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EX-21 - EXHIBIT 21 - SCIENTIFIC GAMES CORPa2196685zex-21.htm
EX-12 - EXHIBIT 12 - SCIENTIFIC GAMES CORPa2196685zex-12.htm
EX-23.1 - EXHIBIT 23.1 - SCIENTIFIC GAMES CORPa2196685zex-23_1.htm
EX-99.1 - EXHIBIT 99.1 - SCIENTIFIC GAMES CORPa2196685zex-99_1.htm
EX-32.1 - EXHIBIT 32.1 - SCIENTIFIC GAMES CORPa2196685zex-32_1.htm
EX-23.2 - EXHIBIT 23.2 - SCIENTIFIC GAMES CORPa2196685zex-23_2.htm
EX-32.2 - EXHIBIT 32.2 - SCIENTIFIC GAMES CORPa2196685zex-32_2.htm
EX-31.2 - EXHIBIT 31.2 - SCIENTIFIC GAMES CORPa2196685zex-31_2.htm
EX-31.1 - EXHIBIT 31.1 - SCIENTIFIC GAMES CORPa2196685zex-31_1.htm
EX-10.56 - EXHIBIT 10.56 - SCIENTIFIC GAMES CORPa2196685zex-10_56.htm
EX-10.58 - EXHIBIT 10.58 - SCIENTIFIC GAMES CORPa2196685zex-10_58.htm
EX-10.57 - EXHIBIT 10.57 - SCIENTIFIC GAMES CORPa2196685zex-10_57.htm
EX-10.59 - EXHIBIT 10.59 - SCIENTIFIC GAMES CORPa2196685zex-10_59.htm
10-K - FORM 10-K - SCIENTIFIC GAMES CORPa2196685z10-k.htm

Exhibit 99.2

 

CONSORZIO LOTTERIE NAZIONALI

 

INDEX TO FINANCIAL STATEMENTS

 

 

Page

Statements of Financial Position as of December 31, 2009, 2008 and 2007

F- 2

 

 

Statements of Comprehensive Income for the Years Ended December 31, 2009, 2008 and 2007

F- 3

 

 

Statements of Changes in Equity for the Years Ended December 31, 2009, 2008 and 2007

F- 4

 

 

Cash Flow Statements for the Years Ended December 31, 2009, 2008 and 2007

F- 5

 

 

Notes to Financial Statements

F- 6

 

F-1



 

CONSORZIO LOTTERIE NAZIONALI
STATEMENTS OF FINANCIAL POSITION

December 31, 2009, 2008 and 2007

(In thousands of Euro)

 

 

 

 

 

December 31,

 

 

 

Notes

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

(adjusted)

 

(adjusted)

 

ASSETS

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

Equipment, net

 

3

 

2.801

 

3.853

 

4.820

 

Intangible assets, net

 

4

 

286

 

46

 

36

 

Deferred income taxes

 

16

 

2.212

 

1.906

 

1.448

 

Total non-current assets

 

 

 

5.299

 

5.805

 

6.304

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Inventories

 

5

 

13.618

 

9.124

 

10.648

 

Trade and other receivables

 

6

 

305.946

 

359.535

 

405.282

 

Current financial assets from parent company

 

18/20

 

249.913

 

129.345

 

15.101

 

Other current assets

 

7

 

1.231

 

467

 

798

 

Cash and cash equivalents

 

8

 

4

 

175

 

4

 

Total current assets

 

 

 

570.712

 

498.646

 

431.833

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

576.011

 

504.451

 

438.137

 

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Issued capital

 

9

 

16.000

 

16.000

 

16.000

 

Legal reserve

 

 

 

3.200

 

3.200

 

1.077

 

Retained earnings, including net income for the period

 

 

 

123.347

 

117.731

 

85.920

 

Total equity

 

 

 

142.547

 

136.931

 

102.997

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

Long-term provisions

 

10

 

730

 

616

 

144

 

Total non-current liabilities

 

 

 

730

 

616

 

144

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

 

11

 

428.247

 

352.789

 

287.219

 

Derivative instruments

 

20

 

583

 

1.492

 

3.166

 

Current financial payables to parent company

 

18/20

 

1.241

 

5.254

 

2.521

 

Other current liabilities

 

12

 

219

 

2.087

 

1.626

 

Income taxes payable

 

 

 

2.444

 

5.282

 

40.464

 

Total current liabilities

 

 

 

432.734

 

366.904

 

334.996

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

 

576.011

 

504.451

 

438.137

 

 

F-2



 

CONSORZIO LOTTERIE NAZIONALI
STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2009, 2008 and 2007
(In thousands of Euro)

 

 

 

 

 

For the year ended
December 31,

 

 

 

Notes

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

(adjusted)

 

(adjusted)

 

Service revenues

 

13

 

327.957

 

322.411

 

277.004

 

Other revenue

 

 

 

875

 

990

 

567

 

Total Revenue

 

 

 

328.832

 

323.401

 

277.571

 

 

 

 

 

 

 

 

 

 

 

Cost of tickets

 

 

 

45.628

 

43.090

 

41.197

 

Service costs

 

14

 

93.448

 

93.228

 

90.535

 

Depreciation, amortization and write-downs

 

 

 

4.339

 

4.130

 

2.608

 

Other operating costs

 

