Reporting of noise-related costs in the financial statements
Costs for formal expropriations qualify as an intangible asset under the accounting provisions of the Swiss Code of Obligations. They are recognised as assets at the latest on the date on which the counterparty has attained an assertable claim. Amortisation of capitalised costs for formal expropriations is based at a minimum on the consolidated financial statements. Adequate provisions are recognised for current liabilities arising from sound insulation and resident protection measures. Any balance of revenue from noise charges after deduction of noise-related costs (compensation for formal expropriations, sound insulation and resident protection measures, operating costs, financing costs and amortisation) is transferred to the provision for aircraft noise (see note 9, Provision for aircraft noise).
The reporting of noise-related costs in the financial statements is a complex matter requiring significant assumptions and estimates concerning the obligation to recognise provisions. This complexity is attributable to a large variety of relevant legal bases, unclear or pending legal practice and political debate. Flughafen Zürich AG has received a total of around 20,000 noise-related claims for compensation, of which around 6,700 were still pending at the end of 2018. Almost 1,000 of these cases are currently being examined by the Swiss Federal Assessments Commission.
The rulings by the Swiss Federal Supreme Court in the first half of 2008 on fundamental issues related to formal expropriations enabled Flughafen Zürich AG to reliably estimate the total cost of compensation for formal expropriations for the first time, in spite of the remaining uncertainties regarding the accuracy of this estimate. With further rulings on 8 June 2010 and 9 December 2011, the Swiss Federal Supreme Court definitively set the cut-off date for the foreseeability of an eastern approach as 1 January 1961 and ruled definitively on the method used to calculate a decline in the market value of investment property. In the first half of 2016, the Swiss Federal Supreme Court handed down two rulings in test cases regarding claims for compensation relating to the eastern and southern approach routes. Based on these Swiss Federal Supreme Court rulings and other fundamental issues that have since been decided in a court of final instance, the company undertook a reappraisal of costs for formal expropriations.
In the first half of 2018, the Swiss Federal Supreme Court handed down two rulings in test cases regarding cooperative ownership. By answering important questions relating to how pending claims for compensation will be dealt with in a court of final instance, these rulings increased legal certainty significantly. These Swiss Federal Supreme Court rulings enabled Flughafen Zürich AG to undertake a reappraisal of the outstanding cost of compensation for formal expropriations at 30 June 2018.
With respect to sound insulation and resident protection measures, Flughafen Zürich AG is required to implement sound insulation measures in the area where it claims exemptions from noise limits (emission limit). In this context, the Federal Office of Civil Aviation (FOCA) has initiated a night-time noise abatement procedure. The area with exemptions under the Sectoral Aviation Infrastructure Plan adopted by the Federal Council on 23 August 2017 is to be extended. With effect from 30 June 2018, the Board of Directors approved a further CHF 60 million of measures in this context in addition to the costs of CHF 340 million previously estimated.
As at 31 December 2018, Flughafen Zürich AG has recognised an intangible asset from the right of formal expropriation of CHF 19.9 million (2017: CHF 15.1 million) and a provision for aircraft noise of CHF 468.4 million in total (2017: CHF 485.3 million) in the financial statements according to the provisions of the Swiss Code of Obligations.
Depending on future and final-instance legal judgements, especially with respect to the southern approaches, noise-related liabilities may in future be subject to substantial adjustments, which would also require adjustments to the noise-related costs recognised in the balance sheet. At the present time, it is not possible to reliably estimate the total costs to capitalise as an intangible asset from the right of formal expropriation, the resulting amortisation or the corresponding provision.
As based on current knowledge, the Airport of Zurich Noise Fund has sufficient assets to be able to finance the costs for formal expropriations as well as noise insulation and resident protection measures that can be estimated under the base case at the present time, the passenger-related noise supplement was suspended as of 1 February 2014.