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Employee Benefits | 12 Months Ended
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Dec. 31, 2017
Text block1 [abstract] |
Employee Benefits | Note 16. Employee Benefits The Company has various labor liabilities for employee benefits in connection with pension, seniority and post-retirement medical benefits . Benefits vary depending upon the country where the individual employees are located. Presented below is a discussion of the Company’s labor liabilities in Mexico, which comprise the substantial majority of those recorded in the consolidated financial statements. During 2016, Coca-Cola FEMSA settled its pension plan in Colombia and consequently Coca-Cola FEMSA recognized the corresponding effects of the settlement as disclosed below. The settlement of the complementary pension plan was only for certain executive employees. 16.1 Assumptions The Company annually evaluates the reasonableness of the assumptions used in its labor liability for post-employment and other non-current employee benefits computations. Actuarial calculations for pension and retirement plans, seniority premiums and post-retirement medical benefits, as well as the associated cost for the period, were determined using the following long-term assumptions for Mexico:
Mexico |  | December 31, 2017 |  |  | December 31, 2016 |  |  | December 31, 2015 |
Financial: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate used to calculate the defined benefit obligation |  |  | 7.60 | % |  |  | 7.60 | % |  |  | 7.00 | %
Salary increase |  |  | 4.50 | % |  |  | 4.50 | % |  |  | 4.50 | %
Future pension increases |  |  | 3.50 | % |  |  | 3.50 | % |  |  | 3.50 | %
Healthcare cost increase rate |  |  | 5.10 | % |  |  | 5.10 | % |  |  | 5.10 | %
Biometric: |  |  |  |  |  |  |  |  |  |  |  |
Mortality (1) |  |  | EMSSA 2009 |  |  |  | EMSSA 2009 |  |  |  | EMSSA 2009 |
Disability (2) |  |  | IMSS-97 |  |  |  | IMSS-97 |  |  |  | IMSS-97 |
Normal retirement age |  |  | 60 years |  |  |  | 60 years |  |  |  | 60 years |
Employee turnover table (3) |  |  | BMAR 2007 |  |  |  | BMAR 2007 |  |  |  | BMAR 2007 |
Measurement date December:
(1) | EMSSA. Mexican Experience of social security.
(2) | IMSS. Mexican Experience of Instituto Mexicano del Seguro Social.
(3) | BMAR. Actuary experience.
In Mexico the methodology used to determine the discount rate was the Yield or Internal Rate of Return (“IRR”) which involves a yield curve. In this case, the expected rates of each period were taken from a yield curve of Mexican Federal Government Treasury Bonds (known as CETES in Mexico) because there is no deep market in high quality corporate obligations in Mexican pesos. In Mexico upon retirement, the Company purchases an annuity for the employee, which will be paid according to the option chosen by the employee. Based on these assumptions, the amounts of benefits expected to be paid out in the following years are as follows:
|  | Pension and Retirement Plans |  |  | Seniority Premiums |  |  | Post Retirement Medical Services |  |  | Total |
2018 |  | Ps. | 611 |  |  | Ps. | 53 |  |  | Ps. | 19 |  |  | Ps. | 683 |
2019 |  |  | 233 |  |  |  | 52 |  |  |  | 20 |  |  |  | 305 |
2020 |  |  | 351 |  |  |  | 50 |  |  |  | 22 |  |  |  | 423 |
2021 |  |  | 263 |  |  |  | 48 |  |  |  | 24 |  |  |  | 335 |
2022 |  |  | 270 |  |  |  | 47 |  |  |  | 25 |  |  |  | 342 |
2023 to 2027 |  |  | 2,115 |  |  |  | 254 |  |  |  | 158 |  |  |  | 2,527 |
16.2 Balances of the liabilities for employee benefits
|  | December 31, 2017 |  |  | December 31, 2016 |
Pension and Retirement Plans: |  |  |  |  |  |  |  |
Defined benefit obligation |  | Ps. | 7,370 |  |  | Ps. | 5,702 |
Pension plan funds at fair value |  |  | (3,131 | ) |  |  | (2,216 | )