 

 

989

 

1.368

 

736

 

Total Costs

 

 

 

144.404

 

141.816

 

135.076

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

184.428

 

181.585

 

142.495

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

15

 

4.332

 

3.665

 

3.429

 

Financial expenses

 

15

 

(7.658

)

(11.749

)

(7.238

)

 

 

 

 

 

 

 

 

 

 

Net income before income tax

 

16

 

181.103

 

173.502

 

138.686

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

16

 

57.756

 

55.771

 

52.766

 

Net income for the year

 

 

 

123.347

 

117.731

 

85.920

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Components of other comprehensive income

 

 

 

 

 

 

Income tax relating to components of other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income for the year, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

123.347

 

117.731

 

85.920

 

 

F-3



 

CONSORZIO LOTTERIE NAZIONALI
STATEMENTS OF CHANGES IN EQUITY
Years ended December 31, 2009 and 2008
(In thousands of Euro)

 

 

 

Issued

 

Legal

 

Retained

 

 

 

For the year ended December 31, 2009

 

Capital

 

Reserve

 

Earnings

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2009

 

16.000

 

3.200

 

117.731

 

136.931

 

 

 

 

 

 

 

 

 

 

 

Net income for the year

 

 

 

123.347

 

123.347

 

Other comprehensive income/(loss)

 

 

 

 

 

Total comprehensive income/(loss)

 

 

 

123.347

 

123.347

 

 

 

 

 

 

 

 

 

 

 

Dividend distribution

 

 

 

(117.731

)

(117.731

)

Balance at December 31, 2009

 

16.000

 

3.200

 

123.347

 

142.547

 

 

For the year ended December 31, 2008

 

Issued

 

Legal

 

Retained

 

 

 

(adjusted)

 

Capital

 

Reserve

 

Earnings

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

16.000

 

1.077

 

85.920

 

102.997

 

 

 

 

 

 

 

 

 

 

 

Net income for the year

 

 

 

117.731

 

117.731

 

Other comprehensive income/(loss)

 

 

 

 

 

Total comprehensive income/(loss)

 

 

 

117.731

 

117.731

 

 

 

 

 

 

 

 

 

 

 

Allocation of prior year income

 

 

2.123

 

(2.123

)

 

Dividend distribution

 

 

 

(83.797

)

(83.797

)

Balance at December 31, 2008

 

16.000

 

3.200

 

117.731

 

136.931

 

 

For the year ended December 31, 2007

 

Issued

 

Legal

 

Retained

 

 

 

(adjusted)

 

Capital

 

Reserve

 

Earnings

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2007

 

11.820

 

 

17.077

 

28.897

 

 

 

 

 

 

 

 

 

 

 

Net income for the year

 

 

 

85.920

 

85.920

 

Other comprehensive income/(loss)

 

 

 

 

 

Total comprehensive income/(loss)

 

 

 

85.920

 

85.920

 

 

 

 

 

 

 

 

 

 

 

Allocation of prior year income

 

 

1.077

 

(1.077

)

 

Dividend distribution

 

 

 

(16.000

)

(16.000

)

Increase in issued capital

 

4.180

 

 

 

4.180

 

Balance at December 31, 2007

 

16.000

 

1.077

 

85.920

 

102.997

 

 

F-4



 

CONSORZIO LOTTERIE NAZIONALI
CASH FLOW STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(In thousands of Euro)

 

 

 

 

 

Year ended December 31,

 

 

 

Notes

 

2009

 

2008

 

2007

 

Operating activities:

 

 

 

 

 

 

 

 

 

Profit before income tax

 

16

 

181.103

 

173.502

 

138.686

 

Adjustments to reconcile profit before income tax to net cash flow

 

 

 

 

 

 

 

 

 

Depreciation

 

3

 

2.175

 

1.830

 

887

 

Intangible asset amortization

 

4

 

332

 

47

 

39

 

Interest income

 

20

 

(38

)

(46

)

(214

)

Interest on intercompany loan

 

20

 

(1.263

)

(708

)

(173

)

Total accrued interest income

 

 

 

(1.301

)

(754

)

(387

)

Bank interest charges and commissions

 

20

 

26

 

35

 

34

 

Other intercompany interest

 

20

 

908

 

5.254

 

3.375

 

Interest expense to AAMS and other interest expense

 

 

 

461

 

2.041

 

1.791

 

Total accrued interest expense

 

 

 

1.395

 

7.330

 

5.200

 

Other non-monetary items:

 

 

 

 

 

 

 

 

 

Unrealized foreign exchange (gains)/losses, net

 

 

 

(137

)

(217

)

(1.451

)

Exchange (gains)/losses on derivatives, net

 

 

 

(389

)

(1.674

)

844

 

Net change in long-term provisions

 

 

 

114

 

472

 

(50

)

Realized foreign exchange (gains)/losses, net

 

 

 

(1.498

)

2.040

 

(397

)

Income taxes paid

 

 

 

(60.878

)

(91.361

)

(23.161

)

Cash flows before changes in working capital

 

 

 

120.916

 

91.215

 

120.210

 

Change in net working capital:

 

 

 

 

 

 

 

 

 

Inventories

 

 

 

(4.494

)

1.524

 

(2.987

)

Trade and other receivables:

 

 

 

 

 

 

