EX-99.1 3 d626869dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Coca-Cola FEMSA, S.A.B. de C.V.

We have audited the accompanying consolidated statements of financial position of Coca-Cola FEMSA, S.A.B. de C.V. and its subsidiaries as of December 31, 2012 and 2011 and January 1, 2011, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Coca-Cola FEMSA, S.A.B. de C.V. and its subsidiaries as of December 31, 2012 and 2011 and January 1, 2011, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Coca-Cola FEMSA, S.A.B. de C.V. and subsidiaries’ internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2013 expressed an unqualified opinion thereon.

Mancera, S.C.

A member practice of

Ernst & Young Global

/s/ Adan Aranda Suarez

Adan Aranda Suarez

Mexico City, Mexico

March 14, 2013, except for Note 29, as to which the date in November 8, 2013.

F-1

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At December 31, 2012, 2011 and at January 1, 2011 (Date of transition to IFRS)

Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.)

		Note				December 2012 (*)				December 2012				December 2011				January 1, 2011
ASSETS
Current assets:
Cash and cash equivalents			5			$	1,791			Ps.	23,222			Ps.	11,843			Ps.	12,142
Marketable securities			6				1				12				330				—
Accounts receivable, net			7				720				9,329				8,632				6,363
Inventories			8				625				8,103				7,549				5,007
Recoverable taxes							206				2,673				2,215				2,027
Other current financial assets			20				117				1,523				833				409
Other current assets			9				81				1,035				1,322				821
Total current assets							3,541				45,897				32,724				26,769
Non-current assets:
Investments in associates and joint ventures			10				413				5,352				3,656				2,108
Property, plant and equipment, net			11				3,280				42,517				38,102				28,470
Intangible assets, net			12				5,169				67,013				62,163				43,221
Deferred tax assets			24				122				1,576				1,944				1,790
Other non-current financial assets			20				71				925				845				15
Other non-current assets, net			13				218				2,823				2,304				1,954
Total non-current assets							9,273				120,206				109,014				77,558
TOTAL ASSETS						$	12,814			Ps.	166,103			Ps.	141,738			Ps.	104,327
LIABILITIES AND EQUITY
Current liabilities:
Bank loans and notes payable			18			$	324			Ps	4,194			Ps	638			Ps.	1,615
Current portion of non-current debt			18				73				945				4,902				225
Interest payable							15				194				206				151
Suppliers							1,096				14,221				11,852				8,988
Accounts payable							352				4,563				3,676				3,752
Taxes payable							321				4,162				3,471				2,300
Other current financial liabilities			20				98				1,271				1,030				991
Total current liabilities							2,279				29,550				25,775				18,022
Non-current liabilities:
Bank loans and notes payable			18				1,911				24,775				16,821				15,245
Post-employment and other non-current employee benefits			16				169				2,188				1,367				1,156
Deferred tax liabilities			24				76				979				706				321
Other non-current financial liabilities			20				37				476				717				734
Provisions and other non-current liabilities			25				255				3,307				3,271				3,414
Total non-current liabilities							2,448				31,725				22,882				20,870
Total liabilities							4,727				61,275				48,657				38,892
Equity:
Capital stock			22				157				2,029				2,009				1,947
Additional paid-in capital							2,583				33,488				27,230				10,533
Retained earnings							4,976				64,501				56,792				50,488
Cumulative other comprehensive income (loss)							126				1,631				3,997				(93	)
Equity attributable to equity holders of the parent							7,842				101,649				90,028				62,875
Non-controlling interest in consolidated subsidiaries			21				245				3,179				3,053				2,560
Total equity							8,087				104,828				93,081				65,435
TOTAL LIABILITIES AND EQUITY						$	12,814			Ps.	166,103			Ps.	141,738			Ps.	104,327

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

The accompanying notes are an integral part of these consolidated statements of financial position.

F-2

CONSOLIDATED INCOME STATEMENTS

For the years ended December 31, 2012 and 2011

Amounts expressed in millions of U.S. dollars ( $ ) and in millions of Mexican pesos ( Ps.), except per share amounts

		Note				2012 (*)				2012				2011
Net sales						$	11,332			Ps.	146,907			Ps.	122,638
Other operating revenues							64				832				586
Total revenues							11,396				147,739				123,224
Cost of goods sold							6,102				79,109				66,693
Gross profit							5,294				68,630				56,531
Administrative expenses							480				6,217				5,140
Selling expenses							3,103				40,223				32,093
Other income			19				42				545				685
Other expenses			19				115				1,497				2,060
Interest expense							151				1,955				1,729
Interest income							33				424				616
Foreign exchange gain, net							21				272				61
Gain on monetary position for subsidiaries in hyperinflationary economies							—				—				61
Market value (gain) loss on financial instruments			20				(1	)			(13	)			138
Income before income taxes and share of the profit of associates and joint ventures accounted for using the equity method							1,542				19,992				16,794
Income taxes			24				484				6,274				5,667
Share of the profit of associates and joint ventures accounted for using the equity method, net of taxes			10				14				180				86
Consolidated net income						$	1,072			Ps.	13,898			Ps.	11,213
Attributable to:
Equity holders of the parent						$	1,028			Ps.	13,333			Ps.	10,662
Non-controlling interest							44				565				551
Consolidated net income						$	1,072			Ps.	13,898			Ps.	11,213
Net equity holders of the parent (U.S. dollars and Mexican pesos):
Earnings per share			23			$	0.51			Ps.	6.62			Ps.	5.72

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

The accompanying notes are an integral part of these consolidated income statements.

F-3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2012 and 2011

Amounts expressed in millions of U.S. dollars ( $ ) and in millions of Mexican pesos ( Ps.)

		Note				2012 (*)				2012				2011
Consolidated net income						$	1,072			Ps.	13,898			Ps.	11,213
Other comprehensive income:
Unrealized gain on available-for sale securities, net of taxes			6				—				(2	)			4
Valuation of the effective portion of derivative financial instruments, net of taxes			20				(16	)			(201	)			(3	)
Exchange differences on translation of foreign operations							(182	)			(2,361	)			4,073
Remeasurements of the net defined benefit liability, net of taxes			16				(10	)			(125	)			(6	)
Total comprehensive (loss) income, net of tax							(208	)			(2,689	)			4,068
Consolidated comprehensive income for the year, net of tax						$	864			Ps.	11,209			Ps.	15,281
Attributable to:
Equity holders of the parent						$	846			Ps.	10,967			Ps.	14,752
Non-controlling interest							18				242				529
Consolidated comprehensive income for the year, net of tax						$	864			Ps.	11,209			Ps.	15,281

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

The accompanying notes are an integral part of these consolidated statements of comprehensive income.

F-4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2012 and 2011

Amounts expressed in millions of U.S. dollars ( $ ) and in millions of Mexican pesos ( Ps.)

