Notes to the consolidated financial statements

The Comet Group (“Comet”, the “Group”) is one of the world’s leading vendors of x-ray, radio frequency (RF) power and ebeam technology. With high-quality components, systems and services, marketed under the “Comet”, “Yxlon” and “ebeam” brands, the Group helps its customers optimize the quality, reliability and efficiency of their products and processes. Yxlon x-ray systems for non-destructive testing are supplied to end customers in the automotive, aerospace, electronics and energy sectors. Under the Comet brand, the Group builds components and modules such as x-ray sources, vacuum capacitors, RF generators and impedance matching networks, marketed to manufacturers in the automotive, aerospace, semiconductor and solar industries as well as for security applications at airports. Under the ebeam brand, the Group develops and markets compact ebeam sets for the treatment of surfaces in the food and printing industries.

The consolidated financial statements (except with respect to certain financial instruments) have been drawn up under the historical cost convention. The fiscal year-end for the financial statements of all Group companies is December 31. These consolidated financial statements have been prepared in compliance with Swiss stock corporation law and International Financial Reporting Standards (IFRS). All IFRS in force at the balance sheet date and all interpretations (IFRIC) of the International Accounting Standards Board (IASB) were applied. Comet did not early-adopt new standards and interpretations except as specifically stated below. The significant accounting policies applied are unchanged from the prior year except as set out below.

02.1 Changes in accounting ­policies

Revised and new accounting rules

With effect from January 1, 2018, Comet has applied the following new or revised IFRS / IAS for the first time:

Except as described below, the first-time application of the above new or amended standards and interpretations had no effect on Comet’s financial position, ­results of operations and cash flows.

IFRS 15 – Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11, Construction Contracts, IAS 18, Revenue, and the associated interpretations, and provides accounting guidance for all sales revenue from contracts with customers. It excludes contracts that are within the scope of other IFRS standards. The new standard establishes a five-step model for the recognition of revenue from contracts with customers. Companies must exercise judgment in considering the contract terms and all relevant facts and circumstan­ces (including implied contract terms). Comet has elected to use the full retrospective approach for the implementation of IFRS 15.

The application of IFRS 15 has the following impact on items of the consolidated balance sheet:

The application of IFRS 15 has the following impact on items of the consolidated statement of income:

The changes resulting from IFRS 15 had no material impact on other comprehensive income. The impacts on the consolidated statement of cash flows were related only to the changes in net income and corresponding deferred taxes and the change in working capital. The cash flows from investing and financing activities were not affected.

The impacts on the consolidated balance sheet and statement of income are ­described below:

a) Revenue from contracts with customers

Sale of products

Revenue from the sale of products (including spare parts) is as a rule recognized on the basis of a single performance obligation, which is satisfied at a specific point in time. The performance obligation is satisfied, and the revenue recognized, when the customer acquires control of the product. Generally, the customer acquires control at delivery of the product or spare part. This applies to the PCT and IXT divisions and the engineering business of the EBT division. Here the adoption of IFRS 15 thus had no impact on the amount and timing of revenue recognition.

Sale of systems

In the systems business, customers are supplied with comprehensive and sometimes complex systems. Besides this equipment itself, the segment also provides services such as installation and complete integration into customers’ processes. Under the new accounting standard these services are no longer regarded as separable, as they form an integral part of the delivery. Revenue from the sale of systems is thus as a rule recognized on the basis of a single performance obligation, which is satisfied at a specific point in time. The performance obligation is satisfied when the customer has taken delivery of and accepted the system. This applies to the IXS division and the systems business of the EBT division. In the case of systems already delivered (with the risks and rewards thus having passed to the customer) for which there was not yet a certificate of acceptance, revenue and the related sales have been retrospectively restated.

Sale of services

Comet provides services related to products and systems. Warranty obligations that provide an additional service to the customer (service-type warranties), such as an extension of the warranty period, are separate performance obligations and the revenue associated with them is recognized over time. For general maintenance services and defect correction intended to ensure that the delivered good is, or performs, as specified in the contract (assurance-type warranties), the estimated cost of the liability is recognized as a provision in accordance with IAS 37. The treatment of warranty obligations did not result in a change in the amount or timing of revenue recognition. Revenue from other services such as repair or training continues to be recognized at a specific point in time as before.

