1
Financial Statements 2023 – Roche Finance Europe B.V.
Roche Finance Europe B.V. -
Financial Statements 2023
Financial Statements 2023 – Roche Finance Europe B.V.
2
Management Report
1. Review of the year ended 31 December 2023
General
Roche Finance Europe B.V., a company registered in the Netherlands (hereinafter ‘the Company’), is 100% indirectly owned by
Roche Holding Ltd, a public company registered in Switzerland and parent company of the Roche Group. The main activity of the
Company is the provision of financing to other affiliates of the Roche Group. The refinancing is in the form of bond or loan from
the financial markets.
Financial position and performance
In the financial year 2023, the company made a net profit of EUR 1,213 thousand (2022: profit of EUR 456 thousand). Interest
income on loans was EUR 61,999 thousand (2022: EUR 32,453 thousand), interest expense on debt instruments was EUR 50,868
thousand (2022: EUR 16,747 thousand), amortisation cost of debt discount was EUR 1,101 thousand (2022: EUR 1,474 thousand)
and guarantee fees to the parent company were EUR 9,210 thousand (2022: EUR 13,613 thousand).
No investments were made during the financial year 2023 (2022: none).
On 27 February 2023 the Company issued EUR 750 million fixed rate bonds with a coupon of 3.204% and EUR 500 million fixed
rate bonds with a coupon of 3.355%. The bonds will mature on 27 August 2029 and 27 February 2035, respectively. The bonds
have a primary listing at the SIX Swiss Exchange. Both issued bonds are guaranteed by Roche Holding Ltd, the parent company
of the Roche Group. The Company received EUR 1,247 million aggregate net proceeds from these issuances and sale of these
fixed bonds. On the same date the Company granted two loans to Roche Finance Ltd, Switzerland: a loan of EUR 750 million with
an interest rate of 3.266% and due 27 August 2029, and another loan in the amount of EUR 500 million with an interest rate of
3.463% and due 27 February 2035, by using the net proceeds from the two issuances together with cash pool funding.
On 27 February 2023 the Company received the full repayment of EUR 650 million loan receivable from Roche Deutschland
Holding GmbH which was due on the same date. These funds were used by the Company to repay EUR 650 million notes on the
same date.
On 29 August 2023, the Company received the full repayment of GBP 71 million outstanding loan from Roche Diagnostics Limited,
United Kingdom. On the same date, the Company used these funds, together with the cash pool fund, to repay the outstanding
balance of GBP 77 million of the 5.375% GBP notes with an original principal of GBP 250 million.
On 4 December 2023 the Company issued EUR 600 million fixed rate bonds with a coupon of 3.312% and EUR 900 million fixed
rate bonds with a coupon of 3.586%. The bonds will mature on 4 December 2027 and 4 December 2036, respectively. The bonds
have a primary listing at the SIX Swiss Exchange. Both issued bonds are guaranteed by Roche Holding Ltd, the parent company
of the Roche Group. The Company received EUR 1,497 million aggregate net proceeds from these issuances and sale of these
fixed bonds. On the same date the Company granted two loans to Roche Finance Ltd, Switzerland: a loan of EUR 600 million with
an interest rate of 3.380% and due 4 December 2027, and another loan in the amount of EUR 900 million with an interest rate of
3.668% and due 4 December 2036, by using the net proceeds from the two issuances together with cash pool funding.
The long-term credit rating of Roche Holding Ltd is AA by Standard & Poor’s, Aa2 by Moody’s and AA by Fitch, based on the
most recent available ratings. The present value of the future cash flows of the intercompany loans is sufficient in order to meet
the liquidity needs and the future obligations of the Company.
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Financial Statements 2023 – Roche Finance Europe B.V.
Employees
The Company has no employees. Roche Pharmholding B.V., Woerden, performs all administrative activities on behalf of the
Company.
Diversity and Inclusion
With the resignation of Mr. Maturin Tchoumi on 10 March 2023 and the appointment of Mr. Andrew Plank on 10 March 2023, the
Board of Directors of Roche Finance Europe B.V. (‘the Board’) consists of 4 members, all of which are male. The Board of
Directors recognises the benefits of diversity, including gender balance. The Board of Directors will continue to be selected based
on wide-ranging experience, backgrounds, skills, knowledge and insights and the gender diversity objectives will be taken into
account as much as possible. In order to achieve gender diversity, the Board of Directors aims towards a balanced representation
of at least 30% women and at least 30% men. These targets are deemed appropriate and ambitious for the Company. The
Company did not meet the gender diversity target for the year 2023. For any future Board Member appointments, the target of
gender diversity as set by the Board of Directors remains an important selection criteria.
Governance
The Board of Directors contains of three local executive Board of Directors members who are responsible for the daily operations
and one international non - executive director who is responsible for the governance.
Code of Conduct
The Roche Group Code of Conduct, as publicly available on Roche corporate website, states the expectations Roche has as an
employer towards employees and sets forth the standards for business behaviour that apply throughout the Roche Group. All
employees and all others acting on behalf of Roche must comply with the Roche Group Code of Conduct, regardless of their
location and the nature of their work. The Roche Group Code of Conduct is built on the Roche Values. The code contains
guidance in the areas of products and services, personal integrity, corporate integrity, employment (including measures against
corrupt business behaviour), company assets, responsible business and comprehensive compliance management. It also provides
questions and answers, examples and information on where to find more detailed guidance on the various topics. Roche
employees, as well as business critical business partners, are trained on the key compliance principles by a global mandatory
eLearning. All employees are required to complete this eLearning when they join Roche, as well as when the Roche Group Code
of Conduct gets updated every 5 years.
Future outlook
As of the date of this report, the Company will continue its current activities in 2024 with no changes expected.
2. Principal risks and uncertainties
Strategy
The financing activities of the Company will develop in line with the strategy of the Roche Group. Depending on the future
financing needs of the Roche Group, the Board of Directors of the Company may decide to issue new debt securities and/or
borrow funds to finance affiliates of the Roche Group. Consequently, the Board of Directors is responsible for the long-term
strategy of the Company. The Company meets all of the requirements with respect to Corporate Governance by complying with
requirements as set out in the relevant regulation, including those of the Luxembourg Stock Exchange, SIX Swiss Exchange and
Frankfurt freiverkehr.
Operational activities
The Company has no employees. Roche Pharmholding B.V., Woerden, performs all administrative activities on behalf of the
Company. The Board of Directors is responsible to ensure all activities, including the ones performed outside the IT infrastructure,
are performed considering adequate segregation of duties. This is also in order to mitigate the risk of fraudulent activities. The
risk of fraud mainly arise from payment cycle and financial reporting. Both are covered by ensuring adequate segregation of
Financial Statements 2023 – Roche Finance Europe B.V.
4
duties in the payments and administration processes. The Board is also responsible for managing the interest, liquidity and credit
risks of the Company. Whenever the Company is unable to manage these risks adequately, or is unable to meet compliance with
applicable regulations, this would directly affect the reputation of the Company and the Roche Group.
Risks
The Company is exposed to various financial risks arising from its financing activities.
Credit Risk
The Company is exposed to potential default of payment of any of its loans receivable from other affiliates of the Roche Group.
Therefore the credit risk ultimately depends on the financial position of the Roche Group.
The Company has assessed certain accounting matters that generally require consideration of forecasted financial information.
