Notes to the consolidated financial statements as of March 31, 2021

1.1 Corporate information

The Sonova Group (the “Group”) specializes in the design, development, manufacture, worldwide distribution and service of technologically advanced hearing systems for adults and children with hearing impairment. The Group operates worldwide and distributes its products in over 100 countries through its own distribution network and through independent distrib­utors. The ultimate parent company is Sonova Holding AG, a limited liability company incorporated in Switzerland. Sonova Holding AGʼs registered office is located at Laubis­rütistrasse 28, 8712 Stäfa, Switzerland.

1.2 Basis of consolidated financial statements

The consolidated financial statements of the Group are based on the financial statements of the individual Group companies at March 31, which are prepared in accordance with uniform accounting policies. The consolidated financial statements were prepared under the historical cost convention except for the revaluation of certain financial assets at market value, which were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The consolidated financial statements were approved by the Board of Directors of Sonova Holding AG on May 12, 2021, and are subject to approval by the Annual General Shareholdersʼ Meeting on June 15, 2021.

The consolidated financial statements are presented in millions of Swiss Francs (CHF) and rounded to the nearest hundred thousand. Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided. All ratios and variances are calculated using the underlying amount rather than the presented rounded amounts.

The consolidated financial statements include Sonova Holding AG as well as the domestic and foreign subsidiaries over which Sonova Holding AG exercises control. A list of the significant consolidated companies is given in Note 7.7.

Accounting policies of relevance for an understanding of the consolidated financial statements are set out in the specific notes to the financial statements.

1.3 Significant accounting judgments and estimates

Preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. This includes estimates and assumptions in the ordinary course of business as well as non-recurring events such as the outcome of pending legal disputes. The estimates and assumptions are continuously evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable. Actual results may differ from these estimates and assumptions.

The main estimates and assumptions with a significant risk of resulting in a material adjustment are described in the following notes:

Impact of the Covid-19 pandemic

The global health and economic crisis resulting from the COVID-19 pandemic is affecting the hearing care market and with it the Groupʼs business activities. Audiology stores, the primary consumer channel for hearing care products and services, were partially closed or operating with reduced hours during most of the financial year 2020/21. The Cochlear Implants business was also significantly affected, as healthcare providers have in part deferred non-essential surgeries. In this context, Sonova had implemented strict cost-saving programs, and temporary government-subsidized work time reductions in a number of countries. Refer to Note 7.5 for government support received worldwide in financial year 2020/21.

The uncertainties resulting from the COVID-19 pandemic required management to make estimates and assumptions that significantly affected the financial statements for the financial year 2020/21 and 2019/20. In particular, it affected cash flow projections in the goodwill impairment testing (described in Note 3.5) and allowances on receivables (described in Note 3.1 and Note 4.7). Furthermore, it also led to a suspension of the Groupʼs share buyback program (described in Note 4.6) and additional financing requirements (described in Note 4.5).

1.4 Changes in accounting policies

In 2020/21 the Group adopted the following minor amendments to existing standards and interpretations, without having a significant impact on the Groupʼs result and financial position:

The Group has assessed the expected impacts of the various new and revised standards and interpretations that will be effective for the financial year starting April 1, 2021 and beyond. These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.