Credit Suisse : 2021 Parent company financial statements – Credit Suisse





IX - Parent company financial statements - Credit Suisse (Bank)

Report of the Statutory Auditor	533
Parent company financial statements	535
Notes to the financial statements	538
Proposed appropriation of retained
earnings and capital distribution	575

531





Notes to the financial statements
1	Company details, business developments and subsequent events...........................................	538
2	Accounting and valuation principles.......................................................................................	539
3	Risk management, derivatives and hedging activities..............................................................	543
4	Net income from interest activities........................................................................................	552
5	Net income/(loss) from trading activities and fair value option.................................................	552
6	Personnel expenses.............................................................................................................	552
7	General and administrative expenses.....................................................................................	552
8	Increase/(release) of provisions and other valuation adjustments, losses
	and extraordinary income and expenses................................................................................	553
9 Taxes..................................................................................................................................	553
10	Assets and liabilities from securities lending and borrowing, repurchase and
	reverse repurchase agreements............................................................................................	553
11	Collateral and impaired loans and receivables........................................................................	554
12	Trading assets and liabilities and other financial instruments held at fair value...........................	555
13	Derivative financial instruments.............................................................................................	556
14	Financial investments...........................................................................................................	559
15	Other assets and other liabilities...........................................................................................	560
16	Assets pledged....................................................................................................................	560
17	Pension plans......................................................................................................................	560
18	Issued structured products...................................................................................................	561
19	Unsecured senior debt and structured notes..........................................................................	562
20	Provisions and allowance for credit losses.............................................................................	562
21	Expected credit losses and credit quality...............................................................................	563
22	Composition of share capital, conversion and reserve capital..................................................	569
23	Significant shareholders and groups of shareholders..............................................................	570
24	Shareholdings of the Board of Directors, Executive Board and employees
	and information on compensation plans.................................................................................	571
25	Amounts receivable from and amounts payable to related parties............................................	573
26	Total assets by country rating...............................................................................................	573
27	Fiduciary transactions..........................................................................................................	574
28	Assets under management...................................................................................................	574

532 Parent company financial statements - Credit Suisse (Bank)





Report of the Statutory Auditor

Report of the Statutory Auditor

To the General Meeting of Credit Suisse AG, Zurich

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Credit Suisse AG, which comprise the statements of income, balance sheets, statement of changes in equity and notes for the year ended December 31, 2021, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements as at 31 December, 2021 comply with Swiss law and the articles of association.

Basis for opinions

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report.

We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Overview	Overall materiality: CHF 200 million
	We tailored the scope of our audit in order to perform sufficient work to
	enable us to provide an opinion on the financial statements as a whole,
	taking into account the structure of the entity, the accounting processes and
	controls, and the industry in which the entity operates.

As key audit matters the following areas of focus have been identified:

• Valuation of certain financial instruments
• Litigation provision
• Allowance for credit losses
• Carrying value of participations
• Risk of unauthorized changes to applications and data

PricewaterhouseCoopers AG, Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland

Telephone: [phone], Telefax: [phone], www.pwc.ch

PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.

Parent company financial statements - Credit Suisse (Bank)

533





Materiality

The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall materiality	CHF 200 million
Benchmark applied	Net assets
Rationale for the materiality	We chose net assets as a benchmark because, in our view, it is a key
benchmark applied	indicator used when assessing solvency and stability of Credit Suisse AG.

Audit scope

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered where subjective judgements were made; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due

to fraud.

Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of certain financial instruments

Key audit matter	How our audit addressed the key audit matter
As described in Notes 12, 13 and 18 to the financial	Addressing the matter involved performing procedures
statements, Credit Suisse AG carries CHF 45,842	and evaluating audit evidence in connection with
million of its assets held at fair value, which consists of	forming our overall opinion on the financial statements.
CHF 39,410 million of trading assets and CHF 6,432	These procedures included testing the effectiveness of
million of positive replacement values of derivative	controls relating to the fair value of these financial
financial instruments. Credit Suisse AG also carries	instruments, including controls over Credit Suisse AG's
CHF 60,113 million of its liabilities held at fair value,	models, significant unobservable inputs, and data.

which consists of CHF 4,786 million of trading liabilities,	These procedures also included, among others (i) the
CHF 5,065 million of negative replacement values of
involvement of professionals with specialized skill and
derivative financial instruments, and CHF 50,262 million
knowledge to assist in developing an independent
of liabilities from other financial instruments. These
range of prices for a sample of financial instruments
balances include assets and liabilities for which no
and (ii) comparing the independent estimate to
prices are available and which have few or no
management's estimate to evaluate the
observable inputs, the determination of fair value may
reasonableness of management's estimate.
require the use of either industry standard models or
Developing the independent estimate involved (i)
internally developed proprietary models as well as
testing the completeness and accuracy of data
require subjective assessment and judgment,
provided by management, and as appropriate, (ii)
depending on liquidity, pricing assumptions, the current
evaluating the reasonableness of management's
economic and competitive environment and the risks
unobservable inputs and (iii) independently developing
affecting the specific instrument. Unobservable inputs
unobservable inputs related to volatility, correlation and
used by management to value certain of these financial
credit spread.
2 Credit Suisse AG | Report of the Statutory Auditor

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Key audit matter	How our audit addressed the key audit matter
instruments included (i) volatility, (ii) correlation and (iii)
credit spread.
The principal considerations for our determination that
performing procedures relating to the fair value of
certain of these financial instruments is a key audit
matter are the significant judgment by management to
determine the fair value of these financial instruments
due to the use of either industry standard models or
internally developed proprietary models, which included
unobservable inputs related to (i) volatility,
(ii) correlation and (iii) credit spread. This in turn led to a
high degree of auditor subjectivity, judgment and effort
to evaluate the audit evidence related to the valuation,
and the audit effort involved the use of professionals
with specialized skill and knowledge.
Litigation provision
Key audit matter	How our audit addressed the key audit matter
Credit Suisse AG is involved in a number of judicial,	Addressing the matter involved performing procedures
regulatory and arbitration proceedings concerning	and evaluating audit evidence in connection with
matters arising in connection with the conduct of its	forming our overall opinion on the financial statements.
businesses. Credit Suisse AG's aggregate litigation	These procedures included testing effectiveness of
provisions include estimates of losses, additional losses	controls relating to management's estimation of the
or ranges of loss for proceedings for which such losses	litigation provisions, including controls over determining
are probable and can be reasonably estimated. As	whether a loss is probable and whether the amount of
described in Note 20 to the financial statements, as of	loss can be reasonably estimated, as well as controls
December 31, 2021 Credit Suisse AG has recorded	over the related financial statement disclosures.
litigation provisions of CHF 284 million.	These procedures also included, among others,

The principal considerations for our determination that performing procedures relating to the litigation provisions is a critical audit matter are the significant

judgment by management when assessing the likelihood of a loss being incurred and when determining whether a reasonable estimate of the loss or ranges of loss for each claim can be made, which in turn led to a high degree of auditor judgment, subjectivity, and effort in evaluating management's assessment of the litigation provisions and related disclosures.

The determination of when to recognize a litigation provision and the basis of measurement are case specific and highly judgmental. This increases the inherent risk of an error.

obtaining and evaluating the letters of audit inquiry with internal and external legal counsel, evaluating the reasonableness of management's assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable, and evaluating the sufficiency of the Credit Suisse AG's litigation provisions and related disclosures.

3 Credit Suisse AG | Report of the Statutory Auditor

Parent company financial statements - Credit Suisse (Bank)

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