Sale of prototypes

Income from customers for research and development services is evaluated differently under IFRS 15 than before. After the delivery of the first prototype, ­further income received for research and development services is now classified as ­derived from the sale of prototypes and is reported as revenue.

b) Advance payments by customers and contract liabilities

Prepayments by customers were reclassified to contract liabilities.

c) Contract costs and sales commissions

Under IFRS 15, the sales commissions owed for agent activities are recognized at contract inception. As these represent incremental costs directly attributable to obtaining a contract, they are capitalized and a liability of equal amount is recognized for sales commissions. Their recognition as an expense occurs as soon as Comet has transferred control of the products or systems to the customer.

IFRS 9 – Financial Instruments

IFRS 9 introduced new guidance for the classification and measurement of financial assets and liabilities, the recognition of impairment losses, and hedge accounting. Comet applies IFRS 9 prospectively, with the comparative information continuing to be reported in accordance with IAS 39. At January 1, 2018 there were no available-for-sale financial assets, held-to-maturity investments, or financial instruments at fair value through other comprehensive income. The financial assets and liabilities previously classified as at fair value through profit or loss continue to meet the criteria of this category. The other financial instruments are measured at amortized cost as before. Consequently, the classification of financial instruments to the appropriate categories under IFRS 9 had no effect on the accounting treatment of assets and liabilities.

Under IFRS 9 the impairment of financial assets – including, specifically, trade receivables measured at amortized cost – is now assessed using an expected credit loss model. This change did not have any material impacts on Comet’s financial assets.

02.2 New accounting rules becoming effective in subsequent periods

02.3 Estimates

02.4 Consolidation

02.4.1 Basis of consolidation

There were no changes in the basis of consolidation from the prior year. The consolidated financial statements comprise the accounts of the companies listed ­below.

02.4.2 Method of consolidation

The consolidated financial statements represent the aggregation of the annual accounts of the individual Group companies, which are prepared using uniform accounting principles. Those companies controlled by Comet Holding AG are fully consolidated. This means that these companies’ assets, liabilities, equity, expenses and income are entirely included in the consolidated financial statements. All intragroup balances and transactions, unrealized gains and losses resulting from intragroup transactions, and dividends are eliminated in full.

Acquisitions and goodwill

Companies are consolidated from the date on which effective control passes to the Group. Consolidation ends only when effective control ceases. On acquisition, the identifiable assets, liabilities and contingent liabilities are measured at fair value and included in the accounts using the acquisition method. For acquisitions, intangible assets that arise from a contractual or legal right or are separable from the business entity, and whose fair value can be measured reliably, are reported separately. Goodwill, being the excess of the aggregate consideration transferred over the fair value of the net assets of the acquired subsidiary, is initially measured at cost. If the aggregate consideration transferred is lower than the fair value of the acquired net assets, the difference is recognized as negative goodwill in other operating income at the acquisition date. Goodwill and other intangible assets are allocated on acquisition to those companies expected to benefit from the acquisition or to generate future cash flows as a result of it. When Group companies are sold, the difference between their sale price and their net assets, plus accumulated currency translation differences, is recognized as operating income in the consolidated statement of income.

Foreign currency translation

The functional currency of the Group companies is the respective national currency. Transactions in a currency other than the functional currency are translated at the exchange rate prevailing at the transaction date. Financial assets and liabilities are translated at the balance sheet date at the exchange rate as of that date; the resulting currency translation differences are reported in the income statement. The consolidated financial statements are presented in Swiss francs. The financial statements of the Group companies are translated at the average exchange rates for the year (the “average rate” in the table below) for the income statement and at year-end rates (the “closing rate”) for the balance sheet. The resulting currency translation differences are recognized in other comprehensive income. Currency translation differences from intragroup loans for the long-term financing of Group companies are also recognized in other comprehensive income, to the extent that repayment is neither planned nor is likely to occur in the foreseeable future.