 

 

 

- Trade and other receivables

 

 

 

(3.356

)

(4.434

)

(5.802

)

- Receivables from PoS (retailers)

 

 

 

60.693

 

52.539

 

(57.339

)

- Related party receivables

 

 

 

(3.769

)

(2.030

)

(1.432

)

Accounts payable:

 

 

 

 

 

 

 

 

 

- Payables to AAMS

 

 

 

88.213

 

53.475

 

(23.958

)

- Payables to others

 

 

 

(697

)

98

 

163

 

- Payables to suppliers including related parties

 

 

 

(10.887

)

9.169

 

(10.928

)

Current income taxes

 

16

 

(58.349

)

(56.171

)

(52.511

)

Deferred income taxes

 

16

 

593

 

400

 

(255

)

Income taxes payable

 

 

 

2.106

 

4.768

 

40.757

 

Other tax receivables

 

 

 

55.599

 

50.932

 

12.581

 

VAT payables and taxes other than income taxes

 

 

 

(2.109

)

389

 

1.061

 

Cash flows from operating activities

 

 

 

244.459

 

201.872

 

19.560

 

Investing activities:

 

 

 

 

 

 

 

 

 

Purchase of equipment

 

3

 

(1.123

)

(863

)

(2,545

)

Purchase of intangible assets

 

4

 

(572

)

(57

)

(27

)

Disposal of financial assets

 

 

 

 

 

2

 

Interest received

 

 

 

511

 

46

 

214

 

Cash flows from investing activities

 

 

 

(1.184

)

(874

)

(2356

)

Financing activities

 

 

 

 

 

 

 

 

 

Interest paid

 

 

 

(1.005

)

(971

)

(1.825

)

Dividends paid

 

 

 

(117.731

)

(83.797

)

(16.000

)

Payables to AAMS and other

 

 

 

 

 

 

Increase in issued capital

 

 

 

 

 

4.180

 

Net change in financial receivables from/payables to parent company

 

 

 

(124.709

)

(116.059

)

(12.732

)

Cash flows from financing activities

 

 

 

(243.445

)

(200.827

)

(26.377

)

Net increase (decrease) in cash and cash equivalents

 

 

 

(171

)

171

 

(9.173

)

Cash and cash equivalents at the beginning of the period

 

 

 

175

 

4

 

9.177

 

Cash and cash equivalents at the end of the period

 

8

 

4

 

175

 

4

 

 

F-5


 

CONSORZIO LOTTERIE NAZIONALI
NOTES TO FINANCIAL STATEMENTS
(thousands of Euro)

 

1.              Corporate information

 

Consorzio Lotterie Nazionali (hereinafter “CLN” or “the Company”) is a consortium organized under the laws of the Republic of Italy. The head office of the Company is located in Rome, Italy.

 

The financial statements of the Company for the year ended December 31, 2009 were approved for issue by the Board of Directors in accordance with a resolution dated February 24, 2010.

 

The Company’s operations are entirely in the Republic of Italy. In the month of October 2003, the Italian Ministry of Economy and Finances granted to CLN the exclusive concession to operate various traditional and instant lotteries, including “scratch and win” instant games. The concessions, granted to CLN by the Ministry entity Amministrazione Autonoma dei Monopoli di Stato (hereinafter “AAMS”) expires in the months of March and May of 2010, for traditional lotteries and instant lotteries, respectively, unless such concession terms are extended by AAMS. During August 2009, AAMS issued a tender for a new nine-year concession agreement, which was initially awarded to the Company. However, another lottery operator in the Italian market filed and was granted a court order to annul the tender process. As discussed in Note 19, the Company and AAMS have filed an appeal against the original court decision, with the first hearing relating to this matter scheduled for March 9, 2010. The Company intends to vigorously defend the legality of the original tender process and to take all necessary actions to win renewal of the original concession agreements.

 

The Company’s instant and traditional lotteries are available through various vendors located throughout Italy, mainly at tobacco shops, cafès, bars, motorway restaurants and newspaper stands (collectively, “Points of Sale” or “PoS”).

 

The Company’s deed of association assigns to all of the Company’s equity holders specific roles in the Company’s business activities as follows:

 

·                  Lottomatica Group S.p.A. (the parent of the Company and formerly Lottomatica S.p.A.): its role includes design and coordination of the overall Company operations, i.e., management of marketing and accounting functions, collection of wagers from Points of Sales, administration of periodic drawings, and procurement of software and hardware for Points of Sale;

·                  Scientific Games International: its role includes design and production of instant lottery tickets;

·                  Arianna 2001 S.p.A: its role includes serving as the secure depository and manager of the instant lottery tickets inventory;

·                  Olivetti S.p.A.: its role includes responsibilities for the supply and maintenance of software and hardware of the Company;

·                  Servizi Base 2001 S.p.A.: its role includes management of the instant lottery ticket distribution to the Points of Sale.

 

2.1 Basis of preparation

 

The financial statements have been prepared on a historical cost basis, except as disclosed in the accounting policies below for derivative financial instruments, which are measured at fair value. The financial statements are presented in thousands of Euro unless otherwise indicated.

