6-K 1 tm219646d1_6k.htm FORM 6-K
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15b-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

December 2020

Date of Report (Date of Earliest Event Reported)

 

Embotelladora Andina S.A.

(Exact name of registrant as specified in its charter)

 

Andina Bottling Company, Inc.

(Translation of Registrant´s name into English)

 

Avda. Miraflores 9153

Renca

Santiago, Chile

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ☒   Form 40-F ☐

 

Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ☐   No ☒

 

Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ☐   No ☒

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form 6-K is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934

Yes ☐   No ☒

 

 

 

Consolidated Financial Statements

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Santiago, Chile

As of Decemeber 31, 2020 and 2019

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Financial Statements

As of December 31, 2020 and 2019

 

Independent Auditor’s Report

(Translation of the report originally issued in Spanish)

 

To Shareholders and Directors

Embotelladora Andina S.A.

 

We have audited the accompanying consolidated financial statements of Embotelladora Andina S.A. and subsidiaries (“the Company”), which comprise the consolidated statement of financial position as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion on the Regulatory Basis of Accounting

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Embotelladora Andina S.A. and subsidiaries as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards.

 

Tatiana Ramos S.

EY Audit SpA

 

Santiago February 23, 2021

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Financial Statements

 

I. Consolidated Statements of Financial Position as of December 31, 2020 and 2019 1
II. Consolidated Statements of Income by Function for the fiscal years ended December 31, 2020 and 2019 3
III. Consolidated Statements of Comprehensive Income for the fiscal years ended December 31, 2020 and 2019 4
IV. Consolidated Statements of Changes in Equity for the fiscal years ended December 31, 2020 and 2019 5
V. Consolidated Statements of Direct Cash Flows for the fiscal years ended December 31, 2020 and 2019 6
VI. Notes to the Consolidated Financial Statements 7

 

  1. Corporate information 7
  2. Basis of preparation of Consolidated Financial Statements and application of accounting criteria 8
  3. Financial reporting by segment 30
  4. Cash and cash equivalents 33
  5. Other financial assets, current and non-current 33
  6. Other non-financial assets, current and non-current 34
  7. Trade debtors 35
  8. Inventory 36
  9. Tax assets and liabilities 36
  10. Income tax and deferred taxes 37
  11. Property, plant and equipment 40
  12. Related parties 43
  13. Employee benefits, current and non-current 45
  14. Investments accounted for using the equity method 46
  15. Intangible assets other than goodwill 48
  16. Goodwill 49
  17. Other financial liabilities, current and non-current 50
  18. Trade accounts payable and other accounts payable 59
  19. Other provisions, current and non-current 59
  20. Other non-financial liabilities 60
  21. Equity 60
  22. Assets and liabilities for derivative instruments 63
  23. Litigations and contingencies 66
  24. Financial risk management 70
  25. Expenses by nature 75
  26. Other income 75
  27. Other expenses by function 76
  28. Income and financial costs 76
  29. Other (loss) gains 76
  30. Local and foreign currency 77
  31. Environment 81
  32. Subsequent events 81

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Statements of Financial Position

as of December 31, 2020 and 2019

 

ASSETS  NOTE   12.31.2020   12.31.2019 
     CLP (000’s)   CLP (000’s) 
Current assets:              
               
Cash and cash equivalents  4    309,530,699    157,567,986 
Other financial assets  5    140,304,853    347,278 
Other non-financial assets  6    13,374,381    16,188,965 
Trade and other accounts receivable, net  7    194,021,253    191,077,588 
Accounts receivable from related companies  12.1    11,875,408    10,835,768 
Inventory  8    127,972,650    147,641,224 
Current tax assets  9    218,472    9,815,294 
Total Current Assets      797,297,716    533,474,103 
               
Non-Current Assets:              
Other financial assets  5    162,013,278    110,784,311 
Other non-financial assets  6    90,242,672    125,636,150 
Trade and other receivables  7    73,862    523,769 
Accounts receivable from related parties  12.1    138,346    283,118 
Investments accounted for under the equity method  14    87,956,354    99,866,733 
Intangible assets other than goodwill  15    604,514,165    675,075,375 
Goodwill  16    98,325,593    121,221,661 
Property, plant and equipment  11    605,576,545    722,718,863 
Deferred tax assets  10.2    1,925,869    1,364,340 
Total Non-Current Assets       1,650,766,684    1,857,474,320 
Total Assets       2,448,064,400    2,390,948,423 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

1

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Statements of Financial Position

as of December 31, 2020 and 2019

 

LIABILITIES AND EQUITY  NOTE   12.31.2020   12.31.2019 
     CLP (000’s)   CLP (000’s) 
LIABILITIES            
Current Liabilities              
Other financial liabilities  17    38,566,724    40,593,878 
Trade and other accounts payable  18    230,445,809    243,700,553 
Accounts payable to related parties  12.2    39,541,968    53,637,601 
Other provisions  19    1,335,337    2,068,984 
Tax liabilities  9    8,828,599    6,762,267 
Employee benefits current provisions  13    31,071,019    38,392,854 
Other non-financial liabilities  20    28,266,730    26,502,215 
Total Current Liabilities      378,056,186    411,658,352 
               
Other financial liabilities, non-current  17    989,829,569    743,327,057 
Accounts payable, non-current  18    295,279    619,587 
Accounts payable to related companies, non-current  12.2    10,790,089    19,777,812 
Other provisions, non-current  19    48,734,936    67,038,566 
Deferred tax liabilities  10.2    153,669,547    169,449,747 
Employee benefits non-current provisions  13    13,635,558    10,173,354 
Other non-financial liabilities, non-current  20    21,472,048    - 
Tax liabilities, non-current  9    20,597    - 
Total Non-current liabilities      1,238,447,623    1,010,386,123 
               
EQUITY  21           
Issued capital       270,737,574    270,737,574 
Retained earnings       654,171,126    600,918,265 
Other reserves       (113,727,586)   76,993,851 
Equity attributable to equity holders of the parent      811,181,114    948,649,690 
Non-controlling interests      20,379,477    20,254,258 
Total Equity      831,560,591    968,903,948 
Total Liabilities and Equity      2,448,064,400    2,390,948,423 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

2

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Statements of Income by Function

For the fiscal years ended December 31, 2020 and 2019

 

        01.01.2020   01.01.2019 
    NOTE   12.31.2020   12.31.2019 
       CLP (000’s)    CLP (000’s)
Net sales       1,698,281,237    1,779,025,115 
Cost of sales   8    (1,022,498,659)   (1,048,343,767)
Gross Profit        675,782,578    730,681,348 
Other income   26    8,356,298    40,947,158 
Distribution expenses   25    (152,532,018)   (166,996,289)
Administrative expenses   25    (283,638,935)   (325,903,809)
Other expenses   27    (17,430,256)   (26,182,847)
Other (loss) gains   29    287    2,876 
Financial income   28    14,945,879    45,155,791 
Financial expenses   28    (54,772,837)   (46,209,020)
Share of profit (loss) of investments in associates and joint ventures accounted for using the equity method   14.3    2,228,763    (3,415,083)
Foreign exchange differences        (3,088,278)   (4,130,543)
Income by indexation units        (11,828,762)   (7,536,466)
Net income before income taxes        178,022,719    236,413,116 
Income tax expense   10.1    (54,905,399)   (61,166,891)
Net income        123,117,320    175,246,225 
                
Net income attributable to               
Owners of the controller         121,999,805    173,721,928 
Non-controlling interests         1,117,515    1,524,297 
Net income         123,117,320    175,246,225 
                
Earnings per Share, basic and diluted       CLP   CLP 
Earnings per Series A Share   21.5    122.75    174.79 
Earnings per Series B Share   21.5    135.02    192.27 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

3

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Statements of Comprehensive Income

For the fiscal years ended December 31, 2020 and 2019

 

   01.01.2020   01.01.2019 
   12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Net income   123,117,320    175,246,225 
Other Comprehensive Income:          
Components of other comprehensive income that will not be reclassified to net income for the period, before taxes          
Actuarial Gains (losses) from defined benefit plans   (3,146,362)   (379,007)
Components of other comprehensive income that will be reclassified to net income for the period, before taxes          
Gain (losses) from exchange rate translation differences   (264,119,093)   (41,844,584)
Gain (losses) from cash flow hedges   (12,203,755)   (1,865,233)
Income tax related to components of other comprehensive income that will not be reclassified to net income for the period          
Income tax benefit related to defined benefit plans   849,518    102,332 
           
Income tax related to components of other comprehensive income that will be reclassified to net income for the period          
Income tax related to exchange rate translation differences   84,571,922    9,295,545 
Income tax related to cash flow hedges   2,334,037    683,483 
Other comprehensive income, total   (191,713,733)   (34,007,464)
Total comprehensive income   (68,596,413)   141,238,761 
Total comprehensive income attributable to:          
Owners of the controller   (68,721,632)   139,861,690 
Non-controlling interests   125,219    1,377,071 
Total comprehensive income   (68,596,413)   141,238,761 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

4

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Statements of Changes in Equity

For the periods ended December 31, 2020 and 2019

 

      Other reserves                      
  Issued
Capital
   Reserves for
exchange rate
differences
   Cash flow
hedge
reserve
   Actuarial gains or
losses in employee
benefits
   Other
reserves
   Total other
reserves
   Retained
earnings
   Controlling
equity
   Non-controlling
interests
   Total equity  
  CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)  
Opening balance as of 01.01.2020   270,737,574    (339,076,340)   (14,850,683)   (2,230,752)   433,151,626    76,993,851    600,918,265    948,649,690    20,254,258    968,903,948 
Changes in equity                                                  
Comprehensive income                                                  
Earnings   -    -    -    -    -    -    121,999,805    121,999,805    1,117,515    123.117.320 
Other Comprehensive income   -    (178,420,146)   (9,868,850)   (2,432,441)   -    (190,721,437)   -    (190,721,437)   (992,296)   (191.713.733)
Comprehensive income   -    (178,420,146)   (9,868,850)   (2,432,441)   -    (190,721,437)   121,999,805    (68,721,632)   125,219    (68.596.413)
Dividends   -    -    -    -    -    -    (103,365,468)   (103,365,468)   -    (103,365,468)
Increase (decrease) from Other changes   -    -    -    -    -    -    34,618,524    34,618,524    -    34,618,524 
Total de Changes in equity   -    (178,420,146)   (9,868,850)   (2,432,441)   -    (190,721,437)   53,252,861    (137,468,576)   125,219    (137,343,357)
Ending balance as of 12.31.2020   270,737,574    (517,496,486)   (24,719,533)   (4,663,193)   433,151,626    (113,727,586)   654,171,126    811,181,114    20,379,477    831,560,591 

 

        Other reserves                     
  Issued
Capital
   Reserves for
exchange rate
differences
   Cash flow
hedge
reserve
   Actuarial gains or
losses in employee
benefits
   Other
reserves
   Total other
reserves
   Retained
earnings
   Controlling
equity
   Non-controlling
interests
   Total equity 
  CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Opening balance as of 01.01.2019   270,737,574    (306,674,528)   (13,668,932)   (1,954,077)   433,151,626    110,854,089    462,221,463    843,813,126    19,901,617    863,714,743 
Changes in equity                                                  
Comprehensive income                                                  
Earnings   -    -        -    -    -    173,721,928    173,721,928    1,524,297    175.246.225  
Other Comprehensive income   -    (32,401,812)   (1,181,751)   (276,675)   -    (33,860,238)   -    (33,860,238)   (147,226)   (34.007.464)
Comprehensive income   -    (32,401,812)   (1,181,751)   (276,675)   -    (33,860,238)   173,721,928    139,861,690    1,377,071    141.238.761 
Dividends   -    -    -    -    -    -    (86,568,579)   (86,568,579)   (1,024,430)   (87,593,009)
Increase (decrease) from Other changes   -    -    -    -    -    -    51,543,453    51,543,453    -    51,543,453 
Total de Changes in equity   -    (32,401,812)   (1,181,751)   (276,675)   -    (33,860,238)   138,696,802    104,836,564    352,641    105,189,205 
Ending balance as of 12.31.2019   270,737,574    (339,076,340)   (14,850,683)   (2,230,752)   433,151,626    76,993,851    600,918,265    948,649,690    20,254,258    968,903,948 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

5

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Statements of Direct Cash Flows

For the periods ended December 31, 2020 and 2019

 

       01.01.2020   01.01.2019 
Cash flows provided by (used in) Operating Activities  NOTE   12.31.2020   12.31.2019 
      CLP (000’s)   CLP (000’s) 
Cash flows provided by Operating Activities              
Receipts from the sale of goods and the rendering of services (including taxes)       2,321,999,131    2,626,374,510 
Payments for Operating Activities              
Payments to suppliers for goods and services (including taxes)       (1,517,256,079)   (1,802,751,639)
Payments to and on behalf of employees       (189,758,823)   (203,681,853)
Other payments for operating activities (value-added taxes on purchases, sales and others)       (266,228,165)   (292,958,045)
Dividends received       1,176,079    411,041 
Interest payments       (44,299,001)   (36,141,477)
Interest received       7,538,364    1,539,120 
Income tax payments       (29,474,900)   (34,198,767)
Other cash movements (tax on bank debits Argentina and others)       (4,927,608)   (3,444,416)
Cash flows provided by (used in) Operating Activities       278,768,998    255,148,474 
               
Cash flows provided by (used in) Investing Activities              
Proceeds from sale of Property, plant and equipment       3,570    18,904 
Purchase of Property, plant and equipment       (85,874,958)   (110,683,258)
Purchase of intangible assets       (207,889)   (448,307)
Proceeds from other long term assets (withdrawal of time-deposits at 90 days or longer term)       -    - 
Payments on forward, term, option and financial exchange agreements       (472,551)   (70,373)
Collection on forward, term, option and financial exchange agreements       2,122,954    1,135,034 
Other payments on the purchase of financial instruments        (139,449,884)   - 
Net cash flows used in Investing Activities       (223,878,758)   (110,048,000)
               
Cash Flows generated from (used in) Financing Activities              
Proceeds from short term loans       27,633,156    50,297,337 
Payments of loans       (25,197,737)   (74,332,889)
Lease liability payments       (3,974,086)   (2,989,457)
Dividend payments by the reporting entity       (99,985,500)   (86,265,896)
Other inflows (outflows) of cash (Placement and payment of public obligations)       214,565,128    (13,821,732)
Net cash flows (used in) generated by Financing Activities       113,040,961    (127,112,637)
Net increase in cash and cash equivalents before exchange differences       167,931,201    17,987,837 
Effects of exchange differences on cash and cash equivalents       (13,574,854)   4,048,168 
Effects of inflation in cash and cash equivalents in Argentina       (2,393,634)   (2,006,632)
Net increase (decrease) in cash and cash equivalents       151,962,713    20,029,373 
Cash and cash equivalents – beginning of period  4    157,567,986    137,538,613 
Cash and cash equivalents - end of period  4    309,530,699    157,567,986 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

6

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Notes to the Consolidated Financial Statements

 

1 - CORPORATE INFORMATION

 

Embotelladora Andina S.A. RUT (Chilean Tax Id. N°) 91.144.000-8 (hereinafter “Andina,” and together with its subsidiaries, the “Company”) is an open stock corporation, whose corporate address and principal offices are located at Miraflores 9153, borough of Renca, Santiago, Chile. The Company is registered under No. 00124 of the Securities Registry and is regulated by Chile’s Financial Market Commission (hereinafter “CMF”) and pursuant to Chile’s Law 18,046 is subject to the supervision of this entity. It is also registered with the U.S. Securities and Exchange Commission (hereinafter “SEC”) and its stock is traded on the New York Stock Exchange since 1994.

 

The principal activity of Embotelladora Andina S.A. is to produce, bottle, commercialize and distribute the products under registered trademarks of The Coca-Cola Company (TCCC). The Company maintains operations and is licensed to produce, commercialize and distribute such products in certain territories in Chile, Brazil, Argentina and Paraguay.

 

In Chile, the territories in which it has such a license are the Metropolitan Region; the province of San Antonio, the V Region; the province of Cachapoal including the commune of San Vicente de Tagua-Tagua, the VI Region; the II Region of Antofagasta; the III Region of Atacama, the IV Region of Coquimbo XI Region de Aysén del General Carlos Ibáñez del Campo; XII Region of Magallanes and Chilean Antarctic. In Brazil, the aforementioned license covers much of the state of Rio de Janeiro, the entire state of Espirito Santo, and part of the states of Sao Paulo and Minas Gerais. In Argentina it includes the provinces of Córdoba, Mendoza, San Juan, San Luis, Entre Ríos, as well as part of the provinces of Santa Fe and Buenos Aires, Chubut, Santa Cruz, Neuquén, Río Negro, La Pampa, Tierra del Fuego, Antarctica and South Atlantic Islands. Finally, in Paraguay the territory comprises the whole country. The bottling agreement for the territories in Chile expires in October 2023; in Argentina it expires in 2022; in Brazil it expires in 2022, and in Paraguay it expires in 2021. Said agreements are renewable upon the request of the licensee and at the sole discretion of The Coca-Cola Company.

 

As of the date of these consolidated financial statements, regarding Andina’s principal shareholders, the Controlling Group holds 55.38% of the outstanding shares with voting rights, corresponding to the Series A shares. The Controlling Group is composed of the Chadwick Claro, Garcés Silva, Said Handal and Said Somavía families, who control the Company in equal parts.

 

These Consolidated Financial Statements reflect the consolidated financial position of Embotelladora Andina S.A. and its subsidiaries, which were approved by the Board of Directors on February 23, 2021.

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2 - BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND APPLICATION OF ACCOUNTING CRITERIA

 

2.1Accounting principles and basis of preparation

 

The Company’s Consolidated Financial Statements for the fiscal years ended December 31, 2020 and December 31, 2019, have been prepared in accordance with International Accounting Standard N° 34 (IAS 34) incorporated in the International Financial Reporting Standards (hereinafter “IFRS”) issued by the International Accounting Standards Board (hereinafter “IASB”).

 

These Consolidated Financial Statements have been prepared following the going concern principle by applying the historical cost method, with the exception, according to IFRS, of those assets and liabilities that are recorded at fair value.

 

These Consolidated Statements reflect the consolidated financial position of Embotelladora Andina S.A. and its Subsidiaries as of December 31, 2020 and December 31, 2019 and the results of operations for the periods between January 1 and December 31, 2020 and 2019, together with the statements of changes in equity and cash flows for the periods between January 1 and December 31, 2020 and 2019.

 

These Consolidated Financial Statements have been prepared based on the accounting records maintained by the Parent Company and by the other entities that are part of the Company and are presented in thousands of Chilean pesos (unless expressly stated) as this is the functional and presentation currency of the Company. Foreign operations are included in accordance with the accounting policies established in Notes 2.5.

 

2.2Subsidiaries and consolidation

 

Subsidiary entities are those companies directly or indirectly controlled by Embotelladora Andina. Control is obtained when the Company has power over the investee, when it has exposure or is entitled to variable returns from its involvement in the investee and when it has the ability to use its power to influence the amount of investor returns. They include assets and liabilities, results of operations, and cash flows for the periods reported. Income or losses from subsidiaries acquired or sold are included in the Consolidated Financial Statements from the effective date of acquisition through the effective date of disposal, as applicable.

 

The acquisition method is used to account for the acquisition of subsidiaries. The consideration transferred for the acquisition of the subsidiary is the fair value of assets transferred, equity securities issued, liabilities incurred or assumed on the date that control is obtained. Identifiable assets acquired, and identifiable liabilities and contingencies assumed in a business combination are accounted for initially at their fair values at the acquisition date. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the consideration is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

 

Intercompany transactions, balances and unrealized gains on transactions between Group entities are eliminated. Unrealized losses are also eliminated. When necessary, the accounting policies of the subsidiaries are modified to ensure uniformity with the policies adopted by the Group.

 

The interest of non-controlling shareholders is presented in the consolidated statement of changes in equity and the consolidated statement of income by function under “Non-Controlling Interest” and “Earnings attributable to non-controlling interests”, respectively.

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The consolidated financial statements include all assets, liabilities, income, expenses, and cash flows of the Company and its subsidiaries after eliminating balances and transaction among the Group’s entities, the subsidiary companies included in the consolidation are the following:

 

     Ownership interest 
      12.31.2020   12.31.2019 
Taxpayer ID  Company Name  Direct   Indirect   Total   Direct   Indirect   Total 
59.144.140-K  Abisa Corp S.A.   -    99.99    99.99    -    99.99    99.99 
Foreign  Aconcagua Investing Ltda.   0.70    99.28    99.98    0.70    99.28    99.98 
96.842.970-1  Andina Bottling Investments S.A.   99.9    0.09    99.99    99.9    0.09    99.99 
96.972.760-9  Andina Bottling Investments Dos S.A.   99.9    0.09    99.99    99.9    0.09    99.99 
Foreign  Andina Empaques Argentina S.A.   -    99.98    99.98    -    99.98    99.98 
96.836.750-1  Andina Inversiones Societarias S.A.   99.98    0.01    99.99    99.98    0.01    99.99 
76.070.406-7  Embotelladora Andina Chile S.A.   99.99    -    99.99    99.99    -    99.99 
Foreign  Embotelladora del Atlántico S.A.   0.92    99.07    99.99    0.92    99.07    99.99 
96.705.990-0  Envases Central S.A.   59.27    -    59.27    59.27    -    59.27 
Foreign  Paraguay Refrescos S.A.   0.08    97.75    97.83    0.08    97.75    97.83 
76.276.604-3  Red de Transportes Comerciales Ltda.   99.9    0.09    99.99    99.9    0.09    99.99 
Foreign  Rio de Janeiro Refrescos Ltda.   -    99.99    99.99    -    99.99    99.99 
78.536.950-5  Servicios Multivending Ltda.   99.9    0.09    99.99    99.9    0.09    99.99 
78.861.790-9  Transportes Andina Refrescos Ltda.   99.9    0.09    99.99    99.9    0.09    99.99 
96.928.520-7  Transportes Polar S.A.   99.99    -    99.99    99.99    -    99.99 
76.389.720-6  Vital Aguas S.A.   66.50    -    66.50    66.50    -    66.50 
93.899.000-k  Vital Jugos S.A.   15.00    50.00    65.00    15.00    50.00    65.00 

 

2.3Investments in associates and joint ventures

 

Ownership interest held by the Group in joint ventures and associates are recorded following the equity method. According to the equity method, the investment in an associate or joint venture is initially recorded at cost. As of the date of acquisition, the investment in the statement of financial position is recorded by the proportion of its total assets, which represents the Group’s participation in its capital, once adjusted, where appropriate, the effect of the transactions made with the Group, plus capital gains that have been generated in the acquisition of the company.

 

Dividends received from these companies are recorded by reducing the value of the investment and the results obtained by them, which correspond to the Group according to its ownership, are recorded under the item “Participation in profit (loss) of associates accounted for by the equity method.”

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2.3.1Investments in Associates

 

Associates are all entities over which the Group exercises significant influence but does not have control. Significant influence is the power to intervene in the financial and operating policy decisions of the associate, without having control or joint control over it. The results of these associates are accounted for using the equity method. Accounting policies of the associates are changed, where necessary, to ensure conformity with the policies adopted by the Company and unrealized gains are eliminated.

