Doing Business

Doing Business in Mexico 2015

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108 Tax and Legal Services - PwC Mexico Footnote disclosure The requirements for disclosures in footnotes are generally similar to those in effect under IFRS. They include information as to the principal accounting policies of the company, material contingencies of whatever nature, commitments for substantial purchases of assets or under lease contracts, mortgages and other charges on assets, details of long-term debt and foreign currency exposure, details of derivative financial instruments, limitations on dividends, guarantees given, employees' pension plans, transactions with related parties, and income taxes. Recording of income Income statements are almost universally prepared on an annual basis for presentation at shareholders' meetings and for income tax purposes. The value-added tax law requires monthly returns of revenue. Accordingly, difficulties are sometimes encountered by companies that wish to keep their accounts on the basis of periods consisting of precisely 4, 13 or 52 weeks. Annual income tax returns must be prepared for fiscal years that end precisely on December 31. The law provides that invoices must be issued no more than 30 days after a sale is made, but accrual accounting requires that all shipments be recorded in the period in which they were made. Gross profits on installment sales are generally recognized in the period of sale, although in certain cases, particularly where collection is not assured, they are recognized as collections are made. Book and tax differences Numerous differences between the book and tax treatment of items of income and expense may and usually do exist. The tax treatments mentioned below are discussed in more detail in Chapter 15. The more important are shown in Table IX below. It should be noted that, generally speaking, conformity between accounting and tax treatment of income and expense items is not required. Foreign investors There are no disclosure requirements applicable exclusively to foreign investors. However, a foreign-owned subsidiary or investee company would have to comply with the disclosure requirements applicable to all entities doing business in Mexico. These include the need to disclose all significant transactions with related parties, including parent, affiliated and subsidiary companies, together with the following information. • Nature of the relationship. • Amount and description of transaction (even when no charge is made for the goods or services). • Effect of any changes in the terms of recurring transactions. • Balances with related parties and a description of any special characteristics (for example, due dates, interest rates). • Any other information considered necessary for an understanding of the transaction. Transactions of a similar nature may be grouped together. Remuneration paid to company directors, officers and executives for services rendered in such capacities and the extent of directors' or officers' shareholdings need not be disclosed. However, in the case of public companies, the total combined remuneration paid to directors and principal officers must be disclosed.

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