 

Despite the pending expiration of the concession agreements as discussed in Note 1 above, management has concluded that, regardless of the outcome of the court hearing relating to its appeal, the Company will continue to operate in the foreseeable future (at a minimum, for the one year period subsequent to December 31, 2009) to either satisfy the requirements of the old concession beyond the original expiry or under the terms of a new

 

F-6



 

CONSORZIO LOTTERIE NAZIONALI
NOTES TO FINANCIAL STATEMENTS
(thousands of Euro)

 

concession agreement, both as discussed in further detail in Note 19. Accordingly, the financial statements as of December 31, 2009 and for the year then ended have been prepared on a going concern basis.

 

Statement of Compliance

 

The financial statements of CLN have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

Reclassifications

 

December 31, 2008 and 2007 Statements of financial position

 

The Company, as summarized below, adjusted the December 31, 2008 and 2007 presentation of the Receivables from retailers to conform to the 2009 presentation, which reflects the nature of such balances as “trade” accounts and leaves “residual” the nature of the items presented in the Other current assets. The Company also adjusted the presentation of the Other liabilities to AAMS in order to ensure consistency between assets and liabilities.

 

The Trade and other receivables, Other current assets, Accounts payable, and Other current liabilities notes (Notes 6, 7, 11 and 12, respectively) were adjusted accordingly.

 

The reclassifications are shown in the table below:

 

 

 

December 31, 2008

 

 

 

As

 

As Previously

 

 

 

(thousands of euros)

 

Adjusted

 

Reported

 

Reclassification

 

Assets

 

 

 

 

 

 

 

Trade and other receivables

 

359,535

 

35,892

 

323,643

 

Other current assets

 

467

 

324,110

 

(323,643

)

Liabilities

 

 

 

 

 

 

 

Accounts payable

 

352,789

 

104,841

 

247,948

 

Other current liabilities

 

2,087

 

250,035

 

(247,948

)

 

 

 

December 31, 2007

 

 

 

As

 

As Previously

 

 

 

(thousands of euros)

 

Adjusted

 

Reported

 

Reclassification

 

Assets

 

 

 

 

 

 

 

Trade and other receivables

 

405.282

 

29.099

 

376.183

 

Other current assets

 

798

 

376.981

 

(376.183

)

Liabilities

 

 

 

 

 

 

 

Accounts payable

 

287.219

 

93.849

 

193.370

 

Other current liabilities

 

1.626

 

194.996

 

(193.370

)

 

As a result of the reclassification of the items as shown in the table above, in accordance with the provision of IAS 1, Presentation of Financial Statements, the Company presented a statement of financial position as at the beginning of the earliest comparative period, January 1, 2008 (i.e., December 31, 2007).

 

2.2 Changes in accounting policy

 

The accounting policies adopted are consistent with those of the previous financial year except as follows:

 

The Company has adopted the following new and amended IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations during the year. Adoption of these new and amended

 

F-7



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

standards and interpretations did not have any effect on the financial performance or position of the Company.

 

·                  IFRS 1 First Time Adoption of IFRS (Revised);

·                  IFRS 2 Share-based Payment: Vesting Conditions and Cancellations;

·                  IFRS 7 Financial Instruments: Disclosures;

·                  IFRS 8 Operating Segments;

·                  IAS 1 Presentation of Financial Statements;

·                  IAS 23 Borrowing Costs (Revised);

·                  IAS 32 Financial Instruments: Presentation and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation;

·                  IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement

·                  IFRIC 15 Agreement for the Construction of Real Estate;

·                  IFRIC 18 Transfers of Assets from Customers;

·                  Improvements to IFRSs.

 

The principal effects of these changes are as follows:

 

IFRS 1 First Time Adoption of IFRS (Revised)

 

The amendment to IFRS 1 allows an entity to determine the “cost” of investments in subsidiaries, jointly controlled entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using a deemed cost. The revised standard was issued on November 27, 2008 and its adoption had no effect on the financial position, performance or cash flows of the Company.

 

IFRS 2 Share-based Payment (Revised): Vesting Conditions and Cancellations

 

The IASB issued an amendment to IFRS 2 in January 2008 that clarifies the definition of a vesting condition and prescribes the treatment for an award that is effectively cancelled. The adoption of this standard had no effect on the financial position, performance or cash flows of the Company or require additional disclosures since the Company has no share based payment plans.

 

IFRS 7 Financial Instruments: Disclosures

 

The amended standard requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognized at fair value. In addition, a reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The Company’s fair value measurement and liquidity risk disclosures were not significantly impacted by the amendments.

 

IFRS 8 Operating Segments

 

The Company adopted IFRS 8, which replaced IAS 14 Segment Reporting, on January 1, 2009, its effective date. IFRS 8 specifies how an entity should report information about its operating and reportable segments in annual and interim financial statements. It also defines requirements for related disclosures about products and services, geographical areas and major customers. The adoption of this standard had no effect on the financial position, performance or cash flows of the Company or require additional disclosures since the Company currently has only one business segment.

 

IAS 1 Presentation of Financial Statements

 

The revised standard separates owner and non-owner changes in equity. The statement of changes in equity

 

F-8



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

includes only details of transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity. In addition, the standard introduces the statement of comprehensive income: it presents all items of recognized income and expense, either in one single statement, or in two linked statements. The Company has elected to present one single statement of comprehensive income and has adjusted the 2008 and 2007 Statements of Comprehensive Income and Changes in Equity to conform to the 2009 presentation.