 

2.3.2Joint arrangements

 

Joint arrangements are those entities in which the Group exercises control through an agreement with other shareholders and jointly with them, that is, when decisions on their relevant activities require the unanimous consent of the parties that share control.

 

Depending on the rights and obligations of the parties, joint arrangements are classified as:

 

-Joint venture: agreement whereby the parties exercising joint control are entitled to the net assets of the entity. Joint ventures are integrated into the consolidated financial statements by the equity method, as described above.

 

-Joint operation: agreement whereby the parties exercising joint control are entitled to the assets and obligations with respect to the liabilities related to the agreement. Joint operations are consolidated by proportionally integrating the assets and liabilities affected by said operation.

 

To determine the type of joint agreement that derives from a contractual agreement, Group Management evaluates the structure and legal form of the agreement, the terms agreed by the parties, as well as other relevant factors and circumstances.

 

Embotelladora Andina does not have joint arrangements that qualify as a joint operation business.

 

2.4Financial reporting by operating segment

 

“IFRS 8 Operating Segments” requires that entities disclose information on the results of operating segments. In general, this is information that Management and the Board of Directors use internally to assess performance of segments and allocate resources to them. Therefore, the following operating segments have been determined based on geographic location:

 

Operation in Chile
Operation in Brazil
Operation in Argentina
Operation in Paraguay

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2.5Functional currency and presentation currency

 

2.5.1Functional currency

 

Items included in the financial statements of each of the entities in the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of each of the Operations is the following:

 

Company  

Functional currency

Embotelladora del Atlántico   Argentine Peso (ARS)
Embotelladora Andina   Chilean Peso (CLP)
Paraguay Refrescos   Paraguayan Guaraní (PYG)
Rio de Janeiro Refrescos   Brazil Real (BRL)

 

Foreign currency-denominated monetary assets and liabilities are converted to the functional currency at the spot exchange rate in effect on the closing date.

 

All differences arising from the liquidation or conversion of monetary items are recorded in the income statement, with the exception of the monetary items designated as part of the hedging of the Group’s net investment in a business abroad. These differences are recorded under other comprehensive income until the disposal of the net investment, at which point they are reclassified to the income statement. Tax adjustments attributable to exchange differences in these monetary items are also recognized under other comprehensive income.

 

Non-monetary items that are valued at historical cost in a foreign currency are converted using the exchange rate in effect at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are converted using the exchange rate in effect at the date on which fair value is determined. Losses or gains arising from the conversion of non-monetary items measured at fair value are recorded in accordance with the recognition of losses or gains arising from the change in the fair value of the respective item (e.g., exchange differences arising from items whose fair value gains or losses are recognized in another overall result or in results are also recognized under comprehensive income ).

 

Functional currency in hyperinflationary economies

 

Beginning July 2018, Argentina’s economy is considered as hyperinflationary, according to the criteria established in the International Accounting Standard No. 29 “Financial information in hyperinflationary economies” (IAS 29). This determination was carried out based on a series of qualitative and quantitative criteria, including an accumulated inflation rate of more than 100% for three years. In accordance with IAS 29, the financial statements of companies in which Embotelladora Andina S.A. participates in Argentina have been retrospectively restated by applying a general price index to the historical cost, in order to reflect the changes in the purchasing power of the Argentine peso, as of the closing date of these financial statements.

 

Non-monetary assets and liabilities were restated since February 2003, the last date an inflation adjustment was applied for accounting purposes in Argentina. In this context, it should be mentioned that the Group made its transition to IFRS on January 1, 2004, applying the attributed cost exemption for Property, plant and equipment.

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For consolidation purposes in Embotelladora Andina S.A. and as a result of the adoption of IAS 29, the results and financial situation of our Argentine subsidiaries were converted to the closing exchange rate (ARS/CLP) as December 31, 2020, in accordance with IAS 21 “Effects of foreign currency exchange rate variations”, when dealing with a hyperinflationary economy.

 

The comparative amounts in the consolidated financial statements are those that were presented as current year amounts in the relevant financial statements of the previous year (i.e., not adjusted for subsequent changes in price level or exchange rates). This results in differences between the closing net equity of the previous year and the opening net equity of the current year and, as an accounting policy option, these changes are presented as follows: (a) the re-measurement of initial balances under IAS 29 as an adjustment to equity and (b) subsequent effects, including re-expression under IAS 21 , as “Exchange rate differences in the conversion of foreign operations” under other comprehensive income.

 

Inflation for the periods from January to December 20202 and 2019 amounted to 36.01% and 54.85%, respectively.

 

2.5.2Presentation currency

 

The presentation currency is the Chilean peso, which is the functional currency of the parent company, for such purposes, the financial statements of subsidiaries are translated from the functional currency to the presentation currency as indicated below:

 

a.Translation of financial statements whose functional currency does not correspond to hyperinflationary economies (Brazil and Paraguay)

 

Financial statements measured as indicated are translated to the presentation currency as follows:

 

The statement of financial position is translated to the closing exchange rate at the financial statement date and the income statement is translated at the average monthly exchange rates, the differences that result are recognized in equity under other comprehensive income.
Cash flow income statement are also translated at average exchange rates for each transaction.
In the case of the disposal of an investment abroad, the component of other comprehensive income (OCI) relating to that investment is reclassified to the income statement.

 

b.Translation of financial statements whose functional currency corresponds to hyperinflationary economies (Argentina)

 

Financial statements of economies with a hyperinflationary economic environment, are recognized according to IAS 29 Financial Information in Hyperinflationary Economies, and subsequently converted to Chilean pesos as follows:

 

The statement of financial position sheet is translated at the closing exchange rate at the financial statements date.
The income statement is translated at the closing exchange rate at the financial statements date
The statement of cash flows is converted to the closing exchange rate at the date of the financial statements.
For the disposal of an investment abroad, the component of other comprehensive income (OCI) relating to that investment is reclassified to the income statement.

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2.5.3Exchange rates

 

Exchange rates regarding the Chilean peso in effect at the end of each period are as follows:

 

Date

  USD  BRL  ARS  PGY
12.31.2020  710.95  136.80  8.44  0.103
12.31.2019  748.74  185.76  12.50  0.116

 

2.6Property, plant, and equipment

 

The elements of Property, plant and equipment, are valued for their acquisition cost, net of their corresponding accumulated depreciation, and of the impairment losses they have experienced.

 

The cost of the items of Property, plant and equipment include in addition to the price paid for the acquisition: i) the financial expenses accrued during the construction period that are directly attributable to the acquisition, construction or production of qualified assets, which are those that require a substantial period of time before being ready for use, such as production facilities. The Group defines a substantial period as one that exceeds twelve months. The interest rate used is that corresponding to specific financing or, if it does not exist, the weighted average financing rate of the Company making the investment; and ii) personnel expenses directly related to the construction in progress.

 

Construction in progress is transferred to operating assets after the end of the trial period when they are available for use, from which moment depreciation begins.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset only when it is probable that future economic benefits associated with the items of Property, plant and equipment will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. Repairs and maintenance are charged to the income statement in the reporting period in which they are incurred.

 

Land is not depreciated since it has an indefinite useful life. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives.

 

The estimated useful lives by asset category are:

 

Assets   Range in years
Buildings   15-80
Plant and equipment   5-20
Warehouse installations and accessories   10-50
Furniture and supplies   4-5
Motor vehicles   4-10
Other Property, plant and equipment   3-10
Bottles and containers   2-5

 

The residual value and useful lives of Property, plant and equipment are reviewed and adjusted at the end of each fiscal year, if appropriate.

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The Company assesses on each reporting date if there is evidence that an asset may be impaired. The Group estimates the recoverable amount of the asset, if there is evidence, or when an annual impairment test is required for an asset.

 

Gains and losses on disposals of property, plant, and equipment are calculated by comparing the proceeds to the carrying amount and are charged to other expenses by function or other gains, as appropriate in the statement of comprehensive income.

 

2.7Intangible assets and Goodwill

 

2.7.1Goodwill

 

Goodwill represents the excess of the consideration transferred over the Company’s interest in the net fair value of the net identifiable assets of the subsidiary and the fair value of the non-controlling interest in the subsidiary on the acquisition date. Since goodwill is an intangible asset with indefinite useful life, it is recognized separately and tested annually for impairment. Goodwill is carried at cost less accumulated impairment losses.

 

Gains and losses on the sale of an entity include the carrying amount of goodwill related to that entity.

 

Goodwill is assigned to each cash generating unit (CGU) or group of cash-generating units, from where it is expected to benefit from the synergies arising from the business combination. Such CGUs or groups of CGUs represent the lowest level in the organization at which goodwill is monitored for internal management purposes.

 

2.7.2Distribution rights

 

Distribution rights are contractual rights to produce and/or distribute products under the Coca-Cola brand and other brands in certain territories in Argentina, Brazil, Chile and Paraguay that were acquired during Business Combination. Distribution rights are born from the process of valuation at fair value of the assets and liabilities of companies acquired in business combinations. Distribution rights have an indefinite useful life and are not amortized, (as they are permanently renewed by The Coca-Cola Company) and therefore are subject to impairment tests on an annual basis.

 

2.7.3Software

 

Carrying amounts correspond to internal and external software development costs, which are capitalized once the recognition criteria in IAS 38, Intangible Assets, have been met. Their accounting recognition is initially realized for their acquisition or production cost and, subsequently, they are valued at their net cost of their corresponding accumulated amortization and of the impairment losses that, if applicable, they have experienced. The aforementioned software is amortized within four years.

 

2.8Impairment of non-financial assets

 

Assets that have an indefinite useful life, such as intangibles related to distribution rights and goodwill, are not amortized and are tested annually for impairment or more frequently if events or changes in circumstances indicate a potential impairment. Assets that are subject to amortization are tested for impairment whenever there is an event or change in circumstances indicating that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the greater of an asset’s fair value less costs to sell or its value in use.

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For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units - CGU).

 

Regardless of what was stated in the previous paragraph, in the case of CGUs to which capital gains or intangible assets have been assigned with an indefinite useful life, the analysis of their recoverability is carried out systematically at the end of each fiscal year. These indications may include new legal provisions, change in the economic environment that affects business performance indicators, competition movements, or the disposal of an important part of a CGU.

 

Management reviews business performance based on geographic segments. Goodwill is monitored at the operating segment level that includes the different cash generating units in operations in Chile, Brazil, Argentina and Paraguay. The impairment of distribution rights is monitored geographically in the CGU or group of cash generating units, which correspond to specific territories for which Coca-Cola distribution rights have been acquired. These cash generating units or groups of cash generating units are composed of the following segments:

 

-Operation in Chile;
-Operation in Argentina;
-Operation in Brazil (State of Rio de Janeiro and Espirito Santo, Ipiranga territories, investment in the Sorocaba associate and investment in the Leão Alimentos S.A. associate);
-Operation in Paraguay

 

To check if goodwill has suffered a loss due to impairment of value, the Company compares the book value thereof with its recoverable value, and recognizes an impairment loss, for the excess of the asset’s carrying amount over its recoverable amount. To determine the recoverable values ​​of the CGU, management considers the discounted cash flow method as the most appropriate.

 

The main assumptions used in the annual test are:

 

a)Discount rate

 

The discount rate applied in the annual test carried out in December 2020 was estimated using the CAPM (Capital Asset Pricing Model) methodology, which allows estimating a discount rate according to the level of risk of the CGU in the country where it operates. A nominal discount rate in local currency before tax is used according to the following table:

 

    Discount rates 2020   Discount rates 2019 
Argentina    28.1%   35.3%
Chile    7.2%   8.5%
Brazil    9.9%   11.4%
Paraguay    9.3%   11.5%

 

b)Other assumptions

 

The financial projections to determine the net present value of the future cash flows of the CGUs are modeled based on the main historical variables and the respective budgets approved by the CGU. In this regard, a conservative growth rate is used, which reaches 5% for the carbonated beverage category and up to 7% for less developed categories such as juices and waters. Beyond the fifth year of projection, growth perpetuity rates are established per operation ranging from 1% to 2.5% depending on the degree of maturity of the consumption of the products in each operation. In this sense, the variables with greatest sensitivity in these projections are the discount rates applied in the determination of the net present value of projected cash flows, growth perpetuities and EBITDA margins considered in each CGU.

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In order to sensitize the impairment test, variations were made to the main variables used in the model. Ranges used for each of the modified variables are:

 

-Discount Rate: Increase / Decrease of up to 100 bps as a value in the rate at which future cash flows are discounted to bring them to present value
-Perpetuity: Increase / Decrease of up to 75 bps in the rate to calculate the perpetual growth of future cash flows
-EBITDA margin: Increase / Decrease of 100 bps of EBITDA margin of operations, which is applied per year for the projected periods, that is, for the years 2021-2025

 

In each sensitization scenario of the of the 3 variables mentioned above, no signs of impairment were observed for the Company’s CGUs.

 

The Company performs the impairment analysis on an annual basis. As a result of the tests conducted as of December 31, 2020 and 2019, no evidence of impairment was identified in any of the CGUs listed above, assuming conservative EBITDA margin projections and in line with market history.

 

Despite the deterioration in macroeconomic conditions experienced by the economies of the countries in which operations are carried out and as a result of the pandemic, the impairment test yielded recovery values higher than the book values of assets, including those for the sensitivity calculations in the stress test conducted on the model.

 

It should be noted that although no impairment evidence was identified for the CGUs described above, the annual review of other investments identified that for the AdeS brand in Chile’s operation the recoverable value would be CLP 1,451 million below the book value recorded in the financial statements, which were reduced from its book value as of December 2020. The main reasons are due to the lower expected flows for the seed-based non-carbonated beverage segment for the local market.

 

2.9Financial instruments

 

A financial instrument is any contract that results in the recognition of a financial asset in one entity and a financial liability or equity instrument in another entity.

 

2.9.1Financial assets

 

Pursuant to IFRS 9 “Financial Instruments”, except for certain trade accounts receivable, the Group initially measures a financial asset at its fair value plus transaction costs, in the case of a financial asset that is not at fair value, reflecting changes in P&L.

 

The classification is based on two criteria: (a) the Group’s business model for the purpose of managing financial assets to obtain contractual cash flows; and (b) if the contractual cash flows of financial instruments represent “solely payments of principal and interest” on the outstanding principal amount (the “SPPI criterion”). According to IFRS 9, financial assets are subsequently measured at (i) fair value with changes in P&L (FVPL), (ii) amortized cost or (iii) fair value through other comprehensive income (FVOCI).

 

The subsequent classification and measurement of the Group’s financial assets are as follows:

 

-Financial asset at amortized cost for financial instruments that are maintained within a business model with the objective of maintaining the financial assets to collect contractual cash flows that meet the SPPI criterion. This category includes the Group’s trade and other accounts receivable.

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-Financial assets measured at fair value with changes in other comprehensive income (FVOCI), with gains or losses recognized in P&L at the time of liquidation. Financial assets in this category correspond to the Group’s instruments that meet the SPPI criterion and are kept within a business model both to collect cash flows and to sell.

 

Other financial assets are classified and subsequently measures as follows:

 

-Equity instruments at fair value with changes in other comprehensive income (FVOCI) without recognizing earnings or losses in P&L at the time of liquidation. This category only includes equity instruments that the Group intends to keep in the foreseeable future and that the Group has irrevocably chosen to classify in this category in the initial recognition or transition.

 

-Financial assets at fair value with changes in P&L (FVPL) include derivative instruments and equity instruments quoted that the Group had not irrevocably chosen to classify at FVOCI in the initial recognition or transition. This category also includes debt instruments whose cash flow characteristics do not comply with the SPPI criterion or are not kept within a business model whose objective is to recognize contractual cash flows or sale.

 

A financial asset (or, where applicable, a portion of a financial asset or a portion of a group of similar financial assets) is initially disposed (for example, canceled in the Group’s consolidated financial statements) when:

 

-The rights to receive cash flows from the asset have expired,

 

-The Group has transferred the rights to receive the cash flows of the asset or has assumed the obligation to pay all cash flows received without delay to a third party under a transfer agreement; and the Group (a) has substantially transferred all risks and benefits of the asset, or (b) has not substantially transferred or retained all risks and benefits of the asset but has transferred control of the asset.

 

2.9.2Financial Liabilities

 

Financial liabilities are classified as a fair value financial liability at the date of their initial recognition, as appropriate, with changes in results, loans and credits, accounts payable or derivatives designated as hedging instruments in an effective coverage.

 

All financial liabilities are initially recognized at fair value and transaction costs directly attributable are netted from loans and credits and accounts payable.

 

The Group’s financial liabilities include trade and other accounts payable, loans and credits, including those discovered in current accounts, and derivative financial instruments.

 

The classification and subsequent measurement of the Group’s financial liabilities are as follows:

 

-Fair value financial liabilities with changes in results include financial liabilities held for trading and financial liabilities designated in their initial recognition at fair value with changes in results. The losses or gains of liabilities held for trading are recognized in the income statement.

 

-Loans and credits are valued at cost or amortized using the effective interest rate method. Gains and losses are recognized in the income statement when liabilities are disposed, as well as interest accrued in accordance with the effective interest rate method.

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A financial liability is disposed of when the obligation is extinguished, cancelled or expires. Where an existing financial liability is replaced by another of the same lender under substantially different conditions, or where the conditions of an existing liability are substantially modified, such exchange or modification is treated as a disposal of the original liability and the recognition of the new obligation. The difference in the values in the respective books is recognized in the statement of income.

 

2.9.3Offsetting financial instruments

 

Financial assets and financial liabilities are offset with the corresponding net amount presenting the corresponding net amount in the statement of financial position, if:

 

-There is currently a legally enforceable right to offset the amounts recognized, and
-It is intended to liquidate them for the net amount or to realize the assets and liquidate the liabilities simultaneously.

 

2.10Derivatives financial instruments and hedging activities

 

The Company and its subsidiaries use derivative financial instruments to mitigate risks relating to changes in foreign currency and exchange rates associated with raw materials, and loan obligations. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value at each closing date. Derivatives are accounted as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

 

2.10.1Derivative financial instruments designated as cash flow hedges

 

At the inception of the transaction, the group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated income statement within “other gains (losses)”.

 

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when foreign currency denominated financial liabilities are translated into their functional currencies). The gain or loss relating to the effective portion of cross currency swaps hedging the effects of changes in foreign exchange rates are recognized in the consolidated income statement within “foreign exchange differences.” When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the consolidated income statement.

 

2.10.2Derivative financial instruments not designated for hedging

 

The fair value of derivative financial instruments that do not qualify for hedge accounting pursuant to IFRS are immediately recognized in the income statement under “Other income and losses”. The fair value of these derivatives is recorded under “other current financial assets” or “other current financial liabilities” in the statement of financial position.”

 

The Company does not use hedge accounting for its foreign investments.

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The Company also evaluates the existence of derivatives implicitly in contracts and financial instruments as stipulated by IFRS 9 and classifies them pursuant to their contractual terms and the business model of the group. As of December 31, 2020, the Company had no implicit derivatives,

 

2.10.3Fair value hierarchy

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the date of the transaction. Fair value is based on the presumption that the transaction to sell the asset or to transfer the liability takes place;

 

-In the asset or liability main market, or
-In the absence of a main market, in the most advantageous market for the transaction of those assets or liabilities.

 

The Company maintains assets related to foreign currency derivative contracts which were classified as Other current and non-current financial assets and Other current and non-current financial liabilities, respectively, and are accounted at fair value within the statement of financial position. The Company uses the following hierarchy to determine and disclose the fair value of financial instruments with assessment techniques:

 

Level 1: Quote values (unadjusted) in active markets for identical assets or liabilities 

Level 2: Valuation techniques for which the lowest level variable used, which is significant for the calculation, is directly or indirectly observable

Level 3: Valuation techniques for which the lowest level variable used, which is significant for the calculation, is not observable.

 

During the reporting periods there were no transfers of items between fair value measurement categories. All of which were valued during the periods using Level 2.

 

2.11Inventories

 

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method. The cost of finished goods and work in progress includes raw materials, direct labor, other direct costs and manufacturing overhead (based on operating capacity) to bring the goods to marketable condition, but it excludes interest expense. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Spare parts and production materials are stated at the lower of cost or net realizable value.

 

The initial cost of inventories includes the transfer of losses and gains from cash flow hedges, related to the purchase of raw materials.

 

Estimates are also made for obsolescence of raw materials and finished products based on turnover and age of the related goods.

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2.12Trade accounts receivable and other accounts receivable

 

Trade accounts receivable and other accounts receivable are measured and recognized at the transaction price at the time they are generated less the provision for expected credit losses, pursuant to the requirements of IFRS 15, since they do not have a significant financial component, less the provision of expected credit losses. The provision for expected credit losses is made applying a value impairment model based on expected credit losses for the following 12 months. The Group applies a simplified focus for trade receivables, thereby impairment is always recorded referring to expected losses during the whole life of the asset. The carrying amount of the asset is reduced by the provision of expected credit losses, and the loss is recognized in administrative expenses in the consolidated income statement by function.

 

2.13Cash and cash equivalents

 

Cash and cash equivalents include cash on hand, bank balances, time deposits and other short-term highly liquid and low risk of change in value investments and mutual funds with original short-term maturities equal to or less than three months from the date of acquisition.

 

2.14Other financial liabilities

 

Resources obtained from financial institutions as well as the issuance of debt securities are initially recognized at fair value, net of costs incurred during the transaction. Then, liabilities are valued by accruing interests in order to equal the current value with the future value of liabilities payable, using the effective interest rate method.

 

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualified assets, considered as those that require a substantial period of time in order to get ready for their forecasted use or sale, are added to the cost of those assets until the period in which the assets are substantially ready to be used or sold.

 

2.15Income tax

 

The Company and its subsidiaries in Chile account for income tax according to the net taxable income calculated based on the rules in the Income Tax Law. Subsidiaries in other countries account for income taxes according to the tax regulations of the country in which they operate.

 

Deferred income taxes are calculated using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements, using the tax rates that have been enacted or substantively enacted on the balance sheet date and are expected to apply when the deferred income tax asset is realized, or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.

 

The Company does not recognize deferred income taxes for temporary differences from investments in subsidiaries in which the Company can control the timing of the reversal of the temporary differences and it is probable that they will not be reversed in the near future.

 

The Group offsets deferred tax assets and liabilities if and only if it has legally recognized a right to offset against the tax authority the amounts recognized in those items; and intends to settle the resulting net debts, or to realize the assets and simultaneously settle the debts that have been offset by them.

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2.16Employee benefits

 

The Company records a liability regarding indemnities for years of service that will be paid to employees in accordance with individual and collective agreements subscribed with employees, which is recorded at actuarial value in accordance with IAS 19 “Employee Benefits”.

 

Results from updated of actuarial variables are recorded within other comprehensive income in accordance with IAS 19.

 

Additionally, the Company has retention plans for some officers, which have a provision pursuant to the guidelines of each plan. These plans grant the right to certain officers to receive a cash payment on a certain date once they have fulfilled with the required years of service.

 

The Company and its subsidiaries have recorded a provision to account for the cost of vacations and other employee benefits on an accrual basis. These liabilities are recorded under current non-financial liabilities.