The accounting matters assessed included, but were not limited to, the Company’s financial assets. No impairment issues were
noted for financial assets of the Company. At 31 December 2023 the Company has no financial assets which are past due.
Market and Liquidity Risk
The exposure to interest rates and foreign exchange rates is limited, because contractual interest rates, duration and terms of
financial assets and liabilities as well as the currencies are generally matching. Therefore, the liquidity risk is reduced as well.
Moreover, the Company’s obligations to third parties on the bond markets are guaranteed by Roche Holding Ltd, the parent
company of the Roche Group and covered by loans receivable from other members of the Roche Group that have the same
maturity. The Company assets and liabilities increased significantly compared to previous year as a result of notes repayments
and bond issuances throughout 2023, resulting in an increased liquidity risk for the year ended 31 December 2023.
The Company’s financial risk management is described in more detail in Note 15 to the Annual Financial Statements for the year
ended 31 December 2023.
Uncertainties
The main activity of the Company is to provide financing to other members of the Roche Group and to refinance this on the bond
or loan markets. Depending on decisions of management, the Company may potentially issue new debt securities and/or borrow
funds to finance other members of the Roche Group.
While there was no significant impact on the Company’s Financial Statements, the Company will continue to monitor the areas of
increased judgements and risk for material changes. Based on our current knowledge and available information, it is not
expected that current macroeconomic conditions will have an impact on the ability of the Company to continue as a going
concern.
The other various known and unknown risks, uncertainties and other factors could lead to substantial differences between the
current and future results, financial position and performance of the Company and the historical results given in the Management
Report and the Financial Statements.
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Financial Statements 2023 – Roche Finance Europe B.V.
3. Responsibility statement
The directors of Roche Finance Europe B.V. confirm that, to the best of their knowledge as of the date of their approval of the
audited financial statements as at 31 December 2023:
the audited financial statements as at 31 December 2023, which have been prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of Roche
Finance Europe B.V. taken as a whole; and
the management report gives a true and fair view of the development and performance of the business and the position
of Roche Finance Europe B.V. together with a description of the principal risks and uncertainties that it faces.
Woerden, 31 January 2024
The Board of Directors
Peter Eisenring Andrew Plank
Mark Ekelschot Rahul Doshi
Financial Statements 2023 – Roche Finance Europe B.V.
6
Roche Finance Europe B.V. Financial Statements
Roche Finance Europe B.V., statement of comprehensive income in millions of EUR
Year ended 31 December
2023
2022
Income
Financial income – related parties
3, 14
62
32
Total Income
62
32
Expenses
Financing costs
3
(52)
(18)
Guarantee fees – related parties
3, 14
(9)
(14)
Changes in impairment losses on financial instruments
1
-
Total expenses
(60)
(32)
Profit (loss) before taxes
2
-
Income tax
5
(1)
-
Net profit (loss)
1
-
Other comprehensive income, net of tax
-
Total comprehensive income
1
-
7
Financial Statements 2023 – Roche Finance Europe B.V.
Roche Finance Europe B.V., balance sheet (before result appropriation) in millions of EUR
31 December 2023
31 December 2022
Non-current assets
Long-term loans receivable – related parties
7, 14
3,748
997
Deferred income tax assets
5
-
-
Total non-current assets
3,748
997
Current assets
Short-term loans receivable – related parties
7, 14
-
731
Accounts receivable – related parties
8
48
36
Current income tax assets
5
-
-
Cash and cash equivalents
9
-
-
Total current assets
48
767
Total assets
3,796
1,764
Non-current liabilities
Long-term debt
11
(3,743)
(999)
Total non-current liabilities
(3,743)
(999)
Current liabilities
Short-term debt
11
-
(736)
Current income tax liabilities
5
-
-
Accrued interest on debt instruments
10
(35)
(12)
Total current liabilities
(35)
(748)
Total liabilities
(3,778)
(1,747)
Total net assets
18
17
Equity
Share capital
12
2
2
Retained earnings
15
15
Unappropriated result
1
-
Total equity
18
17
Financial Statements 2023 – Roche Finance Europe B.V.
8
Roche Finance Europe B.V., statement of cash flows in millions of EUR
Year ended 31 December
Cash flows from operating activities
2023
2022
Net profit (loss) after tax
1
-
Adjustments:
- Interest income – related parties
3
(62)
(32)
- Changes in expected loss allowance on loans
(1)
-
- Financing costs
3
52
18
- Guarantee fees expense – related parties
3
9
14
- Income taxes expense
1
-
- Unrealised exchange (gains) losses on loan receivables
2
4
- Unrealised exchange (gains) losses on debt
(2)
(4)
Total
(1)
-
Issuance of long-term loans receivable – related parties
7
(2,750)
Proceeds from repayment of loans receivable – related parties
7
732
-
Interest received – related parties
46
32
(Increase) decrease of cash pool balance with related parties
6
(1)
Total cash flow from operating activities
(1,966)
31
Cash flows from investing activities
Total cash flow from investing activities
-
-
Cash flows from financing activities
Proceeds from issuance of bonds
11
2,744
Repayment and redemption of notes
11
(739)
-
Guarantee fees paid – related parties
(9)
(14)
Interest paid
(30)
(17)
Total cash flow from financing activities
1,966
(31)
Increase (decrease) in cash and cash equivalents
-
-
Cash and cash equivalents at 1 January
-
-
Cash and cash equivalents at 31 December
9
-
-
9
Financial Statements 2023 – Roche Finance Europe B.V.
Roche Finance Europe B.V., statement of changes in equity in millions of EUR
Share capital
Retained earnings
Unappropriated result
Total
Year ended 31 December 2022
At 1 January 2022
2
15
-
17
Net income
-
-
-
-
Other comprehensive income
-
-
-
-
Total comprehensive income
-
-
Appropriation of result
-
-
-
-
At 31 December 2022
2
15
-
17
Year ended 31 December 2023
At 1 January 2023
2
15
-
17
Net income
-
-
1
1
Other comprehensive income
-
-
-
-
Total comprehensive income
-
-
1
1
Appropriation of result
-
-
-
-
At 31 December 2023
2
15
1
18
The retained earnings represents the Company’s cumulative net result at the beginning of the period after accounting for
dividend payments. Unappropriated result represents the Company’s net result for the period.
Financial Statements 2023 – Roche Finance Europe B.V.
10
Notes to the Roche Finance Europe B.V. Financial Statements
1. General accounting principles and policies
Basis of preparation
These financial statements are the audited annual financial statements (hereafter ‘the Annual Financial Statements’) of Roche
Finance Europe B.V., Chamber of Commerce Number 30186306, a company incorporated in the Netherlands (‘the Company’). The
Company is controlled by the immediate parent company Roche Pharmholding B.V. and 100% indirectly owned by Roche Holding
Ltd, a public company registered in Switzerland and parent company of the Roche Group, and therefore the Company is part of
the Roche Group. The main activity of the Company is the provision of financing to other affiliates of the Roche Group. The
refinancing is in the form of bond or loan from the financial markets.
Statement of compliance
The Annual Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS
Accounting Standards) as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code. They have
been prepared using the historical cost convention except for items that are required to be accounted for at fair value (currently
none). They were approved for issue by the Board of Directors on 31 January 2024.