		Capital Stock				Additional Paid-in Capital				Retained Earnings				Unrealized Gain on Available- for- sale Securities				Valuation of the Effective Portion of Derivative Financial Instruments				Exchange Differences on Translation of Foreign Operations				Remeasurements of the Net Defined Benefit Liability				Equity Attributable To Equity Holders of the Parent				Non- Controlling Interest				Total Equity
Balances at January 1, 2011		Ps.	1,947			Ps.	10,533			Ps.	50,488			Ps.	—			Ps.	17			Ps.	—			Ps.	(110	)		Ps.	62,875			Ps.	2,560			Ps.	65,435
Net income			—				—				10,662				—				—				—				—				10,662				551				11,213
Other comprehensive income, net of tax			—				—				—				4				27				4,073				(14	)			4,090				(22	)			4,068
Total comprehensive income			—								10,662				4				27				4,073				(14	)			14,752				529				15,281
Dividends declared			—				—				(4,358	)			—				—				—				—				(4,358	)			(8	)			(4,366	)
Acquisition of Grupo Tampico			28				7,799				—				—				—				—				—				7,827				—				7,827
Acquisition of Grupo CIMSA			34				8,984				—				—				—				—				—				9,018				—				9,018
Acquisition of non-controlling interest			—				(86	)			—				—				—				—				—				(86	)			(28	)			(114	)
Balances at December 31, 2011			2,009				27,230				56,792				4				44				4,073				(124	)			90,028				3,053				93,081
Net income			—				—				13,333				—				—				—				—				13,333				565				13,898
Other comprehensive income, net of tax			—				—				—				(2	)			(179	)			(2,054	)			(131	)			(2,366	)			(323	)			(2,689	)
Total comprehensive income			—				—				13,333				(2	)			(179	)			(2,054	)			(131	)			10,967				242				11,209
Dividends declared			—				—				(5,624	)			—				—				—				—				(5,624	)			(109	)			(5,733	)
Acquisition of Grupo Fomento Queretano			20				6,258				—				—				—				—				—				6,278				—				6,278
Acquisition of non-controlling interest			—				—				—				—				—				—				—				—				(7	)			(7	)
Balances at December 31, 2012		Ps.	2,029			Ps.	33,488			Ps.	64,501			Ps.	2			Ps.	(135	)		Ps.	2,019			Ps.	(255	)		Ps.	101,649			Ps.	3,179			Ps.	104,828

The accompanying notes are an integral part of these consolidated statements of changes in equity.

F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2012 and 2011

Amounts expressed in millions of U.S. dollars ( $ ) and in millions of Mexican pesos ( Ps.)

		2012 (*)				2012				2011
Cash flows from operating activities:
Income before income taxes		$	1,556			Ps.	20,172			Ps.	16,880
Adjustments to reconcile income before taxes:
Non-cash operating expenses			17				218				(8	)
Unrealized gain on marketable securities			—				(2	)			(4	)
Share of the profit of associates and joint ventures accounted for using the equity method, net of taxes			(14	)			(180	)			(86	)
Depreciation			392				5,078				3,850
Amortization			47				614				369
(Gain) loss on disposal of long-lived assets			(8	)			(99	)			35
Write-off of long-lived assets			1				14				625
Interest income			(33	)			(424	)			(617	)
Interest expense			139				1,796				1,609
Foreign exchange gain, net			(21	)			(272	)			(61	)
Non-cash movements in post-employment and other non-current employee benefits obligations			44				571				118
Gain on monetary position, net			—				—				(61	)
Market value loss on financial instruments			11				138				1
(Increase) decrease:
Accounts receivable and other current assets			(119	)			(1,545	)			(2,272	)
Other current financial assets			(94	)			(1,218	)			(575	)
Inventories			(56	)			(731	)			(1,828	)
Increase (decrease):
Suppliers and other accounts payable			403				5,231				850
Other liabilities			(27	)			(346	)			(224	)
Employee benefits paid			(7	)			(88	)			(143	)
Income taxes paid			(407	)			(5,277	)			(4,565	)
Net cash flows from operating activities			1,824				23,650				13,893
Investing activities:
Acquisition of Grupo Tampico, net of cash acquired (Note 4)			—				—				(2,414	)
Acquisition of Grupo CIMSA, net of cash acquired (Note 4)			—				—				(1,912	)
Acquisitions of Grupo Fomento Queretano, net of cash acquired (Note 4)			(86	)			(1,114	)			—
Purchase of marketable securities			—				—				(326	)
Proceeds from the sale of marketable securities			20				273				—
Interest received			33				424				639
Acquisitions of long-lived assets			(751	)			(9,741	)			(6,855	)
Proceeds from the sale of long-lived assets			23				293				375
Acquisition of intangible assets			(18	)			(235	)			(944	)
Other non-current assets			(32	)			(420	)			(140	)
Investment in shares			(37	)			(469	)			(620	)
Net cash flows used in investing activities			(848	)			(10,989	)			(12,197	)
Financing activities:
Proceeds from borrowings			1,267				16,429				6,934
Repayment of borrowings			(653	)			(8,464	)			(2,733	)
Interest paid			(131	)			(1,694	)			(1,580	)
Dividends paid			(442	)			(5,734	)			(4,366	)
Acquisition of non-controlling interests			—				(6	)			(115	)
Other financing activities			(21	)			(270	)			(1,175	)
Payments under finance leases			(15	)			(201	)			(37	)
Net cash flows from / (used in) financing activities			5				60				(3,072	)
Net increase (decrease) in cash and cash equivalents			981				12,721				(1,376	)
Initial balance of cash and cash equivalents			914				11,843				12,142
Effects of exchange rate changes and inflation effects on the balance sheet of cash held in foreign currencies			(104	)			(1,342	)			1,077
Ending balance of cash and cash equivalents		$	1,791			Ps.	23,222			Ps.	11,843

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

The accompanying notes are an integral part of these consolidated statements of cash flow.

F-6

NOTES TO THE CONSOLIDATED STATEMENTS

As of December 31, 2012, 2011 and as of January 1, 2011 ( Date of transition to IFRS )

Amounts expressed in millions of U.S. dollars ( $ ) and in millions of Mexican pesos ( Ps.)

note 1. Activities of the Company

Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola FEMSA” or “the Company”) is a Mexican corporation, mainly engaged in acquiring, holding and transferring all types of bonds, capital stock, shares and marketable securities.

Coca-Cola FEMSA is indirectly owned by Fomento Economico Mexicano, S.A.B. de C.V. (“FEMSA”), which holds 48.9% of its capital stock and 63% of its voting shares and The Coca-Cola Company (“TCCC”), which indirectly owns 28.7% of its capital stock and 37% of its voting shares. The remaining 22.4% of Coca-Cola FEMSA’s shares trade on the Bolsa Mexicana de Valores, S.A.B. de C.V. (BMV: KOFL) and the New York Stock Exchange, Inc. (NYSE: KOF). The address of its registered office and principal place of business is Mario Pani No. 100 Col. Santa Fe Cuajimalpa Delegacion Cuajimalpa de Morelos, Mexico D.F. 05348, Mexico.

Coca-Cola FEMSA and its subsidiaries (the “Company”), as an economic unit, are engaged in the production, distribution and marketing of certain Coca-Cola trademark beverages in Mexico, Central America (Guatemala, Nicaragua, Costa Rica and Panama), Colombia, Venezuela, Brazil and Argentina.

As of December 31, 2012 and 2011 the most significant subsidiaries over which the Company exercises control are:

Company		Activity		Country		Ownership percentage 2012				Ownership percentage 2011
Propimex, S. de R.L. de C.V.		Manufacturing and distribution		Mexico			100.00	%			100.00	%
Controladora Interamericana de Bebidas, S. de R.L. de C.V.		Holding		Mexico			100.00	%			100.00	%
Spal Industria Brasileira de Bebidas, S.A.		Manufacturing and distribution		Brazil			98.25	%			97.93	%
Coca-Cola Femsa de Venezuela, S.A.		Manufacturing and distribution		Venezuela			100.00	%			100.00	%
Industria Nacional de Gaseosas, S.A.		Manufacturing and distribution		Colombia			100.00	%			100.00	%

note 2. Basis of Preparation

2.1 Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements of the Company for the year ended December 31, 2012 are the first annual financial statements that comply with IFRS and where IFRS 1, First Time Adoption of International Financial Reporting Standards, has been applied.

The Company’s transition date to IFRS is January 1, 2011 and management prepared the opening balance sheet under IFRS as of that date. For periods up to and including the year ended December 31, 2011, the Company prepared its consolidated financial information under Mexican Financial Reporting Standards (“Mexican FRS”). The differences in the requirements for recognition, measurement and presentation between IFRS and Mexican FRS were reconciled for purposes of the Company’s equity at the date of transition and at December 31, 2011, and for purposes of consolidated comprehensive income for the year ended December 31, 2011. Reconciliations and explanations of how the transition to IFRS has affected the consolidated financial position, financial performance and cash flows of the Company are provided in Note 27.

