x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-3247759 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on which Registered |
Common Stock, $.01 Par Value per Share; Preferred Stock Purchase Rights | New York Stock Exchange |
Large accelerated filer | x | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |
Emerging growth company | ¨ | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed Herewith |
3.1 | Amended and Restated Certificate of Incorporation of Live Nation Entertainment, Inc., as amended. | 10-K | 001-32601 | 3.1 | 2/25/2010 | Live Nation | |
3.2 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Live Nation Entertainment, Inc. | 8-K | 001-32601 | 3.1 | 6/7/2013 | Live Nation | |
3.3 | Fifth Amended and Restated Bylaws of Live Nation Entertainment, Inc. | 8-K | 001-32601 | 3.2 | 6/7/2013 | Live Nation | |
4.1 | Amended and Restated Rights Agreement, dated as of December 18, 2015, between Live Nation Entertainment, Inc. and Computershare Inc. | 8-K | 001-32601 | 4.1 | 12/24/2015 | Live Nation | |
4.2 | Form of Certificate of Designations of Series A Junior Participating Preferred Stock. | 8-K | 001-32601 | 4.2 | 12/23/2005 | Live Nation | |
4.3 | Form of Right Certificate. | 8-K | 001-32601 | 4.1 (Annex B) | 12/23/2005 | Live Nation | |
10.1 | Stockholder Agreement, dated February 10, 2009, among Live Nation, Inc., Liberty Media Corporation, Liberty USA Holdings, LLC and Ticketmaster Entertainment, Inc. | 8-K | 001-32601 | 10.2 | 2/13/2009 | Live Nation | |
10.2 | Registration Rights Agreement, dated January 25, 2010, among Live Nation, Inc., Liberty Media Corporation and Liberty Media Holdings USA, LLC. | 8-K | 001-32601 | 10.1 | 1/29/2010 | Live Nation | |
10.3 | Tax Matters Agreement, dated December 21, 2005, among CCE Spinco, Inc., CCE Holdco #2, Inc. and Clear Channel Communications, Inc. | 8-K | 001-32601 | 10.2 | 12/23/2005 | Live Nation | |
10.4 | Tax Sharing Agreement, dated August 20, 2008, among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. | 8-K | 001-34064 | 10.2 | 8/25/2008 | Ticketmaster | |
10.5 | Form of Indemnification Agreement. | 10-K | 001-32601 | 10.23 | 2/25/2010 | Live Nation | |
10.6 § | Live Nation Entertainment, Inc. 2005 Stock Incentive Plan, as amended and restated as of March 19, 2015. | 8-K | 001-32601 | 10.2 | 6/11/2015 | Live Nation | |
10.7 § | Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan. | S-8 | 333-164507 | 10.1 | 1/26/2010 | Live Nation | |
10.8 § | Amendment No. 1 to the Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan. | 10-Q | 001-32601 | 10.1 | 11/4/2010 | Live Nation | |
10.9 § | Live Nation Entertainment, Inc. 2006 Annual Incentive Plan, as amended and restated as of March 19, 2015. | 8-K | 001-32601 | 10.1 | 6/11/2015 | Live Nation | |
10.10 § | Form Stock Option Agreement for the Live Nation Entertainment, Inc. 2005 Stock Incentive Plan, as amended and restated as of March 19, 2015. | 10-K | 001-32601 | 10.12 | 2/25/2016 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed Herewith |
10.11 § | Form Restricted Stock Agreement for the Live Nation Entertainment, Inc. 2005 Stock Incentive Plan, as amended and restated as of March 19, 2015. | 10-K | 001-32601 | 10.13 | 2/25/2016 | Live Nation | |
10.12 § | Form Stock Option Agreement for the Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan. | 10-K | 001-32601 | 10.14 | 2/25/2016 | Live Nation | |
10.13 § | Form Restricted Stock Agreement for the Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan. | 10-K | 001-32601 | 10.15 | 2/25/2016 | Live Nation | |
10.14 § | Amended and Restated Live Nation, Inc. Stock Bonus Plan. | 8-K | 001-32601 | 10.1 | 1/25/2010 | Live Nation | |
10.15 § | Employment Agreement, dated October 21, 2009, among Live Nation, Inc., Live Nation Worldwide, Inc. and Michael Rapino. | 8-K | 001-32601 | 10.1 | 10/22/2009 | Live Nation | |
10.16 § | First Amendment to Employment Agreement, dated December 27, 2012 by and between Live Nation Entertainment, Inc. and Michael Rapino. | 10-K | 001-32601 | 10.29 | 2/26/2013 | Live Nation | |
10.17 § | Employment Agreement, effective January 1, 2014, between Live Nation Entertainment, Inc. and Joe Berchtold. | 10-K | 001-32601 | 10.24 | 2/24/2014 | Live Nation | |
10.18 § | Employment Agreement, effective January 1, 2014, between Live Nation Entertainment, Inc. and Michael Rowles. | 10-K | 001-32601 | 10.17 | 2/24/2014 | Live Nation | |
10.19 § | Employment Agreement, effective January 1, 2014, between Live Nation Entertainment, Inc. and Kathy Willard. | 10-K | 001-32601 | 10.19 | 2/24/2014 | Live Nation | |
10.20 § | Employment Agreement, effective December 17, 2007, between Live Nation Worldwide, Inc. and Brian Capo. | 10-Q | 001-32601 | 10.4 | 8/7/2008 | Live Nation | |
10.21 § | First Amendment to Employment Agreement, effective December 31, 2008, between Live Nation Worldwide, Inc. and Brian Capo. | 10-K | 001-32601 | 10.30 | 3/5/2009 | Live Nation | |
10.22 § | Second Amendment to Employment Agreement, effective October 22, 2009, between Live Nation Worldwide, Inc. and Brian Capo. | 10-K | 001-32601 | 10.55 | 2/25/2010 | Live Nation | |
10.23 | Credit Agreement entered into as of May 6, 2010, among Live Nation Entertainment, Inc., the Foreign Borrowers party thereto, the Guarantors identified therein, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Agent and J.P. Morgan Europe Limited, as London Agent. | 10-Q | 001-32601 | 10.4 | 8/5/2010 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed Herewith |
10.24 | Amendment No. 1, to the Credit Agreement, dated as of June 29, 2012, entered into by and among Live Nation Entertainment, Inc., the relevant Credit Parties identified therein, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders. | 10-Q | 001-32601 | 10.2 | 8/7/2012 | Live Nation | |
10.25 | Amendment No. 2 to the Credit Agreement, dated as of August 16, 2013, entered into by and among Live Nation Entertainment, Inc., the Guarantors identified therein, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the Lenders, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian agent and J.P. Morgan Europe Limited, as London agent. | 10-Q | 001-32601 | 10.2 | 5/6/2014 | Live Nation | |
10.26 | Amendment No. 3 to the Credit Agreement, dated as of October 31, 2016, entered into by and among Live Nation Entertainment, Inc., the Guarantors identified therein, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian agent, J.P. Morgan Europe Limited, as London agent and the lenders from time to time party thereto. | 10-K | 001-32601 | 10.26 | 2/23/2017 | Live Nation | |
10.27 | Incremental Term Loan Joinder Agreement No. 1, dated August 20, 2012, by and among Live Nation Entertainment, Inc., JPMorganChase Bank, N.A., as administrative agent, each Incremental Term Loan Lender defined therein and the relevant Credit Parties identified therein. | 10-Q | 001-32601 | 10.2 | 11/5/2012 | Live Nation | |
10.28 | Indenture, dated August 20, 2012, by and among Live Nation Entertainment, Inc., the Guarantors defined therein, and the Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 11/5/2012 | Live Nation | |
10.29 | First Supplemental Indenture, entered into as of October 4, 2012, among Live Nation Entertainment, Inc., the Guarantors listed in Appendix I attached thereto, Live Nation UshTours (USA), LLC, and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.3 | 11/5/2012 | Live Nation | |
10.30 | Second Supplemental Indenture, entered into as of August 13, 2013, among Live Nation Entertainment, Inc., the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 8-K | 001-32601 | 10.1 | 8/16/2013 | Live Nation | |
10.31 | Third Supplemental Indenture, dated as of February 6, 2014 among Live Nation Entertainment, Inc., BigChampagne, LLC, the Existing Guarantors Party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 5/6/2014 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed Herewith |
10.32 | Fourth Supplemental Indenture, dated as of May 27, 2014, among Live Nation Entertainment, Inc., Reigndeer Entertainment Corp., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.3 | 7/31/2014 | Live Nation | |
10.33 | Fifth Supplemental Indenture, dated as of August 27, 2014, among Live Nation Entertainment, Inc., Ticketstoday, LLC, the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.2 | 10/30/2014 | Live Nation | |
10.34 | Sixth Supplemental Indenture, dated as of October 31, 2014, among Live Nation Entertainment, Inc., EXMO Inc., Artist Nation Management, Inc., Guyo Entertainment, Inc., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-K | 001-32601 | 10.3 | 2/26/2014 | Live Nation | |