Going concern
Management has assessed that it is appropriate to prepare the Company’s financial statements on a going concern basis. The
Company’s obligations to third parties on the bond markets are guaranteed by Roche Holding Ltd, the parent company of the
Roche Group and covered by loan receivables from other members of the Roche Group that have the same contractual maturities.
Key accounting judgements, estimates and assumptions
The preparation of the Annual Financial Statements requires management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets, liabilities and related disclosures. Actual outcomes could differ from
those management estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on
historical experience and various other factors. Revisions to estimates are recognised in the period in which the estimate is
revised.
There are currently no key assumptions about the future and no key source of estimation uncertainty that the Company’s
management believe have a significant risk of causing a material adjustment to the carrying value of assets and liabilities within
the next twelve months.
Impairment of financial assets.
At 31 December 2023 the Company had EUR 2 million in allowance for doubtful accounts for loans receivables (2022: EUR 3
million) (see Note 7). The allowance for doubtful accounts is based on assumptions about risk of default and expected loss rates.
The Company uses judgement in making these assumptions and selecting the inputs to the calculation of the allowance for
doubtful accounts, based on the company’s past experience, existing market conditions as well as forward-looking estimates at
the end of each reporting period.
Changes in accounting policies adopted by the Roche Group and, consequently, by the Company
In 2023 Roche Group has implemented various minor amendments to existing standards and interpretations. In addition, the
Roche Group has adopted the amendments to IAS 12 ‘Income Taxes’ relating to ‘International Tax Reform – Pillar Two Model
Rules’ issued by the International Accounting Standards Board (IASB) in May 2023. The Roche Group has applied the exception
to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. None of
these new and revised standards and interpretations has a material impact on the Company’s overall results and financial
position.
Future new and revised standards
The Roche Group and consequently the Company are currently assessing the potential impacts of the various new and revised
standards and interpretations that will be mandatory from 1 January 2024 which the Roche Group, and consequently, the
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Financial Statements 2023 – Roche Finance Europe B.V.
Company has not yet applied. Based on an analysis to date, the Company does not anticipate that these will have a material
impact on the Company’s overall results and financial position. The Roche Group and the Company are also assessing other new
and revised standards which are not mandatory until after 2024.
Foreign currency translation
The functional currency of the Company is Euro (EUR). Transactions in other currencies are initially reported using the exchange
rate at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the rates ruling at the
reporting date. The exchange differences arising from the translation of the unsettled monetary assets and liabilities or upon their
settlement are recognised in profit or loss.
Accounting policies for assets and liabilities
Cash and cash equivalents
Cash and cash equivalents include cash on hand and time, call and current balances with banks and similar institutions. Such
balances are only reported as cash equivalents if they are readily convertible to known amounts of cash, are subject to
insignificant risk of changes in their fair value and have a maturity of three months or less from the date of acquisition.
Fair values
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. It is determined by reference to quoted market prices or by the use of established
valuation techniques such as the discounted cash flow method if quoted prices in an active market are not available (‘Fair value
hierarchy’). Valuation techniques will incorporate observable market data about market conditions and other factors that are
likely to affect the fair value of a financial instrument.
Financial assets at amortised cost
Financial assets are measured at amortised costs.
Loans and receivables are non-derivative financial assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest. Loans and receivables are initially recorded at fair value and
subsequently carried at amortised cost using the effective interest rate method, less any impairment losses.
For loans to related parties carried at amortised cost, the Company applies the general expected credit loss model.
Allowances for expected credit losses for loans to related parties are recognised based on a forward looking expected credit loss
model. The methodology used to determine the amount of the allowance is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset. The Company uses the 30 days past due criteria as a
backstop rather than a primary driver to considering exposures to have significantly increased credit risk since the initial
recognition.
For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve months of
expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly,
lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit
impaired, lifetime expected credit losses along with interest income on a net basis are recognised.
The Company considers the probability of default upon initial recognition of an asset and whether there has been a significant
increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in
credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as
at the date of initial recognition. The following indicators are incorporated: internal credit rating, significant increases in credit risk
on other financial instruments of the same borrower, actual or expected significant adverse changes in business, financial and
economic conditions that are expected to cause a significant change to the borrower’s ability to meet its obligations.
Debt instruments
Debt instruments are initially recognised at fair value, net of transaction costs incurred, which is equal to the net proceeds
received. Subsequently they are reported at amortised cost. Any discount between the net proceeds received and the principal
Financial Statements 2023 – Roche Finance Europe B.V.
12
value due on redemption is amortised over the duration of the debt instrument and is recognised as part of financing costs using
the effective interest rate method. The Company derecognises a financial liability when its contractual obligations are discharged,
cancelled or expired.
Accounting policies for profit or loss
Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using
the effective interest method.
Finance costs comprise guarantee fee expenses, interest expense on borrowings and impairment losses recognised on financial
assets. Guarantee fee to Roche Holding Ltd. are recognised as is accrued and calculated as a fixed percentage of nominal value
of outstanding Euro notes. Interest expenses are recognised using the effective interest method. Allowance for credit losses on
financial assets to related parties are recognised based on a forward looking expected credit loss model.
Taxation
Income taxes include all taxes based upon the taxable profits of the Company, including withholding taxes payable on the
distribution of retained earnings within the Roche Group. Other taxes not based on income, such as property and capital taxes,
are included within other expenses.
Deferred tax assets and liabilities are recognised on temporary differences between the tax bases of assets and liabilities and
their carrying values. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available
against which the unused tax losses can be utilised.
Current and deferred tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and
when there is a legally enforceable right to offset them. Deferred taxes are determined based on the currently enacted tax rates
applicable in each tax jurisdiction where the Company operates.
Classification of cash flows
The Company has elected to present cash flow from operating activities using the indirect method, by adjusting the Company’s
net profit or loss after tax for any non-cash income and expense items in order to derive the cash generated from operations. The
Company classifies the cash flows from the issuance of, or proceeds from, loans receivables and the interest received to
‘operating activities’. The cash pool balances with related parties are also presented within cash flows from operating activities.
The Company believes that, for a finance entity, presenting the aforementioned items within operating activities provides more
relevant information. The cash flows from interest paid and repayment or redemption of notes and guaranteed feed paid are
classified as financing activities.
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Financial Statements 2023 – Roche Finance Europe B.V.
2. Operating segment information
The Company has only one operating segment and undertakes its operations in the Netherlands. The vast majority of income
relates to interest on loans received from related parties
7
.
Financial income by locations of debtors in millions of EUR
2023
2022
Switzerland
39
-
Germany
20
28
UK
3
4
Total
62
32
3. Financial income and financing costs
Financial income – related parties in millions of EUR
2023
2022
Interest income – related parties
14
62
32
Total financial income – related parties
62
32
Financing costs in millions of EUR
2023
2022
Interest expense on debt instruments
(51)
(17)
Amortisation of debt discount
11
(1)
(1)
Guarantee fees – related parties
(9)
(14)
Changes in impairment losses on financial instruments
1
-
Total financing costs
(60)
(32)
4. Auditors remuneration
For the financial year 2023, BDO Audit & Assurance B.V. charged net EUR 59,600 to the Company for the audit of Statutory
Financial Statements and EUR 20,000 for the review of the Interim Financial Statements (2022: BDO Audit & Assurance B.V.
charged in total EUR 59,500).
No other services have been provided by the auditor.
