23 Business combinations
General
Business combinations are accounted for using the acquisition method. Acquisition costs comprise the consideration paid, including the fair value of deferred and contingent consideration. Transaction costs are recognized as operating expenses. Businesses acquired in the reporting year are included in the Group’s consolidated financial statements from the date on which the Group obtained control of the business.
Net assets acquired comprise identifiable assets, liabilities, and contingent liabilities, and are recognized at fair value. Identifiable intangible assets mainly consist of maintenance portfolios. The difference between the acquisition costs and the fair value of the net assets acquired is recognized as goodwill. Goodwill is allocated to those cash-generating units that are expected to benefit from the acquisition and to generate future cash flows. Non-controlling interests are generally recognized according to their proportionate share of the fair value of the net assets acquired.
It is common practice for the Group to acquire call options for interests that were not acquired, and to write put options.
Step acquisitions
If the Group obtains control of an associate, the previously held interests are measured at fair value at the acquisition date. Any gain or loss resulting from the remeasurement is recognized in other income. Items previously recognized in OCI are reclassified to the income statement.
In the reporting year and in the previous year, Schindler acquired the business activities or the shares of various smaller companies that sell, install, modernize, and maintain elevators and escalators. Viewed individually, the impact of the business combinations that took place in the reporting year is not material, nor would it have been material had the business combinations have occurred on January 1, 2022, or January 1, 2021, respectively. The business combinations enable the Group to strengthen its market position and regional coverage.
The fair values of the net assets acquired through all business combinations are as follows:
| In CHF million | 2022 | 2021 | ||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | 8 | 6 | ||
| Accounts receivable | 16 | 6 | ||
| Other current assets | 1 | 3 | ||
| Property, plant, and equipment | 5 | 1 | ||
| Maintenance portfolio | 69 | 97 | ||
| Deferred tax assets | 1 | 1 | ||
| Other non-current assets | 4 | – | ||
| Liabilities | ||||
| Accounts payable | 14 | 7 | ||
| Contract liabilities | 6 | 3 | ||
| Other current liabilities | 10 | 2 | ||
| Deferred tax liabilities | 16 | 13 | ||
| Other non-current liabilities | 3 | 3 | ||
| Net assets acquired | 55 | 86 | ||
| Non-controlling interests | – | – | ||
| Goodwill | 110 | 64 | ||
| Total acquisition costs | 165 | 150 |
Gross trade accounts receivable total CHF 17 million and the related bad debt allowances total CHF 1 million (previous year: gross amount of CHF 7 million and allowances of CHF 1 million).
The Group assumes that CHF 37 million of goodwill is tax-deductible (previous year: CHF 33 million).
Cash flows
A reconciliation of the net cash outflow for all business combinations is provided in the following table:
| In CHF million | 2022 | 2021 | ||
|---|---|---|---|---|
| Cash and cash equivalents paid | 145 | 114 | ||
| Deferred purchase consideration | 20 | 36 | ||
| Total acquisition costs | 165 | 150 | ||
| Cash and cash equivalents acquired | –8 | –6 | ||
| Deferred purchase consideration | –20 | –36 | ||
| Paid deferred purchase consideration | 27 | 33 | ||
| Net cash outflow | 164 | 141 |