHF 47.9 million in 2013).

11. Inventories

11. Inventories
CHF million 2014 2013
Raw material 99.9 73.9
Packaging material 110.0 82.6
Semi-finished and finished products 459.7 334.4
Value adjustment – 57.9 – 36.1
Total 611.7 454.8

In 2014, CHF 3.0 million (CHF 1.7 million in 2013) of the value adjustment as at the end of 2013 have been released to the income statement.

12. Accounts receivable

12. Accounts receivable
CHF million 2014 2013
Accounts receivable, gross 944.9 704.1
Value adjustment – 27.4 – 20.4
Total 917.5 683.7
Value adjustment as at January 1 – 20.4 – 21.2
Addition – 13.1 – 3.2
Utilization 4.4 3.0
Release 1.8 1.0
Currency translation – 0.1
Value adjustment as at December 31 – 27.4 – 20.4

The following table presents the aging of accounts receivable:

CHF million 2014 2013
Not yet past due 733.8 561.4
Past due 1–30 days 127.7 93.4
Past due 31–90 days 60.1 23.3
Past due over 91 days 23.3 26.0
Accounts receivable gross 944.9 704.1

Historically, the default rate for accounts receivable in the category “Not yet past due” was lower than 1%. Hence the default risk is considered to be low. Value adjustments are calculated based on the assessment of the default risk with regards to accounts receivable balances already past due.

The carrying amounts of accounts receivable are denominated in the following currencies:

CHF million 2014 2013
CHF 52.8 53.1
EUR 352.8 345.6
USD 304.1 105.8
GBP 59.3 47.1
Other currencies 148.5 132.1
Accounts receivable net 917.5 683.7

13. Derivative FinanCIAL INSTRUMENTS ANd Hedging RESERVES

At the balance sheet date, the fair value of derivative financial instruments was as follows:

    2014 2013
CHF million Assets Liabilities Assets Liabilities
Derivatives (cash flow hedges and raw material contracts) 13.5 5.2 16.2 2.8
Other derivatives 27.6 0.1 0.8
Total 13.5 32.8 16.3 3.6

The carrying amount (contract value) of the outstanding forward-currency and raw-material contracts as at December 31, 2014, is CHF 1,403.3 million (CHF 692.8 million in 2013). The majority of gains and losses recognized in the hedging reserve, as shown in the Consolidated Statement of Changes in Equity amounting to a net gain of CHF 8.8 million as of December 31, 2014 (net gains of CHF 10.5 million in 2013), will be released to material expenses in the income statement at various dates within the next 24 months. Other derivative instruments which have been executed in accordance with the risk policy and do not qualify for hedge accounting under the criteria of IAS 39 as well as the ineffective portion of designated derivative instruments, have been recognized immediately in the income statement.

14. MARKETABLE SECURITIES and short-term financial assets

14. MARKETABLE SECURITIES and short-term financial assets
CHF million 2014 2013
Fair-value-through-profit-or-loss financial assets 0.2 11.1
Held-to-maturity financial assets 100.0
Total 0.2 111.1

Fair-value-through-profit-or-loss financial assets (Held for trading)

CHF million 2014 2013
CHF equity securities 0.2 8.5
EUR equity securities 2.6
Total 0.2 11.1

The carrying amounts of the above financial assets are designated as "at fair-value-through-profit-or-loss" upon initial recognition. Changes in the fair values of these assets are recorded in the positions “Income from financial assets” and “Expenses from financial assets” in the income statement.

The fair value of all quoted securities is based on their currently paid or, if not available, bid prices in an active market.

Held-to-maturity financial assets

The "held-to-maturity financial asset", a CHF deposit of CHF 100.0 million, was repaid in full in 2014. In 2013, the deposit was valued at amortized cost.


CHF million 2014 2013
Cash at bank and in hand 171.1 614.4
Short-term bank deposits 0.7 5.0
Total 171.8 619.4

The effective interest rate on short-term bank deposits reflects the average interest rate of the money market as well as the development of the currencies invested with an original maturity period of up to three months.

