Spin Master Corp. — Annual Report 2023

Feb 28, 2024

Spin Master Corp.

Consolidated financial statements

For the years ended December 31, 2023 and December 31, 2022

Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

Spin Master Corp.

Table of contents

Independent auditor’s report .........................................................................................................................................		1
Consolidated statements of financial position .............................................................................................................		4
Consolidated statements of earnings and comprehensive income .........................................................................		5
Consolidated statements of changes in shareholders' equity ...................................................................................		6
Consolidated statements of cash flows ........................................................................................................................		7
Notes to the Consolidated financial statements ..........................................................................................................	8	- 55

Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada

==> picture [123 x 24] intentionally omitted <==

Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca

Independent Auditor's Report

To the Shareholders and the Board of Directors of Spin Master Corp.

Opinion

We have audited the consolidated financial statements of Spin Master Corp. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements of earnings and comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matter

A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2023. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Provisions for sales allowances - Refer to Notes 2F, 3D and 12 to the financial statements

Key Audit Matter Description

The Company routinely enters into arrangements with its customers to provide sales incentives, support customer promotional activities and provide compensation for defective merchandise. Such arrangements are considered variable consideration for revenue recognition purposes, and the Company uses the expected value method to quantify the variable consideration. A sales allowance is established to reflect amounts for programs which can be contractual or discretionary by nature. Contractual allowances are fixed and determinable at the time of sale, which do not require management to make significant judgments. The determination of the provisions for discretionary sales allowances are impacted by various current and forward-looking factors including customer sales volumes, channel inventory positions, product performance at retail, historical performance, market conditions and other considerations.

Given the significant judgments made by management to estimate the provisions for discretionary sales allowances, performing audit procedures to evaluate their reasonableness required a high degree of auditor judgment and an increased extent of audit effort.

How the Key Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination of the provisions for discretionary sales allowances included the following procedures, among others:

• Evaluated management's methods regarding the development of the provisions for discretionary sales allowances. Evaluated the reasonableness of the assumptions used by management to develop the provisions for discretionary sales allowances, including assessing the completeness and appropriateness of information considered by management.

• Tested the underlying inputs used in the determination of the provisions for discretionary sales allowances.

• Assessed management's historical ability to estimate the provisions for discretionary sales allowances by comparing the prior year estimated amounts to actual allowances utilized in the current year.

• Evaluated the reasonableness of the provisions for discretionary sales allowances by comparing a sample to the actual results of transactions occurring after year end.

Other Information

Management is responsible for the other information. The other information comprises:

• Management's Discussion and Analysis

• The information, other than the financial statements and our auditor's report thereon, in the Annual Report

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

2

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Mark Bernardi.

/s/ Deloitte LLP

Chartered Professional Accountants Licensed Public Accountants Toronto, Ontario February 28, 2024

3

Spin Master Corp. Consolidated statements of financial position

		Dec 31,	Dec 31,
(in US$ millions)	Notes	2023	20221
Assets
Current assets
Cash and cash equivalents	11	705.7	644.3
Trade receivables, net	12	414.4	311.0
Other receivables	12	60.0	49.5
Inventories, net	13	98.0	105.1
Prepaid expenses and other assets	14	40.9	22.3
		1,319.0	1,132.2
Non-current assets1
Intangible assets1	16	281.3	279.8
Goodwill	17	165.9	179.0
Right-of-use assets	26	53.6	62.9
Property, plant and equipment	15	32.6	36.0
Deferred income tax assets	10	110.8	94.7
Other assets	14	26.5	20.5
		670.7	672.9
Total assets1		1,989.7	1,805.1
Liabilities
Current liabilities1
Trade payables and accrued liabilities	18	385.4	339.4
Provisions	21	32.1	30.7
Lease liabilities	26	11.4	16.3
Deferred revenue	19	11.0	11.5
Income taxpayable1	10	6.6	29.7
		446.5	427.6
Non-current liabilities
Deferred income tax liabilities	10	59.1	55.7
Lease liabilities	26	50.7	54.9
Provisions	21	14.3	15.1
		124.1	125.7
Total liabilities1		570.6	553.3
Shareholders’ equity
Share capital	22	783.4	754.7
Retained earnings1		604.5	477.4
Contributed surplus		27.4	40.7
Accumulated other comprehensive income(loss)		3.8	(21.0)
Total shareholders’ equity1		1,419.1	1,251.8
Total liabilities and shareholders’ equity1		1,989.7	1,805.1
1December 31, 2022 restated for the change in accounting policy (see Note 4).

Approved by the Board of Directors on February 28, 2024.

The accompanying notes on pages 8 to 55 are an integral part of these Consolidated financial statements.

4

Spin Master Corp. Consolidated statements of earnings and comprehensive income

		Year Ended Dec 31,	Year Ended Dec 31,
(in US$ millions, except earnings per share)	Notes	2023	2022
Revenue	5	1,904.9	2,020.3
Cost of sales		866.5	916.5
Gross profit		1,038.4	1,103.8
Expenses
Selling, general and administrative	8	775.7	782.1
Depreciation and amortization	8	25.4	28.9
Other expense, net	6	33.7	10.9
Foreign exchange loss(gain),net	9	14.7	(61.4)
Operating Income		188.9	343.3
Interest income	7	(27.4)	(10.7)
Interest expense	7	15.1	13.6
Income before income tax expense		201.2	340.4
Income tax expense	10	49.8	79.1
Net Income		151.4	261.3
Earnings per share
Basic	23	1.46	2.54
Diluted	23	1.43	2.45
Weighted average number of shares (in millions)
Basic	23	103.5	102.9
Diluted	23	105.7	106.4
		Year Ended Dec 31,
(in US$ millions)		2023	2022
Net Income		151.4	261.3
Items that may be subsequently reclassified to Net Income
Foreign currency translation gain (loss)		24.8	(79.8)
Items that are not subsequently reclassified to Net Income
Gain on minorityinterest and other investments	14, 29	—	0.1
Other comprehensivegain(loss)		24.8	(79.7)
Total comprehensive income		176.2	181.6

The accompanying notes on pages 8 to 55 are an integral part of these Consolidated financial statements.

5

Spin Master Corp. Consolidated statements of changes in shareholders' equity

					Accumulated
					other
		Share	Retained	Contributed	comprehensive
(in US$ millions)	Note	capital	earnings	surplus	income(loss)	Total
Balance at January 1, 2022		736.9	216.0	40.8	58.7	1,052.4
Change in accounting policy	4	—	9.3	—	—	9.3
Balance at January 1, 2022(restated)1		736.9	225.3	40.8	58.7	1,061.7
Net Income		—	261.3	—	—	261.3
Other comprehensive loss - foreign currency
translation		—	—	—	(79.8)	(79.8)
Other comprehensive income - other		—	—	—	0.1	0.1
Share-based compensation	22	—	—	17.6	—	17.6
Dividends declared	22	—	(9.2)	—	—	(9.2)
Share options exercised and common shares
issued	22	0.2	—	(0.1)	—	0.1
Shares issued upon settlement of long-term
incentiveplan	22	17.6	—	(17.6)	—	—
Balance at December 31, 2022		754.7	477.4	40.7	(21.0)	1,251.8
Balance at January 1, 20231		754.7	477.4	40.7	(21.0)	1,251.8
Net Income		—	151.4	—	—	151.4
Other comprehensive income - foreign currency
translation		—	—	—	24.8	24.8
Share-based compensation	22	—	—	20.1	—	20.1
Dividends declared	22	—	(18.5)	—	—	(18.5)
Shares issued upon settlement of long-term
incentive plan	22	33.4	—	(33.4)	—	—
Subordinate votingsharespurchased and cancelled	22	(4.7)	(5.8)	—	—	(10.5)
Balance at December 31, 2023		783.4	604.5	27.4	3.8	1,419.1

1 Restated for the change in accounting policy (see Note 4)

The accompanying notes on pages 8 to 55 are an integral part of these Consolidated financial statements.

6

Spin Master Corp. Consolidated statements of cash flows

		Year	Ended Dec 31,
(in US$ millions)	Notes	2023	2022
Operating activities
Net Income		151.4	261.3
Adjustments to reconcile net income to cash provided by operating activities
Income tax expense	10	49.8	79.1
Interest income	7	(27.4)	(10.7)
Depreciation and amortization	8	130.1	68.2
Loss on disposal of non-current assets	15, 16, 26.	1.1	1.5
Interest and accretion expense	7	5.1	5.5
Amortization of Facility fee costs	7	0.5	0.4
Gain on investment in limited partnership, net	29	(0.4)	—
Impairment of non-current assets	15, 16, 17	35.8	3.0
Loss on minority interest and other investments	6	—	0.5
Unrealized foreign exchange loss (gain), net	9	26.1	(40.3)
Share-based compensation expense	22	20.1	17.6
Net changes in non-cash working capital	24	(105.1)	(67.7)
Net change in non-cash provisions and other assets		(2.1)	1.0
Income taxes paid		(93.6)	(83.6)
Income taxes received		7.8	4.5
Interest received		27.8	9.0
Cashprovided by operating activities		227.0	249.3
Investing activities
Investment in property, plant and equipment	15	(28.0)	(30.4)
Investment in intangible assets	16	(79.4)	(69.0)
Business acquisitions, net of cash acquired	28	(26.5)	(10.6)
Advance paid for business acquisitions		—	(1.0)
Investment distribution income	29	0.3	0.1
Minority interest and other investments	14	(2.5)	(7.5)
Proceeds from sale of non-current assets		0.8	9.2
Cash used in investing activities		(135.3)	(109.2)
Financing activities
Payment of lease liabilities	26	(14.9)	(15.8)
Dividends paid	22	(18.4)	(4.6)
Proceeds from issuance of common shares from exercise of share options	22	—	0.1
Repurchase of subordinate voting shares under the NCIB	22	(10.5)	—
Payment of financingcosts related to the Facility	14, 20	(0.3)	—
Cash used in financing activities		(44.1)	(20.3)
Effect of foreign currencyexchange rate changes on cash and cash equivalents		13.8	(38.2)
Net increase in cash and cash equivalents during the year		61.4	81.6
Cash and cash equivalents,beginningof theyear		644.3	562.7
Cash and cash equivalents, end of the year		705.7	644.3

The accompanying notes on pages 8 to 55 are an integral part of these Consolidated financial statements.

7

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

1. Description of business

Spin Master Corp. was formed by the amalgamation of Spin Master Corp. (formerly SML Investments Inc. which was incorporated on June 9, 2004 under the Business Corporations Act (Ontario)), SML Investments 2008 Inc. and Varadi Bee Corp. pursuant to the filing of articles of amalgamation under the Business Corporations Act (Ontario) on July 29, 2015. The Company is a leading global children's entertainment company, creating exceptional play experiences through its three creative centres: Toys, Entertainment and Digital Games. Its head and registered office is located at 225 King Street West, Suite 200, Toronto, Canada, M5V 3M2. Spin Master Corp. and its subsidiaries are together referred to, in these Consolidated financial statements, as the “Company” or “Spin Master”.

The Company has three reportable operating segments: Toys, Entertainment and Digital Games (see Note 30).

2. Summary of material accounting policies

(A) Statement of compliance and basis of preparation and measurement

The Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board ("IASB").

All financial information is presented in millions of United States dollars ("US$") and has been rounded to the nearest hundred thousand, except as otherwise indicated.

These Consolidated financial statements were approved and authorized for issuance by the Board of Directors on February 28, 2024.

The Consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value, as explained in the accounting policies below. Historical cost is measured on the fair value of the consideration provided in exchange for goods and services.

(B) Application of new and revised IFRS

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality — Judgements Disclosure of Accounting Policies

The amendments to IAS 1 require that the Company discloses its material accounting policies instead of its significant accounting policies. The amendments also clarify that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed, and not all accounting policy information that relates to material transactions, other events or conditions is material to the financial statements. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. Effective January 1, 2023, the Company adopted the amendments to IAS 1 and IFRS Practice Statement 2. As a result of the adoption of these amendments, there were no adjustments to the presentation or amounts recognized in these Consolidated financial statements.

— Amendments to IAS 8 Accounting Polices, Changes in Accounting Estimates and Errors Definition of Accounting Estimates

The amendments introduce a new definition for accounting estimates: clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. Furthermore, the amendments clarify that a change in accounting estimate that results from new information or new developments is not correction of an error. Effective January 1, 2023, the Company adopted the changes to IAS 8 and the adoption of these amendments did not have a material impact on these Consolidated financial statements.

Amendments to IAS 12 Income Taxes — Deferred Tax related to Assets and Liabilities arising from a Single

Transaction

The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal taxable and deductible temporary differences such as deferred taxes on leases and decommissioning obligations. Effective January 1, 2023, the Company adopted the changes to IAS 12 and the adoption of these amendments did not have a material impact on these Consolidated financial statements.

8

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

Amendments to IAS 12 Income Taxes — International Tax Reform — Pillar Two Model Rules

In May 2023, the IASB amended IAS 12 Income Taxes to include a temporary exception to the requirements to recognize and disclose information about deferred tax assets and liabilities related to the new global minimum tax regime ("Pillar Two"). The Company has applied this temporary exception.

Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Company operates. Certain jurisdictions of the Organization for Economic Co-operation and Development (“OECD”) have agreed to implement a new global minimum tax regime based on model rules. The proposed Pillar Two rules are intended to ensure that large multinational enterprises pay a minimum tax of 15% on the income arising in each jurisdiction in which they operate. These rules may come into effect in 2024.

The Company has performed an assessment of its potential exposure to Pillar Two income taxes. The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings, country-by-country reporting and financial statements for the constituent entities in the Company. Based on the assessment, the effective tax rates calculated in accordance with Pillar Two in most of the jurisdictions in which the Company operates are above 15%. However, there are a limited number of jurisdictions where the transitional safe harbour relief does not apply and effective tax rates calculated in accordance with the Pillar Two are close to 15%. The Company does not expect a material exposure to Pillar Two income taxes in those jurisdictions.

(C) Basis of preparation

The Consolidated financial statements incorporate the financial statement accounts of the Company and entities controlled by the Company and its subsidiaries (the “Group”). Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated statements of earnings and comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

(D) Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred to the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.