 

2.17Provisions

 

Provisions for litigation and other contingencies are recognized when the Company has a present legal or constructive obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

 

2.18Leases

 

In accordance with IFRS 16 “Leases” Embotelladora Andina analyzes, at the beginning of the contract, the economic background of the agreement, to determine if the contract is, or contains, a lease, evaluating whether the agreement transfers the right to control the use of an identified asset for a period of time in exchange for a consideration. Control is considered to exist if the client has i) the right to obtain substantially all the economic benefits from the use of an identified asset; and ii) the right to direct the use of the asset.

 

The Company when operating as a lessee, at the beginning of the lease (on the date the underlying asset is available for use) records an asset for the right-of-use in the statement of financial position (under Property, plant and equipment) and a lease liability (under Other financial liabilities).

 

This asset is initially recognized at cost, which includes: i) value of the initial measurement of the lease liability; ii) lease payments made up to the start date less lease incentives received; iii) the initial direct costs incurred; and iv) the estimation of costs for dismantling or restoration. Subsequently, the right-of-use asset is measured at cost, adjusted by any new measurement of the lease liability, less accumulated depreciation and accumulated losses due to impairment of value. The right-of-use asset is depreciated in the same terms as the rest of similar depreciable assets, if there is reasonable certainty that the lessee will acquire ownership of the asset at the end of the lease. If such certainty does not exist, the asset depreciates at the shortest period between the useful life of the asset or the lease term.

 

On the other hand, the lease liability is initially measured at the present value of the lease payments, discounted at the incremental loan rate of the Company, if the interest rate implicit in the lease could not be easily determined. Lease payments included in the measurement of the liability include: i) fixed payments, less any lease incentive receivable; ii) variable lease payments; iii) residual value guarantees; iv) exercise price of a purchase option; and v) penalties for lease termination.

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The lease liability is increased to reflect the accumulation of interest and is reduced by the lease payments made. In addition, the carrying amount of the liability is measured again if there is a modification in the terms of the lease (changes in the term, in the amount of payments or in the evaluation of an option to buy or change in the amounts to be paid). Interest expense is recognized as an expense and is distributed among the periods that constitute the lease period, so that a constant interest rate is obtained in each year on the outstanding balance of the lease liability.

 

Short-term leases, equal to or less than one year, or lease of low-value assets are excepted from the application of the recognition criteria described above, recording the payments associated with the lease as an expense in a linear manner throughout the lease term. The Company does not act as lessor.

 

2.19Deposits for returnable containers

 

This liability comprises cash collateral, or deposit, received from customers for bottles and other returnable containers made available to them.

 

This liability pertains to the deposit amount that would be reimbursed when the customer or distributor returns the bottles and containers in good condition, together with the original invoice.

 

This liability is presented under Other current financial liabilities since the Company does not have legal rights to defer settlement for a period in excess of one year. However, the Company does not anticipate any material cash settlements for such amounts during the upcoming year.

 

2.20Revenue recognition

 

The Company recognizes revenue when control over a good or service is transferred to the client. Control refers to the ability of the client to direct the use and obtain substantially all the benefits of the goods and services exchanged. Revenue is measured based on the consideration to which it is expected to be entitled for such transfer of control, excluding amounts collected on behalf of third parties.

 

Management has defined the following indicators for revenue recognition, applying the five-step model established by IFRS 15 “Revenue from contracts with customers”: 1) Identification of the contract with the customer; 2) Identification of performance obligations; 3) Determination of the transaction price; 4) Assignment of the transaction price; and 5) Recognition of revenue.

 

All the above conditions are met at the time the products are delivered to the customer. Net sales reflect the units delivered at list price, net of promotions, discounts and taxes.

 

The revenue recognition criteria of the good provided by Embotelladora Andina corresponds to a single performance obligation that transfers the product to be received to the customer.

 

2.21Contributions of The Coca-Cola Company

 

The Company receives certain discretionary contributions from The Coca-Cola Company (TCCC) mainly related to the financing of advertising and promotional programs for its products in the territories where the Company has distribution licenses. The contribution received from TCCC are recognized in net income after the conditions agreed with TCCC in order to become a creditor to such incentive have been fulfilled, they are recorded as a reduction in the marketing expenses included in the Administration Expenses account. Given its discretionary nature, the portion of contributions received in one period does not imply it will be repeated in the following period.

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2.22Dividend payments

 

Dividend distribution to Company shareholders is recorded as a liability in the Company’s Consolidated Financial Statements, considering the 30% minimum dividend of the period’s earnings established by Chilean Corporate Law, unless otherwise agreed in the respective meeting, by the unanimity of the issued shares.

 

Interim and final dividends are recorded at the time of their approval by the competent body, which in the first case is normally the Board of Directors of the Company, while in the second case it is the responsibility of General Shareholders’ Meeting.

 

2.23Critical accounting estimates and judgments

 

In preparing the consolidated financial statements, the Company has used certain judgments and estimates made to quantify some of the assets, liabilities, income, expenses and commitments. Following is an explanation of the estimates and judgments that might have a material impact on future financial statements.

 

2.23.1Impairment of goodwill and intangible assets with indefinite useful lives

 

The Company tests annually whether goodwill and intangible assets with indefinite useful life (such as distribution rights) have suffered any impairment. The recoverable amounts of cash generating units are generating units are determined based on value in use calculations. The key variables used in the calculations include sales volumes and prices, discount rates, marketing expenses and other economic factors including inflation. The estimation of these variables requires a use of estimates and judgments as they are subject to inherent uncertainties; however, the assumptions are consistent with the Company’s internal planning end past results. Therefore, management evaluates, and updates estimates according to the conditions affecting the variables. If these assets are considered to have been impaired, they will be written off at their estimated fair value or future recovery value according to the lowest discounted cash flows analysis. At December 31, 2020 discounted cash flows in the Company’s cash generating units in Chile, Brazil, Argentina and Paraguay generated a higher value than the carrying values of the respective net assets, including goodwill of the Brazilian, Argentinian and Paraguayan subsidiaries.

 

2.23.2Fair Value of Assets and Liabilities

 

IFRS requires in certain cases that assets and liabilities be recorded at their fair value. Fair value is the price that would be received for selling an asset or paid to transfer a liability in a transaction ordered between market participants at the date of measurement.

 

The basis for measuring assets and liabilities at fair value are their current prices in an active market. For those that are not traded in an active market, the Company determines fair value based on the best information available by using valuation techniques.

 

In the case of the valuation of intangibles recognized as a result of acquisitions from business combinations, the Company estimates the fair value based on the “multi-period excess earning method”, which involves the estimation of future cash flows generated by the intangible assets, adjusted by cash flows that do not come from these, but from other assets. The Company also applies estimations over the period during which the intangible assets will generate cash flows, cash flows from other assets, and a discount rate.

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Other assets acquired, and liabilities assumed in a business combination are carried at fair value using valuation methods that are considered appropriate under the circumstances. Assumptions include the depreciated cost of recovery and recent transaction values for comparable assets, among others. These valuation techniques require certain inputs to be estimated, including the estimation of future cash flows.

 

2.23.3Allowances for doubtful accounts

 

The Group uses a provision matrix to calculate expected credit losses for trade receivables. Provisions are based on due days for various groups of customer segments that have similar loss patterns (i.e. by geography region, product type, customer type and rating, and credit letter coverage and other forms of credit insurance).

 

The provision matrix is initially based on the historically observed non-compliance rates for the Group. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For example, if expected economic conditions (i.e. gross domestic product) are expected to deteriorate over the next year, which can lead to more non-compliances in the industry, historical default rates are adjusted. At each closing date, the observed historical default rates are updated and changes in prospective estimates are analyzed. The assessment of the correlation between observed historical default rates, expected economic conditions and expected credit losses are significant estimates.

 

2.23.4Useful life, residual value and impairment of property, plant, and equipment

 

Property, plant, and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of those assets. Changes in circumstances, such as technological advances, changes to the Company’s business model, or changes in its capital strategy might modify the effective useful lives as compared to our estimates. Whenever the Company determines that the useful life of Property, plant and equipment might be shortened, it depreciates the excess between the net book value and the estimated recoverable amount according to the revised remaining useful life. Factors such as changes in the planned usage of manufacturing equipment, dispensers, transportation equipment and computer software could make the useful lives of assets shorter. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of any of those assets may not be recovered. The estimate of future cash flows is based, among other factors, on certain assumptions about the expected operating profits in the future. The Company’s estimation of discounted cash flows may differ from actual cash flows because of, among other reasons, technological changes, economic conditions, changes in the business model, or changes in operating profit. If the sum of the projected discounted cash flows (excluding interest) is less than the carrying amount of the asset, the asset shall be written-off to its estimated recoverable value.

 

At the closing of December 2020, based on the best estimate according to the most recent reliable, reasonable and available information, management made a change in its useful life accounting estimates, for the Chilean Operation.

 

Changes in estimates are mainly recorded in fixed assets related to plant and equipment, which includes the following items:

 

Assets   Previous year range   New year range
Buildings   30-50   15-80
Plants and equipment   10-20   5-20
Fixed installations and accessories   10-30   10-50
Furniture and materials   4-5   5
Vehicles   5-7   4-10
Other property, plant and equipment   3-8   5-10
Containers and cases   2-8   2-5

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This change in estimated useful life resulted in greater depreciation for the period between January 1 to December 31, 2020 of approximately CLP 7,071,114 thousand, representing approximately 6% of total consolidated depreciation.

 

2.24.1New Standards, Interpretations and Amendments for annual periods beginning on or after January 1, 2020.

 

Standards and interpretations, as well as the improvements and amendments to IFRS, which have been issued, effective at the date of these financial statements, are detailed below:

 

    Standards and Interpretations  Mandatory application date
Conceptual Framework  Revised Conceptual Framework  January 1, 2020

 

Revised Conceptual Framework

 

The IASB issued a Revised Conceptual Framework in March 2018, incorporating some new concepts, providing updated definitions and recognition criterion for assets and liabilities and clarifying some important concepts. Changes in the Conceptual Framework may affect the application of IFRS when no standard applies to a given transaction or event. Application of the revised Conceptual Framework did not have significant impacts on the financial statements of the Company.

 

Amendments to IFRS which have been issued and are in effect beginning January 1, 2020 are detailed below:

 

    Amendments  Implementation date
IFRS 3  Definition of a business  January 1,2020
IAS 1 and IAS 8  Definition of material  January 1,2020
IFRS 9, IAS 39 and IFRS 7  Reference Interest Rate Reform  January 1,2020
IFRS 16  COVID-19-Related Rent Concessions  January 1,2020

 

IFRS 3 Business Combinations - Definition of Business

 

The IASB issued amendments to the definition of business in IFRS 3 Business Combinations, to help entities determine whether an acquired set of activities and assets is a business or not. The IASB clarifies the minimum requirements for defining a business, eliminates the assessment of whether market participants are able to replace any missing elements, includes guidance to help entities assess whether a process acquired is substantial, reduces the definitions of a business and products and introduces an optional fair value concentration test.

 

Amendments have to be applied to business combinations or asset acquisitions that occur on or after the start of the first annual reporting period beginning on or after January 1, 2020. As a result, entities do not have to review transactions that occurred in previous periods. Early application is permitted and must be disclosed.

 

Because the amendments apply prospectively to transactions or other events that occur on or after the date of the first application, most entities will probably not be affected by these amendments in the transition. However, those entities that consider the acquisition of a set of activities and assets after implementing the amendments must first update their accounting policies in a timely manner.

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Amendments may also be relevant in other areas of IFRS (e.g. they may be relevant when a controller loses control of a subsidiary and has anticipated the sale or contribution of assets between an investor and its associate or joint venture) (Amendments to IFRS 10 and IAS 28).

 

Company management performs the impact assessment of the amendment once these types of transactions take place.

 

IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material

 

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, changes in accounting estimates and errors, to align the definition of “material” in all standards and to clarify certain aspects of the definition. The new definition states that information is material if when omitted, misstated, or reasonably hidden could be expected to influence decisions that primary users of general-purpose of the financial statements make based on those financial statements, which provide financial information about a specific reporting entity.

 

Amendments should be applied prospectively. Early application is permitted and must be disclosed.

 

While amendments to the definition of material are not expected to have a significant impact on an entity’s financial statements, the introduction of the term “hide” in the definition could impact the way materiality judgments are made, increasing the importance of how information is communicated and organized in the financial statements.

 

Company management has assessed the amendment, which have not had any impact on these financial statements.

 

IFRS 9, IAS 39 and IFRS 7 Reference Interest Rate Reform

 

In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7, which concludes the first stage of its work to respond to the effects of the reform of interbank offer rate (IBOR) in financial information. The amendments provide temporary exceptions that allow hedge accounting to continue during the uncertain period, prior to replacing existing benchmark interest rates with near-risk free alternative interest rates.

 

Amendments should be applied retrospectively. However, any hedge relationship that has previously been discontinued cannot be reinstated with the application of these amendments, nor can a hedge relationship be designated using the retrospect reasoning benefit. Early application is permitted and must be disclosed.

 

Company management has assessed the amendment, which have not had significant impacts on these financial statements.

 

IFRS 16 COVID-19-Related Rent Concessions

 

In May 2020, the IASB issued an amendment to IFRS 16 Leases to provide relief for lessees in the application of IFRS 16 guidance regarding lease modifications due to rent concessions occurring as a direct consequence of the Covid-19 pandemic. The amendment does not affect lessors.

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As a practical solution, a lessee may choose not to assess whether the Covid-19-related rent reduction granted by a lessor is a modification of the lease. A lessee making this choice will recognize changes in lease payments from Covid-19-related rent reductions in the same way as it would recognize the change under IFRS 16 as if such a change was not a modification of the lease.

 

A lessee shall apply this practical solution retroactively, recognizing the cumulative effect of the initial application of the amendment as an adjustment in the initial balance of accumulated results (or another component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment.

 

A lessee will apply this amendment for annual periods beginning on or after September 1, 2020. Early application is permitted, including in the financial statements not authorized for publication as of May 28, 2020.

 

Company management has not implemented this amendment because it has no Covid-19-related lease modifications.

 

2.24.2 New Accounting Standards, Interpretations and Amendments with effective application for annual periods beginning on or after January 1, 2020.

 

Standards and interpretations, as well as IFRS amendments, which have been issued, but have still not become effective as of the date of these financial statements are set forth below. The Company has not made an early adoption of these standards:

 

  Standards and Interpretations  Mandatory application date
IFRS 17  Insurance Contracts  January 1, 2023

 

IFRS 17 - Insurance Contracts

 

In May 2017, the IASB issued IFRS 17 Insurance Contracts, a new accounting standard for insurance contracts that covers recognition, measurement, presentation and disclosure. Once effective, it will replace IFRS 4 Insurance Contracts issued in 2005. The new rule applies to all types of insurance contracts, regardless of the type of entity issuing them, as well as certain guarantees and financial instruments with certain characteristics of discretionary participation. Some exceptions within the scope may be applied.

 

IFRS 17 will be effective for periods starting on or after January 1, 2023, with comparative figures required. Early application is permitted, provided that the entity applies IFRS 9 Financial Instruments, on or before the date on which IFRS 17 is first applied.

 

Amendments to IFRS that have been issued to become effective in the near future are detailed below.

 

   Amendments  Date of application
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16  Interest Rate Benchmark Reform—Phase 2  January 1, 2023
IAS 1  Classification of liabilities as current or non-current  January 1, 2023
IFRS 3  Reference to the Conceptual Framework  January 1, 2022
IAS 16  Property, Plant and Equipment — Proceeds before Intended Use  January 1, 2022
IAS 37  Onerous Contracts—Cost of Fulfilling a Contract  January 1, 2022
IFRS 10 and IAS 28  Consolidated Financial Statements - sale or contribution of assets between an investor and its associate or joint venture  To be determined

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IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform—Phase 2

 

In August 2020, the IASB published the second phase of the Interest Rate Benchmark Reform containing amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. With this publication, the IASB completes its work to respond to the effects of Interbank Offer Rate Reform (IBOR) on financial information.

 

The amendments provide temporary exceptions that address the effects on financial information when a benchmark interest rate (IBOR) is replaced by an almost risk-free alternative interest rate.

 

Amendments are required and early application is permitted. A hedging ratio must be resumed if the hedging ratio was discontinued solely due to the changes required by the reform of the benchmark interest rate and would therefore not have been discontinued if the second phase of amendments had been implemented at that time. While application is retrospective, an entity is not required to restate previous periods.

 

IAS 1 Presentation of Financial Statements - Classification of liabilities as current or non-current

 

In June 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify requirements for the classification of liabilities as current or non-current.

 

The amendments are effective for periods beginning on or after January 1, 2022. Entities should carefully consider whether there are any aspects of the amendments suggesting that the terms of their existing loan agreements should be renegotiated. In this context, it is important to stress that amendments must be implemented retrospectively.

 

IFRS 3 Reference to the Conceptual Framework

 

In May 2020, the IASB issued amendments to IFRS 3 Business Combinations – Reference to the Conceptual Framework. These amendments are intended to replace the reference to an earlier version of the IASB Conceptual Framework (1989 Framework) with a reference to the current version issued in March 2018 without significantly changing its requirements.

 

The amendments shall be effective for periods beginning on or after January 1, 2022 and should be applied retrospectively. Early application is permitted if, at the same time or before, an entity also applies all amendments contained in the amendments to the Conceptual Framework References of the IFRS Standards issued in March 2018.

 

The amendments will provide consistency in financial information and avoid potential confusion by having more than one version of the Conceptual Framework in use.

 

IAS 16 Property, Plant and Equipment — Proceeds before Intended Use

 

The amendment prohibits deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss for the period, pursuant to applicable standards.

 

The amendment shall be effective for periods beginning on or after January 1, 2022. The amendment should be applied retrospectively only property, plant and equipment items available for use on or after the beginning of the first period presented in the financial statements in which the entity first applies the amendment.

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IAS 37 Onerous Contracts—Cost of Fulfilling a Contract

 

In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities, and Contingent Assets to specify the costs an entity needs to include when assessing whether a contract is onerous, or it generates losses.

 

The amendment shall be effective for periods beginning on or after January 1, 2022. The amendment should be applied retrospectively to existing contracts at the beginning of the annual reporting period in which the entity first applies the amendment (date of initial application). Early application is permitted and must be disclosed.

 

The amendments are intended to provide clarity and help ensure consistent implementation of the standard. Entities that previously applied the incremental cost approach will see an increase in provisions to reflect the inclusion of costs directly related to contract activities, while entities that previously recognized contractual loss provisions using the guidance to the previous standard, IAS 11 Construction Contracts, should exclude the allocation of indirect costs from their provisions.

 

IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures – sale or contribution of assets between an investor and its associate or joint venture

 

Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) address a recognized inconsistency between IFRS 10 requirements and IAS 28 (2011) requirements in the treatment of the sale or contribution of assets between an investor and its associate or joint venture. The amendments, issued in September 2014, state that when the transaction involves a business (whether it is in a subsidiary or not) all gains, or losses generated are recognized. A partial gain or loss is recognized when the transaction involves assets that do not constitute a business, even when the assets are in a subsidiary. The mandatory implementation date of these amendments is yet to be determined because the IASB is awaiting the results of its research project on accounting according to the equity method of accounting. These amendments must be applied retrospectively, and early adoption is allowed, which must be disclosed.

 

Company management will perform an impact assessment of the above described amendments once they become effective.

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3 – FINANCIAL REPORTING BY SEGMENT

 

The Company provides financial information by segments according to IFRS 8 “Operating Segments,” which establishes standards for reporting by operating segment and related disclosures for products and services, and geographic areas.

 

The Company’s Board of Directors and Management measures and assesses performance of operating segments based on the operating income of each of the countries where there are Coca-Cola franchises.

 

The operating segments are determined based on the presentation of internal reports to the Company´s chief strategic decision-maker. The chief operating decision-maker has been identified as the Company´s Board of Directors who makes the Company’s strategic decisions.

 

The following operating segments have been determined for strategic decision making based on geographic location:

 

Operation in Chile
Operation in Brazil
Operation in Argentina
Operation in Paraguay

 

The four operating segments conduct their businesses through the production and sale of soft drinks and other beverages, as well as packaging materials.

 

Expenses and revenue associated with the Corporate Officer were assigned to the operation in Chile in the soft drinks segment because Chile is the country that manages and pays the corporate expenses, which would also be substantially incurred, regardless of the existence of subsidiaries abroad.

 

Total revenues by segment include sales to unrelated customers and inter-segments, as indicated in the consolidated statement of income of the Company.

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A summary of the Company’s operating segments in accordance to IFRS is as follows:

 

For the period year ended December 31, 2020 

Chile

Operation

   Argentina
Operation
  

Brazil

Operation

   Paraguay
Operation
   Intercompany
Eliminations
   Consolidated
Total
 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Net sales   644,761,885    318,827,620    580,063,307    157,152,584    (2,524,159)   1,698,281,237 
Cost of sales   (392,720,439)   (172,065,726)   (373,444,835)   (86,791,818)   2,524,159    (1,022,498,659)
Distribution expenses   (59,897,972)   (49,112,014)   (34,784,528)   (8,737,504)   -    (152,532,018)
Administrative expenses   (112,306,460)   (69,668,104)   (79,674,089)   (21,990,282)   -    (283,638,935)
Finance income   6,437,945    1,169,193    7,068,396    270,345    -    14,945,879 
Financial expense   (23,938,992)   (729,164)   (30,104,681)   -    -    (54,772,837)
Financial expenses, net (*)   (17,501,047)   440,029    (23,036,285)   270,345    -    (39,826,958)
Share of entity in income of associates accounted for using the equity method, total   1,248,478    -    980,285    -    -    2,228,763 
Income tax expense   (23,057,195)   (7,668,059)   (20,536,914)   (3,643,231)   -    (54,905,399)
Other income (loss)   (21,231,223)   (6,046,069)   3,064,104    222,477    -    (23,990,711)
Net income of the segment reported   19,296,027    14,707,677    52,631,045    36,482,571    -    123,117,320 
                               
Depreciation and amortization   50,271,626    22,895,329    27,339,714    10,413,848    -    110,920,517 
                               
Current assets   532,713,969    70,215,594    149,709,603    44,658,550    -    797,297,716 
Non-current assets   636,275,547    144,802,176    643,447,811    226,241,150    -    1,650,766,684 
Segment assets, total   1,168,989,516    215,017,770    793,157,414    270,899,700    -    2,448,064,400 
                               
Carrying amount in associates and joint ventures accounted for using the equity method, total   50,628,307    -    37,328,047    -    -    87,956,354 
                               
Segment disbursements of non-monetary assets   41,114,189    15,803,061    17,075,672    11,882,036    -    85,874,958 
                               
Current liabilities   198,669,957    58,904,281    96,144,933    24,337,015    -    378,056,186 
Non-current liabilities   748,105,248    10,717,606    465,225,175    14,399,594    -    1,238,447,623 
Segment liabilities, total   946,775,205    69,621,887    561,370,108    38,736,609    -    1,616,503,809 
                               
Cash flows (used in) provided by in Operating Activities   191,911,595    24,603,123    36,409,227    25,845,053    -    278,768,998 
Cash flows (used in) provided by Investing Activities   (178,910,100)   (16,010,950)   (17,075,672)   (11,882,036)   -    (223,878,758)
Cash flows (used in) provided by Financing Activities   117,081,470    (167,606)   (3,443,826)   (429,077)   -    113,040,961 

 

(*) Financial expenses associated with external financing for the acquisition of companies, including capital contributions among others, are also presented in this item.