16. Share and participation capital

16. Share and participation capital
  Number of registered shares (RS) 1) Number of participation certificates (PC) 2) Registered shares (CHF million) Participation certificates (CHF million) Total (CHF million)
At January 1, 2013 136,700 894,488 13.7 8.9 22.6
Capital increase 53,076 0.5 0.5
Cancellation of shares – 589 – 22,253 – 0.1 – 0.2 – 0.3
At December 31, 2013 136,111 925,311 13.6 9.3 22.9
Capital increase 30,755 0.3 0.3
At December 31, 2014 136,111 956,066 13.6 9.6 23.2

1) At par value of CHF 100.–

2)At par value of CHF 10.–

The conditional capital has a total of 528,906 participation certificates (PC) (559,661 in 2013) with a par value of CHF 10.–. Of this total, 174,456 (205,211 in 2013) are reserved for employee stock option programs; the remaining 354,450 participation certificates (354,450 in 2013) are reserved for capital market transactions. There is no other authorized capital. In 2014, a total of 30,755 (53,076 in 2013) of the employee options were exercised at an average price of CHF 2,409.56 (CHF 2,454.23 in 2013). The participation certificate has no voting right, but otherwise has the same ownership rights as the registered share.

17. financial liabilities

17. financial liabilities
CHF million 2014 2013
CHF 250 million floating rate bond, 2014–2017 249.6
CHF 500 million 0.5% Bond, 2014–2020 498.9
CHF 250 million 1.0% Bond, 2014–2024 248.1
Loans 1.3 1.0
Bank and other borrowings 18.3 6.0
Total borrowings 1,016.2 7.0

In September 2014 Lindt & Sprüngli Group placed bonds of CHF 1 billion in order to finance the acquisition of Russell Stover Candies, LLC. The bonds consist of the following three tranches:

  • CHF 250 million floating rate bond with a term of 3 years and a floating interest rate based on 3-month CHF LIBOR plus 0.18% per annum. The interests are paid quarterly, starting January 8, 2015;
  • CHF 500 million bond with a term of 6 years and a fixed coupon of 0.5% per annum. The interest payments will be due on an annual basis, starting October 8, 2015; and
  • CHF 250 million bond with a term of 10 years and a fixed coupon of 1.0% per annum. The interest payments will be due on an annual basis, starting October 8, 2015.

The carrying amounts of the Group's financial liabilities are denominated in the following currencies:

CHF million 2014 2013
CHF 996.6
EUR 9.9 6.6
USD 8.2
Other currencies 1.5 0.4
Total 1,016.2 7.0

18. Pension plans and other long-term employee benefits

The Group operates in and outside of Switzerland different pension plans for employees that satisfy the participation criteria. Among these plans are defined contribution and defined benefit plans that cover most of the employees against retirement, disability and death.


The Group offers to employees that satisfy the eligibility criteria defined contribution plans in different locations. The Group is obliged to pay a fixed percentage of the annual pay to these pension schemes. To some of these plans, the employees also have to make contributions. These are typically deducted by the employer from the monthly salary and paid to the pension fund. Apart from the payment of the contributions, the employer has no further obligation to these pension funds or to the employees.

In 2014 the employer contributions to Defined Contribution Plans amounted to CHF 8.5 million (CHF 7.5 million in 2013).

18.2 MULTI-Employer Plans

The Group offers to employees that satisfy the eligibility criteria defined contribution plans in different locations. Some subsidiaries in the US are affiliated to a multi-employer plan. Based on the terms of the plan, the plan qualifies as a defined benefit plan. The Lindt & Sprüngli Group is in discussion with the trustees of the plan to obtain the information, that are required to recognize the plan as a defined benefit plan. At the time of the preparation of this disclosure note, the necessary information to estimate in a reasonable way the share of the Groups' defined benefit liability was not yet available. In particular, the plan was not yet able to provide the participation data for the former employees with vested rights and the pensioners relating to the Group that would have allowed estimating the defined benefit obligation. Based on this situation and as required by IAS 19, the plan is currently treated as a defined contribution plan. The Group is analyzing the situation on an ongoing basis. As soon as sufficient information is available to reasonably estimate the pension liability, the plan will be recognized as a defined benefit plan in the balance sheet. This change in accounting principle will be recognized in equity.

The employer contribution to this plan is calculated based on the working hours of the active employees. For each hour a fixed contribution is paid to the plan. This fixed amount is determined based on a collective agreement with the relevant unions.

In 2014 the employer contribution to the multi-employer plan amounts to CHF 1.5 million (CHF 1.1 million in 2013). In 2015 the employer contribution is estimated at CHF 1.8 million. The increase in 2015 compared to 2014 is related to the acquisition of Russell Stover Candies, LCC (12 months of contribution in 2015 compared to only four months in 2014).

The Group can be liable to the plan for other entities' obligations under the terms and conditions as the minimum funding requirements may lead to higher contributions. This is the case if another affiliated company gets insolvent.

If the affiliation contract to the plan is terminated, the Group must pay a withdrawal liability. The withdrawal liability is calculated based on the total contributions of the afiliated employers and the employer contributions of the Group to the plan. Based on the latest available information of the multi-employer plan at December 31, 2012, the total withdrawal liability of the plan amounts to USD 4.9 billion. The Group's share of the withdrawal liability is at 0.9% for 2014.