5. Income taxes
Income tax expenses in millions of EUR
2023
2022
Current income taxes
(1)
-
Deferred income taxes
0
-
Total income tax (expense)
(1)
-
Income tax assets (liabilities) in millions of EUR
31 December
2023
31 December
2022
Current income taxes
- Assets
-
-
- Liabilities
-
-
Net current income tax assets (liabilities)
-
-
Financial Statements 2023 – Roche Finance Europe B.V.
14
Deferred income taxes
- Assets
0
-
- Liabilities
-
-
Net deferred income tax assets (liabilities)
0
-
The Company is a member of the fiscal unity for corporate income tax (see Note 13). The Company’s local statutory tax rate is
25.8% (2022: 25.8%) and this is also the effective tax rate in these Annual Financial Statements. The Company’s effective tax rate
can be reconciled to the Company’s applicable tax rate as follows:
6. Employee benefits
The Company has no employees. Roche Pharmholding B.V., Woerden, performs all administrative activities on behalf of the
Company.
7. Loans receivable – related parties
On 27 February 2023, following the issuance of two EUR denominated bonds (see Note 9), the Company granted two new loans
with the total amount of EUR 1,250 million to Roche Finance Ltd, Switzerland.
On 27 February 2023, in line with contractual terms, the Company received loan repayments of EUR 650 million from Roche
Deutschland Holding GmbH, Germany.
On 29 August 2023, in line with contractual terms, the Company received loan repayments of GBP 71 million from Roche
Diagnostics Limited, United Kingdom.
On 4 December 2023, following the issuance of two EUR denominated bonds (see Note 9), the Company granted two new loans
with the total amount of EUR 1,500 million to Roche Finance Ltd, Switzerland.
Loans receivables: movements in carrying value in millions of EUR
2023
2022
At 1 January
1,728
1,732
Proceeds from repayments of loans receivables – related parties
(732)
-
Issuance of long-term loans receivables – related parties
2,750
-
Changes in impairment losses on financial instruments
1
-
Currency translation effects
1
(4)
At 31 December
3,748
1,728
Reported as
- Long-term loans receivables
3,748
997
- Short-term loans receivables
-
731
Total loans receivables
3,748
1,728
Reconciliation of the Company’s effective tax rate
2023
2022
Applicable tax rate
25.8%
25.8%
Company’s effective tax rate
25.8%
25.8%
15
Financial Statements 2023 – Roche Finance Europe B.V.
GBP denominated loans
Loans receivable – related parties in millions of EUR
31 December 2023
31 December 2022
Short-term loans
Roche Diagnostics Limited, United Kingdom, due 29 August 2023,
outstanding principal GBP 71 million (2021: GBP 71 million), interest
rate 5.67%
-
81
Total loans receivable due in less than 1 year – related parties
-
-81
EUR denominated loans
Loans receivable – related parties in millions of EUR
31 December 2023
31 December 2022
Long-term loans
Roche Deutschland Holding GmbH, Germany, due 25 February 2025,
outstanding principal EUR 1.0 billion, interest rate 1.80%
1,000
1,000
Roche Finance Ltd, Switzerland, due 27 August 2029, outstanding
principal EUR 750 million, interest rate 3.266%
750
-
Roche Finance Ltd, Switzerland, due 27 February 2035, outstanding
principal EUR 500 million, interest rate 3.463%
500
-
Roche Finance Ltd, Switzerland, due 4 December 2027, outstanding
principal EUR 600 million, interest rate 3.380%
600
-
Roche Finance Ltd, Switzerland, due 4 December 2036, outstanding
principal EUR 900 million, interest rate 3.668%
900
-
Total loans receivable due in more than 1 year – related parties
3,750
1,000
Short-term loans
Roche Deutschland Holding GmbH, Germany, due 27 February 2023,
outstanding principal EUR 650 million, interest rate 1.515%
-
650
Total loans receivable due in less than 1 year – related parties
-
650
Total GBP and EUR denominated loans reported as
- Long-term loans receivable – related parties
14
3,750
1,000
- Short-term loans receivable – related parties
14
0
731
Total loans receivable – related parties
3,750
1,731
Expected credit loss – IFRS 9
(2)
(3)
Total loans receivable – related parties (Net)
3,748
1,728
Asset available for the repayment of liabilities
Movements in carrying value of recognised asset in millions of EUR
At 1
January
Cash flows
(Inflow)/ Outflow
Financing
Income
Foreign Exchange
and other
Adjustments
At 31
December
2022
Loan (including interest receivable)
1,757
(32)
32
(4)
1,753
Total assets available for the repayment
of liabilities
1,757
(32)
32
(4)
1,753
2023
Loan (including interest receivable)
1,753
1,972
62
4
3,791
Total asset available for the repayment
of liabilities
1,753
1,972
62
4
3,791
Financial Statements 2023 – Roche Finance Europe B.V.
16
8. Accounts receivable - related parties
The Company deposits surplus funds with Roche Finance Ltd in its function as corporate cash pool leader for numerous Roche
affiliates (see Note 15).
At 31 December the Company also had interest receivables from Roche affiliates in respect of the loans given (see Note 7).
Accounts receivable – related parties in millions of EUR
31 December 2023
31 December 2022
Accounts receivable with cash pool leader
5
11
Interest receivables – related parties
43
25
Total accounts receivable – related parties
48
36
9. Cash and cash equivalents
At 31 December 2023 the Company had no cash in its bank account (2022: none). Any funds deposited by the Company with the
corporate cash pool leader, Roche Finance Ltd, are readily available.
10. Accrued interest
Accrued interest in millions of EUR
31 December 2023
31 December 2022
Interest payable
35
12
Total accrued interest
35
12
17
Financial Statements 2023 – Roche Finance Europe B.V.
11. Debt
Debt: movements in carrying value of recognised liabilities in millions of EUR
2023
2022
At 1 January
1,735
1,738
Proceeds from issue of bonds
2,744
-
Repayment and redemption of notes
(739)
-
Amortisation of debt discount
3
1
1
Currency translation effects
2
(4)
At 31 December
3,743
1,735
Consisting of
- Notes and bonds
3,743
1,735
Total debt
3,743
1,735
Reported as
- Long-term debt
3,743
999
- Short-term debt
-
736
Total debt
3,743
1,735
Recognised liabilities and effective interest rates of notes and bonds in millions of EUR
Effective
interest rate
31 December 2023
31 December 2022
Long-term debts
0.875% notes due 25 February 2025, principal EUR 1.0
billion (ISIN: XS1195056079)
0.93%
999
999
3.312% bonds due 4 December 2027, principal EUR
600 million (ISIN: XS2726331932)
3.35%
599
-
3.204% bonds due 27 August 2029, principal EUR 750
million (ISIN: XS2592088236)
3.24%
749
-
3.355% bonds due 27 February 2035, principal EUR
500 million (ISIN: XS2592088400)
3.38%
499
-
3.586% bonds due 4 December 2036, principal EUR
900 million (ISIN: XS2726335099)
3.61%
897
-
Total debt payable in more than 1 year
3,743
999
Short-term debts
0.5% notes due 27 February 2023, principal
EUR 650 million (ISIN: XS1371715118)
0.63%
-
649
5.375% notes due 29 August 2023, principal
GBP 250 million, outstanding GBP 77 million
(ISIN: XS0175478873)
5.46%
-
87
Total debt payable in less than 1 year
-
736
Total debt
3,743
1,735
The fair values of financial liabilities at the reporting date are not materially different from their reported carrying values. The fair
values of the notes issued at 31 December 2023 are stated below. These are calculated based on observable market prices of the
notes (Level 1 fair value hierarchy). There are no pledges on the Company’s assets in connection with the debt. All issued notes
are guaranteed by Roche Holding Ltd, the parent company of the Roche Group.
