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LITIGATION AND CONTINGENCIES | 12 Months Ended
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Dec. 31, 2020
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 CLP 778,065 thousand (CLP 942,173 thousand in 2019). 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 CLP 295,856 thousand 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 CLP 47,945,921 thousand (CLP 66,070,162 thousand in 2019). 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, 2020 and 2019, amounted to CLP 21,054,433 thousand and CLP 32,166,823 thousand, 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 1,525,587,904, with different Financial Institutions and Insurance Companies in Brazil, these entities receive an annual commission fee of 0.79%. 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) totaling BRL 2,471,137,390 at December 31, 2020. The Company does not share the position of the Brazilian tax authority in these procedures and considers that it 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. As a result of the acquisition of Companhia de Bebidas Ipiranga in 2013 and pursuant to this criterion and although there are contingencies listed only as possible for BRL 701,660,858 (amount includes adjustments for current lawsuits) a start provision has been generated in the accounting of the business combination for BRL 139,596,221 equivalent to CLP 19,098,159 thousand.
| b) |  | Other tax contingencies.
They refer to ICMS-SP tax administrative processes that challenge the credits derived from the acquisition of tax-exempt products acquired by the Company from a supplier located in the Manaus Free Zone. The total amount is BRL 409,075,280 being assessed by external attorneys as a remote loss, so it has no accounting provision. The company was challenged by the federal tax authority for tax deductibility of a portion of goodwill in the 2014-2016 period arising from the acquisition of Companhia de Bebidas Ipiranga. The tax authority understands that the entity that acquired Companhia de Bebidas Ipiranga is Embotelladora Andina and not Rio de Janeiro Refrescos Ltda. In the view of external lawyers, such a statement is erroneous, classifying it as a possible loss. The value of this process is BRL 463,613,817, as of December 31, 2020.
| 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 CLP 1,300,587 thousand (CLP 2,065,496 thousand in 2019). 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 CLP 34,747 thousand (CLP 3,488 thousand in 2019). 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 |  | 12.31.2020 |  | 12.31.2019
|  |  |  |  |  |  |  |  |  | CLP (000’s) |  | CLP (000’s)
Transportes San Martin |  | Embotelladora Andina S.A. |  | Parent Company |  | Cash |  | Trade accounts and other account receivable |  | 2,907 |  | 2,805
Cooperativa Agricola Pisquera Elqui Limitada |  | Embotelladora Andina S.A. |  | Parent Company |  | Cash |  | Other non-current financial assets |  | 1,216,865 |  | 1,216,865
Inmob. e invers. supetar Ltda. |  | Transportes Polar |  | Subsidiary |  | Cash |  | Other non-current non-financial assets |  | 4,579 |  | 4,579
María Lobos Jamet |  | Transportes Polar |  | Subsidiary |  | Cash |  | Other non-current non-financial assets |  | 2,566 |  | 2,565
Bodega San Francisco |  | Transportes Polar |  | Subsidiary |  | Cash |  | Other non-current non-financial assets |  | 8,606 |  | 6,483
Workers Claims |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 5,329,947 |  | 6,600,863
Civil and tax claims |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 5,882,379 |  | 12,186,432
Governmental institutions |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Plant and Equipment |  | Property, plant & equipment |  | 9,842,108 |  | 13,379,610
Distribuidora Baraldo S.H. |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 169 |  | 250
Acuña Gomez |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 253 |  | 375
Nicanor López |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 181 |  | 268
Labarda |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 3 |  | 5
Municipalidad Bariloche |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | — |  | 36,313
Municipalidad San Antonio Oeste |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 18,650 |  | 27,598
Municipalidad Carlos Casares |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 754 |  | 1,116
Municipalidad Chivilcoy |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 116,641 |  | 172,602
Others |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 36 |  | 53
Granada Maximiliano |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 1,521 |  | 2,250
Cicsa |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current non-financial assets |  | 2,114 |  | 3,128
Several lessors |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current non-financial assets |  | 13,140 |  | 15,289
Aduana de EZEIZA |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Cash deposit |  | Other current non-financial assets |  | 286 |  | 422
Municipalidad de Junin |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 243 |  | 360
Almada Jorge |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 2,064 |  | 3,054
Mirgoni Marano |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 51 |  | 76
Farias Matias Luis |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 947 |  | 1,401
Temas Industriales SA - Embargo General de Fondos |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  |  |  | 156,759
DBC SA C CERVECERIA ARGENTINA SA ISEMBECK |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 19,009 |  | 28,129
Coto Cicsa |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 3,379 |  | 5,001
Cencosud |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 2,112 |  | 3,125
Mariano Mirgoni |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Judicial deposit |  | Other non-current non-financial assets |  | 105,936 |  | —
Marcus A.Peña |  | Paraguay Refrescos |  | Subsidiary |  | Property |  | Property, plant & equipment |  | 4,011 |  | 3,955
Mauricio J Cordero C |  | Paraguay Refrescos |  | Subsidiary |  | Property |  | Property, plant & equipment |  | 814 |  | 917
José Ruoti Maltese |  | Paraguay Refrescos |  | Subsidiary |  | Property |  | Property, plant & equipment |  | 655 |  | 738
Alejandro Galeano |  | Paraguay Refrescos |  | Subsidiary |  | Property |  | Property, plant & equipment |  | 1,132 |  | 1,275
Ana Maria Mazó |  | Paraguay Refrescos |  | Subsidiary |  | Property |  | Property, plant & equipment |  | 1,077 |  | 1,213
Guarantees provided without obligation of assets included in the financial statements:
|  |  |  | Committed assets |  | Amounts involved
Guaranty Creditor |  | Debtor name |  | Relationship |  | Guaranty |  | Type |  | 12.31.2020 |  | 12.31.2019
|  |  |  |  |  |  |  |  |  | CLP (000’s) |  | CLP (000’s)
Labor procedures |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 1,527,347 |  | 2,819,285
Administrative procedures |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 8,860,598 |  | 10,432,633
Federal Government |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 147,841,989 |  | 138,635,908
State Government |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 46,031,398 |  | 54,803,911
Sorocaba Refrescos |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Guarantor |  | 2,736,159 |  | 3,715,186
Others |  | Rio de Janeiro Refrescos Ltda. |  | Subsidiary |  | Guaranty receipt |  | Legal proceeding |  | 1,715,099 |  | 3,757,062
Aduana de EZEIZA |  | Embotelladora del Atlántico S.A. |  | Subsidiary |  | Surety insurance |  | Faithful compliance of contract |  | 3,150 |  | 673,854
Aduana de EZEIZA |  | Andina Empaques Argentina S.A. |  | Subsidiary |  | Surety insurance |  | Faithful compliance of contract |  | 143,615 |  | 506,623

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