18.3 Defined Benefit Plans and other long-term employee benefits plans

The Group finances Defined Benefit Plans for the employees that satisfy the criteria to join such plans. The most significant Defined Benefit Plans are located in Switzerland, Germany, USA, France, and Italy.

In addition to these plans, the Group operates jubilee benefit plans and other plans with benefits depending on the past years of service. These plans qualify as other long-term employee benefits under IAS 19.

a) Employee benefits plans in Switzerland

The Group operates different pension schemes in Switzerland. They are either organized through a separate foundation or through an affiliation to a collective foundation of an insurance company. The foundations are governed by foundation boards. The foundation boards are made up by an equal number of employee and employer representatives. The members of the foundation board are obliged by the law and the plan rules to act in the interest of the member (active employees and pensioners) only. Since the decisions are taken by the foundation boards, the only influence of the group is through its representatives.

The main duties of the foundation boards include the decision about the plan rules including the level of the contributions, the organization and the investment strategy.

The benefits are mainly depending on the insured salary and the years of service. For some of the plans the benefits are depending on retirement savings account. At retirement age, the insured members can choose whether to take a pension for life, which includes a spouse's pension, or a lump sum. In addition to retirement benefits, the plan benefits also include disability and death benefits. Insured members may also buy into the scheme to improve their pension provision up to the maximum amount permitted under the rules or may withdraw funds early for the purchase of a residential property for their own use. On leaving the company, the retirement savings will be transferred to the pension institution of the new employer or to a vested benefits institution. This type of benefit may result in pension payments varying considerably between individual years.

In defining the benefits, the minimum requirements of the Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and its implementing provisions must be observed. The BVG defines the minimum pensionable salary and the minimum retirement credits. The interest rate applicable to these minimum retirement savings is set by the Swiss Federal Council at least once every two years. In 2014, the rate was 1.75% (1.5 % in 2013).

The structure of the plan and the legal provisions of the BVG mean that the employer is exposed to actuarial risks. The main risks are investment risk, the inflation risk if it results in a salary increase, the interest risk, the disability risk and the risk of longevity.

The employee and employer's contributions are set by the foundation board. The employer has to finance at least 50% of the total contributions. Contributions can also be financed through employer welfare fund or finance foundations of the employer. In the event of a shortfall, recapitalization contributions to eliminate the gap in coverage may be levied from both the employer and the employee.

Beside the pension schemes, there are employer foundations that have as a main task to finance the pension schemes. The board members of these foundations are appointed exclusively by the employer.

In March 2013, the Board of the foundation “Fonds für Pensionsergänzungen der Chocoladefabriken Lindt & Sprüngli AG” has restructured the pension fund schemes within the Group. As a consequence assets from one of the pension funds have been transferred to an employer fund and two other nonprofit funds. The value of assets transferred to the two non-profit funds, which are no longer in the scope of IAS 19, amounted to CHF 286.0 million. Under IFRIC 14 the net assets of the employer fund had to be considered as an economic benefit of the employer and to be fully recognized as an asset in the consolidated balance sheet of the Group, resulting in an increase of financial assets and deferred tax liabilities of CHF 855.0 million in 2013 (before the transfer of the pension assets to the two non-profit funds).

b) Employee benefits plans in Germany

In Germany the group operates different company pension plans. These plans are based on different rules and agreements between the employer and employees. For certain management employees individual agreements are applied. The plan provides benefits in the event of retirement, disability and death. Depending on the plan rules, the benefits are either paid as pensions for life or as lump sums. The most significant plans are financed directly by the employer. Upon termination of the employment prior to retirement, the vested benefits remain preserved as required by the German pension law.

The plans are regulated by the German pension law (Betriebsrentengesetz). The most significant risks in these plans are the life expectancy risk, the salary increase risk, and the inflation risk that might result in pension adjustments.

c) Employee benefits plans in the US

In relation to the acquisition of Russell Stover Candies, LLC two defined benefit plans and one multi-employer plan (see note 18.2) have been assumed by the Group. The first defined benefit plan is a closed defined benefit plan. The old age benefits are calculated based on the years of service and a fixed USD amount. The benefits are typically provided as annual old age pensions for life. Next to the old age benefits, the plan provides death benefits. The plan is financed in full by the employer. Plan participant's contributions are not allowed. Due to the plan characteristics, the employer is exposed to different actuarial risks, in special to the risk of the development of the future life expectancy.

