In addition to the accounting provisions relating to stock corporation law (Articles 660 - 670 OR), Item 32 of the Swiss Code of Obligations contains provisions relating to commercial accounting. On December 21, 2007, the Swiss Federal Council filed a motion to restructure the provisions of Item 32 of the OR and, thus, replace the provisions relating to stock corporation law.
A quick rundown of the current accounting provisions.
An annual financial statement with its associated income statement, balance sheet and notes must be prepared in such a way that a company's assets and earnings can be valued as accurately as possible. The law sets out the minimum breakdown of the income statement and the balance sheet, and defines a minimum content for the notes. Valuation is based on procurement or manufacturing costs. The formation of hidden reserves is permitted. Only if doing so would portray the operating result in a much more favorable light must the notes contain a net breakdown of all hidden reserves.
If, by way of a majority vote or any other means, a company merges one or more companies under joint management, it is obligated under Art. 663 OR to prepare a consolidated financial statement. A company can be exempted from this obligation, but only provided it remains within certain limiting criteria in two successive years (i.e. balance sheet total must be within CHF 10 m, annual sales within CHF 20 m, max. 200 average number of employees in the year). Companies that are obligated to produce a consolidated financial statement whatever the case include listed companies and those with outstanding bonds. The Swiss Code of Obligations does not, however, contain any provisions on the accounting standard according to which a consolidated financial statement must be prepared. Only the IPO laws of the SWX Swiss Exchange require that an accepted accounting standard based on the "true and fair view" principle be used (such as Swiss GAAP FER, IFRS or US GAAP).
The changes submitted to parliament envisage embodying new accounting regulations irrespective of legal form in Item 32 of the Code. The provisions in the draft bill apply to all organizations that are required to keep books and records, and coincide largely with the existing legal regulations. Larger companies are also required to produce a cash flow statement and a management report, among other things. A company is obligated to file a consolidated financial statement if it exceeds certain limiting criteria in two successive years (i.e. balance sheet total of CHF 10 m, annual sales of CHF 20 m, average number of full-time employees in the year of 50). A new requirement of the draft bill is that consolidated financial statements must be drawn up in accordance with an accepted accounting standard (likely to be Swiss GAAP FER, IFRS or US GAAP).
The limiting criteria obligating companies to file consolidated financial statements contained in the draft bill dated December 21, 2007, have been increased in the course of parliamentary debates from a balance sheet total of CHF 10 m, annual sales of CHF 20 m and an average number of full-time employees in the year of 50 to a balance sheet total of CHF 20 m, annual sales of CHF 40 m and an average number of full-time employees in the year of 250. A transfer of the obligation to file consolidated financial statements to a controlled company is also under consideration. The draft bill would also have obligated companies to draw up consolidated financial statements in accordance with an accepted accounting standard (such as Swiss GAAP FER or IFRS). Parliament also refrained from this: consolidated financial statements drawn up in accordance with an accepted accounting standard will only be required for stock corporations.
