How the financial statements of gambling companies are regulated

The financial statements of gambling operators are at the intersection of accounting standards and special gambling supervision. On the one hand - IFRS or US GAAP, requirements of capital markets and tax authorities. On the other hand, specialized regulators (for example, UKGC in the UK, AGCO/iGO in Ontario, DGE/PGCB/MLB in the US, MGA in Malta, etc.), which require separate GGR statistics, game tax, player reports and internal controls.

Below is a practical map of requirements that form the structure of P&L, management accounting and public disclosures of gambling companies.

1) Who regulates and what reports require

Financial regulators and exchanges

Annual and quarterly reporting requirements for IFRS/US GAAP, audit, risk disclosures, segment reporting, non-financial metrics.

For public companies in the USA - SOX 302/404 (assessment and audit of internal control over financial statements).

Gambling regulators (by license)

Monthly/quarterly packages: GGR/NGR by verticals, game taxes/fees, reports on player wallets, jackpots, bonus obligations, complaints and responsible gambling.

Requirements for ICS/MICS (Internal/Mandatory Internal Control Standards) - minimum standards for cash procedures, reporting, delimitation of responsibilities, access control, accounting for chips/cache/jackpots/payout fund.

Periodic operational audits and inspections, including IT audits.

Tax authorities

Calculation and payment of gaming tax/levy (usually from GGR or NGR) and corporate tax (CIT), as well as VAT/GST for services (not for the game win itself, in most modes).

2) Accounting Basis: IFRS and US GAAP for iGaming/IR

Revenue (IFRS 15/ASC 606)

Moment of recognition: when the gaming obligation is fulfilled (the result of the bet is determined).

Principal vs Agent: Content aggregators/marketplaces and affiliates - it is critical to determine whether gross or net is reflected.

Bonuses and promos: as a rule, compensation to the client (consideration payable to a customer) - reduce revenue or are recognized as a separate expense depending on the policy.

Loyalty/points: contractual obligations (deferred revenue) until maturity/expiration (breakage is taken into account according to statistics).

Jackpots: contributions to the fund - reserves/liabilities; gain - period expense.

Segment reporting (IFRS 8/ASC 280)

Disclosures by vertical (casino, betting, poker, bingo, offline/IR) and geography (country/state/province).

Lease/REIT

For IR operators - lease/sale-leaseback accounting according to IFRS 16/ASC 842; affects EBITDA/net debt.

3) Industry "language": GGR, NGR and non-financial metrics

Handle/Drop - turnover of bets/deposited funds.

GGR (Gross Gaming Revenue) = Handle − Player Payouts (or Handle × HE).

NGR (Net Gaming Revenue) = GGR − bonuses − content royalties − payment costs − gaming taxes − jackpot contributions (composition changes by policy/jurisdiction).

Non-GAAP indicators: Adjusted EBITDA, NGR margin, Hold%. Require reconciliation with standard reporting.

4) What does applied regulation require (essentially)

Player/Wallet Reporting

Balance of players' funds as separate obligations (segregated funds), reconciliation with bank/trust accounts.

SLA and payout statistics (Time-to-Payout, deviations, AML freezes).

Bonus/loyalty reports

Accruals, wagering, breakage, cancellations/returns, abuse/sanctions.

Tax rules: are bonuses taken into account when calculating the gaming tax base.

Jackpots and RNGs

Jackpot fund movement, contribution rate, triggering, configuration audit.

Verification of RNG/game mechanics by accredited laboratories (GLI, BMM, etc.) + change management.

Monthly GGR reports

By verticals/games/providers, with a geographical section (country/state/province), in the forms of the regulator.

5) Internal controls and IT controls

SOX 404/ICFR (for public companies)

Design and effectiveness of key controls: revenue recognition, wallet/bank reconciliation, tax calculation, period-end closing, access/changes to systems.

MICS/ICS (Gaming)

Checkout/check, limits and procedures, dual control, token/cache inventory, table/slot reports, incidents and investigations.

ITGC and application controls

Change management (dev→test→prod), access, backup, audit trails.

Anti-fraud graph and monitoring: multi-accounts, bonus carousels, chargeback schemes.

