SIX finds weakness in company financial statements

Herstellung von Wirkstoffen für Medikamente
Active ingredient manufacturer Evolva has been sloppy with financial statements. (Image: media service)

Biotech company Evolva has been fined for errors in annual financial statements. This case involves an area that often leads to sore points.

The Swiss Exchange Regulation (SER), the supervisory and sanctioning body of the Swiss stock exchange SIX, has fined biotech company Evolva Holding for errors in its 2019 and 2020 financial statements.

The amount of the fine is 50,000 Swiss francs, SER and the company itself announced on Monday. This amount of the fine is thus in the middle range of what SER usually fines.

Repentant management

In the corresponding annual financial statements according to IFRS, incomplete information had been provided and technical errors had been committed, it was further stated.

In determining the amount of the sanction, the Sanction Commission took into account the seriousness of the fault, the gravity of the violation and the issuer’s sensitivity to sanctions, according to the communiqué.

The active ingredient manufacturer from Reinach in the canton of Basel-Land, which is listed on the Swiss stock exchange, accepted the decision in a statement.

The main allegations about a possible goodwill write-down in the books were not confirmed. However, there were deficiencies in the information and in the impairment test, it said.

Only fine affects

The new Evolva management, which joined the company in 2021 and 2022, accepted the SER decision and vowed to improve internal processes, the statement added.

But the errors found would have no material impact on the financial statements for the years in question, asserted new CEO Christian Wichert, who took over this year in February.

Neither the income statement nor the balance sheets were financially affected by the matter, the new management affirmed. The company was only burdened by the fine of 50,000 Swiss francs and the costs of the whole affair.

Frequent defects

What is interesting for the other listed companies is that SER is apparently taking a closer look at goodwill and its disclosures. 

Back in February 2022, the sanction commission had found Blackstone Resources AG had, among other things, incorrectly accounted for the acquisition of its subsidiary, South America Invest, and the resulting goodwill  as well as disclosed incorrect information related to this acquisition in its 2019 IFRS half-year financial statements and 2019 IFRS annual financial statements.

However, unlike drug maker Evolva, the company had promptly appealed the decision.

Billion-dollar deal at SIX

In the case of goodwill, therefore, a comparatively large number of disclosures are required in order for external parties to be able to understand the matter with the appropriate clarity.

When it comes to declarations, companies are best advised to look to the Swiss stock exchange SIX itself. With the takeover of the Spanish stock exchange BME, SIX itself has mega-goodwill on its books, and the exchange operator must make all details as transparent as possible for external parties.

Companies should take the details as a model; after all, SIX, which is majority-owned by Swiss banks, probably does not want to risk any errors in annual financial statements.


SIX finds weakness in company financial statements

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