Australia Lottery Business - Cash flow treatments for online sales/prize payments.

[Arikari Blue]

Hi, my company sells lottery tickets through retailers and online platforms (PlayWeb).

Our customers open their accounts in PlayWeb and deposit cash to play our lottery games.

There are 4 different types of customer transactions in PlayWeb for our business operation and their GL entries are shown below:

• Customer Deposits: DR – Cash at Bank, CR - PlayWeb Liability
• Ticket Purchases from PlayWeb account: DR – PlayWeb Liability, CR – Sales
• Prize Payments to PlayWeb account: DR – Prize Expense, CR – PlayWeb Liability
• Customer Withdrawals: Dr – PlayWeb Liability, CR – Cash at Bank
• When prize payments are made to PlayWeb accounts, Customer can either withdraw cash from their PlayWeb accounts or purchase new lottery tickets using their PlayWeb balances.

If our total sales (including both Retailers and PlayWeb sales) were $100m and Prize expense was $50m during FY20X1 and the balance movement of PlayWeb liability GL during FY20X1 was $2m increase with the below detail:

• Opening Bal: $5m
• Customer Deposits: Cr $20m
• Ticket Purchases from PlayWeb account: Dr $30m
• Prize Payment to PlayWeb account: Cr $15m
• Customer Withdrawals: Dr $3m
• Closing Bal: $ 7m

In above, what is correct disclosure of operating cash flow in our cash flow statement FY20X1? (assuming no balance movements in Sales Debtor & Prize Creditor during FY20X1)

a. i) Cash Receipts from Sales: $100m (which is total sales FY20X1)
ii) Cash Prize Payments: $48m (total prize expense $50m – PlayWeb liability GL movement $2m)

Or

b. i) Cash Receipts from Sales: $90m ($100m total sales FY20X1 less $30m non-cash adjustments for ‘Ticket purchases from PlayWeb accounts’ plus $20m Customer Deposits in PlayWeb accounts)
ii) Cash Prize Payments: $38m ($50m total prize expense FY20X1 less $15m non-cash adjustments for ‘Prize Payments to PlayWeb accounts’ plus $3m Customer Withdrawals)