Financial Statements 2023 – Roche Finance Europe B.V.
18
Fair value of notes and bonds in millions of EUR
31 December 2023
31 December 2022
0.875% notes due 25 February 2025, principal EUR 1.0 billion
(ISIN: XS1195056079)
974
965
0.5% notes due 27 February 2023, principal EUR 650 million
(ISIN: XS1371715118)
-
649
5.375% notes due 29 August 2023, principal GBP 250 million,
outstanding GBP 76 million (ISIN: XS0175478873)
-
87
3.204% bonds due 27 August 2029, principal EUR 750 million
(ISIN: XS2592088236)
769
-
3.355% bonds due 27 February 2035, principal EUR 500 million
(ISIN: XS2592088400)
520
-
3.312% bonds due 4 December 2027, principal EUR 600 million
(ISIN: XS2726331932)
615
-
3.586% bonds due 4 December 2036, principal EUR 900 million
(ISIN: XS2726335099)
950
-
Total debt payable
3,828
1,701
Issuance of bonds
On 27 February 2023 the Company completed an offering of EUR 1,250 million fixed rate bonds issued in two tranches, of which
EUR 750 million for bonds with a coupon of 3.204% and EUR 500 million for bonds with a coupon of 3.355%. The bonds will
mature on 27 August 2029 and 27 February 2035, respectively. These bonds have a primary listing at the SIX Swiss Exchange. The
Group received EUR 1,247 million aggregate net proceeds from the issuance and sale of these fixed rate bonds.
On 4 December 2023 the Company completed an offering of EUR 600 million fixed rate bonds with a coupon of 3.312% and EUR
900 million fixed rate bonds with a coupon of 3.586%. The bonds will mature on 4 December 2027 and 4 December 2036,
respectively. These bonds have a primary listing at the SIX Swiss Exchange. The Company received EUR 1,497 million aggregate
net proceeds from the issuance and sale of these fixed rate bonds.
The Company did not issue any new bonds or notes in 2022.
Redemption and repurchase of notes
On 27 February 2023, the Company redeemed 0.5% fixed rate notes with the amount of EUR 650 million. The cash outflow was
EUR 650 million, plus accrued interest. The effective interest rate of these bonds was 0.63%.
On 29 August 2023 the Company redeemed the 5.375% fixed rate notes with an outstanding amount of GBP 77 million. The cash
outflow was EUR 89 million, plus accrued interest. The effective interest rate of these notes was 5.46%.
The Company did not redeem or repurchase any bonds and notes in 2022.
Liabilities arising from financing activities
Movements in carrying value of recognised liabilities in millions of EUR
At 1
January
Cash flows
Inflow (Outflow)
Financing
Costs
Foreign Exchange
and other
Adjustments
At 31
December
2022
Debt (including interest payable)
1,750
(17)
18
(4)
1,747
Total liabilities arising from
financing activities
1,750
(17)
18
(4)
1,747
2023
Debt (including interest payable)
1,747
1,975
52
4
3,778
19
Financial Statements 2023 – Roche Finance Europe B.V.
Total liabilities arising from
financing activities
1,747
1,975
52
4
3,778
12. Equity
Share Capital
The authorised share capital of the Company amounts to EUR 10 million, consists of 100,000 shares with a nominal value of EUR
100 each of which 20,000 ordinary, voting shares have been issued and fully paid in. Roche Pharmholding B.V., a company
registered in the Netherlands, is the sole shareholder.
Dividends
There were no dividend payments in 2023 (2022: none).
Retained earnings and unappropriated result
The retained earnings represents the Company’s cumulative net result at the beginning of the period after accounting for
dividend payments. Unappropriated result represents the Company’s net result for the period.
Own equity instruments
As of 31 December 2023, the Company holds none of its own shares (31 December 2022: none).
13. Contingent liabilities
The Company is a member of the fiscal unity for corporate income tax led by the parent, Roche Pharmholding B.V. As a result, the
Company settles its taxes per intercompany with Roche Pharmholding B.V. Based on the Tax Collection Act, the Company and the
parent are jointly and severally liable for the taxes payable of the fiscal unity.
The income corporate tax as recognized in the financial statement of the Company is based on the statutory result of the
company. The Company settles the corporate income tax through its current account with the parent.
As of 31 December 2023, the Company does not have any material contingent liabilities (2022: none).
14. Related parties
Parent and other related parties
As a member of the Roche Group, all of the Company’s related party transactions are with Roche Group affiliates. The
transactions include interest on and issues/repayments of loans given by the Company. The Company pays guarantee fee to the
ultimate parent company Roche Holding Ltd. In addition the Company has a current account with Roche Finance Ltd, the
corporate cash pool leader, as described in Note 7.
Subsidiaries and associates
The Company has no subsidiaries or associates.
Related party transactions in millions of EUR
2023
2022
Interest income – related parties
3
62
32
Guarantee fees – related parties
3
(9)
(14)
(Increase) decrease of cash pool balance with related parties
8
6
(1)
Financial Statements 2023 – Roche Finance Europe B.V.
20
Related party balances in millions of EUR
31 December
2023
31 December
2022
Long-term loans receivable – related parties
7
3,750
1,000
Short-term loans receivable – related parties
7
-
731
Accounts receivable – related parties
8
48
36
Key management personnel
The purpose of the Company is to act as a financing company for the operations of the Roche Group. The members of the
Company’s Board of Directors act as the chief operating decision-maker.
Board of Directors of Roche Finance Europe
Peter Eisenring
Member of the Board
Appointed 31 January 2003
Mark Ekelschot
Member of the Board
Appointed 15 June 2018
Maturin Tchoumi
Member of the Board
Appointed 1 September 2021
Rahul Doshi
Member of the Board
Resigned 10 March 2023
Appointed 1 May 2022
Andrew Plank
Memner of the Board
Appointed 10 March 2023
The directors did not receive remuneration or payment from the Company for their time and expenses related to their services
during 2023 and 2022.
15. Risk management
Roche Group risk management
Risk management is a fundamental element on all levels of the Roche Group and encompasses different types of risks. The
Company is also part of this business practice. At a group level, risk management is an integral part of the business planning and
controlling processes. Material risks are monitored and regularly discussed with the Corporate Executive Committee and the
Audit Committee of the Board of Directors of Roche Holding Ltd, parent company of Roche Group.
Financial risk management
The Company is exposed to financial risks arising from its corporate finance activities of providing financing to other affiliates of
the Roche Group and obtaining refinancing on the bond markets. There are three Roche Group affiliates representing
approximately 100% of the Company’s interest revenues in 2023 (2022: 100%). The Company’s financial risk exposures are related
to changes in interest rates and the creditworthiness and solvency of the Company’s counterparties.
Financial risk management within the Roche Group is governed by policies reviewed by the Board of Directors. These policies
cover credit risk, liquidity risk and market risk and are also applicable to the Company. These policies provide guidance on risk
limits, type of authorised financial instruments and monitoring procedures. As a general principle, the policies prohibit the use of
derivative financial instruments for speculative trading purposes. Policy implementation and day-to-day risk management are
carried out by the relevant treasury functions and regular reporting on these risks is performed by the relevant accounting and
controlling functions within Roche.