In the second defined benefit plan the employee receives a lump sum equal to the savings account at retirement. In addition to the savings account, the return on the investments chosen by the employee are reimbursed. The underlying assets are separated in a trust but do not qualify as defined benefit assets under IAS 19 as the assets are available to the creditors. Nevertheless, the trust reimburses the Company for the payments of the benefits. For this plan there is no actuarial risk, as long as the investments of the trust cover the investments chosen by the employees.

d) Other employee benefits plans

The other plans are located in France, Italy and Austria. These plans are based on the local legal requirements.

The last actuarial valuation was prepared at December 31, 2014 by independent actuaries. The market value of assets at December 31, 2014 was estimated based on the information available at the moment of preparing the results.

The main assumptions on which the actuarial calculations are based can be summarized as follows:

  Pension plans Other long-term employee benefits
  2014 2013 2014 2013
Discount rate 1.9% 2.6% 2.7% 3.3%
Future salary increases 1.5% 1.6%    
Future pension adjustments 0.5% 0.6%    

For the countries with material pension obligations the following assumptions about the life expectancy at age 65 were taken into account:

  2014 2013
  Switzerland Germany USA Switzerland Germany USA
Retirement in 20 years (age of 45 at balance sheet date)            
Men 23.16 21.52 20.40 23.09 21.39
Women 25.59 25.46 21.70 25.52 25.34
Retirement at balance sheet date (age of 65)            
Men 21.39 18.85 18.80 21.29 18.71
Women 23.86 22.92 22.92 23.76 22.79

The amounts recognized in the income statement and in the Other Comprehensive Income (OCI) can be summarized as follows:

  Pension plans Other long-term employee benefits
CHF million 2014 2013 2014 2013
Employee benefits expense        
Total service cost        
Current service cost 12.6 13.0 0.6 0.6
Past service cost und curailments 0.1 0.6
Net interest cost – 19.8 – 10.4 0.2 0.3
Liability management cost 0.8 0.6
Actuarial gains and losses 0.6
Total defined benefit cost (+) / gain (–) of the period – 6.3 3.8 1.4 0.9
Valuation components accounted for in OCI        
Actuarial gains and losses        
Arising from changes in demographic assumptions 0.3
Arising from changes in financial assumptions 62.3 – 22.9
Arising from experiences – 0.8 2.4
Return on plan assets (excl. amounts in net interest) – 193.2 – 344.9
Return on reimbursment (excluding interest income) 0.3
Changes in asset ceiling – 851.5
Total defined benefit cost (+) / gain (–) recognized in OCI – 131.4 – 1,216.6
Total defined benefit cost (+) / gain (–) – 137.7 – 1,212.8

The changes in pension obligations, pension assets and the asset ceiling can be summarized as follows:

Changes in the present value of the defined benefit obligation

  Pension plans Other long-term employee benefits
CHF million 2014 2013 2014 2013
Defined benefit obligation as at January 1 438.5 448.1 8.3 9.4
Current service cost 12.6 13.0 0.6 0.7
Plan participants' contributions 4.9 3.9
Interest expense on the net present value of the obligation 11.4 10.0 0.2 0.3
Actuarial gains (–) / losses (+) 61.5 – 21.0 0.6
Past service (gain) / loss 0.2 0.6
Liabilities assumed in business combinations 36.3
Benefits paid through pension assets – 13.9 – 14.6
Benefits paid by employer – 9.0 – 3.0 – 1.5 – 2.1
Currency exchange differences – 0.2 1.5 – 0.1
Defined benefit obligation as at December 31 542.3 438.5 8.1 8.3

Changes in the fair value of plan assets

    Pension plans
CHF million 2014 2013
Fair value of plan assets as at January 1 1,344.8 1,272.9
Plan participants' contributions 4.9 3.9
Contributions by employer 3.8 2.8
Interest income 31.0 24.0
Return on plan assets (excl. Interest income) 193.2 344.9
Transfer of assets – 288.5
Assets assumed in business combinations 14.7
Benefits paid through pension assets – 13.9 – 14.6
Liability management cost – 0.7 – 0.7
Currency translations 0.7 0.1
Fair value of plan assets as at December 31 1,578.5 1,344.8

Development of reimbursement rights 1)

CHF million 2014
Reimbursement rights as at January 1
Employee contributions
Employer contributions 0.1
Interest income on reimbursements 0.2
Return on reimbursement (excluding interest income) – 0.3
Business combinations 17.9
Reimbursements to employer – 5.5
Currency translation 0.7
Reimbursement rights as at December 31 13.1

1) Relates exclusively to reimbursment rights of newly acquired company Russell Stover Candies, LLC.