The Company’s consolidated financial statements and notes were authorized for issuance by the Company’s Chief Executive Officer Carlos Salazar Lomelín and Chief Financial and Administrative Officer Héctor Treviño Gutiérrez on February 22, 2013. Those consolidated financial statements and notes were then approved by the Company’s Board of Directors on February 26, 2013 and by the Shareholders on March 5, 2013. The consolidated financial statements included in the Company’s 2012 Form 20-F were the same as those previously approved, although they were supplemented for subsidiary guarantor financial statement disclosures. Those consolidated financial statements were approved for issuance in the Company’s annual report on Form 20-F by the Company’s Chief Executive Officer and Chief Financial Officer on March 14, 2013, and subsequent events have been considered through that date (See Note 30).

The accompanying consolidated financial statements are the same as those included in the Company’s 2012 Form 20-F, except that Note 29 has been updated to reflect additional subsidiary guarantor disclosures in connection with a filing with the SEC.

F-7

2.2 Basis of measurement and presentation

The consolidated financial statements have been prepared on the historical cost basis except for the following:

• Available-for-sale investments

• Derivative financial instruments

• Trust assets of post-employment and other non-current employee benefit plans

The financial statements of subsidiaries whose functional currency is the currency of a hyperinflationary economy are stated in terms of the measuring unit current at the end of the reporting period.

2.2.1 Presentation of consolidated income statement

The Company classifies its costs and expenses by function in the consolidated income statement, in order to conform to the industry practices where the Company operates.

2.2.2 Presentation of consolidated statements of cash flows.

The Company’s consolidated statement of cash flows is presented using the indirect method.

2.2.3 Convenience translation to U.S. dollars ($)

The consolidated financial statements are stated in millions of Mexican pesos (“Ps.”) and rounded to the nearest million unless stated otherwise. However, solely for the convenience of the readers, the consolidated balance sheet as of December 31, 2012, the consolidated statements of income, the consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended December 31, 2012 were converted into U.S. dollars at the exchange rate of 12.9635 pesos per U.S. dollar as published by the Federal Reserve Bank of New York as of that date. This arithmetic conversion should not be construed as representations that the amounts expressed in Mexican pesos may be converted into U.S. dollars at that or any other exchange rate.

2.3 Critical accounting judgments and estimates

In the application of the Company’s accounting policies, which are described in Note 3, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

2.3.1 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

2.3.1.1 Impairment of indefinite lived intangible assets, goodwill and other depreciable long-lived assets

Intangible assets with indefinite lives as well as goodwill are subject to annual impairment tests. An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in arm’s length transactions of similar assets or observable market prices less incremental costs for disposing of the asset. In order to determine whether such assets are impaired, the Company initially calculates an estimation of the value in use of the cash-generating units to which such assets have been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The Company reviews annually the carrying value of our intangible assets with indefinite lives and goodwill for impairment based on recognized valuation techniques. While the Company believes that its estimates are reasonable, different assumptions regarding such estimates could materially affect its evaluations. Impairment losses are recognized in current earnings in the period the related impairment is determined.

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable

F-8

amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. The key assumptions used to determine the recoverable amount for the Company’s CGUs, including a sensitivity analysis, are further explained in Notes 3.15 and 12.

2.3.1.2 Useful lives of property, plant and equipment and intangible assets with defined useful lives

Property, plant and equipment, including returnable bottles as they are expected to provide benefits over a period of more than one year, as well as intangible assets with defined useful lives are depreciated/amortized over their estimated useful lives. The Company bases it estimates on the experience of its technical personnel as well as based on its experience in the industry for similar assets, see Notes 3.11, 11 and 12

2.3.1.3 Post-employment and other non-current employee benefits

The Company annually evaluates the reasonableness of the assumptions used in its post-employment and other non-current employee benefit computations. Information about such assumptions is described in Note 16.

2.3.1.4 Income taxes

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. For its Mexican subsidiaries, the Company recognizes deferred income taxes, based on its financial projections depending on whether it expects to incur the regular income tax (“ISR”) or the business flat tax (“IETU”) in the future. Additionally, the Company regularly reviews its deferred tax assets for recoverability, and records a deferred tax asset based on its judgment regarding the probability of historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences, see Note 24.

2.3.1.5 Tax, labor and legal contingencies and provisions

The Company is subject to various claims and contingencies related to tax, labor and legal proceedings as described in Note 25. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management periodically assesses the probability of loss for such contingencies and accrues a provision and/ or discloses the relevant circumstances, as appropriate. If the potential loss of any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a provision for the estimated loss.

2.3.1.6 Valuation of financial instruments

The Company is required to measure all derivative financial instruments at fair value.

The fair values of derivative financial instruments are determined considering quoted prices in recognized markets. If such instruments are not traded, fair value is determined by applying techniques based upon technical models supported by sufficient reliable and verifiable data, recognized in the financial sector. The Company bases its forward price curves upon market price quotations. Management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments, see Note 20.

2.3.1.7 Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities assumed by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:

• deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12, Income Taxes and IAS 19, Employee Benefits, respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Company entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2, Share- based Payment at the acquisition date, see Note 3.23; and

• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

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Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the Company previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the Company previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

For each business combination, the Company elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

2.3.1.8 Investments in associates

If the Company holds, directly or indirectly, 20 per cent or more of the voting power of the investee, it is presumed that it has significant influence, unless it can be clearly demonstrated that this is not the case. If the Company holds, directly or indirectly, less than 20 per cent of the voting power of the investee, it is presumed that the Company does not have significant influence, unless such influence can be clearly demonstrated. Decisions regarding the propriety of utilizing the equity method of accounting for a less than 20 per cent-owned corporate investee requires a careful evaluation of voting rights and their impact on the Company’s ability to exercise significant influence. Management considers the existence of the following circumstances, which may indicate that the Company is in a position to exercise significant influence over a less than 20 per cent-owned corporate investee:

• representation on the board of directors or equivalent governing body of the investee;

• participation in policy-making processes, including participation in decisions about dividends or other distributions;

• material transactions between the Company and the investee;

• interchange of managerial personnel; or

• provision of essential technical information.

Management also considers the existence and effect of potential voting rights that are currently exercisable or currently convertible should also be considered when assessing whether the Company has significant influence.

In addition, the Company evaluates the indicators that provide evidence of significant influence:

• the Company’s extent of ownership is significant relative to other shareholdings (i.e. a lack of concentration of other shareholders);

• the Company’s significant shareholders, its parent, fellow subsidiaries, or officers of the Company, hold additional investment in the investee; and

• the Company is a part of significant investee committees, such as the executive committee or the finance committee.

note 3. Significant Accounting Policies

3.1 Basis of consolidation

The consolidated financial statements incorporate the financial statements of Coca-Cola FEMSA and subsidiaries controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. Total consolidated net income and comprehensive income of subsidiaries is attributed to the controlling interest and to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Company.

All intercompany transactions, balances, income and expenses have been eliminated in the consolidated financial statements.

Note 1 to the consolidated financial statements lists significant subsidiaries that are controlled by the Company as of December 31, 2012 and 2011.

3.1.1 Acquisitions of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are measured at carrying amount and reflected in equity, as part of additional paid in capital.

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3.1.2 Loss of control

Upon the loss of control, the Company derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in consolidated net income. If the Company retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity method or as a financial asset depending on the level of influence retained.

3.2 Business combinations

Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred to the Company. In assessing control, the Company takes into consideration potential voting rights that are currently exercisable.

