01 Nature of the business activities

The Comet Group (“Comet”, the “Group”) is one of the world’s leading vendors of x-ray and radio frequency (RF) power technology. With high-quality components, systems and services, marketed under the “Comet” and “Yxlon” brands, the Group helps its customers optimize the quality, reliability and efficiency of their products and processes. Yxlon x-ray systems for non-destructive inspection are supplied to end customers in the electronics, automotive, aerospace 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 semiconductor, automotive and aerospace industries as well as the security sector. Under the ebeam brand, Comet also developed, manufactured and marketed compact ebeam sets for the treatment of surfaces in the food and printing industries. Comet sold the ebeam lamp business to Tetra Pak eBeam Systems SA, Pully, Switzerland, effective November 30, 2020 (see notes 4 and 8).

02 Accounting policies

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 unless specifically stated. The significant accounting policies applied are unchanged from the prior year except as set out below.

As a result of rounding and the presentation in thousands of Swiss francs, totals in the consolidated financial statements may not add.

02.1 Changes in accounting policies

Revised and new accounting rules

With effect from January 1, 2020, Comet has applied the following new or adjusted IFRS/IFRIC for the first time:

• IFRS 3 – Business Combinations (amendment): Definition of a Business
• IAS 1 – Presentation of Financial Statements, and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (amendments): Definition of Material
• IFRS 7 – Financial Instruments: Disclosures, IFRS 9 – Financial Instruments, and IAS 39 – Financial Instruments: Recognition and Measurement (amendments): Interest Rate Benchmark Reform
• Conceptual Framework for Financial Reporting (revision, issued March 29, 2018)
• IFRS 16 – Leases (amendment): Covid-19-Related Rent Concessions

On May 28, 2020, the International Accounting Standards Board (IASB) published an amendment to IFRS 16 concerning Covid-19-related rent concessions. Lessees have the option to waive the assessment of whether a rent concession related to Covid-19 represents a lease modification as defined in IFRS 16. Instead, the lessee may treat such lease concessions as if they were not a modification and recognize the effect as a variable lease payment in profit or loss. The amendment is effective from June 1, 2020 and applies to rent concessions granted until and including June 30, 2021. Earlier application is permitted, including in financial statements not yet authorized for issue at May 28, 2020. Comet has applied this practical expedient. This provided a relief effect of CHF 0.1 million in income before tax in the year under review.

The new or amended standards and interpretations had no material effect on the Group’s financial position, results of operations and cash flows.

02.3 Estimates

Comet’s consolidated financial statements contain assumptions and estimates that affect the reported financial position, results of operations and cash flows. These assumptions and estimates were made on the basis of management’s best knowledge at the time of preparation of the accounts. Actual results may differ from the values presented. The following estimates have the greatest effects on the consolidated financial statements:

• Intangible assets (see notes 19 to 21): For acquisitions, the fair value of the acquired net assets (including acquired intangible assets) is estimated. Any amount paid in excess of this estimate represents goodwill. Intangible assets with a finite life are written off over the expected period of use; those with an indefinite life (primarily goodwill and rights to trademarks and names) are not amortized but are tested annually for impairment. Especially in the determination of the value in use of goodwill and rights to trademarks and names, differences between assumed and actual outcomes could lead to changes in the results of impairment testing. The assumptions concerning the achievable margins and the growth rates have a significant impact on impairment test outcomes. The valuation of goodwill and other intangibles, as well as the estimation of useful life, have an effect on the consolidated financial statements.
• Provisions (see note 25) are, by definition, liabilities of uncertain amount. Future events can thus lead to adjustments that affect income.
• Deferred tax assets (see note 11) are recognized only if it is likely that taxable profits will be earned in the future. The tax planning is based on estimates and assumptions as to the future profit trajectories of the Group companies that may later prove incorrect. This can lead to changes with an effect on income.
• Employee benefit plans (see note 26): The Group operates employee benefit plans for its staff that are classified as defined benefit plans under IFRS. These defined benefit plans are valued annually, which requires the use of various assumptions. Differences between the actual outcomes and the assumptions, particularly as to the discount rate for future obligations and as to life expectancy, may have effects on the valuation of plan assets and thus on the financial position of the Group. The impact of the most important parameters on the net present value of the obligation is presented in note 26.

