Annual Report 2012.pdf - Cherry

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Part 2 notes TANGIBLE FIXED ASSETS Tangible fixed assets are reported at their historic acquisition cost after deduction for accumulated depreciation and any writedowns. Repairs and maintenance are recognised on a regular basis. Depreciation is based on the original acquisition value, reduced by the estimated residual value and taking into write-downs made. Linear depreciation is applied over the useful life of the assets as follows: Slot machines in use 3-10 years Product gaming 2 years Recreational gaming 2-5 years Casino tables 5 years Casino wheels, Sweden 3-5 years Scanning system (maritime slot machines) 3-5 years Registering equipment (Swedish casino) 3 years Other gaming inventories max 5 years Office inventories 5 years Computers 3 years Vehicles 3-5 years INVENTORIES Inventories are valued at the lower of the acquisition cost after the requisite deduction for obsolescence and net sales value. The acquisition value for the inventory is calculated through the application of the FIFO method. LEASING Leasing is classified as either financial or operational leasing. Leasing where an essential part of the risks and advantages of the ownership are retained by the lessor is classified as operational leasing. Payments made during the leasing period (after deductions for any incentives from the lessor) are recognized in the income statement linearly over the leasing period. The group leases some tangible fixed assets. Leasing agreements of fixed assets where the group essentially holds the financial risks and advantages associated with the ownership is classified as financial leasing. At the start of the leasing period financial leasing is reported in the balance sheet at the lower of the fair value of the leasing object and the current value of minimum lease charges. Each leasing payment is allocated between amortisation of the liability and financial expenses. The corresponding payment obligations, after deduction of financial expenses, are included in the balance sheet items Long-term borrowing and Short-term borrowing. The interest part in the financial expenses is reported in the income statement, allocated over the leasing period so that each accounting period is charged with an amount that corresponds to 40 | annual report 2012 a fixed interest rate for liability reported during respective periods. Fixed assets held in accordance with financial leasing agreements are written-down during the shorter period of the asset’s useful life and leasing period. The scope of Cherry’s operational leasing agreements is reported in Note 14 and financial leasing agreements are indicated in Note 16. REMUNERATION TO EMPLOYEES SHORT-TERM REMUNERATION Short-term remuneration to employees is calculated with discounting and reported as an expense when the related services are received. A provision for estimated bonus payments and other contractual compensation is reported when the group has legal or informal obligations to make such payments as a result of the fact that the services in question have been received from the employees and the provision amount can be estimated reliably. PENSION COMMITMENTS Pension plans are financed through payments from respective group companies and in some cases from the employees. All pensions are reported as defined contributions. Group payments concerning defined contribution pension plans are recognised during the period the employees have performed the services to which the contributions refer. Pensions for employees who have chosen the opportunity of an alternative ITP and pensions for croupiers and dealers are defined contributions. Pension commitments for some the company’s employees are secured through insurance in Alecta. Alecta’s surplus can be distributed to policy holders and/or the insured. At the end of 2012, Alecta’s surplus amounted in the form of the collective consolidation level to 130 percent (preliminary data, the last previous year it was 143 percent). The collective consolidation level consists of the market value of Alecta’s assets in percent of the insurance commitments calculated in accordance with Alecta’s insurance undertakings, which do not correspond with IAS 19. COMPENSATION ON NOTICE OF TERMINATION Compensation on the termination of employment is paid when an employee is given notice by the company prior to the normal pension date, or when an employee accepts a voluntary retirement from in exchange for such compensation. The group reports severance pay when it is manifestly obliged to give notice to an employee in accordance with a detailed formal plan without the opportunity of recall. In the event the company has issued an offer to encourage voluntary retirement, the severance pay is based on the number of employees who are estimated to accept the offer. Benefits due more than 12 months after the end of the reporting period are discounted to current value. INCENTIVE PROGRAMME The 2011–2014 incentive programme for the Cherry group does not come under IFRS 2 and share related compensation. Employees are offered options at market prices. PROVISIONS A provision is reported in the balance sheet when the group has an existing legal or informal obligation as a result of an event that has occurred, and where it is likely that an outflow of financial resources will be needed to regulate the obligation and it is possible to make a reliable estimation of the amount. A provision for restructuring is reported when the group has established a detailed and formal restructuring plan, and the restructuring has either been begun or has been officially acknowledged. Provisions are reported in the balance sheet under other current and long-term liabilities. When the outflow of resources is estimated to take place later than one year after the balance sheet date, the expected future cash flow is discounted and the provision is reported at capitalised value. CASH FLOW STATEMENT AND DEFINITION OF LIQUID ASSETS The cash flow statement is prepared in accordance with the indirect method. The reported cash flow only included transactions that permit incoming or outgoing payments. Liquid assets are classified as cash and bank balances with a term shorter than three months, and which are only exposed to a negligible risk of fluctuations in value. PARENT COMPANY ACCOUNTING PRINCIPLES The parent company accounting is prepared in accordance with the Annual Accounts Act and RFR 2 Accounting regulations for legal entities. The parent company applies the same principle as the group, with the exception of the following. The principles remain unchanged in comparison with previous years, unless otherwise stated in Changes in accounting principles. Deviations between group and parent company accounting principles are motivated by the limitations the Annual Accounts Act imposes in the application of IFRS in the parent company and the tax regulations that enable different accounting for legal entities than for the group.