 

IAS 23 Borrowing Costs

 

The revised IAS 23 requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. In accordance with the transitional provisions of the amended IAS 23, the Company has adopted the standard on a prospective basis from its effective date, January 1, 2009. The adoption of this standard had no effect on the financial position, performance or cash flows of the Company.

 

IAS 32 Financial Instruments: Presentation and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation

 

The standards have been amended to allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfil a number of specified criteria. These amendments to IAS 32 and IAS 1 were issued in February 2008 and their adoption had no effect on the financial position, performance or cash flows of the Company.

 

IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement

 

This amendment to IFRIC 9 requires an entity to assess whether an embedded derivative must be separated from a host contract when the entity reclassifies a hybrid financial asset out of the fair value through profit or loss category. This assessment is to be made based on circumstances that existed on the later of the date the entity first became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract. IAS 39 now states that if an embedded derivative cannot be reliably measured, the entire hybrid instrument must remain classified as at fair value through profit or loss. The Company has adopted these amendments on a prospective basis. Their adoption had no effect on the Company’s financial position, performance or cash flows as the Company has no such hybrid financial instruments containing embedded derivatives.

 

IFRIC 15 Agreement for the Construction of Real Estate

 

IFRIC 15 was issued in July 2008 and became effective for financial years beginning on or after January 1, 2009. The interpretation is to be applied retrospectively. It clarifies when and how revenue and related expenses from the sale of a real estate unit should be recognised if an agreement between a developer and a buyer is reached before the construction of the real estate is completed. Furthermore, the interpretation provides guidance on how to determine whether an agreement is within the scope of IAS 11 or IAS 18. The adoption of this interpretation is not applicable to the Company, as CLN does not conduct such activity.

 

IFRIC 18 Transfers of Assets from Customers

 

On 29 January 2009 the IFRIC issued an Interpretation that provides additional guidance on the accounting for transfers of assets from customers. It clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water) or to do both. IFRIC 18 requires entities to apply the Interpretation prospectively to transfers of assets from customers received on or after July 1, 2009. IFRIC 18 is likely to be particularly relevant for the utility sector. The adoption had no effect on the financial position, performance or cash flows of the Company.

 

F-9



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

Improvements to IFRSs

 

In May 2008 and April 2009 the IASB issued omnibus of amendments to its standards, primarily with a view of removing inconsistencies and clarifying wording. This has been done as part of the annual improvements project as a method to make necessary, but not urgent, amendments to IFRSs arising from matters raised by the IFRIC. There are separate transitional provisions for each standard. The amendments made can result in accounting changes for presentation, recognition and measurement. The adoption of such amendments resulted in changes to accounting policies but had no effect on the financial position, performance or cash flows of the Company.

 

2.3 International Financial Reporting Standards to be adopted in 2010 and later

 

The International Accounting Standards Board and IFRIC issued additional standards and interpretations which are effective for periods starting after the date of these financial statements and therefore have yet to be adopted by CLN as described below.

 

IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions

 

In June 2009 the IASB issued an amendment to IFRS 2 on the accounting for group cash-settled share-based payment transactions. This amendment is effective for financial years beginning on or after January 1, 2010. This amendment also supersedes IFRIC 8 and IFRIC 11. The adoption of this standard is not expected to have an impact on the financial position, performance or cash flows of the Company.

 

IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended)

 

The revised standards were issued in January 2008 and become effective for financial years beginning on or after July 1, 2009. IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after July 1, 2009, its effective date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

 

IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill or give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary.

 

The changes by IFRS 3 (Revised) and IAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests, if any.

 

IAS 39 Financial Instruments: Recognition and Measurement — Eligible Hedged Items

 

The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. It clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as the hedged item. This amendment to IAS 39 was issued in August 2008 and becomes effective for financial years beginning on or after July 1, 2009. The Company has concluded that the amendment will have no impact on its financial position, performance or cash flows, as CLN has not entered into any such instruments as accounting hedges.

 

IFRIC 17 Distributions of Non-cash Assets to Owners

 

On 27 November 2008 the IFRIC issued this interpretation which is effective for annual periods beginning on or after July 1, 2009 with early application permitted. It provides guidance on how to account for non-cash distributions to owners. The interpretation clarifies when to recognise a liability, how to measure it and

 

F-10



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

the associated assets, and when to derecognise the asset and liability. The adoption of this interpretation is not expected to have an impact on the financial position, performance or cash flows of the Company.

 

2.4 Significant accounting judgments, estimates and assumptions

 

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

 

Estimates and assumptions

 

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Deferred Tax Assets

 

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available in the future. Significant management judgment is required to determine the amount of deferred tax assets that can be realized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

 

2.5 Summary of significant accounting policies

 

Foreign currency translation

 

Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss.

 

Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

 

Equipment, net

 

Equipment are stated at cost less accumulated depreciation. Cost includes ancillary costs directly attributable to bringing the asset into operating condition. Depreciation is calculated on straight-line basis over the estimated useful life of the assets as follows:

 

Terminals and communication equipment

 

5 to 7 years

 

 

 

Machinery and equipment

 

4 years

 

 

 

Furniture and fittings

 

8 to 9 years

 

The carrying values of systems and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

 

All repairs and maintenance costs are recognised in profit or loss as incurred.

