Introduction
Regulatory framework​
Update to current practice
Comment
The Competition Commission (ComCo) has recently specified how turnover that has been denominated in a non-Swiss currency must be converted into Swiss francs in a merger control notification. Specifically, ComCo drew up a blueprint for situations in which the calendar year does not coincide with an entity's financial year. This will have practical implications for parties to a planned concentration, as the requirement of a merger control notification depends in many cases on reaching certain turnover thresholds set out in the Federal Act on Cartels and other Restraints of Competition (CartA) and the applicable exchange rate may be the decisive factor in determining whether the turnover thresholds are reached or exceeded.
According to article 9(1) CartA, planned concentrations of undertakings must be notified to ComCo before their implementation, provided that certain turnover thresholds are reached or exceeded in the financial year that precedes the concentration. The starting point of the turnover calculation is the revenues as shown in the income statement of an entity involved in the planned concentration. For turnover in non-Swiss currencies, article 4(2) of the Ordinance on the Control of Concentrations of Undertakings (MCO) establishes that the turnover must be converted into Swiss francs in accordance with generally accepted accounting principles applicable in Switzerland. The ComCo further specified this in its merger notification explanatory note and form of 21 October 2014, which stated that the conversion must be based on the average annual exchange rate that is published by the Swiss National Bank (SNB).
According to the Swiss Code of Obligations, the aim of financial reporting is to allow third parties to form a reliable opinion about an entity's economic position. In consideration of the above, ComCo has recently specified that the annual average exchange rate used for the conversion into Swiss francs shall correspond to the actual annual average exchange rate for the accounting period relevant to the income statement.
In this regard, ComCo establishes two different calculation methods that depend on whether an entity's financial year coincides with the calendar year. If it does coincide with the calendar year, the entity may rely on the calendar year's annual average exchange rate published by the SNB. However, if the financial year does not correspond to the calendar year, the annual average exchange rate is to be calculated based on the 12 monthly average exchange rates representing the relevant financial year. This means that the sum of the 12 monthly average exchange rates, which correspond to the months of the financial year, must be divided by 12. For example, if the financial year covered the period from April 2020 to March 2021, the calculation would be the sum of the average monthly exchange rate for each month from April 2020 to March 2021 divided by 12.
The SNB provides a tabular overview of the 12 monthly average exchange rates on its website, which may be downloaded in Excel format for a configurable period.
The approach to the conversion of turnover in non-Swiss currencies into Swiss francs as part of the merger control notification deviates from the standard procedure determined in the merger notification explanatory note and form for entities whose financial year does not coincide with the calendar year. Instead of relying directly on the SNB's annual average exchange rate, the actual annual average exchange rate must be calculated based on the monthly average exchange rates tailored to the months of the entity's financial year. Therefore, the applicable exchange rate is:
- the SNB's annual average exchange rate, if the financial year coincides with the calendar year; or
- the sum of the 12 relevant monthly average exchange rates divided by 12, if the financial year does not coincide with the calendar year.
For more information please contact Marcel Meinhardt or Céline Deborah Kellmann at Lenz & Staehelin by telephone (+41 58 450 80 00) or email ([email protected] or [email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.