Net defined benefit liability |  | Ps. | 4,239 |  |  | Ps. | 3,486 |
Seniority Premiums: |  |  |  |  |  |  |  |
Defined benefit obligation |  | Ps. | 783 |  |  | Ps. | 663 |
Seniority premium plan funds at fair value |  |  | (109 | ) |  |  | (102 | )
Net defined benefit liability |  | Ps. | 674 |  |  | Ps. | 561 |
Postretirement Medical Services: |  |  |  |  |  |  |  |
Defined benefit obligation |  | Ps. | 524 |  |  | Ps. | 460 |
Medical services funds at fair value |  |  | (64 | ) |  |  | (60 | )
Net defined benefit liability |  | Ps. | 460 |  |  | Ps. | 400 |
Total employee benefits |  | Ps. | 5,373 |  |  | Ps. | 4,447 |
16.3 Trust assets Trust assets consist of fixed and variable return financial instruments recorded at market value, which are invested as follows:
Type of Instrument |  | December 31, 2017 |  |  | December 31, 2016 |
Fixed return: |  |  |  |  |  |  |  |
Traded securities |  |  | 18 | % |  |  | 15 | %
Bank instruments |  |  | 5 | % |  |  | 4 | %
Federal government instruments of the respective countries |  |  | 62 | % |  |  | 63 | %
Variable return: |  |  |  |  |  |  |  |
Publicly traded shares |  |  | 15 | % |  |  | 18 | %
|  |  | 100 | % |  |  | 100 | %
In Mexico, the regulatory framework for pension plans is established in the Income Tax Law and its Regulations, the Federal Labor Law and the Mexican Social Security Institute Law. None of these laws establish minimum funding levels or a minimum required level of contributions. In Mexico, the Income Tax Law requires that, in the case of private plans, certain notifications must be submitted to the authorities and a certain level of instruments must be invested in Federal Government securities among others. The Company’s various pension plans have a technical committee that is responsible for verifying the correct operation of the plan with regard to the payment of benefits, actuarial valuations of the plan, and supervise the trustee. The committee is responsible for determining the investment portfolio and the types of instruments the fund will be invested in. This technical committee is also responsible for reviewing the correct operation of the plans in all of the countries in which the Company has these benefits. The risks related to the Company’s employee benefit plans are primarily attributable to the plan assets. The Company’s plan assets are invested in a diversified portfolio, which considers the term of the plan so as to invest in assets whose expected return coincides with the estimated future payments. Since the Mexican Tax Law limits the plan asset investment to 10% for related parties, this risk is not considered to be significant for purposes of the Company’s Mexican subsidiaries. In Mexico, the Company’s policy is to invest at least 30% of the fund assets in Mexican Federal Government instruments. Guidelines for the target portfolio have been established for the remaining percentage and investment decisions are made to comply with these guidelines insofar as the market conditions and available funds allow. In Mexico, the amounts and types of securities of the Company in related parties included in portfolio fund are as follows:
|  | December 31, 2017 |  |  | December 31, 2016 |
Debt: |  |  |  |  |  |  |  |
Cementos Mexicanos. S.A.B. de C.V. |  | Ps. | — |  |  | Ps. | 7 |
Grupo Televisa, S.A.B. de C.V. |  |  | 28 |  |  |  | 45 |
Grupo Financiero Banorte, S.A.B. de C.V. |  |  | — |  |  |  | 7 |
BBVA Bancomer S.A. de C.V. |  |  | 10 |  |  |  |  |
El Puerto de Liverpool, S.A.B. de C.V. |  |  | 30 |  |  |  | 5 |
Grupo Industrial Bimbo, S.A.B. de C. V. |  |  | 5 |  |  |  | 19 |
Gentera, S.A.B. de C.V. |  |  | — |  |  |  | 8 |
Capital: |  |  |  |  |  |  |  |
Grupo Industrial Bimbo, S.A.B. de C.V. |  |  | — |  |  |  | 6 |
