[if gte vml 1]><v:shapetype id="_x0000_t75" coordsize="21600,21600" o:spt="75" o:preferrelative="t" path="m@4@5l@4@11@9@11@9@5xe" filled="f" stroked="f"> <v:stroke joinstyle="miter"></v:stroke> <v:formulas> <v:f eqn="if lineDrawn pixelLineWidth 0"></v:f> <v:f eqn="sum @0 1 0"></v:f> <v:f eqn="sum 0 0 @1"></v:f> <v:f eqn="prod @2 1 2"></v:f> <v:f eqn="prod @3 21600 pixelWidth"></v:f> <v:f eqn="prod @3 21600 pixelHeight"></v:f> <v:f eqn="sum @0 0 1"></v:f> <v:f eqn="prod @6 1 2"></v:f> <v:f eqn="prod @7 21600 pixelWidth"></v:f> <v:f eqn="sum @8 21600 0"></v:f> <v:f eqn="prod @7 21600 pixelHeight"></v:f> <v:f eqn="sum @10 21600 0"></v:f> </v:formulas> <v:path o:extrusionok="f" gradientshapeok="t" o:connecttype="rect"></v:path> <o:lock v:ext="edit" aspectratio="t"></o:lock> </v:shapetype><v:shape id="Image_x0020_1" o:spid="_x0000_s1026" type="#_x0000_t75" style='position:absolute;margin-left:103.6pt;margin-top:.7pt;width:154.8pt; height:151.25pt;z-index:251658240;visibility:visible;mso-wrap-style:square; mso-width-percent:0;mso-height-percent:0;mso-wrap-distance-left:9pt; mso-wrap-distance-top:0;mso-wrap-distance-right:9pt; mso-wrap-distance-bottom:0;mso-position-horizontal:right; mso-position-horizontal-relative:margin;mso-position-vertical:absolute; mso-position-vertical-relative:text;mso-width-percent:0;mso-height-percent:0; mso-width-relative:margin;mso-height-relative:margin'> <v:imagedata src="file:///C:/Users/NGFINA~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.png" o:title=""></v:imagedata> <w:wrap type="square" anchorx="margin"></w:wrap> </v:shape><![endif][if !vml][endif]During an acquisition (cross-border or not), many issues are essential to the success of the operation. The human and cultural aspects of course, but also financial ones. For Swiss SMEs, the accounting standards, the options offered, the approaches and the chart of accounts are different from their European peers. Specific adjustments are necessary in order to have an appropriate economic and financial understanding (and to enable comparability at European level). It is therefore dangerous for an investor (especially a foreign one) to value a Swiss SME without analyzing and restating the target's financial statements in detail. For example, profitability can be deliberately degraded via hidden reserves. The purpose of this article is to alert the reader (Swiss or foreign investor) about this specific Swiss issue. We offer this financial expertise to our clients.


During an acquisition, in addition to the required standard adjustments (normalization of sales and cost structure, mainly thanks to the elimination of non-recurring items), it is necessary to adapt to local accounting standards. In Switzerland, for example, the presentation of the balance sheet is reversed compared to the European one (asset presented in order of decreasing liquidity). But above all, there may be hidden reserves, a Swiss accounting specificity. Thus, according to the “Code des Obligations” (OR 960a-e), the primary objective of accounting standards is the protection of creditors (and not the presentation of a true and fair view of financial statements, in particular profitability and financial structure). A Swiss SME may constitute hidden reserves, without the obligation to dissolve them in the long term. These are designed to sustain the business over the long term by creating equity reserves (not shown in the balance sheet) that are available to offset a possible economic downturn in the future. Thus, Switzerland fights against unemployment by limiting its tax collection in the short term (the tax authorities recover this differential when these reserves are dissolved, in particular during a transfer or sale of the company).


These hidden reserves are constituted either by undervaluing the assets (eg. recognizing stocks at a lower value than the economic reality, or amortizing too much, for example by underestimating the useful life of the assets, or by omitting a revaluation at market value), or by overestimating liabilities (eg. over-provisioning). This artificially reduces the company’s economic profitability.


The presentation of the Swiss financial statements differs from the European one. In the “Code des Obligations”, the precautionary principle is preferred compared to the true and fair principle (unlike IFRS and US GAAP for example). SMEs thus have more options and latitude to steer their results and present their financial statements, constituting hidden reserves. These may not be dissolved according to Art. 960a-e. A communication in the appendix of the financial statements (Art 959c of the revised law of 2015) is only obligatory in the event of dissolution. We strongly recommend investors to be advised to analyze this Swiss specific issue, which impacts both modeling and valuation. We are at their disposal for this.

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