Report
Annual Report and Accounts 2022 to 2023
The Gambling Commission's 2022 to 2023 Annual Report and Accounts. For the period 1 April 2022 to 31 March 2023.
9. Financial instruments
International Financial Reporting Standards (IFRS) 7 and IFRS 9 (Financial Instruments: Disclosures) establishes principles for the presentation, recognition and measurement, and disclosure of financial instruments as liabilities or equity.
In accordance with IFRS 7 and IFRS 9, the carrying values of short-term assets and liabilities (at amortised cost) are not considered different to fair value.
The Gambling Commission is not exposed to the degree of financial risk faced by commercial entities, because of the way that it is funded.
Financial instruments also play a more limited role in creating or changing risk than would be typical of financial entities, to which these standards mainly apply.
The Commission has obtained consent from its sponsoring department to place surplus funds on bank deposit. It would also require consent from the Department for Culture Media and Sport (DCMS) prior to acquiring financial instruments or borrowings.
Currency risk
The Commission is a domestic organisation with the great majority of transactions, and all assets and liabilities being in the United Kingdom (UK) and denominated in sterling. The Commission has no overseas operations. The Commission therefore is not exposed to currency rate fluctuations.
Interest rate risk
Other than finance leases, the Commission has no borrowings and therefore is not exposed to interest rate risk.
Credit risk
The Commission does not provide credit arrangements for the payment of licence fees by the industry. All fees must be paid on or before the date prescribed to prevent a breach of the licence and the licence being revoked. As the Commission relies on fees receivable from the gambling industry (payable immediately) and departmental Grant-in-Aid (GIA) for specific projects the Commission has very low exposure to credit risk.
Due to the impacts on trading during the coronavirus (COVID-19) pandemic, the Commission provided credit arrangements for some fines to be paid by gambling operators. All fees must be paid on or before the date prescribed to prevent being in breach of the payment agreement, failure to pay will result in interest charges. Interest shall accrue and shall be payable by gambling operators on any part of the Financial Penalty that is not paid at the rate of 2.5 percent above Bank of England base rate until the date of payment. Historically, payment plans have not been required and fines and penalties were considered to be non-complex financial assets which were low risk of not being paid.
In accordance with IFRS 9, Financial Instruments, an impairment review is carried out regularly assess these assumptions.
Where fines and penalties are uncollectible or, for policy reasons, (other than the imposition of an alternative penalty), the Commission decides that it is inappropriate to pursue collection, the amounts not collected are recorded as an expense. The amounts not collectible are estimated from the most appropriate data available to the Commission.
Liquidity risk
Other than finance leases, the Commission has no borrowings and relies on fees receivable from the gambling industry and departmental GIA for its cash requirements, the Commission is exposed to minimal liquidity risk.
The Commission adopted IFRS 16 Leases during the 2019 to 2020 financial year.
Financial assets and financial liabilities
Financial assets
| Description | Type of financial asset | 2022 to 2023 £ thousands |
2021 to 2022 £ thousands |
|---|---|---|---|
| Cash and cash equivalents | Amortised cost | 30,051 | 27,325 |
| Trade and other receivables | Amortised cost | 11,388 | 21,231 |
| Deposits | Amortised cost | 0 | 0 |
| Loans | Amortised cost | 6 | 2 |
| Contract assets | Amortised cost | 0 | 0 |
| Subtotal - amortised cost | 41,445 | 48,558 | |
| Equity investments – held through Other Comprehensive Income including Investment Funds and Shares and Equity type Investments | Fair value through other comprehensive income | 0 | 0 |
| Investment in subsidiaries | Fair value through other comprehensive income | 0 | 0 |
| Subtotal - fair value through other comprehensive income | 0 | 0 | |
| Derivative financial instrument assets | Fair value through profit or loss | 0 | 0 |
| Financial instrument non-derivatives through profit and loss | Fair value through profit or loss | 0 | 0 |
| Subtotal - fair value through profit or loss | 0 | 0 | |
| Total financial assets | 41,445 | 48,558 |
Financial liabilities
| Description | Type of financial asset | 2022 to 2023 £ thousands |
2021 to 2022 £ thousands |
|---|---|---|---|
| Trade and other payables including Consolidated Fund | Amortised cost | (11,724) | (24,323) |
| Lease liability | Amortised cost | (2,492) | (3,329) |
| Contract liabilities | Amortised cost | 0 | 0 |
| Subtotal - amortised cost | (14,216) | (27,652) | |
| Derivative financial instrument liabilities | Fair value through profit or loss | 0 | 0 |
| Subtotal - Fair value through profit or loss | 0 | 0 | |
| Total financial liabilities | (14,216) | (27,652) | |
| Total | 27,229 | 20,906 |
Definitions under IFRS 9
Financial assets measured at amortised cost
Held in a business model whose objective is to hold assets to collect contractual cash flows only (for example, a simple debt instrument not classified at fair value).
Financial assets classified and measured at Financial asset at fair value through other comprehensive income
Held in business model whose objective is achieved by collecting contracts and selling financial assets. This category is mandatory for some debt instruments (that is, all except those measured at amortised cost or Financial asset at fair value through profit or loss) and irrevocably elected equity instruments (which can also be measured at Fair value through other comprehensive income).
Financial assets measured at Financial asset at fair value through profit or loss
For all other equity instruments, excluding those elected previously, all derivatives and any instruments specifically designated to this category using the fair value option (available on initial recognition as an alternative to measuring at Fair value through other comprehensive income to reduce an accounting mismatch).
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10. Cash and cash equivalents
Last updated: 8 August 2024
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