During the years ended December 31, 2017, 2016 and 2015, the Company did not make significant contributions to the plan assets and does not expect to make material contributions to the plan assets during the following fiscal year. The plan assets include securities of the Company in portfolio fund in amount of Ps. 114, as of December 31, 2016. There are no restrictions placed on the trustee’s ability to sell those securities. As of December 31, 2017, the plan assets did not include securities of the Company in portfolio funds. 16.4 Amounts recognized in the consolidated income statements and the consolidated statement of comprehensive income
|  | Income Statement |  |  | AOCI(1) |
December 31, 2017 |  | Current Service Cost |  |  | Past Service Cost |  |  | Gain or Loss on Settlement or Curtailment |  |  | Net Interest on the Net Defined Benefit Liability |  |  | Remeasurements of the Net Defined Benefit Liability |
Pension and retirement plans |  | Ps. | 341 |  |  | Ps. | 10 |  |  | Ps. | (2) |  |  | Ps. | 267 |  |  | Ps. | 1,060 |
Seniority premiums |  |  | 106 |  |  |  | — |  |  |  | (1) |  |  |  | 41 |  |  |  | 46 |
Postretirement medical services |  |  | 24 |  |  |  | — |  |  |  | — |  |  |  | 30 |  |  |  | 184 |
Total |  | Ps. | 471 |  |  | Ps. | 10 |  |  | Ps. | (3) |  |  | Ps. | 338 |  |  | Ps. | 1,290 |
December 31, 2016 |  | Current Service Cost |  |  | Past Service Cost |  |  | Gain or Loss on Settlement or Curtailment |  |  | Net Interest on the Net Defined Benefit Liability |  |  | Remeasurements of the Net Defined Benefit Liability |
Pension and retirement plans |  | Ps. | 245 |  |  | Ps. | 45 |  |  | Ps. | (61) |  |  | Ps. | 224 |  |  | Ps. | 1,102 |
Seniority premiums |  |  | 93 |  |  |  | — |  |  |  | — |  |  |  | 34 |  |  |  | 18 |
Postretirement medical services |  |  | 21 |  |  |  | — |  |  |  | — |  |  |  | 24 |  |  |  | 151 |
Total |  | Ps. | 359 |  |  | Ps. | 45 |  |  | Ps. | (61) |  |  | Ps. | 282 |  |  | Ps. | 1,270 |
Pension and retirement plans |  | Ps. | 233 |  |  | Ps. | 3 |  |  | Ps. | (120) |  |  | Ps. | 212 |  |  | Ps. | 913 |
Seniority premiums |  |  | 88 |  |  |  | — |  |  |  | (9) |  |  |  | 32 |  |  |  | 39 |
Postretirement medical services |  |  | 16 |  |  |  | — |  |  |  | — |  |  |  | 23 |  |  |  | 119 |
Post-employment Venezuela |  |  | 6 |  |  |  | — |  |  |  | — |  |  |  | 9 |  |  |  | — |
Total |  | Ps. | 343 |  |  | Ps. | 3 |  |  | Ps. | (129) |  |  | Ps. | 276 |  |  | Ps. | 1,071 |
(1) | Amounts accumulated in other comprehensive income as of the end of the period.
For the years ended December 31, 2017, 2016 and 2015, current service cost of Ps. 408, Ps. 359 and Ps. 343 has been included in the consolidated income statement as cost of goods sold, administrative and selling expenses. Remeasurements of the net defined benefit liability recognized in accumulated other comprehensive income are as follows:
|  | December 31, 2017 |  |  | December 31, 2016 |  |  | December 31, 2015 |
Amount accumulated in other comprehensive income as of the beginning of the period, net of tax |  | Ps. | 966 |  |  | Ps. | 810 |  |  | Ps. | 942 |
Actuarial losses arising from exchange rates |  |  | (2 | ) |  |  | 123 |  |  |  | (12 | )
Remeasurements during the year, net of tax |  |  | 295 |  |  |  | 288 |  |  |  | (46 | )
Actuarial gains and (losses) arising from changes in financial assumptions |  |  | (367 | ) |  |  | (255 | ) |  |  | (74 | )
Amount accumulated in other comprehensive income as of the end of the period, net of tax |  | Ps. | 892 |  |  | Ps. | 966 |  |  | Ps. | 810 |
Remeasurements of the net defined benefit liability include the following:
| • |  | The return on plan assets, excluding amounts included in net interest expense.
| • |  | Actuarial gains and losses arising from changes in demographic assumptions.
| • |  | Actuarial gains and losses arising from changes in financial assumptions.
