The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and interpretations by the International Financial Reporting Interpretations Committee (IFRIC) as endorsed by the European Union (EU) for application within the EU, subject to the exceptions indicated below. Also, the Annual Accounts Act and the recommendations of the Swedish Financial Reporting Board entitled RFR 1 "Additional Accounting Regulations for Groups", have been applied. The Parent Company applies RFR 2 "Accounting for Legal Entities", and applies the same accounting policies as the Group except as specified under "Parent Company’s accounting policies".
The reporting currency of the Group and the functional currency of the Parent Company is SEK. All amounts, unless otherwise stated, are rounded to the nearest million.
Preparing the financial statements in conformity with IFRS requires executive management to make estimates, judgements and assumptions affecting the application of accounting policies and reported amounts. Estimates and assessments are based on past experience and reasonable expectations regarding future events. The outcome may diverge from these estimates and assessments. Estimates are regularly reviewed. Estimates that have an impact on the financial statements are described in Note 27.
There have been no changes to accounting policies compared with the preceding financial year.
The following new and amended standards became statutory for the first time as of the financial year commencing 1 January 2012.
The amendments to IFRS 7 increase disclosure requirements in conjunction with the transfers of financial assets and apply to financial years commencing 1 July 2011 or later. The consolidated financial statements will not be affected by this amendment.
The amendment pertains to the valuation of deferred tax in conjunction with reversals of the asset’s carrying amount, which does not impact the consolidated financial statements..
Amendments to IFRS 7, which becomes effective for the financial year commencing 1 January 2013 or later, expand disclosure requirements in conjunction with the settlement of financial assets and financial liabilities. The amendments to IAS 32, which become effective for the financial year commencing 1 January 2014 or later, pertaining to the settlement of financial assets and financial liabilities clarify how to apply the settlement rules. Group executive management has yet to perform a detailed analysis of the effects of the application of the amendments to IAS 32 an IFRS 7 and are thus unable as yet to quantify their effects.
The amendment to IFRS 9 issued in December 2011 implies that IFRS 9 will apply to financial years commencing on 1 January 2015 or later. The most significant impact of IFRS 9 in terms of the classification and valuation of financial liabilities is related to changes in fair value attributable to changes in the credit risk of a financial liability (recognized at fair value in the income statement).
In the case of financial liabilities classified at fair value via the income statement, it applies that the change in the amount in fair value terms that is due to the change in credit risk for the liability shall, according to IFRS 9, be presented in other comprehensive income. Group executive management has not yet conducted a detailed analysis on the effects of the application of the amendments and is thus unable to quantify any such effects.
The new standard, which is to be applied in a forwarding-looking manner as of 1 January 2013, deals with accounting and disclosure in respect of fair value. The standard clarifies how fair value is determined and the disclosures required. Group executive management is currently of the assessment that the Group’s existing holding of financial instruments fulfils the IFRS 13 requirements on how to recognise fair value.
The amendment, which becomes effective as of 1 July 2012, relates to how items are presented in the statement of other comprehensive income. The Group will implement the changes required by the amendment.
The amendment becomes effective as of 1 January 2013. The amendment to the standard pertains to new rules in conjunction with the calculation of defined-benefit pension plans and could affect the Group’s calculations to a minor extent.
| New and amended standards and interpretations that have not become effective and which are not currently viewed as affecting the Group: | |
| Standard | Becomes effective |
| IFRS 10 – Consolidated Financial Statements | 1 January 2013 |
| IFRS 11 – Joint arrangements | 1 January 2013 |
| IFRS 12 – Disclosures of Interests in Other Entities | 1 January 2013 |
| IAS 27 – Consolidated and Separate Financial Statements | 1 January 2013 |
| IAS 28 – Investments in Associates | 1 January 2013 |
Non-current assets and non-current liabilities consist substantially of the amounts expected to be recovered or paid more than 12 months after the balance sheet date. Current assets and current liabilities consist purely of amounts expected to be recovered or paid less than 12 months from the balance sheet date.
Assets and liabilities are recognised at cost, with the exception of certain financial assets and liabilities measured at fair value.