The exchange rates used to translate the most important currencies are listed below:

02.5 Measurement and ­recognition policies

Financial assets and liabilities

Financial assets are initially measured at fair value (market value), including transaction costs, except in the case of financial assets categorized as at fair value through profit or loss, for which transaction costs are recorded directly in financing expenses. All purchases and sales of financial assets are recognized at the transaction date.

Fair value is determined based on quoted or other market prices. In the fiscal year as in the prior year, no hedge accounting under IFRS 9 or IAS 39 was applied to any hedging transactions. Financial assets are recognized as soon as Comet acquires control of them, and derecognized when it ceases to have control, i.e., when it has sold the rights or they have lapsed. Financial liabilities are derecognized when the obligation specified in the contract is discharged or is canceled or expires.

Cash and cash equivalents

In addition to cash on hand and balances in checking accounts at banks, cash and cash equivalents can also include fixed-term deposits with original maturities of up to three months.

Trade and other receivables and contract assets

Trade receivables, other receivables and contract assets are reported at their face value less any necessary impairment charges. Comet provides for impairment using the simplified approach by recognizing an allowance in the amount of the losses expected over the remaining life of the instruments (known as the expected credit loss model). For specific doubtful arrears with objective indications of impairment, impairment charges are applied individually.

Whether a receivable or a contract asset is recognized is governed by whether the right to consideration is unconditional (leading to recognition of a receivable) or conditional (leading to recognition of a contract asset).

Inventories

Inventories are recorded at the lower of cost and net realizable value. Net realizable value represents the estimated normal sale price less the costs of completion, marketing, selling and distribution. Raw materials and purchased products are measured using the weighted-average method; internally produced goods are measured at target costs. Inventories include proportionate shares of production overheads.

Revenue recognition (sales and other income)

Net sales represent the revenue from the sale of products and services to third parties, net of rebates and other price reductions. Revenue is recognized at the time that control of the products and services has passed to the customer, in the amount of the consideration to which Comet is expected to be entitled in exchange for the products or services. Depending on the product and the agreed shipment terms, control is transferred to the customer at the time of shipment (Incoterms) or only at the time of acceptance by the customer. In the case of warranty obligations that provide an additional service to the customer (service-type warranties), the revenue associated with them is recognized over time, based on the passage of time. Revenue from other services such as repair or training is recognized at the time of satisfaction of the performance obligation.

Customer contributions to development projects, including payments for the delivery of the respective first prototype, are recorded in other operating income; subsequent deliveries of prototypes are reported as sales.

Variable price elements (variable consideration) exist both in retroactive rebates when the quantity of products purchased exceeds a certain threshold in the calendar year, and in individual discounts on products. The amount of the rebate is estimated using the most-likely-amount method and as a rule is allocated proportionately to all performance obligations under the contract.

No interest effect is recognized for contract liabilities and prepayments by customers, as the period between the time of transfer of a promised good or service to the customer and the time of payment is not more than one year.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Borrowing costs related to qualifying assets form part of the historical cost. Depreciation is provided on a straight-line basis over the estimated useful life of the assets. The expense for depreciation of property, plant and equipment is recognized in the income statement under that expense category which corresponds to the function of the particular asset in the Group. Land values are not depreciated. Impairment charges are recognized as a separate line item under accumulated depreciation. Maintenance costs are recognized as assets only if the maintenance extends the expected life of the asset, expands production capacity or otherwise increases asset values. The cost of maintenance and repair that do not increase asset values is charged directly to income. The following estimated useful lives are applied in determining depreciation:

Intangible assets

The intangible assets recognized are goodwill, rights to trademarks and names, customer lists, technology, licenses, patents, and software. Intangible assets are recognized at cost and generally amortized on a straight-line basis over their expected useful life. Goodwill and acquired rights to trademarks and names are not amortized but are tested annually for impairment (see section “Impairment of non-current assets” below). The expense for amortization of intangible assets with finite useful lives is recognized in the income statement under that expense category which corresponds to the function of the particular asset in the Group.