When the consideration transferred by the Company in a business combination includes liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustment against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

All other subsequent changes in the fair value of contingent consideration classified as a liability are accounted for in accordance with the relevant policy. Other contingent consideration is remeasured to fair value at subsequent reporting dates with changes in fair value recognized in profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known would have affected the amounts recognized at that time.

9

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value .

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment, if any. Goodwill is measured as the excess of the sum of the consideration transferred, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash generating units ("CGUs") or groups of CGUs that are expected to benefit from the combination.

(E) Goodwill

A CGU to which goodwill has been allocated is tested for impairment annually, or quarterly when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit.

Any impairment for goodwill is recognized directly in profit or loss, and an impairment recognized for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributed amount of goodwill is included in the determination of the profit or loss on disposal.

(F) Revenue recognition

Toy revenue

The Company’s Toy revenue is derived from the sale of toys and related products to customers who are retailers or distributors in domestic and international markets. Toy revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The Company recognizes revenue when control of the goods has transferred, which is determined by respective shipping terms and certain additional considerations. Invoices are generally issued at the time of delivery (which is when the Company has satisfied its performance obligations under the arrangement). As such, a receivable is recognized as the consideration is unconditional and only the passage of time is required before payment is due. The Company does not have performance obligations subsequent to delivery of the sale of goods to customers and revenues from sale of goods are recognized upon the passing of control to the customer.

The Company routinely enters into arrangements to provide sales allowances requested by customers relating to cooperative advertising, contractual and negotiated discounts, volume rebates, and costs incurred by customers to sell the Company’s products. Such programs are based primarily on the customer inventory position, purchase levels, customer performance of specified promotional activities and other specified factors, as agreed to with customers as well as the nature of the product.

Toy gross product sales represent sales of the Company’s products to customers, excluding the impact of sales allowances. Toy revenue represents the amount of consideration to which the Company expects to be entitled through the sale of goods excluding sales tax and after the application of the variable consideration constraint. Variable consideration includes estimates for sales allowances, defective products, and returns by customers made based on certain judgments, contractual terms and conditions and historical data. The Company uses the expected value method to quantify the variable consideration. The Company monitors periodic results against historical data and makes any adjustments to both sales allowances and returns accruals as required. Note 3 - Significant accounting judgments and estimates outlines additional details on sales allowances.

Entertainment revenue

Entertainment revenues are comprised of distribution revenues and licensing and merchandising revenues.

Distribution revenues are primarily generated through the sale of entertainment content produced by the Company, in accordance with the relevant agreements. Such agreements are assessed as either providing the customer with a 'right-to-use' or 'right-to-access'. Applicable revenues are recognized at a point-in-time or over time based on the classification determined. Judgment is required in determining the appropriate classification. Licenses to distribute entertainment content grants licensees a right to use the Company's brands and other intellectual property. Licensees pay a fixed fee for licenses of the produced content. Revenue is recognized upon delivery of the entertainment programming and is measured based on the consideration to which the Company expects to be entitled upon delivery. There are no future performance obligations associated with the delivery of the entertainment content.

Licensing and merchandising revenues are generated through licensing the Company’s brands and other intellectual property. The license agreements relating to the Company’s brands provide access to the intellectual

10

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

property over the term of the licenses and are considered right-to-access licenses of intellectual property. The Company records sales-based or usage-based royalty revenues for right-to-access licenses upon occurrence of the licensees’ subsequent sale or usage .

Customer advances on licensing and merchandising and/or content distribution, are recorded in deferred revenue until all of the foregoing revenue recognition conditions have been met.

Digital Games revenue

The Company develops digital games which are distributed via third-party platform providers. The Company controls most aspects of the digital games delivered to the end user. The third-party platform providers are providing the service of distributing digital games via their online store/marketplace and administrating payment receipt from the end users. The Company has determined that it is the principal in the arrangement and accordingly, Digital Games revenues are recorded on a gross basis. The fees charged by the third-party platform providers are recorded within cost of sales. Revenue associated with the sale of digital games is recognized when control is transferred. This condition is typically met when the end-user purchases and downloads the digital games from the third-party. The end users can make in-app purchases and the Company recognizes revenue at the time of sale as there are no additional performance obligations other than the delivery of digital games to the third-party platform providers or the delivery of the item purchased within the digital games.

The Company also generates recurring subscription revenue from certain digital games. Revenue is recognized ratably over the contractual subscription term, beginning on the date that the subscription is made available to the end user.

Disaggregation of revenue

The Company disaggregates its revenues into Toys, Entertainment and Digital Games. The Company also disaggregates components of Toy revenues by geographic segment: North America, Europe and Rest of World as well as into four major product categories as follows: (i) Preschool and Dolls & Interactive, (ii) Activities, Games & Puzzles and Plush, (iii) Wheels & Action and (iv) Outdoor.

The Company believes the disaggregation of revenue described above collectively depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See Note 30 Segment information for further information.

(G) Leases

The Company assesses whether a contract is or contains a lease, at inception of a contract. The Company recognizes a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognizes the leases as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are assumed.

The Company considers the lease term to be the noncancellable period of the lease, including any extension options where the Company is reasonably certain to exercise the option, and any termination options where the Company is reasonably certain not to exercise the option.

Lease liability

Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate. The incremental borrowing rate is defined as the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Lease payments included in the measurement of the lease liability comprise:

• fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

• the amount expected to be payable by the lessee under residual value guarantees;

• the exercise of purchase options, if the lessee is reasonably certain to exercise the options; and

• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

11

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and

• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

Right-of-use asset

Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The Company applies IAS 36 Impairment of Assets to determine whether a right-of-use asset is impaired.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those payments occurs and are included in administrative expenses in the Consolidated statements of earnings and comprehensive income.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components and instead account for any lease and associated non-lease components as a single arrangement. The Company has elected to use this practical expedient.

(H) Foreign currencies

The Company reports its financial results in United States dollars. The functional currency of Spin Master Corp. is the Canadian dollar ("CAD"). The functional currency of the Company's consolidated subsidiaries is typically the economic currency in the associated jurisdiction. At December 31, 2023 and 2022, the functional currencies of the Company's subsidiaries included the US dollar, the Canadian dollar, the Euro, the Great Britain pound sterling, the Hong Kong dollar, the Mexican peso, the Chinese yuan, the Vietnamese dong, the Japanese yen, the Swedish krona, the Australian dollar, the Indian rupee, the Polish zloty, and the Russian ruble.

For the purposes of presenting these Consolidated financial statements, the Company's monetary assets and liabilities denominated in foreign currencies are translated using the closing exchange rate at the balance sheet date. Non-monetary items carried at fair value that are denominated in a foreign currency are translated at the rate prevailing when the fair value was determined. Non-monetary items denominated in a foreign currency that are measured at historical cost are translated using the exchange rate at the date of the transaction. Foreign currency exchange gains or losses are recognized in profit or loss.

Assets and liabilities of the Company’s consolidated subsidiaries whose functional currency is other than the presentation currency are translated into US$ using the closing exchange rate at the balance sheet date. Income and expenses are translated using the average exchange rate for the period. The resulting foreign exchange gains and losses are recognized in the foreign currency translation adjustment as part of other comprehensive income. Realized gains and losses are recognized in profit or loss at the time of settlement.

12

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

(I) Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding, assuming the conversion of all dilutive securities were exercised during the period. Securities refer to all outstanding share options, Restricted Stock Units ("RSUs") and Performance Share Units ("PSUs").

(J) Income taxes

Income tax expense or recovery represents the sum of the taxes currently payable or receivable and deferred taxes.

Current tax

For each entity in the Group, the tax currently payable is based on taxable income for the year. Taxable income differs from “income before income tax expense (recovery)” as reported on the Consolidated statements of earnings and comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s current tax expense or recovery is calculated using income tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the Consolidated financial statements and the corresponding tax basis used in the computation of taxable income. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are recognized for deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than a business combination) of assets and liabilities in a transaction that does not affect either taxable income or net income before income taxes. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the income tax rates that are expected to apply in the period in which the liability is expected to be settled or the asset realized, based on income tax rates (and income tax laws) that have been enacted or substantively enacted at the end of the reporting period, reflecting the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the period

Current and deferred tax expense or recovery are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case the current and deferred tax expenses are also recognized in other comprehensive income or directly in equity, respectively. Where current deferred taxes arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(K) Cash and cash equivalents

Cash and cash equivalents is net of outstanding bank overdrafts, if applicable. Cash equivalents consist of highly liquid marketable investments with a maturity date of 90 days or less.

(L) Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment, if any.

Depreciation is recognized so as to depreciate the cost or valuation of assets less their residual values over their useful lives, using the straight-line method or declining balance method. Repairs and maintenance costs are recognized in profit or loss as incurred.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

13

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

The following are the estimated useful lives for the major classes of property, plant and equipment:

Classes	Estimated Useful Life
Land	Indefinite
Buildings	30 years
Moulds, dies and tools	2 years
Office equipment	3 years
Leasehold improvements	Lesser of lease term or 5 years
Computer hardware	3 years
Machinery and equipment	30% declining balance

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognized in profit or loss.

(M) Intangible assets

The following are the estimated useful lives for the major classes of intangible assets:

Classes	Estimated Useful Life
Brands	Indefinite
Trademarks and licenses	Lesser of trademark and license term or 5 years
Customer lists	5 years
Intellectual property ("IP")	10 years
Digital Games development	1-5 years
Entertainment content development	1-5 years
Computer software	30% declining balance
Computer software - other	1-5 years

Intangible assets acquired separately in an asset acquisition

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment, if any.

Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Intangible assets with indefinite useful lives, such as brands that are acquired separately are carried at cost less accumulated impairment.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair values at the acquisition date (which is regarded as their initial cost).

Subsequent to initial recognition, intangible assets acquired in business combinations are reported at cost less accumulated amortization if applicable and accumulated impairment, on the same basis as intangible assets that are acquired separately.

14

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

- - Internally generated intangible assets research and development expenditures

Expenditures on research activities are recognized as incurred and recorded as Product development expenses within Selling, general and administrative in the Consolidated statements of earnings and comprehensive income. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized only if all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset for use or sale;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internallygenerated intangible asset can be recognized, development expenditures are recognized in profit or loss in the period in which they are incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment, on the same basis as intangible assets that are acquired separately.

Entertainment content development

Entertainment content development includes film and television production assets. The Company has access to government programs, including tax credits that are designed to aid in the film and television production and distribution in Canada. The federal and provincial tax credits are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the tax credits will be received. Capitalized costs net of expected federal and provincial tax credits are amortized and charged to amortization expense. The consumption of entertainment content development assets is measured through amortization expense with rates ranging from 25% to 100% at the time of delivery for a full season. Entertainment content development assets which are not fully amortized upon delivery are amortized at rates ranging from 50% to 75% of the remaining balance annually thereafter depending on the expected future benefit attributed to the entertainment content development assets.

Deferred revenue related to entertainment content development assets arises as a result of consideration received in advance of the Company fulfilling its obligations.

Please refer to Note 4 for the change in accounting for entertainment content development assets.

Digital Games development

Digital Games development includes digital games related applications. The Company has access to government programs, including tax credits that are designed to aid in the development of interactive digital media in Canada. These tax credits are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the tax credits will be received. These capitalized costs, net of expected provincial tax credits, are charged to amortization expense based on the useful life of the related digital game.

Impairment of definite life tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment (if any).

When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, otherwise, they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.

15

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment equal to the difference between the carrying and recorded amounts is recognized immediately in profit or loss.

When an impairment subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, provided that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment been recognized for the asset (or CGU) in prior years. A reversal of an impairment is recognized immediately in profit or loss.

(N) Advances on royalties

The Company enters into license agreements with inventors and licensors for the use of their intellectual properties in its products. These agreements may call for payment in advance for a portion of minimum guaranteed amounts. Amounts paid in advance are initially recorded as an asset and subsequently expensed to net income or loss as revenue from the related products is recognized. If all or a portion of an advance does not appear to be recoverable through future use of the rights obtained under license, the non-recoverable portion is expensed immediately in profit or loss.

(O) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Cost includes the purchase price and other costs, such as import duties, taxes and transportation costs. Trade discounts and rebates are deducted from the purchase price. Net realizable value represents the estimated selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecast and net realizable value. The impact of changes in inventory reserves is reflected in cost of sales.

(P) Provisions

A provision is a liability of uncertain timing or amount. Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, 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 amount expected to be required to settle the obligation and are re-measured each reporting date.

Deferred consideration

Where the Company is committed to pay royalties on sales of acquired brands, the future royalty obligation is based on the Company’s estimate of the related brands future sales, discounted for the timing of expected payments.

Provision for defectives

Defectives refer to when the end consumer returns defective goods to the Company’s customers. Customers without a fixed allowance for defectives are eligible for a credit for the cost of the product if returned as defective by the end consumer. The estimate of defectives is made based on the class and nature of the product and is recorded as a reduction to revenue in the Consolidated statements of earnings and comprehensive income.

Supplier obligations

Supplier obligations represent the estimated compensation to be paid to suppliers for lower than expected volumes purchased, resulting in the supplier having excess raw material and finished goods inventories. While payments are not contractually required, the Company regularly compensates suppliers to maintain supplier relationships, which represents a constructive obligation due to past practices. The supplier obligation is based on an estimate of the cost of the supplier’s excess consigned parts and finished goods inventory.

(Q) Share-based payments

The Company has a Long-Term Incentive Plan (“LTIP”) which provides for the issuance of securities under which grants may be made by the Company to employees. The Company, at the discretion of the Board of Directors, grants options to purchase subordinate voting shares, share units (in the form of RSUs and PSUs), stock appreciation rights, shares of restricted stock and any other equity based awards. These awards may be settled in cash or issued shares, or a combination of both at the discretion of the Board of Directors. LTIP liabilities are recorded in shareholders equity and not marked to market.

16

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

Under the plan, the exercise price of each option equals the market price of the Company’s shares on the date of grant and the options have a maximum term of ten years. Options vest between zero and four years.

The costs of equity-settled awards are measured using the Black-Scholes valuation model using management’s inputs and assumptions. Share-based compensation expense for equity-settled awards is recognized in administrative expenses over the vesting period of each award, with a corresponding increase to contributed surplus, based on the vesting period that has elapsed and the Company’s best estimate of the number of equity instruments that will vest.