16.5 Changes in the balance of the defined benefit obligation for post-employment
|  | December 31, 2017 |  |  | December 31, 2016 |  |  | December 31, 2015 |
Pension and Retirement Plans: |  |  |  |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 5,702 |  |  | Ps. | 5,308 |  |  | Ps. | 5,270 |
Current service cost |  |  | 341 |  |  |  | 245 |  |  |  | 233 |
Past service cost |  |  | 10 |  |  |  | 45 |  |  |  | 3 |
Interest expense |  |  | 491 |  |  |  | 369 |  |  |  | 353 |
Effect on curtailment |  |  | (2 | ) |  |  | (61 | ) |  |  | (120 | )
Remeasurements of the net defined benefit obligation |  |  | 263 |  |  |  | (67 | ) |  |  | (154 | )
Foreign exchange loss (gain) |  |  | (79 | ) |  |  | 150 |  |  |  | 39 |
Benefits paid |  |  | (550 | ) |  |  | (287 | ) |  |  | (316 | )
Acquisitions |  |  | 1,194 |  |  |  | — |  |  |  | — |
Ending balance |  | Ps. | 7,370 |  |  | Ps. | 5,702 |  |  | Ps. | 5,308 |
Seniority Premiums: |  |  |  |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 663 |  |  | Ps. | 610 |  |  | Ps. | 563 |
Current service cost |  |  | 106 |  |  |  | 93 |  |  |  | 88 |
Interest expense |  |  | 49 |  |  |  | 41 |  |  |  | 38 |
Settlement |  |  | (1 | ) |  |  | — |  |  |  | — |
Effect on curtailment |  |  | — |  |  |  | — |  |  |  | (9 | )
Remeasurements of the net defined benefit obligation |  |  | 28 |  |  |  | (43 | ) |  |  | (34 | )
Benefits paid |  |  | (68 | ) |  |  | (55 | ) |  |  | (45 | )
Acquisitions |  |  | 6 |  |  |  | 17 |  |  |  | 9 |
Ending balance |  | Ps. | 783 |  |  | Ps. | 663 |  |  | Ps. | 610 |
Postretirement Medical Services: |  |  |  |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 460 |  |  | Ps. | 404 |  |  | Ps. | 338 |
Current service cost |  |  | 24 |  |  |  | 22 |  |  |  | 16 |
Interest expense |  |  | 34 |  |  |  | 27 |  |  |  | 26 |
Remeasurements of the net defined benefit obligation |  |  | 32 |  |  |  | 30 |  |  |  | 44 |
Benefits paid |  |  | (26 | ) |  |  | (23 | ) |  |  | (20 | )
Ending balance |  | Ps. | 524 |  |  | Ps. | 460 |  |  | Ps. | 404 |
Post-employment: |  |  |  |  |  |  |  |  |  |  |  |
Initial balance |  |  |  |  |  | Ps. | 135 |  |  | Ps. | 194 |
Current service cost |  |  |  |  |  |  | — |  |  |  | 5 |
Certain liability cost |  |  |  |  |  |  | — |  |  |  | 73 |
Reclassification to certain liability cost |  |  |  |  |  |  | (135 | ) |  |  | — |
Foreign exchange (gain) |  |  |  |  |  |  | — |  |  |  | (137 | )
Ending balance |  |  |  |  |  | Ps. | — |  |  | Ps. | 135 |
16.6 Changes in the balance of plan assets
|  | December 31, 2017 |  |  | December 31, 2016 |  |  | December 31, 2015 |
Total Plan Assets: |  |  |  |  |  |  |  |  |  |  |  |
Initial balance |  | Ps. | 2,378 |  |  | Ps. | 2,228 |  |  | Ps. | 2,158 |
Actual return on trust assets |  |  | 213 |  |  |  | 40 |  |  |  | 65 |
Foreign exchange loss (gain) |  |  | 86 |  |  |  | 4 |  |  |  | 7 |
Life annuities |  |  | 65 |  |  |  | 107 |  |  |  | 61 |
Benefits paid |  |  | (136 | ) |  |  | (1 | ) |  |  | (63 | )
Acquisitions |  |  | 698 |  |  |  | — |  |  |  | — |
Ending balance |  | Ps. | 3,304 |  |  | Ps. | 2,378 |  |  | Ps. | 2,228 |
As a result of the Company’s investments in life annuities plan, management does not expect it will need to make material contributions to plan assets in order to meet its future obligations. 16.7 Variation in assumptions The Company decided that the relevant actuarial assumptions that are subject to sensitivity and valuated through the projected unit credit method, are the discount rate, the salary increase rate and healthcare cost increase rate. The reasons for choosing these assumptions are as follows:
| • |  | Discount rate: The rate that determines the value of the obligations over time.
| • |  | Salary increase rate: The rate that considers the salary increase which implies an increase in the benefit payable.
| • |  | Healthcare cost increase rate: The rate that considers the trends of health care costs which implies an impact on the postretirement medical service obligations and the cost for the year.