The consolidated financial statements comprise the Parent Company AB Svenska Spel and all companies in which the Parent Company directly or indirectly holds more than 50% of the voting rights, or otherwise exercises controlling influence. Controlling influence entails the right to develop the financial and operative strategies of a company with a view to gaining economic benefit.
A subsidiary’s income and expenses and its assets and liabilities are consolidated in the consolidated financial statements as of the date when the Parent Company gains a controlling influence over the Company until the time that the controlling influence ceases. The consolidated financial statements have been prepared in accordance with the purchase method and with IFRS 3 (revised).
All Group companies have a calendar-based financial year and apply uniform accounting policies. Inter-company receivables and liabilities, inter-company transactions and related profits are eliminated in their entirety in the consolidated financial statements. Losses are eliminated in the same way as profits, provided there are no indications of impairment.
The delivery of services and products among companies in the Group are subject to commercial terms and market pricing.
Svenska Spel’s segment reporting is based on the same division of result areas that Group executive management uses to monitor operations. The Group executive management is Svenska Spel’s supreme decision-making body. The segments are based on Svenska Spel’s offering of various forms of gaming and are divided into the following three operating segments: Sports Games & Lotteries, Vegas and Casino Cosmopol, which also correspond to the Group’s result areas.
Minor redistributions of joint costs were completed during the year. The figures for last year have been adjusted to reflect the new distribution model.
Foreign currency transactions are translated using the exchange rates prevailing on the transaction dates. At the end of the month, assets and liabilities in foreign currency are translated at the closing exchange rate. Foreign exchange gains and losses on current receivables and liabilities are included in operating profit, but foreign exchange gains and losses on financial assets and liabilities are recognized among financial items. Payment flows in foreign currencies are limited.
Over the course of the year, exchange-rate differences are continuously recognized via the income statement.
| Exchange rates | ||
| Closing rate | Closing rate | |
| Valuta | 31 December 2012 | 31 December 2011 |
| USD | 6.5406 | 6.9484 |
| EUR | 8.6416 | 8.9697 |
| GBP | 10.5214 | 10.7068 |
| CHF | 7.1406 | 7.3656 |
Revenue from gaming operations is recognised net, meaning gross revenue less deductions for winners’ shares and retailer commissions. In the income statement, the net amount is called Net revenue from gaming operations, etc.
This method of recognition is used because Svenska Spel’s operations are predominantly based on the allocation of received funds among gaming and lottery participants.
The timing of when the Group’s various forms of gaming, lotteries, casino games and VLT products generate revenue varies. Revenue from gaming and VLTs is generated virtually at the time the stakes are paid, while revenue from lottery tickets arises when a retailer activates tickets for sale, which in principle represents the time of sale. In certain cases, multi-week gaming occurs, whereby the revenue is allocated to the week to which it pertains. Casino revenue arises when gaming tables or slot machines are closed.
All gaming, lottery and casino revenue is recognised on a daily basis. VLT revenue has previously been recognised weekly, which means that when a week straddles the end of a month, the week is attributed to the month to which the greater part belongs. As of 2012, revenues from VLTs will also be recognised on a daily basis. Poker revenue comprises the percentage share of the stakes credited to Svenska Spel, known as the rake, which is also recognised on a daily basis.
Other revenue consists mainly of sales revenue from restaurants, leasing income from retail terminals, revenues for the responsible gaming tool PlayscanTM, registration fees and casino entrance fees. These revenues are recognised in the period to which they pertain.
Note 2 describes the Group’s distribution of net gaming revenue, etc.
Costs that lead to improved gaming products or processes are recognised as assets in the balance sheet if the product or process is technology based and can be used commercially, and there are sufficient resources to complete development and then use and sell the intangible asset. The carrying amount includes material costs, direct salary costs and indirect costs that can be attributed to the asset in a reasonable and consistent manner. Other development costs are expensed against profit/loss as incurred. Development costs recognised in the balance sheet are charged at cost less accumulated amortisation and impairment.
The Group’s intangible assets consist primarily of capitalised development costs for new gaming products and new gaming systems that are considered to be of material economic value for the business in coming years. Activities during feasibility study phases, as well as entertainment and education initiatives, are expensed on an ongoing basis. Other intangible assets pertain to licences and goodwill.
