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How do you account for bookmakers

I have a potential new client who is a bookmaker.

Never been involved in this sector before and I need to know how you account for outstanding bets.

Lets say the year end is 31 Mar-13.  Lets take two bets that I have tried to make the extremes.

Punter A has staked £500 on his son playing for England at 300:1 before 2020.  Do you take £500 to the profit and loss account and ignore the potential liability or account for the bet as a "long term contract".  The son will never play for England he only has one leg.

Punter B has bet £1,000 on Manchester United to win the league.  The league ends on 19 May-13 but Manchester United are so far ahead, at 31 Mar-13, they really have to be bad to lose the title.  Do you recognise the loss in the accounts or do you have to wait until they do win.  It is not a known and certain situation at the year end but probable.

No silly football answers, no witty answers about value price(s) etc.  Non Bob please.

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13th Dec 2012 17:02

Sorry, can't help

But you reminded me of this story http://sports.yahoo.com/blogs/soccer-dirty-tackle/bookie-already-paid-ma... where basically the bookie paid out before the outcome was certain (and I think in fact shouldn't have paid out!).

So I wonder if there is a point where the accounting standards consider a bet is won, perhaps earlier than the actual win day?

This seems a fascinating area... I might research it!

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By Glennzy
15th Dec 2012 02:01

I used to do a few
But they were track side bookmakers at horse and grey hound tracks. They were basically on a cash basis as most bets were taken and settled on the same day. I take your point though what I would do is make a provision for potential payouts to be made beyond the year end. I think the margin is about 20% they make so if you could base it on that. Although if its a few months after the year end you may know the outcome of outstanding bets before you finalise the figures and adjust them accordingly. A lot of book makers will also lay off any large bets they have taken with other bookies which you will need to be aware of.

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