(R) Dividends

The Company has a policy of declaring dividends at the discretion of the Board of Directors. Dividends declared are payable to the Company's shareholders and recognized as a liability in the Consolidated statements of financial position in the period in which the dividends are approved by the Company's Board of Directors.

(S) Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the respective instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are included in the initial carrying value of the related instrument and are amortized using the effective interest method. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Fair value estimates are made at the Consolidated statements of financial position date based on relevant market information and information about the financial instrument. All financial instruments are classified into either: fair value through profit or loss (“FVTPL”), fair value through other comprehensive income ("FVTOCI") or amortized cost.

The Company has made the following classifications:

Cash and cash equivalents	Amortized cost
Trade receivables	Amortized cost
Other receivables	Amortized cost
Other assets	Amortized cost
Investment in a limited partnership	FVTPL
Minority interest and other investments	FVTPL/FVTOCI
Trade payables and accrued liabilities	Amortized cost
Loans and borrowings	Amortized cost
Interest payable	Amortized cost
Foreign exchange forward contracts	FVTPL

The Company classifies its financial assets in the following measurement categories:

• those to be measured at amortized cost; and

• those to be measured subsequently at fair value (either through OCI or through profit or loss)

The classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at amortized cost

Financial assets at amortized cost are non-derivative financial assets which are held within a business model whose objective is to hold assets to collect contractual cash flows and whose contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition. Subsequent to initial recognition, financial assets are measured at amortized cost using the effective interest method, less any impairment.

17

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

Financial assets at fair value

Financial assets are classified as FVTPL when the financial asset is either held for trading or it is designated as FVTPL. A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term;

• on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

For financial assets measured at fair value, gains and losses will either be recorded in profit or loss (within Other expense, net) or OCI.

Financial assets at fair value - Investment in a limited partnership and minority interest and other investments

The Company measures the Investment in a limited partnership and minority interest and other investments (collectively, "investments") at fair value.

For investments in equity instruments that are not held for trading, FVTPL or FVTOCI designation will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at FVTOCI. If the irrevocable election is made, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.

Distribution income from investments are recognized in profit or loss within Other expense, net when the Company’s right to receive payments is established, irrespective of fair value designation.

Impairment of financial assets

Financial assets, other than those classified as FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been decreased.

The carrying amount of the financial asset is reduced by the impairment directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.

When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are offset against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. Loss allowances are based on the lifetime expected credit losses that result from all possible default events over the expected life of the trade receivable, using the simplified approach.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

(T) Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized as the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities (including loans and borrowings and trade payables and other liabilities) are initially measured at fair value, net of transaction costs. Subsequently, other financial liabilities are measured at amortized cost using the effective interest method.

18

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(U) Derivative financial instruments

The Company enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risks.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured at their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss.

(V) Fair value hierarchy and liquidity risk disclosure

Fair value measurements are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value of short-term financial instruments approximates their carrying amounts due to the relatively short period to maturity. These include cash and cash equivalents, trade and other receivables, as well as trade payables and other liabilities. Fair value amounts represent point-in-time estimates and may not reflect fair value in the future.

(W) Future changes in accounting standards

Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not yet effective for periods beginning on or after January 1, 2023 and have not been early adopted by the Company.

The Company is currently assessing the impact, if any, on the Consolidated financial statements.

Amendment to IFRS 16 Leases — Lease Liability in a Sale and Leaseback

The amendments to IFRS 16 add subsequent measurement requirements for sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments require the seller-lessee to determine 'lease payments' or 'revised lease payments' such that the seller-lessee does not recognize a gain or loss that relates to the right of use retained by the seller-lessee, after the commencement date. The amendments are effective for annual reporting periods beginning on or after January 1, 2024. The Company is currently assessing the impact of the standard on its consolidated financial statements.

Amendments to IAS 1 Presentation of Financial Statements — Non-current Liabilities with Covenants

The amendments specify that only covenants that an entity is required to comply with on or before the end of the reporting period affect the entity’s right to defer settlement of a liability for at least twelve months after the reporting date (and therefore must be considered in assessing the classification of the liability as current or non-current). Such covenants affect whether the right exists at the end of the reporting period, even if compliance with the covenant is assessed only after the reporting date (e.g. a covenant based on the entity’s financial position at the reporting date that is assessed for compliance only after the reporting date).

The IASB also specifies that the right to defer settlement of a liability for at least twelve months after the reporting date is not affected if an entity only has to comply with a covenant after the reporting period. However, if the entity’s right to defer settlement of a liability is subject to the entity complying with covenants within twelve months after the reporting period, an entity discloses information that enables users of financial statements to understand the risk of the liabilities becoming repayable within twelve months after the reporting period. This would include information about the covenants (including the nature of the covenants and when the entity is required to comply with them), the carrying amount of related liabilities and facts and circumstances, if any, that indicate that the entity may have difficulties complying with the covenants.

The amendments are applied retrospectively for annual reporting periods beginning on or after January 1, 2024. The Company is currently assessing the impact of the standard on its consolidated financial statements.

19

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

2. Summary of material accounting policies (continued)

Amendments to 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

The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognized in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognized in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture. The effective date of the amendments has yet to be set by the IASB. The Company is currently assessing the impact of the standard on its consolidated financial statements.

Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures — Supplier Finance Arrangements

The amendments add a disclosure objective to IAS 7 stating that an entity is required to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows. In addition, IFRS 7 was amended to add supplier finance arrangements as an example within the requirements to disclose information about an entity’s exposure to concentration of liquidity risk. The amendments, which contain specific transition reliefs for the first annual reporting period in which an entity applies the amendments, are applicable for annual reporting periods beginning on or after January 1, 2024. The Company is currently assessing the impact of the standard on its consolidated financial statements.

Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates — Lack of Exchangeability

The amendments clarify:

a. when a currency is exchangeable into another currency; and

b. how a company estimates a spot rate when a currency lacks exchangeability. A currency is exchangeable into another currency when a company is able to exchange that currency for the other currency at the measurement date and for a specified purpose. When a currency is not exchangeable, a company needs to estimate a spot rate. When estimating a spot rate, a company can use an observable exchange rate without adjustment or another estimation technique or another estimation technique. The amendment also requires companies to provide new disclosures to help users assess the impact of using an estimated exchange rate on the financial statements.The amendments apply for annual reporting periods beginning on or after January 1, 2025. The Company is currently assessing the impact of the standard on its consolidated financial statements.

3. Significant accounting judgments and estimates

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. As these estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant, actual results may differ. The estimates and underlying assumptions are reviewed on an ongoing basis. Adjustments are recognized in the period in which the estimate is modified if the change affects only that period, or in the period the estimate is modified and future periods if the revision affects both current and future periods.

Critical judgments in applying accounting policies

The Company has identified the following judgments, apart from estimates, which management has made in the process of applying the Company’s accounting policies and which have the most significant effect on the amounts recognized in the Consolidated financial statements.

(A) Determination of CGUs

A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Determining the impact of impairment requires significant judgment in identifying which assets or groups of assets are CGUs of the Company.

20

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

3. Significant accounting judgments and estimates (continued)

(B) Functional currency

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates as of the dates the transactions occur. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.

Determining the appropriate functional currencies for entities in the Group requires analysis of various factors, including the currencies and country-specific factors that mainly influence sales prices, and the currencies that mainly influence labour, materials and other costs of providing goods or services.

Significant estimates and assumptions

The Company has identified the following accounting policies under which significant judgments, estimates and assumptions are made, where actual results may differ from these estimates under different assumptions and conditions, and which may materially affect the Company's financial results or financial position in future periods.

(A) Useful life of property, plant and equipment and intangible assets with finite useful lives

The Company employs significant estimates to determine useful lives of property, plant and equipment and intangible assets with finite useful lives, considering industry trends such as technological advancements, past experience, expected use and review of asset lives.

Components of an item of property, plant and equipment may have different useful lives. The Company makes estimates when determining depreciation methods, depreciation rates and useful lives, which require taking into account industry trends and company-specific factors. The Company reviews depreciation methods, useful lives and residual values annually or when circumstances change and adjusts, if necessary, its depreciation methods and assumptions prospectively.

(B) Impairment testing of goodwill and indefinite life intangible assets

Goodwill and indefinite life intangible assets are assessed for impairment at least annually, and whenever there is an indication of impairment. The Company determines the fair value of its CGU groupings and indefinite life intangible assets using discounted cash flow models corroborated by other valuation techniques.

The process of determining these fair values requires the Company to make estimates and assumptions of a longterm nature regarding discount rates, projected revenues, royalty rates and margins derived from past experience, actual operating results and budgets. These estimates and assumptions may change in the future due to uncertain competitive and economic market conditions or changes in business strategies.

(C) Provision for inventories

Inventories are stated at the lower of cost and estimated net realizable value. The Company estimates net realizable value as the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices due to seasonality less estimated costs required to sell. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage or declining selling prices.

(D) Sales allowances

A sales allowance is established to reflect amounts for programs which can be contractual or discretionary by nature, and can include negotiated discounts, customer audits, defective products and refund of costs incurred by customers to sell the Company’s products. Contractual allowances are fixed and determinable at the time of sale and are recorded at the time of sale as a reduction to revenue. Discretionary allowances can vary depending on future outcomes such as nature of the product, customer sales volume, inventory position, product performance at retail, historical performance, market conditions and other considerations. The Company may adjust its estimate of sales allowances when facts and circumstances used in the estimation process change.

21

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

3. Significant accounting judgments and estimates (continued)

(E) Income and other taxes

The calculation of current and deferred income taxes requires the Company to make estimates and assumptions and to exercise judgment regarding the carrying values of assets and liabilities which are subject to accounting estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by tax authorities.

Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred income tax balances on the Consolidated statements of financial position, a charge or credit to income tax expense in the Consolidated statements of earnings and comprehensive income and may result in cash payments or receipts. All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations or judgments may result in a change in the Company’s income, capital or commodity tax provisions in the future. The amount of such a change cannot be reliably estimated.

(F) Business combinations

Business combinations are accounted for using the acquisition method of accounting. The Company determines the fair value of the identifiable assets acquired and the liabilities assumed using discounted cash flow models corroborated by other valuation techniques.

The process of determining these fair values requires the Company to make estimates and assumptions of a longterm nature regarding discount rates, projected revenues, royalty rates and margins derived from past experience, actual operating results and budgets. These estimates and assumptions may change in the future due to uncertain competitive and economic market conditions or changes in business strategies. Refer to note 28 for further details on acquisitions.

4. Change in accounting policy

Effective January 1, 2023, the Company adopted a voluntary change to its accounting policy for the determination of the unit of account used for measuring the entertainment content development assets. The new measurement basis changes the unit of account for the entertainment content assets from episodic to a full season. Previously, the Company amortized the entertainment content development assets at the time of delivery of each episode or film.

Management believes this change in unit of account results in more relevant and reliable information as the new policy better reflects the consumption of the entertainment content development assets to reflect their anticipated pattern of future economic benefits.

Under the new accounting policy, the consumption of entertainment content development assets will be measured through amortization expense with rates ranging from 25% to 100% at the time of delivery for a full season. Entertainment content development assets which are not fully amortized upon delivery will be amortized at rates ranging from 50% to 75% of the remaining balance annually thereafter depending on the expected future benefit attributed to the entertainment content development assets.

The change in accounting policy was applied retrospectively to all periods presented within the Company’s Consolidated financial statements. The change impacted previously reported retained earnings and associated line items within the statement of financial position. The net income impact of the change in accounting policy relating to the prior period presented is immaterial and as such is not separately disclosed below.

	December 31, 2022	December 31, 2022
	Previously	Change in	Restated
(US$ millions)	Reported	Policy	Balance
Intangible assets	267.2	12.6	279.8
Income tax payable	26.4	3.3	29.7
Retained earnings	468.1	9.3	477.4
Retained earnings,as at January1,2022	216.0	9.3	225.3

22

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

5. Revenue

The Company earns revenue from the following primary sources: Toys, Entertainment and Digital Games.

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	2023	2022
Toy revenue	1,540.9	1,737.6
Entertainment revenue	190.1	118.8
Digital Games revenue	173.9	163.9
Revenue	1,904.9	2,020.3

6. Other expense, net

		Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	Notes	2023	2022
Impairment on non-current assets	15, 16, 17	35.8	3.0
Acquisition related deferred incentive compensation	28	7.6	10.3
Legal settlement (recovery)		0.6	(2.1)
Loss on minority interest and other investments	14	—	0.5
Net realized gain on investment	29	(0.1)	(0.1)
Net unrealized gain on investment	29	(0.1)	—
Acquisition related deferred consideration	21	(6.8)	2.6
Other		(3.3)	(3.3)
Other expense, net		33.7	10.9

Acquisition related deferred incentive compensation includes amounts that are contingent on the continued employment of key principals as well as the achievement of certain performance metrics, over their respective requisite service periods (see Note 28).

7. Interest expense and Interest income

Interest expense and Interest income
	Year Ended Dec 31,
(US$ millions)	2023	2022
Bank fees and financing charges	9.5	7.7
Interest on lease liabilities and accretion expense	5.1	5.5
Amortization of Facilityfee costs	0.5	0.4
Interest expense	15.1	13.6
Interest income1	(27.4)	(10.7)

1 Interest income includes interest earned on cash and cash equivalents held by the Company.

23

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

8. Expenses

Expenses include selling, general and administrative expenses and depreciation and amortization.

Selling, general and administrative expenses

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	2023	2022
Administrative	365.1	353.8
Marketing	181.4	185.1
Selling	132.1	144.2
Distribution	64.2	67.9
Product development	32.9	31.1
Selling, general and administrative	775.7	782.1

Administrative expenses include the following:

Administrative expenses include the following:
	Year Ended Dec 31,
(US$ millions)	2023	2022
Employee compensation and benefits1	256.6	250.6
Technology, property, travel and office costs	46.8	44.8
Professional services, recruiting and training	41.8	43.8
Other	19.9	14.6
Administrative expenses	365.1	353.8

1During the year ended December 31, 2023, the Company recognized restructuring expenses of $18.1 million, primarily related to the reduction in the Company's global workforce and closure of its manufacturing facility in Calais, France. Please refer to Note 18 for the corresponding liability related to the unpaid portion of the restructuring expense.