Licenses are reported at their cost less deductions for depreciation/ amortisation and impairment. Goodwill is reported at the purchase value with deductions for accumulated impairment.
Amortisation is applied on a straight-line basis over the expected useful life of the asset, starting from the date the asset is first put to use. The useful life and any residual value of assets are tested at each balance sheet date to establish whether there are any indications of impairment. If such indication arises, the asset’s recoverable amount is calculated. The recoverable amounts for intangible assets with an indefinite useful life and intangible assets not ready for use are tested annually. Impairment is recognised when the carrying amount of an asset exceeds the recoverable amount. Impairment losses are charged to profit or loss. Impairment is reversed if there has been a change in the assumptions underlying determination of the recoverable amount.
| Depreciation periods | Number of years |
| New applications for gaming products | 3 (3) |
| System platforms for new gaming products | 5–10 (5–10) |
| Licences | 5 (5) |
| Goodwill | annual review |
On an annual basis, intangible assets are tested for impairment and the recoverable amount of individual assets is estimated. If the carrying amount of the asset exceeds the calculated recoverable value, the asset is impaired to this value. The recoverable amount represents value in use and is calculated by discounting future estimated cash flows pertaining to individual intangible assets. The recoverable amount of non cash-generating assets that are substantially independent of other assets is calculated for the cash-generating unit to which the asset belongs.
The item property, plant and equipment is recognised as an asset in the balance sheet insofar as it is probable that future financial benefits will accrue to the Group and that the cost of the asset can be calculated reliably. Property, plant and equipment is recognised in the Group at cost with deductions for accumulated depreciation as well as any impairment loss. The cost includes the purchase price and any costs directly attributable to getting the asset to the appropriate place in the appropriate condition for its intended use.
Additional costs are added to the carrying amount of the asset or recognised as a separate asset, whichever is most appropriate. If an additional cost pertains to payment for an already existing component, the recognised amount for the replaced components is derecognised from the balance sheet. Repairs and maintenance are recognised as costs in the income statement for the period to which they pertain.
Property, plant and equipment comprising parts with different useful lives are treated as separate components of property, plant and equipment.
The carrying amount for an item of property, plant and equipment is derecognised on disposal or sale, or when no future economic benefits are expected to arise from use of the asset. Profit or loss arising from the sale or disposal of an asset represents the difference between the selling price and the carrying amount of the asset, less direct selling costs.
| Depreciation periods | Number of years |
| Buildings | 50 (50) |
| Construction and extension, own property | 5–50 (5–50) |
| Construction and extension, property held under lease | 5–30 (5–30) |
| Land | No depreciation |
| Land improvements | 20 (20) |
| Retailer terminals | 5 (5) |
| Equipment | 3–5 (3–5) |
| Computers | 3–5 (3–5) |
Amortisation is applied on a straight-line basis over the expected useful life of the asset, starting from the date the asset is first put to use. The carrying amounts and useful life of the Group’s assets are tested at each balance sheet date to establish whether there are any indications of impairment. If such indication arises, the asset’s recoverable amount is calculated. Impairment is reported via the income statement when an asset’s reported value exceeds the recoverable value. In the event of any change in the assumptions underlying the calculation of the recoverable value is reversed.
The acquisition of subsidiaries is reported according to the purchase method. The purchase price for the acquired operation is valued at fair value on the acquisition date. Acquisition-related expenses are reported in the income statement as they arise. In conjunction with corporate acquisitions in which the purchase price exceeds the fair value on the acquisition date for identifiable, acquired net assets, the difference is reported as goodwill in the financial status report.
Leasing is classified in the consolidated financial statements as operating or finance. Finance leasing occurs when the economic risks and rewards of ownership are materially transferred to the lessee. Leasing fees related to operating leasing agreements are recognised as income/expense in the income statement in the period to which they belong.
All leasing agreements entered into by the Svenska Spel Group have been analysed and deemed to be operating leases. Leasing agreements under which the Group is the lessee relate essentially to leased premises. Leasing agreements under which the Group is the lessor relate primarily to leasing of retailer and lottery terminals.