Change in the asset ceiling

    Pension plans
CHF million 2014 2013
Asset ceiling at January 1 851.5
Interest income recognized in OCI 3.5
Change in asset ceiling recognized in OCI – 855.0
Fair value of plan assets as at December 31

The net position of pension obligations in the balance sheet can be summarized as follows:

Amount recognized in the balance sheet

  Pension plans Other long-term employee benefits
CHF million 2014 2013 2014 2013
Present value of funded obligation 508.7 419.2
Fair value of plan assets – 1,578.5 – 1,344.8
Underfunding (+) / Overfunding (–) – 1,069.8 – 925.6
Present value of unfunded obligations 33.5 19.2 8.1 8.3
Net pension liability (+) / asset (–) – 1,036.3 – 906.4 8.1 8.3
Thereof pension liabilities 172.2 110.5 8.1 8.3
Thereof pension assets 1) – 1,208.4 – 1,016.9

1) See note 9.

The plan assets are mainly managed by the Swiss pension plans and employer funds. The foundation boards issue investment guidelines for the plan assets which include the tactical asset allocation and the benchmarks for comparing the results with a general investment universe. The pension plans are also subject to the legal requirements on diversification and safety laid down by the BVG. Investment in bonds have in general at least an A rating, investments in real estate are typically held directly by the plans.

The foundation boards of the pension funds regularly review whether the chosen investment strategy is appropriate in view of the the pension benefits to be provided and whether the risk capability is in line with the demographic structure. Compliance with the investment guidelines and the investment results of the investment advisors are reviewed by the foundation boards of the pension funds.

The investments in the employer foundation and primarily in the finance foundation are mainly invested in shares of the Group.

The pension assets mainly consist of the following categories of securities:

  2014 2013
CHF million listed not listed Total listed not listed Total
Equities 1,305.9 1,305.9 1,123.5 1,123.5
Bonds 103.3 103.3 65.0 65.0
Real estate 97.8 97.8 97.8 97.8
Qualified insurance policies 17.3 17.3 15.6 15.6
Liquidity 47.0 47.0 27.6 27.6
Other investement 7.2 7.2 15.3 15.3
Total 1,409.2 169.3 1,578.5 1,188.5 156.3 1,344.8

The plan assets include investments in the Group with a market value of CHF 1,168.4 million at December 31, 2014 (CHF 1,019.4 million at December 31, 2013). Moreover, the Group has occupied property from the pension funds with a market value of CHF 16.8 million at December 31, 2014 (CHF 13.8 million at December 31, 2013).

In 2014 the assets provided a return of CHF 227.7 million (CHF 368.9 million in 2013). In 2015 the expected employer contributions amount to CHF 2.9 million and the expected payments for pensions by the employer to CHF 2.8 million.

The following table provides a breakdown of the defined benefit obligations among active insured members, former members with vested benefits, and members receiving pensions:

    Pension plans
CHF million 2014 2013
Active employees 317.6 240.5
Vested terminations 11.8 6.3
Pensioners 212.9 191.7
Total 542.3 438.5

The average duration of the liabilities at December 31, 2014 is 17.8 years (16.4 years at December 31, 2013).

The following table shows the impact of the change of the discount rate, salary increase, and pension indexation on the present value of the defined benefit obligation:

CHF million 2014 2013
Increase (+) / decrease (–) of assumptions by +0.25% –0.25% +0.25% –0.25%
Discount rate – 21.9 23.5 – 16.6 17.9
Salary increase 8.8 – 8.7 6.4 – 6.4
Pension indexations 14.1 – 13.2 11.3 – 10.2

19. Provisions

19. Provisions
CHF million Business risks Other Total
Provisions as at January 1, 2013 44.4 11.8 56.2
Addition 22.8 3.9 26.7
Utilization – 1.4 – 0.9 – 2.3
Release – 5.1 – 0.5 – 5.6
Currency translation 0.1 0.1
Provisions as at December 31, 2013 60.8 14.3 75.1
Addition 8.0 1.3 9.3
Utilization – 1.8 – 1.3 – 3.1
Release – 10.7 – 2.3 – 13.0
Acquisition of subsidiary (note 32) 3.7 4.8 8.5
Currency translation 0.3 0.3 0.6
Provisions as at December 31, 2014 60.3 17.1 77.4

Other provisions for business risks include unsettled claims, onerous contracts as well as legal and administrative proceedings, which arise during the normal course of business. Provisions are recognized at balance sheet date when a present legal or constructive obligation as a result of past events occurs and the expected outflow of resources can be reliably estimated. The timing of outflows is uncertain as it depends upon the outcome of the proceedings.

