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Other Liabilities, Provisions, Contingencies and Commitments | 12 Months Ended
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Dec. 31, 2018
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Other Liabilities, Provisions, Contingencies and Commitments | Note 25. Other Liabilities, Provisions, Contingencies and Commitments 25.1 Other current financial liabilities
|  | December 31, 2018 |  |  | December 31, 2017 |
Sundry creditors |  | Ps. | 8,489 |  |  | Ps. | 9,116 |
Derivative financial instruments (see Note 20) |  |  | 384 |  |  |  | 3,947 |
Others |  |  | 20 |  |  |  | 16 |
Total |  | Ps. | 8,893 |  |  | Ps. | 13,079 |
The carrying value of current accounts payables approximates its fair value as of December 31, 2018 and 2017. 25.2 Provisions and other non-current liabilities
|  | December 31, 2018 |  |  | December 31, 2017 |
Contingencies |  | Ps. | 9,928 |  |  | Ps. | 12,855 |
Payable taxes |  |  | 873 |  |  |  | 458 |
Others |  |  | 767 |  |  |  | 1,233 |
Total |  | Ps. | 11,568 |  |  | Ps. | 14,546 |
25.3 Other financial liabilities
|  | December 31, 2018 |  |  | December 31, 2017 |
Derivative financial instruments (see Note 20) |  | Ps. | 1,262 |  |  | Ps. | 1,769 |
Security deposits |  |  | 970 |  |  |  | 1,028 |
Total |  | Ps. | 2,232 |  |  | Ps. | 2,797 |
25.4 Provisions recorded in the consolidated statement of financial position The Company has various loss contingencies and has recorded reserves as other liabilities for those legal proceedings for which it believes an unfavorable resolution is probable. Most of these contingencies are the result of the Company’s business acquisitions. The following table presents the nature and amount of the contingencies recorded as of December 31, 2018 and 2017:
|  | December 31, 2018 |  |  | December 31, 2017 |
Indirect taxes |  | Ps. | 5,421 |  |  | Ps. | 6,836 |
Labor |  |  | 2,601 |  |  |  | 2,723 |
Legal |  |  | 1,906 |  |  |  | 3,296 |
Total |  | Ps. | 9,928 |  |  | Ps. | 12,855 |
25.5 Changes in the balance of provisions recorded 25.5.1 Indirect taxes
|  | December 31, 2018 |  |  | December 31, 2017 |  |  | December 31, 2016 |
Balance at beginning of the period |  | Ps. | 6,836 |  |  | Ps. | 11,065 |  |  | Ps. | 1,725 |
Penalties and other charges |  |  | 123 |  |  |  | 362 |  |  |  | 173 |
New contingencies (see Note 19) |  |  | 178 |  |  |  | 91 |  |  |  | 768 |
Contingencies added in business combination (1) |  |  | 104 |  |  |  | 861 |  |  |  | 7,840 |
Cancellation and expiration |  |  | 106 |  |  |  | (796 | ) |  |  | (106 | )
Payments |  |  | (112 | ) |  |  | (947 | ) |  |  | (6 | )
Brazil amnesty adoption |  |  | — |  |  |  | (3,321 | ) |  |  | — |
Effects of changes in foreign exchange rates |  |  | (951 | ) |  |  | (479 | ) |  |  | 671 |
Effects due to derecognition of Philippines |  |  | (863 | ) |  |  | — |  |  |  | — |
Balance at end of the period |  | Ps. | 5,421 |  |  | Ps. | 6,836 |  |  | Ps. | 11,065 |
(1) | During 2016, Coca-Cola FEMSA recognized an amount of Ps. 7,840 corresponding to tax claims with local Brazil IRS (including a contingency of Ps. 5,321 related to the deductibility of a tax goodwill balance). The remaining contingencies relate to multiple claims with loss expectations assessed by management and supported by the analysis of legal counsels as possible, the total amount of contingencies guaranteed agreements amounts to Ps. 8,081. During 2017, Coca-Cola FEMSA took advantage of a Brazilian tax amnesty program. The settlement of certain outstanding matters under that amnesty program generated a benefit of Ps. 1,874 which has been offset against the corresponding indemnifiable assets.