10.35 | Seventh Supplemental Indenture, dated as of March 27, 2015 among Live Nation Entertainment, Inc., Country Nation, LLC, the existing Guarantors Party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.2 | 4/30/2015 | Live Nation | |
10.36 | Eight Supplemental Indenture, dated as of August 13, 2015, among Live Nation Entertainment, Inc., the guarantors listed in Appendix I thereto, FG Acquisition Co, LLC, Front Gate Holdings, LLC, and Front Gate Ticketing Solutions, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.2 | 10/29/2015 | Live Nation | |
10.37 | Indenture, dated as of May 23, 2014, among Live Nation Entertainment, Inc., the Guarantors and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 7/31/2014 | Live Nation | |
10.38 | First Supplemental Indenture, dated as of August 27, 2014, among Live Nation Entertainment, Inc., Ticketstoday, LLC, the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 10/30/2014 | Live Nation | |
10.39 | Second Supplemental Indenture, dated as of October 31, 2014, among Live Nation Entertainment, Inc., EXMO, Inc., Artist Nation Management, Inc., Guyo Entertainment, Inc., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-K | 001-32601 | 10.33 | 2/26/2014 | Live Nation | |
10.40 | Third Supplemental Indenture, dated as of March 27, 2015 among Live Nation Entertainment, Inc., Country Nation, LLC, the Existing Guarantors Party thereto and The Bank of New York Mellon Trust Company N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 4/30/2015 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed Herewith |
10.41 | Fourth Supplemental Indenture, dated as of August 13, 2015, among Live Nation Entertainment, Inc., the guarantors listed in Appendix I thereto, FG Acquisition Co, LLC, Front Gate Holdings, LLC and Front Gate Ticketing Solutions, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.2 | 10/29/2015 | Live Nation | |
10.42 | Fifth Supplemental Indenture, dated as of October 31, 2016 among Live Nation Entertainment, Inc., the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-K | 001-32601 | 10.42 | 2/23/2017 | Live Nation | |
10.43 | Indenture, dated as of May 23, 2014, between Live Nation Entertainment, Inc., and HSBC Bank USA, National Association, as trustee. | 10-Q | 001-32601 | 10.2 | 7/31/2014 | Live Nation | |
10.44 | Indenture, dated as of October 31, 2016, by and among Live Nation Entertainment, Inc. the Guarantors defined therein and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-K | 001-32601 | 10.44 | 2/23/2017 | Live Nation | |
12.1 | Computation of Ratio of Earnings to Fixed Charges. | 10-K | 001-32601 | 12.1 | 2/23/2017 | Live Nation | |
14.1 | Code of Business Conduct and Ethics. | 10-K | 001-32601 | 14.1 | 2/23/2017 | Live Nation | |
21.1 | Subsidiaries of the Company. | 10-K | 001-32601 | 21.1 | 2/23/2017 | Live Nation | |
23.1 | Consent of Ernst & Young LLP. | 10-K | 001-32601 | 23.1 | 2/23/2017 | Live Nation | |
23.2 | Consent of PricewaterhouseCoopers S.C. | X | |||||
24.1 | Power of Attorney (see signature page 104 of 10-K). | 10-K | 001-32601 | 2/23/2017 | Live Nation | ||
31.1 | Certification of Chief Executive Officer. | X | |||||
31.2 | Certification of Chief Financial Officer. | X | |||||
32.1 | Section 1350 Certification of Chief Executive Officer. | X | |||||
32.2 | Section 1350 Certification of Chief Financial Officer. | X | |||||
99.1 | Financial statements of Venta de Boletos por Computadora, S.A. de C.V. as of and for the years ended December 31, 2016 and 2015. | X | |||||
99.2 | Financial statements of Venta de Boletos por Computadora, S.A. de C.V. as of and for the years ended December 31, 2015 and 2014. | X | |||||
101.INS | XBRL Instance Document. | 10-K | 001-32601 | 101.INS | 2/23/2017 | Live Nation | |
101.SCH | XBRL Taxonomy Schema Document. | 10-K | 001-32601 | 101.SCH | 2/23/2017 | Live Nation | |
101.CAL | XBRL Taxonomy Calculation Linkbase Document. | 10-K | 001-32601 | 101.CAL | 2/23/2017 | Live Nation | |
101.DEF | XBRL Taxonomy Definition Linkbase Document. | 10-K | 001-32601 | 101.DEF | 2/23/2017 | Live Nation | |
101.LAB | XBRL Taxonomy Label Linkbase Document. | 10-K | 001-32601 | 101.LAB | 2/23/2017 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed Herewith |
101.PRE | XBRL Taxonomy Presentation Linkbase Document. | 10-K | 001-32601 | 101.PRE | 2/23/2017 | Live Nation |
§ | Management contract or compensatory plan or arrangement. |
LIVE NATION ENTERTAINMENT, INC. | |
By: | /s/ Michael Rapino |
Michael Rapino | |
President and Chief Executive Officer |
PricewaterhouseCoopers S.C. |
/s/ Arturo Martinez Mojica |
Arturo Martinez Mojica |
Mexico City, Mexico |
June 16, 2017 |
Date: | June 23, 2017 |
By: | /s/ Michael Rapino |
Michael Rapino | |
President and Chief Executive Officer |
Date: | June 23, 2017 |
By: | /s/ Kathy Willard |
Kathy Willard | |
Chief Financial Officer |
Date: | June 23, 2017 |
By: | /s/ Michael Rapino |
Michael Rapino | |
President and Chief Executive Officer |
Date: | June 23, 2017 |
By: | /s/ Kathy Willard |
Kathy Willard | |
Chief Financial Officer |
Contents | Page |
Report of Independent Auditors | 1 |
Consolidated financial statements: | |
Statements of financial position | 2 |
Statements of comprehensive income | 3 |
Statements of changes in stockholders’ equity | 4 |
Statements of cash flows | 5 |
Notes to the financial statements | 6 to 32 |
PricewaterhouseCoopers, S. C. |
/s/ Arturo Martinez Mojica |
Arturo Martinez Mojica |
Audit Partner |
Mexico City, June 16, 2017 |
December 31, | |||||||
Assets | 2016 | 2015 | |||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents (Note 6) | Ps | 815,697 | Ps | 914,421 | |||
Accounts receivable (Note 7) | 131,915 | 51,721 | |||||
Related parties (Note 8) | 82,483 | 77,638 | |||||
Advance payments | 2,312 | 1,350 | |||||
Total current assets | 1,032,407 | 1,045,130 | |||||
FURNITURE AND EQUIPMENT - Net (Note 9) | 40,253 | 28,018 | |||||
INTANGIBLE ASSETS AND OTHER ASSETS (Note 10) | 17,352 | 24,940 | |||||
DEFERRED INCOME TAX (Note 14) | 8,505 | 4,793 | |||||
Total assets | Ps | 1,098,517 | Ps | 1,102,881 | |||
Liabilities and Stockholders' Equity | |||||||
LIABILITIES: | |||||||
Suppliers | Ps | 8,316 | Ps | 78 | |||
Accounts payable | 644,098 | 651,504 | |||||
Related parties (Note 8) | 2,648 | 555 | |||||
Accrued liabilities | 11,919 | 18,651 | |||||
Value added tax payable | — | 5,156 | |||||
Total liabilities | 666,981 | 675,944 | |||||
STOCKHOLDERS’ EQUITY (Note 11): | |||||||
Capital stock | 21,854 | 21,854 | |||||
Share premium | 2,629 | 2,629 | |||||
Retained earnings | 403,311 | 396,557 | |||||
Controlling shareholders’ investment in controlling interest | 427,794 | 421,040 | |||||
Non-controlling interest | 3,742 | 5,897 | |||||
Total stockholders’ equity | 431,536 | 426,937 | |||||
COMMITMENTS AND CONTINGENCIES (Notes 15 and 16) | — | — | |||||
Total liabilities and stockholders’ equity | Ps | 1,098,517 | Ps | 1,102,881 | |||
Year ended December 31, | |||||||
2016 | 2015 | ||||||
Revenue for services (Note 12) | Ps | 905,903 | Ps | 843,081 | |||
Cost of services (Note 13) | 319,797 | 301,011 | |||||
Gross profit | 586,106 | 542,070 | |||||
Operating expenses (Note 13) | 145,967 | 138,515 | |||||
Operating income | 440,139 | 403,555 | |||||
Comprehensive financing result: | |||||||
Interest income - Net | (31,366 | ) | (28,433 | ) | |||
Exchange loss (gain) - Net | 739 | (1,546 | ) | ||||
Comprehensive financing income - Net | (30,627 | ) | (29,979 | ) | |||
Profit before income taxes | 470,766 | 433,534 | |||||
Provisions for income taxes (Note 14): | |||||||
Current income tax | 132,631 | 140,836 | |||||
Deferred income tax | 8,535 | (8,142 | ) | ||||
141,166 | 132,694 | ||||||
Net consolidated profit for the year | 329,600 | 300,840 | |||||
Other comprehensive income | — | — | |||||
Consolidated comprehensive income for the year | Ps | 329,600 | Ps | 300,840 | |||
Distribution of consolidated comprehensive net income for the year: | |||||||
Controlling interest | Ps | 330,104 | Ps | 299,647 | |||
Non-controlling interest | (504 | ) | 1,193 | ||||
Ps | 329,600 | Ps | 300,840 |
Retained earnings | |||||||||||||||||||||||||||
Capital stock | Share premium | Holding | Subsidiaries | Total | Non-controlling interest | Total | |||||||||||||||||||||
Balances at January 1, 2015 | Ps | 21,854 | Ps | 2,629 | Ps | 188,046 | Ps | 106,364 | Ps | 294,410 | Ps | 5,749 | Ps | 324,642 | |||||||||||||
Dividends received | — | — | 81,000 | (81,000 | ) | — | — | — | |||||||||||||||||||
Dividends paid | — | — | (197,500 | ) | — | (197,500 | ) | — | (197,500 | ) | |||||||||||||||||
