Mexico Financial Reporting

The fiscal year associated with Mexican companies must correspond with the calendar year. Comparative combined financial statements must be prepared, consisting of:

1. Balance sheet
2. Income statement
3. Statement of cash flows
4. Statement of changes in stockholders’ equity
5. Notes

Until 2008, financial statements were modified for inflation, that is, common price level accounting was used. The historical costs of nonmonetary assets had been restated into pesos of current buying power. The components of stockholders’ collateral were also restated. The acquire or loss from keeping monetary assets and liabilities were contained in current period income, however the effects of other restatements were within stockholders’ equity. A statement of alterations in financial position, similar to the statement of money flows, was also presented. Nevertheless, because it was prepared within constant pesos, the resulting quantities were not cash flows because understood under historical cost accounting. SEC reports amounts in the statement of changes in financial position (adjusted for inflation) as well as cash flow amounts (under historical cost).25 Under Mexican Financial Reporting Standard B-10 (“Inflation Effects”), effective 2008, inflation accounting is only used when the three-year cumulative rising cost of living rate equals or surpasses 26 percent. Notes are an integral part of the financial statements (covered by the auditor’s report) and include the following:

1. Accounting policies of the company
2. Material contingencies
3. Commitments for substantial purchases of assets or under lease contracts
4. Details of long-term debt and foreign currency exposure
5. Limitations on dividends
6. Guarantees
7. Employees’ pension plans
8. Transactions with related parties
9. Income taxes