31

 

 

For the period year ended December 31, 2019 

Chile

Operation

   Argentina
Operation
  

Brazil

Operation

   Paraguay
Operation
   Intercompany
Eliminations
   Consolidated
Total
 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Net sales   608,952,121    394,635,840    619,321,284    158,892,010    (2,776,140)   1,779,025,115 
Cost of sales   (359,465,664)   (214,447,259)   (384,838,875)   (92,368,109)   2,776,140    (1,048,343,767)
Distribution expenses   (59,076,433)   (56,421,024)   (42,673,570)   (8,825,262)      (166,996,289)
Administrative expenses   (114,250,801)   (89,276,114)   (98,071,441)   (24,305,453)      (325,903,809)
Finance income   1,286,021    1,346,501    42,327,682    195,587    -    45,155,791 
Financial expense   (13,151,176)   999,370    (34,057,214)   0    -    (46,209,020)
Financial expenses, net (*)   (11,865,155)   2,345,871    8,270,468    195,587    -    (1,053,229)
Share of entity in income of associates accounted for using the equity method, total   381,255    -    (3,796,338)   -    -    (3,415,083)
Income tax expense   (12,838,517)   (6,902,265)   (36,821,377)   (4,604,732)   -    (61,166,891)
Other income (loss)   (15,109,823)   (3,235,926)   21,754,242    (308,315)   -    3,100,178 
Net income of the segment reported   36,726,983    26,699,123    83,144,393    28,675,726    -    175,246,225 
                               
Depreciation and amortization   46,105,063    25,369,034    29,945,887    9,667,300    -    111,087,284 
                               
Current assets   244,504,165    76,354,086    171,349,293    41,266,559    -    533,474,103 
Non-current assets   657,069,423    165,116,212    786,979,234    248,309,451    -    1,857,474,320 
Segment assets, total   901,573,588    241,470,298    958,328,527    289,576,010    -    2,390,948,423 
                               
Carrying amount in associates and joint ventures accounted for using the equity method, total   49,703,673    -    50,163,060    -    -    99,866,733 
                               
Segment disbursements of non-monetary assets   51,542,820    24,343,002    21,343,312    13,454,124    -    110,683,258 
                               
Current liabilities   193,298,799    68,120,885    124,248,587    25,990,081    -    411,658,352 
Non-current liabilities   474,576,722    13,350,651    506,297,573    16,161,177    -    1,010,386,123 
Segment liabilities, total   667,875,521    81,471,536    630,546,160    42,151,258    -    1,422,044,475 
                               
Cash flows (used in) provided by in Operating Activities   145,551,360    30,440,761    63,145,540    16,010,813    -    255,148,474 
Cash flows (used in) provided by Investing Activities   (50,706,748)   (24,790,752)   (21,096,376)   (13,454,124)   -    (110,048,000)
Cash flows (used in) provided by Financing Activities   (100,352,068)   (616,475)   (25,654,792)   (489,302)   -    (127,112,637)

 

(*) Financial expenses associated with external financing for the acquisition of companies, including capital contributions among others, are also presented in this item.

32

 

 

4 – CASH AND CASH EQUIVALENTS

 

The composition of Cash and cash equivalents is as follows:

 

By item  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Cash   339,628    2,331,714 
Bank balances   82,997,449    51,176,617 
Other fixed rate instruments   226,193,622    104,059,655 
Total cash and cash equivalents   309,530,699    157,567,986 

 

Other fixed income instruments are mainly investments in short-term fixed income instruments with good credit rating. There are no restrictions for significant amounts available to cash.

 

By currency  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
USD   21,332,268    16,733,249 
EUR   223,449    9,722 
ARS   14,821,502    3,830,199 
CLP   201,936,140    78,420,966 
PGY   21,688,915    12,383,873 
BRL   49,528,425    46,189,977 
Cash and cash equivalents   309,530,699    157,567,986 

 

5 – OTHER CURRENT AND NON-CURRENT FINANCIAL ASSETS

 

The composition of other financial assets is as follows:

 

   Balance 
  Current   Non-current 
Other financial assets  12.31.2020   12.31.2019   12.31.2020   12.31.2019 
    CLP (000’s)   CLP (000’s)    CLP (000’s)   CLP (000’s) 
Financial assets measured at amortized cost (1)   140,304,853    30,073    1,216,865    1,216,865 
Financial assets at fair value (2)   -    317,205    150,983,295    98,918,457 
Other financial assets measured at amortized cost (3)   -    -    9,813,118    10,648,989 
Total   140,304,853    347,278    162,013,278    110,784,311 

 

(1)Financial instrument that does not meet the definition of cash equivalents as defined in Note 2.13. CLP 139,449,883 of these financial assets correspond to short-term realizable instruments, managed by third parties.

 

(2)Market value of hedging instruments. See details in Note 22.

 

(3)Correspond to the rights in the Argentinean company Alimentos de Soya S.A., manufacturing company of “AdeS” products and its distribution rights, which are framed in the purchase of the “AdeS” brand managed by The Coca-Cola Company at the end of 2016.

33

 

 

6 – OTHER CURRENT AND NON-CURRENT NON-FINANCIAL ASSETS

 

The composition of other non-financial assets is as follows:

 

   Balance 
   Current   Non-current 
Other non-financial assets  12.31.2020    12.31.2019   12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s) 
Prepaid expenses   7,932,770    11,242,456    527,110    595,045 
Tax credit remainder (1)   234,124    180,695    76,262,417    103,540,639 
Guaranty deposit   286    422        - 
Deposit in courts   -    -    11,492,642    19,226,030 
Others (2)   5,207,201    4,765,392    1,960,503    2,274,436 
Total   13,374,381    16,188,965    90,242,672    125,636,150 

 

(1)In November 2006, Rio de Janeiro Refrescos Ltda. (“RJR”) filed a court order No. 0021799-23.2006.4.02.5101 seeking recognition of the right to exclude ICMS (Tax on Commerce and Services) from the PIS (Program of Social Integration) and COFINS (Contribution for the Financing of Social Security) calculation base, as well as recognition of the right to obtain reimbursement of amounts unduly collected since November 14, 2001, duly restated using the Selic interest rate. On May 20, 2019, the ruling favoring RJR became final, allowing the recovery of amounts overpaid from November 14, 2001 to August 2017. It is worth noting that in September 2017, RJR had already obtained a Security Mandate, which granted it the right to exclude, from that date, the ICMS from the PIS and COFINS calculation base.

 

The company took steps to assess the total amount of the credit at issue for the period of unduly collection of taxes from November 2001 to August 2017, totaling CLP 103,540 million (BRL 613 million, of which BRL 370 million corresponds to capital and BRL 243 million to interest and monetary restatement. These amounts were recorded as of December 31, 2019. In addition, the company acknowledged the indirect costs (attorneys’ fees, consulting, auditing, indirect taxes and other obligations) resulting from the recognition of the right acquired in court, totaling BRL 175 million.

 

The payment of income tax occurs when liquidating the credit, therefore the respective deferred tax liability recorded was CLP 20,246 million (BRL 148 million). In 2020 already CLP 16,142 million (BRL 118 million) have been offset.

 

Compahia de Bebidas Ipiranga (“CBI”) acquired in September 2013, also filed a court order No. 0014022-71.2000.4.03.6102 in order to recognize the same issue as the one previously described for RJR. In September 2019, the ruling favoring CBI became final, allowing the recovery of the amounts overpaid from September 12, 1989 to December 1, 2013 (date when CBI was incorporated by RJR). CBI’s credit will be generated in the name of RJR, however, pursuant to the contractual clause (“Subscription Agreement for Shares and Exhibits”), as soon as collected by RJR, this payment should be immediately paid to former CBI shareholders (supervention favoring former CBI shareholders). Based on supporting documents found, for the August 1993-November 2013 period, the amount of credits related to this process have been calculated and totaled CLP 22,162 million (BRL 162 million, of which BRL 80 million corresponds to capital and BRL 82 million correspond to interest and monetary restatement), from this amount, CLP 958 million (BRL 7 million) must be deducted from indirect taxes, thus generating an account payable to former shareholders for CLP 21,204 million (BRL 155 billion) and a government receivables related to credits for that same amount. It is worth mentioning that for the September 1989-July 1993 period, the Company did not account the credit due to the lack of supporting documents.

 

In addition, RJR has an associate called Sorocaba Refrescos SA (“Sorocaba”), where it has a 40% shareholding in the capital, which also filed a court order seeking recognition of the right to the same issue as RJR’s action. On June 13, 2019, the ruling favoring Sorocaba became final, allowing the recovery of the amounts overpaid from July 5, 1992 until the date on which the decision became final. As of December 31, 2020, the impacts were recognized in RJR’s result from its ownership in Sorocaba, totaling CLP 6,703 million (BRL 49 million, of which BRL 28 million correspond to capital and BRL 21 million correspond to interest and monetary restatement). In addition, the company recognized indirect costs (attorneys’ fees, consulting, auditing, indirect taxes, and other obligations) resulting from the recognition of the right acquired in court, totaling CLP 1,368 million (BRL 10 million).

 

Income tax payment occurs upon credit settlement, with that the respective deferred tax liability recorded was CLP 1,778 million (BRL 13 million). In 2020, CLP 684 million (BRL 5 million) of the total credit obtained by Sorocaba have already been offset.

 

(2)Other non-financial assets are mainly composed of advances to suppliers.

34

 

 

7 – TRADE AND OTHER RECEIVABLES

 

The composition of trade and other receivables is as follows:

 

   Balance 
   Current   Non-current 
Trade debtors and other accounts receivable, Net  12.31.2020   12.31.2019   12.31.2020   12.31.2019 
  

CLP (000’s)

  

CLP (000’s)

  

CLP (000’s)

   CLP (000’s) 
Trade debtors   151,017,754    150,509,528    40,432    - 
Other debtors   41,688,151    39,620,246    32,219    466,007 
Other accounts receivable   1,315,348    947,814    1,211    57,762 
Total   194,021,253    191,077,588    73,862    523,769 

 

   Balance 
   Current   Non-current 
Trade debtors and other accounts receivable, Gross  12.31.2020   12.31.2019   12.31.2020   12.31.2019 
  

CLP (000’s) 

  

CLP (000’s) 

  

CLP (000’s)

   CLP (000’s) 
Trade debtors   154,591,684    153,654,549    40,432    - 
Other debtors   44,691,925    42,719,679    32,219    466,007 
Other accounts receivable   1,533,307    1,196,347    1,211    57,762 
Total   200,816,916    197,570,575    73,862    523,769 

 

The stratification of the portfolio is as follows:

 

  Balance 
Current trade debtors without impairment impact  12.31.2020
CLP (000’s)
   12.31.2019
CLP (000’s)
 
Less than one month   147,177,119    148,150,717 
Between one and three months   2,230,594    1,872,144 
Between three and six months   1,708,015    838,277 
Between six and eight months   509,855    482,596 
Older than eight months   3,006,533    2,310,815 
Total   154,632,116    153,654,549 

 

The Company has approximately 283,500 clients, which may have balances in the different sections of the stratification. The number of clients is distributed geographically with 66,100 in Chile, 89,900 in Brazil, 69,600 in Argentina and 58,000 in Paraguay.

35

 

 

The movement in the allowance for expected credit losses is presented below:

 

  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening balance   6,492,987    6,298,208 
Increase (decrease)   2,321,958    1,762,246 
Provision reversal   (1,595,521)   (1,184,953)
Increases (decrease) for changes of foreign currency   (423,761)   (382,514)
Sub – total movements   302,676    194,779 
Ending balance   6,795,663    6,492,987 

 

8 – INVENTORIES

 

The composition of inventories is detailed as follows:

 

Details  12.31.2020   12.31.2019 
  CLP (000’s)   CLP (000’s) 
Raw materials (1)   80,902,721    93,524,911 
Finished goods   27,556,884    32,337,670 
Spare parts and supplies   19,592,377    20,769,626 
Work in progress   76,577    567,973 
Other inventories   3,101,016    3,625,488 
Obsolescence provision (2)   (3,256,925)   (3,184,444)
Total   127,972,650    147,641,224 

 

The cost of inventory recognized as cost of sales amounts to CLP 1,022,498,659 thousand and CLP 1,048,343,767 thousand as of December 31, 2020 and 2019, respectively.

 

(1)Approximately 80% is composed of concentrate and sweeteners used in the preparation of beverages, as well as caps and PET supplies used in the packaging of the product.

 

(2)The obsolescence provision is related mainly with the obsolescence of spare parts classified as inventories and to a lesser extent to finished products and raw materials. The general standard is to provision all those multi-functional spare parts without utility in rotation in the last four years prior to the technical analysis technical to adjust the provision. In the case of raw materials and finished products, the obsolescence provision is determined according to maturity.

 

9 – TAX ASSETS AND LIABILITIES

 

The composition of current tax accounts receivable is the following:

 

Tax assets  12.31.2020   12.31.2019 
  CLP (000’s)   CLP (000’s) 
Tax credits (1)   218,472    9,815,294 
Total   218,472    9,815,294 

 

(1) Tax credits correspond to income tax credits on training expenses, purchase of Property, plant and equipment, and donations.

36

 

 

The composition of current tax accounts payable is the following:

 

   Current   Non-Current 
Tax liabilities  31.12.2020       31.12.2019       31.12.2020       31.12.2019     
   M$   M$   M$   M$ 
Income tax expense   8,828,599    6,762,267    20,957    - 
Total   8,828,599    6,762,267    20,957    - 

 

10 – INCOME TAX EXPENSE AND DEFERRED TAXES

 

10.1 Income tax expense

 

The current and deferred income tax expenses are detailed as follows:

 

Details 

 

12.31.2020

  

 

12.31.2019

 
  CLP (000’s)   CLP (000’s) 
Current income tax expense   55,522,189    35,439,707 
Current tax adjustment previous period   (735,907)   713,992 
Foreign dividends tax withholding expense   6,987,142    4,534,145 
Other current tax expense (income)   (47,569)   (425,958)
Current income tax expense   61,725,855    40,261,886 
Expense (income) for the creation and reversal of temporary differences of deferred tax and others   (6,820,456)   20,905,005 
Expense (income) for deferred taxes   (6,820,456)   20,905,005 
Total income tax expense   54,905,399    61,166,891 

 

The distribution of national and foreign tax expenditure is as follows:

 

Income taxes  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Current taxes          
Foreign   (39,128,690)   (24,315,576)
National   (22,597,165)   (15,946,310)
Current tax expense   (61,725,855)   (40,261,886)
Deferred taxes          
Foreign   7,280,487    (24,012,798)
National   (460,031)   3,107,793 
Deferred tax expense   6,820,456    (20,905,005)
Income tax expense   (54,905,399)   (61,166,891)

37

 

 

The reconciliation of the tax expense using the statutory rate with the tax expense using the effective rate is as follows:

 

Reconciliation of effective rate  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Net income before taxes   178,022,719    236,413,116 
Tax expense at legal rate (27.0%)   (48,066,134)   (63,831,541)
Effect of a different tax rate in other jurisdictions   1,032,950    (3,471,705)
Permanent differences:          
Non-taxable revenues   (2,417,582)   9,507,807 
Non-deductible expenses   (6,007,898)   (4,664,045)
Tax effect on excess tax provided for in previous periods   113,747    (3,316,278)
Tax monetary restatement effect Chilean companies   (5,936,464)   5,199,589 
Foreign subsidiaries tax withholding expense and other legal tax debits and credits   6,375,982    (590,718)
Adjustments to tax expense   (7,872,215)   6,136,355 
Tax expense at effective rate   (54,905,399)   (61,166,891)
Effective rate   30.8%   25.9%

  

The applicable income tax rates in each of the jurisdictions where the Company operates are the following:

 

    Rate 
Country   2020   2019 
Chile    27.0%   27.0%
Brazil    34.0%   34.0%
Argentina    30.0%   30.0%
Paraguay    10.0%   10.0%

38

 

 

10.2       Deferred income taxes

 

The net cumulative balances of temporary differences that give rise to deferred tax assets and liabilities are detailed as follows:

 

   12.31.2020   12.31.2019 
Temporary differences  Assets   Liabilities   Assets   Liabilities 
  CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Property, plant and equipment   5,421,466    39,544,960    5,445,810    51,414,971 
Obsolescence provision   1,340,235    -    1,588,563    - 
ICMS exclusion credit   -    17,679,221    -    25,651,794 
Employee benefits   4,475,497    18,300    5,418,561    12,157 
Post-employment benefits   150,027    101,339    148,853    787,576 
Tax loss carry forwards (1)   6,423,820    -    7,607,813    - 
Tax goodwill Brazil   2,080,987    -    10,341,033    - 
Contingency provision   24,103,234    -    34,109,458    - 
Foreign Exchange differences (2)   8,116,713    -    9,284,450    - 
Allowance for doubtful accounts   915,562    -    756,895    - 
Assets and liabilities for placement of bonds   378,901    2,377,870    390,163    1,187,649 
Lease liabilities   1,528,990    -    2,242,439    - 
Inventories   469,416    -    447,192    - 
Distribution rights   -    144,151,661    -    163,107,412 
Hedging derivatives   -    -    -    - 
Others   3,785,655    7,060,830    -    3,705,078 
Subtotal   59,190,503    210,934,181    77,781,230    245,866,637 
Total assets and liabilities net   1,925,869    153,669,547    1,364,340    169,449,747 

 

(1)Tax losses mainly associated with the subsidiary Embotelladora Andina Chile S.A. Tax losses have no expiration date in Chile
(2)Corresponds to differed taxes for exchange rate differences generated on the translation of debt expressed in foreign currency in the subsidiary Rio de Janeiro Refrescos Ltda. and which for tax purposes are recognized in Brazil then incurred.

 

The movement in deferred income tax accounts is as follows:

 

Movement  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening Balance   168,085,407    145,245,948 
Increase (decrease) in deferred tax   4,411,619    20,905,005 
Increase (decrease) due to foreign currency translation (*)   (20,753,348)   1,934,454 
Total movements   (16,341,729)   22,839,459 
Ending balance   151,743,678    168,085,407 

 

(*) Includes IAS 29 effect, due to inflation in Argentina

39

 

 

11 – PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment are detailed below at the end of each period:

 

Property, plant and equipment, gross  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Construction in progress   34,194,083    27,290,581 
Land   94,321,726    104,196,754 
Buildings   266,921,167    299,282,674 
Plant and equipment   515,395,328    571,154,695 
Information technology equipment   24,323,557    23,912,963 
Fixed installations and accessories   45,558,495    46,062,659 
Vehicles   45,808,748    55,128,493 
Leasehold improvements   203,164    214,886 
Rights of use (1)   56,726,206    40,498,400 
Other properties, plant and equipment (2)   314,602,940    452,600,945 
Total Property, plant and equipment, gross   1,398,055,414    1,620,343,050 

 

Accumulated depreciation of Property, plant and equipment  12.31.2020  

 

12.31.2019

 
   CLP (000’s)   CLP (000’s) 
Buildings   (86,004,289)   (87,308,899)
Plant and equipment   (369,605,125)   (385,801,471)
Information technology equipment   (19,445,250)   (18,911,118)
Fixed installations and accessories   (27,910,603)   (26,219,378)
Vehicles   (29,397,964)   (33,167,346)
Leasehold improvements   (144,022)   (144,865)
Rights of use (1)   (35,388,929)   (8,254,568)
Other properties, plant and equipment (2)   (224,582,687)   (337,816,542)
Total accumulated depreciation   (792,478,869)   (897,624,187)
Total Property, plant and equipment, net   605,576,545    722,718,863 

 

(1) For adoption of IFRS 16. See details of underlying assets in Note 11.1

(2) The net balance of each of these categories is presented below:

 

Other Property, plant and equipment, net  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Bottles   30,275,255    44,071,742 
Marketing and promotional assets (market assets)   44,106,959    57,442,154 
Other Property, plant and equipment   15,638,039    13,270,507 
      Total   90,020,253    114,784,403 

40

 

 

11.1       Movements

 

Movements in Property, plant and equipment are detailed as follows:

 

  Construction
in progress
  Land  Buildings,
net
  Plant and
equipment, net
  IT
equipment, net
  Fixed
facilities
and
accessories,
net
  Vehicles, net  Leasehold
improvements,
net
  Others  Right-of-use, net  Property,
plant &
equipment, net
 
  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)   CLP (000’S) 
Opening balance at January 1, 2020   27,290,581   104,196,754   211,973,775   185,353,224   5,001,845   19,843,281   21,961,147   70,021   114,784,403   32,243,832   722,718,863 
Additions   37,726,227   -   1,520,363   8,963,015   809,348   (1,313)  1,323,740   -   30,536,408   -   80,877,788 
Additions right-of-use (1)   -   -   -   -   -   -   -   -   -   1,775,457   1,775,457 
Divestitures   -   -   (164,113)  (2,485,145)  (2,426)  -   (22,823)  -   (6,046,468)  (87,043)  (8,808,018)
Transfers between items of Property, plant and equipment   (23,336,382)  -   2,177,344   8,858,066   1,151,754   1,175,520   906,624   50,356   9,016,718   -   - 
Right-of-use transfers   -   -   -   -   -   -   -   -   -   -   - 
Depreciation expense   -   -   (7,240,230)  (33,465,104)  (2,058,555)  (2,803,621)  (4,963,835)  (44,630)  (48,830,152)  (99,406,127)    
Amortization   (7,851,901)  (7,851,901)                                    
Increase (decrease) to due foreign currency translation differences   (3,086,288)  (9,936,257)  (29,231,570)  (19,859,576)  (829,268)  (628,317)  (3,124,155)  (16,605)  (11,400,730)  (4,728,542)  (82,841,308)
Other increases (decreases) (2)   (4,400,055)  61,229   1,881,309   (1,574,277)  805,609   62,342   330,086   -   1,960,074   (14,526)  (888,209)
Total movements   6,903,502   (9,875,028)  (31,056,897)  (39,563,021)  (123,538)  (2,195,389)  (5,550,363)  (10,879)  (24,764,150)  (10,906,555)  (117,142,318)
Ending balance al 12.31.2020   34,194,083   94,321,726   180,916,878   145,790,203   4,878,307   17,647,892   16,410,784   59,142   90,020,253   21,337,277   605,576,545 

 

(1)Right of use assets is composed as follows:

 

Right-of-use  Gross asset   Accumulated
depreciation
   Net asset 
  CLP (000’s)   CLP (000’s)   CLP (000’s) 
Constructions and buildings   2,740,852    (1,326,250)   1,414,602 
Plant and Equipment   37,671,980    (19,802,307)   17,869,673 
IT Equipment   451,313    (449,249)   2,064 
Motor vehicles   7,298,422    (5,966,204)   1,332,218 
Others   8,563,639    (7,844,919)   718,720 
Total   56,726,206    (35,388,929)   21,337,277 

 

Lease liabilities interest expenses at the closing of the period reached CLP 2,047,387 thousand

41

 

 

(2)Corresponds mainly to the effect of adopting IAS 29 in Argentina

 

  Construction
in progress
  Land  Buildings, net  Plant and
equipment, net
  IT
equipment, net
  Fixed
facilities
and
accessories,
net
  Vehicles, net  Leasehold
improvements,
net
  Others  Right-of-use, net  Property,
plant &
equipment, net
 
   CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)   CLP (000’S) 
Opening balance at January 1, 2019   26,048,670   100,479,196   214,160,351   207,403,985   5,184,721   21,057,169   21,798,601   32,177   114,606,098   -   710,770,968 
Additions   49,134,461   -   749,800   11,582,259   675,974   7,271   (342,001)  1,309   32,640,210   -   94,449,283 
Additions right-of-use (1)   -   -   -   -   -   -   -   -   -   21,721,728   21,721,728 
Divestitures   (8,761)  -   (5,902)  (352,204)  (977)  (8,911)  (52,095)  (155)  (1,135,304)  -   (1,564,309)
Transfers between items of property, plant and equipment   (48,358,902)  2,268,316   430,971   20,735,065   1,019,048   1,379,012   7,650,847   65,250   14,810,393   -   - 
Right-of-use transfers (1)   (25,991)  -   (266,007)  (13,788,120)  (23,712)  -   (1,181,465)  -   (2,520,405)  17,805,700   - 
Depreciation expense   -   -   (7,681,481)  (37,572,910)  (1,949,851)  (2,977,512)  (6,267,039)  (30,737)  (42,410,016)  (98,889,546)    
Amortization (2)   -   -   -   -   -   -   -   -   -   (8,254,568)  (8,254,568)
Increase (decrease) to due foreign currency translation differences   688,063   1,529,526   4,685,319   3,228,519   83,757   386,253   464,563   2,177   2,216,555   1,024,539   14,309,271 
Other increase (decrease) (3)   (186,959)  (80,284)  (99,276)  (5,883,370)  12,885   (1)  (110,264)  -   (3,423,128)  (53,567)  (9,823,964)
Total movements   1,241,911   3,717,558   (2,186,576)  (22,050,761)  (182,876)  (1,213,888)  162,546   37,844   178,305   32,243,832   11,947,895 
Ending balance at 12.31.2019   27,290,581   104,196,754   211,973,775   185,353,224   5,001,845   19,843,281   21,961,147   70,021   114,784,403   32,243,832   722,718,863 

 

(1)By adoption of IFRS 16.
(2)Of the total of CLP 8,254,468 thousand recorded as amortization for the current period, CLP 5,994,037 thousand correspond to right-of-use amortization arising from the adoption of the IFRS, effective beginning on January 1, 2019. The remaining CLP 2,260,531 thousand correspond to depreciation (today amortization) of goods acquired under the financial lease method, which until December 31, 2018 were classified and valued pursuant to the accounting criteria of Property, plant and equipment.
(3)Mainly correspond to the effects of adopting IAS 29 in Argentina.