Dividends paid to non-controlling interest | (1,045 | ) | (1,045 | ) | |||||||||||||||||||||||
Comprehensive income for the year (Note 3n.) | — | — | 192,264 | 107,383 | 299,647 | 1,193 | 300,840 | ||||||||||||||||||||
Balances at December 31, 2015 | 21,854 | 2,629 | 263,810 | 132,747 | 396,557 | 5,897 | 426,937 | ||||||||||||||||||||
Dividends received | — | — | 109,000 | (109,000 | ) | — | — | — | |||||||||||||||||||
Dividends paid | — | — | (323,350 | ) | — | (323,350 | ) | — | (323,350 | ) | |||||||||||||||||
Dividends paid to non-controlling interest | — | — | — | — | — | (1,651 | ) | (1,651 | ) | ||||||||||||||||||
Comprehensive income for the year (Note 3n.) | — | — | 219,234 | 110,870 | 330,104 | (504 | ) | 329,600 | |||||||||||||||||||
Balances at December 31, 2016 | Ps | 21,854 | Ps | 2,629 | Ps | 268,694 | Ps | 134,617 | Ps | 403,311 | Ps | 3,742 | Ps | 431,536 |
Year ended | |||||||
December 31, | |||||||
Operating activities | 2016 | 2015 | |||||
Profit before income taxes | Ps | 470,766 | Ps | 433,534 | |||
Items related to investing activities: | |||||||
Depreciation and amortization | 21,123 | 39,015 | |||||
Interests receivable | (31,366 | ) | (28,433 | ) | |||
Subtotal of investing activities related items | 460,523 | 444,116 | |||||
(Increase) decrease in accounts receivable | (56,193 | ) | 16,259 | ||||
(Increase) decrease in related parties - Net | (2,752 | ) | 163,190 | ||||
(Increase) decrease in deferred costs and advance payments | (962 | ) | 6,770 | ||||
(Decrease) Increase in suppliers and other accounts payable | (11,056 | ) | 326,770 | ||||
Decrease in deferred revenues | — | (4,654 | ) | ||||
Income taxes paid | (168,879 | ) | (139,511 | ) | |||
Net cash flows from operating activities | 220,681 | 812,940 | |||||
Investing activities | |||||||
Investment in furniture and equipment | (25,770 | ) | (4,512 | ) | |||
Interests collected | 31,366 | 28,433 | |||||
Investment in other assets | — | (3,867 | ) | ||||
Net cash flows from investing activities | 5,596 | 20,054 | |||||
Financing activities | |||||||
Dividends paid to non-controlling interest | (1,651 | ) | (1,045 | ) | |||
Dividends paid | (323,350 | ) | (197,500 | ) | |||
Net cash flows from financing activities | (325,001 | ) | (198,545 | ) | |||
Net (decrease) increase in cash and cash equivalents | (98,724 | ) | 634,449 | ||||
Cash and cash equivalents at beginning of year | 914,421 | 279,972 | |||||
Cash and cash equivalents at end of year | Ps | 815,697 | Ps | 914,421 | |||
a. | Marketing of tickets through automated sales systems for any type of events (including but not limited to shows related to sport, musical, cultural, theater, and massive entertainment), mainly through the electronic system called “Ticketmaster”. |
b. | Using, transmission, marketing or control of goods, services and databases related to the activities above mentioned, and rendering of related services. |
a. | Consolidation |
Parent percentage share | ||
Company | 2016 and 2015 | Main activity |
Servicios Especializados para la Venta Automatizada de Boletos, S. A. de C. V. | 100 | Rendering of administrative, technical, technological and marketing services. |
ETK Boletos, S. A. de C. V. (ETK) | 72.5 | Automated sales of tickets. |
b. | Recording, functional and presentation currency |
c. | Effects of inflation on the financial information |
December 31, | ||||
2016 | 2015 | |||
Annual inflation rate | 3.36 | 2.13 | ||
Cumulative inflation in the last three years | 10.52 | 12.08 |
d. | Cash and cash equivalents |
e. | Accounts receivable |
f. | Advance payments |
g. | Furniture and equipment |
h. | Intangible assets and other assets |
• | Finite useful life: are those whose expected future economic benefits are limited by any legal or economic condition and are amortized in straight line in accordance to term of the contract and are subject to annual impairment testing when impairment indicators are identified. |
• | Indefinite useful life, which are not amortized and subject to annual impairment assessment. |
i. | Suppliers and accounts payable |
j. | Current and deferred income tax |
k. | Stockholders’ equity |
l. | Share premium |
m. | Other comprehensive income |
n. | Comprehensive income |
o. | Costs, expenses and additional line items presentation in the statement of income |
p. | Revenue recognition |
q. | Other income allowances |
r. | Exchange loss (gain) |
s. | Reclassifications in the financial statements |
a. | As of December 31, 2016 and 2015, the Company had the following monetary assets and liabilities in dollars as shown as follows: |
December 31, | |||||||
2016 | 2015 Unaudited | ||||||
Assets | Dls. | 5,457 | Dls. | 638 | |||
Liabilities | (28 | ) | (30 | ) | |||
Net long position | Dls. | 5,429 | Dls. | 608 |
b. | The most significant foreign currency transactions carried out by the Company are summarized below: |
Year ended | |||||||
December 31, | |||||||
2016 | 2015 | ||||||
Sales | Dls. | 584 | Dls. | 1,381 | |||
Costs and operating expenses | (2,154 | ) | (2,632 | ) | |||
Royalty costs | (250 | ) | (250 | ) |
December 31, | |||||||
2016 | 2015 | ||||||
Cash | Ps | 233 | Ps | 99 | |||
Bank deposits | 13,100 | 11,136 | |||||
Demand investments | 802,364 | 903,186 | |||||
Total cash and cash equivalents | Ps | 815,697 | Ps | 914,421 |
December 31, | |||||||
2016 | 2015 | ||||||
Recoverable income tax | Ps | 86,764 | Ps | 20,036 | |||
Accounts receivable from sale of tickets | 29,427 | 25,082 | |||||
Customers | 9,377 | 1,556 | |||||
Recoverable value added tax | 8,942 | — | |||||
Other accounts receivable | 891 | 5,170 | |||||
135,401 | 51,844 | ||||||
Allowance for doubtful accounts | (3,486 | ) | (123 | ) | |||
Ps | 131,915 | Ps | 51,721 |
a. | The balances with related parties at December 31, 2016 and 2015 are shown as follows: |
December 31, | |||||||
Accounts receivable: | 2016 | 2015 | |||||
Affiliates | |||||||
Ocesa Promotora, S. A. de C. V. | Ps | 80,710 | Ps | 213 | |||
Servicios Compartidos de Alta Dirección, S. A. de C. V. | 806 | 309 | |||||
Operadora de Centros de Espectáculos, S. A. de C. V. (OCESA) 1 | 720 | 73,147 | |||||
Cie Internacional, S. A. de C. V. | 186 | 119 | |||||
Make Pro, S. A. de C. V. | 38 | 2,209 | |||||
Serinem México, S. A. de C. V. | 18 | 388 | |||||
Servicios Corporativos CIE, S. A. de C. V. | 5 | 500 | |||||
Fútbol del Distrito Federal, S. A. de C. V. | — | 420 | |||||
Televisa, S. A. de C. V. | — | 251 | |||||
Creatividad y Espectáculos, S. A. de C. V. | — | 80 | |||||
Car Sport Racing, S. A. de C. V. | — | 2 | |||||
Ps | 82,483 | Ps | 77,638 |
December 31, | |||||||
Accounts payable: | 2016 | 2015 | |||||
Affiliates | |||||||
Servicios Administrativos del Entretenimiento, S. A. de C. V. | Ps | 2,482 | Ps | 315 | |||
Creatividad y Espectáculos, S. A. de C. V. | 126 | — | |||||
Logística Organizacional para la Integración de Eventos, S. A. de C. V. | 31 | — | |||||
Ocesa Presenta, S. A. de C. V. | 9 | — | |||||
Administradora Mexicana de Hipódromo, S. A. de C. V. | — | 240 | |||||
Ps | 2,648 | Ps | 555 |
1 | Accounts receivable with OCESA have no expiration term, without guarantee, and they accrued monthly interests to the TIIE plus two points. |
b. | During the years ended on December 31, 2016 and 2015, the Company carried out the following operations with related parties: |
Year ended December 31, | |||||||
Income from: | 2016 | 2015 | |||||
Affiliates | |||||||
Commissions and charges from ticket sales | Ps | 62,120 | Ps | 45,962 | |||
Sponsorship income | 18,700 | 18,962 | |||||
Interest earned | 598 | 15,333 | |||||
Equipment leasing | — | 291 | |||||
Other income | — | 30 | |||||
Costs and expenses | |||||||
Affiliates | |||||||
Personnel and administrative services | Ps | 106,965 | Ps | 93,914 | |||
Lease of properties | 10,412 | 10,194 | |||||
Corporate fees | 10,099 | 7,995 | |||||
Sponsorship commissions | 1,976 | 1,643 | |||||
Other expenses | 9,999 | 2,940 | |||||
Stockholders | |||||||
Communication services | 6,664 | 7,087 | |||||
Royalties | 4,025 | 4,007 |
December 31, | Annual depreciation or amortization rate (%) | |||||||
2016 | 2015 | |||||||
Computer and peripheral equipment | Ps | 192,797 | Ps | 171,223 | 30 | |||
Furniture and office equipment | 8,734 | 8,503 | 10 | |||||
Leasehold improvements | 8,115 | 6,682 | 5 | |||||
Transportation equipment | 4,776 | 4,328 | 25 | |||||
214,422 | 190,736 | |||||||
Accumulated depreciation | (174,169 | ) | (162,718 | ) | ||||
Ps | 40,253 | Ps | 28,018 |
December 31, | |||||||
2016 | 2015 | ||||||
Access rights and ease to properties - Net | Ps | 26,918 | Ps | 26,918 | |||
EDB-Ticket Software | 6,716 | 6,716 | |||||
Non-compete agreement - ETK | 5,600 | 5,600 | |||||
