Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

The composition of income tax expense for the years ended December 31, 2016, 2017 and 2018 is as follows:

Deferred tax related to items recognized in OCI during the year:


	For the years ended December 31,
	2016			2017			2018
Remeasurement of defined benefit plans	Ps.	(7,734,732	)	Ps.	3,032,403		Ps.	408,735
Effect of financial instruments acquired for hedging purposes		(21,046	)		(5,337	)
Equity investments at fair value		2,858,452			(266,753	)		1,613,667
Other		136,879			—			(8,922	)

Deferred tax benefit (expense) recognized in OCI	Ps.	(4,760,447	)	Ps.	2,760,313		Ps.	2,013,480

A reconciliation of the statutory income tax rate in Mexico to the consolidated effective income tax rate recognized by the Company is as follows:


	Year ended December 31,
	2016			2017			2018
Statutory income tax rate in Mexico		30.0%			30.0%			30.0%
Impact of non-deductible and non-taxable items:
Tax inflation effects		15.9%			17.8%			7.3%
Derivatives		8.0%			1.0%			0.4%
Employee benefits		4.4%			2.2%			1.3%
Other		9.8%			2.6%			6.3%

Effective tax rate on Mexican operations		68.1%			53.6%			45.3%
Use of unrecognized tax credits in Brazil		(0.6%	)		(0.4%	)		—
Equity interest in net loss of associated companies		(0.2%	)		—			—
Dividends received from associates		(7.9%	)		(1.2%	)		(0.8%	)
Foreign subsidiaries and other non-deductible items, net		(10.8%	)		(8.3%	)		1.5%

Effective tax rate		48.6%			43.7%			46.0%

An analysis of temporary differences giving rise to the net deferred tax liability is as follows:


	Consolidated statements of financial position						Consolidated statements of comprehensive income
	2017			2018			2016			2017			2018
Provisions		Ps.26,268,666			Ps.20,781,421			Ps.1,622,132			Ps.1,579,604			Ps.1,841,705
Deferred revenues		7,461,802			6,866,120			(12,128	)		(965,010	)		3,632,051
Tax losses carry forward		38,332,408			27,881,491			12,706,245			(323,506	)		(5,833,660	)
Property, plant and equipment ⁽¹⁾		(9,929,129	)		(11,756,590	)		2,445,783			1,974,753			453,493
Inventories		2,003,049			2,106,976			(229,571	)		519,046			81,270
Licenses and rights of use ⁽¹⁾		(2,455,877	)		(3,896,788	)		54,182			348,201			961,402
Employee benefits		33,253,071			33,673,874			3,616,952			1,225,310			1,128,209
Other		9,639,995			10,956,823			(1,918,543	)		793,094			(270,407	)

Net deferred tax assets		Ps.104,573,985			Ps.86,613,327

Deferred tax expense in net profit for the year								Ps.18,285,052			Ps.5,151,492			Ps.1,994,063

(1)	As of December 31, 2018, the balance included the effects of hyperinflation.

Reconciliation of deferred tax assets and liabilities, net:


	2016			2017			2018
Opening balance as of January 1,	Ps.	69,817,147		Ps.	98,589,818		Ps.	104,573,985
Deferred tax benefit		18,285,052			5,151,492			1,994,063
Translation effect		15,273,228			(1,687,276	)		(8,854,010	)
Deferred tax benefit (expense) recognized in OCI		(4,760,447	)		2,760,313			2,013,480
Deferred taxes acquired in business combinations		(25,162	)		(240,362	)		(25,827	)
Hyperinflationary effect in Argentina		—			—			(4,907,151	)
Effect of adoption of IFRS 9 (Note 2ai)		—			—			544,628
Effect of adoption of IFRS 15 (Note 2ai)		—			—			(8,725,841	)

Closing balance as of December 31,	Ps.	98,589,818		Ps.	104,573,985		Ps.	86,613,327

Presented in the consolidated statements of financial position as follows:
Deferred income tax assets	Ps.	112,651,699		Ps.	116,571,349		Ps.	111,186,768
Deferred income tax liabilities		(14,061,881	)		(11,997,364	)		(24,573,441	)

	Ps.	98,589,818		Ps.	104,573,985		Ps.	86,613,327

The combined income before taxes and the combined provision for taxes of such subsidiaries in 2016, 2017 and 2018 are as follows:

2016

2017

2018

Combined income before taxes

Ps.

45,697,258

Ps.

38,286,046

Ps.

66,314,883

Combined tax provision differences
not deducible-not cumulative in
the foreign subsidiaries

Ps.

9,169,083

Ps.

5,790,950

Ps.

20,593,392

At December 31, 2018, the available tax loss carryforwards recorded in deferred tax assets are as follows on a country by country basis:


Country	Balance of available tax loss carryforwards at December 31, 2018		Tax loss carryforward benefit
Brazil		Ps. 59,695,441		Ps. 20,296,450
Austria		20,128,833		5,032,208
Mexico		6,043,603		1,813,081
Colombia		2,239,486		739,030
Nicaragua		2,403		722

Total		Ps. 88,109,766		Ps. 27,881,491