Credit risk
The credit rating of Roche Holding Ltd is AA (Standard & Poor's). The credit rating of loans receivables from related parties are
internally rated. Loans receivables from related parties internally rated as AA (investment grade) amount EUR 2,750 million and
loans receivables from related parties internally rated as BB amount EUR 1,000 million.
21
Financial Statements 2023 – Roche Finance Europe B.V.
For financial assets at amortised cost, the Company applies the general expected credit loss model. As loans receivables at
amortised cost are assessed to be low risk following the internal rating outcome, and no change in credit risk occurred since
inception, the impairment allowance is determined at 12-month expected credit losses (ECL) with a reference to internal credit
ratings of the counterparties. The Company considers the probability of default upon initial recognition of asset and whether
there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether
there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting
date with the risk of default as at the date of initial recognition.
Evidence that a financial asset is credit-impaired also includes the following observable data:
significant financial difficulty of the borrower;
a breach of contract;
the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for a security because of financial difficulties.
The ECL is the sum of the value of all possible losses, each multiplied by the probability of that loss occurring and calculated as
follows: ECL = EAD × LGD × PD. Exposure at Default (EAD) is the gross carrying value of loans receivable; Loss Given Default
(LGD) is the portion of loans receivable that the Company shall lose if a borrower defaults; Probability of Default (PD) is the
likelihood of a default of a counterparty over an observed period. There were no loans receivables for which the Company
observed a significant increase in the credit risk which would require the application of the lifetime expected credit losses
impairment model. There were no material movements in the loss allowance in 2023. The Company assesses a significant
increase in credit risk using the delta in the lifetime default probability, internal ratings and arrears. The Company evaluates
qualitative information on the borrower’s other cash flow obligations (including to other debt providers), its liquidity position and
business performance and on the regulatory, economic, and technological environment of the borrower. The Company uses the
30 days past due criteria as a backstop rather than a primary driver to considering exposures to have significantly increased
credit risk since the initial recognition.
Credit risk arises from the possibility that counterparties to transactions may default on their obligations, causing financial losses
for the Company. The objective of managing counterparty credit risk is to prevent losses of liquid funds deposited with or
invested in such counterparties. The maximum exposure to credit risk resulting from financial activities, without considering
netting agreements and without taking account of any collateral held or other credit enhancements, is equal to the carrying value
of the Company’s financial assets.
The Company considers a financial asset to be in default when the counterparty is unlikely to pay its obligations to the Company
in full. In assessing whether a counterparty is in default, the Company considers both qualitative and quantitative indicators (e.g.
overdue status) that are based on data developed internally and for certain financial assets also obtained from external sources.
The following indicators are incorporated: internal credit rating, significant increases in credit risk on other financial instruments
of the same borrower, actual or expected significant adverse changes in business, financial and economic conditions that are
expected to cause a significant change to the borrower’s ability to meet its obligations.
The Company is exposed to potential default of payment of any of its loan receivable from other affiliates of the Roche Group.
Even though no binding agreement between Roche Group and the related counterparties to the loan receivables has been
entered into, it is Roche Group intent at all times to provide its affiliates with sufficient liquidity to honour their payment
obligations to Roche Finance Europe. The credit rating of Roche Holding Ltd, the parent company of Roche Group and the
ultimate parent of the counterparties to the loan receivable is AA (Standard & Poor's), based on the most recent available ratings,
which corresponds to an investment grade credit rating. On the basis of the information available, the management determined
that any risk that the intercompany counterparties to the transactions may default on their obligations is clearly remote. Therefore
the management considers that the credit risk of the loan receivable from other affiliates of the Roche Group is low.
Financial Statements 2023 – Roche Finance Europe B.V.
22
Carrying value and fair value of financial assets in millions of EUR
31 December 2023
31 December 2022
By line items in notes
Asset class
Carrying
amount
Fair value
Carrying
amount
Fair value
Long-term loan receivable – related parties
7
Amortised cost
3,750
3,834
1,000
946
Short-term loan receivable – related parties
7
Amortised cost
-
-
731
728
Accounts receivable – related parties
8
Amortised cost
48
48
36
36
Total
3,798
3,882
1,767
1,710
The fair values of financial assets at the reporting date are not materially different from their reported carrying values. The fair
value for loan receivable – related parties disclosed in the above table was calculated based on the present value of the future
cash flows of the loans, discounted at an adjusted market rate for instruments with similar credit status, maturity periods and
currency. The increase in the fair value of the loan receivable in 2023 compared to 2022 is due to new loan transactions in 2023
as well as a decline in the market rates affecting existing loans. The counterparties to the Company’s financial assets are
members of the Roche Group and therefore the credit risk ultimately depends on the financial position of the Roche Group. The
fair value of the long-term loan receivables is classified as Level 2 in the fair value hierarchy.
At 31 December 2023 the Company has no financial assets which are past due but not impaired (2022: none) and no financial
assets whose terms have been renegotiated (2022: none). The maximum exposure to credit risk at the reporting date is the
carrying value of each class of financial assets disclosed in Note 7. The gross carrying amount of a financial asset is written off
and derecognised only when the Company has no reasonable expectation of recovering the financial asset, after all reasonable
efforts and enforcement procedures for recovery have been exhausted. The Company individually makes an assessment with
respect to the timing and amount of write-off based on the individual facts and circumstances. The Company expects no
significant recovery from the amount written off and derecognised.
Expected credit loss allowance in millions of EUR
2023
2022
At 1 January
3
3
Changes in impairment losses on financial instruments due to:
- repayment of loan receivables
(1)
-
- issuance of loan receivables
0
-
At 31 December
2
3
Liquidity risk
Liquidity risk arises through a surplus of financial obligations over available financial assets due at any point in time. The
Company’s obligations to third parties on the bond markets are guaranteed by Roche Holding Ltd, the parent company of the
Roche Group and covered by loan receivables from other members of the Roche Group that have the same contractual maturities.
The remaining undiscounted cash flow contractual maturities of financial assets and liabilities, including estimated interest
receivables and payments, are shown in the tables below.
Contractual maturities of financial assets in millions of EUR
Within one year
Between two and five years
More than 5 years
31 December 2022
Long-term loans receivable –
related parties
7
729
1,000
-
Future interest cash flow
33
36
-
23
Financial Statements 2023 – Roche Finance Europe B.V.
31 December 2023
Long-term loans receivable –
related parties
7, 14
-
1,600
2,150
Future interest cash flow
113
378
410
The remaining undiscounted cash flow contractual maturities of financial assets and liabilities, including estimated interest
receivables and payments, are shown in the tables below.
Contractual maturities of financial liabilities in millions of EUR
Within one year
Between two and five years
More than 5 years
31 December 2022
Debt
11
737
1,000
-
Future interest cash flow
17
18
-
31 December 2023
Debt
11
-
1,600
2,150
Future interest cash flow
102
361
400
There are no other contractual cash flows from financial assets and liabilities.
Market risk
Market risk arises from changing market prices, mainly foreign exchange rates and interest rates, of the Company’s financial
assets or financial liabilities which affect the Company’s financial result and equity.
