Roche adopts IAS19 (revised) and implements presentational changes with effect from 1 January 2013

• Change in the accounting policy - IAS 19 (revised) Employee Benefits • Presentational change - Pharmaceuticals Division geographic sales split changed to reflect new internal organisational structure • No impact on 2013 outlook as communicated at FY 2012 results: sales to grow in line with previous year, Core EPS targeted to grow ahead of sales. Roche expects to further increase dividend.

Change in accounting policy - IAS 19 (revised) Employee Benefits The revised version of IAS 19 was adopted by Roche on 1 January 2013. It will be implemented in the 2013 results and the 2012 results will be restated retrospectively. Amongst other matters the revised version of IAS 19 ‘Employee Benefits’ includes the following changes to the previous version of the standard:

• Eliminating the option to defer the recognition of actuarial gains and losses from defined benefit post-employment plans, known as the ‘corridor method’. Roche has not previously applied this option, but rather used the option to recognise such gains and losses in other comprehensive income. The option previously applied by Roche will henceforth be a requirement under the revised standard and therefore this change in the new standard has no impact on the Roche Group’s financial statements.

• The previous method of including the expected income from the plan assets at an estimated asset return is replaced by using the discount rate that is used to discount the defined benefit obligation. In the restated results of 2012 this results in a reduction in net financial income of 164 million Swiss francs for the 2012 full year and 81 million Swiss francs for the 2012 half-year. The on-going impact for 2013 and beyond is expected to be of a similar magnitude. There was no impact on Roche’s operating income or net assets from this change. • Past service cost is recognised in the income statement in the period of a plan amendment instead of deferring the portion related to unvested benefits. The impact of this results in an increase in the Group’s net assets by 22 million Swiss francs for the 2012 full year and 24 million Swiss francs for the 2012 half-year.

Following the revision to IAS19 disclosed above the Group has also made a presentational change to rename ‘Financial income’ to ‘Other financial income (expense)’ and this caption has been moved below ‘Financing costs’.

Presented below are the reconciliations for the 2012 Core results between the results published previously in 2012 (using the previous standard) and the restated amounts which will be reported as comparatives in 2013 (using the revised standard). The reconciliations between the reported IFRS figures under the existing standard and the restated amounts are presented in Table 1 in the appendix.

 

Restated Roche Group core results in millions of CHF
	Year ended 31 December 2012				Six months ended 30 June 2012
	As originally published	Application of IAS 19 (revised)	Restated		As originally published	Application of IAS 19 (revised)	Restated
Operating profit	17,160	-	17,160		8,641	-	8,641
Associates	-	-	-		(2)	-	(2)
Financing costs	(2,273)	350	(1,923)		(1,058)	171	(887)
Other financial income (expense)	471	(514)	(43)		239	(252)	(13)
Profit before taxes	15,358	(164)	15,194		7,820	(81)	7,739
Income taxes	(3,480)	51	(3,429)		(1,785)	25	(1,760)
Net income	11,878	(113)	11,765		6,035	(56)	5,979
Attributable to
- Roche shareholders	11,643	(112)	11,531		5,922	(56)	5,866
- Non-controlling interests	235	(1)	234		113	-	113
Core EPS
Basic (CHF)	13.73	(0.13)	13.60		6.99	(0.06)	6.93
Diluted (CHF)	13.62	(0.13)	13.49		6.94	(0.06)	6.88

 

Core Earnings per share (Core EPS): In addition to the diluted Core EPS, the Group now also discloses the basic Core EPS to align disclosure to current practice. This additional disclosure has been made to improve the comparability with our peers and is presented in the Restated Roche Group core results table above. Presentational change – Pharmaceuticals Division geographic sales split From 1 January 2013 the Group will report Pharmaceuticals Division sales by four geographies: US, Europe, Japan and International. Europe (previously disclosed as Western Europe) will be enlarged to include 11 countries* within Central and Eastern Europe which were previously included within the International region. This presentation reflects our internal organisational structure and aligns better with common market principles. Restated quarterly sales by regions and top 20 products for 2012 are presented in Table 2 of the appendix.