The Company measures goodwill at the acquisition date as the fair value of the consideration transferred plus the fair value of any previously-held equity interest in the acquiree and the recognized amount of any non-controlling interests in the acquiree (if any), less the net recognized amount of the identifiable assets acquired and liabilities assumed. If after reassessment, the excess is negative, a bargain purchase gain is recognized in consolidated net income at the time of the acquisition.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognized at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, if after reassessment subsequent changes to the fair value of the contingent considerations are recognized in consolidated net income.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete, and discloses that its allocation is preliminary in nature. Those provisional amounts are adjusted during the measurement period (not greater than 12 months), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

3.3 Foreign currencies and consolidation of foreign subsidiaries, investments in associates and joint ventures

In preparing the financial statements of each individual subsidiary, investment in associates and joint venture, transactions in currencies other than the individual entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not remeasured.

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for:

• The variations in the net investment in foreign subsidiaries generated by exchange rate fluctuation are included in the cumulative translation adjustment, which is recorded in equity as part of the cumulative translation adjustment within the cumulative other comprehensive income.

• Intercompany financing balances with foreign subsidiaries that are considered as non-current investments, since there is no plan to pay such financing in the foreseeable future. Monetary position and exchange rate fluctuation regarding this financing is included in the cumulative translation adjustment, which is recorded in equity as part of the cumulative translation adjustment within the cumulative other comprehensive income.

• Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

For incorporation into the Company’s consolidated financial statements, each foreign subsidiary, associates or joint venture’s individual financial statements are translated into Mexican pesos, as described as follows:

• For hyperinflationary economic environments, the inflation effects of the origin country are recognized, and subsequently translated into Mexican pesos using the year-end exchange rate for the consolidated statements of financial position and consolidated income statement and comprehensive income; and

• For non-inflationary economic environments, assets and liabilities are translated into Mexican pesos using the year-end exchange rate, equity is translated into Mexican pesos using the historical exchange rate, and the income statement and comprehensive income is translated using the exchange rate at the date of each transaction. The Company uses the average exchange rate of each month only if the exchange rate does not fluctuate significantly.

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				Exchange Rates of Local Currencies Translated to Mexican Pesos
																Exchange Rate as of
				Average Exchange Rate for								December 31,				December 31,				January 1,
Country or Zone		Functional / Currency		2012				2011				2012				2011				2011 (1)
Mexico		Mexican peso		Ps.	1.00			Ps	1.00			Ps.	1.00			Ps.	1.00			Ps.	1.00
Guatemala		Quetzal			1.68				1.59				1.65				1.79				1.54
Costa Rica		Colon			0.03				0.02				0.03				0.03				0.02
Panama		U.S. dollar			13.17				12.43				13.01				13.98				12.36
Colombia		Colombian peso			0.01				0.01				0.01				0.01				0.01
Nicaragua		Cordoba			0.56				0.55				0.54				0.61				0.56
Argentina		Argentine peso			2.90				3.01				2.65				3.25				3.11
Venezuela		Bolivar			3.06				2.89				3.03				3.25				2. 87
Brazil		Reais			6.76				7.42				6.37				7.45				7.42

⁽¹⁾  December 31, 2010 exchange rates used for conversion of financial information as of the opening balance sheet on January 1, 2011.

The Company has operated under exchange controls in Venezuela since 2003 that affect its ability to remit dividends abroad or make payments other than in local currencies and that may increase the real price of raw materials purchased in local currency. In January 2010, the Venezuelan government announced a devaluation of its official exchange rate to 4.30 bolivars to one U.S. dollar.

The translation of the financial statements of the Company’s Venezuelan subsidiary is performed using the exchange rate of 4.30 Bolivars per U.S. dollar (See also Note 30).

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in other comprehensive income in respect of that operation attributable to the owners of the Company are recognized in the consolidated income statement.

In addition, in relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Foreign exchange differences arising are recognized in equity as part of the cumulative translation adjustment.

The translation of assets and liabilities denominated in foreign currencies into Mexican pesos is for consolidation purposes and does not indicate that the Company could realize or settle the reported value of those assets and liabilities in Mexican pesos. Additionally, this does not indicate that the Company could return or distribute the reported Mexican peso value equity to its shareholders.

3.4 Recognition of the effects of inflation in countries with hyperinflationary economic environments

The Company recognizes the effects of inflation on the financial information of its Venezuelan subsidiary that operates in hyperinflationary economic environments (when cumulative inflation of the three preceding years is approaching, or exceeds, 100% or more in addition to other qualitative factors), which consists of:

• Using inflation factors to restate non-monetary assets, such as inventories, property, plant and equipment, intangible assets, including related costs and expenses when such assets are consumed or depreciated.

• Applying the appropriate inflation factors to restate capital stock, additional paid-in capital, net income, retained earnings and items of other comprehensive income by the necessary amount to maintain the purchasing power equivalent in the currency of the corresponding hyperinflationary country on the dates such capital was contributed or income was generated up to the date of these consolidated financial statements are presented; and

• Including the monetary position gain or loss in consolidated net income.

The Company restates the financial information of its subsidiaries that operate in hyperinflationary economic environments using the consumer price index of each country.

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As of December 31, 2012, 2011, and January 1, 2011, the operations of the Company are classified as follows:

Country		Cumulative Inflation 2010-2012				Type of Economy		Cumulative Inflation 2009-2011				Type of Economy		Cumulative Inflation 2008-2010				Type of Economy
Mexico			12.3	%		Non-hyperinflationary			12.3	%		Non-hyperinflationary			15.2	%		Non-hyperinflationary
Guatemala			15.8	%		Non-hyperinflationary			11.6	%		Non-hyperinflationary			15.0	%		Non-hyperinflationary
Costa Rica			15.9	%		Non-hyperinflationary			15.3	%		Non-hyperinflationary			25.4	%		Non-hyperinflationary
Panama			16.7	%		Non-hyperinflationary			13.7	%		Non-hyperinflationary			14.1	%		Non-hyperinflationary
Colombia			9.6	%		Non-hyperinflationary			9.1	%		Non-hyperinflationary			13.3	%		Non-hyperinflationary
Nicaragua			25.7	%		Non-hyperinflationary			18.6	%		Non-hyperinflationary			25.4	%		Non-hyperinflationary
Argentina			34.6	%		Non-hyperinflationary			30.8	%		Non-hyperinflationary			28.1	%		Non-hyperinflationary
Venezuela			94.8	%		Hyperinflationary			102.9	%		Hyperinflationary			108.2	%		Hyperinflationary
Brazil			19.4	%		Non-hyperinflationary			17.4	%		Non-hyperinflationary			17.4	%		Non-hyperinflationary

While the Venezuelan economy’s cumulative inflation rate for the period 2010-2012 was less than 100%, it was approaching 100%, and qualitative factors support its continued classification as a hyper-inflationary economy.

3.5 Cash and cash equivalents

Cash is measured at nominal value and consists of non-interest bearing bank deposits. Cash equivalents consist principally of short-term bank deposits and fixed rate investments, both with maturities of three months or less at the acquisition date and are recorded at acquisition cost plus interest income not yet received, which is similar to market prices.

The Company also maintains restricted cash held as collateral to meet certain contractual obligations (see Note 20). Restricted cash is presented within other current financial assets given that the restrictions are short-term in nature.

3.6 Financial assets.

Financial assets are classified into the following specified categories: “fair value through profit or loss (FVTPL)”, “held-to-maturity investments”, “available-for-sale” and “loans and receivables”. The classification depends on the nature and purpose of holding the financial assets and is determined at the time of initial recognition.

When a financial asset or financial liability is recognized initially, the Company measures it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

The Company’s financial assets include cash and cash equivalents, marketable securities, loans and receivables, derivative financial instruments and other financial assets.

3.6.1 Effective interest rate method

The effective interest rate method is a method of calculating the amortized cost of loans and receivables and other financial assets (designated as held to maturity) and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

3.6.2 Marketable securities

Marketable securities consist of debt securities and bank deposits with maturities of more than three months at the acquisition date. Management determines the appropriate classification of investments at the time of purchase and assesses such designation as of each reporting date, see Note 6.