Financial instruments are every form of contract that causes a financial asset or liability to arise. Financial instruments recognised on the asset side of the balance sheet include cash and cash equivalents, trade receivables, shares and loan receivables.
Liabilities and equity mainly comprise trade payables and unpaid winnings.
Financial instruments are initially carried at cost, representing the fair value of the instrument, with transaction costs added for all financial instruments except those defined as a financial instrument recognised at fair value in the income statement, with transaction costs recognised in the income statement.
A financial asset or financial liability is recognised in the balance sheet when the Company becomes party to the contractual conditions of the instrument. Financial assets are derecognised when the right to receive cash flow from the instrument has expired or been transferred and the Group has transferred essentially all the risks and benefits associated with ownership. A financial liability is derecognised when the contractual undertakings have been fulfilled or are otherwise extinguished.
Financial instruments are classified in categories. Classification is based on the purpose for which the financial instrument was acquired. Classification of the instrument is determined by executive management on initial recognition and retested on each reporting date. The categories are as follows:
This category consists of two sub-groups:
Svenska Spel enters into currency forward contracts in compliance with the Group’s finance policy to hedge the flow of foreign currencies. These derivative instruments also comprise contractual terms and conditions that are embedded in other contracts. Embedded derivatives must be recognised separately unless they are closely related to the host contract. Svenska Spel mainly employs currency forward contracts to hedge purchases denominated in EUR and USD. Svenska Spel does not apply hedge accounting pursuant to IAS 39. Derivative instruments are recognised in the balance sheet on the contract date and are valued at fair value, both initially and in connection with subsequent revaluation. Gains or losses arising from revaluation are recognised in the income statement under financial income or financial expenses, respectively.
Svenska Spel has financial investments in bonds with a real rate of interest intended to provide funds for future payments of winnings in Triss Månadsklöver, these are shown in the balance sheet as "financial assets" and "current investments" respectively. Future payments to winners of Triss Månadsklöver are reported as a non-current and current liability, respectively, under unpaid winnings and belong to this category.
Trade and other receivables are classified under this category since they have determined or determinable payments and are not quoted on an active market. Recognition is at amortised cost less any allowance for any value decline. As the expected maturity is short, these assets are valued at the nominal amount expected to occur. Individual testing occurs if there is objective evidence of an impairment requirement. Impairment of trade receivables is recognised under operating costs.
Cash and cash equivalents are classified as loan receivables and consist of cash, immediately accessible bank balances and equivalent institutions and current investments with a maturity from the acquisition date of less than three months, which are exposed to an insignificant risk of value changes. Value changes are reported under financial items in the income statement.
This category comprises financial assets with determined or determinable payments and determined maturity, which are held with the intention of being held to maturity.
In accordance with the Group’s current finance policy, surplus liquidity is invested in zero coupon bonds and commercial papers. Investments with an original maturity of less than three months, which are subject to insignificant risk of value fluctuation and can easily be converted to bank funds, are classified and measured as cash and cash equivalents. Other investments with maturity of between three and twelve months are classified under this category in cases where they are intended to be held to maturity.
Available-for-sale financial assets are non-derivative assets. Assets in this category are measured at fair value with changes in value charged to equity. The Group has no financial assets in this category.
Trade and other payables have short expected due dates and are measured without discounting at the nominal amount. All Group funds are measured at accrued cost. Funds are accumulated for the jackpots of various types of games. Funded winnings may vary greatly over time depending on when winnings are actually paid.
Svenska Spel’s settlement fund includes lottery and game winnings that are not claimed within the set period and also payment rounding amounts. The redemption period for winnings for the Vegas gaming form is 30 days, for other games 90 days and for lotteries up to 1.5 years. When the redemption date has passed, unclaimed winnings are placed in the settlement fund in accordance with the Company’s licence. Paid winnings are rounded down to the nearest SEK and the excess amount transferred to the settlement fund. The funds in the settlement fund are used to cover the future payments of winnings for approved claims, and can be used to return funds to winning participants by, for example, increasing the frequency of winnings or topping up certain winning categories during campaigns.
The Parent Company, AB Svenska Spel, and its subsidiary, Casino Cosmopol AB, are exempt from corporate taxes, lottery taxes and, largely, value added taxes. However, all companies in the sub-group Svenska Spels Förvaltnings AB have a tax liability and are also largely required to pay value added tax.