E- Ticket Brand | 1,900 | 1,900 | |||||
41,134 | 41,134 | ||||||
Accumulated amortization | (23,851 | ) | (16,297 | ) | |||
17,283 | 24,837 | ||||||
Other assets | 69 | 103 | |||||
Ps | 17,352 | Ps | 24,940 |
a. | Capital stock |
Number of shares | Description | Amount | |||||
17,975 | Series “A” shares, comprising the minimum fixed capital stock without withdrawal rights | Ps | 18 | ||||
32,025 | Series “B” shares, comprising the minimum fixed capital stock, without withdrawal rights | 32 | |||||
50,000 | Subtotal of capital stock without withdrawal rights | 50 | |||||
10,529,241 | Series “A” shares, comprising the variable portion of capital stock, with an unlimited maximum | 10,529 | |||||
4,095,148 | Series “A-1” shares, comprising the variable portion of capital stock, with an unlimited maximum | 4,095 | |||||
7,179,886 | Series “B” shares, comprising the variable portion of capital stock, with an unlimited maximum | 7,180 | |||||
21,804,275 | Subtotal variable capital stock | 21,804 | |||||
21,854,275 | Capital stock | Ps | 21,854 |
b. | Retained earnings |
Year ended December 31, | |||||||
Revenue: | 2016 | 2015 | |||||
Service charges | Ps | 713,170 | Ps | 667,534 | |||
Credit card recovery | 109,377 | 92,096 | |||||
Advertising | 18,700 | 21,132 | |||||
Entertainment guide | 17,175 | 19,754 | |||||
Implementation of services | 927 | 3,867 | |||||
Others | 46,554 | 38,698 | |||||
Total revenue | Ps | 905,903 | Ps | 843,081 |
Year ended December 31, | |||||||
Costs: | 2016 | 2015 | |||||
Commissions | Ps | 142,557 | Ps | 144,403 | |||
Professional services | 46,834 | 14,221 | |||||
Administrative services | 31,058 | 6,498 | |||||
Advertising | 10,550 | 2,844 | |||||
Entertainment guide | 10,524 | 15,115 | |||||
Tickets | 10,145 | 12,373 | |||||
Computing services | 7,875 | 5,946 | |||||
Royalties | 5,009 | 4,008 | |||||
Non-capitalizable assets | 4,118 | 5,062 | |||||
Lease | 1,999 | 15,224 | |||||
Maintenance | 1,488 | 18,251 | |||||
Production | — | 110 | |||||
Others | 27,745 | 32,396 | |||||
299,902 | 276,451 | ||||||
Depreciation and amortization | 19,895 | 24,560 | |||||
Total costs | Ps | 319,797 | Ps | 301,011 |
Year ended December 31, | |||||||
Expenses: | 2016 | 2015 | |||||
Administrative services | Ps | 100,885 | Ps | 69,799 | |||
Lease | 12,679 | 11,114 | |||||
Corporate fees | 9,412 | 7,997 | |||||
Computing services | 73 | 1,088 | |||||
Others | 21,690 | 34,062 | |||||
144,739 | 124,060 | ||||||
Depreciation and amortization | 1,228 | 14,455 | |||||
Total expenses | Ps | 145,967 | Ps | 138,515 |
i. | In 2016 and 2015, the Company determined a tax profit of Ps442,103 and Ps469,453, respectively. The tax income differs from the accounting income, mainly in such items cumulative by the time and deducted differently for accounting and tax purposes, by the recognition of the inflation effects for tax purposes, as well as such items only affecting either the accounting or tax income. |
ii. | Beginning 2014, the Income Tax Law establishes that the income tax rate applicable for 2014 and subsequent years is 30% on the taxable profit. |
iii. | The reconciliation between the statutory and the effective income tax rates is shown below: |
Year ended December 31, | ||||||||
2016 | 2015 | |||||||
Profit before income taxes | Ps | 470,766 | Ps | 433,534 | ||||
Income tax statutory rate | 30 | % | 30 | % | ||||
Income tax at statutory rate | 141,230 | 130,060 | ||||||
Plus (less) effect of the following permanent items on the income tax: | ||||||||
Effects of inflation | (2,728 | ) | (1,663 | ) | ||||
Non-deductible expenses | 2,566 | 838 | ||||||
Other items | 98 | 3,459 | ||||||
Income tax at current rate | Ps | 141,166 | Ps | 132,694 | ||||
Effective income tax rate | 30 | % | 31 | % |
iv. | At December 31, 2016 and 2015 the main temporary differences on which deferred income tax was recognized are analyzed as follows: |
December 31, | |||||||
2016 | 2015 | ||||||
Furniture and equipment | Ps | 8,291 | Ps | 9,047 | |||
Intangible assets and other assets | 8,604 | (10,495 | ) | ||||
Provisions and estimations | 11,454 | 18,774 | |||||
Advance payments | — | (1,350 | ) | ||||
28,349 | 15,976 | ||||||
Applicable income tax rate | 30 | % | 30 | % | |||
Deferred income tax asset | Ps | 8,505 | Ps | 4,793 |
a. | VBC offices. VBC has entered into an agreement with Operadora de Centros de Espectáculos, S. A. de C. V. (OCESA), an affiliated company, for the use of office spaces and for certain cleaning and security services in these places located inside the facilities of “Palacio de los Deportes” in Mexico City. This agreement grants VBC to use the facilities as its offices and call center in this City. VBC pays to OCESA a monthly fixed fee. In addition, VBC has signed a lease agreement with an individual involving a property located in Guadalajara, Jalisco, used as its offices and call center in this City, where VBC pays a monthly fixed fee that increases annually based on the NCPI. |
b. | As part of its business activities, VBC and ETK are engaged in the distribution and sale of tickets to certain artistic events to be conducted in the immediately following year, in exchange for which they receive amounts from third parties for the purchase of tickets to said events. The companies hold those amounts in cash, so that if the events in question are not held, the amounts are returned in accordance with the applicable legal provisions. At December 31, 2016 and 2015, cash and cash equivalents included deposits received from third parties for the eventual acquisition of tickets totaling Ps549,289 and Ps644,841 respectively. |
c. | Ticketmaster Brand Name and System. VBC has entered into a license agreements with Ticketmaster Corporation for use of the TicketMaster brand and system, expiring on March 31, 2015, and for which it pays an annual royalty fixed fee expressed in dollars, this agreement was renewed for a period of three years, ending on March 31, 2018. |
a. | Under the provisions of the Income Tax Law, parties carrying out operations with related parties, either resident in Mexico or abroad, are subject to tax limitations and obligations related to the determination of transfer pricing, which must be similar to those agreed with unrelated parties in comparable transactions. |
b. | The Company regularly contract the services of specialists in areas such as security, cleaning, access control, production, assembling and other similar services required to conduct its business activities, and it perform multiple agreements with third parties who agreeing to develop activities to the Company. Under the provisions of the labor legislation and recent amendments thereto on the subject of social security, some of the subcontractors or workers of these service providers may take steps in order for the Company to be considered the beneficiary of those services or liable for possible related contingencies. |
c. | The Company is regularly called by the Federal Attorney's Office of Consumer (PROFECO) when consumers of their services do not consider that the conditions offered are met and complain into this office. Sometimes the PROFECO has imposed fines for alleged violations of administrative procedures or to the related law. At the date of issuance of the financial statements, there are conciliatory proceedings into the PROFECO. To date, the Company has not suffered any damages from those complaints and in litigation of those complaints, the resolutions imposed have been settled, therefore, in the opinion of the Company advisors, these matters do not represent a material contingency, and it is very unlikely that any of those amounts will be payable, or where appropriate, that the above criteria under which the Company was never condemned to these causes could be opposite. |
d. | On July 24, 2012, the Procedures General Department of PROFECO issued a sanction to VBC for an alleged violation of article 10 of the Consumer Protection Law, as it considers that marketing and sale of the service denominated “La Guía” is an unfair practice for consumers, and therefore imposed a Ps1,690 fine and instructed the Company to stop marketing “La Guía” as it has so far. A motion for review was filed against said resolution, and on October 25, 2012, the Procedures General Department declared the company's grievances unfounded. |
a. | VBC filed a request for an administrative declaration of the violations on trade matter committed by Wal-Mart de México, S. A. B. de C. V. (Wal-Mart) related to improper use of “La Guía del Entretenimiento” copyrights, into the newspaper publications and guide section, where its counterclaim Wal-Mart requested that VBC’s copyrights be declared invalid. |
