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LITIGATION AND CONTINGENCIES | 12 Months Ended
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Dec. 31, 2019
LITIGATION AND CONTINGENCIES |
LITIGATION AND CONTINGENCIES | 23 – LITIGATION AND CONTINGENCIES 23.1 Lawsuits and other legal actions: In the opinion of the Company’s legal counsel, the Parent Company and its subsidiaries do not face legal or extrajudicial 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$ 942,173. 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$ 457,576 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$ 66,070,162. 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 Deposit in courts 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, 2019 and 2018, amounted to ThCh$ 32,166,823 and ThCh$ 31,143,415, respectively.
Part of the assets held under warranty by Rio de Janeiro Refrescos Ltda. as of December 31, 2014, are in the process of being released and others have already been released in exchange for guarantee insurance and bond letters for BRL 1,152,911,259, with different Financial Institutions and Insurance Companies in Brazil, these entities receive an annual commission fee of 0.59%.and 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 BRL 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 BRL 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 BRL 135,282,155 however, there are new lawsuits arising after the purchase of ex-Companhia de Bebidas Ipiranga (October 2013) that amount to BRL 375,286,356. The Company does not share 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 legal 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 BRL 694,085,017 (including readjustments of current lawsuits), the Company recorded a provision for the beginning of business combination accounting in the amount BRL 213,122,274 equivalent to ThCh$ 39,608,019.
| 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. Based on this criterion, a starting provision has been made in the accounting of the business combination for BRL 77,587,076 equivalent to ThCh$ 14,412,520.
| 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$ 2,065,496. 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$ 3,488. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.
23.2 Direct guarantees and restricted assets: Guarantees and restricted assets are detailed as follows: Guarantees that commit assets included in the financial statements:
|  |  |  |  |  | Committed assets |  | Accounting value
Guaranty creditor |  | Debtor name |  | Relationship |  | Guaranty |  | Type |  | 12-31-2019 |  | 12-31-2018
|  |  |  |  |  |  |  |  |  | ThCh$ |  | ThCh$
Gas Licuado Lipigas S.A. |  | Embotelladora Andina S.A. |  | Parent company |  | Cash |  | Trade debtors and other accounts receivable |  | — |  | 1,140
Transportes San Martin |  | Embotelladora Andina S.A. |  | Parent company |  | Cash |  | Trade debtors and other accounts receivable |  | 2,805 |  | —
Cooperativa Agrícola Pisquera Elqui Limitada |  | Embotelladora Andina S.A. |  | Parent company |  | Cash |  | Other non-current financial assets |  | 1,216,865 |  | —
Inmob. e invers. supetar Ltda. |  | Transportes Polar |  | Subsidiary |  | Cash |  | Other non-current non-financial assets |  | 4,579 |  | 4,579
Maria Lobos Jamet |  | Transportes Polar |  | Subsidiary |  | Cash |  | Other non-current non-financial assets |  | 2,565 |  | 2,565
Bodega San Francisco |  | Transportes Polar |  | Subsidiary |  | Cash |  | Other non-current non-financial assets |  | 6,483 |  | —
Employee claims |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 6,600,863 |  | 5,336,644
Civil and tax claims |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 12,186,432 |  | 12,597,136
Government entities |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Plant & equipment |  | Property, Plant & Equipment |  | 13,379,610 |  | 13,209,635
Distribuidora Baraldo S.H. |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 250 |  | 369
Acuña Gomez |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 375 |  | 553
Nicanor López |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 268 |  | 395
Labarda |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 5 |  | 7
Municipalidad Bariloche |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 36,313 |  | 21,420
Municipalidad San Antonio Oeste |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 27,598 |  | 40,682
Municipalidad Carlos Casares |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 1,116 |  | 1,645
Municipalidad Chivilcoy |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 172,602 |  | 254,430
Others |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 53 |  | 78
Granada Maximiliano |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 2,250 |  | 3,317
Cicsa |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current non-financial assets |  | 3,128 |  | 4,612
Other lessors |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current non-financial assets |  | 15,289 |  | 46,169
Aduana de EZEIZA |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current non-financial assets |  | 422 |  | 3,013
Municipalidad de Junin |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 360 |  | 1,592
Almada Jorge |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 3,054 |  | 4,949
Municipalidad de Picun Leufu |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | — |  | 72
Mirgoni Marano |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 76 |  | 112
Farias Matias Luis |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 1,401 |  | 309
Temas Industriales SA - Embargo General de Fondos |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 156,759 |  | 231,077
Gomez Alejandra Raquel |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | — |  | 35
Lopez Gustavo Gerardo C/Inti Saic Y Otros |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current financial assets |  | — |  | 226
Tribunal Superior De Justicia De La Provincia De Córdoba |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | — |  | 290
DBC SA C CERVECERIA ARGENTINA SA ISEMBECK |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 28,129 |  | 41,465
Coto Cicsa |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 5,001 |  | —
Cencosud |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Deposit in court |  | Other non-current non-financial assets |  | 3,125 |  | —
Marcus A.Peña |  | Paraguay Refrescos |  | Subsidiary |  | Real estate |  | Property, Plant & Equipment |  | 3,955 |  | 4,164
Mauricio J Cordero C |  | Paraguay Refrescos |  | Subsidiary |  | Real estate |  | Property, Plant & Equipment |  | 917 |  | 904
José Ruoti Maltese |  | Paraguay Refrescos |  | Subsidiary |  | Real estate |  | Property, Plant & Equipment |  | 738 |  | 758
Alejandro Galeano |  | Paraguay Refrescos |  | Subsidiary |  | Real estate |  | Property, Plant & Equipment |  | 1,275 |  | 1,251
Ana Maria Mazó |  | Paraguay Refrescos |  | Subsidiary |  | Real estate |  | Property, Plant & Equipment |  | 1,213 |  | 1,191
|  |  |  |  |  |  |  |  |  | 33,865,874 |  | 31,816,784
Guarantees provided without obligation of assets included in the financial statements:
|  |  |  | Committed assets |  | Amounts involved
Guaranty creditor |  | Debtor name |  | Relationship |  | Guaranty |  | Type |  | 12.31.2019 |  | 12.31.2018
|  |  |  |  |  |  |  |  |  | ThCh$ |  | ThCh$
Employee procedures |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 2,819,285 |  | 2,601,353
Administrative procedures |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 10,432,633 |  | 8,233,853
Federal Government |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 138,635,908 |  | 116,192,877
State Government |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 54,803,911 |  | 43,015,207
Sorocaba Refrescos |  | Rio de Janeiro Refrescos Ltda. |  | Associate |  | Loan |  | Guarantor |  | 3,715,186 |  | 3,586,095
Others |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 3,757,062 |  | 3,236,092
Aduana de EZEIZA |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Surety insurance |  | Faithful compliance of contract |  | 673,854 |  | 699,502
Aduana de EZEIZA |  | Andina Empaques Argentina S.A. |  | Subsidiary |  | Surety insurance |  | Faithful compliance of contract |  | 506,623 |  | 182,459

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