Employee compensation and benefits

Employee compensation and benefits
	Year Ended Dec 31,
(US$ millions)	2023	2022
Salaries, wages and bonuses	2.2	3.0
Employee benefits	0.6	0.9
Employee compensation and benefits expenses in cost of sales	2.8	3.9
Salaries, wages and bonuses	182.0	194.8
Employee benefits	36.4	33.4
Share-based compensation	20.1	17.6
Restructuringexpense	18.1	4.8
Employee compensation and benefits in administrative expenses	256.6	250.6
Employee compensation and benefits	259.4	254.5

24

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

8. Expenses (continued)

Depreciation and amortization

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	2023	2022
Property, plant and equipment
Moulds, dies and tools, included in cost of sales	19.9	20.5
Building and leasehold improvements	4.7	5.6
Equipment	2.4	1.7
Computer hardware	1.0	0.8
Equipment,included in cost of sales	1.9	0.1
	29.9	28.7
Intangible assets
Entertainment content development, included in cost of sales	77.7	14.4
Digital games and app development, included in cost of sales	5.1	4.3
Trademarks, licenses, IP & customer lists - definite life	3.1	5.1
Computer software	2.6	3.5
	88.5	27.3
Right-of-use assets	11.6	12.2
Depreciation and amortization	130.1	68.2
	Year Ended Dec 31,
(US$ millions)	2023	2022
Included in cost of sales	104.7	39.2
Included in expenses	25.4	29.0
Depreciation and amortization	130.1	68.2

9. Foreign exchange

	Year Ended	Dec 31,
(US$ millions)	2023	2022
Unrealized foreign exchange loss (gain), net	26.1	(40.3)
Realized foreign exchangegain,net	(11.4)	(21.1)
Foreign exchange loss (gain), net	14.7	(61.4)

Unrealized foreign exchange gains and losses are generated by the translation of monetary assets and liabilities denominated in a currency other than the functional currency and also includes gains and losses related to the Company's hedging programs. Realized foreign exchange gains and losses are recognized when monetary assets and liabilities denominated in a currency other than the functional currency of the applicable entity are settled and also includes gains and losses related to the Company's hedging programs. The Company periodically enters into derivative financial instruments such as foreign exchange forward contracts to manage foreign currency risk on cash flows denominated in currencies other than the US dollar (see Note 29).

25

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

10. Income tax

The income tax expense recognized in the Consolidated statements of earnings and comprehensive income comprises of the following:

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	2023	2022
Current income tax expense	61.6	69.8
Deferred income tax(recovery)expense	(11.8)	9.3
Income tax expense	49.8	79.1

The income tax expense is calculated as follows:

The income tax expense is calculated as follows:
		Year Ended Dec 31,
(US$ millions)	2023		2022
Income before income tax expense	201.2		340.4
Income tax expense at Canadian statutory tax rate of 26.5% (2022 - 26.5%)	53.3	26.5 %	90.2	26.5 %
Effect of:
Different tax rates of subsidiaries operating in other jurisdictions	(7.8)	(3.9) %	(9.8)	(2.9) %
Unused tax losses and tax attributes not recognized as deferred tax assets	0.7	0.3 %	1.1	0.3 %
Expense not deductible in determining taxable income	1.8	0.9 %	0.8	0.2 %
Recognition of previously unrecognized tax losses and other deferred tax assets	(0.2)	(0.1) %	—	— %
Other	2.0	1.1 %	(3.2)	(0.9)%
Income tax expense	49.8	**24.8 % **	79.1	23.2 %

The tax rates used for the reconciliations above are the Canadian statutory tax rates of Spin Master Corp., payable by corporate entities in the Company, on taxable profits under tax laws in the respective jurisdictions in which the Company operates.

Current tax assets and liabilities

As at December 31, 2023, the Company had income tax payable of $6.6 million (2022 - $29.7 million).

Deferred income tax balances

The following is the analysis of deferred income tax assets and liabilities presented in the Consolidated statements of financial position:

of financial position:
(US$ millions)	2023	2022
Deferred income tax assets	110.8	94.7
Deferred income tax liabilities	(59.1)	(55.7)
Deferred income tax assets, net of deferred income tax liabilities	51.7	39.0

The sources of deferred income tax balances are as follows:

		Recognized
		in
(US$ millions)	2021	net income	2022
Property, plant and equipment	3.3	(2.3)	1.0
Intangible assets	24.2	(6.4)	17.8
Provisions	15.6	3.2	18.8
Allowance for doubtful accounts	0.1	—	0.1
Benefits of tax loss carryforwards	4.4	(3.0)	1.4
Other temporarydifferences	0.7	(0.8)	(0.1)
Deferred income tax assets, net of deferred income tax liabilities	48.3	(9.3)	39.0

26

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

10. Income tax (continued)

Income tax(continued)
		Recognized	Foreign
		in	currency
(US$ millions)	2022	net income	translation	2023
Property, plant and equipment	1.0	5.5	—	6.5
Intangible assets	17.8	(3.5)	0.4	14.7
Provisions	18.8	5.4	0.5	24.7
Allowance for doubtful accounts	0.1	0.3	—	0.4
Benefits of tax loss carryforwards	1.4	(0.5)	—	0.9
Other temporarydifferences	(0.1)	4.6	—	4.5
Deferred income tax assets, net of income tax liabilities	39.0	11.8	0.9	51.7

Unused tax losses

As at December 31, 2023, the Company had unused tax losses of $9.1 million (2022 - $8.7 million). Unused tax losses of $0.2 million will expire between 2024 and 2033, $4.3 million will expire beyond 2033 and $4.6 million may be carried forward indefinitely. There were no unrecognized deductible temporary differences for the year ended December 31, 2023 (2022 - $nil).

Unrecognized taxable temporary differences associated with investments

The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax liabilities were not recognized as at December 31, 2023 are $310.0 million (2022 - $338.2 million).

11. Cash and cash equivalents

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Cash	705.7	544.3
Cash equivalents	—	100.0
Cash and cash equivalents	705.7	644.3

As at December 31, 2023, the Company held $nil (December 31, 2022 - $100.0 million) in short term investments with a maturity date of 90 days or less.

Subsequent to December 31, 2023, the Company utilized $434.0 million of cash for the acquisition of Melissa & Doug LLC. Please refer to Note 31 for more details.

12. Trade and other receivables, net

Trade receivables

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Trade receivables	660.1	514.7
Provisions for sales allowances	(241.7)	(202.2)
Allowance for doubtful accounts	(4.0)	(1.5)
Trade receivables, net	414.4	311.0

Trade receivables disclosed above include any amounts that are past due as at the end of the reporting period.

Trade receivables past due but not impaired

Trade receivables past due but not impaired
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
61-90 days	6.4	8.0
91-120 days	0.7	3.7
> 120 days	9.0	11.1
Total trade receivables past due but not impaired	16.1	22.8

27

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

12. Trade and other receivables, net (continued)

Movement in the allowance for doubtful accounts

Movement in the allowance for doubtful accounts Trade and other receivables, net(continued)
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Balance, beginning of year	1.5	0.7
Net impairment recognized	3.7	0.8
Amounts written off during the year as uncollectible	(1.1)	(0.1)
Foreign currencytranslation	(0.1)	0.1
Balance, end of year	4.0	1.5

In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period.

Other receivables

Other receivables
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Investment tax credits receivables	48.9	37.3
Sales tax receivables	4.1	3.9
Other	7.0	8.3
Other receivables	60.0	49.5

13. Inventories, net

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Raw materials	2.7	7.7
Finishedgoods	95.3	97.4
Inventories, net	98.0	105.1

Inventories as at December 31, 2023 are net of $9.0 million for the provision of inventories to net realizable value (December 31, 2022 - $8.8 million).

The cost of inventories recognized as an expense in cost of sales during the year ended December 31, 2023 was $705.2 million (2022 - $819.2 million).

During the year ended December 31, 2023, included within cost of sales in the Consolidated statements of earnings and comprehensive income was a cost of $7.4 million (2022 - $5.8 million) related to finished goods inventories written down to net realizable value.

28

Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

Spin Master Corp.

14.	Dec 31, Dec 31, (US$ millions) Notes 2023 2022 Prepaid expenses and other assets
	Prepaid expenses 35.2 13.9 Advances on royalties 1.6 6.7 Unrealized foreign exchangegain on financial instruments 4.1 1.7
	Prepaid expenses and other assets 40.9 22.3
	Dec 31, Dec 31, (US$ millions) Notes 2023 2022
	Minority interest and other investments 11.3 8.8 Investment in a limited partnership 29 3.7 3.9 Advances on royalties 5.0 2.9 Investment tax credits - non-current portion 4.6 3.6 Other 1.9 1.3
	Other assets, non-current 26.5 20.5

Investment in a limited partnership

For the year ended December 31, 2023, the Company recognized a net unrealized gain in Other expense, net in the Consolidated statements of earnings and comprehensive income of $0.1 million (2022 - $nil). The Company recognized distribution income of $0.1 million in Other expense, for the year ended December 31, 2023 and 2022.

The Company has paid $2.8 million and is obligated to pay the remaining $0.2 million upon receiving capital calls over the remaining term of the limited partnership agreement. The investment in a limited partnership is held for medium to long-term strategic purposes (see Note 29).

Minority interest and other investments

Minority interest and other investments classified as FVTOCI is comprised of equity instruments that the Company has irrevocably elected to recognize in this category. These are strategic investments, and the Company considers this classification to be more relevant.

During the year ended December 31, 2023, the Company invested $2.5 million in existing minority interest and other investments classified as FVTPL.

In 2022, the Company acquired minority interests in privately-held entities for a total of $7.5 million. The investments are held for medium to long term strategic purposes. Four investments are classified as FVTPL and one classified as FVTOCI.

In the third quarter of 2022, the Company acquired the remaining ownership interest and control of a minority interest investment classified as FVTOCI. As part of the step acquisition to 100% ownership of the entity, the existing investment was deemed to be disposed and reacquired at fair value of $0.7 million (see Note 28).

The carrying value of the seven minority interest and other investments held as at December 31, 2023 (December 31, 2022 - five investments) were as follows:

		Carrying	value at,
	Initial	Dec 31,	Dec 31,
(US$ millions)	investment	2023	2022
Minority interest and other investments classified as FVTOCI	3.6	3.0	3.0
Minorityinterest and other investments classified as FVTPL	8.8	8.3	5.8
Minority interest and other investments	12.4	11.3	8.8

For the year ended December 31, 2023, the Company recognized $nil gains or losses (2022 - $0.5 million of losses within Other expenses, net and $0.1 million of gain within Other comprehensive loss) for the minority interest and other investments classified as FVTPL and FVTOCI, respectively in the Consolidated statements of earnings and comprehensive income.

29

Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

Spin Master Corp.

15. Property, plant and equipment

			Land, building
	Moulds, dies		and leasehold	Computer
(US$ millions)	and tools	Equipment	improvements	hardware	Total
Cost
Balance at December 31, 2021	172.6	28.1	39.6	12.4	252.7
Additions	23.0	3.6	2.7	1.1	30.4
Disposals	(7.0)	(0.4)	(0.8)	(0.5)	(8.7)
Impairment	(1.6)	—	—	—	(1.6)
Foreign currency translation	(10.9)	(1.1)	(1.8)	(0.4)	(14.2)
Balance at December 31, 2022	176.1	30.2	39.7	12.6	258.6
Additions	20.6	1.9	3.7	1.8	28.0
Disposals	(38.3)	(5.5)	(3.0)	(0.6)	(47.4)
Impairment	(0.9)	—	—	—	(0.9)
Assets recognized upon acquisition	0.4	—	—	—	0.4
Foreign currencytranslation	(2.2)	0.3	0.8	0.4	(0.7)
Balance at December 31, 2023	155.7	26.9	41.2	14.2	238.0
Accumulated depreciation and
impairment
Balance at December 31, 2021	(151.4)	(22.3)	(27.4)	(11.8)	(212.9)
Depreciation	(20.5)	(1.8)	(5.6)	(0.8)	(28.7)
Disposals	5.8	0.4	0.7	0.4	7.3
Impairment	(0.3)	—	—	—	(0.3)
Foreign currencytranslation	9.5	0.6	1.4	0.5	12.0
Balance at December 31, 2022	(156.9)	(23.1)	(30.9)	(11.7)	(222.6)
Depreciation	(19.9)	(4.3)	(4.7)	(1.0)	(29.9)
Disposals	37.1	4.6	2.7	0.7	45.1
Foreign currencytranslation	3.2	(0.4)	(0.6)	(0.2)	2.0
Balance at December 31, 2023	(136.5)	(23.2)	(33.5)	(12.2)	(205.4)
Net carrying amount
Balance at December 31, 2022	19.2	7.1	8.8	0.9	36.0
Balance at December 31, 2023	19.2	3.7	7.7	2.0	32.6

At December 31, 2023, the Company assessed tangible assets for any indication of impairment and noted no indicators with the exception of those related to certain tooling assets. Impairment are recorded when the carrying amount of the asset exceeds its recoverable amount. For the year ended December 31, 2023, the Company recorded impairment of $0.9 million (2022 $1.9 million), related to tooling in Other expense, net within the Consolidated statements of earnings and comprehensive income.

30

Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

Spin Master Corp.

16. Intangible assets

Intangible assets
			Trademarks,
			licenses, IP
			& customer	Entertainment	Digital game
		Brands -	lists -	content	and app	Computer
(US$ millions)	Note	indefinite	definite	development	development	software	Total
Cost
Balance at December 31, 2021		157.3	56.4	253.0	27.6	34.6	528.9
Additions		—	0.5	54.6	9.1	4.8	69.0
Impairment		—	—	(1.1)	—	—	(1.1)
Assets acquired through
business combinations	28	4.4	—	—	—	—	4.4
Foreign currencytranslation		(2.0)	(0.8)	(15.7)	(1.9)	(2.5)	(22.9)
Balance at December 31, 2022		159.7	56.1	290.8	34.8	36.9	578.3
Additions1		3.3	—	54.0	19.1	3.0	79.4
Disposals		—	—	—	—	(0.1)	(0.1)
Impairment		—	—	(6.4)	(0.7)	(1.1)	(8.2)
Assets acquired through
business combinations	28	12.5	3.7	—	—	—	16.2
Foreign currencytranslation		0.6	0.2	7.4	1.6	0.9	10.7
Balance at December 31, 2023		176.1	60.0	345.8	54.8	39.6	676.3
Accumulated amortization
Balance at December 31, 2021	4	—	(32.1)	(213.0)	(14.8)	(29.2)	(289.1)
Amortization		—	(5.1)	(14.4)	(4.3)	(3.5)	(27.3)
Foreign currencytranslation		—	0.5	13.7	1.4	2.3	17.9
Balance at December 31, 2022	4	—	(36.7)	(213.7)	(17.7)	(30.4)	(298.5)
Amortization		—	(3.1)	(77.7)	(5.1)	(2.6)	(88.5)
Disposal		—	—	—	—	0.1	0.1
Foreign currencytranslation		—	(0.8)	(6.1)	(0.5)	(0.7)	(8.1)
Balance at December 31, 2023		—	(40.6)	(297.5)	(23.3)	(33.6)	(395.0)
Net carrying amount
Balance at December 31, 2022	4	159.7	19.4	77.1	17.1	6.5	279.8
Balance at December 31, 2023		176.1	19.4	48.3	31.5	6.0	281.3

1 On April 14, 2023, the Company recorded an addition of $3.3 million in indefinite life brands as a result of the assets acquired from a games & puzzles company.

