Consolidated financial statements are prepared when
a parent company controls another organization. Control is indicated by a chance to determine
a company’s operating as well as financial policies. Control usually exists when more
compared to 50 percent of a company’s common inventory is owned, but it can be provided by in
other ways, including the capability to appoint management or a most of the board of
directors. The actual equity method is used if you find influence but not control, usually
meaning an ownership degree between 10 and 50 %. Joint ventures may be proportionally
combined or accounted for using the collateral method. Mexico has used
International Accounting Standard No. on foreign currency translation
The purchase method is used to take into account business combinations.
Goodwill is
the excess of purchase price over the current value of the net assets acquired. It is not
amortized, but subject to an annual impairments test. An intangible asset is amortized
more than its useful life (usually no more than 20 years) unless the life span is indefinite, in
that situation it is not amortized but subject to a yearly impairments test.Research costs are expensed as incurred, while development costs are capitalized
and amortized once technological feasibility has been established. Leases are classified
as financing or operating.
Financing leases-those transferring substantially all of the
benefits and risks of possession of the asset-are capitalized, while rents through operating
leases are expensed around the income statement. Contingent deficits are accrued when they
are most likely and measurable. General backup reserves are not acceptable below
Mexican GAAP. Deferred taxes are supplied for in full, using the legal responsibility method. The
costs of employee retirement benefits, seniority premiums, and termination spend are accrued
currently whenever they can be reasonably estimated according to actuarial calculations.
Statutory (legal) supplies are created by allocating Five percent of income each year until
the actual reserve equals 20 percent from the value of the outstanding funds stock.