Impacts of Covid-19

The effects of the Covid-19 crisis on the global economy as a whole and on Comet’s markets remain uncertain. With respect to these impacts, Comet has critically reviewed the assumptions and estimates that affect the financial position, results of operations and cash flows. In this review, no relevant changes have been identified that would have a material impact on these financial statements. Comet is able to meet its contractual and financial obligations in full.

In connection with the Covid-19 pandemic, Comet received one-time government assistance in the year under review. This consisted mainly of reductions in social security contributions. The positive effect on income before tax was CHF 0.9 million. The assistance received has been recognized as offsets within the corresponding expense items in the consolidated income statement.

02.4 Consolidation

02.4.1 Basis of consolidation

Effective December 31, 2020, Comet acquired sole ownership of the software developer Object Research Systems (ORS) Inc., based in Montreal, Canada. The related information is provided in note 20.

As well, two subsidiaries, Comet Technologies Malaysia Sdn. Bhd., Penang, Malaysia, and Comet Solutions Taiwan Ltd., Hsinchu County, Taiwan, were founded in the year under review. The companies are wholly owned by Comet Holding AG.

The consolidated financial statements thus 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 cash generating units 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

Revenue recognition (sales and other income)

Net sales represent the revenue from the sale of goods and services to third parties, net of rebates and other price reductions. The Group’s revenue is derived from the sale of goods (including spare parts) by the PCT and IXM divisions and the sale of systems (including services such as installation) by the IXS division. Revenue from the sale of goods, including spare parts, systems and system-related services, 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 or service. In the sale of goods that are not systems, the transfer of control generally occurs at the time of delivery. Performance obligations for system sales (including for installation) are fulfilled at the time of acceptance by the customer. In connection with both non-system goods and with systems, Comet also offers services. Warranty obligations for providing 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.

Customer contributions to development projects and 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.

Sales commissions owed for agent activities are capitalized at contract inception as incremental costs attributable to obtaining a contract 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 to the customer. 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.

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).

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.

• Financial items at fair value through profit or loss: These include all derivatives, trading positions, and certain financial assets and liabilities designated as falling into this category. These assets are recognized at fair value in the balance sheet. Changes in value are reported as financing income or expense in the reporting period in which they occur.
• Financial items at amortized cost: These are measured at cost using the effective interest method.

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.

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 standard costs. Inventories include proportionate shares of production overheads.

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 and impairment. 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 costs of maintenance and repair that do not increase asset values are charged directly to income. The following estimated useful lives are applied in determining depreciation:

Right-of-use assets and lease liabilities

As a lessee, Comet recognizes leases on the basis of a right-of-use model. At the inception of every contract, Comet assesses whether it includes a lease, separating lease components from non-lease components. No assets and liabilities are recognized for leases with a term of one year or less and for leases of low-value assets (with a value when new of less than CHF 5,000); the expenses for these are recognized directly in the income statement. The initial measurement of the right of use for a leased asset is made by calculating the present value of the lease payments, plus initial direct costs, plus estimated costs for dismantling, removal and restoration, less lease incentives received. The lease liabilities correspond to the present value of the discounted payment obligations. For discounting the lease payments, Comet uses the interest rate implicit in the lease. In doing so, the currency area in which the leased asset is located and the Comet-specific credit risk are taken into account. Comet primarily has leases with fixed payments, which includes leases with rent-free periods and ones with rising payments. Leases with variable payments are immaterial.