The following estimated useful lives are applied in determining amortization:

Provisions

Provisions are recognized only where Comet has a present obligation to a third party arising from a past event and the amount of the obligation can be estimated reliably. No provisions are recognized for possible losses that may result from future events.

Provisions are classified as current to the extent that the related cash outflows are expected to occur within one year from the balance sheet date. Conversely, the cash outflows in respect of non-current provisions are expected to occur more than twelve months after the balance sheet date. If the interest effect is material, the cash outflows are discounted.

Post-employment benefits

Comet maintains post-employment benefit plans for its employees which differ according to the local circumstances of the individual Group companies. The benefit plans are financed by contributions to benefit arrangements that are separate legal entities (foundations or insurance companies) or by the accumulation of reserves in the balance sheet of the respective Group company. In the case of defined contribution plans or economically equivalent arrangements, the expenses accrued in the reporting period represent the agreed contributions of the Group company. For defined benefit plans, the service costs and the present value of the defined benefit obligation are calculated in actuarial valuations by independent experts, using the projected unit credit method. The calculations are updated annually. The surplus or deficit recognized in the balance sheet is equal to the present value of the defined benefit obligation as determined by the actuary, less the fair value of plan assets. Any resulting net surplus is recognized as an asset only to the extent of the potential economic benefit that may be realized from this asset in the future, taking into consideration IFRIC 14. The expense charged to income is the actuarially determined service cost plus the net interest cost. Actuarial gains and losses are recognized in other comprehensive income. They comprise experience adjustments (the effects of differences between the previous actuarial assumptions and the observed outcomes) and the effects of changes in actuarial assumptions (particularly regarding the discount rate and life expectancy).

Long-term employee benefits

Comet grants length-of-service awards to its employees after a certain number of years of service, in the form of lump-sum payments that increase in amount with the number of years of employment. Comet calculates the resulting obligation using the projected unit credit method. The calculation is updated annually. Any actuarial gains or losses from the remeasurement are immediately taken to income.

Share-based payments

Part of the variable compensation of the members of the Executive Committee under the short-term incentive plan (STIP), and part of the fixed compensation of the Board of Directors, is paid in stock. In addition, the Executive Committee is granted stock under a long-term incentive plan (LTIP). The expense is recognized at the value of the stock earned, measured at the quoted market price (fair value) at the grant date. The amount accrued for those components of compensation which must be equity-settled (i.e., for which there is no option of cash payment) is recognized directly in equity. For components which the beneficiary can choose to receive in equity or in cash, the value of the option which this choice represents is determined and recognized as an increase in equity, while the rest of the obligation is recorded as a liability.

Income tax

The income tax expense for the reporting period is composed of current taxes and deferred taxes.

Current taxes

Current tax liabilities and assets for the current period and prior reporting periods are recognized based on the amount expected to be payable to or refunded by the tax authorities. They are calculated based on the tax regulations and tax rates in effect at the balance sheet date.

Deferred taxes

Deferred taxes are accounted for by the liability method. Under this approach, the income tax effects of temporary differences between the tax bases and the values used in the consolidated financial statements are recorded as non-current liabilities or non-current assets. Deferred taxes are calculated at actual or expected local tax rates. Changes in deferred taxes are included in income tax expense in the income statement, except for deferred taxes in respect of items that are recognized outside profit or loss. These latter deferred taxes are likewise recognized outside profit or loss; according to the underlying accountable event, they are recognized either in other comprehensive income or directly in equity. Deferred tax liabilities are recognized on all taxable temporary differences except for goodwill. Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilized, except:

Leases

Leases of property, plant and equipment that transfer substantially all risks and rewards of ownership to Group companies are classified as finance leases. For assets acquired under finance leases, the lower of the fair value of the asset and the net present value of future non-cancelable lease payments is recognized as a non-current asset. Assets held under finance leases are depreciated over the shorter of their estimated useful life and the term of the lease. Service contracts (particularly outsourcing agreements) involving direct or indirect provisions on the use of specified assets are reviewed at inception as to whether the arrangements contain a lease under IFRS.