Data alienation: storage of logs, export at the request of the regulator, PII protection.

6) Taxes: game vs profit vs indirect

Gaming tax/levy: usually as% of GGR (sometimes NGR/handle). Rates vary by jurisdiction and vertical.

Corporate tax (CIT): on profit after operating expenses (and after gaming tax).

VAT/GST/DST: usually not for winnings, but for services (PSP, software, marketing) and digital services in a crossboarder.

Common rules for groups: for large MNEs - the effects of the global minimum tax (ETR ≥ 15%) in a number of countries.

7) AML/KYC and compliance reports

KYC/CDD/EDD policies, sanctions lists, transaction monitoring.

Submit SAR/STR (Suspicious Activity Report) to competent authorities.

Deposit/loss limits, RG signals, self-exclusion logs are part of regulatory reporting and audits.

8) Disclosures in Annual/Quarterly Accounts

Accounting policy: GGR/NGR methods, bonuses, loyalty, jackpots, principal/agent, conversion rates, revenue recognition by vertical.

Segment data, geography, concentration of revenue/risks.

Judicial and regulatory issues (licenses, inspections, fines).

Risk management: fraud, information security, RG, payment risks, dependence on content providers/PSP.

ESG/Responsible Gaming: metrics and policies if declared.

9) Frequent mistakes and how to avoid them

1. Mixing custom "operating NGR" with accounting revenue without reconciliation.

2. Incorrect classification of bonuses (do not reduce revenue when they should) and loyalty (liability or breakage is not reflected).

3. Ignoring principal/agent - overestimation of revenue on aggregator flows.

4. Lack of jurisdiction for gaming tax and incorrect bets.

5. Weak IT controls (no change/access logs) - risk of comments from the auditor and regulator.

6. Incomplete checks of players' wallets with trust accounts and weak control over Time-to-Payout.

7. ICS/MICS inconsistency with actual processes (Gap analysis is not performed regularly).

10) CFO/COO checklist (minimum for one year)

Updated accounting policy (IFRS 15/ASC 606): bonuses, loyalty, jackpots, principal/agent.
There are reconciliations: players' wallets ↔ bank/trust ↔ GL, monthly; aging of non-withdrawn funds.
Regulatory packages (GGR/NGR/taxes/jackpots/bonuses) are formed from a single data source and agreed with accounting.
MICS/ICS documented and tested; Gap analysis was carried out based on the results of past inspections.
ITGC/application controls: change management, roles/accesses, logs; SOC reports of key providers.
Jurisdiction Tax Matrix: gaming tax, CIT, VAT/GST/DST rates; settlement/payment processes.
SOX/ICFR (if applicable): key control map, testing, remediation plan.
AML/RG reports: SLA and completeness, integration of signals into reporting and risk management.
Disclosure control: reconciliation Non-GAAP ↔ GAAP/IFRS, segments/geo, risks/disputes.
Audit/inspection plans (external auditor, laboratories, regulator) and data availability.

11) Template section "Accounting policy" (skeleton)

1. Revenue recognition: moment, vertical, principal/agent, currency/exchange rate.

2. GGR/NGR method: composition of adjustments (bonuses, royalties, payments, taxes, jackpots).

3. Bonuses/loyalty: classification, accounting for obligations, breakage.

4. Jackpots: reserves, triggering criteria, publishing parameters.

5. Game taxes: rates and bases by jurisdiction, recognition procedure.

6. Gaming obligations: player wallets, deposits/withdrawals, deductions.

7. Value judgments and sources of uncertainty.

8. Non-financial metrics and Non-GAAP: definitions and reconciliations.

Regulation of the financial reporting of gambling companies consists of two layers: reporting standards (IFRS/US GAAP) and gambling supervision with its own forms, checks and control procedures. Successful operators do three things:

1. Unified data model for accounting, taxes and regulatory packages;

2. Tight controlling and IT controls (SOX/ICFR + MICS/ICS), regular reconciliations and audit trail;

3. Transparent disclosures (accounting policies, Non-GAAP reconciliations, risks) so that investors and regulators read the same numbers.

This approach reduces regulatory and audit risks, accelerates period closure and increases market confidence - and therefore directly improves the cost of capital and business sustainability.