Effective January 1, 2023, the Company adopted a voluntary change to its accounting policy for the determination of the unit of account used for measuring the entertainment content development assets resulting in a restatement of $12.6 million for the balance at December 31, 2021 (see Note 4).

The Company’s Entertainment content development and Digital Games development assets are comprised primarily of internally generated intangible assets. As at December 31, 2023, the range of remaining useful life of these definite life intangible assets based on their net carrying amount was one to five years.

At December 31, 2023, the Company assessed intangible assets for any indication of impairment. Impairment is recorded when the carrying amount of the asset exceeds its recoverable amount. The Company recorded an impairment of $8.2 million (2022 - $1.1 million) for the year ended December 31, 2023, related to content development projects, app development projects and components of computer software in Other expense, net within the Consolidated statements of earnings and comprehensive income.

During the year ended December 31, 2023, the Company amortized Entertainment content development costs in the amount of $13.4 million for the delivered of PAW Patrol: The Mighty Movie .

31

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

16. Intangible assets ( continued )

Intangible asset impairment - definite life assets

For the year ended December 31, 2023, the Company recorded impairment of $6.4 million (2022 - $1.1 million) related to entertainment content projects no longer in active development, $1.1 million (2022 - $nil) related to computer software and $0.7 (2022 - $nil million) related to Digital Games app development within Other expense, net in the Consolidated statements of earnings and comprehensive income.

Indefinite life brands

The carrying amount of indefinite life brands by CGU is as follows:

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Games and Puzzles	43.5	35.6
Rubik's	40.7	37.4
Plush	33.9	33.9
SwimWays	28.5	28.0
Etch A Sketch	7.2	7.1
Wheels & Action	4.8	—
Meccano	2.3	2.4
Toys intangible assets	160.9	144.4
Digital Games intangible assets	15.3	15.3
Total	176.2	159.7

The Company has assessed these intangible assets to have indefinite useful lives as they will generate economic benefit with no foreseeable limit. Therefore, the Company does not amortize these intangible assets, but tests for impairment in accordance with the Company's policy. The recoverable amount of the CGUs for indefinite life brands have been determined on the same basis and assumptions as goodwill (see Note 17).

For the year ended December 31, 2023, the Company completed its annual impairment tests for indefinite life brands and did not recognized any impairment (2022 - $nil).

17. Goodwill

		Dec 31,	Dec 31,
(US$ millions)	Notes	2023	2022
Balance, beginning of year		179.0	173.1
Additions during the year	28	12.4	7.2
Impairment recognized in the year		(26.7)	—
Foreign currencytranslation		1.2	(1.3)
Balance, end of year		165.9	179.0

The carrying amount of goodwill was allocated to these CGUs as follows:

The carrying amount of goodwill was allocated to these CGUs as follows:
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Games and Puzzles	61.5	51.3
Rubik's	23.0	23.0
Digital Games	22.6	22.6
SwimWays	22.4	40.1
Plush	20.3	20.3
Toys	7.5	7.5
Wheels and Action	3.1	—
Other	5.5	6.2
Orbeez	—	8.0
Goodwill	165.9	179.0

32

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

17. Goodwill

- Intangible asset impairment goodwill and indefinite life brands

In assessing goodwill and indefinite life intangible assets for impairment at December 31, 2023 and 2022, the Company compared the aggregate recoverable amount of the assets included in CGUs to their respective carrying amounts.

The recoverable amount of a CGU is determined based on a value in use calculation which uses cash flow projections based on financial forecasts covering a five-year period and a terminal value. The terminal value is the value attributed to the CGU's cash flows beyond the five-year period. The key assumptions used in the value in use calculation are discount rates, projected revenues and margins.

The discount rate applied to each CGU to determine the value in use is a pre-tax discount rate that reflects current market assessments of the time value of money and considers the risk-free rate, market equity risk premium, size premium and the risks specific to each CGU's cash flow projections. The pre-tax discount rates used by the Company for the purpose of its value in use calculations ranged from 11.3% to 19.6% (2022 -14.8% to 23.0%).

Revenue growth rates are based on management's best estimates considering historical and expected future operating and plans, economic considerations and the general outlook for the industry and markets in which the CGU operates. Cash flow projections during the forecast period are determined using expected gross margins and raw materials price inflation throughout the forecast period. The projections are prepared separately for each of the Company's CGUs and are based on the most recent financial budgets approved by management. The terminal value is projected using a 1.0% (2022 - 1.0%) per annum growth rate in perpetuity which is the projected long-term average growth rate.

The Company has conducted a sensitivity analysis on the key assumptions used to determine the recoverable amount for each of the CGUs. Management believes that any reasonable change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGUs.

For the year ended December 31, 2023, there was $26.7 million (2022 - $nil million) of goodwill impairment recognized for three CGUs representing the Company's product lines. Goodwill impairment charges of $17.7 million for the SwimWays CGU, reflecting the adverse impact of macroeconomic challenges and timing of certain growth strategies on its future cash flow; $8.0 million for the Orbeez CGU, due to management's strategic decision to change its business operations resulting in a change in its identification as a CGU; and $1.0 million for the Meccano CGU, reflecting management's decision to close its manufacturing facility and the adverse impact on its future cash flow were recognized within Other expense, net in the Consolidated statements of earnings and comprehensive income (Please refer to Note 6).

18. Trade payables and accrued liabilities

Trade payables and accrued liabilities
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Trade payables	189.2	153.0
Accrued liabilities	196.2	186.4
Trade payables and accrued liabilities	385.4	339.4

Accrued liabilities are comprised of payroll related liabilities, accrued royalties, commodity tax, dividends payable, and other. As at December 31, 2023, $4.6 million of dividends payable is included in accrued liabilities (December 31, 2022 - $4.6 million) (see Note 22).

As at December 31, 2023, a restructuring liability of $3.5 million, expected to be paid in 2024 (December 31, 2022 - $0.4 million), related to the reduction in the Company's global workforce and closure of its manufacturing facility in Calais, France, is included in accrued liabilities with a corresponding expense recorded in Selling, general and administrative expenses in the Consolidated statements of earnings and comprehensive income (Please refer to Note 8).

33

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

19. Deferred revenue

Deferred revenue is comprised of advances on contracts relating to Entertainment revenue and subscriptions relating to Digital Games revenue. These amounts represent consideration received in advance of the Company fulfilling its performance obligations. As at December 31, 2023, the Company had deferred revenue of $11.0 million (December 31, 2022 - $11.5 million).

For the year ended December 31, 2023, the Company recognized revenue of $11.9 million (2022 - $8.3 million) relating to amounts previously deferred.

20. Loans and borrowings

Unsecured Debt

Bank facilities

The Company has an unsecured five-year revolving credit facility (the "Facility") with a borrowing capacity of $510.0 million which matures on September 28, 2026, and contains certain financial covenants. The Facility also has an option which permits the Company to increase the total capital available by an additional $200.0 million. Total financing costs of $1.8 million, which include Facility amendment fees and related legal fees, are recognized in Other assets and are being amortized over the term of the amended and restated agreement.

On November 20, 2023, the Company entered into a one-year non-revolving credit facility (the "Acquisition Facility") with a borrowing capacity of $225.0 million which matures on November 19, 2024, and contains certain financial covenants. The Acquisition Facility will be used to assist in the funding of the acquisition of Melissa & Doug LLC. Total financing costs of $0.8 million, which include Facility arranger fees, agency fees and related legal fees, are recognized in Other assets and are being amortized over the term of the Acquisition Facility. Please refer to Note 31.

As at December 31, 2023, there were $1.5 million (December 31, 2022 - $1.4 million) in letters of credit outstanding under the Facility. As at December 31, 2023, there was $nil drawn (December 31, 2022 - $nil) under the Facility. As at December 31, 2023, Unamortized Facility fee costs in the amount of $1.7 million (December 31, 2022 - $1.2 million) recognized in Prepaid expenses and other assets in the Consolidated statements of financial position .

This Facility is subject to the maintenance of certain financial covenants. The Company was in compliance with all financial covenants as at December 31, 2023 and December 31, 2022.

Bank overdraft facility

The Company has an uncommitted overdraft facility agreement (the "European Facility") for $15.9 million (equivalent to €15.0 million). The European Facility will be used, if needed, to fund working capital requirements in Europe. As at December 31, 2023, the outstanding balance was $nil (December 31, 2022 - $nil).

Secured Debt

Bank facilities

The Company has an uncommitted revolving credit facility to finance television and film production (the "Production Facility"). The limit of the credit facility is $7.4 million (equivalent to CA$10.0 million). As at December 31, 2023, the outstanding balance of the Production Facility was $nil (December 31, 2022 - $nil).

34

Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

Spin Master Corp.

21. Provisions

Provisions
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Deferred Consideration(i)	26.7	26.7
Defectives(ii)	14.5	13.6
Supplier liabilities(iii)	5.2	5.5
Provisions	46.4	45.8
Current	32.1	30.7
Non-current	14.3	15.1
Provisions	46.4	45.8

(US$ millions)	Deferred consideration(i)	Defectives(ii)	Supplier liabilities(iii)	Total
December 31, 2021	23.3	9.9	5.9	39.1
Provisions recognized	12.5	11.4	2.0	25.9
Accretion recognized	1.3	—	—	1.3
Payments	(12.6)	(7.6)	(2.4)	(22.6)
Revaluation ofprovisions	2.2	(0.1)	—	2.1
December 31, 2022	26.7	13.6	5.5	45.8
Provisions recognized	14.2	9.7	1.5	25.4
Accretion recognized	1.2	—	—	1.2
Payments	(8.7)	(9.0)	(1.7)	(19.4)
Revaluation ofprovisions	(6.8)	0.2	—	(6.6)
December 31, 2023	26.7	14.5	5.2	46.4

• (i) Certain business combinations include agreement terms associated with royalty payables or deferred incentive compensation and are based on the achievement of certain financial performance criteria and/ or continued employment. The accretion of the royalties is recorded in Interest expense in the Consolidated statements of earnings and comprehensive income. Accrued deferred incentive compensation is recorded in Other expense, net in the Consolidated statements of earnings and comprehensive income. Subsequent reviews of financial performance may result in the recording of additional considerations or reductions of the existing provision and are recorded in Other expense, net in the Consolidated statements of earnings and comprehensive income.

• (ii) Defectives occur when the end consumer returns faulty goods to the Company’s customers. Customers without a fixed allowance for defectives are eligible for a credit for the cost of the product if returned as defective by the end consumer. The estimate of defectives is made based on the class and nature of the product and reduces the revenue figure in the Consolidated statements of earnings and comprehensive income.

• (iii) Supplier liabilities represent the estimated amounts to be paid to suppliers for lower than expected volumes purchased, resulting in the supplier having excess raw material and/or finished goods inventory. While such payments are not legally required, the Company may compensate suppliers to maintain supplier relationships. The supplier obligation is based on the Company’s estimate of the cost of the supplier’s excess raw material and/or finished goods inventory. The provision for supplier obligations is recorded in cost of sales in the Consolidated statements of earnings and comprehensive income.

The Company is involved in various routine legal proceedings incidental to the ordinary course of its business. The Company believes that the outcome of all pending legal proceedings in the aggregate is not probable to have a material adverse effect on the Company’s business, financial condition and/or its results of operations. However, in light of the uncertainties involved in legal proceedings generally, the ultimate outcome of a particular matter could be material to the Company’s operating results for a particular period depending on, among other things, the size of the loss or the nature of the liability imposed and the level of the Company’s income for that particular period.

35

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

22. Share capital

• (a) Authorized as at December 31, 2023 and December 31, 2022

• Unlimited number of multiple voting shares with no par value;

• Unlimited number of subordinate voting shares with no par value; and

• Unlimited number of preferred shares issuable in series with no par value.

Multiple voting shares and subordinate voting shares entitle the holder to receive dividends, and to receive the proceeds of liquidation, dissolution or winding up the Company in proportion to the number of shares held. These rights are subject to the prior rights of the holders of any shares ranking prior to the multiple voting shares and the subordinate voting shares.

The holders of the multiple voting shares are entitled to 10 votes for each share held and the holders of the subordinate voting shares are entitled to 1 vote for each share held.

Multiple voting shares are convertible at any time into an equivalent number of subordinate voting shares. Subordinate voting shares do not have any redemption or conversion rights.

Preferred shares of each series will be entitled to preference over the multiple voting shares and subordinate voting shares with respect to the payment of dividends and to receive the proceeds of liquidation, dissolution or winding up of the Company.

	Year Ended Dec 31, Year Ended Dec 31, 2023 2022
	Shares (millions) Amount (US$ millions) Shares (millions) Amount (US$ millions)
Multiple voting shares: Outstanding, beginning of year Conversion to subordinate votingshares	68.7 350.5 70.6 360.2 — — (1.9) (9.7)
Outstanding, end of year Subordinate voting shares: Outstanding, beginning of year Issuance of subordinate voting shares Conversion from multiple voting shares Subordinate votingsharespurchased and cancelled	68.7 350.5 68.7 350.5 34.2 404.2 31.8 376.7 1.2 33.4 0.5 17.8 — — 1.9 9.7 (0.4) (4.7) — —
Outstanding, end ofyear	35.0 432.9 34.2 404.2
Shares issued and outstanding, end of year	103.7 783.4 102.9 754.7

On January 5, 2023, the Company launched, and the Toronto Stock Exchange ("TSX") accepted the notice to launch a Normal Course Issuer Bid (the "NCIB"). Under the NCIB, the Company repurchases its subordinate voting shares on the open market at its discretion and subject to compliance with applicable securities laws and the rules of the TSX. The NCIB period commenced on January 9, 2023, and will end on the earlier of January 8, 2024, and the completion of purchases under the NCIB, of up to 2,845,904 subordinate voting shares, which represented approximately 10% of the "public float" (within the meaning of the rules of the TSX) upon launch of the NCIB.