At 31 December 2023 and 31 December 2022, the Company’s exposure to cash flow interest rate risk was insignificant, as the
outstanding principal amount on the Company’s debt (see Note 11) and the loans receivable from related parties (see Note 7) are
both at fixed interest rates. The Company’s variable interest-bearing financial assets are the receivable balance with the corporate
cash pool leader (see Note 8) in EUR, CHF and GBP. The rate of interest in credit balance on the cash pool account will be the
reference rate for the relevant currency less a margin of 0.075%. The rate of interest in debit balance on the cash pool account
will be the reference rate for the relevant currency plus a margin of 0.075%. If the reference rate falls below 0.075%, credit
balances will receive no interest and debit balances will be charged 0.150% for the respective period.
The Company accounts the loans at amortised cost. Therefore, movements in the market-rate only impact the fair value
disclosure of the loans.
The foreign exchange risk was also insignificant as the terms of financial assets and liabilities as well as the currency are
matching.
Capital
The capital management of the Company is managed within the Roche Group. The Company’s objectives when managing capital
are:
To safeguard the Company’s ability to continue as a going concern, so that it can continue to provide financing activities
on behalf of the Roche Group.
To maintain sufficient financial resources to mitigate against risks and unforeseen events.
Financial Statements 2023 – Roche Finance Europe B.V.
24
Capital is monitored on the basis of the capitalisation, which is calculated as being debt plus equity. Information on the
Company’s debt and equity is reported to senior management as part of the Roche Group’s regular internal management
reporting. The Company’s capitalisation is shown in the table below.
Capital in millions of EUR
31 December
2023
31 December
2022
Debt
11
3,743
1,735
Equity
18
17
Capitalisation
3,761
1,752
The Company is not subject to regulatory capital adequacy requirements as known in the financial services industry. The
Company’s liability contracts do not contain covenants.
16. Result appropriation
The directors recommend that the entire profit for the financial year of EUR 1,213 thousand is to be taken to Retained Earnings.
The proposal has not been included in the Company’s 2023 Annual Financial Statements.
17. Subsequent events
There are no subsequent events to be reported.
Woerden, 31 January 2024
The Board of Directors
Peter Eisenring Andrew Plank
Mark Ekelschot Rahul Doshi
25
Financial Statements 2023 – Roche Finance Europe B.V.
Other information
Independent auditor’s report
The independent auditor’s report is added to the next pages.
Appropriation of results
In accordance with Article 21 of the Articles of Association the result for the year is at the disposal of the shareholder.
Article 21 excerpt:
The allocation of profits earned in a financial year shall be determined by the General Meeting.
Distribution can only take place up to the amount of the distributable part of the net assets.
Distribution of profits shall take place after the completion of the Annual Accounts from which it is approved.
The General Meeting may, subject to due observance of the provision of the law, resolve to pay an interim dividend.
The General Meeting may, subject to due observance of the paragraph 2, resolve to make payments to the charge of any
reserve which need not to be maintained by virtue of the law.
A claim of a shareholder of payment of a dividend shall be barred after five years have elapsed.
Independent auditor’s report
To: the shareholders of Roche Finance Europe B.V. and the executive and non-executive
Board member of Roche Finance Europe B.V.
A. Report on the audit of the financial statements 2023 included in the annual
report
Our opinion
We have audited the financial statements 2023 of Roche Finance Europe B.V. based in
Woerden.
WE HAVE AUDITED
OUR OPINION
The financial statements comprise:
1. The balance sheet (before result
appropriation) as at 31 December 2023;
2. the following statements for 2023: the
statements of comprehensive income,
changes in equity and cash flows; and
3. the notes comprising material accounting
policy information.
In our opinion, the accompanying financial
statements give a true and fair view of the
financial position of Roche Finance Europe
B.V. as at 31 December 2023 and of its
result and its cash flows for 2023 in
accordance with International Financial
Reporting Standards as adopted by the
European Union (EU-IFRS) and with Part 9
of Book 2 of the Dutch Civil Code.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on
Auditing. Our responsibilities under those standards are further described in the ‘Our
responsibilities for the audit of the financial statements’ section of our report.
We are independent of Roche Finance Europe B.V. in accordance with the EU Regulation on
specific requirements regarding statutory audit of public-interest entities, the Wet toezicht
accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for
Professional Accountants, a regulation with respect to independence) and other relevant
independence regulations in the Netherlands. Furthermore we have complied with the
Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
2 |
B. Information in support of our opinion
We designed our audit procedures in the context of our audit of the financial statements as a
whole and in forming our opinion thereon. The following information in support of our opinion
was addressed in this context, and we do not provide a separate opinion or conclusion on
these matters.
Materiality
Based on our professional judgement we determined the materiality for the financial
statements as a whole at € 37,900,000. The materiality is based on a benchmark of total
assets (representing 1% of total assets) which we consider to be one of the principal
considerations for users of the financial statement in assessing the financial performance of
the company. We have also taken into account misstatements and/or possible misstatements
that in our opinion are material for the users of the financial statements for qualitative
reasons.
We agreed with the Board of Directors of Roche Finance Europe B.V. that misstatements in
excess of € 1,895,000 which are identified during the audit, would be reported to them, as
well as smaller misstatements that in our view must be reported on qualitative grounds.
Audit approach going concern
As explained in the section ‘Going concern’ on page 10 of the financial statements and in the
section ‘Uncertainties’ in the management report, the Board of Directors has carried out a
going concern assessment for the period of twelve months from the date of preparation of the
financial statements and has not identified any events or circumstances that may cause
reasonable doubt on the entity's ability to continue as a going concern (hereinafter: ‘going
concern risks’).
Our audit procedures to evaluate the board’s going concern assessment included:
considered whether the board's going concern assessment contains all relevant information
that we have knowledge of and inquired the board on key assumptions and estimates. In
doing so, we have paid attention, among the other things to the recoverability of the
loans.
obtained information from the board about its knowledge of going concern risks beyond
the period of the going concern assessment carried out by the board.
Our audit procedures indicated that the going concern assumption used by the board is
appropriate and no going concern risks have been identified.
Audit approach fraud risks
We identified and assessed the risks of material misstatements of the financial statements
due to fraud. During our audit we obtained an understanding of the entity and its
environment and the components of the system of internal control, including the risk
assessment process and management’s process for responding to the risks of fraud and
monitoring the system of internal control, as well as the outcome
We refer to section “Operational activities” on page 3 of the management report for
management’s fraud risk assessment.
3 |
We evaluated the design and relevant aspects of the system of internal control and in
particular the fraud risk assessment, as well as among others the Roche Group code of
conduct, whistle blower procedures and incident registration. We evaluated the design and
the implementation and, where considered appropriate, tested the operating effectiveness,
of internal controls designed to mitigate fraud risks.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect
to financial reporting fraud, misappropriation of assets and bribery and corruption. We
evaluated whether these factors indicate that a risk of material misstatement due fraud is
present.
We identified the following fraud risks and performed the following specific procedures:
As in all of our audits and based on our professional standards, we identified and
addressed the risk of management override of internal control. We performed procedures
to evaluate key accounting estimates in particular relating to important judgment areas
and significant accounting estimates related to the valuation of the loans, issued to Roche
Group Companies as disclosed in note 7 of the financial statements and the interest
receivables from Roche Group Companies as disclosed in note 8 of the financial
statements. We have also used data analysis to identify and address high-risk journal
entries. We refer to our key audit matter ‘valuation of loans issued’ for more information.