* Europe region includes: Austria, Belgium, Denmark, Finland, Germany, Greece, Ireland, Israel, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and UK with 11 newly added countries: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. Table 1 – IAS19 (revised) Employee Benefits

IFRS results

 

Restated Roche Group consolidated income statement in millions of CHF
	Year ended 31 December 2012				Six months ended 30 June 2012
	As originally published	Application of IAS 19 (revised)	Restated		As originally published	Application of IAS 19 (revised)	Restated
Operating profit	14,125	-	14,125		6,332	-	6,332
Associates	-	-	-		(2)	-	(2)
Financing costs	(2,273)	350	(1,923)		(1,058)	171	(887)
Other financial income (expense)	471	(514)	(43)		239	(252)	(13)
Profit before taxes	12,323	(164)	12,159		5,511	(81)	5,430
Income taxes	(2,550)	51	(2,499)		(1,143)	25	(1,118)
Net income	9,773	(113)	9,660		4,368	(56)	4,312
Attributable to
- Roche shareholders	9,539	(112)	9,427		4,255	(56)	4,199
- Non-controlling interests	234	(1)	233		113	-	113
Earnings per share and non-voting equity security
Basic (CHF)	11.25	(0.13)	11.12		5.02	(0.06)	4.96
Diluted (CHF)	11.16	(0.13)	11.03		4.99	(0.06)	4.93

 

 

Restated Roche Group consolidated statement of comprehensive income in millions of CHF
	Year ended 31 December 2012				Six months ended 30 June 2012
	As originally published	Application of IAS 19 (revised)	Restated		As originally published	Application of IAS 19 (revised)	Restated
Net income recognised in the income statement	9,773	(113)	9,660		4,368	(56)	4,312
Other comprehensive income, net of tax	(1,948)	111	(1,837)		(1,058)	56	(1,002)
Total comprehensive income	7,825	(2)	7,823		3,310	-	3,310
Attributable to
- Roche shareholders	7,864	(1)	7,863		3,183	-	3,183
- Non-controlling interests	(39)	(1)	(40)		127	-	127

 

 

Restated Roche Group consolidated balance sheet (selected items) in millions of CHF
	31 December 2012					30 June 2012
	As originally published	Application of IAS 19 (revised)		Restated		As originally published	Application of IAS 19 (revised)	Restated
Deferred income tax assets	4,856	(7)		4,849		3,200	(8)	3,192
Post-employment benefit assets	668	10		678		580	13	593
Deferred income tax liabilities	(1,394)	(3)		(1,397)		(235)	(3)	(238)
Post-employment benefit liabilities	(7,253)	22		(7,231)		(6,684)	22	(6,662)
Other net assets	19,851	-		19,851		15,215	-	15,215
Net assets	16,728	22		16,750		12,076	24	12,100
Capital and reserves attributable to Roche shareholders	14,494	20		14,514		9,616	21	9,637
Equity attributable to non-controlling interests	2,234	2		2,236		2,460	3	2,463
Total equity	16,728	22		16,750		12,076	24	12,100
Restated Roche Group consolidated equity at 1 January 2012 in millions of CHF
			As originally published				Application of IAS 19 (revised)	Restated
Capital and reserves attributable to Roche shareholders			12,095				21	12,116
Equity attributable to non-controlling interests			2,387				3	2,390
Total equity			14,482				24	14,506

 

With best regards,

Roche Investor Relations

Dr. Karl Mahler Phone: +41 61 68-78503 e-mail: karl.mahler@roche.com

Dr. Sabine Borngräber Phone: +41 61 68-88027 e-mail: sabine.borngraeber@roche.com

Luís Correia Ph.D. Phone: +41 61 68-75284 e-mail: luis.correia@roche.com

Tamer Farhan Ph.D. Phone: +41 61 68-82552 e-mail: tamer.farhan@roche.com

Dr. Nina Mojas Phone: +41 61 68-71300 e-mail: nina.mojas@roche.com

 

Elhan Webb, CFA Phone: +41 61 68-89630 e-mail: elhan.webb@roche.com

Investor Relations North America

Thomas Kudsk Larsen Phone: +1 650 467 2016 e-mail: larsen.thomas@gene.com

Nina Goworek Phone: +1 650 467 8737 e-mail: goworek.nina@gene.com

Ekaterine Kortkhonjia Ph.D. Phone: +1 650 467 5873 e-mail: kortkhonjia.ekaterine@gene.com