On March 10, 2023, the Company entered into an automatic share purchase plan ("ASPP") to effect the purchase of subordinate voting shares under the NCIB for a period up to April 14, 2023. In 2023, the Company repurchased and cancelled 397,700 subordinate voting shares at a cost of $10.5 million.

On April 14, 2023, upon the expiry of the ASPP commitment period, the Company derecognized the remaining obligation for the outstanding repurchase commitment in trade payables and accrued liabilities.

36

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

22. Share capital (continued)

The following table summarizes the Company’s activities under the NCIB for the year ended December 31, 2023:

	Year Ended Dec 31
(US$ millions)	2023
Subordinate voting shares repurchased under the NCIB for cancellation (number of shares)	397,700
Cash consideration paid	10.5
Reduction in share capital	4.7
Premiumpaid on repurchased and cancelled shares recorded in retained earnings	5.8

The following table provides a summary of dividends declared and paid.

				Dividends declared and
Declaration Date	Record Date	Payment Date	Rateper Share(CA$)	accrued(in US$ millions)
February 28, 2024	March 29, 2024	April 12, 2024	0.06	4.6
November 1, 2023	December 29, 2023	January 12, 2024	0.06	4.6
August 2, 2023	September 29, 2023	October 13, 2023	0.06	4.6
May 3, 2023	June 30, 2023	July 14, 2023	0.06	4.7
March 8, 2023	March 31, 2023	April 14, 2023	0.06	4.6
November 2, 2022	December 30, 2022	January 13, 2023	0.06	4.6
July 27, 2022	September 29, 2022	October 14, 2022	0.06	4.6

During the year ended December 31, 2023, dividends of $18.4 million (2022 - $4.6 million) were paid.

During the year ended December 31, 2023, the Company implemented a Dividend Reinvestment Plan (the "DRIP"). The DRIP provides the Company’s eligible shareholders with the opportunity to have all or a portion of the cash dividends declared on their subordinate voting shares or multiple voting shares automatically reinvested into additional subordinate voting shares of the Company on an ongoing basis.

(b) Share-based plans

The total expense recognized for employee services received during the year ended for December 31, 2023 equitysettled transactions is shown in the following table:

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	2023	2022
Equity-settled RSUs and PSUs	20.1	17.5
Sharepurchase options	—	0.1
Share based compensation expense	20.1	17.6

Share based compensation expense is recorded in administrative expenses in the Consolidated statements of earnings and comprehensive income with a corresponding amount recorded in contributed surplus.

Long-Term Incentive Plan

The Company has an equity based compensation plan providing for the issuance of securities from treasury under which the grants will be made by the Company. Under the Long-Term Incentive Plan ("LTIP"), the Board may at its discretion from time to time, grant share options, share units, in the form of Restricted Stock Units ("RSUs") and Performance Share Units ("PSUs"), stock appreciation rights, restricted stock and any other equity based awards. As at December 31, 2023, the aggregate number of subordinate voting shares that may be issued pursuant to grants under the LTIP may not exceed 9,669,599 (December 31, 2022 - 9,669,599). As at December 31, 2023, 2,952,265 (December 31, 2022 - 3,656,929) subordinate voting shares remained reserved for issuance under the LTIP.

The Company settled vested LTIP grants during the year ended December 31, 2023 through the issuance of shares. The settlements resulted in a transfer of $33.4 million (2022 - $17.6 million) from contributed surplus to share capital.

37

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

22. Share capital (continued)

Restricted Stock Units and Performance Share Units

RSUs and PSUs are granted to Eligible Persons by the Company’s Board. The Board determines the Grant Value and Valuation Date for each Grant. RSUs and PSUs vest from the date of grant in accordance with the vesting schedule determined by the Board and set out in the applicable Grant Agreement for each Eligible Person.

Below is a summary of the activity related to RSUs outstanding as at December 31, 2023 and December 31, 2022.

	Dec 31,	Dec 31,
(number of units)	2023	2022
Outstanding, beginning of year	1,082,423	942,931
Granted	676,978	412,676
Exercised	(562,775)	(214,456)
Forfeited	(50,599)	(58,728)
Outstanding, end of year	1,146,027	1,082,423

Below is a summary of the activity related to PSUs outstanding as at December 31, 2023 and December 31, 2022.

	Dec 31,	Dec 31,
(number of units)	2023	2022
Outstanding, beginning of year	1,006,332	1,091,862
Granted	404,009	276,410
Exercised	(665,519)	(318,179)
Forfeited	(22,198)	(43,761)
Outstanding, end of year	722,624	1,006,332

Deferred Share Units ("DSUs")

DSUs are an incentive program for Board members of the Company, whereby Board members may elect to receive remuneration in the form of DSUs, cash or combination thereof. The DSUs vest immediately upon grant but cannot be exercised until the Company's Board of Director departs the Company.

Below is a summary of the activity related to the DSUs outstanding as at December 31, 2023 and December 31, 2022.

	Dec 31,	Dec 31,
(number of units)	2023	2022
Outstanding, beginning of year	187,864	157,293
Granted	72,506	55,479
Exercised	(3,690)	(24,908)
Outstanding, end of year	256,680	187,864

The fair value of the DSUs is determined to be the share price on the grant date. Share based compensation expense of $1.9 million (2022 - $1.7 million) was recorded for the year ended December 31, 2023.

A mark to market loss of $0.1 million on DSUs outstanding (2022 - gain of $1.7 million) was recorded for the year ended December 31, 2023.

The share based compensation and mark to market loss or gain related to DSUs are reflected in administrative expenses in the Consolidated statements of earnings and comprehensive income. A corresponding amount was recorded in accrued liabilities.

The total share based compensation expense of $20.1 million (2022 - $17.6 million) includes the equity-settled RSU and PSU share based compensation of $20.0 million (2022 - $19.3 million) and the mark to market loss on DSUs of $0.1 million (2022 - gain of $1.7 million).

38

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

22. Share capital (continued)

Share Purchase Options (“Options”)

The Company has one share option plan for key employees, which forms part of their LTIP. Under this plan, the exercise price of each option equals the market price of the Company’s shares on the date of grant and the Options have a maximum term of ten years. The Options vest ratably over a four-year vesting period.

The Company did not issue any Options in 2023 and 2022. As at December 31, 2023, 476,224 (December 31, 2022 - 483,426) Options were outstanding with a weighted average exercise price of CA$34.78 (December 31, 2022 - CA$34.97).

	Dec 31, Dec 31, 2023 2022
	Number of share options Weighted average exercise price(CAD) Number of share options Weighted average exercise price(CAD)
Outstanding, beginning of year Exercised Forfeited and/or expired	483,426 34.97 497,733 35.22 — — (4,157) 37.96 (7,202) 47.52 (10,150) 46.02
Outstanding, end ofyear	476,224 34.78 483,426 35.22
Exercisable options	476,224 34.78 425,749 33.96
Dec 31, Dec 31, 2023 2022
Exerciseprice Number of Share Options Outstanding Weighted average remaining contractual life(years) Number of Share Options Outstanding Weighted average remaining contractual life(years)
$22.94 179,069 2.3 179,069 3.3 $37.64 125,516 3.2 125,516 4.2 $37.96 86,185 5.1 87,570 6.1 $49.80 — 0 5,817 0.3 $52.20 85,454 4.2 85,454 5.2
Total 476,224 3.4 483,426 4.3

23. Earnings per share

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions, except per share amounts)	2023	2022
Net Income	151.4	261.3
Weighted average number of shares (in millions)	103.5	102.9
Dilutive effect of equity1	2.2	3.5
Diluted weighted average number of shares (in millions)	105.7	106.4
Basic earnings per share	1.46	2.54
Diluted earnings per share	1.43	2.45

1 The dilutive effect of equity includes equity instruments which comprise of employee stock options.

39

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

24. Net changes in non-cash working capital

Net changes in non-cash working capital
	Year	Ended Dec 31,
(US$ millions)	2023	2022
(Increase) decrease in assets:
Trade receivables, net	(111.9)	61.4
Other receivables	(13.0)	0.6
Inventories, net	8.0	37.4
Prepaid expenses and other assets	(18.8)	(11.3)
	(135.7)	88.1
Increase (decrease) in liabilities:
Trade payables and accrued liabilities	36.3	(157.3)
Deferred revenue	(0.5)	0.6
Provisions	(5.5)	1.0
Other	0.3	—
	30.6	(155.7)
Net changes in non-cash working capital	(105.1)	(67.7)

25. Related party transactions

In the normal course of operations, the Company engaged the services of a law firm whose managing partner is also a member of the Company's Board of Directors, which have been made on terms equivalent to those that prevail in arm's length transactions.

For the year ended December 31, 2023, related party transactions were included in administrative expenses in the Consolidated statements of earnings and comprehensive income of the Company in the amount of $2.0 million (2022 - $1.3 million). As at December 31, 2023, amounts payable to the director's law firm were $0.4 million (December 31, 2022 - $0.4 million).

During the three months ended June 30, 2023, the Company paid incentive compensation related liabilities of $3.7 million on behalf of three members of the Company's Board of Directors. These amounts were repaid by all three directors to the Company in the second quarter of 2023.

Compensation of key management personnel

The compensation of directors and other key management personnel for the years ended December 31, 2023 and December 31, 2022 were as follows:

	Year Ended Dec 31,	Year Ended Dec 31,
(US$ millions)	2023	2022
Salaries, wages and bonuses	5.8	5.7
Share-based compensation	8.6	3.3
Employee benefits	0.3	0.3
Total compensation of key management personnel	14.7	9.3

40

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

26. Leases

Amounts recognized in the Consolidated statements of financial position

Leased office buildings represented approximately 90% of the right-of-use assets with the remainder comprised of leases of distribution centres, information technology ("IT") equipment, and vehicles.

The Company has categorized classes of assets for leases of office buildings and distribution centres as "Building" and IT equipment and vehicles are as "Equipment". The weighted average lease term for both classes is 11 years (2022 - 11 years). The carrying value of right-of-use assets and depreciation by class of underlying assets are as follows:

(US$ millions)	Building	Equipment	Right-of-use assets	Right-of-use assets
January 1, 2022	63.9	1.3		65.2
Additions	12.0	0.3		12.3
Modifications	0.5	0.1		0.6
Depreciation	(11.5)	(0.7)		(12.2)
Foreign currencytranslation	(2.8)	(0.2)		(3.0)
December 31, 2022	62.1	0.8		62.9
Additions	0.6	0.5		1.1
Disposals	(3.0)	(0.3)		(3.3)
Modifications	3.5	0.1		3.6
Depreciation	(11.1)	(0.5)		(11.6)
Foreign currencytranslation	0.9	—		0.9
December 31, 2023	53.0	0.6		53.6
(US$ millions)			Lease liabilities
January 1, 2022				73.0
Additions				12.3
Modifications				0.6
Interest expense				4.2
Lease payments				(15.8)
Foreign currencytranslation				(3.1)
December 31, 2022				71.2
(US$ millions)			Lease liabilities
Additions				1.0
Disposals				(3.6)
Modifications				3.5
Interest expense				3.9
Lease payments				(14.9)
Foreign currencytranslation				1.0
December 31, 2023				62.1
			Dec 31,	Dec 31,
(US$ millions)			2023	2022
Lease liabilities, current			11.4	16.3
Lease liabilities,non-current			50.7	54.9
Total lease liabilities			62.1	71.2

Extension and termination options are included in a number of building and equipment leases across the Company. These terms are used to maximize operational flexibility in terms of managing contracts. Extension and termination options are exercisable only by the Company and not by the respective lessor.

41

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

26. Leases (continued)

Amounts recognized in the Consolidated statements of earnings and comprehensive income

Amounts recognized in the Consolidated statements of earnings and comprehensive Leases(continued)	income
(US$ millions)	2023	2022
Depreciation expense on right-of-use assets	11.6	12.2
Interest expense on lease liabilities	3.9	4.2
Loss on disposal of right-of-use assets	0.4	—
Expense relating to leases of short term and low value assets	1.6	1.9
Expense relatingto variable leasepayments not included in measurement of lease liability	8.0	4.6
Total	25.5	22.9

27. Commitments for expenditures

Licensing and similar agreements in effect at December 31, 2023 that contain provisions for future minimum payments, include the following:

As at December 31, 2023	Less than 1 year to	Less than 1 year to	greater than 5	years
(US$ millions)	< 1 Year	1-5 Years	> 5 Years		Total
Lease liabilities - undiscounted	13.2	37.0	31.4			81.6
Guaranteed payments due to licensors	11.3	42.9		—		54.2
Purchase obligations	7.3	15.3		—		22.6
Other	0.1	0.1		—		0.2
Total commitments	31.9	95.3	31.4			158.6

42

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

28. Business acquisitions

Acquisition of certain assets from 4D Brands International Inc

On January 17, 2023, the Company acquired certain assets from 4D Brands International Inc. and 4D Cityscape Worldwide Limited, (collectively, the “Vendors”) creators of puzzle games. Management performed an analysis under IFRS 3, Business Combinations (“IFRS 3”) and has determined that the assets and processes acquired comprised a business and accounted for the transaction as a business combination using the acquisition method of accounting. This acquisition complements the Company’s existing games and puzzles offering and has been reported in the Toys segment within the Activities, Games & Puzzles and Plush product category and included in the Games and Puzzles cash generating unit (“CGU”) beginning from the date of acquisition.

The Company incurred $0.2 million in transaction related costs which were included in administrative expenses in the Consolidated statements of earnings and comprehensive income.

