10
g)
A charge of 100m to “General and administrative expenses” has
been reflected in the pro forma income statement for
the year ended 31 December 2023 for real estate onerous contract provisions in
connection with decisions to vacate
certain premises post the Group merger.
Under U.S. GAAP,
onerous contract provisions cannot be recognized while
the respective contract is still in use; under IFRS Accounting Standards
,
such provisions are recognized based on a
management decision to reduce usage on a contract with cost commitments
.
This adjustment is non-recurring in
nature.
h)
A charge of 200m to “General and administrative expenses” has been
reflected in the pro forma income statement for
the year ended 31 December 2023 to increase provisions relating to a difference
in policy between Credit Suisse
Parent Bank under U.S. GAAP and UBS Parent Bank under IFRS Accounting
Standards, where certain provisions are
measured using the low point in a range under U.S. GAAP but measured at the mid-point
under IFRS Accounting
Standards (when each point in a range is as likely as any other). This adjustment
is non-recurring in nature.
i)
The U.S. GAAP cash flow hedge Other Comprehensive Income (“OCI”) balance
of the Credit Suisse Parent Bank
was set to zero as of the Group merger date, which, for the purpose of
the pro forma condensed combined income
statement, was as of 1 January 2023.
An adjustment has been made to “Net interest income” to reflect the reversal of
an estimated 579m
loss related to the difference between the amortization
of cash flow hedge OCI under U.S. GAAP
and the estimated amount that would have been recognized for
the year ended 31 December 2023 following the reset
of the cash flow hedge OCI balance to zero as of 1 January 2023.
j)
The acquisition of Credit Suisse Group AG by UBS Group AG on 12 June 2023
was made without the ordinary due
diligence procedures and outside the conventional time frame for an acquisition
of this scale and nature. As such,
complete information about all relevant facts and circumstances as of the acquisition
date was not practically
available to UBS at the time when the initial acquisition accounting was applied for the
purpose of the UBS Group
second quarter 2023 report, with the amounts that form part of the
business combination accounting therefore
considered provisional and subject to further measurement period
adjustments if new information about facts and
circumstances existing on the date of the acquisition were to be obtained
within one year from the acquisition date.
In the second quarter of 2024, in light of the additional information about circumstances
existing on the acquisition
date that became available to management, IFRS 3 measurement period adjustments
of 0.2bn were made in relation to
provisions and contingent liabilities. In addition, fair value measurement
adjustments of 0.3bn were made to the
acquisition date fair values of exposures associated with Russia, as well as other positions
in Non-core and Legacy,
following the completion of a detailed review.
The adjustments reflect management’s
final conclusions on critical
assumptions and judgments in respect of the consolidated financial
statements of UBS Group AG, which are within a
range of reasonably possible outcomes, relating to significant uncertainties
that existed on the acquisition date.
Of the 0.5bn of measurement period adjustments resulting in a reduction in
the carrying amount of net assets for UBS
Group AG, 122m related to facts and circumstances relevant for financial
reporting of the Credit Suisse Parent Bank
under IFRS Accounting Standards as of the date of the acquisition of
Credit Suisse Group AG by UBS Group AG.
This has resulted in pro forma charges
to “Credit loss expense / (release)” and “Other net income from financial
instruments measured at fair value through profit or loss” of 104m
and 18m, respectively. For pro
forma reporting
purposes, this income statement impact has been presented in the earliest pro
forma condensed combined income
statement period, being the year ended 31 December 2023. This adjustment
is non-recurring in nature.
k)
Income tax expense / (benefit) has been analyzed in light of the pre
-tax adjustments made in the unaudited condensed
combined pro forma income statement.
Accordingly, a pro forma
credit adjustment of 30m has been reflected in “Tax
expense / (benefit)” for the year ended 31 December 2023 in respect of
estimated pre-tax pro forma adjustments that
relate to legal entities whose tax positions give rise to a tax impact, and other
tax adjustments.
As a result of analyzing current and deferred tax balance sheet positions as of 31
December 2023 of the individual
entities contained in the Credit Suisse Parent Bank consolidation perimeter
,
a deferred tax benefit of 245m has been
recognized as an additional credit to “Tax
expense / (benefit)” for the year ended 31 December 2023 reflecting
revaluations for the US and Singapore branches of Credit Suisse AG based on combined
profit forecasts following
completion of the Transaction.
All pro forma pre-tax adjustments for Credit Suisse Parent Bank’s
consolidated income statement for the year ended
31 December 2023 have been considered and no further tax expense or benefit
has been recognized in connection
with the pre-tax adjustments in the unaudited pro forma condensed
combined income statement as it is assumed that
the other pre-tax adjustments will either not be recognized for tax purposes, or
they will generally relate to entities
with tax losses carried forward that are not recognized as deferred tax assets. Any changes
to the unaudited pro forma
condensed combined income statement for the year ended 31 December
2023 in respect of these entities would,
therefore, only affect the amount of their unrecognized
tax losses carried forward and would have no impact on their
tax expenses or benefits for the year ended 31 December 2023. This assessment includes
assumptions and represents
UBS Parent Bank’s best estimate as to the
likely tax impacts. The assessment could change as further information
becomes available, including how the entities and businesses of Credit Suisse Parent Bank
in each location will be
reorganized, receipt of revised profit forecasts for those entities, and
discussions with the relevant tax authorities.