CHANGES IN ACCOUNTING PRINCIPLES 2012 Unless otherwise stated below the parent company accounting principles in 2012 have changed in line with what has been specified for the group. GROUP CONTRIBUTIONS AND SHARE- HOLDER CONTRIBUTIONS The parent company reports group contributions received in accordance with the same principle as ordinary dividends, i.e. as a financial income. Group contributions are reported as financial expenses. Shareholder contributions are made directly to equity at the recipient and activated in shares and participation at the issuer, in so far as there are no write-downs. FINANCIAL POLICY The group’s financial operations are conducted on the basis of the financial policy established by the board and is characterised by a low level of risk. Financial operations and the management of financial risks are coordinated via the parent company Cherry AB, which is also responsible for the placement of excess liquidity. Financing of subsidiaries mainly takes place via the parent company and a cash pool, to which all Swedish companies are linked. The operational subsidiaries manage their own financial risks within the framework established by the board and in coordination with the parent company. Disclosures on Cherry’s financial risk management reflect the information issued internally to leading executives. CURRENCY EXPOSURE RISKS The group is exposed to changes in the foreign exchange rate as some of its sales take place in currencies that differ from the costs (transaction exposure). Results are also affected by changes in foreign exchange rates when the results of the foreign subsidiaries are converted to Swedish kronor (translation exposure). Group equity is also affected by changes in foreign exchange rates when the assets and liabilities in foreign subsidiaries are recalculated to GROUP COMPANIES Participations in group companies are reported in the parent company at the acquisition value, reduced by any write-downs. Conditional proceeds are valued on the basis of the likelihood that they will be received. Any changes in the provision/receivable are added to, or reduce the acquisition value. DIVISION INTO RESTRICTED AND UNRESTRICTED EQUITY In the parent company balance sheet equity is divided up into restricted and unrestricted equity in accordance with the Annual Accounts Act. Note 3: Financial risk management Swedish kronor (translation exposure). All the earnings of the business area Online Gaming are in euro and majority of its costs are also in euro. Cherry does not implement hedging for this part at present. Foreign companies are mainly financed through equity and intergroup loans, which are issued either in the parent company currency or in the currency of the subsidiary. Hedging of equity in foreign subsidiaries is not implemented. If the Swedish currency fell by 5 percent in relation to the euro, with all other variables constant, profit after tax on 31 December 2012 would have been SEK 1.6 million higher mainly as a result of gains from the conversion of the results from Online Gaming. Earnings items in foreign group and associated companies are not hedged. Exchange rates used in consolidated financial statements Average rate 2012 2011 EUR 8.71 9.03 GBP 10.73 10.41 Closing rate (Ultimo) 2012 2011 EUR 8.62 8.94 GBP 10.49 10.68 ANTICIPATED DIVIDENDS The parent company reports anticipated dividends from subsidiaries in those cases where the parent company has the sole right to the scope of the host transfer and if the parent company has taken a decision on the scope of the dividend before its financial reports are published. No anticipated dividends were reported in the annual accounts for the fiscal year of 2012. REFINANCING RISKS, LIQUIDITY RISKS AND CAPITAL MANAGEMENT Group operations are mainly financed with their own resources. As of the year end 31-12-2012 the group had no loans apart from financial leasing. Cherry also has a standing overdraft facility in Sweden for SEK 15 million. The table below shows group liabilities allocated by the time remaining to the contractual due date. The amounts shown in the table are the contractual, non-discounted cash flows. Cherry has traditionally aimed for a low level of debt with an equity ratio of at least 30 percent. The tangible fixed assets in the group mainly consist of gaming and gaming equipment. Future investments in tangible fixed assets are mainly estimated to be financed with internally generated resources. There may be a need for external financing in the event of any major acquisitions of companies. The objective is primarily to implement acquisitions through cash payment and, or the issue of shares. INTEREST RISKS Group earnings and cash flows from operations are essentially independent of changes in interest levels on the market. Excess liquidity in the group is banked in accordance with As of 31 December 2012 Less than 3 months From 3 months to 1 year From 1 to 2 years From 2 to 5 years More than 5 years Acquisition loan - - - - - Other long-term liabilities - - - - - Financial leasing 172 520 1 083 - - Accounts payable and other liabilities 12 865 15 954 - - - annual report 2012 | 41
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Page 6 and 7: PART 1 CHERRY - 50 YEAR ANNIVERSARY
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