The tables below summarize the allocation of the total of purchase consideration of $18.9 million:

Assets acquired at the date of acquisition

Assets acquired at the date of acquisition
(US$ millions)	Fair value as at January 17, 2023
Assets acquired
Intangible assets	8.5
Inventories	0.7
Prepaid expenses and other assets	0.4
Fair value of identifiable net assets acquired	9.6
Goodwill arising on acquisition
Cash consideration	14.6
Purchase price adjustment	0.2
Fair value of contingent consideration	4.1
Total purchase consideration	18.9
Fair value of identifiable net assets acquired	9.6
Goodwill arising from transaction	9.3
Net cash outflow on acquisition
Cash consideration	14.6
Less: Advance paid in 2022	0.5
Net cash outflow on acquisition	14.1

Goodwill arose on the acquisition as the consideration paid effectively included amounts for the benefit of expected revenue growth and future market development. These benefits are not recognized separately from goodwill as they do not meet the recognition criteria for identifiable intangible assets. As at the date of acquisition, $9.3 million of goodwill is expected to be deductible for income tax purposes and is being amortized for tax purposes over 15 years.

The total purchase consideration includes $4.1 million in deferred payments for future royalties recorded in provisions in the Consolidated statements of financial position. The future royalties are payable to the vendor upon the achievement of key performance indicators over a five-year period. The potential undiscounted amount of all future payments that the Company could be required to make under this contingent consideration arrangement is between $nil and $7.4 million.

Impact of acquisition on the results of the Company

Included in the Company's financial results for the year ended December 31, 2023 is $7.7 million in revenue attributable to the acquisition.

For the year ended December 31, 2023, the Company recognized $1.8 million of gain relating to contingent considerations in Other expense, net in the Consolidated statements of earnings and comprehensive income.

43

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

28. Business acquisitions (continued) Acquisition of certain assets from Innovation First International, Inc.

On February 2, 2023, the Company acquired certain assets from Innovation First, Inc., Innovation First International Inc., Innovation First Labs, Inc., Innovation First Logistics., Inc. Management performed an analysis under IFRS 3, and has determined that the assets and processes acquired comprised a business and therefore, accounted for the transaction as a business combination using the acquisition method of accounting. This acquisition is an opportunity for Spin Master to enter the niche market of robotic toys and grow the HEXBUG brand. The acquired business has been reported in the Toys segment within the Wheels & Action product category and included in the Wheels & Action cash generating unit (“CGU”) beginning from the date of acquisition.

The Company incurred $0.2 million in transaction related costs which were included in administrative expenses in the Consolidated statements of earnings and comprehensive income.

The tables below summarize the allocation of the total of purchase consideration of $14.6 million:

Assets acquired at the date of acquisition

Assets acquired at the date of acquisition
(US$ millions)	Fair value as at February 2, 2023
Assets acquired
Inventories	2.9
Property, plant, and equipment	0.4
Intangible assets	7.7
Prepaid and other assets	0.5
Fair value of identifiable net assets acquired	11.5
Goodwill arising on acquisition
Cash consideration	12.9
Purchase price adjustment	0.3
Fair value of contingent consideration	1.4
Total purchase consideration	14.6
Fair value of identifiable net assets acquired	11.5
Goodwill arising from transaction	3.1
Net cash outflow on acquisition
Cash consideration	12.9
Less: Advance paid in 2022	0.5
Net cash outflow on acquisition	12.4

Goodwill arose on the acquisition as the consideration paid effectively included amounts for the benefit of expected revenue growth and future market development. These benefits are not recognized separately from goodwill as they do not meet the recognition criteria for identifiable intangible assets. As at the date of acquisition, $3.1 million of goodwill is expected to be deductible for income tax purposes and is being amortized for tax purposes over 15 years.

The total purchase consideration includes $1.4 million in deferred payments for future royalties. The contingent consideration is recorded in provisions in the Consolidated statements of financial position. The future royalties are payable to the vendor upon the achievement of key performance indicators over a seven-year period. The potential undiscounted amount of all future payments that the Company could be required to make under this contingent consideration arrangement is between $nil and $3.7 million.

Impact of acquisition on the results of the Company

Included in the Company's financial results for the year ended December 31, 2023 is $15.5 million in revenue attributable to the acquisition.

For the year ended December 31, 2023, the Company recognized no gain or loss relating to contingent considerations in Other expense, net in the Consolidated statements of earnings and comprehensive income.

44

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

28. Business acquisitions (continued)

Summary of prior year acquisitions

Acquisition of certain assets from SolidRoots, LLC

On August 2, 2022, the Company acquired certain assets from SolidRoots, LLC (“SolidRoots”), a creator of family board games. Management performed an analysis under IFRS 3 and determined that the assets and processes acquired comprised a business and therefore, accounted for the transaction as a business combination using the acquisition method of accounting. This acquisition complements the Company's existing board games offering and is reported in the Toys segment within the Activities, Games & Puzzles and Plush product category and included in the Games and Puzzles CGU beginning from the date of acquisition.

The purchase consideration of $10.7 million was comprised of $8.5 million of cash consideration and $2.2 million of contingent consideration related to the estimated fair value of future royalties. The purchase agreement also included total deferred incentive compensation of $1.0 million, which is contingent on the continued employment of key principals as well as certain performance metrics, over a five-year period. These payments are considered a remuneration expense and are accrued over the related service period.

Purchase consideration of $10.7 million has been allocated as follows: $4.4 million to intangible assets (related to the brand), $2.0 million to inventories and $0.1 million to prepaid expenses and other assets, with the remainder of $4.2 million allocated to goodwill.

Acquisition of the remaining shares of Nørdlight Games AB

On August 24, 2021, the Company acquired 18.53% of the shares in Nørdlight Games AB (“Nørdlight”), a company that creates and develops digital games, based in Sweden. On August 8, 2022, the Company acquired the remaining 81.47% of the shares of Nørdlight, resulting in ownership and control of 100% of the voting shares in Nørdlight. This investment was classified in 2021 as an equity instrument measured at FVTOCI. Management performed an analysis under IFRS 3 and determined that the assets and processes acquired comprised a business and therefore, accounted for the transaction as a business combination using the acquisition method of accounting. The acquisition has been reported under the Digital Games segment and CGU beginning from the date of acquisition.

The Company paid cash consideration of $2.5 million. The total purchase consideration has been allocated to the identifiable assets of $0.5 million, and liabilities of $0.2 million, with the remainder $2.9 million allocated to goodwill.

The purchase agreement also includes contingent consideration of $4.9 million which is payable on achieving certain performance metrics and has been allocated a fair value of $nil in the total purchase consideration.

Assets acquired and liabilities recognized at the date of acquisition

	SolidRoots, LLC	Nørdlight Games AB
	Fair value as at	Fair value as at
(US$ millions)	August 2, 2022	August 8, 2022
Assets acquired
Cash	—	0.4
Other receivables	—	0.1
Intangible assets	4.4	—
Inventories	2.0	—
Prepaid expenses and other assets	0.1	—
	6.5	0.5
Liabilities assumed
Tradepayables and accrued liabilities	—	0.2
Fair value of identifiable net assets acquired	6.5	0.3

45

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

28. Business acquisitions (continued)

Goodwill arising on acquisition

	SolidRoots, LLC	Nørdlight Games AB
Cash consideration	8.5	2.5
Fair value of contingent consideration	2.2	—
Fair value ofpreviouslyheld equityinterest	—	0.7
Total purchase consideration	10.7	3.2
Fair value of identifiable net assets acquired	6.5	0.3
Goodwill arising from transaction	4.2	2.9

Net cash outflow on acquisition

Net cash outflow on acquisition
	SolidRoots, LLC	Nørdlight Games AB
Cash consideration	8.5	2.5
Less: Cash balance acquired	—	0.4
Net cash outflow on acquisition	8.5	2.1

29. Financial instruments and risk management

Capital management

Management includes the following items in its definition of capital:

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Share capital	783.4	754.7
Retained earnings1	604.5	477.4
Contributed surplus	27.4	40.7
Capital	1,415.3	1,272.8

1 December 31, 2022 restated for the change in accounting policy (see Note 4).

The Company makes adjustments to its capital structure based on the funds available to the Company in supporting the operations of the business and to ensure that the subsidiaries of the Company will be able to continue on a going concern basis.

The Company manages its capital structure, and may make adjustments in light of changes in economic conditions. In order to maintain or modify the capital structure, the Company may arrange new debt with existing or new lenders, or obtain additional financing through other means.

Management reviews its capital management strategy for reasonability on an ongoing basis and believes that this approach is reasonable. The Company declared a quarterly dividend beginning with the third quarter of 2022 and the Company launched a NCIB in the first quarter of 2023, as described in Note 22.

The Facility and Acquisition Facility require the Company to comply with certain financial covenants. As at December 31, 2023, the Company was in compliance with such financial covenants.

Financial risk management objectives

Management’s objective is to protect the Company and its subsidiaries on a consolidated basis against material economic exposures or the variability of results from various financial risks that include foreign currency risk, interest rate risk, credit risk and liquidity risk.

46

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

29. Financial instruments and risk management (continued)

Market risk

Foreign currency risk

Due to the structure of the Company’s international operations, it is exposed to foreign currency risk driven by fluctuations in exchange rates. Risk arises because the value of monetary assets, liabilities, revenues and expenditures arising from transactions denominated in foreign currencies may vary due to changes in exchange rates (“transaction exposures”) and because the non-US dollar denominated financial statements of the Company’s subsidiaries may vary on translation into the US dollar presentation currency (“translation exposures”). These exposures could impact the Company’s earnings and cash flows.

The Company periodically enters into derivative financial instruments such as foreign exchange forward contracts to manage its foreign currency risk on cash flows denominated in currencies other than the US dollar.

As at December 31, 2023, the Company is committed under outstanding foreign exchange contracts representing a total net sell commitment of $74.7 million (December 31, 2022 - net sell commitment of $20.3 million). These foreign exchange contracts have maturity dates varying from March 2024 to March 2025. For the year ended December 31, 2023, net realized losses on the Company’s matured foreign exchange contracts were $8.7 million (2022 - realized gains of $3.1 million) and are included in the Consolidated statements of earnings and comprehensive income.

		Notional value:
As at December 31, 2023		foreign currency	Notional value:	Unrealized
(in millions)		(Sell)/Buy	US$	gain(loss): US$
Foreign exchange contracts
Buy US$	GBP	(14.5)	(17.6)	(0.8)
Buy US$	EUR	(46.5)	(50.9)	(0.7)
Buy US$	MXN	(311.5)	(15.7)	(2.0)
Buy US$	AUD	(5.5)	(3.7)	(0.1)
Sell US$	CAD	212.9	157.1	4.0
Sell US$	JPY	320.7	2.2	0.1
Sell US$	HKD	25.7	3.3	—
Total			74.7	0.5

		Notional value:
As at December 31, 2022		foreign currency	Notional value:	Unrealized
(in millions)		(Sell)/Buy	US$	(loss) gain: US$
Foreign exchange contracts
Buy US$	EUR	(60.5)	66.2	0.9
Buy US$	GBP	(17.5)	22.0	0.9
Buy US$	MXN	(655.0)	31.1	(1.9)
Sell US$	CAD	186.6	(142.6)	(4.4)
BuyUS$	AUD	(4.5)	3.0	(0.1)
Total			(20.3)	(4.6)

- Foreign currency risk sensitivity analysis

The Company is mainly exposed to the Canadian dollar, the Great Britain pound sterling, the Mexican peso, the Euro, Swedish krona and Australian dollar. The following table details the Company's sensitivity to a 5.0% change in currency units against the US$. The sensitivity analysis includes all outstanding foreign currency denominated current monetary assets and liabilities and adjusts their translation as at the end of the reporting period for a 5.0% change in foreign currency rates. A positive number below indicates an increase in a foreign exchange gain where the currency unit changes 5.0% against US$.

47

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

29. Financial instruments and risk management (continued)

(US$ millions)	Currency unit strengthens by 5% Currency unit weakens by 5%
	Dec 31, Dec 31, Dec 31, Dec 31, 2023 2022 2023 2022
Canadian dollar Great Britain pound sterling Mexican peso Euro Swedish krona Australian dollar	(6.6) (6.4) 5.9 5.8 0.8 0.5 (0.7) (0.4) 1.7 2.0 (1.6) (1.8) 2.6 1.0 (2.3) (0.9) (0.5) (0.5) 0.4 0.4 0.5 0.5 (0.4) (0.5)

Interest rate risk - management

Interest rate risk is the risk that the Company’s financial assets and liabilities will increase or decrease in value due to a change in interest rates. The Company may be exposed to interest rate risk should it borrow under its credit facilities at a variable rate.

Interest rate risk - sensitivity analysis

The Company is exposed to interest rate risk mainly relating to interest income on its cash and cash equivalents balances and interest expense on loans and borrowings.

For the year ended December 31, 2023, with all other variables held constant, a 50-basis point decrease in interest rates would have resulted in a decrease to interest income of $3.2 million for the year (2022 - a decrease to interest income of $2.8 million). A 50-basis point increase in interest rates would have resulted in an increase to interest income of $3.9 million for the year (2022 - an increase to interest income of $2.8 million). These amounts are determined by considering the impact of the interest rates on the Company’s loans and borrowings and cash and cash equivalents balances as at December 31, 2023.

Credit risk

As the Company usually grants credit to customers on an unsecured basis, credit risk arises from the possibility that customers may experience financial difficulty and may be unable to fulfil their financial obligations.

This risk is mitigated through financial arrangements such as cash in advance of shipment, letters of credit or bank or parental guarantees. In addition, the Company purchases Accounts Receivables insurance for our global customer base, who are not covered by other financial arrangements. This process, in conjunction with an established credit limit and payment term, mitigates the Company’s risk of loss. The financial arrangements, insurance policies and customer credit limits are reviewed annually.

As at December 31, 2023, approximately 44.9% (2022 - 48.6%) of the Company’s trade receivables are due from three major retail customers which represent approximately 51.7% of Toy gross product sales for the year ended December 31, 2023 (2022 - 52.2%).

The Company mitigates credit risk on its cash balance by ensuring deposits are with financial institutions with high credit-ratings assigned by international credit-rating agencies.

Liquidity risk

The following details the Company’s remaining contractual maturities for its financial liabilities with contractual repayment periods. The tables reflect the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay, including both interest and principal.

