US GAAP vs MX GAAP
# Mexico US
1 Effects in inflation in FS All financial statements are presented in constant pesos as of the latest balance sheet date The historical cost basis is required to be maintained in the financial statements. No gain or loss on monetary position is recognized
Inventories are restated using the specific cost method based on independent appraisals
Fixedassets may either be restated by independent appraisals or by applying the Mexican National Consumer Price Index (“NCPI”).
All other nonmonetary accounts, primarily stockholders’ equity, are restated using NCPI
The excess (insufficiency) in restated stockholders’ equity, included in stockholders’ equity, reflects the difference between the increase (decrease) in the specific values ofnonmonetary assets and the increase attributable to general inflation
Recognition of the effects of inflation is considered a more meaningful presentation than historical cost-based financial reporting because it represents a comprehensive measure of the effects of price level changes in the inflationary Mexican economy
2 Deferred Taxes & Employee Profit Sharing Require recognizing thedeferred tax effects for all transactions that are affected in different periods for financial statements than for tax returns. Requires an asset and liability approach for financial accounting and reporting for income taxes.
Current and deferred employee profit sharing expense is included in provisions The provision for current and deferred employee profit sharing is expensed as incurred as anoperating expense
3 Purchase Accounting The excess of the purchase price over the adjusted net book value of the enterprise acquired is recorded as goodwill and amortized over a period not to exceed 20 years. the purchase method of accounting requires the acquiring company to record at fair value the assets acquired and liabilities assumed.
Negative goodwill (the excess of the adjusted netbook value of the enterprise acquired over the purchase price) is recorded as a deferred credit and amortized over a period not to exceed 5 years the purchase method of accounting requires the acquiring company to record at fair value the assets acquired and liabilities assumed. whether or not previously recorded by the acquired enterprise, is recorded as goodwill. Goodwill is amortized over aperiod not to exceed 40 years
Negative goodwill (the excess of the fair value of assets acquired and liabilities assumed over the purchase price) should be allocated to proportionately reduce the values assigned to noncurrent assets (except long-term investments in marketable securities).
4 Consolidation An entity should consolidate all subsidiaries in which it has control An entityshould consolidate all subsidiaries in which it has a controlling financial interest represented by the direct or indirect ownership of a majority voting interest, except those in which control of the subsidiary is temporary or significant doubt exists regarding the entity’s ability to control the subsidiary
5 Associated Companies Requires the use of the equity method whenever the investor isable to exercise significant influence. Significant influence is presumed to occur when the investor holds between 10% - 50% of the investee, unless the contrary is demonstrated. Significant influence can also be demonstrated with a holding of less than 10 percent if a specific set of requirements is fulfilled Requires the equity method of accounting whenever the investor is able to exercisesignificant influence. Significant influence is presumed if the investor holds between 20% - 50% of the investee. A holding of less than 20% leads to the presumption that the investor does not have the ability to exercise significant influence unless that ability can be demonstrated otherwise
6 Joint Ventures Investments in joint ventures where the investor has shared control are accounted for...
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