42

 

 

12 – RELATED PARTIES

 

Balances and main transactions with related parties are detailed as follows:

 

12.1Accounts receivable:

 

               12.31.2020  12.31.2019  
Taxpayer ID  Company  Relationship  Country  Currency  Current  Non-Current  Current  Non-Current  
           CLP (000’S)  CLP (000’s)  CLP (000’s)  CLP (000’s)  
96.891.720-K  Embonor S.A.  Shareholder related  Chile  CLP  3,643,603  -  6,589,539  -  
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  CLP  16,024  138,346  14,839  283,118  
Foreign  Coca Cola de Argentina  Director related  Argentina  ARS  4,558,753  -  1,203,389  -  
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  ARS  308,882  -  428,802  -  
96.517.210-2  Embotelladora Iquique S.A.  Shareholder related  Chile  CLP  292,801  -  278,176  -  
86.881.400-4  Envases CMF S.A.  Associate  Chile  CLP  773,732  -  217,510  -  
96.919.980-7  Cervecería Austral S.A.  Director related  Chile  USD  -  -  45,644  -  
77.755.610-K  Comercial Patagona Ltda.  Director related  Chile  CLP  -  -  3,872  -  
77.526.480-2  Comercializadora Nova Verde  Common shareholder  Chile  CLP  837,837  -  -  -  
76.572.588-7  Coca Cola del Valle New Ventures S.A.  Associate  Chile  CLP  1,401,898  -  2,003,203  -  
76.140.057-6  Monster  Associate  Chile  CLP  41,878  -  50,794  -  
Total              11,875,408  138,346  10,835,768  283,118  

 

12.2Accounts payable:

 

               12.31.2020  12.31.2019  
Taxpayer ID  Company  Relationship  Country  Currency  Current  Non-Current  Current  Non-Current  
               CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  CLP  18,897,093  -  20,555,135  -  
Foreign  Recofarma do Indústrias Amazonas Ltda.  Shareholder related  Brazil  BRL  7,926,109  10,790,089  14,888,934  19,777,812  
86.881.400-4  Envases CMF S.A.  Associate  Chile  CLP  3,856,973  -  6,359,797  -  
Foreign  Ser. y Prod. para Bebidas Refrescantes S.R.L.  Shareholder  Argentina  ARS  4,848,196  -  5,887,070  -  
Foreign  Leão Alimentos e Bebidas Ltda.  Associate  Brazil  BRL  1,323,609  -  1,841,377  -  
Foreign  Monster Energy Brasil Com de Bebidas Ltda.  Shareholder related  Brazil  BRL  1,156,786  -  827,300  -  
76.572.588-7  Coca Cola del Valle New Ventures S.A.  Associate  Chile  CLP  490,758  -  1,247,961  -  
89.996.200-1  Envases del Pacífico S.A.  Director related  Chile  CLP  3,414  -  25,202  -  
96.891.720-K  Embonor S.A.  Shareholder related  Chile  CLP  118,314  -  275,565  -  
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  ARS  402,581  -  929,986  -  
77.526.480-2  Comercializadora Nova Verde  Common shareholder  Chile  CLP  518,135  -  765,521  -  
Foreign  Coca Cola Panamá  Shareholder related  Panamá  USD  -  -  7,739  -  
Foreign  Sorocaba Refrescos S.A.  Associate  Brazil  BRL  -  -  26,014  -  
Total              39,541,968  10,790,089  53,637,601  19,777,812  

43

 

 

12.3Transactions:

 

Taxpayer ID  Company  Relationship  Country  Transaction Description  Currency  Accumulated
12.31.2020
  Accumulated
12.31.2019
 
                    CLP (000’s)  CLP (000’s)  
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  Concentrate purchase  CLP  139,193,479  150,548,253  
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  Advertising services purchase  CLP  2,890,638  4,369,500  
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  Water source lease  CLP  3,847,817  5,324,194  
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  Sale of raw materials and others  CLP  1,169,944  1,196,793  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of bottles  CLP  12,210,449  19,422,280  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Raw material purchase  CLP  16,055,991  16,814,062  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of caps  CLP  91,778  281,174  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of services and others  CLP  520,221  6,425,579  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Sale of services and others  CLP  1,578  -  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of packaging  CLP  5,992,443  521,466  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Sale of finished products  CLP  2,380,574  -  
86.881.400-4  Envases CMF S.A.  Associate  Chile  Sale of packaging/raw materials  CLP  6,344,834  6,132,091  
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Sale of finished products  CLP  44,982,749  50,315,292  
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Sale of services and others  CLP  447,092  268,526  
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Sale of raw material and material  CLP  197,288  212,517  
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Minimum Dividend  CLP  118,314  -  
96.517.310-2  Embotelladora Iquique S.A.  Shareholder related  Chile  Sale of finished products  CLP  167,430  3,208,559  
89.996.200-1  Envases del Pacífico S.A.  Director related  Chile  Raw material and material purchase  CLP  427  93,117  
Foreign  Recofarma do Indústrias Amazonas Ltda.  Shareholder related  Brazil  Concentrate purchase  BRL  71,959,416  91,426,935  
Foreign  Recofarma do Indústrias Amazonas Ltda.  Shareholder related  Brazil  Reimbursements and other purchases  BRL  220,708  5,977,419  
Foreign  Serv. y Prod. para Bebidas Refrescantes S.R.L.  Shareholder related  Argentina  Concentrate purchase  ARS  81,198,463  97,321,567  
Foreign  Serv. y Prod. para Bebidas Refrescantes S.R.L.  Shareholder related  Argentina  Advertising participation  ARS  6,395,881  4,111,764  
Foreign  KAIK Participações  Associate  Brazil  Reimbursements and other purchases  BRL  14,162  39,382  
Foreign  Sorocaba Refrescos S.A.  Associate  Brazil  Product purchase  BRL  3,671,472  1,049,709  
89.862.200-2  Latam Airlines Group S.A.  Director related  Chile  Product purchase  CLP  85,140  -  
76.572.588-7  Coca Cola Del Valle New Ventures S.A.  Associate  Chile  Sale of services and others  CLP  397,659  3,959,962  
76.572.588-7  Coca Cola Del Valle New Ventures S.A.  Associate  Chile  Purchase of services and others  CLP  4,410,223  -  
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  Payment of fees and services  ARS  1,373,594  802,563  
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  Product purchase  ARS  80,761  4,274,236  
77526480-2  Comercializadora Novaverde S.A.  Common shareholder  Chile  Sale of raw materials  CLP  10,914  -  
77526480-2  Comercializadora Novaverde S.A.  Common shareholder  Chile  Sale of finished products  CLP  2,050,156  -  
77526480-2  Comercializadora Novaverde S.A.  Common shareholder  Chile  Sale of services and others  CLP  459,707  -  
77526480-2  Comercializadora Novaverde S.A.  Common shareholder  Chile  Raw material purchase  CLP  1,009,547  -  

44

 

(GRAPHIC)

 

12.4Salaries and benefits received by key management

 

Salaries and benefits paid to the Company’s key management personnel including directors and managers are detailed as follows:

  

Description  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Executive wages, salaries and benefits   7,464,071    6,267,936 
Director allowances   1,479,420    1,512,000 
Accrued benefits last five years and payments during the fiscal year   297,072    305,674 
Benefit for contract termination   115,341    54,819 
Total   9,355,904    8,140,429 

 

13 – CURRENT AND NON-CURRENT EMPLOYEE BENEFITS

 

Employee benefits are detailed as follows:

 

Description  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Accrued vacation   14,650,267    17,584,587 
Participation in profits and bonuses   15,969,735    20,896,357 
Indemnities for years of service   14,086,575    10,085,264 
Total   44,706,577    48,566,208 

 

   CLP (000’s)   CLP (000’s) 
Current   31,071,019    38,392,854 
Non-Current   13,635,558    10,173,354 
Total   44,706,577    48,566,208 

  

13.1Indemnities for years of service

 

The movements of employee benefits, valued pursuant to Note 2 are detailed as follows:

 

Movements  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening balance   10,085,264    9,415,541 
Service costs   1,675,492    784,984 
Interest costs   369,332    354,471 
Actuarial variations   3,127,398    (210,956)
Benefits paid   (1,170,911)   (258,776)
Total   14,086,575    10,085,264 

45

 

(GRAPHIC) 

 

13.1.1Assumptions

 

The actuarial assumptions used are detailed as follows:

 

Assumptions  12.31.2020  12.31.2019
Real discount rate  -0.05%  2.7%
Expected salary increase rate  2.0%  2.0%
Turnover rate  7.68%  5.4%
Mortality rate  RV-2014  RV-2014
Retirement age of women  60 years  60 years
Retirement age of men  65 years  65 years

  

13.2Personnel expenses

 

Personnel expenses included in the consolidated statement of income are as follows:

 

Description  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Wages and salaries   187,600,163    194,740,646 
Employee benefits   48,504,899    58,005,213 
Severance benefits   3,238,966    6,987,184 
Other personnel expenses   12,993,234    13,389,967 
Total   252,337,262    273,123,010 

 

14 – INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD

 

14.1Description

 

Investments in associates using equity method of accounting are detailed as follows:

 

         Functional 

Investment value 

  

Ownership interest 

 
Taxpayer ID  Company  Country  currency  12.31.2020   12.31.2019   12.31.2020   12.31.2019 
86.881.400-4  Envases CMF S.A. (1)  Chile  CLP   20,185,148    18,561,835    50.00%   50.00%
Foreign  Leão Alimentos e Bebidas Ltda. (2)  Brazil  BRL   10,628,035    17,896,839    10.26%   10.26%
Foreign  Kaik Participações Ltda. (2)  Brazil  BRL   979,978    1,313,498    11.32%   11.32%
Foreign  SRSA Participações Ltda.  Brazil  BRL   48,032    65,301    40.00%   40.00%
Foreign  Sorocaba Refrescos S.A.  Brazil  BRL   20,976,662    24,636,945    40.00%   40.00%
Foreign  Trop Frutas do Brasil Ltda. (2)  Brazil  BRL   4,695,228    6,250,481    7.52%   7.52%
76.572.588.7  Coca Cola del Valle New Ventures S.A.  Chile  CLP   30,443,271    31,141,834    35.00%   35.00%
Total            87,956,354    99,866,733           

 

(1)In Envases CMF S.A., regardless of the percentage of ownership interest, it was determined that no controlling interest was held, only a significant influence, given that there was not a majority vote of the Board of Directors to make strategic business decisions.
(2)In these companies, regardless of the ownership interest, it has been defined that the Company has significant influence, given that it has the right to appoint directors.

46

 

 

(GRAPHIC)

 

14.2Movement

 

The movement of investments in other entities accounted for using the equity method is shown below:

 

Description  12.31.2020   12.31.2019 
  

CLP (000’s) 

  

CLP (000’s) 

 
Opening balance   99,866,733    102,410,945 
Dividends declared   (1,215,126)   (1,076,491)
Share in operating income   3,248,680    (2,495,621)
Amortization unrealized income in associates   (566,422)   (919,462)
Increase (decrease) in foreign currency translation, investments in associates   (13,377,511)   1,947,362 
Ending balance   87,956,354    99,866,733 

 

The main movements are explained below:

 

In 2020 Leão Alimentos e Bebidas Ltda. recognized the value of a plant at its value of use less the costs of sale, reducing the value previously recognized. Andina recognized as results for the 2020 period a proportional loss of CLP 2,931 million.
In the 2020 period Sorocaba Refrescos S.A., recognized a tax credit for excluding ICMS from the PIS and COFINS calculation base. Andina recognized as results for the 2020 period a proportional result of CLP 2,134 million.
Dividends declared in 2020 correspond mainly to Envases CMF S.A.

 

14.3Reconciliation of share of profit in investments in associates:

 

Description  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Equity value on income of associates   3,248,680    (2,495,621)
Unrealized earnings from product inventory acquired from associates and not sold at the end of the period, which is presented as a discount in the respective asset account (containers and / or inventory)   (528,122)   (394,490)
Amortization goodwill in the sale of fixed assets of Envases CMF S.A.   85,266    85,266 
Amortization goodwill preferential shares CCDV S.A.   (523,061)   (610,238)
Income statement balance   2,228,763    (3,415,083)

 

14.4Summary financial information of associates:

  

At December 31, 2020:

 

  

Envases

CMF S.A.

  

Sorocaba

Refrescos
S.A.

  

Kaik
Participações
Ltda.

  

SRSA
Participações
Ltda.

  

Leão Alimentos
e Bebidas

Ltda.

  

Trop Frutas
do
Brasil
Ltda.

  

Coca-Cola del
Valle New
Ventures S.A.

 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Total assets   75,089,424    86,802,489    8,657,291    288,440    144,111,310    76,012,734    105,735,317 
Total liabilities   34,633,862    41,781,275    26    168,354    37,634,466    21,236,127    20,000,197 
Total revenue   40,455,562    45,021,214    8,657,265    120,086    144,111,310    54,776,607    85,735,120 
Net income (loss) of associates   4,717,515    664,208    96,980    117,350    (39,244,393)   (890,021)   (475,467)
                                    
Reporting date   12.31.2020    11.30.2020    11.30.2020    11.30.2020    11.30.2020    11.30.2020    12.31.2020 

47

 

(GRAPHIC)

 

At December 31, 2019 

 

  

Envases
CMF S.A.

  

Sorocaba

Refrescos
S.A.

  

Kaik
Participações
Ltda.

  

SRSA
Participações
Ltda.

  

Leão
Alimentos
e Bebidas

Ltda.

  

 

Trop Frutas do
Brasil Ltda.

  

Coca-Cola del
Valle New
Ventures S.A.

 
  

CLP (000’S)

  

CLP (000’S)

  

CLP (000’S)

  

CLP (000’S)

  

CLP (000’S)

  

CLP (000’S)

  

CLP (000’S)

 
Total assets   77,994,582    116,551,131    11,661,828    393,856    248,493,994    104,778,397    107,388,847 
Total liabilities   39,826,283    54,650,105    35    229,780    38,137,061    27,158,470    18,693,717 
Total revenue   58,640,058    69,343,990    337,450    160,342    139,769,189    47,252,571    31,914,825 
Net income (loss) of associates   1,449,997    3,948,798    337,450    160,342    2,320,841    (1,177,262)   4,297,003 
    77,994,582    116,551,131    11,661,828    393,856    248,493,994    104,778,397    107,388,847 
Reporting date   12.31.2019    11.30.2019    11.30.2019    11.30.2019    11.30.2019    11.30.2019    11.30.2019 

 

15 - INTANGIBLE ASSETS OTHER THAN GOODWILL

  

Intangible assets other than goodwill are detailed as follows:

 

   December 31, 2020   December 31, 2019 
   Gross   Accumulated   Net   Gross   Accumulated   Net 
Description  Value   Amortization   Value   Value   Amortization   Value 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Distribution rights (1)   598,371,081    (2,005,344)   596,365,737    667,148,383    (393,187)   666,755,196 
Software   35,030,003    (26,882,550)   8,147,453    34,347,843    (26,484,427)   7,863,416 
Others   417,957    (416,982)   975    750,309    (293,546)   456,763 
Total   633,819,041    (29,304,876)   604,514,165    702,246,535    (27,171,160)   675,075,375 

 

(1)Correspond to the contractual rights to produce and distribute Coca-Cola products in certain parts of Argentina, Brazil, Chile and Paraguay. Distribution rights result from the valuation process at fair value of the assets and liabilities of the companies acquired in business combinations. Production and distribution contracts are renewable for periods of 5 years with Coca-Cola. The nature of the business and renewals that Coca-Cola has permanently done on these rights, allow qualifying them as indefinite contracts.

 

The distribution rights together with the assets that are part of the cash-generating units, are annually subjected to the impairment test. Such distribution rights have an indefinite useful life and are not subject to amortization: except for the Monster rights that are amortized in the term of the agreement which is 4 years.

 

Distribution rights  12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Chile (excluding Metropolitan Region, Rancagua and San Antonio)   303,702,092    305,235,247 
Brazil (Rio de Janeiro, Espirito Santo, Ribeirão Preto and investments in Sorocaba and Leão Alimentos e Bebidas Ltda.)   138,176,054    187,616,890 
Paraguay   152,595,420    171,841,663 
Argentina (North and South)   1,892,171    2,061,396 
Total   596,365,737    666,755,196 

48

 

(GRAPHIC)

 

The movement and balances of identifiable intangible assets are detailed as follows:

 

   January 1 to December 31, 2020   January 1 to December 31, 2019 
   Distribution               Distribution             
Description  rights   Others   Software   Total   rights   Others   Software   Total 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Opening balance   666,755,196    456,763    7,863,416    675,075,375    661,026,400    430,196    7,365,957    668,822,553 
Additions   94,661    -    2,575,125    2,669,786    -    -    3,296,558    3,296,558 
Amortization   (1,573,878)   -    (2,088,612)   (3,662,490)   (133,753)   -    (2,324,225)   (2,457,978)
Other increases (decreases) (1)   (68,910,242)   (455,786)   (202,478)   (69,568,506)   5,862,549    26,567    (474,874)   5,414,242 
Ending balance   596,365,737    977    8,147,451    604,514,165    666,755,196    456,763    7,863,416    675,075,375 

 

(1)Mainly corresponds to restatement due to the effects of translation of distribution rights of foreign subsidiaries.

  

16 - GOODWILL

 

Movement in Goodwill is detailed as follows:

 

Operating segment

 

01.01.2020

  

Translation differences

from functional

currency

  

12.31.2020

 
   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Chilean operation   8,503,023    -    8,503,023 
Brazilian operation   75,674,072    (19,672,659)   56,001,413 
Argentine operation   29,750,238    (2,406,596)   27,343,642 
Paraguayan operation   7,294,328    (816,813)   6,477,515 
Total   121,221,661    (22,896,068)   98,325,593 

 

Operating segment

 

01.01.2019

 

Translation differences

from functional

currency

  

 

12.31.2019

 
   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Chilean operation   8,503,023    -    8,503,023 
Brazilian operation   73,080,100    2,593,972    75,674,072 
Argentine operation   28,318,129    1,432,109    29,750,238 
Paraguayan operation   7,327,921    (33,593)   7,294,328 
Total   117,229,173    3,992,488    121,221,661 

49

 

(GRAPHIC)

 

17 – OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES

 

Liabilities are detailed as follows:

 

   Balance 
   Current   Non-current 
   12.31.2020   12.31.2019   12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Bank loans (17.1.1 – 2)   799,072    1,438,161    4,000,000    909,486 
Bonds payable, net (1)(Note 17.2)   18,705,015    21,604,601    918,921,342    718,962,871 
Deposits in guarantee   12,126,831    11,163,005    -    - 
Derivative contract liabilities (Note 22)   1,217,322    374,576    51,568,854    - 
Leasing agreements (Note 17.4.1 – 2)   5,718,484    6,013,535    15,339,373    23,454,700 
Total   38,566,724    40,593,878    989,829,569    743,327,057 

 

(1)Amounts net of issuances expenses and discounts related to issuance.

 

The fair value of financial assets and liabilities is presented below:

 

Current 

Book Value

12.31.2020

  

Fair Value

12.31.2020

  

Book Value

12.31.2019

  

Fair Value

12.31.2019

 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Cash and cash equivalent (2)   309,530,699    309,530,699    157,567,986    157,567,986 
Other financial assets (1)   -    -    317,205    317,205 
Trade debtors and other accounts receivable (2)   194,664,683    194,664,683    191,077,588    191,077,588 
Accounts receivable related companies (2)   11,875,408    11,875,408    10,835,768    10, 835,768 
Bank loans (2)   799,072    896,307    1,438,161    1,434,255 
Bonds payable (2)   18,705,015    22,471,852    21,604,601    24,188,060 
Bottle guaranty deposits (2)   12,126,831    12,126,831    11,163,005    11,163,005 
Derivative contracts liabilities (see note 20) (1)   1,217,322    1,217,322    374,576    374,576 
Leasing agreements (2)   5,542,356    5,542,356    6,013,535    6,013,535 
Accounts payable (2)   230,438,133    230,438,133    243,700,553    243,700,553 
Accounts payable related companies (2)   39,541,968    39,541,968    53,637,601    53,637,601 

 

Non-current  12.31.2020   12.31.2020   12.31.2019   12.31.2019 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Other financial assets (1)   150,983,295    150,983,295    98,918,457    98,918,457 
Accounts receivable, non-current (2)   73,862    73,862    523,769    523,769 
Accounts receivable related companies (2)   138,346    138,346    283,118    283,118 
Bank loans (2)   4,000,000    4,056,753    909,486    867,025 
Bonds payable (2)   918,921,342    1,088,617,557    718,962,871    803,017,145 
Forward agreements (see note 20) (1)   15,339,373    15,339,373    23,454,700    23,454,700 
Leasing agreements (2)   295,279    295,279    619,587    619,587 
Accounts payable, non-current (2)   150,983,295    150,983,295    98,918,457    98,918,457 

 

(1)Fair values are based on discounted cash flows using market discount rates at the close of the six-month and one-year period and are classified as Level 2 of the fair value measurement hierarchies.

