Unless otherwise stated, all figures are in NOK million.
The Annual Accounts are prepared in compliance with the provisions of the Norwegian Accounting Act (regnskapsloven) and good accounting practice, with such modifications made necessary by the unique nature of Norsk Tipping as set out in the Norwegian Gaming Act (lov om pengespill m.v.) no. 103, of 28 August 1992.
Norsk Tipping AS' activities are subject to the provisions of the Norwegian Gaming Act, which states that a wholly-owned state-regulated company will act as a gaming enterprise. The Norwegian Ministry of Culture determines the company's Articles of Association, appoints the Board and issues instructions to the Board. The Board is charged with ensuring that business activities are conducted in compliance with the company's objectives and guidelines. The Board is responsible for adequate organisation and management of the company, which includes ensuring that matters including registration and asset management are subject to satisfactory controls. The Articles of Association set out the Ministry of Culture's entitlement to issue instructions outside the ambit of ordinary governance as exercised by the company's general meeting.
Norsk Tipping's subsidiaries have no relevance in determining assessment of the Group's financial status or results. For this reason, and pursuant to Section 3-8 of the Norwegian Accounting Act (regnskapsloven), no consolidated accounts have been prepared.
Use of estimates
Management has made use of estimates and assumptions that have influenced the profit and loss account and the valuation of assets and liabilities. It is first and foremost valuations of fixed and intangible assets and related depreciations that are influenced by assumptions and estimates regarding economic lifetimes. Valuations have also been made of any unsecured assets and obligations on balance day in connection with completion of the annual accounts in accordance with good accounting practice. Management is not aware of any major uncertainties linked to the value of assets presented in the accounts and balance sheet.
Transactions in foreign currencies are converted based on the exchange rate prevailing on the date of the transaction. Monetary items in foreign currencies are converted to Norwegian kroner using the exchange rate prevailing on the balance sheet date. During the accounting period, fluctuations in currency exchange rates are recognised on a continuous basis under other financial items.
Operating revenues, prizes and commissions
The term 'gaming revenues’ is understood to refer to the gross stake amounts risked by players. In the case of gaming terminals, such as Belago and Multix, and online gaming, players will normally play several times during a single gaming session and recycle any winnings they may receive. For accounting purposes, each individual game, involving a stake followed by a draw with a possible payment of winnings, is regarded as a separate transaction regardless of the number of gaming sessions.
The accounting of gaming revenues and related prizes and commissions does not correspond fully with the calendar year, but is adjusted to conform to the subdivision of the year into numbered weeks. In 2018, gaming-related revenues and expenses are distributed across 52 gaming periods/weeks. Gaming stakes and related forecast prize distribution for multi-week gaming are accrued for each of the relevant gaming periods/weeks. Commissions are limited correspondingly.
Revenues from other sales are recognised when delivery has taken place and the most important aspects of risk and earnings have been transferred.
The company is exempt from tax.
Classification and assessment of balance sheet items
Current assets and short-term liabilities include items due for payment within one year of the date of acquisition, together with items linked to the commodity cycle. Remaining items are classified as non-current assets/long-term liabilities.
Current assets are assessed at their acquisition cost or fair value, whichever is less. Short-term liabilities are capitalised at their nominal value on the date on which they were incurred.
Non-current assets are assessed at their acquisition cost, with a deduction for depreciations and write-downs. Long-term liabilities are capitalised at their nominal value on the date on which they were incurred.
Research and development
The company adheres to the exemption rule set out in the provisions of Section 5-6 of the Accounting Act for the entry of expenses related to basic research and development. The company's activities in this field are very limited. Intangible assets developed in-house are treated as fixed assets.
Fixed and intangible assets
Fixed assets are recognised and written-down linearly over the lifetime of the asset in question. Direct asset maintenance is entered as current operating expenditure, whereas upgrades or improvements are recognised in the balance sheet and written-down according to the anticipated lifetime of the asset in question. If the fair value of an asset is less than its book value, the asset is written-down to its fair value. The fair value corresponds to the net sales value or utility value, whichever is the higher. The term 'utility value' is understood to mean the net present value of future cash flows that the asset is expected to generate, either directly or as a prerequisite for the company’s other cash flow items.
Company activities linked to the development of its own software, gaming concepts, distribution media and systems are assessed according to the guidelines on intangible assets set out in the NRS 19 accounting standard. Development activities that meet the criteria are capitalised and written down over the anticipated economic lifetime of the asset in question.
Subsidiaries and affiliated companies are assessed according to the cost method in the company's accounts. Investments are valued at the shares’ acquisition cost unless a write-down has been deemed necessary. Investments are written down to fair value if the fall in value is the result of circumstances that cannot be regarded as short-lived and thus considered necessary in accordance with good accounting practice. Write-downs are reversed if the reason for the write-down no longer exists.
Dividends, group contributions and other allocations from subsidiaries and affiliated companies are recognised as revenues during the same year as they are approved by the companies’ general meetings.
The company operates with limited stock. Stocks are valued at procurement cost or fair value, whichever is the lower. Procurement costs are calculated using the FIFO method and include expenses incurred on procurement of the goods, and costs linked to bringing goods to their present location and up to current condition.
Accounts receivable from agents, customers and others are entered in the balance sheet at nominal value after the deduction of a provision for anticipated loss. Provision for loss is made on a case-by-case assessment of individual accounts. An unspecified provision is also made to cover anticipated losses on other trade receivables.
The company operates with fixed benefit pension schemes that are assessed at the net present value of their future pension benefits which, for accounting purposes, are regarded as accrued on the balance sheet day. Pension funds are assessed at their true value.
Changes to fixed benefit pension liabilities resulting from amendments to pension plans are distributed over the estimated average remaining accrual period.
The company makes use of the corridor method in connection with recognition of the effects of pension plan assumptions. The cumulative effect of changes in estimates and financial and actuarial assumptions (actuarial gains and losses) that are less than 10 per cent of the greater of pension obligations and pension fund holdings at the start of the year, are not included. If, at the start of the year, the cumulative effect exceeds 10 per cent, the excess amount is recognised over the anticipated average remaining accrual period. Net pension expenditures for the period are entered as salary and personnel expenditures.
Statement of Cash Flow
The cash flow statement is prepared based on the indirect method. Cash and cash equivalents include such items as cash, bank deposits and other short-term, liquid investments.
Value Added Tax
Norsk Tipping AS' ordinary activities are exempt from value added tax pursuant to Section 5 (b), subsection 1 (6) of the Norwegian Value Added Tax Act (merverdiavgiftsloven). As a general rule, expenditures and investments are inclusive of VAT.
Revision of comparative figures
In the annual accounts for 2018 the method of recognition of advance payments is changed in relation to previous years. This has entailed a reclassification of entries from ‘other short-term liabilities’ to ‘residual profits payable’. The comparative figures have been revised.