 

A unit of equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference

 

F-11



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

 

Intangible assets, net

 

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful lives are as follows:

 

Software

 

3 years

 

 

 

Licenses

 

3 years

 

 

 

Others

 

2 to 5 years

 

The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least annually at year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement within the caption “Depreciation, amortization and write-downs”.

 

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

 

Impairment of non-financial assets

 

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows take into account the risks specific to the asset and are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

 

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a specific identification basis.

 

F-12



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.

 

Financial assets

 

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. The Company only has financial assets classified as loans and receivables and fair value through profit and loss. When financial assets are recognized initially on the trade date, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

 

The Company determines the classification of its financial assets on initial recognition.

 

Trade receivables and other receivables

 

Trade accounts receivable are subsequently measured at amortized cost less impairment. Allowances for doubtful accounts are generally recorded when there is objective evidence that the Company will not be able to collect the related receivables. Bad debts are written off when identified.

 

Short-term receivables are not discounted because the effect of discounting cash flows is immaterial.

 

Cash and cash equivalents

 

Cash and cash equivalents in the balance sheet are comprised of cash at banks and on hand and short-term, highly liquid investments with an original maturity of three months or less at the date of purchase.

 

Financial liabilities

 

Financial liabilities at amortized cost

 

All loans and borrowings and trade accounts payable are initially recognized at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Short-term payables are not discounted because the effect of discounting cash flows is immaterial.

 

Financial liabilities at fair value through profit or loss

 

Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

 

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are classified as held for trading unless they are designated as effective hedging instruments.

 

Gains or losses on liabilities held for trading are recognized in income statement.

 

Derivative financial instruments and hedging

 

The Company uses derivative financial instruments such as forward currency contracts to mitigate the risks associated with foreign currency related to the purchase of lottery tickets.

 

The Company’s forward currency contracts do not qualify for hedge accounting; therefore any gains or losses arising from changes in their fair value are taken directly to net profit or loss for the year. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

 

F-13



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

Derecognition of financial assets and liabilities

 

Financial assets

 

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

 

·                  the rights to receive cash flows from the asset have expired;

·                  the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or

·                  the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

Financial liabilities

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

 

Provisions

 

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Whenever the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a borrowing cost.

 

Revenue recognition

 

Revenues are recognized to the extent that it is probable the economic benefits associated with the transaction will flow to the Company and the amount of revenue can be reliably measured. Revenues are measured at the fair value of the consideration received, excluding discounts and taxes. The contracts generally provide for a variable amount of monthly service fees received through AAMS based on a percentage of instant and traditional lottery’s total wagers. Specific recognition criteria must also be met before revenue is recognized as discussed below.

 

The Company’s revenues derive from operating contracts. Under operating contracts, the Company manages all of the activities along the lottery value chain including collecting wagers, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials for the game. Fees earned under operating contracts are recognized as revenue in the period earned and are classified as Service Revenue in the Income Statement when all of the following criteria are met:

 

·                  Persuasive evidence of an arrangement exists, which is typically when a customer contract has been signed;

·                  Services have been rendered;

·                  The fee is deemed to be fixed or determinable and free of contingencies or significant uncertainties; and

·                  Collectability is reasonably assured.

 

F-14



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

 

Interest income and interest expense

 

Interest income and interest expense are recognized as interest accrues (using the effective interest rate, that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial assets or liabilities).

 

Income taxes

 

Current income tax

 

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

 

Deferred income tax

 

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred income tax liabilities are recognized for all taxable temporary differences.

 

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses, can be utilized.

 

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

 

Income tax relating to items recognized directly in equity is recognized in equity and not in the income statement.

 

3. Equipment, net

 

Equipment, net amounts to euro 2.801 and includes euro 342 for those tangible assets to be transferred free of charge at the expiration of the concession (separately disclosed). These assets are defined as “Freely distributed assets” (FDA) and refer to Company’s equipment in use by third parties (points of sale) to carry out activities related to Instant and Traditional lotteries which are to be returned to the Ministry of Finance upon the expiration of the concession agreement.

 

F-15


 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

Balance at December 31, 2009

 

Leasehold
Improvements

 

Furniture
and
Equipment

 

Other
Assets

 

Contract
in
Progress

 

Freely
Distributed
Assets

 

Total

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2009

 

230

 

5.309

 

153

 

290

 

1.527

 

7.509

 

Additions

 

 

951

 

 

117

 

55

 

1.123

 

Transfers

 

 

290

 

 

(290

)

 

 

Balance at December 31, 2009

 

230

 

6.550

 

153

 

117

 

1.582

 

8.632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2009

 

187

 

2.378

 

83

 

 

1.008

 

3.656

 

Depreciation charge for the year

 

43

 

1.882

 

18

 

 

232

 

2.175

 

Transfers

 

 

 

 

 

 

 

Balance at December 31, 2009

 

230

 

4.260

 

101

 

 

1.240

 

5.831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

 

 

2.290

 

52

 

117

 

342

 

2.801

 

 

Balance at December 31, 2008

 

Leasehold
Improvements

 

Furniture
and
Equipment

 

Other
Assets

 

Contract
in
Progress

 

Freely
Distributed
Assets

 

Total

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

230

 