Income tax consists of current tax and deferred tax. Income taxes are charged directly to the income statement except where the underlying transaction is charged directly to equity, in which case the associated tax effect is recognized in other comprehensive income or equity. Current tax is tax that is to be paid or received pertaining to the current year with application of the tax rates in effect on the closing date.
Deferred tax is determined using the balance sheet method based on the temporary differences between the carrying amount and the value of assets and liabilities for tax purposes. Deferred income tax is calculated based on application of the tax rates in effect on the balance sheet date. Deferred tax assets relating to tax deductible temporary differences and tax loss carry-forwards are recognised only insofar as it is probable that they will be utilised.
A provision is reported in the balance sheet when the group has an existing legal or informal obligation as a result of the occurrence of an event and it is likely that an outflow of financial resources will be required to settle the obligation and a reliable estimate of the amount can be made. When the effect of the payment timing is significant, provisions are calculated through the discounting of the anticipated future cash flow at a certain interest rate that reflects current market assessments of the time value of money. Most of these provisions are pension provisions.
Employees in the Svenska Spel Group receive remuneration in the form of basic salary, benefits and occupational pension. Variable remuneration is paid to employees for work performed during, for example, unsociable working hours. No bonus-based remuneration or remuneration in the form of financial instruments is payable.
In addition to salary, employees receive benefits, which depend to some extent on the position in the Company held by the employee. All employees are entitled to a subsidised lunch and to certain compensation for fitness care and healthcare. Executive management and sales representatives are also entitled to a benefit in the form of access to a company car and subsidised fuel.
Salaried employees in the Svenska Spel Group are covered by the ITP plan administered by Collectum. Pension obligations after terminated employment are classified as either defined-contribution or defined-benefit plans. According to a statement from the Swedish Financial Reporting Board UFR 3, pension plans secured in accordance with the ITP plan are to be classified as defined-benefit plans. However, Collectum, which insures the ITP plan, has not been able to provide Svenska Spel or other companies with sufficient information to be able to determine the Company’s share of the plan’s total assets and liabilities. Since these obligations can only be attributed to the insurance beneficiary, they are recognised under UFR 3 as a defined-contribution plan.
The Svenska Spel Group’s employees who are collectively covered by agreements in the LO agreement area are affiliated to the defined-contribution pension plan named the SAF-LO Pension Agreement, which is administrated by Fora.
Within the Parent Company Svenska Spel, there are a few older pension obligations to former employees. These obligations amount to insignificant sums and are secured in part through allocations to the Company’s pension liability and in part through Svenska Spel’s Pension Foundation. AB Svenska Spel pays ongoing pension payments pursuant to these obligations, whereupon annual crediting from Svenska Spel’s Pension Foundation occurs.
A provision is recognised in conjunction with termination of employment only if the Company is demonstrably committed to either terminating the employment of an employee before the retirement date. The provision is recognised when no service is required in return from the employee.
Svenska Spel does not receive any Government or other financial grants.
The cash-flow statement is prepared pursuant to the indirect method. Cash and cash equivalents in the cash-flow statement consist of cash and bank balances and investments with a maturity of less than three months, which are not subject to any material risk of value fluctuation.
The Parent Company has prepared its annual financial statements in conformity with the Annual Accounts Act (1995:1554) and the Recommendations of the standards of the Swedish Financial Reporting Board in RFR 2 Accounting for legal entities. This implies that in the annual financial statements of the legal entity, the Parent Company is to apply all EU-approved IFRSs and statements from IFRIC to the extent possible within the framework of the Annual Accounts Act and the Pension Obligations Vesting Act, and in consideration of the relationship between accounting and taxation. The recommendations state the exceptions to be made from, and supplements to, IFRS. The Parent Company applies the same accounting policies as the Group except as specified below.
Dividends to the shareholders of the Parent Company are recognised as a liability in the financial reports of the Parent Company and the Group when the shareholders of the Parent Company adopt the distribution. The Parent Company anticipates dividends from subsidiaries.
Participations in subsidiaries are reported at cost in the Parent Company’s financial reporting.