Payments under operating leases are recorded as operating expenditure and recognized on a straight-line basis in profit or loss over the periods to which they relate.

Impairment of non-current assets

The value of property, plant and equipment and other non-current assets, including intangibles, is reviewed whenever it appears possible, as a result of changed circumstances or events, that the assets’ carrying amount represents an overvaluation. Intangible assets under construction are tested for impairment annually. If the carrying amount exceeds the amount recoverable through use or sale of the asset, the carrying amount is reduced to this recoverable amount and the difference is recorded as an impairment charge in the income statement. The recoverable amount is the higher of realizable value or value in use. Value in use is determined on the basis of discounted expected future cash flows. Any acquired goodwill and any rights to trademarks or names with an indefinite useful life are not amortized but are reviewed annually at the same date for impairment. This impairment test is based on the results for the fiscal year, the rolling multi-quarter forecast and the rolling multi-year plan.

In the following tables, sales revenue is analyzed by region and by market sector.

The aggregate amount of the transaction prices allocated to performance obligations that were unsatisfied or partly unsatisfied at December 31, 2018 was CHF 114 million. Comet will realize this revenue as soon as the performance obligations have been fulfilled and the customers have acquired control of the products or services. It is expected that this will generally be the case in the next 12 to 24 months. Comet is making use of the practical expedient available for the initial application of IFRS 15 regarding the disclosure of remaining performance obligations.

Contract balances

Opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers are presented in the balance sheet and in note 5. The contract assets consisted mainly of the rights to consideration for product deliveries and services of the X-Ray Systems division that were completed but not yet billed at the balance sheet date. The contract liabilities consisted of prepayments received from customers. The revenue recognized in 2018 from contract liabilities that existed at the beginning of the period amounted to CHF 22.6 million (prior year: CHF 26.8 million).

Material changes in contract balances result from the receipt of customer payments and the invoicing of satisfied performance obligations. The divestiture of the ebeam systems business in Davenport, Iowa, USA, caused a reduction of CHF 5.0 million in contract liabilities. Further details are disclosed in note 21.

The Group is managed on the basis of the following four operating divisions, which are delineated based on their products and services. For financial reporting purposes the divisions are also referred to here as “operating segments” or “segments”.

Segment operating income represents all revenues and expenses attributable to a particular division. The only revenues and expenses not allocated to the segments are those of Comet Holding AG, certain government grants, and net financial items and income taxes. These unallocated expenses and revenues are reported in the “corporate” column. Transactions between the segments are invoiced at prices also charged to third parties.

The segment assets and liabilities represent all operating items. The following assets and liabilities are not allocated to operating segments: the assets and liabilities of Comet Holding AG, all cash and cash equivalents, all current and non-current debt and all income tax assets and liabilities. These unallocated assets and liabilities are reported in the “Corporate” column.

04.1 Operating segments

Reconciliation of aggregate segment assets and liabilities to ­­ consolidated results

04.2 Geographic information

Comet markets its products and services throughout the world and has its own companies in Switzerland, Germany, Denmark, the USA, China, Japan and South Korea. Net sales are allocated to countries on the basis of customer location.

04.3 Sales with key accounts

In the year under review, the Plasma Control Technologies division recorded sales of CHF 115 million with its largest customer, which represented 26.4% of Group sales (prior year: CHF 120 million and 27.3%).

At January 1, 2017, the beginning of the prior year, net trade receivables were CHF 43.3 million; there were no contract assets. The divestiture of the ebeam systems business in Davenport had a negative effect of CHF 1.1 million on trade ­receivables. Further details are disclosed in note 21.

The allowance account for impairment of trade receivables showed the following movement:

At the balance sheet date, complete impairment was recognized on CHF 0.5 ­million (prior year: CHF 0.5 million) of trade receivables. Within the item “other receivables” and within contract assets, there were no amounts past due or written down. The Group does not hold security against trade and other receivables.

The aging schedule for past-due trade receivables on which impairment has been recognized is summarized in the table below.