3.6.2.1 Available-for-sale marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in other comprehensive income. Interest and dividends on investments classified as available-for-sale are included in interest income. The fair values of the investments are readily available based on quoted market prices. The exchange effects of securities available for sale are recognized in the consolidated income statement in the period in which they arise.

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3.6.2.2 Held-to maturity marketable securities are those that the Company has the positive intent and ability to hold to maturity, and are carried at acquisition cost which includes any cost of purchase and premium or discount related to the investment which is amortized over the life of the investment based on its outstanding balance utilizing the effective interest method less any impairment. Interest and dividends on investments classified as held-to maturity are included in interest income. As of December 31, 2012, December 31, 2011 and January 1, 2011 there were no investments classified as held to maturity.

3.6.3 Loans and receivables

Loans and receivables are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. Loans and receivables with a relevant period (including trade and other receivables) are measured at amortized cost using the effective interest method, less any impairment.

Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. For the years ended December 31, 2012 and 2011 the interest income recognized in the interest income line item within the consolidated statements of income is Ps. 58 and Ps. 40, respectively.

3.6.4 Other financial assets

Other financial assets are non current accounts receivable and derivative financial instruments. Other financial assets with a relevant period are measured at amortized cost using the effective interest method, less any impairment.

3.6.5 Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial assets that can be reliably estimated.

Evidence of impairment may include indicators as follows:

• Significant financial difficulty of the issuer or counterparty; or

• Default or delinquent in interest or principal payments; or

• It becoming probable that the borrower will enter bankruptcy or financial re-organization; or

• The disappearance of an active market for that financial asset because of financial difficulties.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance for doubtful accounts. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in consolidated net income.

3.6.6 Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

• The rights to receive cash flows from the financial asset have expired, or

• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

3.6.7 Offsetting of financial instruments

Financial assets are required to be offset against financial liabilities and the net amount reported in the consolidated statement of financial position if, and only when the Company:

• Currently has an enforceable legal right to offset the recognized amounts, and

• Intends to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

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3.7 Derivative financial instruments

The Company is exposed to different risks related to cash flows, liquidity, market and third party credit. As a result, the Company contracts different derivative financial instruments in order to reduce its exposure to the risk of exchange rate fluctuations between the Mexican peso and other currencies, and interest rate fluctuations associated with its borrowings denominated in foreign currencies and the exposure to the risk of fluctuation in the costs of certain raw materials.

The Company values and records all derivative financial instruments and hedging activities, in the consolidated statement of financial position as either an asset or liability measured at fair value, considering quoted prices in recognized markets. If such instruments are not traded in a formal market, fair value is determined by applying techniques based upon technical models supported by sufficient, reliable and verifiable market data, recognized in the financial sector. Changes in the fair value of derivative financial instruments are recorded each year in current earnings or as a component of cumulative other comprehensive income based on the item being hedged and the effectiveness of the hedge.

3.7.1 Hedge accounting

The Company designates certain hedging instruments, which include derivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

3.7.2 Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading valuation of the effective portion of derivative financial instruments. The gain or loss relating to the ineffective portion is recognized immediately in consolidated net income, and is included in the market value (gain) loss on financial instruments line item within the consolidated statements of income.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to consolidated net income in the periods when the hedged item is recognized in consolidated net income, in the same line of the consolidated statement of income as the recognized hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognized in other comprehensive income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in cumulative other comprehensive income in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in consolidated net income. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in consolidated net income.

3.8 Inventories and cost of goods sold

Inventories are measured at the lower of cost and net realizable value. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Inventories represent the acquisition or production cost which is incurred when purchasing or producing a product, and are based on the weighted average cost formula.

Cost of goods sold is based on average cost of the inventories at the time of sale. Cost of goods sold includes expenses related to the purchase of raw materials used in the production process, as well as labor costs (wages and other benefits), depreciation of production facilities, equipment and other costs, including fuel, electricity, equipment maintenance, inspection and plant transfer costs.

3.9 Other current assets

Other current assets, which will be realized within a period of less than one year from the reporting date, are comprised of prepaid assets and agreements with customers.

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Prepaid assets principally consist of advances to suppliers of raw materials, advertising, promotional, leasing and insurance expenses, and are recognized as other assets at the time of the cash disbursement, and are unrecognized in the consolidated statement of financial position or consolidated income statement caption when the risks and rewards of the related goods have been transferred to the Company or services have been received, respectively.

The Company has prepaid advertising costs which consist of television and radio advertising airtime paid in advance. These expenses are generally amortized over the period based on the transmission of the television and radio spots. The related production costs are recognized in consolidated net income as incurred.

The Company has agreements with customers for the right to sell and promote the Company’s products over a certain period. The majority of these agreements have terms of more than one year, and the related costs are amortized using the straight-line method over the term of the contract, with amortization presented as a reduction of net sales. During the years ended December 31, 2012 and 2011, such amortization aggregated to Ps. 970 and Ps. 793, respectively. The costs of agreements with terms of less than one year recorded as a reduction in net sales when incurred.

3.10 Investments in associates and joint ventures

Investments in associates are those entities in which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but not control, over the financial and operating policies.

Investment in associate is accounted for using the equity method and initial recognition comprises the investment’s purchase price and any directly attributable expenditure necessary to acquire it.

The consolidated financial statements include the Company’s share of the consolidated net income and other comprehensive income, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases.

When the Company’s share of losses exceeds the carrying amount of the associate, including any non-current investments, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has a legal or constructive obligation or has made payments on behalf of the associate.

Goodwill identified at the acquisition date is presented as part of the investment in shares of the associate in the consolidated statement of financial position. Any goodwill arising on the acquisition of the Company’s interest in associate is accounted for in accordance with the Company’s accounting policy for goodwill arising in a business combination, see Note 3.2.

After application of the equity method, the Company determines whether it is necessary to recognize an additional impairment loss on its investment in its associate. For investments in shares, the Company determines at each reporting date whether there is any objective evidence that the investment in shares is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the share of the profit or loss of associates and joint ventures accounted for using the equity method in the consolidated statements of income.

3.10.1 Interest in joint ventures

The Company has interests in joint ventures whose are jointly controlled entities, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the entity. The arrangement requires unanimous agreement for financial and operating decisions among the venturers.

The Company recognizes its interest in the joint ventures using the equity method.

The financial statements of the joint ventures are prepared for the same reporting period as the Company. Adjustments are made where necessary to bring the accounting policies in line with those of the Company.

3.11 Property, plant and equipment

Property, plant and equipment are initially recorded at their cost of acquisition and/or construction and are presented net of accumulated depreciation and/or accumulated impairment losses, if any. The borrowing costs related to the acquisition or construction of qualifying asset is capitalized as part of the cost of that asset.

Major maintenance costs are capitalized as part of total acquisition cost. Routine maintenance and repair costs are expensed as incurred.

Investments in progress consist of long-lived assets not yet in service, in other words, that are not yet used for the purpose that they were bought, built or developed. The Company expects to complete those investments during the following 12 months.

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Depreciation is computed using the straight-line method over acquisition cost. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted and depreciated for as separate items (major components) of property, plant and equipment. The Company estimates depreciation rates, considering the estimated useful lives of the assets.

The estimated useful lives of the Company’s principal assets are as follows:

		Years
Buildings		40 – 50
Machinery and equipment		10 – 20
Distribution equipment		7 – 15
Refrigeration equipment		5 – 7
Returnable bottles		1.5 – 4
Other equipment		3 – 10

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds (if any) and the carrying amount of the asset and is recognized in consolidated net income.

Returnable and non-returnable bottles:

The Company has two types of bottles: returnable and non-returnable.

• Non returnable: Are recorded in consolidated net income at the time of product sale.

• Returnable: Are classified as long-lived assets as a component of property, plant and equipment. Returnable bottles are recorded at acquisition cost; for countries with hyperinflationary economies, restated according to IAS 29. Depreciation of returnable bottles is computed using the straight-line method considering their estimated useful lives.

