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v3.20.1

Other Liabilities, Provisions, Contingencies and Commitments | 12 Months Ended
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Dec. 31, 2019
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Other Liabilities, Provisions, Contingencies and Commitments | Note 26. Other Liabilities, Provisions, Contingencies and Commitments 26.1 Other current financial liabilities
|  | December 31, 2019 |  |  | December 31, 2018 |
Sundry creditors |  | Ps. | 11,509 |  |  | Ps. | 8,489 |
Derivative financial instruments (see Note 21) |  |  | 848 |  |  |  | 384 |
Other notes payable (1) |  |  | 11,294 |  |  |  | — |
Others |  |  | 4 |  |  |  | 20 |
Total |  | Ps. | 23,655 |  |  | Ps. | 8,893 |
(1) | Related to Socofar’s put option exercised on December 13, 2019.
26.2 Provisions and other non-current liabilities
|  | December 31, 2019 |  |  | December 31, 2018 |
Contingencies |  | Ps. | 8,854 |  |  | Ps. | 9,928 |
Payable taxes |  |  | 710 |  |  |  | 873 |
Others |  |  | 879 |  |  |  | 767 |
Total |  | Ps. | 10,443 |  |  | Ps. | 11,568 |
26.3 Other financial liabilities
|  | December 31, 2019 |  |  | December 31, 2018 |
Derivative financial instruments (see Note 21) |  | Ps. | 1,672 |  |  | Ps. | 1,262 |
Security deposits |  |  | 809 |  |  |  | 970 |
Total |  | Ps. | 2,481 |  |  | Ps. | 2,232 |
26.4 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, 2019 and 2018:
|  | December 31, 2019 |  |  | December 31, 2018 |
Indirect taxes |  | Ps. | 5,062 |  |  | Ps. | 5,421 |
Labor |  |  | 2,455 |  |  |  | 2,601 |
Legal |  |  | 1,337 |  |  |  | 1,906 |
Total |  | Ps. | 8,854 |  |  | Ps. | 9,928 |
26.5 Changes in the balance of provisions recorded 26.5.1 Indirect taxes
|  | December 31, 2019 |  |  | December 31, 2018 |  |  | December 31, 2017 |
Balance at beginning of the period |  | Ps. | 5,421 |  |  | Ps. | 6,836 |  |  | Ps. | 11,065 |
Penalties and other charges |  |  | 1 |  |  |  | 123 |  |  |  | 362 |
New contingencies |  |  | 486 |  |  |  | 178 |  |  |  | 91 |
Contingencies added in business combination |  |  | — |  |  |  | 104 |  |  |  | 861 |
Cancellation and expiration |  |  | (247 | ) |  |  | 106 |  |  |  | (796 | )
Payments |  |  | (174 | ) |  |  | (112 | ) |  |  | (947 | )
Brazil amnesty adoption |  |  | — |  |  |  | — |  |  |  | (3,321 | )
Effects of changes in foreign exchange rates |  |  | (425 | ) |  |  | (951 | ) |  |  | (479 | )
Effects due to derecognition of Philippines |  |  | — |  |  |  | (863 | ) |  |  | — |
Balance at end of the period |  | Ps. | 5,062 |  |  | Ps. | 5,421 |  |  | Ps. | 6,836 |
26.5.2 Labor
|  | December 31, 2019 |  |  | December 31, 2018 |  |  | December 31, 2017 |
Balance at beginning of the period |  | Ps. | 2,601 |  |  | Ps. | 2,723 |  |  | Ps. | 2,578 |
Penalties and other charges |  |  | 293 |  |  |  | 310 |  |  |  | 56 |
New contingencies |  |  | 521 |  |  |  | 330 |  |  |  | 283 |
Contingencies added in business combination |  |  | 44 |  |  |  | 289 |  |  |  | — |
Cancellation and expiration |  |  | (283 | ) |  |  | (133 | ) |  |  | (32 | )
Payments |  |  | (500 | ) |  |  | (193 | ) |  |  | (92 | )
Effects of changes in foreign exchange rates |  |  | (221 | ) |  |  | (725 | ) |  |  | (69 | )
Venezuela deconsolidation effect |  |  | — |  |  |  | — |  |  |  | (1 | )
Balance at end of the period |  | Ps. | 2,455 |  |  | Ps. | 2,601 |  |  | Ps. | 2,723 |
26.5.3 Legal
|  | December 31, 2019 |  |  | December 31, 2018 |  |  | December 31, 2017 |
Balance at beginning of the period |  | Ps. | 1,906 |  |  | Ps. | 3,296 |  |  | Ps. | 2,785 |
Penalties and other charges |  |  | 94 |  |  |  | 86 |  |  |  | 121 |
New contingencies |  |  | 213 |  |  |  | 72 |  |  |  | 186 |
Contingencies added in business combination |  |  | 77 |  |  |  | 67 |  |  |  | 783 |
Cancellation and expiration |  |  | (542 | ) |  |  | (146 | ) |  |  | (16 | )
Payments |  |  | (318 | ) |  |  | (251 | ) |  |  | (417 | )
Brazil amnesty adoption |  |  | — |  |  |  | — |  |  |  | 7 |
Effects of changes in foreign exchange rates |  |  | (93 | ) |  |  | (335 | ) |  |  | (151 | )
Venezuela deconsolidation effect |  |  | — |  |  |  | — |  |  |  | (2 | )
Effects due to derecognition of Philippines |  |  | — |  |  |  | (883 | ) |  |  | — |
Balance at end of the period |  | Ps. | 1,337 |  |  | Ps. | 1,906 |  |  | Ps. | 3,296 |
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. 26.6 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, 2019 is Ps. 81,683. 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, with loss expectations assessed by management and supported by the analysis of legal counsel considered as possible. The main possible contingencies of Brazilian operations amount to approximately Ps. 53,937. This refers to various tax disputes related primarily to: (i) Ps. 10,378 of credits for ICMS (“VAT”); (ii) Ps. 34,102 related to tax credits of “IPI” over raw materials acquired from Free Trade Zone Manaus; (iii) claims of Ps. 6,274 related to compensation of federal taxes not approved by the IRS (Tax authorities) and (iv) Ps. 3,183 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 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 subsidiaries operates. The Company does not expect any material liability to arise from these contingencies. 26.7 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. 10,471, Ps. 7,739 and Ps. 9,433 as of December 31, 2019, 2018 and 2017, respectively, by pledging fixed assets and entering into available lines of credit covering the contingencies, see Note 14. Also, as disclosed in Note 9.2, there is some restricted cash in Brazil related to current deposits in order to fulfill the collateral requirements for accounts payable. 26.8 Commitments The Company has firm commitments for the purchase of property, plant and equipment of Ps. 556 as of December 31, 2019.

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