The following table presents the amount of defined benefit plan expense and OCI impact in absolute terms of a variation of 0.5% in the assumptions on the net defined benefit liability associated with the Company’s defined benefit plans. The sensitivity of this 0.5% on the significant actuarial assumptions is based on a projected long-term discount rates for Mexico and a yield curve projections of long-term sovereign bonds:
+0.5%: |  | Income Statement |  | OCI (1)
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability |  | Current Service Cost |  |  | Past Service Cost |  |  | Gain or Loss on Settlement or Curtailment |  |  | Effect of Net Interest on the Net Defined Benefit Liability (Asset) |  |  | Remeasurements of the Net Defined Benefit Liability (Asset) |
Pension and retirement plans |  | Ps. | 322 |  |  | Ps. | 9 |  |  | Ps. | (2) |  |  | Ps. | 264 |  |  | Ps. | 1,289 |
Seniority premiums |  |  | 102 |  |  |  | — |  |  |  | (1) |  |  |  | 41 |  |  |  | 44 |
Postretirement medical services |  |  | 23 |  |  |  | — |  |  |  | — |  |  |  | 33 |  |  |  | 178 |
Post-employment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | Ps. | 447 |  |  | Ps. | 9 |  |  | Ps. | (3) |  |  | Ps. | 338 |  |  | Ps. | 1,511 |
Expected salary increase |  | Current Service Cost |  |  | Past Service Cost |  |  | Gain or Loss on Settlement or Curtailment |  |  | Effect of Net Interest on the Net Defined Benefit Liability (Asset) |  |  | Remeasurements of the Net Defined Benefit Liability (Asset) |
Pension and retirement plans |  | Ps. | 355 |  |  | Ps. | 10 |  |  | Ps. | (2) |  |  | Ps. | 286 |  |  | Ps. | 1,496 |
Seniority premiums |  |  | 112 |  |  |  | — |  |  |  | (1) |  |  |  | 43 |  |  |  | 42 |
Postretirement medical services |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Post-employment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | Ps. | 467 |  |  | Ps. | 10 |  |  | Ps. | (3) |  |  | Ps. | 329 |  |  | Ps. | 1,538 |
Assumed rate of increase in healthcare costs |  | Current Service Cost |  |  | Past Service Cost |  |  | Gain or Loss on Settlement or Curtailment |  |  | Effect of Net Interest on the Net Defined Benefit Liability (Asset) |  |  | Remeasurements of the Net Defined Benefit Liability (Asset) |
Postretirement medical services |  | Ps. | 26 |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | 33 |  |  | Ps. | 265 |
-0.5%: Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability |  | Current Service Cost |  |  | Past Service Cost |  |  | Gain or Loss on Settlement or Curtailment |  |  | Effect of Net Interest on the Net Defined Benefit Liability (Asset) |  |  | Remeasurements of the Net Defined Benefit Liability (Asset) |
Pension and retirement plans |  | Ps. | 355 |  |  | Ps. | 10 |  |  | Ps. | (2) |  |  | Ps. | 268 |  |  | Ps. | 1,506 |
Seniority premiums |  |  | 111 |  |  |  | — |  |  |  | (1) |  |  |  | 40 |  |  |  | 46 |
Postretirement medical services |  |  | 26 |  |  |  | — |  |  |  | — |  |  |  | 31 |  |  |  | 267 |
Post-employment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | Ps. | 492 |  |  | Ps. | 10 |  |  | Ps. | (3) |  |  | Ps. | 339 |  |  | Ps. | 1,819 |
Expected salary increase |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension and retirement plans |  | Ps. | 323 |  |  | Ps. | 9 |  |  | Ps. | (2) |  |  | Ps. | 253 |  |  | Ps. | 1,291 |
Seniority premiums |  |  | 100 |  |  |  | — |  |  |  | (1) |  |  |  | 38 |  |  |  | 56 |
Postretirement medical services |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Post-employment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | Ps. | 423 |  |  | Ps. | 9 |  |  | Ps. | (3) |  |  | Ps. | 291 |  |  | Ps. | 1,347 |
Assumed rate of increase in healthcare costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Postretirement medical services |  | Ps. | 23 |  |  | Ps. | — |  |  | Ps. | — |  |  | Ps. | 28 |  |  | Ps. | 179 |
(1) | Amounts accumulated in other comprehensive income as of the end of the period.
16.8 Employee benefits expense For the years ended December 31, 2017, 2016 and 2015, employee benefits expenses recognized in the consolidated income statements as cost of goods sold, administrative and selling expenses are as follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Wages and salaries |  | Ps. | 53,056 |  |  | Ps. | 39,459 |  |  | Ps. | 39,459 |
Social security costs |  |  | 9,860 |  |  |  | 6,114 |  |  |  | 6,114 |
Employee profit sharing |  |  | 1,209 |  |  |  | 1,506 |  |  |  | 1,243 |
Post employment benefits |  |  | 815 |  |  |  | 625 |  |  |  | 493 |
Share-based payments |  |  | 351 |  |  |  | 468 |  |  |  | 463 |
Termination benefits |  |  | 455 |  |  |  | 503 |  |  |  | 503 |
|  | Ps. | 65,746 |  |  | Ps. | 48,675 |  |  | Ps. | 48,275 |

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