Gaming Assurance

The UAE gaming market size was valued at around USD 484 million and is projected to reach around USD 754 million by 2030. There are many financial and governance implications.

Interesting point common in gaming industry is that third parties are involved in providing the good or services to the end customer.

The challenge is to assess whether the entity is acting as a principal or an agent and whether to recognise Revenue as gross or net.

Another challenge is to consider if Revenue is to be recognised over period of time or point in time.

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A Gaming Company develops, produces, markets and licenses (right-to-use) fully integrated live casino and slots solutions to gaming operators. In live casino, a game presenter, i.e. dealer, runs the game from a casino gaming table that is followed in real time via a video stream. End users, i.e. the players, make betting decisions on their devices (computers, smartphones, tablets).

The Gaming Company’s revenues consist of fixed and variable fees from gaming operators that use the company/group’s solutions for online casino and from other associated services. A majority of the revenue derives from commission/royalty fees, which is calculated as a percentage of the customer’s profit generated by the Gaming Company’s online casino platform. In addition to commission, a proportion of the Gaming Company’s revenue derives from fees for dedicated tables, integration and set-up fees. Dedicated table fees are invoiced to customers who have chosen to offer their end users dedicated tables.

Revenue recognition policy:

Revenue is reported excluding VAT and discounts and after the elimination of intra-Group sales. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the company/group and when specific criteria have been met, as described below.

• Revenues, based on gain of the control by customer, should be recognised either over time or at a point of time.
• Revenue for subscriptions is recognised on a straight-line basis over the subscription period.
• Set-up fees should be accounted over time due to control gaining by the customer.

The Gaming Company receives gaming fees from its contracted partners. These include a percentage of the gaming operators’ revenue from using the Gaming Company’s solution for online casino. These gaming fees are calculated according to the terms and conditions of each agreement and reported in the period when the gaming transactions are conducted. Fees from other closely related services, such as start-up fees for integration of live casino solutions, are reported when the services have been provided.

Principal v/s agent considerations

Another interesting point common in gaming industry is that third parties are involved in providing the good or services to the end customer.

As per the general guidance of IFRS 15, if the entity controls the specified good or service before it is transferred to the end customer it is principal and is required to present revenue and expenses gross or else it is agent and present revenue and expenses and in net even if gross cashflows go through the agent.

It is important to evaluate and determine which entity controls the specified good or service before it is transferred to the end customer.

This can certainly be challenging in gaming industry since many parties are involved in the process.