b. | On April 14, 2015 VBC delivered to PROFECO the complaint made by Candy Ivette Santa Rita Luna for the fraudulent sale of five tickets made by Luis Fernando Gonzalez Paredes, who figured as Ticketmaster employee, for the musical show called “La Gira del Adiós” of Vicente Fernández on December 28, 2014 at the Convention Center and Charrería Palenque Texcoco. In order to clarify the responsibility of the company and to provide defense evidence against PROFECO, the facts were reported to the authority in Iztacalco, Mexico City. |
c. | The Central Prosecutor for Financial Crimes, requested information to VBC, regarding tickets sale for several events promoted by Promoshow Peninsular, S. A. de C. V. in connection with the complaint presented by the fraud offense against this company. At the date of the financial statements, information has been provided to the Public Prosecutor’s Office to protect VBC from intervention or responsibility for the reported events. |
d. | On September 27, 2016 VBC filed a facts complaint before the Iztacalco District authority in order to retreat VBC of any liability derived from the tickets sold on the Facebook page "TopLive" for some events promoted by VBC and some of them sponsored by related parties, which were carried out in October and November 2016. |
* | Early application of these MFRS is allowed provided they are jointly applied. |
I. | Differences in measurement methods |
a. | The figures of non-monetary line items at December 31, 2016 and 2015 are stated in historical Mexican pesos modified by the inflation effects up to December 31, 2007. Starting January 1, 2008, according to the provisions of MFRS B-10 “Inflation Effects”, the Company discontinued the recognition of inflation accounting as the Mexican economy is not an inflationary environment, since cumulative inflation has been below 26% (limit to define an economy as inflationary under MFRS). Under U.S. GAAP effects of inflation recognized under MFRS up to 2007 might not be recognized. The reconciliation does not include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the SEC, it represents a comprehensive measure of the effects of price-level changes in the Mexican economy, and as such, is considered a more meaningful presentation than historical cost-based financial reporting for U.S. GAAP. |
b. | The Company provides financing to related parties, for which interest is determined by using the nominal interest rate. In accordance with ASC 470 “Debt” the borrower’s periodic interest cost shall be determined by using the effective interest method considering in the determination of interest, the debt issuance costs, discounts and premium throughout the outstanding term of the loan using a constant interest rate. |
II. | Additional accounting policies under U.S. GAAP and reclassifications |
a. | Consolidation |
b. | Impairment of accounts receivables for ticket sales |
c. | Furniture and equipment - Impairment |
d. | Intangibles |
e. | Ticketing contract advances |
f. | Revenue |
a. | Revenue from commissions on ticket sales |
b. | Revenue recognition for services |
a. | Fair value measurements disclosures |
b. | Related-party transactions |
c. | Intangible and other assets: |
December 31, | |||||||
2016 | 2015 | ||||||
Definite-lived Intangible assets | |||||||
Ticketing contracts - Gross | Ps | 26,918 | Ps | 26,918 | |||
Non-compete agreement - ETK (a) | 5,600 | — | |||||
Accumulated amortization (b) | (20,438 | ) | (13,737 | ) | |||
Software EDB-Ticket - Gross | 6,716 | 6,716 | |||||
E-Ticket Brand (c) | 1,900 | — | |||||
Accumulated amortization (d) | (3,413 | ) | (2,560 | ) | |||
Subtotal | 17,283 | 17,337 | |||||
Indefinite-lived Intangible assets | |||||||
E-Ticket Brand (c) | — | 1,900 | |||||
Non-compete agreement - ETK (a) | — | 5,600 | |||||
Total Intangible assets | 17,283 | 24,837 | |||||
Lease hold improvements - Gross | — | — | |||||
Accumulated amortization | — | — | |||||
Other | 69 | 103 | |||||
Total | Ps | 17,352 | Ps | 24,940 |
(a) | It is amortized since 2016 for 5 years with an amortization rate of 20% per year. |
(b) | Includes ticketing contracts and non-compete agreement amortization in 2016. |
(c) | It is amortized since 2016 for 10 years with an amortization rate of 10% per year. |
(d) | Includes software EDB-Ticket and E-Ticket brand amortization in 2016 |
Amortization | ||||||
2017 | Ps | 3,720 | ||||
2018 | 3,220 | |||||
2019 | 2,520 | |||||
2020 | 2,187 | |||||
2021 | 400 |
d. | Revenue analysis |
Year ended | |||||||
December 31, | |||||||
2016 | 2015 | ||||||
Revenue as reported under MFRS | Ps | 905,903 | Ps | 843,081 | |||
Reclassification from Cost of Services (1) | (110,615 | ) | (113,301 | ) | |||
Revenue under US GAAP | Ps | 795,288 | Ps | 729,780 |
(1) | Bank commissions paid for the sale of tickets with credit cards are recovered as part of the price of the services. Amounts paid are recognized within the Cost of Services and amounts charged to clients for this concept are recognized as revenue on a gross basis. The reclassification is to present the amount paid for bank commissions net of the amounts recognized for credit card recovery. |
December 31, | |||||||
Deferred taxes included within: | 2016 | 2015 | |||||
Assets: | |||||||
Furniture and equipment | Ps | 2,488 | Ps | 2,714 | |||
Accruals | 3,436 | 5,595 | |||||
Allowance for doubtful accounts | 1,046 | 37 | |||||
Total deferred tax assets | 6,970 | 8,346 | |||||
Liabilities: | |||||||
Cost of future events | 4,381 | (405 | ) | ||||
Intangible and other assets | (2,846 | ) | (3,148 | ) | |||
Total deferred liabilities | 1,535 | (3,553 | ) | ||||
Net deferred income taxes | Ps | 8,505 | Ps | 4,793 |
e. | Commitments and contingent liabilities |
Non-cancelable | |||
Operating Leases | |||
2017 | Ps | 12,704 | |
2018 | 13,279 | ||
2019 | 13,849 | ||
2020 | 14,417 | ||
2021 | 14,951 | ||
Total | Ps | 69,200 |
Contents | Page |
Report of Independent Auditors | 1 |
Consolidated financial statements: | |
Statements of financial position | 2 |
Statements of comprehensive income | 3 |
Statements of changes in stockholders' equity | 4 |
Statements of cash flows | 5 |
Notes to the financial statements | 6 to 31 |
December 31, | |||||||
Assets | 2015 | 2014 | |||||
Unaudited | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents (Note 6) | Ps | 914,420,510 | Ps | 279,971,575 | |||
Accounts receivable (Note 7) | 51,721,678 | 67,980,595 | |||||
Related parties (Note 8) | 77,657,777 | 241,905,187 | |||||
Deferred costs and advance payments | 1,350,093 | 8,119,730 | |||||
Total current assets | 1,045,150,058 | 597,977,087 | |||||
FURNITURE AND EQUIPMENT - Net (Note 9) | 28,017,535 | 39,677,188 | |||||
INTANGIBLE ASSETS AND OTHER ASSETS (Note 10) | 24,940,381 | 43,750,692 | |||||
DEFERRED INCOME TAX (Note 15) | 4,792,789 | — | |||||
Total assets | Ps | 1,102,900,763 | Ps | 681,404,967 | |||
Liabilities and Stockholders' Equity | |||||||
CURRENT LIABILITIES: | |||||||
Suppliers | Ps | 77,747 | Ps | 5,783,468 | |||
Accounts payable | 651,504,500 | 324,168,236 | |||||
Related parties (Note 8) | 574,959 | 1,632,643 | |||||
Accrued liabilities (Note 11) | 18,651,128 | 9,515,734 | |||||
Value added tax payable | 5,155,959 | 7,660,274 | |||||
Deferred revenues | — | 4,653,716 | |||||
Total current liabilities | 675,964,293 | 353,414,071 | |||||
DEFERRED INCOME TAX (Note 15) | — | 3,349,113 | |||||
Total liabilities | 675,964,293 | 356,763,184 | |||||
STOCKHOLDERS' EQUITY (Note 12): | |||||||
Capital stock | 21,854,275 | 21,854,275 | |||||
Share premium | 2,628,300 | 2,628,300 | |||||
Retained earnings | 396,557,426 | 294,410,774 | |||||
Controlling shareholders' investment in controlling interest | 421,040,001 | 318,893,349 | |||||
Non-controlling interest | 5,896,469 | 5,748,434 | |||||
Total stockholders' equity | 426,936,470 | 324,641,783 | |||||
COMMITMENTS AND CONTINGENCIES (Notes 16 and 17) | — | — | |||||
Total liabilities and stockholders' equity | Ps | 1,102,900,763 | Ps | 681,404,967 | |||
Year ended | |||||||
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Revenue for services (Note 13) | Ps | 843,080,800 | Ps | 592,427,661 | |||
Cost of services (Note 14) | (301,010,948 | ) | (183,286,331 | ) | |||
Gross profit | 542,069,852 | 409,141,330 | |||||
Operating expenses (Note 14) | (138,514,930 | ) | (147,040,661 | ) | |||
Operating income | 403,554,922 | 262,100,669 | |||||
Comprehensive financing results: | |||||||
Interest income - Net | 28,432,999 | 16,921,633 | |||||
Exchange gain - Net | 1,545,673 | 17,692 | |||||
