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CONTINGENCIES AND COMMITMENTS | 12 Months Ended
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Dec. 31, 2018
CONTINGENCIES AND COMMITMENTS |
CONTINGENCIES AND COMMITMENTS | NOTE 21 -- CONTINGENCIES AND COMMITMENTS 21.1 Lawsuits and other legal actions: In the opinion of the Company’s legal counsel, the Parent Company and its subsidiaries do not face judicial or extra-judicial contingencies that might result in material or significant losses or gains, except for the following:
| 1) |  | Embotelladora del Atlántico S.A. faces labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$948,042. Management considers it unlikely that non-provisioned contingencies will affect the Company’s income and equity, based on the opinion of its legal counsel. Additionally, Embotelladora del Atlántico S.A. maintains time deposits for an amount of ThCh$656,817 to guaranty judicial liabilities
| 2) |  | Rio de Janeiro Refrescos Ltda. faces labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$55,518,871 Management considers it unlikely that non-provisioned contingencies will affect the Company’s income and equity, based on the opinion of its legal counsel. As it is customary in Brazil, Rio de Janeiro Refrescos Ltda. maintains judicial deposits and assets given in pledge to secure the compliance of certain processes, irrespective of whether these have been classified as a possible, probable or remote. The amounts deposited or pledged as legal guarantees as of December 31, 2018 and December 31, 2017, amounted to ThCh$31,143,415 and ThCh$31,953,725, respectively.
To ensure fulfillment of the obligations arising from judicial proceedings faced in Brazil, Rio de Janeiro Refrescos Ltda., has taken guarantee insurance and guarantee letters amounting to R$986,396,119 with different financial institutions and insurance companies in Brazil, through which these entities after a 0.44% annual commission, become responsible of fulfilling obligations with the Brazilian tax authorities should any trial result against Rio de Janeiro Refrescos Ltda. Additionally, if the warranty and bail letters are executed, Rio de Janeiro Refrescos Ltda. promises to reimburse to the financial institutions and Insurance Companies any amounts disbursed by them to the Brazilian government. Main contingencies faced by Rio de Janeiro Refrescos are as follows:
| a) |  | Tax contingencies resulting from credits on tax on industrialized products (IPI).
Rio de Janeiro Refrescos is a party to a series of proceedings under way, in which the Brazilian federal tax authorities demand payment of value-added tax on industrialized products (Imposto sobre Produtos Industrializados, or IPI) allegedly owed by ex-Companhia de Bebidas Ipiranga. The initial amount demanded reached R$1,330,473,161 (historical amount without adjustments), corresponding to different trials related to the same cause. In September 2014, one of these trials for R$598,745,218, was settled in favor of the Company, and additionally during 2017 several trials were settled in favor of the Company in the amount for R$135,282,155 however, there are new lawsuits arising after the purchase of ex-Companhia de Bebidas Ipiranga (October 2013) that amount to R$346,232,541. The Company rejects the position of the Brazilian tax authority in these procedures and considers that Companhia de Bebidas Ipiranga was entitled to claim IPI tax credits in connection with purchases of certain exempt raw materials from suppliers located in the Manaus free trade zone. Based on the opinion of its advisers, and judicial outcomes to date, Management estimates that these procedures do not represent probable losses and has not recorded a provision on these matters. Notwithstanding the above, the IFRS related to business combination in terms of distribution of the purchase price establish that contingencies must be measured one by one according to their probability of occurrence and discounted at fair value from the date on which it is deemed the loss can be generated. According to this criterion, from a total of identified contingencies amounting R$1,138,749,846 (including readjustments of current lawsuits), the Company recorded a provision for the beginning of business combination accounting in the amount R$203,070,206 equivalent to ThCh$36,411,450.
| b) |  | Tax contingencies on ICMS and IPI causes.
