Annual Report 2012.pdf - Cherry

Part 2 notes
group finance policy. Short terms are applied.
With the exception of financial leasing, Cherry
had no interest bearing loans as of 31-12-2012.
COUNTERPARTY RISKS AND CREDIT RISKS
Cherry has no essential concentration of credit
risks. The company estimates that it has more
than 200 customers in its business operations.
No single customer accounts for more than
10 percent of group sales. Concerning Online
Gaming, Cherry bears the responsibility for
any credit risks of customers and also for any
jackpots.
Cherry has its own platform for Online
Gaming, as well as white label solutions. For
white label solutions, Cherry’s partners are
responsible for all the credit risks of customers
and for any jackpots, where provisions are
made monthly. Concerning its own platform,
Cherry is responsible for credit risks and
jackpots. Provisions are also made monthly for
jackpots. Individual units in respective business
areas may, however, have a larger exposure to
individual customers. All jackpots are randomly
generated. Depending on the results, earnings
and profit may be affected in the short term.
Cherry has several partners who pay on a
monthly basis. There is risk of one or more of
these partners become insolvent and failing to
pay their debts to Cherry.
Cherry issues advance payments, so-called
restaurant loans, to some of the customers in
the group, which is a natural part of Cherry’s
gaming operations in Restaurant Casino. The
terms and conditions for repayment rates are
agreed individually with respective restaurant
42 | annual report 2012
owners. Cherry receives compensation corresponding
to the market interest rate for outstanding
loans. Restaurant loans are a competitive
factor in the industry and are of important
for the outcome of the business negotiations
concerning venue agreements. Their issue
involves a credit risk. To minimise this risk
the borrower takes out security in the form of
corporate or real estate mortgages, personal
guarantees and, or other mortgaging of property.
All loan issues undergo Cherry’s credit assessment.
In 2012 a credit resolution in excess
of SEK 300 thousand was taken by the board
of Cherry, a credit resolution of SEK 150-300
thousand by the president together with the
chairman, and a credit resolution of up the
SEK 150 thousand by the president.
In Cherry’s business operations no official
independent external credit rating service is
available for customers. Nevertheless, risk assessments
of customer credit worthiness are
made on the basis of their financial position,
previous experience and other factors. Individual
risk limits are established on the basis of
internal or external credit assessments in accordance
with the limits set by the board. The
use of credit limits is followed up regularly.
The credit quality of financial assets that
neither have fallen due for payment nor are
in need of a write-down is assessed through
reference to external credit ratings (if such
are available) or to the payment history of the
counterparty.
Cash handling in the Cherry group does
take place, but has significantly diminished
now that Maritime Gaming has been discon-
tinued. The risks involved with handling cash
in Restaurant Casino have nevertheless been
reduced in that the physical handling of cash at
most of the venues is not handled by the Cherry
Group, along with the introduction of card
terminals at almost all of the Cherry venues.
This has led to a significant reduction in the
handling of cash. In those cases where cash
handling does take place, most of the handling
is managed by our partners, i.e. restaurants,
hotels and night clubs. This does involve a
credit risk for Cherry. Reversal accounting of
internal control systems is used minimise this
risk, which quickly detects deviations. Security
companies such as Nokas, Loomis and others
are often used in those cases where Cherry
handles cash.
TAX RISKS
Cherry conducts its business operations
through subsidiaries in Malta, Gibraltar and
Sweden. Operations, including transactions
between group companies, are managed in accordance
with the company’s interpretation of
current tax laws, gaming agreements and regulations,
or by the interpretation of them by the
government agencies concerned. In addition,
these regulations can change, possibly with a
retroactive impact. The decisions of tax authorities
can have a negative effect on the previous
or current tax situation for the group. The company
and its subsidiaries are, in so far as this
can be known, not currently the object of any
form of tax audit.