We have rebutted the presumed fraud risk on revenue recognition, due to the simplicity of
the process and the high predictability, as well as the absence of incentives by the Board of
Directors.
We incorporated elements of unpredictability in our audit. We also considered the outcome
of our other audit procedures and evaluated whether any findings were indicative of fraud or
non-compliance.
We considered available information and made enquiries of the Board of directors.
Our audit procedures did not lead to indications or suspicions for fraud potentially resulting in
material misstatements.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements. We have communicated the key audit
matters to the Board of Directors of Roche Finance Europe B.V. The key audit matters are not
a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a
whole and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
VALUATION OF LOANS ISSUED
OUR AUDIT APPROACH
We consider the valuation of the loans,
issued to Roche Group Companies as
disclosed in note 7 of the financial
statements and the interest receivables from
Roche Group Companies as disclosed in
We have performed detailed audit
procedures addressing the valuation of the
loans issued to and interest receivables
from Roche Deutschland Holding GmbH and
Roche Finance Ltd.
4 |
note 8 of the financial statements, combined
representing 99.9% of the balance sheet
total, a key audit matter. We identified this
as a key audit matter due to the size of the
loans issued and due to the material impact
a possible impairment may have on the
income statement.
Initially, loans issued to and the interest
receivables from Roche Group Companies
are recognized at its fair value and
subsequently carried at amortized cost using
the effective interest method. The Board of
Directors recognized the expected credit loss
provision with regard to the loans issued to
Roche Deutschland Holding GmbH and Roche
Finance Ltd in accordance with IFRS 9.
We have performed the following audit
procedures:
Inspected the financial statements as
per 31 December 2022 of counterparties
Roche Deutschland Holding GmbH and
Roche Finance Ltd.
Inspected the loan agreements entered
into between the company and Roche
Deutschland Holding GmbH and Roche
Finance Ltd and the agreement with
guarantor Roche Holding Ltd.
Inspected the 2023 interim financial
statements of the guarantor Roche
Holding Ltd and financial statements as
per 31 December 2022 of Roche Holding
Ltd.
Evaluated the information derived from
credit rating agencies: Standard &
Poor's, Moody's and Fitch Ratings.
Evaluated the probability of default rate
and the loss given default rate derived
from Moody's.
Reviewed the market values of the
outstanding notes.
Reviewed news reports.
Searched and evaluated the information
for investors on the website of Roche
Holding Ltd.
Discussed the recent developments in
the financial position and the cash flows
with the Board of Directors.
Verified the repayment of the EUR loan
in February 2023 and the GBP loan at
the amounts of EUR 650 million and GBP
71 million, in line with the contract
details.
Reconciled the cashflows according to
the inhouse bank statements to the
contract details of the 4 loans issued in
2023 to Roche Finance Ltd at a total
amount of EUR 2,750 million.
Assessed the adequacy of the disclosures
in the financial statements relating to
both the loans issued to and interest
receivables from Roche Group
Companies, including the accurate
presentation.
5 |
C. Report on other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report
contains other information that consists of:
the management report;
other information as required by Part 9 of Book 2 of the Dutch Civil Code;
Based on the following procedures performed, we conclude that the other information:
is consistent with the financial statements and does not contain material misstatements;
contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the
management report and the other information.
We have read the other information. Based on our knowledge and understanding obtained
through our audit of the financial statements or otherwise, we have considered whether the
other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2, and
the Dutch Standard 720. The scope of the procedures performed is substantially less than the
scope of those performed in our audit of the financial statements.
The Board of Directors is responsible for the preparation of the other information, including
the management report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other
information as required by Part 9 of Book 2 of the Dutch Civil Code.
D. Report on other legal and regulatory requirements and European Single
Electronic Format
Engagement
We were engaged by the Board of Directors as auditor of Roche Finance Europe B.V. as of the
audit for financial year 2017 and have operated as statutory auditor ever since that financial
year.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU
Regulation on specific requirements regarding statutory audit of public-interest entities.
European Single Electronic Format (ESEF)
Roche Finance Europe B.V has prepared its annual report in ESEF. The requirements for this
are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical
standards on the specification of a single electronic reporting format (hereinafter: the RTS on
ESEF).
In our opinion, the annual report prepared in XHTML-format, including the financial
statements of Roche Finance Europe B.V, has been prepared in all material respects with the
RTS on ESEF.
6 |
Management is responsible for preparing the annual report including the financial statements,
in accordance with the RTS on ESEF.
Our responsibility is to obtain reasonable assurance for our opinion whether the annual report
complies with the RTS on ESEF.
We performed our examination in accordance with Dutch law, including Dutch Standard
3950N 'Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van een
digitaal verantwoordingsdocument' (assurance engagements relating to compliance with
criteria for digital reporting).
Our examination included amongst others:
obtaining an understanding of the entity's financial reporting process, including the
preparation of the annual financial report in XHTML-format;
identifying and assessing the risks that the annual report does not comply in all material
respects with the RTS on ESEF and designing and performing further assurance procedures
responsive to those risks to provide a basis for our opinion, including examining whether
the annual financial report in XHTML-format is in accordance with the RTS on ESEF.
E. Description of responsibilities regarding the financial statements
Responsibilities of the executive and non-executive Board of Directors for the financial
statements
The Board of Directors is responsible for the preparation and fair presentation of the financial
statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code.
Furthermore, the Board of Directors is responsible for such internal control as the Board of
Directors determines is necessary to enable the preparation of the financial statements that
are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Board of Directors is responsible
for assessing the company’s ability to continue as a going concern. Based on the financial
reporting frameworks mentioned, the Board of Directors should prepare the financial
statements using the going concern basis of accounting, unless the Board of Directors either
intends to liquidate the company or to cease operations, or has no realistic alternative but to
do so.
The Board of Directors should disclose events and circumstances that may cast significant
doubt on the company’s ability to continue as a going concern in the financial statements.
The non-executive Board of Director is responsible for overseeing the company’s financial
reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to
obtain sufficient and appropriate audit evidence for our opinion.
7 |
Our audit has been performed with a high, but not absolute, level of assurance, which means
we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements. The materiality affects the nature,
timing and extent of our audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
We have exercised professional judgement and have maintained professional scepticism
throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements
and independence requirements. Our audit included among others:
identifying and assessing the risks of material misstatement of the financial statements,
whether due to fraud or error, designing and performing audit procedures responsive to
those risks, and obtaining audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;
obtaining an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control;
evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Board of Directors;
concluding on the appropriateness of the Board of Directors’ use of the going concern basis
of accounting, and based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the entity’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause a company to cease to continue as
a going concern;
evaluating the overall presentation, structure and content of the financial statements,
including the disclosures; and
evaluating whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with the Board of Directors, regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant findings
in internal control that we identify during our audit. In this respect we also submit an
additional report in accordance with Article 11 of the EU Regulation on specific requirements
regarding statutory audit of public-interest entities. The information included in this
additional report is consistent with our audit opinion in this auditor’s report.
We provide the Board of Directors with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
8 |
From the matters communicated with the Board of Directors, we determine the key audit
matters: those matters that were of most significance in the audit of the financial
statements. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, not
communicating the matter is in the public interest.
Amstelveen, 31 January 2024
For and on behalf of BDO Audit & Assurance B.V.,
W.J.P. Hoeve RA