They refer mainly to tax settlements issued by advance appropriation of ICMS credits on fixed assets, payment of the replacement of ICMS tax to the operations, untimely IPI credits calculated on bonuses, among other claims. The Company does not consider that these judgments will result in significant losses, given that their loss, according to its legal counsel, is considered unlikely. However, the accounting standards of financial information related to business combination in terms of distribution of the purchase price, establish contingencies must be valued one by one according to their probability of occurrence and discounted to fair value from the date on which it is deemed that the loss can be generated. According to this criterion, an initial provision has been made in the business combination accounting for an amount of R$76,883,016 equivalent to ThCh$ 13,785,489.
| 1) |  | Embotelladora Andina S.A. and its Chilean subsidiaries face labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$5,970,453. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.
| 2) |  | Paraguay Refrescos S.A. faces tax, trade, labor and other lawsuits. Accounting provisions have been made for the contingency of any loss because of these lawsuits amounting to ThCh$15,160. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.
21.2 Direct guarantees and restricted assets: Guarantees and restricted assets are detailed as follows: Guarantees that compromise assets including in the financial statements:
|  |  |  |  |  |  |  |  |  | Balance pending payment on the closing date
|  | Provided by |  | Committed assets |  | of the financial statements
Guarantee in favor of |  | Name |  | Relationship |  | Guarantee |  | Type |  | 12.31.2018 |  | 12.31.2017
|  |  |  |  |  |  |  |  |  | ThCh$ |  | ThCh$
Industria Metalúrgica Inamar Ltda. |  | Embotelladora Andina S.A. |  | Parent Company |  | Land |  | Property, plant and equipment |  | — |  | 17,991,202
Gas Licuado Lipigas S.A. |  | Embotelladora Andina S.A. |  | Parent Company |  | Cash and cash equivalents |  | Trade and other receivables |  | 1,140 |  | 1,140
Hospital Militar |  | Servicios Multivending |  | Subsidiary |  | Cash and cash equivalents |  | Trade and other receivables |  | — |  | 4,727
Parque Arauco |  | Servicios Multivending |  | Subsidiary |  | Cash and cash equivalents |  | Trade and other receivables |  | — |  | 5,345
Aeropuerto Nuevo Pudahuel |  | Servicios Multivending |  | Subsidiary |  | Cash and cash equivalents |  | Other receivables |  | — |  | 10,129
Hospital FACH |  | Servicios Multivending |  | Subsidiary |  | Cash and cash equivalents |  | Other receivables |  | — |  | 697
Inmob. E Invers. Supetar Ltda |  | Transportes Polar S.A. |  | Subsidiary |  | Cash and cash equivalents |  | Other non-current, non-financial assets |  | 4,579 |  | 4,579
Bodegas San Francisco Ltda. |  | Transportes Polar S.A. |  | Subsidiary |  | Cash and cash equivalents |  | Other non-current, non-financial assets |  | — |  | 6,483
Maria Lobos Jamet |  | Transportes Polar S.A. |  | Subsidiary |  | Cash and cash equivalents |  | Trade and other receivables |  | 2,565 |  | 2,565
Reclamaciones Trabajadores |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 5,336,644 |  | 4,626,086
Reclamaciones Civiles Y Tributarias |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 12,597,136 |  | 13,104,186
Instituciones Gubernamentales |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Property, plant and equipment |  | Property, plant and equipment |  | 13,209,635 |  | 14,223,453
Distribuidora Baraldo S.H. |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 369 |  | 659
Acuña Gomez |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 553 |  | 989
Nicanor López |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 395 |  | 707
Labarda |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 7 |  | 12
Municipalidad Bariloche |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 21,420 |  | 38,315
Municipalidad San Antonio Oeste |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 40,682 |  | 72,768
Municipalidad Carlos Casares |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 1,645 |  | 2,943
Municipalidad Chivilcoy |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 254,430 |  | 455,104
Others |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 78 |  | 140