3,124

 

152

 

 

3,140

 

6,646

 

Additions

 

 

572

 

1

 

290

 

 

863

 

Transfers

 

 

1,613

 

 

 

(1,613

)

 

Balance at December 31, 2008

 

230

 

5,309

 

153

 

290

 

1,527

 

7,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

136

 

476

 

65

 

 

1,149

 

1,826

 

Depreciation charge for the year

 

51

 

1,532

 

18

 

 

229

 

1,830

 

Transfers

 

 

370

 

 

 

(370

)

 

Balance at December 31, 2008

 

187

 

2,378

 

83

 

 

1,008

 

3,656

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2008

 

43

 

2,931

 

70

 

290

 

519

 

3,853

 

 

4.        Intangible assets, net

 

Intangible assets are comprised of certain computer software and license costs to operate such software. Intangible assets are being amortized ratably over their estimated useful lives which do not exceed the expiration dates of the lottery operation agreement.

 

F-16



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

Balance at December 31, 2009

 

Software

 

Licences

 

Total

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2009

 

3.624

 

697

 

4.321

 

Additions

 

493

 

79

 

572

 

Balance at December 31, 2009

 

4.117

 

776

 

4.893

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2009

 

3.578

 

697

 

4.275

 

Amortization for the year

 

271

 

61

 

332

 

Balance at December 31, 2009

 

3.849

 

758

 

4.607

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

 

268

 

18

 

286

 

 

Balance at December 31, 2008

 

Software

 

Licences

 

Total

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

3,567

 

697

 

4,264

 

Additions

 

57

 

 

57

 

Balance at December 31, 2008

 

3,624

 

697

 

4,321

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

3,548

 

680

 

4,228

 

Amortization for the year

 

30

 

17

 

47

 

Balance at December 31, 2008

 

3,578

 

697

 

4,275

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2008

 

46

 

 

46

 

 

5.        Inventories

 

 

 

December 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Instant Lottery Tickets (at cost or net realizable value)

 

13.618

 

9.124

 

 

Inventories are entirely comprised of instant lottery tickes held by the depositary and eqity holder Arianna 2001 S.p.A. During the period there were no write downs or any reversal of write downs.

 

F-17



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

6.        Trade and other receivables

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Trade receivables

 

31.022

 

27.689

 

22.925

 

Receivables from retailers

 

262.950

 

323.643

 

376.183

 

Related party receivables

 

11.974

 

8.203

 

6.174

 

 

 

305.946

 

359.535

 

405.282

 

 

Trade receivables refer to the commission fees from AAMS as set forth in the concession agreement, are non-interest bearing, and are generally due from 30 to 90 days.

 

Receivables from retailers refer to the amounts due to CLN from the retailers where tickets are sold. The collection of these monthly remittances generally occurs between ten and twenty days after each month-end.

 

The related party receivables relate to services rendered for the collection of lottery tickets.

 

7.        Other current assets

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Other receivables

 

191

 

466

 

795

 

Prepaid expenses

 

297

 

 

 

VAT receivables

 

743

 

1

 

3

 

 

 

1.231

 

467

 

798

 

 

8.        Cash and cash equivalents

 

 

 

December 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Cash and cash equivalents

 

4

 

175

 

 

Cash and cash equivalents are stated at cost, which approximates fair value, and earn interest at market rates. The Company participates in a cash pooling agreement with an equity holder, Lottomatica Group S.p.A., pursuant to which its funds are swept daily into various cash pools managed by Lottomatica Group S.p.A.. Amounts swept into the cash pools of Lottomatica Group S.p.A. are classified as “current financial assets from parent company”. For comments on related party balances and transactions, see further disclosure in Notes 18 and 20.

 

F-18



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

9.        Equity

 

On February 26, 2009, at the annual meeting, general equity holders’ declared, and the Company subsequently paid, euro 117.731 in dividends.

 

The equity holders and issued capital attributed to them are as follows at December 31, 2009:

 

Equity holder

 

Percent
of issued
capital

 

Issued
capital

 

Lottomatica Group S.p.A.

 

63

%

10,080

 

Scientific Games Int.

 

20

%

3,200

 

Arianna 2001 S.p.A.

 

15

%

2,400

 

Olivetti S.p.A.

 

1

%

160

 

Servizi Base 2001 S.p.A.

 

1

%

160

 

Total

 

100

%

16,000

 

 

10.     Long term provisions

 

Balance at December 31, 2009

 

Legal
Matters

 

Other

 

Total

 

 

 

 

 

 

 

 

 

Balance at January 1, 2009

 

600

 

16

 

616

 

Arising during the year

 

292

 

 

292

 

Utilized

 

(162

)

(16

)

(178

)

Balance at December 31, 2009

 

730

 

 

730

 

 

Balance at December 31, 2008

 

Legal
Matters

 

Other

 

Total

 

 

 

 

 

 

 

 

 

Balance at January 1, 2008

 

 

144

 

144

 

Arising during the year

 

600

 

16

 

616

 

Utilized

 

 

(144

)

(144

)

Balance at December 31, 2008

 

600

 

16

 

616

 

 

Legal matters

 

Provisions relate primarily to the legal fees in connection with legal matters discussed in Note 19. It is expected that most of this provision will be utilized in the next financial year.