25.5.2 Labor
|  | December 31, 2018 |  |  | December 31, 2017 |  |  | December 31, 2016 |
Balance at beginning of the period |  | Ps. | 2,723 |  |  | Ps. | 2,578 |  |  | Ps. | 1,372 |
Penalties and other charges |  |  | 310 |  |  |  | 56 |  |  |  | 203 |
New contingencies |  |  | 330 |  |  |  | 283 |  |  |  | 397 |
Contingencies added in business combination |  |  | 289 |  |  |  | — |  |  |  | 500 |
Cancellation and expiration |  |  | (133 | ) |  |  | (32 | ) |  |  | (186 | )
Payments |  |  | (193 | ) |  |  | (92 | ) |  |  | (336 | )
Effects of changes in foreign exchange rates |  |  | (725 | ) |  |  | (69 | ) |  |  | 628 |
Venezuela deconsolidation effect |  |  | — |  |  |  | (1 | ) |  |  | — |
Balance at end of the period |  | Ps. | 2,601 |  |  | Ps. | 2,723 |  |  | Ps. | 2,578 |
25.5.3 Legal
|  | December 31, 2018 |  |  | December 31, 2017 |  |  | December 31, 2016 |
Balance at beginning of the period |  | Ps. | 3,296 |  |  | Ps. | 2,785 |  |  | Ps. | 318 |
Penalties and other charges |  |  | 86 |  |  |  | 121 |  |  |  | 34 |
New contingencies |  |  | 72 |  |  |  | 186 |  |  |  | 196 |
Contingencies added in business combination |  |  | 67 |  |  |  | 783 |  |  |  | 2,231 |
Cancellation and expiration |  |  | (146 | ) |  |  | (16 | ) |  |  | (46 | )
Payments |  |  | (251 | ) |  |  | (417 | ) |  |  | (81 | )
Brazil amnesty adoption |  |  | — |  |  |  | 7 |  |  |  | — |
Effects of changes in foreign exchange rates |  |  | (335 | ) |  |  | (151 | ) |  |  | 133 |
Venezuela deconsolidation effect |  |  | — |  |  |  | (2 | ) |  |  | — |
Effects due to derecognition of Philippines |  |  | (883 | ) |  |  | — |  |  |  | — |
Balance at end of the period |  | Ps. | 1,906 |  |  | Ps. | 3,296 |  |  | Ps. | 2,785 |
While provision for all claims has already been made, the actual outcome of the disputes and the timing of the resolution cannot be estimated by the Company at this time. 25.6 Unsettled lawsuits The Company has entered into several proceedings with its labor unions, tax authorities and other parties that primarily involve Coca-Cola FEMSA and its subsidiaries. These proceedings have resulted in the ordinary course of business and are common to the industry in which the Company operates. The aggregate amount being claimed against the Company resulting from such proceedings as of December 31, 2018 is Ps. 57,446. Such contingencies were classified by legal counsel as less than probable but more than remote of being settled against the Company. However, the Company believes that the ultimate resolution of such several proceedings will not have a material effect on its consolidated financial position or result of operations. Included in this amount Coca-Cola FEMSA has tax contingencies, most of which are related to its Brazilian operations, amounting to approximately Ps. 51,104, with loss expectations assessed by management and supported by the analysis of legal counsel consider as possible. Among these possible contingencies, are Ps. 12,346 in various tax disputes related primarily to credits for ICMS (“VAT”) and Ps. 33,217 related to tax credits of “IPI” over raw materials acquired from Free Trade Zone Manaus. Possible claims also include Ps. 4,787 related to compensation of federal taxes not approved by the IRS (Tax authorities) and Ps. 664 related to the requirement by the Tax Authorities of State of São Paulo for ICMS (“VAT”), interest and penalty due to the alleged underpayment of tax arrears for the period 1994-1996. Coca-Cola FEMSA is defending its position in these matters and final decision is pending in court. In addition, the Company has Ps. 4,113 in unsettled indirect tax contingencies regarding indemnification accorded with Heineken Group over FEMSA Cerveza. These matters are related to different Brazilian federal taxes which are pending final decision. In recent years in its Mexican and Brazilian territories, Coca-Cola FEMSA has been requested to present certain information regarding possible monopolistic practices. These requests are commonly generated in the ordinary course of business in the soft drink industry where this subsidiary operates. The Company does not expect any material liability to arise from these contingencies. 25.7 Collateralized contingencies As is customary in Brazil, Coca-Cola FEMSA has been required by the tax authorities there to collateralize tax contingencies currently in litigation amounting to Ps. 7,739, Ps. 9,433 and Ps. 8,093 as of December 31, 2018, 2017 and 2016, respectively, by pledging fixed assets and entering into available lines of credit covering the contingencies (see Note 13). 25.8 Commitments As of December 31, 2018, the Company has contractual commitments for finance leases for computer equipment and operating leases for the rental of production machinery and equipment, distribution and computer equipment, and land for FEMSA Comercio – Proximity, FEMSA Comercio – Fuel and FEMSA Comercio – Health Division. The contractual maturities of the operating lease commitments by currency, expressed in Mexican pesos as of December 31, 2018, are as follows:
|  | Mexican Pesos |  |  | U.S. Dollars |  |  | Others |
Not later than 1 year |  | Ps. | 7,467 |  |  | Ps. | 565 |  |  | Ps. | 2,085 |
Later than 1 year and not later than 5 years |  |  | 30,691 |  |  |  | 1,485 |  |  |  | 6,196 |
Later than 5 years |  |  | 30,884 |  |  |  | 200 |  |  |  | 2,361 |
Total |  | Ps. | 69,042 |  |  | Ps. | 2,250 |  |  | Ps. | 10,642 |
Rental expense charged to consolidated net income was Ps. 10,621, Ps. 9,468 and Ps. 8,202 for the years ended December 31, 2018, 2017 and 2016, respectively. Future minimum lease payments under finance leases with the present value of the net minimum lease payments are as follows:
|  | 2018 Minimum Payments |  |  | Present Value of Payments |  |  | 2017 Minimum Payments |  |  | Present Value of Payments |
Not later than 1 year |  | Ps. | 38 |  |  | Ps. | 33 |  |  | Ps. | 41 |  |  | Ps. | 34 |
Later than 1 year and not later than 5 years |  |  | 62 |  |  |  | 59 |  |  |  | 91 |  |  |  | 82 |
Later than 5 years |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total minimum lease payments |  |  | 100 |  |  |  | 92 |  |  |  | 132 |  |  |  | 116 |
Less amount representing finance charges |  |  | 8 |  |  |  | — |  |  |  | 16 |  |  |  | — |
Present value of minimum lease payments |  |  | 92 |  |  |  | 92 |  |  |  | 116 |  |  |  | 116 |

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