Comet’s leases may include renewal options. These are included in the calculations only if, taking into account all significant determining factors, they are considered highly likely to be exercised. For indefinite leases, the following principles apply (the extension periods cited are from the lease inception or from the expiry of the minimum lease term):

In the event of a material modification, Comet remeasures the lease liability at the date of the change. Adjustments to the lease liability are deducted from or added to the corresponding right-of-use asset. Any difference remaining upon early termination of a lease is recognized through profit or loss. 

Where Comet is the lessor, the lease is accounted for either as an operating or a finance lease, depending on its terms.

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”). 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 generally 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:

• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit for the period nor taxable profit or loss.
• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future.

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 that are in the process of being generated 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.

03 Revenue from contracts with customers

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

Comet sold the ebeam lamp business to Tetra Pak eBeam Systems SA, Pully, Switzerland, effective November 30, 2020 (see note 8). Assets and liabilities having a future value in use and remaining with Comet after the divestiture were allocated to other divisions of the Group according to their intended use, and the ebeam Technologies (EBT) division was dissolved with effect from January 1, 2021.

Unsatisfied performance obligations

The aggregate amount of the transaction prices allocated to performance obligations that were unsatisfied or partly unsatisfied at December 31, 2020 was CHF 166 million (prior year: CHF 138 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. This is expected generally to be the case in the next 12 to 24 months.

Contract balances

Opening and closing balances of receivables and contract assets are reported in note 13. Contract liabilities from contracts with customers are presented in the balance sheet. 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 2020 from contract liabilities existing at the beginning of the reporting period amounted to CHF 18.4 million (prior year: CHF 14.7 million). Material changes in contract balances result from the receipt of customer payments and the invoicing of satisfied performance obligations.

04 Segment reporting

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”.

• The Plasma Control Technologies (PCT) division develops, manufactures and markets vacuum capacitors, radio frequency (RF) generators and RF impedance matching networks for the high-precision control of plasma processes required, for instance, in the production of memory chips and flat panel displays.
• The X-Ray Systems (IXS) division develops, manufactures and markets x-ray systems, and provides related services, for non-destructive examination using x-ray and microfocus technology and computed tomography.
• The Industrial X-Ray Modules (IXM) division develops, manufactures and markets highly compact x-ray sources and portable x-ray modules for non-destructive examination, steel metrology, and security inspection.
• The ebeam Technologies (EBT) division developed, manufactured and marketed compact ebeam sets for the treatment of surfaces in the food and printing industries. Comet sold the ebeam lamp business to Tetra Pak eBeam Systems SA, Pully, Switzerland, effective November 30, 2020 (see note 8). Assets and liabilities having a future value in use and remaining with Comet after the divestiture were allocated to other divisions of the Group according to their intended use, and the EBT segment was dissolved with effect from January 1, 2021.
  

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, 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 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, South Korea, Malaysia, Canada and Taiwan. 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 128 million with its largest customer, which represented 32.4% of Group sales (prior year: CHF 84 million and 22.7%, respectively).

05 Other operating income

06 Staff costs and staff count

06.1 Staff costs

06.2 Staff count

07 Development expenses

Development expenses comprise the costs of new-product development, improvement of existing products, and process engineering. Comet’s development activities focus on the fields of vacuum technology, high voltage engineering and material science, and on the further development of the divisions’ core products. In view of the uncertainty of future economic benefits that may flow from development projects, Comet as a rule does not capitalize development costs but charges them directly to the income statement.

08 Gain on disposal of businesses

Effective November 30, 2020, Comet sold the ebeam lamp business (part of the EBT division) to Tetra Pak eBeam Systems SA, Pully, Switzerland. The following assets and liabilities were transferred as an asset group to the new owner:

The gain of CHF 4.0 million on the disposal is taxable. The expected tax rate is 13% and the tax effect is therefore CHF 0.5 million.

Comet did not divest any businesses in the prior year.

09 Amortization, depreciation and impairment

10 Financing income and expenses

Foreign currency translation gains and losses resulted largely from items denominated in US dollars and euros.

11 Income tax

11.1 Current and deferred income tax expense

11.2 Reconciliation of tax expense

The expected income tax rate represents the Group’s experience-based long-term tax rate and takes into account the local income tax rates of the individual Group companies.

