11 Intangible assets

INTANGIBLE ASSET FROM RIGHT OF FORMAL EXPROPRIATION

With the award of the operating licence, Flughafen Zürich AG was also granted a right of formal expropriation in respect of property owners exposed to aircraft noise. This right of formal expropriation was granted on condition that the airport operator bears the costs associated with compensation payments and is recognised as an intangible asset at the date when the probable total cost can be estimated based on final-instance court rulings, so that the cost can be reliably estimated in accordance with IAS 38.21.

On 22 November 2019, the Swiss Federal Supreme Court handed down a ruling in test cases regarding the period of limitation on claims for compensation in Oberglatt. This Swiss Federal Supreme Court ruling and other fundamental issues that have been decided enabled Flughafen Zürich AG to undertake a reappraisal of the outstanding cost of compensation for formal expropriations. Based on the recalculation, the total cost expected in relation to formal expropriations decreased from CHF 350.0 million to CHF 330.0 million, enabling the provision for formal expropriations to be reduced by CHF 20.0 million as at 31 December 2019 (see note 19, Provision for formal expropriations plus sound insulation and resident protection). At the same time, the intangible asset from the right of formal expropriation was reduced by the same amount.

In the previous year, based on Swiss Federal Supreme Court rulings in test cases regarding cooperative ownership, the company was likewise able to undertake a reappraisal of the outstanding cost of compensation for formal expropriations and reduce both the provision for formal expropriations and the intangible asset from the right of formal expropriation by CHF 34.5 million.

As at 31 December 2019, Flughafen Zürich AG has therefore recognised an intangible asset from the right of formal expropriation in the amount of CHF 70.8 million (2018: CHF 93.7 million). This is amortised using the straight-line method over the remaining term of the operating licence (i.e. until May 2051).

Investments in airport operator projects

The investments in airport operator projects in the amount of CHF 343.3 million (2018: CHF 125.6 million) consist of concession rights which, due to the application of IFRIC 12, comprise minimum concession payments recognised as assets and investments made. They relate to the expansion and operation of the Chilean airports in Antofagasta and Iquique (CHF 34.3 million; 2018: CHF 30.4 million), in which Flughafen Zürich AG holds a controlling interest via its subsidiary A-port Chile S.A., the expansion and operation of the Brazilian airport in Florianópolis (CHF 178.3 million; 2018: CHF 95.2 million) through the subsidiary Concessionária do Aeroporto Internacional de Florianópolis S.A. and the expansion and operation of the Brazilian airports in Vitória and Macaé (CHF 130.7 million; 2018: CHF 0.0 million) through the subsidiary Aeroportos do Sudeste do Brasil S.A. The obligations of CHF 26.3 million (2018: CHF 26.1 million) relating to the corresponding concessions have been recognised as current and non-current liabilities (see note 18, Financial liabilities).

Impairment

On a yearly basis, Flughafen Zürich AG carries out a calculation at company level to determine whether there is any indication that property, plant and equipment (see note 8, Property, plant and equipment) and intangible assets may be impaired. The calculation is based on the expected future free cash flows of Flughafen Zürich AG and various assumptions regarding future trends (e.g. passenger and traffic volumes, investments, the hub status of Zurich Airport and the discount rate). The calculation as at 31 December 2019 did not identify any indications of impairment.