Basis of accounting

6 Months Ended

Jun. 30, 2023

Disclosure Of Material Accounting Policy Information [Line Items]

Basis of preparation

Note 1 Basis of accounting

Basis of preparation

The consolidated financial statements (the financial statements) of UBS Group AG and its subsidiaries (together,

UBS or the Group) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by

the International Accounting Standards Board (the IASB), and are presented in US dollars. These interim financial

statements are prepared in accordance with IAS 34,

Interim Financial Reporting

.

In preparing these interim financial statements, the same accounting policies and methods of computation have

been applied as in the UBS Group AG consolidated annual financial statements for the period ended 31 December

2022, except for the changes described in this Note. Note 2 sets out the accounting for the acquisition of the Credit

Suisse Group. These interim financial statements are unaudited and should be read in conjunction with

UBS Group AG’s audited consolidated financial statements in the Annual Report 2022 and the “Management

report” sections of this report, including the disclosures in the “Acquisition of Credit Suisse Group” section of this

report. In the opinion of management, all necessary adjustments have been made for a fair presentation of the

Group’s financial position, results of operations and cash flows.

Preparation of these interim financial statements requires management to make estimates and assumptions that

affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and

liabilities. These estimates and assumptions are based on the best available information. Actual results in the future

could differ from such estimates and differences may be material to the financial statements. Revisions to estimates,

based on regular reviews, are recognized in the period in which they occur. For more information about areas of

estimation uncertainty that are considered to require critical judgment, refer to this Note and Note 2, as well as

“Note 1a Material accounting policies” in the “Consolidated financial statements” section of the Annual Report

2022.

Incremental accounting policies related to the transactions and activities associated with the

acquisition of the Credit Suisse Group

Business combinations

UBS has determined that the acquisition of the Credit Suisse Group constitutes a business combination under IFRS.

As per “Note 1a Material accounting policies, item 1 Consolidation” in the “Consolidated financial statements”

section of the Annual Report 2022, business combinations are accounted for using the acquisition method. Under

this method, any excess of the acquisition-date amounts of the identifiable net assets acquired over the fair value

of the consideration transferred results in a negative goodwill that is recognized in the income statement on the

date of the acquisition, with transaction costs expensed as incurred.

Allowances and provisions for expected credit losses

The Group’s material accounting policies in respect of allowances and provisions for expected credit losses are set

out in “Note 1a Material accounting policies, item 2g Allowances and provisions for expected credit losses” in the

“Consolidated financial statements” section of the Annual Report 2022. Financial instruments, acquired through a

business combination that are not classified by the Group at fair value through profit or loss, are subject to the

IFRS 9 expected credit loss (ECL) requirements. At the date of acquisition, financial instruments within the scope of

the ECL requirements that are determined to be credit impaired are treated as purchased credit-impaired financial

instruments, with all other financial instruments that are not credit impaired treated as stage 1 financial instruments

on the basis that there has not been a significant increase in cre dit risk (an SICR) since their initial recognition.

Consistent with the requirements of IFRS 3 and IFRS 9, immediately after the application of the acquisition method

to the business combination, financial instruments that are not credit impaired are classified as stage 1 financial

instruments and a maximum 12-month ECL is recognized, resulting in a carrying amount below their acquisition-

date fair value. 

Significant increase in credit risk

For the purposes of the 30-days-past-due backstop applied for the determination of an SICR for loans that were

not 30 days past due on the date of acquisition, days past due are determined by counting the number of days for

which the contractual payments have not been received since the acquisition date.

Default and credit impairment

For the purposes of the 90-days-past-due backstop applied for the determination of whether default has occurred,

days past due are determined by counting the number of days since the earliest elapsed due date in respect of

which material payments of interest, principal or fees have not been received, even if that date was prior to the

acquisition date.

Goodwill and other separately identifiable intangible assets 

The Group’s material accounting policies in respect of the accounting of goodwill are set out in “Note 1a Material

accounting policies, item 8 Goodwill” in the “Consolidated financial statements” section of the Annual Report

2022. 

Separately from goodwill, UBS recognizes identifiable intangible assets acquired in a business combination that

were not previously recognized in the financial statements of the acquiree. Amortization of these intangible assets

is recognized on a straight-line basis over their estimated useful life. These assets are tested for impairment at the

appropriate cash-generating unit level.

Negative goodwill, generally determined based on the difference between the provisional fair values for the

identifiable assets acquired and liabilities assumed and consideration transferred, is recognized in the income

statement on the acquisition date.

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Refer to Note 2 for more information

Contingent liabilities recognized in a business combination

Contingent liabilities recognized in a business combination are initially measured at fair value. Subsequently, they

are measured at the higher of (i) the initially recognized fair value less (when appropriate) amortization in

accordance with the principles of IFRS 15 and (ii) the amount that would be recognized in accordance with the

requirements for provisions as set out in IAS 37.