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 2020 the tax reduction amounted to 50% (prior year: 50%).

11.3 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 13% to 33%. No deferred tax liabilities were established for temporary differences of CHF 85.2 million (prior year: CHF 68.0 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, Korea, Taiwan and Canada. 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.

11.4 Movement in deferred tax assets and liabilities

11.5 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 for which no tax assets were recognized were nil (prior year: nil).

At the balance sheet date of December 31, 2020, tax loss carryforwards stood at CHF 3.2 million (prior year: CHF 5.0 million). Including tax credits for R&D and domestic manufacturing, the resulting deferred tax assets were CHF 1.1 million (prior year: CHF 2.2 million). The existing loss carryforwards can be carried forward indefinitely.

In the fiscal year, there were no unrecognized deferred tax assets from tax loss carryforwards (prior year: nil).

12 Earnings per share

Basic earnings per share represents the reporting period’s consolidated net income divided by the average number of shares outstanding.

There are no outstanding stock options or stock subscription rights that could lead to a dilution of earnings per share.

13 Trade and other receivables

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

The impairment test of trade receivables performed in light of the effects of the Covid-19 pandemic identified a moderately higher risk of default in the year under review.

At the balance sheet date, complete impairment was recognized on CHF 0.7 million (prior year: CHF 0.4 million) of trade receivables. Within the item “total 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:

14 Other assets (including financial assets) and financial liabilities

14.1 Other assets, including financial assets

14.2 Other financial liabilities

14.3 Derivative financial instruments

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

The gains and losses from foreign exchange contracts are recognized as financing income or expense (see note 29). 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.

14.4 Other assets at amortized cost

Lease receivables

As part of the divestiture of the ebeam lamp business, property, plant and equipment is leased with a financing component to Tetra Pak eBeam Systems SA (non-variable rent payments). In connection with this, equipment with a residual carrying amount of CHF 1.5 million has been reclassified from property, plant and equipment to other assets. In the year under review, this lease contract had no impact on the income statement.

Restricted cash

In relation to the acquisition of Object Research Systems (ORS) Inc., an agree­ment for compensation of CHF 1.5 million in the post-combination period was concluded with key ORS personnel as a separate transaction. There is also a purchase price holdback of CHF 1.4 million for warranties regarding acquired software technology. For the settlement of these elements, cash was transferred to an escrow account, thus restricting access to these funds (see note 20).

14.5 Other financial liabilities at amortized cost

As part of the acquisition of Object Research Systems (ORS) Inc., a purchase price holdback of CHF 1.4 million was agreed for warranties regarding the acquired software technology (also see explanations in note 14.4).

15 Inventories

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 4.7 million (prior year: CHF 4.6 million).

The sale of the ebeam lamp business resulted in a decrease of CHF 1.3 million in inventories. Note 8 provides further information on this transaction. 

16 Prepaid expenses

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 2.4 million were recognized in the income statement (prior year: CHF 3.4 million).

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

17 Property, plant and equipment

The disposals of plant and equipment included costs of CHF 4.7 million and cumulative depreciation of CHF 2.2 million associated with the divestiture of the ebeam lamp business (see note 8).

Also in connection with the sale of the ebeam lamp business, property, plant and equipment with a financing component is leased to Tetra Pak eBeam Systems SA (with non-variable rent payments). As a result, plant and equipment with a residual carrying amount of CHF 1.5 million has been reclassified to other assets. This reclassification did not lead to an outflow of funds in the consolidated cash flow statement.

The disposals of other tangible assets in the fiscal year included the reclassification of CHF 0.5 million (prior year: CHF 0.1 million) of internally produced demonstration equipment to inventories, which did not result in an outflow of funds.

Assets pledged or assigned as collateral for Group obligations

At December 31, 2020 and December 31, 2019, all real estate liens (mortgage notes in the amount of CHF 30.0 million) were held within the Group.