 

(2)Financial instruments such as: Cash and Cash Equivalents, Trade and Other Accounts Receivable, Accounts Receivable, Bottle Guarantee Deposits and Trade Accounts Payable, and Other Accounts Payable present a fair value that approximates their carrying value, considering the nature and term of the obligation. The business model is to maintain the financial instrument in order to collect/pay contractual cash flows, in accordance with the terms of the contract, where cash flows are received/cancelled on specific dates that exclusively constitute payments of principal plus interest on that principal. These instruments are revalued at amortized cost.

50

 

(GRAPHIC)

 

17.1.1 Bank liabilities, current

 

                           Maturity  Total 
Indebted entity  Creditor Entity       Type of  Nominal  Up to  90 days to  At  At 
Taxpayer ID  Name  Country  Taxpayer ID  Name  Country  Currency  Amortization  Rate  90 days  1 year 

12.31.2020

  12.31.2019 
                            CLP
(000’S)
  CLP
(000’S)
  CLP
(000’S)
  CLP
(000’S)
 
96.705.990-0  Envases Central S.A.  Chile  97.006.000-6  Banco BCI  Chile  UF  Semiannually   2.13% -  760,667  760,667  748,838 
96.705.990-0  Envases Central S.A.  Chile  97.006.000-6  Banco BCI  Chile  UF  Semiannually   2.00% 33,111  -  33,111  - 
Foreign  Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Galicia y Buenos Aires S.A.  Argentina  AR  Upon maturity   82.00% -  -  -  8,453 
Foreign  Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Galicia y Buenos Aires S.A.  Argentina  AR  Monthly   22.00% 5,294  -  5,294    
Foreign  Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Banco Itaú  Brasil  BRL  Monthly   6.63% -  -  -  635,727 
Foreign  Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Banco Itaú  Brasil  BRL  Quarterly   4.50% -  -  -  45,143 
                               Total  799,072  1,438,161 

 

17.1.2 Bank liabilities, non-current

 

                           Maturity 
Indebted entity  Creditor Entity     Type of  Nominal  1 year
up to
 

More

than

2 years
Up to

 

More

than

3 years
Up to

  More
than 4
years
Up to
  More
than 5
  at 
Taxpayer ID  Name  Country  Taxpayer ID  Name  Country  Currency  Amortization  Rate  2 years  3 years  4 years  5 years  Years  12.31.2020 
                          

CLP
(000’s)

 

CLP
(000’s)

 

CLP
(000’s)

 

CLP
(000’s)

 

CLP
(000’s)

 

CLP
(000’s)

 
96.705.990-0  Envases Central S.A.  Chile  97.006.000-6  Banco BCI  Chile   UF  Semiannually  2.00% -  -  4,000,000  -  -  4,000,000 
                                    Total     4,000,000 

 

17.1.3 Bank liabilities, non-current previous year

 

                              Maturity 
Indebted Entity  Creditor Entity     Type  Effective  Nominal  1 year
up to
  More
than
2 years
Up to
  More
than
3 years
Up to
  More
than
4 years
Up to
  More
than 5
  at 
Tax ID  Name  Country  Tax ID  Name  Country  Currency  Amortization  Rate  Rate  2 years  3 years  4 years  5 years  Years  12.31.2019 
                              CLP
(000’s)
  CLP
(000’s)
  CLP
(000’s)
  CLP
(000’s)
  CLP
(000’s) 
  CLP
(000’s) 
 
96.705.990-0  Envases Central S.A.  Chile  97.006.000-6  Banco BCI  Chile  UF  Semiannually  2.13% 2.13% 736,033  -  -  -  -  736,033 
Foreign  Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Banco Itaú  Brazil  BRL  Monthly  6.63% 6.63% 44,621  44,621  44,621  39,590  -  173,453 
                                       Total     909,486 

51

 

(GRAPHIC)

 

17.1.4 Current and non-current bank liabilities “Restrictions”

 

Bank obligations are not subject to restrictions for the reported periods.

 

17.2Bonds payable

 

On January 21, 2020, the Company issued corporate bonds on the international market for USD 300 million with a 30-year maturity, with a bullet structure and an annual interest rate of 3.950%.

 

During 2018, Andina carried out a debt restructuring process that consisted of a partial repurchase in the amount of USD 210 million of the 144A/RegS Senior Notes and refinancing it with the placement of Series F bonds in the local market in the amount of UF 5.7 million due 2039 and accruing an annual interest rate of 2.83%. The costs corresponding to the repurchase of bonds, associated with premium payments, overpricing and proportional amortization of placement costs and discounts in bonds in original U.S. Dollars amounting to CLP 9,583,000 thousand, were recorded in results under the item financial costs.

 

   Current   Non-current   Total 
Composition of bonds payable  12.31.2020   12.31.2019   12.31.2020   12.31.2019   12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Bonds (face value) 1   19,347,033    22,189,595    925,968,913    721,950,553    945,315,946    744,140,148 

 

 

 

1 Gross amounts, do not consider issuance expenses and discounts related to issuance.

 

17.2.1Current and non-current balances

 

Bonds payable correspond to bonds in UF issued by the parent company on the Chilean market and bonds in U.S. dollars issued by the Parent Company on the international market. A detail of these instruments is presented below:

 

      Current
nominal
  Adjustment  Interest    Final  Interest   Current   Non-current 
Bonds  Series  amount  unit  rate   maturity  payment  12.31.2020   12.31.2019   12.31.2020   12.31.2019 
                     CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
CMF Registration N° 254 06.13.2001  B  1,771,585  UF   6,5%  12-01-2026  Semiannually   7,776,693    7,160,809    40,388,468    46,659,296 
CMF Registration N° 641 08.23.2010  C  1,500,000  UF   4,0%  08-15-2031  Semiannually   647,672    630,731    43,605,495    42,464,910 
CMF Registration N° 759 08.20.2013  C  0  UF   3,5%  08-16-2020  Semiannually   -    7,168,907    -    - 
CMF Registration N° 760 08.20.2013  D  4,000,000  UF   3,8%  08-16-2034  Semiannually   1,629,677    1,587,051    116,281,320    113,239,760 
CMF Registration N° 760 04.02.2014  E  3,000,000  UF   3,75%  03-01-2035  Semiannually   1,083,063    1,048,938    87,210,999    84,929,828 
CMF Registration N° 912 10.10.2018  F  5,700,000  UF   2,83%  09-25-2039  Semiannually   1,234,601    1,195,700    165,700,881    161,366,658 
Bonds USA 2023 10.01.2013  -  365,000,000  US$   5,0%  10-01-2023  Semiannually   3,243,709    3,397,459    259,496,750    273,290,101 
Bonds USA 2050 01.21.2020  -  300,000,000  US$   3,95%  01-21-2050  Semiannually   3,731,618    -    213,285,000    - 
                    Total   19,347,033    22,189,595    925,968,913    721,950,553 

52

 

(GRAPHIC)

 

17.2.3Non-current maturities

 

       Year of maturity   Total non-current 
   Series   More than 1 up to 2   More than 2 up to 3   More than 3 up to 4   More than 5   12.31.2020 
      

CLP (000’s)

  

CLP (000’s)

  

CLP (000’s)

   CLP (000’s)   CLP (000’s) 
CMF Registration N° 254 06.13.2001  B    8,013,138    8,533,990    9,088,700    14,752,640    40,388,468 
CMF Registration N° 641 08.23.2010  C    3,964,136    3,964,136    3,964,136    31,713,087    43,605,495 
CMF Registration N° 760 08.20.2013  D    -    -    -    116,281,320    116,281,320 
CMF Registration N° 760 04.02.2014  E    -    -    -    87,210,999    87,210,999 
CMF Registration N° 912 10.10.2018  F    -    -    -    165,700,881    165,700,881 
USA Bonds  -    -    259,496,750    -    -    259,496,750 
USA 2 Bonds  -    -    -    -    213,285,000    213,285,000 
Total       11,977,274    271,994,876    13,052,836    628,943,927    925,968,913 

 

17.2.4Market rating

 

The bonds issued on the Chilean market had the following rating:

 

AA: ICR Compañía Clasificadora de Riesgo Ltda. rating
AA: Fitch Chile Clasificadora de Riesgo Limitada rating

 

The rating of bonds issued on the international market had the following rating:

 

BBB: Standard&Poors Global Ratings
BBB+: Fitch Ratings Inc.

 

17.2.5Restrictions

 

17.2.5.1Restrictions regarding bonds placed abroad.

 

Obligations with bonds placed abroad are not affected by financial restrictions for the periods reported.

 

17.2.5.2Restrictions regarding bonds placed in the local market.

 

Restrictions on the issuance of bonds for a fixed amount registered under number 254.

  

In October 2020, the Consolidated Financial Liabilities/Consolidated Equity no more than 1.20 times covenant was amended as follows:

 

Maintain an indebtedness level where Net Consolidated Financial Liabilities to Consolidated Equity does not exceed 1.20 times. For these purposes Net Consolidated Financial Liabilities shall be regarded as (i) “Other Current Financial Liabilities,” plus (ii) “Other Non-Current Financial Liabilities,” less (iii) the addition of “Cash and Cash Equivalents” plus “Other Current Financial Assets;” plus “Other Non-Current Financial Assets) (to the extent they correspond to asset balances of derivative financial instruments, taken to cover exchange rate and/or interest rate risks on financial liabilities). Consolidated Equity will be regarded as total equity including non-controlling interest.

 

As of December 31, 2020, this ratio is 0.51 times.

 

Maintain, and in no manner lose, sell, assign or transfer to a third party, the geographical area currently denominated as the “Metropolitan Region” (Región Metropolitana) as a territory in Chile in which we have been authorized by The Coca-Cola Company for the development, production, sale and distribution of products and brands of the licensor, in accordance to the respective bottler or license agreement, renewable from time to time.

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Not lose, sell, assign, or transfer to a third party any other territory of Argentina or Brazil, which as of this date is franchised by TCCC to the Company for the development, production, sale and distribution of products and brands of such licensor, as long as any of these territories account for more than 40% of the Issuer’s Adjusted Consolidated Operating Cash Flow.

 

Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities.

 

Unsecured consolidated liabilities payable shall be regarded as the total liabilities, obligations and debts of the issuer that are not secured by real guarantees on goods and assets of the latter, voluntarily and conventionally constituted by the issuer less the asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

Consolidated Assets free of any pledge, mortgage or other lien will only be regarded as those assets free of any pledge, mortgage or other real lien voluntarily and conventionally constituted by the issuer less asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities and under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

As of December 31, 2020, this ratio is 1.55 times.

 

Restrictions to bond lines registered in the Securities Registered under number 641, series C

 

Maintain a level of “Net Financial Debt” within its quarterly financial statements that may not exceed 1.5 times, measured over figures included in its consolidated statement of financial position. To this end, net financial debt shall be defined as the ratio between net financial debt and total equity of the issuer (equity attributable to controlling owners plus non-controlling interest). On its part, net financial debt will be the difference between the Issuer’s financial debt and cash.

 

As of December 31, 2020, Net Financial Debt level was 0.51 times.

 

Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities.

 

Unencumbered assets refer to the assets that are the property of the issuer; classified under Total Assets of the Issuer’s Financial Statements; and that are free of any pledge, mortgage or other liens constituted in favor of third parties, less “Other Current Financial Assets” and “Other Non-Current Financial Assets” of the Issuer’s Financial Statements (to the extent they correspond to asset balances of derivative financial instruments, taken to hedge exchange rate and interest rate risk of the financial liabilities).

 

Unsecured total liabilities correspond to: liabilities from Total Current Liabilities and Total Non-Current Liabilities of Issuer’s Financial Statement which do not benefit from preferences or privileges, less “Other Current Financial Assets” and “Other Non-Current Financial Assets” of the Issuer’s Financial Statements (to the extent they correspond to asset balances of derivative financial instruments, taken to hedge exchange rate and interest rate risk of the financial liabilities).

 

As of December 31, 2020, this ratio is 1.55 times.

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Maintain a level of “Net Financial Coverage” greater than 3 times in its quarterly financial statements. Net financial coverage means the ratio between the issuer’s Ebitda of the last 12 months and the issuer’s Net Financial Expenses in the last 12 months. Net Financial Expenses will be regarded as the difference between the absolute value of interest expense associated with the issuer’s financial debt account accounted for under “Financial Costs”; and interest income associated with the issuer’s cash accounted for under the Financial Income account. However, this restriction shall be deemed to have been breached where the mentioned level of net financial coverage is lower than the level previously indicated during two consecutive quarters.

 

As of December 31, 2020, Net Financial Coverage level is 8.50 times.

 

Restrictions to bond lines registered in the Securities Registrar under number 760 D-E.

 

Maintain an indebtedness level where Net Consolidated Financial Liabilities to Consolidated Equity does not exceed 1.20 times. For these purposes Net Consolidated Financial Liabilities shall be regarded as (i) “Other Current Financial Liabilities,” plus (ii) “Other Non-Current Financial Liabilities,” less (iii) the addition of “Cash and Cash Equivalents” plus “Other Current Financial Assets;” plus “Other Non-Current Financial Assets) (to the extent they correspond to asset balances of derivative financial instruments, taken to cover exchange rate and/or interest rate risks on financial liabilities). Consolidated Equity will be regarded as total equity including non-controlling interest.

 

As of December 31, 2020, Indebtedness Level is 0.51 times of Consolidated Equity.

 

Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities payable.

 

Unsecured Consolidated Liabilities Payable shall be regarded as the total liabilities, obligations and debts of the issuer that are not secured by real guarantees on goods and assets of the latter, voluntarily and conventionally constituted by the issuer less the asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

The following will be considered in determining Consolidated Assets: assets free of any pledge, mortgage or other lien, as well as those assets having a pledge, mortgage or real encumbrances that operate solely by law, less asset balances of derivative financial instruments, taken to hedge exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Financial Statements. Therefore, Consolidated Assets free of any pledge, mortgage or other lien will only be regarded as those assets free of any pledge, mortgage or other real lien voluntarily and conventionally constituted by the issuer less asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities and under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

As of December 31, 2020, this ratio is 1.55 times.

 

Maintain, and in no manner, lose, sell, assign or transfer to a third party, the geographical area currently denominated as the “Metropolitan Region” as a territory franchised to the Issuer in Chile by The Coca-Cola Company, hereinafter also referred to as “TCCC” or the “Licensor” for the development, production, sale and distribution of products and brands of said licensor, in accordance to the respective bottler or license agreement, renewable from time to time. Losing said territory, means the non-renewal, early termination or cancellation of this license agreement by TCCC, for the geographical area today called “Metropolitan Region”. This reason shall not apply if, as a result of the loss, sale, transfer or disposition, of that licensed territory is purchased or acquired by a subsidiary or an entity that consolidates in terms of accounting with the Issuer.

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Not lose, sell, assign, or transfer to a third party any other territory of Argentina or Brazil, which as of the issuance date of these instruments is franchised by TCCC to the Issuer for the development, production, sale and distribution of products and brands of such licensor, as long as any of these territories account for more than 40% of the Issuer’s Adjusted Consolidated Operating Cash Flow of the audited period immediately before the moment of loss, sale, assignment or transfer. For these purposes, the term “Adjusted Consolidated Operating Cash Flow” shall mean the addition of the following accounting accounts of the Issuer’s Consolidated Statement of Financial Position: (i) “Gross Profit” which includes regular activities and cost of sales; less (ii) “Distribution Costs”; less (iii) “Administrative Expenses”; plus (iv) “Participation in profits (losses) of associates and joint ventures that are accounted for using the equity method”; plus (v) “Depreciation”; plus (vi) “Intangibles Amortization”.

 

Restrictions to bond lines registered in the Securities Registrar under number 912.

 

Maintain an indebtedness level where Net Consolidated Financial Liabilities to Consolidated Equity does not exceed 1.20 times. For these purposes Net Consolidated Financial Liabilities shall be regarded as (i) “Other Current Financial Liabilities,” plus (ii) “Other Non-Current Financial Liabilities,” less (iii) the addition of “Cash and Cash Equivalents” plus “Other Current Financial Assets;” plus “Other Non-Current Financial Assets) (to the extent they correspond to asset balances of derivative financial instruments, taken to cover exchange rate and/or interest rate risks on financial liabilities). Consolidated Equity will be regarded as total equity including non-controlling interest.

 

As of December 31, 2020, this ratio is 0.51 times.

 

Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities payable. Unsecured Consolidated Liabilities Payable shall be regarded as the total liabilities, obligations and debts of the issuer that are not secured by real guarantees on goods and assets of the latter, voluntarily and conventionally constituted by the issuer less the asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position. The following will be considered in determining Consolidated Assets: assets free of any pledge, mortgage or other lien, as well as those assets having a pledge, mortgage or real encumbrances that operate solely by law, less asset balances of derivative financial instruments, taken to hedge exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Financial Statements. Therefore, Consolidated Assets free of any pledge, mortgage or other lien will only be regarded as those assets free of any pledge, mortgage or other real lien voluntarily and conventionally constituted by the issuer less asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities and under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

As of December 31, 2020, this ratio is 1.55 times.

 

Not lose, sell, assign, or transfer to a third party any other territory of Argentina or Brazil, which as of the issuance date of local bonds Series C, D and E is franchised by TCCC to the Issuer for the development, production, sale and distribution of products and brands of such licensor, as long as any of these territories account for more than 40% of the Issuer’s Adjusted Consolidated Operating Cash Flow of the audited period immediately before the moment of loss, sale, assignment or transfer. For these purposes, the term “Adjusted Consolidated Operating Cash Flow” shall mean the addition of the following accounting accounts of the Issuer’s Consolidated Statement of Financial Position: (i) “Gross Profit” which includes regular activities and cost of sales; less (ii) “Distribution Costs”; less (iii) “Administrative Expenses”; plus (iv) “Participation in profits (losses) of associates and joint ventures that are accounted for using the equity method”; plus (v) “Depreciation”; plus (vi) “Intangibles Amortization”.

 

As of December 31, 2020 and 2019, the Company complies with all financial collaterals.

  

17.3Derivative contract liabilities

 

Please see details in Note 22

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17.4.1Current liabilities for leasing agreements

 

                         Maturity   Total 
Debtor Entity  Creditor Entity     Type of  Nominal   Up to   90 days to   At   At 
Name  Country  Taxpayer ID  Name  Country  Currency  Amortization  Rate   90 days   1 year   12.31.2020   12.31.2019 
                         CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Cogeração - Light ESCO  Brasil  BRL  Monthly   12.28%  166,711   531,815   698,526    839,502 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Tetra Pack  Brasil  BRL  Monthly   7.39%  61,617   147,121   208,738    360,854 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Real estate  Brasil  BRL  Monthly   8.20%  66,160   117,534   183,694    300,338 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Leão  Brasil  BRL  Monthly   6.56%  68,366   200,944   269,310    497,386 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Tetra Pak SRL  Argentina  USD  Monthly   12.00%  20,867   62,602   83,469    132,815 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Comafi  Argentina  USD  Monthly   12.00%  31,232   93,695   124,927    88,739 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Real estate  Argentina  ARS  Monthly   50.00%  65,656   148,249   213,905    189,320 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Systems  Argentina  USD  Monthly   1.00%  20,556   61,671   82,227    1,169,884 
Vital Aguas S.A.  Chile  76.389.720-6  Coca Cola del Valle New Ventures S.A  Chile  CLP  Linear   7.50%  289,312   882,152   1,171,464    2,198,998 
Envases Central S.A  Chile  96.705.990-0  Coca Cola del Valle New Ventures S.A  Chile  CLP  Linear   8.40%  565,631   1,724,833   2,290,464    235,699 
Paraguay Refrescos SA  Paraguay  80.003.400-7  Tetra Pack Ltda. Suc. Py  Paraguay  PGY  Monthly   1.00%  55,952   159,680   215,632    - 
Transportes Polar S.A.  Chile  96.928.520-7  Cons. Inmob. e Inversiones Limitada  Chile  UF  Monthly   2.89%  22,944   69,834   92,778    - 
Embotelladora Andina S.A  Chile  91.144.000-8  Central de Restaurante Aramark Ltda.  Chile  CLP  Monthly   1.30%  20,736   62,614   83,350    - 
                              Total   5,718,484    6,013,535 

 

The Company maintains lease agreements on forklifts, vehicles, real estate and machinery. These leases have an average life of between one and eight years without including a renewal option in the contracts.

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17.4.2        Non-current liabilities for leasing agreements, non-current

 

                    Maturity        

Debtor Entity

  Creditor Entity     Amortization  

Nominal

  

1 year to

 

2 years to

 

3 years to

 

4 years to

  More than 

At

 
Name  Country  Taxpayer ID  Name  Country  Currency  Type   Rate  

2 years 

 

3 years 

 

4 years 

 

5 years 

 

5 years 

 

12.31.2020 

 
                          CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S) 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Cogeração - Light ESCO  Brazil  BRL  Monthly   12.28%   789,334   891,946   1,007,901   1,138,928   4,827,833   8,655,942 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Tetra Pack|  Brazil  BRL  Monthly   7.39%   95,856   -   -   -   -   95,856 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Real estate  Brazil  BRL  Monthly   8.20%   72,906   32,980   23,547   -   -   129,433 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Leão Alimentos e Bebidas Ltda.  Brazil  BRL  Monthly   6.56%   261,577   249,681   243,911   225,680   51,007   1,031,856 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Comafi  Argentina  USD  Monthly   12.00%   -   20,867   -   -   -   20,867 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Tetra Pak SRL  Argentina  USD  Monthly   12.00%   -   249,854   -   249,854   72,874   572,582 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Real estate  Argentina  ARS   Monthly   50.00%   -   128,930   -   -   -   128,930 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Real estate  Argentina  ARS   Monthly   50.00%   -   95,931   -   -   -   95,931 
Vital Aguas S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A  Chile  CLP  Monthly   8.20%   1,107,140   -   -   -   -   1,107,140 
Envases Central S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A  Chile  CLP  Monthly   9.00%   2,967,864   -   -   -   -   2,967,864 
Paraguay Refrescos SA  Paraguay  80.003.400-7  Tetra Pack Ltda. Suc. Py  Paraguay  PGY  Monthly   1.00%   -   163,635   -   -   -   163,635 
Transportes Polar S.A.  Chile  76.413.243-2  Cons. Inmob. e Inversiones Limitada  Chile  UF  Monthly   2.89%   -   193,789   -   161,551   -   355,340 
Embotelladora Andina S.A  Chile  76.178.360-2  Central de Restaurante Aramark Ltda.  Chile  CLP  Monthly   1.30%   -   13,997   -   -   -   13,997 
                                           Total   15,339,373 

 

17.4.3 Non-current liabilities for leasing agreements (previous year)

 

      Maturity        

Debtor Entity

  Creditor Entity     Amortization 

Nominal

  

1 year to

 

2 years to

 

3 years to

 

4 years to

  More than 

At

 
Name  Country  Taxpayer ID  Name  Country  Currency  Type  Rate  

2 years 

 

3 years 

 

4 years 

 

5 years 

 

5 years 

  12.31.2019 
                         CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S)  CLP (000’S) 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Cogeração - Light ESCO  Brazil  BRL  Monthly   12.28%   948,466   1.071.766   1.211.096   1.368.538   8.101.730   12.701.596 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Tetra Pack  Brazil  BRL  Monthly   7.39%   271,264   111.005   -   -   -   382.269 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Real estate  Brazil  BRL  Monthly   8.20%   97,784   9.144   -   -   -   106.928 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Leão Alimentos e Bebidas Ltda.  Brazil  BRL  Monthly   6.56%   365,671   355.172   339.020   331.185   375.688   1.766.736 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Tetra Pak SRL  Argentina  USD  Monthly   12.00%   -   398.442   -   343.104   -   741.546 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Comafi  Argentina  USD  Monthly   12.00%   -   110.924   -   -   -   110.924 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Real estate  Argentina  ARS   Monthly   50.00%   -   55.222   -   -   -   55.222 
Vital Aguas S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A  Chile  CLP  Monthly   8.20%   2,242,278   -   -   -   -   2.242.278 
Envases Central S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A  Chile  CLP  Monthly   9.0%   4,947,745   -   -   -   -   4.947.745 
Paraguay Refrescos SA  Paraguay  80.003.400-7  Tetra Pack Ltda. Suc. Py  Paraguay  PGY  Monthly   1.00%   399,456   -   -   -   -   399.456 
                                          Total    23.454.700 

 

Leasing agreement liabilities not subject to financial restrictions for the reported periods.