There are two types of returnable bottles:

• Those that are in the Company’s control within its facilities, plants and distribution centers; and

• Those that have been placed in the hands of customers, but still belong to the Company.

Returnable bottles that have been placed in the hands of customers are subject to an agreement with a retailer pursuant to which the Company retains ownership. These bottles are monitored by sales personnel during periodic visits to retailers and the Company has the right to charge any breakage identified to the retailer. Bottles that are not subject to such agreements are expensed when placed in the hands of retailers.

The Company’s returnable bottles in the market and for which a deposit from customers has been received are depreciated according to their estimated useful lives.

3.12 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs may include:

• interest expense;

• finance charges in respect of finance leases; and

• exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in consolidated net income in the period in which they are incurred.

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3.13 Intangible assets

Intangible assets are identifiable non monetary assets without physical substance and represent payments whose benefits will be received in future years. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite, in accordance with the period over which the Company expects to receive the benefits.

Intangible assets with finite useful lives are amortized and mainly consist of information technology and management system costs incurred during the development stage which are currently in use. Such amounts are capitalized and then amortized using the straight-line method over their expected useful lives. Expenses that do not fulfill the requirements for capitalization are expensed as incurred.

Amortized intangible assets, such as finite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable through its expected future cash flows.

Intangible assets with an indefinite life are not amortized and are subject to impairment tests on an annual basis as well as whenever certain circumstances indicate that the carrying amount of those intangible assets exceeds their recoverable value.

The Company’s intangible assets with an indefinite life mainly consist of rights to produce and distribute Coca-Cola trademark products in the Company’s territories. These rights are contained in agreements that are standard contracts that The Coca-Cola Company has with its bottlers.

In Mexico, the Company has eight bottler agreements for Coca-Cola FEMSA’s territories in Mexico; two expire in June 2013, two expire in May 2015 and additionally four contracts that arose from the merger with Grupo Tampico, CIMSA and Grupo Fomento Queretano, expire in September 2014, April and July 2016 and August 2013, respectively. The bottler agreement for Argentina expires in September 2014, for Brazil expires in April 2014, in Colombia in June 2014, in Venezuela in August 2016, in Guatemala in March 2015, in Costa Rica in September 2017, in Nicaragua in May 2016 and in Panama in November 2014. All of the Company’s bottler agreements are renewable for ten-year terms. These bottler agreements are automatically renewable for ten-year term, subject to the right of either party to give prior notice that it does not wish to renew the agreement. In addition, these agreements generally may be terminated in the case of material breach. Termination would prevent the Company from selling Coca-Cola trademark beverages in the affected territory and would have an adverse effect on the Company’s business, financial conditions, results from operations and prospects.

3.14 Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

3.15 Impairment of non financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest CGUs for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

For goodwill and other indefinite lived intangible assets, the Company tests for impairment on an annual basis and whenever certain circumstances indicate that the carrying amount of the cash generating unit might exceed its implied fair value.

F-18

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in consolidated net income.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in consolidated net income. Impairment losses related to goodwill are not reversible.

As of December, 31 2012, 2011 and January 1 2011, there was no impairment recognized in non financial assets.

3.16 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in consolidated net income, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Leasehold improvements, on operating leases are amortized using the straight-line method over the shorter of either the useful life of the assets or the related lease term.

3.17 Financial liabilities and equity instruments

3.17.1 Classification as debt or equity

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

3.17.2 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

3.17.3 Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at FVTPL, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition.

F-19

All financial liabilities are recognized initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.

The Company financial liabilities include trade and other payables, loans and borrowings, and derivative financial instruments, see Note 3.7.

Subsequent measurement

The measurement of financial liabilities depends on their classification as described below:

3.17.4 Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated statements of income when the liabilities are derecognized as well as through the effective interest method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest method. The effective interest method amortization is included in interest expense in the consolidated statements of income.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statements of income.

3.18 Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

The Company recognizes a provision for a loss contingency when it is probable (i.e. the probability that the event will occur is greater than the probability that it will not) that certain effects related to past events, would materialize and can be reasonably quantified. These events and their financial impact are also disclosed as loss contingencies in the consolidated financial statements when the risk of loss is deemed to be other than remote. The Company does not recognize an asset for a gain contingency until the gain is realized, see Note 25.

Restructuring provisions are recognized only when the recognition criteria for provisions are fulfilled. The Company has a constructive obligation when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline. Furthermore, the employees affected must have been notified of the plans main features.

3.19 Post-employment and other non-current employee benefits

Post-employment and other non-current employee benefits, which are considered to be monetary items, include obligations for pension and post-employment plans and seniority premiums, all based on actuarial calculations, using the projected unit credit method.

F-20

In Mexico and Brazil, the economic benefits and retirement pensions are granted to employees with 10 years of service and minimum age of 60 and 65, respectively. In accordance with Mexican Labor Law, the Company provides seniority premium benefits to its employees under certain circumstances. These benefits consist of a one-time payment equivalent to 12 days wages for each year of service (at the employee’s most recent salary, but not to exceed twice the legal minimum wage), payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily prior to the vesting of their seniority premium benefit.

For defined benefit retirement plans and other non-current employee benefits, such as the Company’s sponsored pension and retirement plans and seniority premiums, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. All remeasurements of the Company’s defined benefit obligation such as actuarial gains and losses are recognized directly in other comprehensive income (“OCI”). The Company presents service costs within cost of goods sold administrative and selling expenses in the consolidated statements of income. The Company presents net interest cost within interest expense in the consolidated statements of income. The projected benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation as of the end of each reporting period. Certain subsidiaries of the Company have established plan assets for the payment of pension benefits and seniority premiums through irrevocable trusts of which the employees are named as beneficiaries, which serve to increase the funded status of such plans’ related obligations.

Costs related to compensated absences, such as vacations and vacation premiums, are recognized on an accrual basis. Cost for mandatory severance benefits are recorded as incurred.

The Company recognizes a liability and expense for termination benefits at the earlier of the following dates:

a. When it can no longer withdraw the offer of those benefits; and

b. When it recognizes costs for a restructuring that is within the scope of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and involves the payment of termination benefits.

The Company is demonstrably committed to a termination when, and only when, the entity has a detailed formal plan for the termination and is without realistic possibility of withdrawal.

A settlement occurs when an employer enters into a transaction that eliminates all further legal of constructive obligations for part or all of the benefits provided under a defined benefit plan. A curtailment arises from an isolated event such as closing of a plant, discontinuance of an operation or termination or suspension of a plan. Gains or losses on the settlement or curtailment of a defined benefit plan are recognized when the settlement or curtailment occurs.

3.20 Revenue recognition

Sales of products are recognized as revenue upon delivery to the customer, and once all the following conditions are satisfied:

• The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

• The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits associated with the transaction will flow to the Company; and

• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

All of the above conditions are typically met at the point in time that goods are delivered to the customer at the customers’ facilities. Net sales reflect units delivered at list prices reduced by promotional allowances, discounts and the amortization of the agreements with customers to obtain the rights to sell and promote the Company’s products.

During 2007 and 2008, the Company sold certain of its private label brands to The Coca-Cola Company. Because the Company has significant continuing involvement with these brands, proceeds received from The Coca-Cola Company were initially deferred and are being amortized against the related costs of future product sales over the estimated period of such sales. The balance of unearned revenues as of December 31, 2012 and 2011 and as of January 1, 2011 amounted to Ps. 98, Ps. 302 and Ps. 547, respectively. As of December 31, 2012 and 2011 and as of January 1, 2011, the current portions of such amounts presented within other current liabilities, amounted to Ps. 61, Ps. 197 and Ps. 276 at, respectively.

Rendering of services and other

Revenue arising from services of sales of waste material and packing of raw materials are recognized in the other operating income caption in the consolidated income statement.

