II Judgements and significant estimates and assumptions in the application of accounting policies
REPORTING OF NOISE-RELATED COSTS IN THE FINANCIAL STATEMENTS
With respect to formal expropriations, the reporting of noise-related costs in the financial statements is a complex matter due to a multitude of relevant legal bases, unclear or pending case law and political debate. Especially in the case of formal expropriations, this financial reporting requires significant assumptions and estimates concerning the capitalisation of such costs and the obligation to recognise appropriate provisions.
Flughafen Zürich AG has received a total of around 20,000 noise-related claims for compensation, of which around 6,300 were still pending at the end of 2019. Almost 800 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 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. In further rulings in 2010, the Swiss Federal Supreme Court definitively set the cut-off date for the foreseeability of an eastern approach as 1 January 1961 and, in 2011, it ruled definitively on the method used to calculate a decline in the market value of investment property. In 2016, the Swiss Federal Supreme Court handed down two rulings in test cases regarding claims for compensation relating to eastern and southern approach routes and, in 2018, it handed down two rulings in test cases regarding cooperative ownership. Based on these Swiss Federal Supreme Court rulings and other fundamental issues that have been decided, the company undertook a reappraisal of costs for formal expropriations at these dates, which in each case led to an adjustment to both the provision for formal expropriations and the intangible asset from the right of formal expropriation.
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 reappraisal, 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 (see note 11, Intangible assets).
As at the reporting date, the estimated costs for formal expropriations amounted to CHF 330.0 million (31 December 2018: CHF 350.0 million), of which CHF 81.9 million had already been paid out at that date. As at 31 December 2019, a provision was recognised for the outstanding costs of CHF 248.1 million (see note 19, Provision for formal expropriations plus sound insulation and resident protection).
With respect to sound insulation and resident protection measures, the Federal Office of Civil Aviation (BAZL) required Flughafen Zürich AG, in connection with its 2014 operating regulations application, to submit an extended sound insulation programme. In June 2015, based on the sound insulation programme submitted, the Board of Directors approved a further CHF 100.0 million of measures in addition to the CHF 240.0 million of costs previously estimated for sound insulation and resident protection. The company is also required to implement sound insulation measures in the area where it claims exemptions from noise limits (emission limit). In this context, the FOCA 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 was extended. In this context in mid-2018, Flughafen Zürich AG recognised a provision for further costs of CHF 60.0 million, with a present value of CHF 57.6 million, in addition to the costs previously estimated for sound insulation and resident protection (see note 5, Other income and expenses and note 19, Provision for formal expropriations plus sound insulation and resident protection).
As at the reporting date, the estimated costs for sound insulation and resident protection measures amounted to CHF 400.0 million (31 December 2018: CHF 400.0 million), of which CHF 260.6 million had already been paid out at that date. As at 31 December 2019, a provision was recognised for the outstanding costs of CHF 139.4 million (see note 19, Provision for formal expropriations plus sound insulation and resident protection).
Depending on future legal judgements – including 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 as assets and liabilities 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.
Aircraft noise costs are refinanced through separate charges. 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. Aircraft noise charges based on flight movements and noise category continue to be levied.