1   Basic principles

The Allreal Group is a real-estate company which operates exclusively in Switzerland with the main focus on the Zurich business region. It is involved in the development and management of its portfolio of residential and commercial real estate and engages in management activities both for its own yield-producing properties and on behalf of third parties (Real Estate division). The general contractor activities encompass project development and the realisation, purchase and sale of properties (Projects & Development division).

Allreal Holding AG (parent company) has its registered office in Baar (Zug, Switzerland) and is listed on SIX Swiss Exchange.

On 10 February 2015, the Board of Directors of Allreal Holding AG approved the consolidated financial statements for publication. They are also subject to the approval of the annual general meeting of Allreal Holding AG of 17 April 2015.

The consolidated annual accounts are based on the individual company accounts, which were prepared in accordance with uniform Group accounting standards as at 31 December. The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) and conform to the Listing Rules as well as with Article 17 of the Financial Reporting Directive (DFR) of the SIX Swiss Exchange and with Swiss law.

The same principles of accounting apply as for the 2013 consolidated financial statements. The scope of consolidation remains unchanged. See 2.29 in connection with the valuation uncertainties.

In the 2014 consolidated financial statements, Allreal applied the following new IFRS standards and interpretations for the first time:

These IFRS changes have no significant impact on the consolidated financial statements.

Some new or amended IFRS standards and interpretations have been adopted by the IASB, but will only enter into force in a subsequent accounting period. The new developments or amendments are listed in the following table, specifying the financial year in which the adjustment enters into force at Allreal.

IFRS 15

The standard contains new principles for recognising revenue. Of particular significance for Allreal is at what point in time revenue and income on development property held for sales are recognised. In accordance with IAS 18 and IFRIC 15, revenue and income are currently recognised on transfer of ownership of the individual development real estate units (see 2.6). Under certain circumstances, the new standard IFRS 15 provides that revenue and income are recognised by the percentage of completion method (POC) over the life of a project.

A detailed analysis of the impact of IFRS 15 on the consolidated financial statements will be made in 2015; it is not planned to apply the standard early. Apart from additional disclosure requirements, the remaining IFRS amendments are not expected to result in any material adjustments.

Subsidiaries are fully consolidated with effect from the date of their acquisition, i.e. from the date on which Allreal gains control. Allreal will be deemed to have gained control if, on the basis of existing rights, it is able to direct those activities of the subsidiaries that significantly affect their returns and also if Allreal is exposed, or has rights, to variable returns from its involvement with the subsidiary and is able to affect those returns through its power over the subsidiary.

Subsidiaries are deconsolidated with effect from the date on which control ends.

Capital is consolidated at the time of purchase using the acquisition method. The purchase price for a corporate acquisition is determined as the total of the market value of the assets transferred, the liabilities contracted or taken over and the equity financial instruments issued by Allreal. Transaction costs in connection with a corporate acquisition will be charged to the income statement. The goodwill arising from a corporate acquisition is reported as an asset on the balance sheet and corresponds to the surplus of the purchase price, the contribution of minority interests in the companies taken over and the market value of the share of equity held previously over the balance of the assets, liabilities and contingent liabilities valued at market values. If the difference is negative, the surplus is immediately charged to the income statement after renewed assessment of the market value of the net assets taken over.

All intercompany balances, income and expenses, as well as unrealised gains and losses from intercompany transactions are fully eliminated.

The scope of consolidation remained unchanged during the period under review. Allreal Office AG made an intercompany transfer of its 100% shareholding in Apalux AG to Allreal Holding AG at book values.

The Allreal Group is subdivided into the two divisions Real Estate and Projects & Development, which constitute segments in their own right. This presentation is in line with the management approach under which Group Management as the decision-making body monitors the results of the two divisions on the level of net profit on a quarterly basis. For the transfer of segment reporting to the consolidated statement of comprehensive income see 2.7.

The Real Estate division comprises the companies Allreal Home AG (residential properties), Allreal Office AG (commercial properties), Allreal Toni AG (Toni site in Zurich-West), Allreal Vulkan AG (commercial properties in Zurich Altstetten), Allreal West AG (Escher-Wyss site in Zurich-West), Apalux AG (commercial and residential properties) and the property management operations of Hammer Retex.

The Projects & Development division consists largely of Allreal Generalunternehmung AG plus Hammer Retex’s activities as a general contractor.

The activities of Allreal Holding AG (parent company) and Allreal Finanz AG (intercompany financing) are not assigned to segments as their business activities do not generate any operating income. In the segment information, they are listed under Holding company/eliminations.