Comprehensive financing income - Net | 29,978,672 | 16,939,325 | |||||
Profit before income taxes | 433,533,594 | 279,039,994 | |||||
Provision for income taxes (Note 15): | |||||||
Current income tax | (140,835,809 | ) | (78,248,691 | ) | |||
Deferred income tax | 8,141,902 | (3,366,359 | ) | ||||
(132,693,907 | ) | (81,615,050 | ) | ||||
Net consolidated profit for the year | 300,839,687 | 197,424,944 | |||||
Other comprehensive income | — | — | |||||
Consolidated comprehensive income for the year | Ps | 300,839,687 | Ps | 197,424,944 | |||
Distribution of consolidated comprehensive net income for the year: | |||||||
Controlling interest | Ps | 299,646,652 | Ps | 195,547,027 | |||
Non-controlling interest | 1,193,035 | 1,877,917 | |||||
Ps | 300,839,687 | Ps | 197,424,944 | ||||
Retained earnings | |||||||||||||||||||||||||||
Capital stock | Share premium | Holding | Subsidiaries | Total | Non-controlling interest | Total | |||||||||||||||||||||
Balances at January 1, 2014 (Unaudited) | Ps | 21,854,275 | Ps | 2,628,300 | Ps | 165,078,673 | Ps | 118,862,151 | Ps | 283,940,824 | Ps | 3,870,517 | Ps | 312,293,916 | |||||||||||||
Dividends received | — | — | 63,061,895 | (63,061,895 | ) | — | — | — | |||||||||||||||||||
Dividends paid | — | — | (185,077,077 | ) | — | (185,077,077 | ) | — | (185,077,077 | ) | |||||||||||||||||
Comprehensive income for the year (Note 3q.) | — | — | 144,983,500 | 50,563,527 | 195,547,027 | 1,877,917 | 197,424,944 | ||||||||||||||||||||
Balances at December 31, 2014 (Unaudited) | 21,854,275 | 2,628,300 | 188,046,991 | 106,363,783 | 294,410,774 | 5,748,434 | 324,641,783 | ||||||||||||||||||||
Dividends received | — | — | 80,999,994 | (80,999,994 | ) | — | — | — | |||||||||||||||||||
Dividends paid | — | — | (197,500,000 | ) | — | (197,500,000 | ) | — | (197,500,000 | ) | |||||||||||||||||
Dividends paid to non-controlling interest | — | — | — | — | — | (1,045,000 | ) | (1,045,000 | ) | ||||||||||||||||||
Comprehensive income for the year (Note 3q.) | — | — | 192,263,407 | 107,383,245 | 299,646,652 | 1,193,035 | 300,839,687 | ||||||||||||||||||||
Balances at December 31, 2015 | Ps | 21,854,275 | Ps | 2,628,300 | Ps | 263,810,392 | Ps | 132,747,034 | Ps | 396,557,426 | Ps | 5,896,469 | Ps | 426,936,470 | |||||||||||||
Year ended | |||||||
December 31, | |||||||
Operating activities | 2015 | 2014 | |||||
Unaudited | |||||||
Profit before income taxes | Ps | 433,533,594 | Ps | 279,039,994 | |||
Items related to investing activities: | |||||||
Depreciation and amortization | 39,014,618 | 25,891,930 | |||||
Interest receivable | (28,432,999 | ) | (16,921,633 | ) | |||
Subtotal of investing activities related items | 444,115,213 | 288,010,291 | |||||
Decrease (increase) in accounts receivable | 16,258,917 | (5,685,615 | ) | ||||
Decrease (increase) in related parties | 163,189,726 | (92,900,475 | ) | ||||
Decrease in deferred costs | 6,769,637 | 2,648,797 | |||||
Increase in suppliers and other accounts payable | 326,770,127 | 88,424,133 | |||||
(Decrease) increase in deferred revenues | (4,653,716 | ) | 1,653,853 | ||||
Income taxes paid | (139,510,540 | ) | (79,290,423 | ) | |||
Net cash flows from operating activities | 812,939,364 | 202,860,561 | |||||
Investing activities | |||||||
Investment in furniture and equipment | (4,511,481 | ) | (20,439,182 | ) | |||
Interest collected | 28,432,999 | 16,921,633 | |||||
Investment in other assets | (3,866,947 | ) | (3,566,478 | ) | |||
Net cash flows from investing activities | 20,054,571 | (7,084,027 | ) | ||||
Financing activities | |||||||
Dividends paid to non-controlling interest | (1,045,000 | ) | — | ||||
Dividends paid | (197,500,000 | ) | (185,077,077 | ) | |||
Net cash flows from financing activities | (198,545,000 | ) | (185,077,077 | ) | |||
Net increase in cash and cash equivalents | 634,448,935 | 10,699,457 | |||||
Cash and cash equivalents at beginning of year | 279,971,575 | 269,272,118 | |||||
Cash and cash equivalents at end of year | Ps | 914,420,510 | Ps | 279,971,575 | |||
a. | Marketing of tickets through automated sales systems for any type of events (including but not limited to shows related to sport, musical, cultural, theater, and massive entertainment), mainly through the electronic system called “Ticketmaster”. |
b. | Using, transmission, marketing or control of goods, services and databases related to the activities above mentioned, and rendering of related services. |
• | MFRS B-8 “Consolidated or combined financial statements”. Incorporates the definition and method of identifying an investment entity. It also establishes the need of performing an analysis to conclude if such entities control the entities in which they participate, if not, the type of investment should be identified and, for accounting recognition purposes the relevant MFRS must be applied. |
• | MFRS C-9 “Liabilities, provisions, contingent assets and liabilities and commitments”. It establishes that advance payments of foreign currency clients should be recognized and the exchange rate of the transition date; i.e., at historical exchange rate and such amount should not be modified due to subsequent exchange fluctuations. |
a. | Consolidation |
Parent percentage share | ||
Company | 2015 and 2014 | Main activity |
Servicios Especializados para la Venta Automatizada de Boletos, S. A. de C. V. | 100 | Rendering of administrative, technical, technological and marketing services. |
ETK Boletos, S. A. de C. V. (ETK) | 72.5 | Automated sales of tickets. |
b. | Recording, functional and presentation currency |
c. | Effects of inflation on the financial information |
December 31, | |||||
2015 | 2014 | ||||
Annual inflation rate | 2.13 | 4.08 | |||
Cumulative inflation in the last three years | 12.08 | 11.80 |
d. | Cash and cash equivalents |
e. | Accounts receivable |
f. | Deferred cost |
g. | Advance payments |
h. | Furniture and equipment |
i. | Intangible assets and other assets |
• | Finite useful life: are those whose expected future economic benefits are limited by any legal or economic condition and are amortized in straight line in accordance to term of the contract and are subject to annual impairment testing when impairment indicators are identified. |
• | Indefinite useful life, which are not amortized and subject to annual impairment assessment. |
j. | Suppliers and accounts payable |
k. | Provisions |
l. | Current and deferred income tax |
m. | Deferred revenue |
n. | Stockholders’ equity |
o. | Share premium |
p. | Other comprehensive income |
q. | Comprehensive income |
r. | Costs, expenses and additional line items presentation in the statement of income |
s. | Revenue recognition |
t. | Other income allowances |
u. | Exchange gain |
a. | As of December 31, 2015 and 2014, the Company had the following monetary assets and liabilities in dollars as shown as follows: |
December 31, | ||||||||
2015 | 2014 | |||||||
Unaudited | ||||||||
Assets | Dls. | 637,336 | Dls. | 252,486 | ||||
Liabilities | (29,596 | ) | (455,343 | ) | ||||
Net long (short) position | Dls. | 607,740 | Dls. | (202,857 | ) | |||
b. | The most significant foreign currency transactions carried out by the Company are summarized below: |
Year ended | |||||||
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Sales | Dls. | 1,381,059 | Dls. | 453,338 | |||
Costs and operating expenses | (2,631,808 | ) | (2,028,889 | ) | |||
Royalty costs | (250,000 | ) | (250,000 | ) |
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Cash | Ps | 99,436 | Ps | 2,590,599 | |||
Bank deposits | 11,135,634 | 18,397,976 | |||||
Demand investments | 903,185,440 | 258,983,000 | |||||
Total cash and cash equivalents | Ps | 914,420,510 | Ps | 279,971,575 |
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Customers | Ps | 1,556,012 | Ps | 3,040,924 | |||
Accounts receivable from sales of tickets | 25,081,494 | 23,019,989 | |||||
Recoverable income tax | 20,036,131 | 42,126,374 | |||||
Other accounts receivable | 5,171,333 | 410,634 | |||||
51,844,970 | 68,597,921 | ||||||
Allowance for doubtful accounts | (123,292 | ) | (617,326 | ) | |||
Ps | 51,721,678 | Ps | 67,980,595 |
a. | The balances with related parties at December 31, 2015 and 2014 are shown as follows: |
December 31, | |||||||
Accounts receivable: | 2015 | 2014 | |||||
Unaudited | |||||||
Affiliates | |||||||
Operadora de Centros de Espectáculos, S. A. de C. V. (OCESA) 1 | Ps | 73,166,660 | Ps | 196,946,742 | |||
Make Pro, S. A. de C. V. | 2,209,235 | 54,264 | |||||
Servicios Corporativos CIE, S. A. de C. V. | 500,345 | 368,251 | |||||
Fútbol del Distrito Federal, S. A. de C. V. | 419,749 | 64,332 | |||||