06.1 Other financial assets

06.2 Other financial liabilities

At the balance sheet date, open positions in forward exchange contracts were as follows:

06.3 Derivative financial ­instruments

The gains and losses from foreign exchange contracts are recognized as financing income or expense (see note 26). The contract amounts shown represent the notional principal amounts of the forward contracts. Consistent with the nature of the Group’s activities, the forward exchange contracts have maturities of less than one year; most are due within six months.

The inventory amounts reflect any necessary individual write-downs for items with a market value below manufacturing cost. The expense recognized for inventory write-downs was CHF 5.5 million (prior year: CHF 5.3 million).

The divestiture of the ebeam systems business in Davenport caused a reduction of CHF 10.5 million in inventories. Further details are disclosed in note 21.

The contract costs represent capitalized sales commissions for agent activities (incremental costs directly attributable to obtaining a contract). In the fiscal year, sales commissions of CHF 3.6 million were recognized in the income statement (prior year: CHF 4.0 million).

The other prepaid expenses consisted largely of prepayments made for the ­subsequent fiscal year.

The disposals of other tangible assets included the reclassification of CHF 0.5 million (prior year: CHF 0.2 million) of internally produced demonstration equipment to inventories, which did not result in an outflow of funds. There were no leased assets (under finance leases) within property, plant and equipment (prior year: CHF 0.2 million).

The assets under construction related largely to improvements of (i.e., finishing-work on) the building expansion in Flamatt. For the building expansion, completed at the end of 2018, and for the improvements to it, interest of CHF 0.6 million was capitalized (prior year: CHF 0.4 million). The interest rate used is the effective interest rate of the bond (see note 13).

The divestiture of the ebeam systems business in Davenport resulted in an impairment charge of CHF 0.7 million and reductions in cost and accumulated depreciation of CHF 1.4 million for plant and equipment and of CHF 0.4 million for other tangible assets. At the time of the disposal, all items of property, plant and equipment had already been fully written off. Further details on the Davenport divestiture are given in notes 11.1 and 21.

Assets pledged or assigned as collateral for Group obligations (encumbered assets)

At December 31, 2018, all real estate liens (mortgage notes in the amount of CHF 30.0 million) were held within the Group. In the prior year, the carrying amount of pledged real estate was CHF 63.2 million, of which CHF 24.0 million was pledged as collateral for Group obligations for CHF 8.0 million of loan amounts drawn.

The divestiture of the ebeam systems business in Davenport resulted in an impairment charge of CHF 5.4 million and reductions in cost and accumulated amortization of CHF 4.4 million for customer lists and of CHF 2.7 million for technology. Further details on the Davenport divestiture are given in notes 11.1 and 21.

The categories “goodwill and trademarks”, “customer lists” and “technology” were capitalized in connection with business combinations. The residual useful lives of the customer lists ranged up to six years.

Under a long-term brand strategy, the established Yxlon name is used alongside the Comet brand. The Group therefore deems the capitalized Yxlon brand to have an indefinite useful life.

The impairment test for goodwill and other intangible assets with indefinite useful lives was performed as at September 30, 2018. For the purpose of the impairment test, the assets to be tested were allocated to and measured as the following two cash generating units, at the level of the IXS division and (within the IXM division) at the level of the IXT business unit:

The impairment test is based on the value in use method. The recoverable amount is determined from the present value of the future cash flows (DCF valuation). The calculations are based on the Board-approved rolling forecast current at the time of the impairment test, and on the Board-approved rolling medium-term plan for 2019 to 2021. Using experience-based estimates, the amounts in the forecast and in the medium-term plan are based on growth projections for net sales, operating income and other parameters, taking into consideration the estimated market trends in the various regions. Cash flows beyond the forecast period are extrapolated using an assumed growth rate of 1.5% to 1.8%, which is within the expected rate of market growth. The assumptions applied in determining value in use correspond to the expected long-term average growth rate of the X-Ray Systems division’s operating business and of the generator business of Industrial X-Ray Modules. Input variables with a critical impact on the outcome of the impairment test are the assumed rates of sales growth and the projected trend in operating income.