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18 – TRADE ACCOUNTS PAYABLE AND OTHER ACCOUNTS PAYABLE

 

Trade and other current accounts payable are detailed as follows:

 

Classification  12.31.2020   12.31.2019 
   CLP (000’S)   CLP (000’S) 
Current   230,445,809    243,700,553 
Non-current   295,279    619,587 
Total   230,741,088    244,320,140 

  

Description  12.31.2020   12.31.2019 
   CLP (000’S)   CLP (000’S) 
Trade accounts payable   163,361,078    172,142,472 
Withholding tax   48,566,443    53,326,254 
Others   18,813,567    18,851,414 
Total   230,741,088    244,320,140 

 

19 – OTHER PROVISIONS, CURRENT AND NON-CURRENT

 

19.1Balances

 

The composition of provisions is as follows:

 

Description  12.31.2020   12.31.2019 
    CLP (000’S)    CLP (000’S) 
Litigation (1)   50,070,273    69,107,550 
Total   50,070,273    69,107,550 
           
Current   1,335,337    2,068,984 
Non-current   48,734,936    67,038,566 
Total   50,070,273    69,107,550 

 

(1)Correspond to the provision made for the probable losses of fiscal, labor and commercial contingencies, based on the opinion of our legal advisors, according to the following detail:

 

Description (see note 23.1)  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Tax contingencies   25,543,101    38,853,059 
Labor contingencies   8,688,551    10,569,754 
Civil contingencies   15,838,621    19,684,737 
Total   50,070,273    69,107,550 

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19.2Movements

 

The movement of principal provisions over litigation is detailed as follows:

 

Detail  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Opening balance as of January 1   69,107,550    62,452,526 
Additional provisions   172,801    121,003 
Increase (decrease) in existing provisions(*)   4,624,789    17,336,285 
Payments   (5,799,209)   (14,977,996)
Reversal for unused provision   -    3,551,223 
Increase (decrease) due to foreign exchange differences   (18,035,657)   624,509 
Total   50,070,274    69,107,550 

 

(*) During 2019, reversal of provisions consisting of fines demanded by the Brazilian tax authority on the use of tax credits resulting from favorable sentencing to Rio de Janeiro Refrescos Ltda. which are not present in 2020.

  

20 – OTHER NON-FINANCIAL LIABILITIES

 

Other current and non-current liabilities at each reporting period end are detailed as follows:

 

   Current   Non-Current 
Description  12.31.2020   12.31.2019   12.31.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Dividends payable   25,999,055    22,639,150    -    - 
Others (1)   2,267,675    3,863,065    21,472,048    - 
Total   28,266,730    26,502,215    21,472,048    - 

 

 

(1)Other non-current corresponds mainly to accounts payable to former shareholders of Companhia de Bebidas Ipiranga (“CBI”). See Note 6 for further information.

  

21 – EQUITY

 

21.1Number of shares:

 

   

Number of subscribed

and paid in shares with voting rights

 
Series   2020   2019 
A    473,289,301    473,289,301 
B    473,281,303    473,281,303 

 

21.1.1Equity:

 

    Subscribed and Paid-in Capital 
Series   2020   2019 
     CLP (000’s)    CLP (000’s) 
A    135,379,504    135,379,504 
B    135,358,070    135,358,070 
Total    270,737,574    270,737,574 

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21.1.2Rights of each series:

 

Series A: Elects 12 of the 14 Directors
Series B: Receives an additional 10% of dividends distributed to Series A and elects 2 of the 14 Directors.

  

21.2Dividend policy

 

According to Chilean law, cash dividends must be paid equal to at least 30% of annual net profit, barring a unanimous vote by shareholders to the contrary. If there is no net profit in a given year, the Company will not be legally obligated to pay dividends from retained earnings. At the ordinary Shareholders’ Meeting held in April 2020, the shareholders agreed to pay out of the 2019 earnings a final dividend and another additional dividend to the 30% required by Chile’s Law 18,046 which are paid in May 2020 and August 2020, respectively.

 

Pursuant to Circular Letter N° 1,945 of the Chilean Financial Market Commission (CMF) dated September 29, 2009, the Company’s Board of Directors decided to maintain the initial adjustments from adopting IFRS as accumulated earnings for future distribution.

 

The dividends declared and paid per share are presented below:

 

Periods

approved - paid

 

 

Type of dividend

   Dividend allocation income 

CLP

Series A

  

CLP

Series B

 
04.17.2019  05.30.2019   Final   2018 Results   21.50    23.65 
04.17.2019  08.29.2019   Additional   Accumulated Earnings   21.50    23.65 
09.24.2019  10.24.2019   Interim   2019 Results   21.50    23.65 
12.20.2019  01.23.2020   Interim   2019 Results   22.60    24.86 
02.25.2020  05.29.2020   Final   2019 Results   26.00    28.60 
02.25.2020  08.28.2020   Additional   Accumulated Earnings   26.60    28.60 
10.27.2020  11.24.2020   Interim   2020 Results   26.60    28.60 
12.22.2020  01.29.2021   Interim   2020 Results   26.60    28.60 

 

21.3Other Reserves

  

The balance of other reserves includes the following:

 

Description  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Goodwill in share exchange reserve   421,701,520    421,701,520 
Translation differences reserves   (517,496,486)   (339,076,340)
Cash flow hedge reserves   (24,719,533)   (14,850,683)
Reserve for employee benefits actuarial gains or losses   (4,663,193)   (2,230,752)
Legal and statutory reserves   5,435,538    5,435,538 
Other   6,014,568    6,014,568 
Total   (113,727,586)   76,993,851 

 

21.3.1Goodwill in share exchange reserve

 

This amount corresponds to the difference between the valuation at fair value of the issuance of shares of Embotelladora Andina S.A. and the book value of the paid capital of Embotelladoras Coca-Cola Polar S.A., which was finally the value of the capital increase notarized in legal terms.

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21.3.2Cash flow hedge reserve

 

They arise from the fair value of the existing derivative contracts that have been qualified for hedge accounting at the end of each financial period. When contracts are expired, these reserves are adjusted and recognized in the income statement in the corresponding period (see Note 22).

 

21.3.3Reserve for employee benefit actuarial gains or losses

 

Corresponds to the restatement effect of employee benefits actuarial losses that according to IAS 19 amendments must be carried to other comprehensive income.

 

21.3.4Legal and statutory reserves

  

In accordance with Official Circular N° 456 issued by the Chilean Financial Market Commission (CMF), the legally required price-level restatement of paid-in capital for 2009 is presented as part of other equity reserves and is accounted for as a capitalization from Other Reserves with no impact on net income or retained earnings under IFRS. This amount totaled CLP 5,435,538 thousand as of December 31, 2009.

 

21.3.5Foreign currency translation reserves

 

This corresponds to the conversion of the financial statements of foreign subsidiaries whose functional currency is different from the presentation currency of the Consolidated Financial Statements. Additionally, exchange differences between accounts receivable kept by the companies in Chile with foreign subsidiaries are presented in this account, which have been treated as investment equivalents accounted for using the equity method. Translation reserves are detailed as follows:

 

Details  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Brazil   (203,657,392)   (98,794,118)
Argentina   (291,332,402)   (246,415,922)
Paraguay   (22,506,692)   6,133,700 
Total   (517,496,486)   (339,076,340)

 

The movement of this reserve for the periods ended on the dates indicated below, is detailed as follows:

 

Details  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Brazil   (104,863,274)   15,386,079 
Argentina   (44,916,480)   (45,297,742)
Paraguay   (28,640,392)   (2,490,149)
Total   (178,420,146)   (32,401,812)

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21.4Non-controlling interests

 

This is the recognition of the portion of equity and income from subsidiaries owned by third parties. This account is detailed as follows:

 

   Non-controlling interests 
   Ownership interest %   Shareholders’ Equity   Income 
           December   December   December   December 
Description  2020   2019   2020   2019   2020   2019 
           CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Embotelladora del Atlántico S.A.  0.0171   0.0171    23,662    26,342    2,312    4,183 
Andina Empaques Argentina S.A.  0.0209   0.0209    2,349    2,290    244    409 
Paraguay Refrescos S.A.  2.1697   2.1697    5,037,332    5,368,470    791,576    622,188 
Vital S.A.  35.0000   35.0000    8,176,999    7,904,741    285,269    263,442 
Vital Aguas S.A.  33.5000   33.5000    1,912,023    1,803,884    109,110    105,870 
Envases Central S.A.  40.7300   40.7300    5,227,112    5,148,531    (70,996)   528,205 
Total           20,379,477    20,254,258    1,117,515    1,524,297 

 

21.5Earnings per share

 

The basic earnings per share presented in the statement of comprehensive income is calculated as the quotient between income for the period and the average number of shares outstanding during the same period.

 

Earnings per share used to calculate basic and diluted earnings per share is detailed as follows:

 

Earnings per share  12.31.2020 
   SERIES A   SERIES B   TOTAL 
Earnings attributable to shareholders (CLP 000’s)   58,095,636    63,904,169    121,999,805 
Average weighted number of shares   473,289,301    473,281,303    946,570,604 
Earnings per basic and diluted share (in CLP)   122.75    135.02    128.89 

 

Earnings per share

  12.31.2019 
   SERIES A   SERIES B   TOTAL 
Earnings attributable to shareholders (CLP 000’s)   82,725,427    90,996,501    173,721,928 
Average weighted number of shares   473,289,301    473,281,303    946,570,604 
Earnings per basic and diluted share (in CLP)   174.79    192.27    183.53 

  

22 – DERIVATIVE ASSETS AND LIABILITIES

 

Embotelladora Andina currently maintains “Cross Currency Swaps” and “Currency Forward” agreements as derivative financial instruments.

 

Cross Currency Swaps (“CCS”), also known as interest rate and currency swaps are valued by the method of discounted future cash flows at a market rate corresponding to the currencies and rates of the transaction.

 

On the other hand, the fair value of forward currency contracts is calculated in reference to current forward exchange rates for contracts with similar maturity profiles.

 

As of December 31, 2020 and 2019, the Company held the following derivative instruments:

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22.1Derivatives accounted for as cash flow hedges

 

Cross Currency Swaps associated with Local Bonds (Chile)

 

At the closing date of these financial statements, the Company maintains derivative contracts to secure part of its bond liabilities issued in Unidades de Fomento totaling UF 10,148,159, to convert these obligations to Chilean pesos.

 

These contracts were valued at their fair values, yielding a net asset of CLP 6,299,116 thousand at the closing date of the financial statements which is presented under other non-current financial assets. The expiration date of derivative contracts is distributed in the years 2026, 2031, 2034 and 2035.

 

Cross Currency Swaps associated with International Bonds (US)

 

At the closing date of these financial statements, the Company maintains derivative contracts to secure US Dollar public bond obligations of USD 360 million due in 2023, to convert such obligations into Brazilian Real. In addition, derivative contracts amounting to USD 300 million are held to convert such obligation into Unidades de Fomento (UF - CLP re-adjustable by the Consumer Price Index) due in 2050. The valuation of the first contract at its fair values generates an asset of CLP 144,684,179 thousand as of December 31, 2020 (CLP 98,918,457 thousand as of December 31, 2019), while the valuation of the second contract at its fair values generates a liability of CLP 51,568,854 thousand at the closing date of these financial statements.

 

The amount of exchange differences recognized in the statement of income related to financial liabilities in U.S. dollars and are absorbed by the amounts recognized under comprehensive income.

 

22.2 Forward currency transactions expected to be very likely

  

During 2020 and 2019, Embotelladora Andina entered into forward contracts to ensure the exchange rate on future commodity purchasing needs for its 4 operations, i.e. closing USD/ARS, USD/BRL, USD/CLP and USD/GYP forward instruments. As of December 31, 2020, outstanding contracts amount to USD 54.0 million (USD 46.9 million as of December 31, 2019).

 

Futures contracts that ensure prices of future raw materials have not been designated as hedge agreements, since they do not fulfill IFRS documentation requirements, whereby its effects on variations in fair value are accounted for directly under other comprehensive income.

 

Fair value hierarchy

 

At the closing date of these financial statements, the Company held assets for derivative contracts for CLP 150,983,295 thousand (CLP 99,235,662 thousand as of December 31, 2019) and held liabilities for derivative contracts for CLP 52,786,176 thousand (CLP 374,576 thousand as of December 31, 2019). Those contracts covering existing items have been classified in the same category of hedged, the net amount of derivative contracts by concepts covering forecasted items have been classified in financial assets and financial liabilities. All the derivative contracts are carried at fair value in the consolidated statement of financial position.

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The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

 

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: Inputs other than quoted prices included in level 1 that are observable for the assets and liabilities, either directly (that is, as prices) or indirectly (that is, derived from prices)

Level 3: Inputs for assets and liabilities that are not based on observable market data.

 

During the reporting period, there were no transfers of items between fair value measurement categories; all of which were valued during the period using level 2.

 

   Fair Value Measurement at December 31, 2020     
   Quoted prices in active markets
for identical assets or liabilities
   Observable
market data
   

Unobservable

market data

      
   (Level 1)   (Level 2)    (Level 3)   Total 
   CLP (000’S)   CLP (000’S)    CLP (000’S)   CLP (000’S) 
Assets                     
Current assets                     
Other current financial assets   -    -    -    - 
Other non-current financial assets   -    150,983,295    -    150,983,295 
Total assets   -    150,983,295    -    150,983,295 
                      

Liabilities

                     
Current liabilities                     
Other current financial liabilities   -    1,217,322     -    1,217,322 
Other non-current financial liabilities   -    51,568,854     -    51,568,854 
Total liabilities   -    52,786,176     -    52,786,176 

  

   Fair Value Measurement at December 31, 2019     
  

Quoted prices in active markets

for identical assets or liabilities

  

Observable

market data

   Unobservable
market data
      
   (Level 1)   (Level 2)   (Level 3)   Total 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Assets                    
Current assets                     

Other current financial assets

   -    317.205         317.205 
Other non-current financial assets   -    98.918.457    -    98.918.457 
Total assets   -    99.235.662    -    99.235.662 
                     
Liabilities                    
Current liabilities                    
Other current financial liabilities   -    374.576    -    374.576 
Total liabilities   -    374.576    -    374.576 

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23 – LITIGATION AND CONTINGENCIES

  

23.1Lawsuits 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.

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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.

 

3)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.

 

4)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.

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23.2Direct 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 

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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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24 – FINANCIAL RISK MANAGEMENT

 

The Company’s businesses are exposed to a variety of financial and market risks (including foreign exchange risk, interest rate risk and price risk). The Company’s global risk management program focuses on the uncertainty of financial markets and seeks to minimize potential adverse effects on the performance of the Company. The Company uses derivatives to hedge certain risks. A description of the primary policies established by the Company to manage financial risks are provided below:

 

Interest Rate Risk

 

As of the closing date of these financial statements, the Company maintains all its debt liabilities at a fixed rate as to avoid fluctuations in financial expenses resulting from tax rate increases.

 

The Company’s greatest indebtedness corresponds to six contracts for own issued Chilean local bonds at a fixed rate for UF 15.85 million denominated in UF (“UF”), debt indexed to inflation in Chile (Company sales are correlated with the UF variation), of which five of these Local Bonds have been redenominated through Cross Currency Swaps to Chilean Pesos (CLP).

 

On the other hand, there is also the Company’s indebtedness on the international market through two 144A/RegS Bonds at a fixed rate, one for USD 365 million, denominated in dollars, and practically 100% of which has been re-denominated to BRL through Cross Currency Swaps, and another one for USD 300 million denominated in USD, and practically 100% of which has been re-denominated to Unidades de Fomento (UF) through Cross Currency Swaps.

 

Credit risk

 

The credit risk to which the Company is exposed comes mainly from trade accounts receivable maintained with retailers, wholesalers and supermarket chains in domestic markets; and the financial investments held with banks and financial institutions, such as time deposits, mutual funds and derivative financial instruments.

 

a)     Trade accounts receivable and other current accounts receivable

 

Credit risk related to trade accounts receivable is managed and monitored by the area of Finance and Administration of each business unit. The Company has a wide base of more than 283 thousand clients implying a high level of atomization of accounts receivable, which are subject to policies, procedures and controls established by the Company. In accordance with such policies, credits must be based objectively, non-discretionary and uniformly granted to all clients of a same segment and channel, provided these will allow generating economic benefits to the Company. The credit limit is checked periodically considering payment behavior. Trade accounts receivable pending of payment are monitored on a monthly basis.

 

i.Sale Interruption

 

In accordance with Corporate Credit Policy, the interruption of sale must be within the following framework: when a customer has outstanding debts for an amount greater than USD 250,000, and over 60 days expired, sale is suspended. The General Manager in conjunction with the Finance and Administration Manager authorize exceptions to this rule, and if the outstanding debt should exceed USD 1,000,000, and in order to continue operating with that client, the authorization of the Chief Financial Officer is required. Notwithstanding the foregoing, each operation can define an amount lower than USD 250,000 according to the country’s reality.

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ii.Impairment

 

The impairment recognition policy establishes the following criteria for provisions: 30% is provisioned for 31 to 60 days overdue, 60% between 60 and 91 days, 90% between 91 and 120 days overdue and 100% for more than 120 days. Exemption of the calculation of global impairment is given to credits whose delays in the payment correspond to accounts disputed with the customer whose nature is known and where all necessary documentation for collection is available, therefore, there is no uncertainty on recovering them. However, these accounts also have an impairment provision as follows: 40% for 91 to 120 days overdue, 80% between 120 and 170, and 100% for more than 170 days.

 

iii.Prepayment to suppliers

 

The Policy establishes that USD 25,000 prepayments can only be granted to suppliers if its value is properly and fully provisioned. The Treasurer of each subsidiary must approve supplier warranties that the Company receives for prepayments before signing the respective service contract. In the case of domestic suppliers, a warranty ballot (or the instrument existing in the country) shall be required, in favor of Andina executable in the respective country, non-endorsable, payable on demand or upon presentation and its validity will depend on the term of the contract. In the case of foreign suppliers, a stand-by credit letter will be required which shall be issued by a first line bank; in the event that this document is not issued in the country where the transaction is done, a direct bank warranty will be required. Subsidiaries can define the best way of safeguarding the Company’s assets for prepayments under USD 25,000.

 

iv.Guarantees

 

In Chile, we have insurance with Compañía de Seguros de Crédito Continental S.A. (AA rating –according to Fitch Chile and Humphreys rating agencies) covering the credit risk regarding trade debtors in Chile.

 

The rest of the operations do not have credit insurance, instead mortgage guarantees are required for volume operations of wholesalers and distributors in the case of trade accounts receivables. In the case of other debtors, different types of guarantees are required according to the nature of the credit granted.

 

Historically, uncollectible trade accounts have been lower than 0.5% of the Company’s total sales.

 

b)    Financial investments

 

The Company has a Policy that is applicable to all the companies of the group in order to cover credit risks for financial investments, restricting both the types of instruments as well as the institutions and degree of concentration. The companies of the group can invest in:

 

i.Time deposits: only in banks or financial institutions that have a risk rating equal or higher than Level 1 (Fitch) or equivalent for deposits of less than 1 year and rated A or higher (S&P) or equivalent for deposits of more than 1 year.

 

ii.Mutual funds: investments with immediate liquidity and no risk of capital (funds composed of investments at a fixed-term, current account, fixed rate Tit BCRA, negotiable obligations, Over Night, etc.) in all those counter-parties that have a rating greater than or equal to AA-(S&P) or equivalent, Type 1 Pacts and Mutual Funds, with a rating greater than or equal to AA+ (S&P) or equivalent.

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iii.Other investment alternatives must be evaluated and authorized by the office of the Chief Financial Officer.

 

Exchange Rate Risk

 

The company is exposed to three types of risk caused by exchange rate volatility:

 

a)   Exposure of foreign investment

 

This risk originates from the translation of net investment from the functional currency of each country (Brazilian Real, Paraguayan Guaraní, and Argentine Peso) to the Parent Company’s reporting currency (Chilean Peso). Appreciation or devaluation of the Chilean Peso with respect to the functional currencies of each country, originates decreases and increases in equity, respectively. The Company does not hedge this risk.

 

a.1Investment in Argentina

 

As of the closing date of these financial statements, the Company maintains a net investment of CLP 145,395,883 thousand. in Argentina, composed by the recognition of assets amounting to CLP 215,017,770 thousand and liabilities amounting to CLP 69,621,887 thousand. These investments accounted for 19.9% of the Company’s consolidated sales revenues

 

As of December 31, 2020, the Argentine peso appreciated by 32.4% with respect to the Chilean peso.

 

If the exchange rate of the Argentine Peso devalued an additional 5% with respect to the Chilean Peso, the Company would have lower income from the operation in Argentina of CLP 239,096 thousand and a decrease in equity of CLP 5,148,794 thousand.

 

a.2Investment in Brazil

 

As of the closing date of these financial statements, the Company maintains a net investment of CLP 231,787,304 thousand in Brazil, composed by the recognition of assets amounting to CLP 793,157,414 thousand and liabilities amounting to CLP 561,370,108 thousand. These investments accounted for 29.9% of the Company’s consolidated sales revenues.

 

As of December 31, 2020, the Brazilian Real appreciated by 26.4% with respect to the Chilean peso.

 

If the exchange rate of the Brazilian Real devalued an additional 5% with respect to the Chilean Peso, the Company would have lower income from the operation in Brazil of CLP 2,506,240 thousand and a decrease in equity of CLP 11,495,651 thousand.