Serinem México, S. A. de C. V. | 388,464 | 99,698 | |||||
Servicios Compartidos de Alta Dirección, S. A. de C. V. | 308,878 | 230,352 | |||||
Televisa, S. A. de C. V. | 250,951 | 272,310 | |||||
Ocesa Promotora, S. A. de C. V. | 212,857 | 43,193,521 | |||||
Cie Internacional, S. A. de C. V. | 119,031 | 165,573 | |||||
Creatividad y Espectáculos, S. A. de C. V. | 80,081 | 75,018 | |||||
Car Sport Racing, S. A. de C. V. | 1,526 | 32,055 | |||||
Administradora Mexicana de Hipódromo, S. A. de C. V. | — | 197,417 | |||||
Ocesa Presenta, S. A. de C. V. | — | 176,568 | |||||
Inmobiliaria de Centros de Espectáculos, S. A. de C. V. | — | 15,486 | |||||
Ideas Marketing, S. A. de C. V. | — | 13,600 | |||||
Ps | 77,657,777 | Ps | 241,905,187 |
December 31, | |||||||
Accounts payable: | 2015 | 2014 | |||||
Unaudited | |||||||
Affiliates | |||||||
Servicios Administrativos del Entretenimiento, S. A. de C. V. | Ps | 314,966 | Ps | 1,145,343 | |||
Administradora Mexicana de Hipódromo, S. A. de C. V. | 240,273 | — | |||||
Operadora de Centros de Espectáculos, S. A. de C. V. | 19,720 | — | |||||
TicketMaster LLC CA | — | 3,083 | |||||
Servicios de Protección Privada Lobo, S. A. de C. V. | — | 3,689 | |||||
Needish México, S. A. de C. V. | — | 480,528 | |||||
Ps | 574,959 | Ps | 1,632,643 |
b. | During the years ended on December 31, 2015 and 2014, the Company carried out the following operations with related parties: |
Year ended | |||||||
December 31, | |||||||
Income from: | 2015 | 2014 | |||||
Unaudited | |||||||
Affiliates | |||||||
Commissions and charges from ticket sales | Ps | 45,962,507 | Ps | 30,081,063 | |||
Sponsorship income | 18,962,000 | 19,571,780 | |||||
Interest earned | 15,333,196 | 12,684,886 | |||||
Equipment leasing | 291,487 | 1,190,523 | |||||
Other income | 30,680 | 957,880 | |||||
Costs and expenses: | |||||||
Affiliates | |||||||
Personnel, administrative and security services | Ps | (93,914,664 | ) | Ps | (91,587,884 | ) | |
Lease of properties | (10,194,494 | ) | (9,794,815 | ) | |||
Corporate fees | (7,995,022 | ) | (7,289,376 | ) | |||
Sponsorship commissions | (1,643,333 | ) | (2,052,460 | ) | |||
Other expenses | (2,940,394 | ) | (4,223,640 | ) | |||
Stockholders: | |||||||
Communication services | (7,087,344 | ) | (4,118,653 | ) | |||
Royalties | (4,007,931 | ) | (3,300,256 | ) |
Annual | |||||||||
depreciation | |||||||||
December 31, | or amortization | ||||||||
2015 | 2014 | rate (%) | |||||||
Unaudited | |||||||||
Computer and peripheral equipment | Ps | 171,223,497 | Ps | 171,852,958 | 30 | ||||
Furniture and equipment | 8,503,286 | 8,502,043 | 10 | ||||||
Leasehold improvements | 6,681,508 | 6,681,508 | 5 | ||||||
Transportation equipment | 4,327,832 | 4,101,868 | 25 | ||||||
190,736,123 | 191,138,377 | ||||||||
Accumulated depreciation | (162,718,588 | ) | (151,461,189 | ) | |||||
Ps | 28,017,535 | Ps | 39,677,188 |
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Access rights and ease to properties - Net | Ps | 26,918,476 | Ps | 42,212,904 | |||
EDB-Ticket Software | 6,715,900 | 6,715,900 | |||||
Non-compete agreement - ETK | 5,600,000 | 5,600,000 | |||||
E- Ticket Brand | 1,900,100 | 1,900,100 | |||||
41,134,476 | 56,428,904 | ||||||
Accumulated amortization | (16,296,869 | ) | (25,861,534 | ) | |||
24,837,607 | 30,567,370 | ||||||
Other assets | 102,774 | 13,183,322 | |||||
Ps | 24,940,381 | Ps | 43,750,692 |
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Beginning balance | Ps | 9,515,734 | Ps | 23,178,580 | |||
Increases | 18,651,088 | 9,515,734 | |||||
Applications | (8,677,927 | ) | (23,178,580 | ) | |||
Cancellations | (837,767 | ) | — | ||||
Ending balance | Ps | 18,651,128 | Ps | 9,515,734 |
a. | Capital stock |
Number of shares | Description | Amount | |||||
17,975 | Series "A" shares, comprising the minimum fixed capital stock without withdrawal rights | Ps | 17,975 | ||||
32,025 | Series "B" shares, comprising the minimum fixed capital stock, without withdrawal rights | 32,025 | |||||
50,000 | Subtotal of capital stock without withdrawal rights | 50,000 | |||||
10,529,241 | Series "A" shares, comprising the variable portion of capital stock, with an unlimited maximum | 10,529,241 | |||||
4,095,148 | Series "A-1" shares, comprising the variable portion of capital stock, with an unlimited maximum | 4,095,148 | |||||
7,179,886 | Series "B" shares, comprising the variable portion of capital stock, with an unlimited maximum | 7,179,886 | |||||
21,804,275 | Subtotal variable capital stock | 21,804,275 | |||||
21,854,275 | Capital stock | Ps | 21,854,275 |
b. | Retained earnings |
Year ended December 31, | |||||||
Revenue: | 2015 | 2014 | |||||
Unaudited | |||||||
Service charges | Ps | 667,534,127 | Ps | 447,412,366 | |||
Credit card recovery | 92,095,494 | 65,527,146 | |||||
Advertising | 21,132,148 | 23,226,360 | |||||
Entertainment guide | 19,754,246 | 35,576,708 | |||||
Implementation of services | 3,866,540 | 5,090,843 | |||||
Others | 38,698,245 | 15,594,238 | |||||
Total revenue | Ps | 843,080,800 | Ps | 592,427,661 |
Year ended December 31, | |||||||
Costs: | 2015 | 2014 | |||||
Unaudited | |||||||
Commissions | Ps | (144,402,798 | ) | Ps | (88,722,066 | ) | |
Maintenance | (18,252,070 | ) | (1,302,565 | ) | |||
Lease | (15,223,653 | ) | (2,679,646 | ) | |||
Entertainment guide | (15,115,102 | ) | (16,456,397 | ) | |||
Professional services | (14,220,536 | ) | (593,159 | ) | |||
Tickets | (12,372,681 | ) | (9,472,212 | ) | |||
Administrative services | (6,497,619 | ) | (12,906,687 | ) | |||
Computing services | (5,945,932 | ) | (8,419,873 | ) | |||
Non-capitalizable assets | (5,062,068 | ) | (4,853,841 | ) | |||
Royalties | (4,007,931 | ) | (3,300,256 | ) | |||
Advertising | (2,844,384 | ) | (602,938 | ) | |||
Production | (110,500 | ) | (7,335,822 | ) | |||
Others | (32,396,435 | ) | (18,439,137 | ) | |||
(276,451,709 | ) | (175,084,599 | ) | ||||
Depreciation and amortization | (24,559,239 | ) | (8,201,732 | ) | |||
Total costs | Ps | (301,010,948 | ) | Ps | (183,286,331 | ) | |
Expenses: | |||||||
Administrative services | Ps | (69,799,257 | ) | Ps | (83,332,289 | ) | |
Lease | (11,114,408 | ) | (11,488,159 | ) | |||
Corporate fees | (7,995,023 | ) | (6,641,376 | ) | |||
Computing services | (1,088,686 | ) | (150,857 | ) | |||
Others | (34,062,177 | ) | (27,737,782 | ) | |||
(124,059,551 | ) | (129,350,463 | ) | ||||
Depreciation and amortization | (14,455,379 | ) | (17,690,198 | ) | |||
Total expenses | Ps | (138,514,930 | ) | Ps | (147,040,661 | ) |
i. | In 2015 and 2014, the Company determined a tax profit of Ps469,452,697 and Ps260,828,970, respectively. The tax income differs from the accounting income, mainly in such items cumulative by the time and deducted differently for accounting and tax purposes, by the recognition of the inflation effects for tax purposes, as well as such items only affecting either the accounting or tax income. |
ii. | The Income Tax Law, which came into force on January 1, 2014 establishes that the income tax rate applicable for 2014 and subsequent years is 30% on the taxable fiscal profit. |
iii. | The reconciliation between the statutory and the effective income tax rates is shown below: |
Year ended December 31, | ||||||||
2015 | 2014 | |||||||
Unaudited | ||||||||
Profit before income taxes | Ps | 433,533,594 | Ps | 279,039,994 | ||||
Income tax statutory rate | 30 | % | 30 | % | ||||
Income tax at statutory rate | 130,060,078 | 83,711,998 | ||||||
Plus (less) effect of the following permanent items on the income tax: | ||||||||
Effects of inflation | (1,663,219 | ) | (2,823,380 | ) | ||||
Non-deductible expenses | 837,610 | 695,749 | ||||||
Other items | 3,459,438 | 30,683 | ||||||
Income tax at current rate | Ps | 132,693,907 | Ps | 81,615,050 | ||||
Effective income tax rate | 31 | % | 30 | % |
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Furniture and equipment | Ps | 9,046,903 | Ps | 2,612,299 | |||
Intangible assets and other assets | (10,495,266 | ) | (17,712,902 | ) | |||
Deferred costs | (1,350,093 | ) | (8,119,730 | ) | |||
Provisions and estimations | 18,774,420 | 10,133,060 | |||||
Deferred revenues | — | 1,923,564 | |||||
15,975,964 | (11,163,709 | ) | |||||
Applicable income tax rate | 30 | % | 30 | % | |||
Deferred income tax asset (liability) | Ps | 4,792,789 | Ps | (3,349,113 | ) |