 

Other

 

Other provisions relate primarily to prizes on certain lottery games. Provisions are calculated based on historical cost information and expected prize payouts. Settlement on prizes varies according to the terms of each individual game.

 

F-19



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

11.     Accounts payable

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Accounts payable

 

4.276

 

2.179

 

1.994

 

Other liabilities to AAMS

 

335.936

 

247.948

 

193.370

 

Related parties payables

 

88.035

 

102.662

 

91.855

 

 

 

428.247

 

352.789

 

287.219

 

 

Accounts payable are non-interest bearing and are normally settled on 60 to 90 day terms.

 

Other liabilities to AAMS refer to the remittance due to AAMS based on the total monthly wagers.

 

For comments on related parties payables, see the related parties relationships and transactions disclosure in Note 18.

 

12.     Other current liabilities

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Taxes other than income taxes

 

15

 

21

 

3

 

Other liabilities

 

204

 

703

 

557

 

VAT payables

 

 

1.363

 

1.066

 

 

 

219

 

2.087

 

1.626

 

 

13.     Service revenue

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Instant lotteries

 

326.827

 

320.665

 

275.042

 

Traditional lotteries

 

1.130

 

1.746

 

1.962

 

 

 

327.957

 

322.411

 

277.004

 

 

The Company operates in a highly regulated environment and sells to counterparties (PoS) usually not linked to the current adverse market conditions.

 

Current year revenues might not be indicative of the 2010 expected future results. This will in large measure depend on the developments described in Note 19 which, as of the date of the preparation of these financial statements, are not entirely predictable.

 

F-20


 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

14. Service costs

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Service costs from Lottomatica Group S.p.A.

 

66.411

 

65.961

 

66.364

 

Points of Sale assistance

 

21.123

 

21.707

 

19.942

 

Consulting fees

 

3.622

 

2.248

 

2.052

 

Maintenance fees

 

993

 

899

 

773

 

Advertising costs

 

227

 

1.685

 

722

 

Other costs

 

1.072

 

728

 

682

 

 

 

93.448

 

93.228

 

90.535

 

 

For comments related to costs from the equity holder Lottomatica Group S.p.A. and other related parties with which the Company conducts business, see the related parties relationships and transactions disclosure in Note 18.

 

15. Financial income and expenses

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Interest income

 

1.301

 

754

 

387

 

Forward currency contracts

 

536

 

1.674

 

 

Exchange gains

 

2.495

 

1.237

 

3.042

 

Financial income

 

4.332

 

3.665

 

3.429

 

 

 

 

 

 

 

 

 

Interest expense

 

1.453

 

7.332

 

5.200

 

Forward currency contracts

 

147

 

 

844

 

Factoring of trade receivables contract

 

5.198

 

1.357

 

 

Exchange losses

 

860

 

3.060

 

1.194

 

Financial expenses

 

7.658

 

11.749

 

7.238

 

 

16. Income tax

 

Significant components of income tax expense are as follows:

 

F-21



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

Current

 

 

 

 

 

 

 

National (IRES)

 

50.215

 

48.185

 

45.744

 

Regional (IRAP)

 

8.134

 

7.986

 

6.767

 

Total Current

 

58.349

 

56.171

 

52.511

 

 

 

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

Deferred income tax recovered

 

(304

)

91

 

(94

)

Deferred income tax (benefit)/expense

 

(2

)

(549

)

349

 

Other adjustments

 

(287

)

58

 

 

Total Deferred

 

(593

)

(400

)

255

 

Total income tax expense

 

57.756

 

55.771

 

52.766

 

 

The tax effects of temporary differences and carry forwards that give rise to deferred income tax assets and liabilities consist of the following:

 

 

 

December 31,

 

 

 

2009

 

2008

 

Deferred tax assets

 

 

 

 

 

Bad debt reserve provision

 

1.387

 

1.243

 

Other provisions

 

664

 

626

 

Intangible assets

 

 

15

 

Equipment depreciation

 

324

 

126

 

Other

 

1

 

62

 

 

 

2.376

 

2.072

 

Deferred tax liabilities

 

 

 

 

 

Unrealized exchange gains

 

49

 

49

 

Equipment depreciation

 

17

 

18

 

Other

 

98

 

99

 

 

 

164

 

166

 

Net deferred income tax assets

 

2.212

 

1.906

 

 

 

 

 

 

 

Net deferred income tax assets at December 31, 2009

 

2.212

 

 

 

Net deferred income tax assets at December 31, 2008

 

1.906

 

 

 

Deferred income tax benefit credited to profit or loss

 

306

 

 

 

 

The effective income tax rate on profit before income tax differed from the Italian statutory tax rate for the following reasons:

 

F-22



 

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

 

 

 

December 31,

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

Net income before income tax

 

181.102

 

173.502

 

138.686

 

 

 

 

 

 

 

 

 

Italian statutory tax rate (IRES)

 

27,5

%

27,5

%

33,0

%

 

 

 

 

 

 

 

 

Theoretical provision for income taxes based on Italian statutory tax rate

 

49.803

 

47.713

 

45.766

 

 

 

 

 

 

 

 

 

Reconciliation of the theoretical and effective provision for income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Permanent differences

 

 

 

 

 

 

 

Italian local tax (IRAP)

 

7.896

 

7.565