In Management's opinion, after taking appropriate legal and administrative advice, the outcome of these business risks will not give rise to any significant loss beyond the amounts provided at December 31, 2014.

20. Accounts payable

The carrying amounts of the Group's accounts payable to suppliers are denominated in the following currencies:

CHF million 2014 2013
CHF 7.8 11.9
EUR 108.2 116.5
USD 51.3 28.8
GBP 8.1 9.0
Other currencies 14.7 15.3
Total 190.1 181.5

21. Accrued liabilities

21. Accrued liabilities
CHF million 2014 2013
Trade 328.7 251.7
Salaries / wages and social costs 107.8 89.5
Other 145.6 132.0
Total 582.1 473.2

Trade-related accrued liabilities comprise year-end rebates, returns, markdowns on seasonal products, and other services provided by trade partners.

The line “Salaries / wages and social costs” is related to bonuses, overtime, and outstanding vacation days, whereas the position “Other” comprises accruals for third-party services rendered as well as commissions.

22. Other income

22. Other income
CHF million 2014 2013
Fees from third parties 3.4 3.2
Insurance reimbursements 3.3 0.4
Other 11.5 10.0
Total 18.2 13.6

The position “Fees from third parties” comprises mainly the reimbursement of freight charges. The position “Other” includes mainly licence fees, rental income, and company-produced additions involving investments in fixed assets.

23. Personnel expenses

23. Personnel expenses
CHF million 2014 2013
Wages and salaries 518.1 462.5
Social benefits 118.2 114.2
Other 83.2 78.0
Total 719.5 654.7

For the year 2014, the Group employed an average of 10,712 people (8,949 in 2013).

24. Net financial result

24. Net financial result
CHF million 2014 2013
Interest income 1.2 1.1
Interest expense – 5.0 – 3.1
Income (+) / expense (–) from financial assets    
Fair value through profit or loss – 0.4 – 0.2
Other 2.4 – 0.6
Total – 1.8 – 2.8

25. Taxes

25. Taxes
CHF million 2014 2013
Current taxes 133.8 106.4
Deferred taxes – 8.8 – 11.8
Other taxes 4.9 3.6
Total 129.9 98.3

The tax on the Group's income before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows:

CHF million 2014 2013
Income before taxes 472.5 401.3
Expected tax 1) 121.3 106.3
Change in applicable tax rates on temporary differences 0.6
Utilization of unrecognized tax loss carry-forwards from prior years – 28.0
Adjustments related to prior years – 2.0 – 1.6
Other 10.6 20.9
Total 129.9 98.3

1) Based on the average applicable tax rate (25.7% in 2014; 26.5% in 2013).

The tax for each component of other comprehensive income is:

  2014 2013
CHF million Before tax Tax After tax Before tax Tax After tax
Hedge accounting – 2.3 0.6 – 1.7 17.2 – 0.4 16.8
Defined benefit plan 131.4 – 41.1 90.3 1,016.7 – 360.0 656.7
Currency translation 80.8 80.8 – 11.5 – 11.5
Total 209.9 – 40.5 169.4 1,022.4 – 360.4 662.0

26. Earnings per share / PARTICIPATION CERTIFICATE

26. Earnings per share / PARTICIPATION CERTIFICATE
CHF million 2014 2013
Non-diluted earnings per share /10 PC (CHF) 1,503.5 1,339.3
Net income (CHF million) 342.4 303.0
Weighted average number of registered shares /10 participation certificates 227,739 226,237
Diluted earnings per share /10 PC (CHF) 1,459.9 1,313.9
Net income (CHF million) 342.4 303.0
Weighted average number of registered shares /10 participation certificates/ outstanding options on 10 PC 234,529 230,612

27. Dividend per share / Participation Certificate

27. Dividend per share / Participation Certificate
CHF 2014 2013
Dividend per share /10 PC 725.00 650.00

1) Proposal of the Board of Directors.

During the period January 1 to record date (April 29, 2015), the dividend-bearing capital (the number of registered shares and participation certificates) can change as a result of additions and retirements within either class of treasury stock (registered shares and participation certificates) as well as the exercise of options, granted through the employee stock option plan.