Granada Maximiliano |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 3,317 |  | 5,934
Cicsa |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 4,612 |  | 8,249
Locadores Varios |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 46,169 |  | 53,900
Aduana De EZEIZA |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 3,013 |  | 6,608
Municipalidad De Junin |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 1,592 |  | 5,755
Almada Jorge |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 4,949 |  | 8,853
Municipalidad De Picun Leufu |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 72 |  | 128
Migoni Marano |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 112 |  | —
Farias Matias Luis |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 309 |  | 1,226
Temas Industriales SA - Embargo General de Fondos |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 231,077 |  | —
Gomez Alejandra Raquel |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 35 |  | 62
Lopez Gustavo Gerardo C/Inti Saic Y Otros |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 226 |  | 403
Fondo Fima Ahorro Plus C |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, financial assets |  | — |  | 519
Tribunal Superior De Justicia De La Provincia De Córdoba |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current, non-financial assets |  | 290 |  | —
DBC SA C CERVECERIA ARGENTINA SA ISEMBECK |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial Deposit |  | Other non-current, non-financial assets |  | 41,465 |  | —
Marcus A.Peña |  | Paraguay Refrescos |  | Subsidiary |  | Building |  | Property, plant and equipment |  | 4,164 |  | 3,782
Mauricio J Cordero C |  | Paraguay Refrescos |  | Subsidiary |  | Building |  | Property, plant and equipment |  | 904 |  | 800
José Ruoti Maltese |  | Paraguay Refrescos |  | Subsidiary |  | Building |  | Property, plant and equipment |  | 758 |  | 715
Alejandro Galeano |  | Paraguay Refrescos |  | Subsidiary |  | Building |  | Property, plant and equipment |  | 1,251 |  | 1,107
Ana Maria Mazó |  | Paraguay Refrescos |  | Subsidiary |  | Building |  | Property, plant and equipment |  | 1,191 |  | 1,054
Total |  |  |  |  |  |  |  |  |  | 31,816,784 |  | 50,651,324
Guarantees provided without obligation of assets included in the financial statements:
|  | Provided by |  | Committed assets |  | Amounts involved
Warranty creditor |  | Name |  | Relationship |  | Guarantee |  | Type |  | 12.31.2018 |  | 12.31.2017
|  |  |  |  |  |  |  |  |  | ThCh$ |  | ThCh$
Importadora Casa y Regalos |  | Trans-Heca S.A. |  | Subsidiary |  | Guarantee insurance |  | Compliance lease contract |  | — |  | 2,050
Inmobiliaria e Inversiones Gestion Activa Ltda |  | Trans-Heca S.A. |  | Subsidiary |  | Guarantee insurance |  | Compliance lease contract |  | — |  | 4,585
Inmobiliaria Portofino |  | Red de Transportes comerciales Ltda. |  | Subsidiary |  | Guarantee insurance |  | Guarantee bond |  | — |  | 900
Teléfonica Chile S.A. |  | Red de Transportes comerciales Ltda. |  | Subsidiary |  | Guarantee insurance |  | Guarantee bond |  | — |  | 1,000
Inmobiliaria San Martin Logista S.A |  | Red de Transportes comerciales Ltda. |  | Subsidiary |  | Guarantee insurance |  | Guarantee bond |  | — |  | 3,461
Employee procedures |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guarantee insurance |  | Judicial action |  | 2,601,353 |  | 1,496,862
Administrative procedures |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guarantee insurance |  | Judicial action |  | 8,233,853 |  | 7,185,511
Gobierno Federal |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guarantee insurance |  | Judicial action |  | 116,192,877 |  | 91,903,312
Gobierno Estadual |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guarantee insurance |  | Judicial action |  | 43,015,207 |  | 20,527,817
HSBC |  | Sorocaba Refrescos S.A. |  | Associate |  | Loan |  | co-signers |  | 3,586,095 |  | 3,716,747
Otros |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guarantee insurance |  | Judicial action |  | 3,236,092 |  | 2,449,103
Aduana de Ezeiza |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Bond insurance |  | Faithful fulfillment of contract |  | 699,502 |  | 63,777
Aduana de Ezeiza |  | Andina Empaques S.A. |  | Subsidiary |  | Bond insurance |  | Faithful fulfillment of contract |  | 182,459 |  | 347,990

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