 

a.3Investment in Paraguay

 

As of the closing date of these financial statements, the Company maintains a net investment of CLP 232,163,091 thousand in Paraguay, composed by the recognition of assets amounting to CLP 270,899,700 thousand and liabilities amounting to CLP 38,736,609 thousand. These investments accounted for 7.9% of the Company’s consolidated sales revenues.

 

As of December 31, 2020, the Paraguayan Guarani appreciated by 11.2% with respect to the Chilean peso.

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If the exchange rate of the Paraguayan Guaraní devalued by 5% with respect to the Chilean Peso, the Company would have lower income from the operations in Paraguay of CLP 1,737,265 thousand and a decrease in equity of CLP 10,462,776.

 

b)  Net exposure of assets and liabilities in foreign currency

 

This risk stems mostly from carrying liabilities in US dollar, so the volatility of the US dollar with respect to the functional currency of each country generates a variation in the valuation of these obligations, with consequent effect on results.

 

In order to protect the Company from the effects on income resulting from the volatility of the Brazilian Real and the Chilean Peso against the U.S. dollar, the Company maintains derivative contracts (cross currency swaps) to cover almost 100% of US dollar-denominated financial liabilities.

 

By designating such contracts as hedging derivatives, the effects on income for variations in the Chilean Peso and the Brazilian Real against the US dollar, are mitigated annulling its exposure to exchange rates.

 

c) Exposure of assets purchased or indexed to foreign currency

 

This risk originates from purchases of raw materials and investments in Property, plant and equipment, whose values are expressed in a currency other than the functional currency of the subsidiary. Changes in the value of costs or investments can be generated through time, depending on the volatility of the exchange rate.

 

In order to minimize this risk, the Company maintains a currency hedging policy stipulating that it is necessary to enter into foreign currency derivatives contracts to lessen the effect of the exchange rate over cash expenditures expressed in US dollars, corresponding mainly to payment to suppliers of raw materials in each of the operations. This policy stipulates a 12-month forward horizon.

 

Commodities risk

 

The Company is subject to a risk of price fluctuations in the international markets mainly for sugar, PET resin and aluminum, which are inputs used to produce beverages and containers, which together, account for 35% to 40% of operating costs. Procurement and anticipated purchase contracts are made frequently to minimize and/or stabilize this risk. To minimize this risk or stabilize often supply contracts and anticipated purchases are made when market conditions warrant.

 

Liquidity risk

 

The products we sell are mainly paid for in cash and short-term credit; therefore, the Company´s main source of financing comes from the cash flow of our operations. This cash flow has historically been sufficient to cover the investments necessary for the normal course of our business, as well as the distribution of dividends approved by the General Shareholders’ Meeting. Should additional funding be required for future geographic expansion or other needs, the main sources of financing to consider are: (i) debt offerings in the Chilean and foreign capital markets (ii) borrowings from commercial banks, both internationally and in the local markets where the Company operates; and (iii) public equity offerings

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The following table presents an analysis of the Company’s committed maturities for liability payments throughout the coming years, with interest calculated for each period:

 

   Payments on the year of maturity 

Item 

  1 year   More than
1 up to 2
   More than
2 up to 3
   More than
3 up to 4
   More than
5
 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Bank debt   775,684    849,879    81,111    81,111    4,081,333 
Bonds payable (1)   72,133,209    11,977,274    12,498,126    272,549,586    628,943,928 
Lease obligations   5,718,484    5,129,266    2,207,021    7,805,284    197,802 
Contractual obligations   8,426,144    83,368,375    13,446,852    9,839,970    9,714,261 
Total   87,053,521    101,324,794    28,233,110    290,275,951    642,937,324 

 

(1)Includes Mark-to-Market liability valuations for bond hedge derivatives

 

COVID-19-Related Risk

 

As a result of the impact that COVID-19 is having in different countries around the world, including its more recent outbreak in the countries where we operate, Coca-Cola Andina has taken measures necessary to protect its employees and to ensure the continuity of the Company’s operations.

 

Among the measures it has adopted to protect its employees are the following:

campaign to educate our employees on actions to be taken to avoid the spread of COVID-19;

sending home any employee that has been exposed to the virus;

implementation of additional cleaning protocols for our facilities;

modifying certain work practices and activities, keeping customer service:

-home office has been implemented for those employees whose work can be performed remotely

-domestic and international traveling has been canceled

providing personal protective equipment to all our employees who need to keep working at plants and distribution centers, as well as to truck drivers and assistants, including face masks and sanitizers.

 

Since mid-March, governments of the countries where the Company operates, have adopted several measures to reduce infection rates of COVID-19. Among these measures are, the closing of schools, universities, shopping centers, restaurants and bars, prohibiting social gathering events, issuing stay-at-home orders and establishing quarantine requirements, imposing additional sanitary requirements on exports and imports, and limiting international travel and closing borders. Governments in the countries where we operate have also announced economic stimulus programs for families and businesses, including in Argentina a temporary restriction on workforce reductions. To date, none of our plants has had to suspend their operations.

 

As a result of the COVID-19 pandemic and the restrictions imposed by the authorities in the four countries where we operate, we have seen high volatility in our sales across channels. During the fourth quarter, in consolidated terms, we continue to see a reduction in our sales volumes on the on-premise channel (albeit to a lesser extent than in previous quarters), consisting mainly of restaurants and bars, which are already able to operate, but with capacity restrictions. We have also observed that volume grows again in supermarkets, albeit slightly and that the traditional and wholesale channels are the ones that continue to drive volume growth. Because the pandemic and the actions taken by governments are changing very rapidly, we believe it is too early to draw conclusions about changes in the long-term consumption pattern, and how these may affect our results of operations and financial results in the future.

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Due to uncertainties regarding the COVID-19 pandemic and the above-mentioned government restrictions, including how long these conditions may persist, and the effects they will have on our sales volumes and our business in general, we cannot accurately predict the ultimate financial impact from these new trends. In any event, we estimate that we will not face liquidity constraints, or difficulties in complying with covenants under our debt instruments. We do not anticipate any significant provisions or impairments at this time. Finally, our investment plan for 2021 will return to precrisis levels, i.e. between approximately USD$ 160 – USD 180 million. Our investment plans are constantly monitored, and we cannot assure that we will completely fulfill it if there is a stronger flare-up of this health situation in the countries where we operate or for other unforeseen circumstance.

 

25 – EXPENSES BY NATURE

 

Other expenses by nature are:

 

   01.01.2020   01.01.2019 
Description  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Direct production costs   862,383,664    877,716,948 
Employee expenses   252,337,262    273,123,010 
Transportation and distribution   126,683,586    138,486,337 
Advertising   6,917,300    27,113,322 
Depreciation and amortization   110,920,517    111,087,284 
Repairs and maintenance   25,971,485    30,528,180 
Other expenses   73,455,798    83,188,784 
Total (1)   1,458,669,612    1,541,243,865 

 

(1) Corresponds to the addition of cost of sales, administration expenses and distribution cost.

 

26 – OTHER INCOME

 

Other income by function is detailed as follows:

 

   01.01.2019   01.01.2019 
Description  12.31.2019   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Gain on disposal of Property, plant and equipment   16,005    265,514 
Recovery of PIS and COFINS credit(1)   6,744,341    40,281,550 
Others   1,595,952    400,094 
Total   8,356,298    40,947,158 

 

(1)   See Note 6 for further information on recovery.

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27 – OTHER EXPENSES BY FUNCTION

 

Other expenses by function are detailed as follows:

 

         
   01.01.2020   01.01.2019 
Description  12.31.2020   12.31.2019 
    CLP (000’S)    CLP (000’S) 
Contingencies and non-operating fees   1,081,812    17,690,171 
Tax on bank debits and other expenses   3,367,615    4,356,973 
Write-offs, disposal and loss of Property, plant and equipment   7,972,976    2,978,194 
Others   5,007,853    1,157,509 
Total   17.430.256    26,182,847 

 

28 – FINANCIAL INCOME AND EXPENSES

 

Financial income and expenses are detailed as follows:

 

a)Financial income

 

   01.01.2020   01.01.2019 
Description  12.31.2020   12.31.2019 
    CLP (000’S)    CLP (000’S) 
Interest income   7,931,055    3,249,550 
Guaranty restatement Ipiranga acquisition   7,674    27,219 
Recovery of PIS and COFINS credit(1)   5,124,810    39,780,620 
Other financial income   1,882,340    2,098,402 
Total   14,945,879    45,155,791 

 

(1)   See Note 6 for further information on recovery.

 

b)Financial costs

 

   01.01.2020   01.01.2019 
Description  12.31.2020   12.31.2019 
    CLP (000’S)    CLP (000’S) 
Bond interest   45,927,500    38,153,036 
Bank loan interest   1,186,731    1,337,670 
Other financial costs   7,658,606    6,718,314 
Total   54,772,837    46,209,020 

 

29 – OTHER (LOSSES) GAINS

  

Other (losses) gains are detailed as follows:

 

   01.01.2020   01.01.2019 
Description  12.31.2020   12.31.2019 
   CLP (000’S)   CLP (000’S) 
Other (losses) gains   287    2,876 
Total   287    2,876 

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30. LOCAL AND FOREIGN CURRENCY

  

Local and foreign currency balances are the following:

 

CURRENT ASSETS  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Cash and cash equivalents   309,530,699    157,567,986 
USD   21,332,268    16,732,278 
EUR   223,449    9,723 
CLP   201,936,140    78,421,936 
BRL   49,528,425    46,189,977 
ARS   14,821,502    3,830,199 
PGY   21,688,915    12,383,873 
           
Other current financial assets   140,304,853    347,278 
CLP   139,449,882    275,407 
BRL   10,171    13,498 
ARS   844,800    16,575 
PGY   -    41,798 
           
Other current non-financial assets   13,374,381    16,188,965 
USD   1,723,989    893,571 
EUR   621,516    615,636 
UF   493,546    410,203 
CLP   1,900,762    5,642,901 
BRL   1,300,995    1,738,793 
ARS   6,052,294    3,918,728 
PGY   1,281,279    2,969,133 
           
Trade accounts and other accounts receivable   194,021,253    191,077,588 
USD   901,930    1,431,079 
EUR        - 
UF   65,250    453,469 
CLP   105,340,179    83,328,449 
BRL   67,423,832    79,586,461 
ARS   14,928,954    19,088,164 
PGY   5,361,108    7,189,966 
           
Accounts receivable related entities   11,875,408    10,835,768 
USD        45,644 
CLP   6,965,894    9,157,922 
BRL   41,878    - 
ARS   4,867,636    1,632,202 
           
Inventories   127,972,650    147,641,224 
USD   -    6,027,076 
CLP   54,112,760    48,320,784 
BRL   31,446,180    43,820,564 
ARS   32,214,119    34,262,914 
PGY   10,199,591    15,209,886 
           
Current tax assets   218,473    9,815,294 
CLP   218,473    9,815,294 
BRL   -    - 
ARS   -    - 
           
Total current assets   797,297,717    533,474,103 
USD   23,958,187    25,129,648 
EUR   844,965    625,359 
UF   558,796    863,672 
CLP   509,924,089    234,962,693 
BRL   149,751,481    171,349,293 
ARS   73,729,306    62,748,782 
PGY   38,530,893    37,794,656 

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NON-CURRENT ASSETS  12.31.2020   12.31.2019 
    CLP (000’s)    CLP (000’s) 
Other non-current financial assets.   162,013,278    110,784,311 
UF   7,515,981    1,216,865 
BRL   144,684,180    98,918,457 
ARS   9,813,117    10,648,989 
           
Other non-current non-financial assets   90,242,672    125,636,150 
UF   338,014    318,533 
CLP   47,530    47,531 
BRL   88,001,852    122,922,979 
ARS   1,825,631    2,223,600 
PGY   29,645    123,507 
           
Accounts receivable, non-current   73,862    523,769 
UF   32,219    465,371 
ARS   1,211    636 
PGY   40,432    57,762 
           
Accounts receivable related entities, non-current   138.346    283,118 
CLP   138,346    283,118 
           
Investments accounted for using the equity method   87.956.354    99,866,733 
CLP   50,628,307    49,703,673 
BRL   37,328,047    50,163,060 
           
Intangible assets other than goodwill   604,514,165    675,075,375 
USD   3,959,421    3,959,421 
CLP   306,202,181    307,324,953 
BRL   139,166,117    189,240,893 
ARS   2,591,026    2,708,445 
PGY   152,595,420    171,841,663 
           
Goodwill   98,325,593    121,221,661 
CLP   9,523,767    9,523,767 
BRL   54,980,669    74,653,328 
ARS   27,343,642    29,750,238 
PGY   6,477,515    7,294,328 
           
Property, plant and equipment   605,576,545    722,718,863 
CLP   255,963,912    282,861,852 
BRL   179,286,945    251,080,517 
ARS   103,227,548    119,784,304 
PGY   67,098,140    68,992,190 
           
Deferred tax assets   1,925,870    1,364,340 
CLP   1,925,870    1,364,340 
           
Total non-current assets   1,650,766,685    1,857,474,320 
USD   3,959,421    3,959,421 
UF   7,886,214    2,000,769 
CLP   624,429,913    651,109,234 
BRL   643,447,810    786,979,234 
ARS   144,802,175    165,116,212 
PGY   226,241,152    248,309,450 

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    12.31.2020    12.31.2019 
CURRENT LIABILITIES   Up to 90 days    90 days to 1 year     Total     Up to 90 days    90 days to 1 year     Total  
    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s) 
Other financial liabilities, current   9,270,838    29,295,886    38,566,724    9,719,894    30,873,984    40,593,878 
USD   72,655    6,704,245    6,776,900    55,388    3,147,441    3,202,829 
UF   7,799,637    5,272,547    13,072,184    7,535,228    11,836,936    19,372,164 
CLP   908,790    13,489,310    14,398,100    842,221    11,700,946    12,543,167 
BRL   362,854    1,245,940    1,608,794    1,153,072    2,119,141    3,272,213 
ARS   70,950    1,578,082    1,649,032    75,060    704,921    779,981 
PGY   55,952    1,005,762    1,061,714    58,925    1,364,599    1,423,524 
                               
Trade accounts and other accounts payable, current   227,503,270    2,942,539    230,445,809    228,259,216    15,441,337    243,700,553 
USD   8,972,065    -    8,972,065    10,049,567    -    10,049,567 
EUR   1,622,411    -    1,622,411    2,024,156    -    2,024,156 
UF   -    -    -    2,044,871    -    2,044,871 
CLP   108,670,085    2,942,539    111,612,624    84,602,547    15,441,337    100,043,884 
BRL   58,136,480    -    58,136,480    75,051,089    -    75,051,089 
ARS   33,511,747    -    33,511,747    40,826,489    -    40,826,489 
PGY   15,878,527    -    15,878,527    13,660,497    -    13,660,497 
Other currencies   711,955    -    711,955    -    -    - 
                               
Accounts payable related entities, current   39,541,968    -    39,541,968    53,637,601    -    53,637,601 
CLP   23,884,687    -    23,884,687    28,471,399    -    28,471,399 
BRL   10,809,085    -    10,809,085    19,279,132    -    19,279,132 
ARS   4,848,196    -    4,848,196    5,887,070    -    5,887,070 
                               
                               
Other current provisions   805,842    529,495    1,335,337    1,637,799    431,185    2,068,984 
CLP   805,842    494,748    1,300,590    1,637,799    427,697    2,065,496 
PGY   -    34,747    34,747    -    3,488    3,488 
                               
Tax liabilities, current   4,590,876    4,237,723    8,828,599    3,097,223    3,665,044    6,762,267 
CLP   173,771    3,414,859    3,588,630    896,975    -    896,975 
BRL   4,249,909    -    4,249,909    2,107,381    -    2,107,381 
ARS   167,196    439,641    606,837    92,867    3,446,054    3,538,921 
PGY   -    383,223    383,223    -    218,990    218,990 
                               
Employee benefits current provisions   17,027,427    14,043,592    31,071,019    26,513,813    11,879,041    38,392,854 
CLP   1,168,973    5,799,389    6,968,362    1,241,603    5,509,351    6,750,954 
BRL   15,325,256    -    15,325,256    20,681,694    -    20,681,694 
ARS   533,198    6,701,756    7,234,954    4,590,516    5,260,142    9,850,658 
PGY   -    1,542,447    1,542,447    -    1,109,548    1,109,548 
                               
Other current non-financial liabilities   620,609    27,646,121    28,266,730    328,441    26,173,774    26,502,215 
CLP   598,769    27,551,000    28,149,769    327,847    26,064,658    26,392,505 
ARS   21,840    -    21,840    594    5,286    5,880 
PGY   -    95,121    95,121    -    103,830    103,830 
                               
Total current liabilities   299,360,830    78,695,356    378,056,186    323,193,987    88,464,365    411,658,352 
USD   9,044,720    6,704,245    15,748,965    10,104,955    3,147,441    13,252,396 
EUR   1,622,411    -    1,622,411    2,024,156    -    2,024,156 
UF   7,799,637    5,272,547    13,072,184    9,580,099    11,836,936    21,417,035 
CLP   136,210,917    53,691,845    189,902,762    118,020,391    59,143,989    177,164,380 
BRL   88,883,584    1,245,940    90,129,524    118,272,368    2,119,141    120,391,509 
ARS   39,153,127    8,719,479    47,872,606    51,472,596    9,416,403    60,888,999 
PGY   15,934,479    3,061,300    18,995,779    13,719,422    2,800,455    16,519,877 
Other currencies   711,955    -    711,955    -    -    - 

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      12.31.2020  12.31.2019 
NON CURRENT LIABILITIES  More than 1 up to 3 years   More than 3 up to 5 years   More than 5 years   Total   More than 1 up to 3 years   More than 3 up to 5 years   More than 5 years   Total 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Other non-current financial liabilities   31,811,687    279,600,958    678,416,924    989,829,569    34,794,568    299,661,490    408,870,999    743,327,057 
USD   366,652    259,746,604    207,280,189    467,393,445    509,366    271,700,335    -    272,209,701 
UF   24,669,188    13,214,387    414,689,041    452,572,616    22,584,954    24,627,105    400,393,581    447,605,640 
CLP   4,089,001    4,000,000    51,568,854    59,657,855    7,926,056    -    -    7,926,056 
BRL   2,394,281    2,639,967    4,878,840    9,913,088    3,319,514    3,334,050    8,477,418    15,130,982 
ARS   128,930    -    -    128,930    55,222    -    -    55,222 
PGY   163,635    -    -    163,635    399,456    -    -    399,456 
                                         
Accounts payable, non-current   295,279    -    -    295,279    619,587    -    -    619,587 
CLP   293,176    -    -    293,176    618,509    -    -    618,509 
ARS   2,103    -    -    2,103    1,078    -    -    1,078 
                                         
Accounts payable related companies   10,790,089    -    -    10,790,089    19,777,812    -    -    19,777,812 
BRL   10,790,089    -    -    10,790,089    19,777,812    -    -    19,777,812 
                                         
Other non-current provisions   789,016    47,945,920    -    48,734,936    968,404    66,070,162    -    67,038,566 
BRL   -    47,945,920    -    47,945,920    -    66,070,162    -    66,070,162 
ARS   789,016    -    -    789,016    968,404    -    -    968,404 
                                         
Deferred tax liabilities   10,677,151    38,508,424    104,483,972    153,669,547    12,834,788    49,848,536    106,766,423    169,449,747 
UF   -    -    -    -    -    -    1,298,050    1,298,050 
CLP   1,604,289    1,070,325    90,781,152    93,455,766    1,449,404    181,418    90,271,026    91,901,848 
BRL   -    37,438,099    -    37,438,099    -    49,667,118    -    49,667,118 
ARS   9,072,862    -    -    9,072,862    11,385,384    -    -    11,385,384 
PGY   -    -    13,702,820    13,702,820    -    -    15,197,347    15,197,347 
                                         
Employee benefits non-current provisions   911.873    145,165    12,578,520    13,635,558    1,114,051    148,954    8,910,349    10,173,354 
CLP   378,733    145,165    12,578,520    13,102,418    461,587    148,954    8,910,349    9,520,890 
ARS   -    -    -    -    88,090    -    -    88,090 
PGY   533,140    -    -    533,140    564,374    -    -    564,374 
                                         
Other non-financial liabilities   35,315    21,436,733    -    21,472,048    -    -    -    - 
BRL   -    21,436,733    -    21,436,733    -    -    -    - 
ARS   35,315    -    -    35,315    -    -    -    - 
                                         
Other non-financial liabilities   20,597    -    -    20,597    -    -    -    - 
CLP   20,597    -    -    20,597    -    -    -    - 
                                         
Total non-current liabilities   55,331,007    387,637,200    795,479,416    1,238,447,623    70,109,210    415,729,142    524,547,771    1,010,386,123 
USD   366,652    259,746,604    207,280,189    467,393,445    509,366    271,700,335    -    272,209,701 
UF   24,669,188    13,214,387    414,689,041    452,572,616    22,584,954    24,627,105    401,691,631    448,903,690 
CLP   6,385,796    5,215,490    154,928,526    166,529,812    10,455,556    330,372    99,181,375    109,967,303 
BRL   13,184,370    109,460,719    4,878,840    127,523,929    23,097,326    119,071,330    8,477,418    150,646,074 
ARS   10,028,226    -    -    10,028,226    12,498,178    -    -    12,498,178 
PGY   696,775    -    13,702,820    14,399,595    963,830    -    15,197,347    16,161,177 

80

 

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31 – THE ENVIRONMENT  

 

The Company has made disbursements for improvements in industrial processes, equipment to measure industrial waste flows, laboratory analysis, consulting on environmental impacts and others.

 

These disbursements by country are detailed as follows:

 

    2020 period   Future commitments 
Country   Recorded as
expenses
   Capitalized to
Property, plant
and equipment
   To be
recorded as
expenses
   To be
capitalized to
Property, plant
and equipment
 
    CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Chile    562,331    -           
Argentina    312,936    8,758    94,226      
Brazil    1,030,883    110,123    207,737    48,810 
Paraguay    101,653    34,218    -      
Total    2,007,803    153,099    301,963    48,810 

  

32 – SUBSEQUENT EVENTS

 

On February 17, 2021, the subsidiary Paraguay Refrescos S.A. along with the companies INPET S.A.E.C.A and CORESA. executed the Bylaws and Shareholders’ Agreement for the incorporation of a company called “CIRCULAR- PET S.A.” Each of the companies will hold a 33.3% ownership interest in the company’s share capital.

 

The subscribed share capital of CIRCULAR- PET S.A. is CLP 4,326 million (PGY 42,000,000,000), where each shareholder at the incorporation act paid a share of CLP 1,030,000 (PGY 10,000,000), totaling a paid-up share capital of CLP 3,090,000 (PGY 30,000,000).

 

The principal activity of CIRCULAR-PET S.A. will be the manufacture and commercialization of recycled post-consumer PET resins, from the transformation of PET flakes. Participation in the company provides the Group with a fully integrated supply chain for its growing business of commercializing products in PET bottles and will ensure the supply of recycled resin under the best conditions for the coming years.

 

No other events have occurred after December 31, 2020 that may significantly affect the Company’s consolidated financial situation.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Santiago, Chile.

 

  EMBOTELLADORA ANDINA S.A.
     
  By: /s/ Andrés Wainer
  Name: Andrés Wainer
  Title: Chief Financial Officer

  

Santiago, March 15, 2021

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