Shareholders' Letter

IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” (valid as from 1 July 2010):
The Interpretation clarifies the requirements to be met when a financial liability is extinguished
through issuance of equity shares or other equity instruments. Swisscom anticipates no impact
on its financial statements from the implementation of this Interpretation.
> “Improvements to IFRS of 2010” (valid as from 1 July 2010 and 1 January 2011, respectively):
“The Amendments to IFRS” cover smaller changes to various IFRS Standards. Swisscom anticipates
no impact on its financial statements in applying these amendments.
4 Significant accounting judgments
and estimation uncertainties
The preparation of the consolidated financial statements is dependent upon estimates and
assumptions made in applying the accounting policies for which management can exercise a certain
degree of judgment. In applying the relevant accounting policies to the consolidated financial
statements, assumptions and estimates must be made about the future that may have a critical
influence on the amount and presentation of assets and liabilities, revenues and expenses as well
as the disclosures in the Notes. The estimates used in drawing up the consolidated financial statements
and valuations are based on empirical values and other factors which are deemed appropriate
in the given circumstances. The following estimates used and assumptions made in applying
the accounting policies have a critical influence on the consolidated financial statements.
Goodwill
As of 31 December 2010, the carrying amount of goodwill from acquisitions totalled CHF 6,261
million. The recoverability of goodwill is tested for impairment annually during the fourth quarter
or earlier if an indication of impairment exists. The value of goodwill is primarily dependent upon
projected cash flows, the discount rate (WACC) and long-term growth rate. The significant assumptions
are disclosed in Note 24. Changes to these assumptions may result in an impairment loss in
the following year.
Post-employment benefits
The defined benefit obligations are calculated on the basis of various financial and demographic
assumptions. The key assumptions for valuing these obligations are the discount rate, future salary
and pension increases as well as the expected return on plan assets. As of 31 December 2010, the
underfunding amounted to CHF 1,160 million, whereby only CHF 78 million were recognised as
a liability in the consolidated balance sheet (CHF 263 million as receivable and CHF 341 million as
liability). A reduction in the discount rate of 0.5% would result in an increase in the obligation of
CHF 631 million. An increase in average future salary increases of 0.5% would lead to an increase
in post-employment benefits of CHF 78 million. A reduction in the expected rate of return of 0.5%
would result in an increase in annual pension costs of CHF 36 million. See Note 10.
Provisions for dismantling and restoration costs
Provisions are raised for costs incurred in connection with dismantling and restoring mobile telephone
and broadcasting stations of Swisscom Broadcast. As of 31 December 2010, the carrying
amount of these provisions totalled CHF 487 million. The level of the provisions is primarily based
on estimates of future costs for dismantling and restoration and the timing of the dismantling.
An increase in the estimated costs by 10% would result in an increase in the provision of CHF 40
million. A postponement of the date of dismantling by ten years would lead to a decrease in the
provisions of CHF 104 million. See Note 28.