To the extent that interest rates are floating, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

48

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

29. Financial instruments and risk management (continued)

The Company's contractual maturities are as follows:

As at December 31, 2023(US$ millions)	< 1year	1-5years	Total
Derivative financial liabilities
Foreign exchange forward contracts	156.0	7.4	163.4
Non-derivative financial liabilities
Tradepayables and accrued liabilities	385.4	—	385.4
	541.4	7.4	548.8

Financing facilities

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Bank loan facilities
Amount undrawn	733.5	533.5
Bank loan facilities	733.5	533.5

Fair value measurements

The following table presents the fair value of financial assets and financial liabilities. The carrying values of the Company’s financial instruments approximate their fair values with the exception of foreign exchange forward contracts, Investment in a limited partnership and minority interest and other investments which are recorded at fair value.

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Financial assets
Cash and cash equivalents	705.7	644.3
Trade receivables, net	414.4	311.0
Other receivables	60.0	49.5
Other assets:
Minority interest and other investments	11.3	8.8
Investment in a limited partnership	3.7	3.9
Investment tax credits - non-current portion	4.6	3.6
Unrealized foreign exchangegain	4.1	1.7
Financial assets	1,203.8	1,022.8
Financial liabilities
Tradepayables and accrued liabilities	385.4	339.4
Financial liabilities	385.4	339.4

With the exception of foreign exchange forward contracts, Investment in a limited partnership and minority interest and other investments described below, all other financial instruments are categorized within Level 1 of the fair value hierarchy.

The fair value of foreign exchange forward contracts at December 31, 2023 resulted in an unrealized gain of $4.1 million, which is recorded in Other assets (December 31, 2022 - $1.7 million) and an unrealized loss of $2.3 million recorded in accrued liabilities (December 31, 2022 - $6.3 million). These fair values are categorized within Level 2 of the fair value hierarchy. The fair values of over-the-counter derivative financial instruments are based on broker or observable market rates. Those quotes are tested for reasonableness by discounting expected future cash flows using market interest and exchange rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument for the Company and counterparty when appropriate. The fair value of foreign exchange contracts is estimated based on forward exchange rates observable at the end of the reporting period and contract forward rates. Realized and unrealized gains and losses on derivative financial instruments may be offset by realized and unrealized losses and gains on the underlying exposures being hedged and are recorded in earnings as they occur.

49

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

29. Financial instruments and risk management (continued)

The fair value of the investment in a limited partnership as at December 31, 2023 is recorded in Other assets at $3.7 million (December 31, 2022 - $3.9 million). For the year ended December 31, 2023 and 2022, the Company recognized $0.1 million (2022 - $nil) in net unrealized gain and $0.1 million (2022 - $0.1 million) in net realized gain in Other expense, net. During the year ended December 31, 2023, the Company received $0.3 million (2022 - $nil) of distribution income in net realized gain related to the investment.

This fair value is categorized within Level 3 of the fair value hierarchy. The fair value of the investment in a limited partnership is estimated using various valuations techniques through the partnership based on the type of investment held by the fund. The quantitative unobservable inputs used in the fair value measurement are not developed by the Company and include assumptions regarding long-term revenue growth rates and discount rates, among others. The investment in a limited partnership is held for medium to long-term strategic purposes.

From inception, the Company has paid $2.9 million and is obligated to pay the remaining $0.1 million upon receiving capital calls over the remaining term of the limited partnership agreement. The investment in a limited partnership is held for medium to long-term strategic purposes.

The fair value of the minority interest and other investments recorded in other assets are as follows:

	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Minority interest and other investments classified as FVTOCI	3.0	3.0
Minorityinterest and other investments classified as FVTPL	8.3	5.8
Minority interest and other investments	11.3	8.8

For the year ended December 31, 2023, there were no gains or losses (2022 - $0.5 million loss) was recognized for the minority interest and other investments classified as FVTPL in the Consolidated statements of earnings and comprehensive income within Other expense, net.

For the year ended December 31, 2023, there were no gains or losses (2022 - $0.1 million gain) recognized for minority interest and other investments classified as FVTOCI in the Consolidated statements of earnings and comprehensive income within Other comprehensive loss

These investments are categorized within Level 3 of the fair value hierarchy. The fair value of these investments is estimated using various valuation techniques. The quantitative unobservable inputs used in the fair value measurement are not developed by the Company and include assumptions regarding long-term revenue growth rates and discount rates, among others.

30. Segment information

Spin Master is a global children's entertainment company with a portfolio that includes children’s products, brands, and entertainment content spanning toys, games, licensed products, film and television programming and digital games.

The Company has three reportable operating segments, which are as follows:

• (i) Toys

• (ii) Entertainment

• (iii) Digital Games

The Toys segment engages in the creation, design, manufacturing, licensing, and marketing of toys, games, and products around the world. The Entertainment segment engages in the creation and production of multi-platform content, stories and characters in original shows, short-form series and films. The Digital Games segment engages in the creation of digital games which include subscription services. The Company also presents Corporate & Other which includes certain corporate costs, foreign exchange and merger and acquisition-related costs, as well as fair value gains and losses and distribution income on minority interest and other investments.

The Chief Operating Decision Maker ("CODM") measures total segment performance based on Adjusted EBITDA, as reported internally to management. The accounting policies of the reportable segments are the same as the Company’s accounting policies described in Note 2.

50

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

30. Segment information (continued)

The Company’s results from operations by reportable operating segment for the year ended December 31, 2023 and December 31, 2022 are as follows:

(US$ millions)		Year Ended Dec	Year Ended Dec	**31, **	2023
			Digital		Corporate &
	Toys	Entertainment	Games		Other	Total
Revenue	1,540.9	190.1	173.9		—	1,904.9
Operating Income (Loss)	101.0	78.0	49.1		(39.2)	188.9
Adjustments:
Restructuring and other related costs	16.3	0.3		1.5	—	18.1
Foreign exchange loss	—	—		—	14.7	14.7
Share based compensation	14.1	1.4		2.9	1.7	20.1
Impairment of goodwill	26.7	—		—	—	26.7
Impairment of property, plant and equipment	0.9	—		—	—	0.9
Impairment of intangible assets	5.4	1.0		0.7	1.1	8.2
Legal settlement recovery	—	—		—	(0.6)	(0.6)
Acquisition related deferred incentive
compensation	2.7	—		4.9	—	7.6
Net unrealized gain on investment	—	—		—	(0.1)	(0.1)
Net realized gain on investment	—	—		—	(0.1)	(0.1)
Acquisition related deferred consideration	(5.6)	—	(1.0)		(0.2)	(6.8)
Transaction costs	—	—		—	11.1	11.1
Depreciation and amortization	50.9	70.8		8.2	0.2	130.1
Adjusted EBITDA	212.4	151.5	66.3		(11.4)	418.8
(US$ millions)		Year Ended Dec		**31, **	2023
			Digital		Corporate &
	Toys	Entertainment	Games		Other	Total
Capital expenditures	34.6	52.1	20.7		—	107.4

51

Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

Spin Master Corp.

30. Segment information (continued)

Segment information(continued)
(US$ millions)		Year Ended Dec		**31, **	2022
			Digital		Corporate &
	Toys	Entertainment	Games		Other	Total
Revenue	1,737.6	118.8	163.9		—	2,020.3
Operating Income	170.1	76.7	46.5		50.0	343.3
Adjustments:
Restructuring and other related costs	4.6	0.1		0.2	—	4.9
Foreign exchange gain	—	—		—	(61.4)	(61.4)
Share based compensation	12.4	1.2		2.3	1.7	17.6
Impairment of property, plant and equipment	1.9	—		—	—	1.9
Impairment of intangible assets	—	1.1		—	—	1.1
Legal settlement recovery	—	—		—	(0.5)	(0.5)
Acquisition related deferred incentive compensation	5.4	—		4.9	—	10.3
Net realized gain on investment	—	—		—	(0.1)	(0.1)
Acquisition related deferred consideration	3.5	—		—	(0.9)	2.6
Fair value loss on Venture investments	—	—		—	0.5	0.5
Transaction costs	—	—		—	1.0	1.0
Depreciation and amortization	46.7	14.8		6.6	0.1	68.2
Adjusted EBITDA	244.6	93.9	60.5		(9.6)	389.4

(US$ millions)		**Year Ended Dec 31, **	**Year Ended Dec 31, **	2022
			Digital	Corporate &
	Toys	Entertainment	Games	Other	Total
Capital expenditures	32.4	54.9	12.1	—	99.4

52

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

30. Segment information (continued)

Revenue reported by segment above represents revenue generated from external customers. There was no intersegment revenue in any year.

The following table provides a reconciliation of the Company's consolidated Adjusted EBITDA to Income before income tax expense for the year ended December 31, 2023 and December 31, 2022:

	Year	Ended Dec 31
(US$ millions)	2023	2022
Revenue from reportable segments	1,904.9	2,020.3
Adjusted EBITDA	418.8	389.4
Adjusting Items:
Depreciation and amortization	(130.1)	(68.2)
Restructuring and other related costs	(18.1)	(4.9)
Foreign exchange (loss) gain	(14.7)	61.4
Share based compensation	(20.1)	(17.6)
Impairment of goodwill	(26.7)	—
Impairment of property, plant and equipment	(0.9)	(1.9)
Impairment of intangible assets	(8.2)	(1.1)
Legal settlement recovery	0.6	0.5
Acquisition related deferred incentive compensation	(7.6)	(10.3)
Net unrealized gain on investment	0.1	—
Net realized gain on investment	0.1	0.1
Loss on minority interest and other investments	—	(0.5)
Acquisition related contingent consideration	6.8	(2.6)
Transaction costs	(11.1)	(1.0)
Operating Income	188.9	343.3
Add (Deduct):
Interest income	27.4	10.7
Interest expense	(15.1)	(13.6)
Income before income tax expense	201.2	340.4

53

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

30. Segment information (continued)

Revenue from major product categories

Spin Master’s Toys segment is organized into four major product categories as follows:

• (i) Preschool and Dolls & Interactive

• (ii) Activities, Games & Puzzles and Plush

• (iii) Wheels & Action

• (iv) Outdoor

The Company’s revenues based on its major product categories are as follows:

	Year Ended	Dec 31,
(US$ millions)	2023	2022
Preschool and Dolls & Interactive	817.7	867.0
Activities, Games & Puzzles and Plush	487.5	561.7
Wheels & Action	409.3	450.8
Outdoor	72.7	99.3
Toy gross product sales1	1,787.2	1,978.8
Sales allowances	(246.3)	(241.2)
Toy revenue	1,540.9	1,737.6
Entertainment revenue	190.1	118.8
Digital Games revenue	173.9	163.9
Revenue	1,904.9	2,020.3

1Toy gross product sales represent sales of the Company’s products to customers, excluding sales allowances.

Geographical information

Revenue by geographical area is based on the location of the customers and non-current assets are based on geographic location of the entity which holds the assets. The North American geographic area is comprised of the United States and Canada. The European geographic area is comprised of the United Kingdom, France, Italy, the Netherlands, Germany, Austria, Switzerland, Belgium, Luxembourg, Slovakia, Hungary, Romania, Czech Republic, Poland, Turkey, Greece, Portugal and Spain. The Rest of World is comprised of Hong Kong, China, Vietnam, India, Australia, New Zealand, Japan and Mexico, and all other areas of the world serviced by the Company’s third party distribution network. Entertainment and Digital Games revenue are tracked on a global basis and are presented as such in the table below.

The Company's revenues are derived from the following geographical areas:

	Year Ended	Dec 31,
(US$ millions)	2023	2022
North America	1,012.1	1,189.8
Europe	505.9	525.0
Rest of World	269.2	264.0
Toy gross product sales	1,787.2	1,978.8
Sales allowances	(246.3)	(241.2)
Toy revenue	1,540.9	1,737.6
Entertainment revenue	190.1	118.8
Digital Games revenue	173.9	163.9
Revenue	1,904.9	2,020.3

Toy gross product sales for North America include amounts attributable to the United States of $0.9 million (2022 - $1,093.3 million) and Canada of $0.1 million (2022 - $96.5 million) for the year ended December 31, 2023.

54

Spin Master Corp. Consolidated financial statements for the years ended December 31, 2023 and December 31, 2022

30. Segment information (continued)

Non-current assets by major geographic region are detailed as follows:

Non-current assets by major geographic region are detailed as follows: Segment information(continued)
	Dec 31,	Dec 31,
(US$ millions)	2023	2022
Non-current assets
North America	422.8	404.1
Europe	85.6	79.0
Rest of World	26.7	18.7
Non-current assets	535.1	501.8
Other	135.6	158.5
Total non-current assets	670.7	660.3

Other includes non-current assets not directly attributable to a specific geographic area.

Non-current assets for North America include assets attributable to Canada of $157.5 million as at December 31, 2023 (December 31, 2022 - $164.5 million).

Major customers

Sales to the Company's three largest customers accounted for 51.7% (2022 - 52.2%) of Toy gross product sales for the year ended December 31, 2023. The Toys segment sells products to each of the Company’s three largest customers. Other than the top three customers, which have remained the same as compared to the comparative period, no other single customer contributed 10% or more to Toy gross product sales for the year ended December 31, 2023 and 2022.

	Year	Ended Dec 31,
(US$ millions)	2023	2022
Toy gross product sales
Customer 1	356.9	422.0
Customer 2	307.1	333.3
Customer 3	260.6	277.5
Total	924.6	1,032.8

31. Subsequent events

On January 2, 2024, the Company, through its subsidiaries, completed the acquisition of all of the issued and outstanding capital stock in MND Holdings I Corp ("Melissa & Doug"). Melissa & Doug is a leading brand in early childhood play with offerings of open-ended, creative, and developmental toys. The acquisition will be reported in the Toys segment beginning from the date of acquisition.

The preliminary estimate of purchase consideration of $959.0 million, net of $32.7 million in estimated cash acquired is comprised of $950.0 million of base consideration adjusted for an estimated $9.0 million for net working capital and liabilities assumed. Spin Master funded the $959.0 million purchase price with $434.0 million cash and $525.0 million of debt. The debt was sourced through a partial drawdown of $300.0 million from the Company's Facility and $225.0 million from the Acquisition Facility.

Given the timing of the transaction and measurement uncertainty with final purchase agreement consideration adjustments, the purchase price allocation is ongoing and will be disclosed in the Company's first quarter 2024 condensed consolidated interim financial statements.

There were $10.1 million in transaction related costs included in administrative expenses in the Consolidated statement of earnings and comprehensive income for the year ended December 31, 2023.

55