Sensitivities to the assumptions applied in the valuation model

The measurement of the values in use of the X-Ray Systems CGU (IXS) and the Industrial X-Ray Technology CGU (IXT) is sensitive to the following assumptions in the planning period (2019 to 2021):

Comet believes that, with a realistic change in the material assumptions, the ­recoverable amount would not fall below the carrying amount.

11.1 Impairment in EBS business

For the ebeam systems business (EBS, part of the EBT division), at the end of the first half of 2018 there were indications of asset impairment due to lower profitability projections, and an impairment test was therefore performed at June 30, 2018.

The impairment test showed the need for an impairment charge on the assets of the EBS CGU. The impairment test is based on the value in use method. The recoverable amount was determined from the present value of the future cash flows (DCF valuation), using a pre-tax discount rate (WACC) of 11.8%. The calculations were based on the Board-approved rolling forecast current at the time of the impairment test, and on the Board-approved rolling medium-term plan for 2019 to 2021. The impairment expense of CHF 6.1 million represents the write-down of certain property, plant and equipment and intangible assets in the EBS business to their recoverable amount. The expense is disclosed in the statement of income under cost of sales (CHF 2.2 million), development expenses (CHF 0.2 million) and marketing and selling expenses (CHF 3.7 million).

Comet divested the ebeam systems business at November 12, 2018, which gave rise to additional losses. Further detail is provided in note 21.

12.1 Current and deferred income tax expense

12.2 Reconciliation of tax expense

The Tax Cuts and Jobs Act for tax reform passed in the United States in December 2017 resulted in a reduction in Comet's expected corporate tax rate from 28% in 2017 to 24% in 2018.

Comet AG, based in Flamatt, has been granted conditional tax relief by the canton of Fribourg in the form of a reduction in cantonal and municipal taxes for the period to 2022. For 2018 the tax reduction amounted to 50% (prior year: 50%).

12.3 Deferred tax assets and liabilities

Deferred tax assets and liabilities can be analyzed as follows:

The deferred tax assets and liabilities were measured at local tax rates, ranging from 14% to 35%. No deferred tax liabilities were established for temporary differences of CHF 75.6 million (prior year: CHF 90.9 million) in respect of the value of the ownership interests in Group companies. Distributions of retained earnings by subsidiaries are not expected to have an effect on income taxes, except for future distributions from China. There were no tax provisions for non-refundable withholding taxes on future distributions of foreign subsidiaries to Comet Holding AG. Distributions by Comet Holding AG to its shareholders have no effect on the reported or future income taxes.

12.4 Movement in deferred tax assets and liabilities

12.5 Tax loss carryforwards

Deferred tax assets, including tax loss carryforwards and expected tax credits, are recognized only if it is likely that future taxable profits will be available to which these deferred tax assets can be applied. Temporary differences (between the carrying amounts in the IFRS financial statements and the corresponding tax base) for which no tax assets were recognized were nil (prior year: nil).

At the balance sheet date of December 31, 2018, tax loss carryforwards stood at CHF 13.0 million (prior year: nil). Including tax credits for R&D and domestic manufacturing, the resulting deferred tax assets were CHF 4.0 million (prior year: CHF 0.7 million). The existing loss carryforwards can be carried forward indefinitely.

In the year under review there were no unrecognized deferred tax assets from tax loss carryforwards (prior year: loss carryforwards of CHF 3.3 million with a potential tax effect of CHF 0.7 million).

On April 20, 2016 a five-year, CHF 60 million bond was issued. The bond has a coupon rate of 1.875% and is listed on the SIX Swiss Exchange (ticker symbol COT16; security number 32 061 943). Its effective interest rate is 2%.

At the end of the fiscal year under review the Comet Group had undrawn credit facilities of CHF 45.6 million (prior year: CHF 41.2 million).

13.1 Non-current debt

The non-current debt consisted of the five-year bond maturing in 2021 and of bank loans. In the year under review, all interest and principal payments were made as contractually agreed.