F-21

The Company recognized these transactions as revenues in accordance with the requirements established in the IAS 18, delivery of goods and rendering of services, which are:

a) The amount of revenue can be measured reliably;

b) It is probable that the economic benefits associated with the transaction will flow to the entity;

c) The stage of completion of the transaction at the end of the reporting period can be measured reliably; and d) The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Interest income

Revenue arising from the use by others of entity assets yielding interest is recognized once all the following conditions are satisfied:

• It is probable that the economic benefits associated with the transaction will flow to the entity; and

• The amount of the revenue can be measured reliably.

For all financial instruments measured at amortized cost and interest bearing financial assets classified as available-for-sale, interest income or expense is recorded using the effective interest rate (“EIR”), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. The related Interest income is included in the consolidated statements of income.

3.21 Administrative and selling expenses

Administrative expenses include labor costs (salaries and other benefits, including employee profit sharing (“PTU”) of employees not directly involved in the sale of the Company’s products, as well as professional service fees, the depreciation of office facilities, amortization of capitalized information technology system implementation costs and any other similar costs.

Selling expenses include:

• Distribution: labor costs (salaries and other related benefits), outbound freight costs, warehousing costs of finished products, write off of returnable bottles in the distribution process, depreciation and maintenance of trucks and other distribution facilities and equipment. For the years ended December 31, 2012 and 2011, these distribution costs amounted to Ps. 16,839 and Ps. 14,967, respectively;

• Sales: labor costs (salaries and other benefits including PTU) and sales commissions paid to sales personnel;

• Marketing: labor costs (salaries and other benefits), promotional expenses and advertising costs.

PTU is paid by the Company’s Mexican and Venezuelan subsidiaries to its eligible employees. In Mexico, employee profit sharing is computed at the rate of 10% of the individual company taxable income, except for considering cumulative dividends received from resident legal persons in Mexico, depreciation of historical rather restated values, foreign exchange gains and losses, which are not included until the asset is disposed of or the liability is due and other effects of inflation are also excluded. In Venezuela, employee profit sharing is computed at a rate equivalent to 15% of after tax income, and it is no more than four months of salary.

3.22 Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes are charged to consolidated net income as they are incurred, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.

3.22.1 Current income taxes

Income taxes are recorded in the results of the year they are incurred.

3.22.2 Deferred income taxes

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized and if any, future benefits from tax loss carry forwards and certain tax credits. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

F-22

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred income taxes are classified as a non-current asset or liability, regardless of when the temporary differences are expected to reverse.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3.23 Share-based payments transactions

Senior executives of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments. The equity instruments are granted and then held by a trust controlled by FEMSA. They are accounted for as equity settled transactions. The award of equity instruments is granted to a fixed value.

Share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the share-based payments is expensed and recognized based on the graded vesting method over the vesting period.

3.24 Earnings per share

The Company presents basic earnings per share (EPS) data for its shares. The Company does not have potentially dilutive shares and therefore its basic earnings per share is equivalent to its diluted earnings per share. Basic EPS is calculated by dividing the net income attributable to controlling interest by the weighted average number of shares outstanding during the period adjusted for the weighted average of own shares purchased in the year.

3.25 Issuance of-stock

The Company recognizes the issuance of own stock as an equity transaction. The difference between the book value of the shares issued and the amount contributed by the non-controlling interest holder or third party is recorded as additional paid-in capital.

note 4. Mergers, Acquisitions and Disposals

4.1 Mergers and Acquisitions

The Company made certain business mergers and acquisitions that were recorded using the acquisition method of accounting. The results of the acquired operations have been included in the consolidated financial statements since the date on which the Company obtained control of the business, as disclosed below. Therefore, the consolidated statements of income and the consolidated statements of financial position in the years of such acquisitions are not comparable with previous periods. The consolidated statements of cash flows for the years ended December 31, 2012 and 2011 show the merged and acquired operations net of the cash related to those mergers and acquisitions.

F-23

4.1.1 Merger with Grupo Fomento Queretano

On May 4, 2012, Coca-Cola FEMSA completed the merger of 100% of Grupo Fomento Queretano, S.A.P.I. (“Grupo Fomento Queretano”) a bottler of Coca-Cola trademark products in the state of Queretaro, Mexico. This acquisition was made so as to reinforce Coca-Cola FEMSA’s leadership position in Mexico and Latin America. The transaction involved the issuance of 45,090,375 shares of previously unissued Coca-Cola FEMSA L shares, along with the cash payment prior to closing of Ps. 1,221, in exchange for 100% share ownership of Grupo Fomento Queretano, which was accomplished through a merger. The total purchase price was Ps. 7,496 based on a share price of Ps. 139.22 per share on May 4, 2012. Transaction related costs of Ps. 12 were expensed by Coca-Cola FEMSA as incurred, and recorded as a component of administrative expenses in the accompanying consolidated statements of income. Grupo Fomento Queretano was included in operating results from May 2012.

The fair value of the Grupo Fomento Queretano’s net assets acquired is as follows:		2012
Total current assets, including cash acquired of Ps. 107		Ps.	445
Total non-current assets			2,123
Distribution rights			2,921
Total assets			5,489
Total liabilities			(598	)
Net assets acquired			4,891
Goodwill			2,605
Total consideration transferred		Ps.	7,496

The Company expects to recover the amount recorded as goodwill through synergies related to the available production capacity. Goodwill has been allocated to Coca-Cola FEMSA’s cash generating unit in Mexico.

Selected income statement information of Grupo Fomento Queretano for the period from May to December 31, 2012 is as follows:

Statement of income		2012
Total revenues		Ps.	2,293
Income before taxes			245
Net income			186

4.1.2 Acquisition of Grupo CIMSA

On December 9, 2011, Coca-Cola FEMSA completed the acquisition of 100% of Corporación de los Angeles, S.A. de C.V. (“Grupo CIMSA”), a bottler of Coca-Cola trademark products, which operates mainly in the states of Morelos and Mexico, as well as in parts of the states of Guerrero and Michoacan, Mexico. This acquisition was also made so as to reinforce the Coca-Cola FEMSA’s leadership position in Mexico and Latin America. The transaction involved the issuance of 75,423,728 shares of previously unissued Coca-Cola FEMSA L shares along with the cash payment prior to closing of Ps. 2,100 in exchange for 100% share ownership of Grupo CIMSA, which was accomplished through a merger. The total purchase price was Ps. 11,117 based on a share price of Ps. 119.55 per share on December 9, 2011. Transaction related costs of Ps. 24 were expensed by Coca-Cola FEMSA as incurred, and recorded as a component of administrative expenses in the accompanying consolidated statements of income. Grupo CIMSA was included in operating results from December 2011.

The fair value of Grupo CIMSA’s net assets acquired is as follows:

		2011 Preliminary				Fair Value Adjustments				2011 Final
Total current assets, including cash acquired of Ps. 188		Ps.	737			Ps.	(134	)		Ps.	603
Total non-current assets			2,802				253				3,055
Distribution rights			6,228				(42	)			6,186
Total assets			9,767				77				9,844
Total liabilities			(586	)			28				(558	)
Net assets acquired			9,181				105				9,286
Goodwill			1,936				(105	)			1,831
Total consideration transferred		Ps.	11,117			Ps.	—			Ps.	11,117

F-24

The Company expects to recover the amount recorded as goodwill through synergies related to the available production capacity. Goodwill has been allocated to Coca-Cola FEMSA’s cash generating unit in Mexico.