28. Share-based payments

Options on participation certificates of Chocoladefabriken Lindt & Sprüngli AG are only outstanding within the scope of the existing employee stock option program. An option entitles an employee to a participation certificate at an exercise price, which consists of an average of the price of the five days preceding the issue date. The options have a blocking period during the vesting period of three to five years and if not exercised, they expire after seven years. Changes in outstanding options can be viewed in the table below:

    2014   2013
  Number of options Weighted average exercise price (CHF / PC) Number of options Weighted average exercise price (CHF / PC)
Outstanding options as at January 1 157,509 2,576.27 179,647 2,437.21
New option rights 19,550 4,062.00 33,450 3,123.00
Exercised rights – 30,755 2,409.56 – 53,076 2,454.23
Cancelled rights – 1,879 2,897.40 – 2,512 2,490.76
Outstanding options as at December 31 144,425 2,808.70 157,509 2,576.27
of which exercisable at December 31 26,082 2,126.13 23,458 2,502.58
Average remaining time to expiration (in days) 796   622  

1) The exercise price varies between CHF 1,543 to CHF 4,062.

Options expenses are charged to the income statement proportionally according to the vesting period. The recorded expenses amount to CHF 15.2 million (CHF 16.5 million in 2013). The assumptions used to calculate the expenses for the grants 2011 to 2014 are listed in the following table:

Date of issue 13.1.2014 11.1.2013 7.2.2012 18.3.2011
Number of issued options 19,550 33,450 35,725 36,180
of which in bracket A (blocking period three years) 6,787 11,649 12,450 12,617
of which in bracket B (blocking period four years) 6,883 11,758 12,556 12,705
of which in bracket C (blocking period five years) 5,880 10,043 10,719 10,858
Issuing price in CHF 4,062 3,123 2,679 2,523
Price of participation certificates on date of issue in CHF 4,036 3,159 2,711 2,580
Value of options on issuing date  
bracket A (blocking period three years) in CHF 633.56 568.13 491.66 524.31
bracket B (blocking period four years) in CHF 691.87 587.76 509.70 557.09
bracket C (blocking period five years) in CHF 735.21 592.07 533.03 587.88
Maximum life span (in years) 7 7 7 7
Form of compensation PC from conditional capital
Expected life span (in years) 5–6 5–6 5–6 5–6
Expected rate of retirement per year 2.3% 2.4% 2.5% 2.5%
Expected volatility 22.1% 22.9% 23.8% 24.3%
Expected dividend yield 1.49% 1.45% 1.39% 1.32%
Risk-free interest rate 0.66 – 0.92% 0.46 – 0.57% 0.48 – 0.63% 1.48 – 1.70%
Model Binomial model

29. Contingencies

The Group had no guarantees in favor of third parties either at December 31, 2014 or December 31, 2013.

30. Commitments

Capital expenditure contracted for at the balance sheet date but not yet incurred is:

CHF million 2014 2013
Property, plant, and equipment 43.2 117.7

The future lease payments under operating lease commitments are:

CHF million 2014 2013
Up to one year 50.8 41.1
Between one and five years 125.5 108.7
Over five years 59.6 49.3
Total 235.9 199.1

Leasing commitments are related to the rental of retail stores, warehouse and office space, vehicles and IT hardware.

31. Transactions with related parties

A family member of a member of the Board of Directors has a majority share in a company, to which products were sold at arm's length for the value of CHF 18.7 million (CHF 18.1 million in 2013) and with which rental income of CHF 0.3 million (CHF 0.3 million in 2013) and license fee income of CHF 0.6 million (CHF 0.5 million in 2013) were generated. Receivables outstanding against this company were CHF 12.5 million (CHF 12.0 million in 2013) at the balance sheet date.

750 registered shares were bought from the “Fonds für Pensionsergänzungen der Chocoladefabriken Lindt  & Sprüngli AG” in 2014 (750 in 2013) at a price of CHF 56,034.– (CHF 45,118.– in 2013) per share (including stamp duty), which corresponds to the five-day average of the closing prices of the share at the SIX Swiss Exchange for the period December 12 to 18, 2014.

As of December 31, 2014, a loan of CHF 4.9 million (CHF 1.5 million in 2013) was outstanding against the “Lindt Chocolate Competence Foundation”. All conditions of this loan are agreed at arm's length.