a. | VBC offices. VBC has entered into an agreement with Operadora de Centros de Espectáculos, S. A. de C. V. (OCESA), an affiliated company, for the use of office spaces and for certain cleaning and security services in these places located inside the facilities of “Palacio de los Deportes” in Mexico City. This agreement grants VBC to use the facilities as its offices and call center in this City. VBC pays to OCESA a monthly fixed fee. In addition, VBC has signed a lease agreement with an individual involving a property located in Guadalajara, Jalisco, used as its offices and call center in this City, where VBC pays a monthly fixed fee that increases annually based on the NCPI. |
b. | As part of its business activities, VBC and ETK are engaged in the distribution and sale of tickets to certain artistic events to be conducted in the immediately following year, in exchange for which they receive amounts from third parties for the purchase of tickets to said events. The companies hold those amounts in cash, so that if the events in question are not held, the amounts are returned in accordance with the applicable legal provisions. At December 31, 2015 and 2014, cash and cash equivalents included deposits received from third parties for the eventual acquisition of tickets totaling Ps644,840,526 and Ps298,537,722, respectively. |
c. | Ticketmaster Brand Name and System. VBC has entered into a license agreements with Ticketmaster Corporation for use of the TicketMaster brand and system, expiring on March 31, 2015, and for which it pays an annual royalty fixed fee expressed in dollars, this agreement was renewed for a period of three years, ending on March 31, 2018. |
a. | Under the provisions of the Income Tax Law, parties carrying out operations with related parties, either resident in Mexico or abroad, are subject to tax limitations and obligations related to the determination of transfer pricing, which must be similar to those agreed with unrelated parties in comparable transactions. |
b. | The Company regularly contract the services of specialists in areas such as security, cleaning, access control, production, assembling and other similar services required to conduct its business activities, and it perform multiple agreements with third parties who agreeing to develop activities to the Company. Under the provisions of the labor legislation and recent amendments thereto on the subject of social security, some of the subcontractors or workers of these service providers may take steps in order for the Company to be considered the beneficiary of those services or liable for possible related contingencies. |
c. | The Company is regularly called by the Federal Attorney's Office of Consumer (PROFECO) when consumers of their services do not consider that the conditions offered are met and complain into this office. Sometimes the PROFECO has imposed fines for alleged violations of administrative procedures or to the related law. At the date of issuance of the financial statements, there are conciliatory proceedings into the PROFECO. |
d. | On July 24, 2012, the Procedures General Department of PROFECO issued a sanction to VBC for an alleged violation of article 10 of the Consumer Protection Law, as it considers that marketing and sale of the service denominated “La Guía” is an unfair practice for consumers, and therefore imposed a Ps1,690,331 fine and instructed the Company to stop marketing “La Guía” as it has so far. A motion for review was filed against said resolution, and on October 25, 2012, the Procedures General Department declared the company's grievances unfounded. |
a. | VBC filed a request for an administrative declaration of the violations on trade matter committed by Wal-Mart de México, S. A. B. de C. V. (Wal-Mart) related to improper use of “La Guía del Entretenimiento” copyrights, into the newspaper publications and guide section, where its counterclaim Wal-Mart requested that VBC’s copyrights be declared invalid. |
b. | On April 14, 2015 VBC delivered to PROFECO the complaint made by Candy Ivette Santa Rita Luna for the fraudulent sale of five tickets made by Luis Fernando Gonzalez Paredes, who figured as Ticketmaster employee, for the musical show called “La Gira del Adiós” of Vicente Fernández on December 28, 2014 at the Convention Center and Charrería Palenque Texcoco. In order to clarify the responsibility of the company and to provide defense evidence against PROFECO, the facts were reported to the authority in Iztacalco, Mexico City. |
c. | The Central Prosecutor for Financial Crimes, requested information to VBC, regarding tickets sale for several events promoted by Promoshow Peninsular, S. A. de C. V. in connection with the complaint presented by the fraud offense against this company. At the date of the financial statements, it has provided the requested information to the authority in order to clarify the responsibility of the VBC in the alleged facts. |
I. | Differences in measurement methods |
a. | The figures of non-monetary line items at December 31, 2015 and 2014 are stated in historical Mexican pesos modified by the inflation effects up to December 31, 2007. Starting January 1, 2008, according to the provisions of MFRS B-10 “Inflation Effects”, the Company discontinued the recognition of inflation accounting as the Mexican economy is not an inflationary environment, since cumulative inflation has been below 26% (limit to define an economy as inflationary under MFRS). Under U.S. GAAP effects of inflation recognized under MFRS up to 2007 might not be recognized. The reconciliation does not include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the SEC, it represents a comprehensive measure of the effects of price-level changes in the Mexican economy, and as such, is considered a more meaningful presentation than historical cost-based financial reporting for U.S. GAAP. |
b. | The Company provides financing to related parties, for which interest is determined by using the nominal interest rate. In accordance with ASC 470 “Debt” the borrower's periodic interest cost shall be determined by using the effective interest method considering in the determination of interest, the debt issuance costs, discounts and premium throughout the outstanding term of the loan using a constant interest rate. |
II. | Additional accounting policies under U.S. GAAP and reclassifications |
a. | Consolidation |
b. | Impairment of accounts receivables for ticket sales |
c. | Furniture and equipment - Impairment |
d. | Intangibles |
e. | Ticketing contract advances |
f. | Revenue |
a. | Revenue from future events |
b. | Revenue from commissions on ticket sales |
c. | Revenue recognition for services |
a. | Fair value measurements disclosures |
b. | Related-party transactions |
c. | Intangible and other assets: |
December 31, | |||||||
2015 | 2014 | ||||||
Definite-lived Intangible assets | Unaudited | ||||||
Ticketing contracts - Gross | Ps | 26,918,476 | Ps | 42,212,904 | |||
Accumulated amortization | (13,737,406 | ) | (23,967,102 | ) | |||
Software EDB-Ticket - Gross | 6,715,900 | 6,715,900 | |||||
Accumulated amortization | (2,559,463 | ) | (1,894,432 | ) | |||
Subtotal | 17,337,507 | 23,067,270 | |||||
Indefinite-lived Intangible assets | |||||||
E-Ticket Brand | 1,900,100 | 1,900,100 | |||||
Non-compete agreement - ETK | 5,600,000 | 5,600,000 | |||||
Total Intangible assets | 24,837,607 | 30,567,370 | |||||
Lease hold improvements - Gross | — | 38,093,223 | |||||
Accumulated amortization | — | (24,909,901 | ) | ||||
Other | 102,774 | — | |||||
Total | Ps | 24,940,381 | Ps | 43,750,692 |
Amortization | ||||||
2016 | Ps | 3,638,072 | ||||
2017 | 3,001,666 | |||||
2018 | 2,060,833 | |||||
2019 | 1,400,000 | |||||
2020 | 1,272,419 |
d. | Revenue analysis |
Year ended | |||||||
December 31, | |||||||
2015 | 2014 | ||||||
Unaudited | |||||||
Revenue as reported under MFRS | Ps | 843,080,800 | Ps | 592,427,661 | |||
Reclassification from Cost of Services (1) | (113,300,464 | ) | (56,784,450 | ) | |||
Revenue under US GAAP | Ps | 729,780,336 | Ps | 535,643,211 |
December 31, | |||||||
Deferred taxes included within: | 2015 | 2014 | |||||
Unaudited | |||||||
Assets: | |||||||
Furniture and equipment | Ps | 2,714,070 | Ps | 783,690 | |||
Deferred revenue | — | 577,069 | |||||
Accruals | 5,595,338 | 2,854,720 | |||||
Allowance for doubtful accounts | 36,988 | 185,198 | |||||
Total deferred tax assets | 8,346,396 | 4,400,677 | |||||
Liabilities: | |||||||
Cost of future events | (405,028 | ) | (2,435,919 | ) | |||
Intangible and other assets | (3,148,579 | ) | (5,313,871 | ) | |||
Total deferred liabilities | (3,553,607 | ) | (7,749,790 | ) | |||
Net deferred income taxes | Ps | 4,792,789 | Ps | (3,349,113 | ) |
e. | Commitments and contingent liabilities |
Non-cancelable | |||
Operating Leases | |||
2016 | Ps | 11,496,939 | |
2017 | 11,850,920 | ||
2018 | 12,219,483 | ||
2019 | 12,626,392 | ||
2020 | 13,025,386 | ||
Total | Ps | 61,219,120 |