Remuneration of the Board of Directors and Group Management

Considering a resignation and a new entry in 2014 the Group consisted of 7 non-executive and executive directors (6 in 2013). The number of executive officers is 8 in 2014 (8 in 2013). The compensation paid to non-executive directors and executive officers is shown below:

CHF million 2014 2013 (Market Value) 1) 2013 (tax value)
Fixed cash compensation 2) 6,449 6,389 6,305
Variable bonus component 3) 5,410 4,760 4,760
Other compensation 4) 1,380 844 844
Options 1) 6,060 8,727 4,566
Registered shares 2,450 3,602 2,691
Total 21,749 24,322 19,166

1) The valuation of Option grants on Lindt & Sprüngli participation certificates is based on the terms and conditions of the Lindt & Sprüngli employee share option plan (see also note 28). Whereas until 2013 the tax value resulting from the allowance of the blocking period has been deducted, no tax deduction is considered from 2014 onwards. The prior year has been restated for comparison.
2) Total gross cash compensation and allowances for Officers and Directors including pension benefits paid by employer (excluding social charges paid by employer) for the Officers.
3) Accrual at year end for expected pay-out in April of following year (excluding social charges paid by employer).
4) Employees part of social charges (AHV) related to exercising of options and grant of registered shares, paid by employer.

Apart from the payments mentioned above, no payments were made on a private basis or via consulting companies to either an executive or non-executive member of the Board or a member of Group Management or Extended Group Management. As of December 31, 2014, there were no loans, advances or credits due to the Group or any of its subsidiaries by any of the members of the Board, the Group Management or the Extended Group Management.

32. Business Combinations

On September 8, 2014 the Lindt & Sprüngli Group acquired Russell Stover Candies, LLC, a traditional US family business and the leading manufacturer of pralines and seasonal candies in the US, headquartered in Kansas City, Missouri. This biggest and most important strategic acquisition in the company's history will give Lindt & Sprüngli an established presence throughout the USA with its LINDT, GHIRARDELLI, RUSSELL STOVER, WHITMAN'S and PANGBURN'S brands. The addition of the Russell Stover and Whitman's brands perfectly complements Lindt & Sprüngli's existing chocolate portfolio and will make the company the Number 3 North American chocolate manufacturer. Since the acquisition date, Russell Stover Candies, LLC is fully consolidated in the financial statements of the Group.

In the course of the asset deal and based on the provisional purchase price allocation the Lindt & Sprüngli Group identified net assets of CHF 783.5 million for the cash settled consideration of CHF 1,499.6 million (CHF 1,148.6 million including the present value of future tax savings):

CHF million 2014
Property, plant, and equipment 93.2
Brands and intellectual property rights 459.9
Customer relationships 121.5
Inventories 155.3
Accounts receivables 22.7
Cash and cash equivalents 24.9
Other current assets 21.5
Pension liabilities – 21.7
Provisions – 8.5
Accounts payable – 44.9
Accrued liabilities – 40.5
Fair Value of acquired net assets 783.5
Goodwill 716.1
Total 1,499.6

The fair values of the identifiable intangible assets consist of "brands and intellectual property rights" and "customer relationships". The goodwill resulting from the acquisition amounts to CHF 716.1 million and mainly represents a control premium and the synergies that can be expected from integrating the acquired company into the Lindt & Sprüngli Group's existing business.

"Goodwill", "brands and intellectual property rights" and "customer relationships" were recognized in the tax accounts and can be depreciated over their taxable useful life on a straight line basis. The present value of these tax deductible depreciation is estimated at CHF 351.0 million and represents future tax savings. Directly attributable transaction costs of CHF 7.2 million are reported as part of the "operating expenses".

As communicated in the course of the acquisition, annual sales of Russell Stover Candies, LLC amount to USD 500 million. During the four months since acquisition until December 31, 2014 the Company accounted for sales of CHF 252.1 million and contributed to the consolidated operating result on a group-wide common basis, considering seasonal fluctuations and the purchase price allocation conducted in inventories.

33. Risk Management disclosures required by Swiss law

The identification and assessment of strategic, operational and financial risks is coordinated by the Group's CFO. Once a year a comprehensive risk inventory, including assessment of risk exposure and likelihood, is established. Financial risks, including raw materials, are quantified based on respective volatilities. The Audit Committee and the Board of Directors are informed on a regular basis about the nature and assessment of risks and measures taken to mitigate them. Corporate functions such as Controlling, Treasury, Tax, Legal, Human Resources, Operations, Marketing, and Sales review continuously the effectiveness of the risk management at subsidiary and Group level.

34. Events after the balance sheet date

The consolidated financial statements were approved for publication by the Board of Directors on March 9, 2015. The approval of the consolidated financial statements by the shareholders will take place at the Annual General Meeting.

The translation of Group companies and associated companies with different functional currencies may have an effect on the consolidated financial statement and correspondingly on the cumulative exchange rate differences recognized in equity.

At the time of approval of the financial statement, the discontinuation of the minimum exchange rate and the resulting value development of the Swiss franc had no impact on the 2014 financial statements.

No events have occurred up to March 9, 2015, which would necessitate adjustments to the carrying values of the Group's assets or liabilities, or which require additional disclosure.