Selected statement of income information of Grupo CIMSA for the period from December to December 31, 2011 is as follows:

		2011
Total revenues		Ps.	429
Income before taxes			32
Net income			23

4.1.3 Acquisition of Grupo Tampico

On October 10, 2011, Coca-Cola FEMSA completed the acquisition of 100% of Administradora de Acciones del Noreste, S.A. de C.V. (“Grupo Tampico”) a bottler of Coca-Cola trademark products in the states of Tamaulipas, San Luis Potosí and Veracruz; as well as in parts of the states of Hidalgo, Puebla and Queretaro. This acquisition was made so as to reinforce Coca-Cola FEMSA’s leadership position in Mexico and Latin America. The transaction involved the issuance of 63,500,000 shares of previously unissued Coca-Cola FEMSA L shares along with the cash payment prior to closing of Ps. 2,436, in exchange for 100% share ownership of Grupo Tampico, which was accomplished through a merger. The total purchase price was Ps. 10,264 based on a share price of Ps. 123.27 per share on October 10, 2011. Transaction related costs of Ps. 20 were expensed by Coca-Cola FEMSA as incurred, and recorded as a component of administrative expenses in the accompanying consolidated statements of income. Grupo Tampico was included in operating results from October 2011.

The fair value of the Grupo Tampico’s net assets acquired is as follows:

		2011 Preliminary				Fair Value Adjustments				2011 Final
Total current assets, including cash acquired of Ps. 22		Ps.	461			Ps.	—			Ps.	461
Total non-current assets			2,529				(17	)			2,512
Distribution rights			5,499				—				5,499
Total assets			8,489				(17	)			8,472
Total liabilities			(804	)			60				(744	)
Net assets acquired			7,685				43				7,728
Goodwill			2,579				(43	)			2,536
Total consideration transferred		Ps.	10,264			Ps.	—			Ps.	10,264

The Company expects to recover the amount recorded as goodwill through synergies related to the available production capacity. Goodwill has been allocated to Coca-Cola FEMSA’s cash generating unit in Mexico.

Selected statement of income information of Grupo Tampico for the period from October to December 31, 2011 is as follows:

Statement of income		2011
Total revenues		Ps.	1,056
Income before taxes			43
Net income			31

Unaudited Pro Forma Financial Data.

The following unaudited consolidated pro forma financial data represent the Company’s historical financial statements, adjusted to give effect to (i) the acquisition of Grupo Fomento Queretano, CIMSA and Grupo Tampico, mentioned in the preceding paragraphs; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets of the acquired companies.

F-25

Below are pro-forma 2012 results as if Grupo Formento Queretano was acquired on January 1, 2012.

		Grupo Fomento Queretano unaudited pro forma consolidated financial data for the period January 1 - December 31, 2012
Total revenues		Ps.	148,727
Income before taxes			20,080
Net income			13,951
Earnings per share			6.64

Below are pro-forma results as if Grupo Tampico and Grupo CIMSA were acquired on January 1, 2011. The second table does not include any pro-forma results for the 2012 Grupo Fomento Queretano acquisition.

		Grupo Tampico and CIMSA unaudited pro forma consolidated financial data for the period January 1-December 31, 2011
Total revenues		Ps.	132,552
Income before taxes			17,866
Net income			12,019
Earnings per share			6.15

note 5. Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and cash equivalents, which are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, with a maturity date of less than three months at their acquisition date. Cash at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statements of financial position as follows:

		December 31, 2012				December 31, 2011				January 1, 2011
Cash and bank balances		Ps.	5,520			Ps.	3,394			Ps.	2,341
Cash equivalents (see Notes 3.5 and 3.6)			17,702				8,449				9,801
		Ps.	23,222			Ps.	11,843			Ps.	12,142

note 6. Marketable Securities

As of December 31, 2012 and 2011, and January 1, 2011, the marketable securities are classified as available-for-sale. The detail is as follows:

Debt Securities (1)		December 31, 2012				December 31, 2011				January 1, 2011
Acquisition cost		Ps.	10			Ps.	326			Ps.	—
Unrealized gain recognized in other comprehensive income			2				4				—
Total marketable securities at fair value		Ps.	12			Ps.	330			Ps.	—

⁽¹⁾  Denominated in U.S. dollars as of December 31, 2012 and 2011.

For the years ended December 31, 2012 and 2011, the effect of the marketable securities in the consolidated income statements under the interest income caption is Ps. 4 and Ps. 34 for the years ended as of December 31, 2012 and 2011.

F-26

note 7. Accounts Receivable

		December 31, 2012				December 31, 2011				January 1, 2011
Trade receivables		Ps.	6,361			Ps.	6,533			Ps.	4,616
Current trade customer notes receivable			377				74				232
The Coca-Cola Company (related party) (Note 14)			1,835				1,157				1,030
Loans to employees			172				145				110
Travel advances to employees			18				26				24
FEMSA and subsidiaries (related parties) (Note 14)			379				314				161
Other related parties (Note 14)			181				209				134
Other			335				472				279
Allowance for doubtful accounts on trade receivables			(329	)			(298	)			(223	)
		Ps.	9,329			Ps.	8,632			Ps.	6,363

7.1 Trade receivables

Accounts receivable representing rights arising from sales and loans to employees or any other similar concept, are presented net of discounts and the allowance for doubtful accounts.

Coca-Cola FEMSA has accounts receivable from The Coca-Cola Company arising from the latter’s participation in advertising and promotional programs and investment in refrigeration equipment and returnable bottles made by Coca-Cola FEMSA.

The carrying value of accounts receivable approximates its fair value as of December 31, 2012 and 2011 and as of January 1, 2011.

Aging of past due but not impaired		December 31, 2012				December 31, 2011				January 1, 2011
60-90 days		Ps.	174			Ps.	18			Ps.	33
90-120 days			46				32				22
120 + days			7				1				25
Total		Ps.	227			Ps.	51			Ps.	80

7.2 Movement in the allowance for doubtful accounts

		December 31, 2012				December 31, 2011				January 1 2011
Opening balance		Ps.	298			Ps.	223			Ps.	215
Allowance for the year			280				126				113
Charges and write-offs of uncollectible accounts			(221	)			(83	)			(95	)
Restatement of beginning balance in hyperinflationary economies			(28	)			32				(10	)
Ending balance		Ps.	329			Ps.	298			Ps.	223

In determining the recoverability of trade receivables, the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the customer base being large and unrelated.

Aging of impaired trade receivables		December 31, 2012				December 31, 2011				January 1, 2011
60-90 days		Ps.	2			Ps.	33			Ps.	9
90-120 days			10				31				17
120+ days			317				234				197
Total		Ps.	329			Ps.	298			Ps.	223

F-27

7.3 Payments from The Coca-Cola Company:

The Coca-Cola Company participates in certain advertising and promotional programs as well as in the Company’s refrigeration equipment and returnable bottles investment program. Contributions received by the Company for advertising and promotional incentives are recognized as a reduction in selling expenses and contributions received for the refrigeration equipment and returnable bottles investment program are recorded as a reduction in the investment in refrigeration equipment and returnable bottles items. For the years ended December 31, 2012 and 2011 contributions received were Ps. 3,018 and Ps. 2,595, respectively.

note 8. Inventories

		December 31, 2012				December 31, 2011				January 1, 2011
Finished products		Ps.	2,302			Ps.	2,453			Ps.	1,627
Raw materials			3,911				2,840				2,032
Non strategic spare parts			802				626				596
Inventories in transit			1,014				1,428				422
Packing materials			59				153				128
Other			15				49				202
		Ps.	8,103			Ps.	7,549			Ps.	5,007

As of December 31, 2012 and 2011 and January 1, 2011, the Company recognized write-downs of its inventories for Ps. 95, Ps. 106 and Ps. 105 to net realizable value for any periods presented in these consolidated financial statements.

note 9. Other Current Assets

		December 31, 2012				December 31, 2011				January 1, 2011
Prepaid expenses		Ps.	906			Ps.	1,086			Ps.	528
Agreements with customers			128				194				90
Other			1				42				203
		Ps.	1,035			Ps.	1,322			Ps.	821

Prepaid expenses as of December 31, 2012 and 2011 and as of January 1, 2011 are as follows:

		December 31, 2012				December 31, 2011				January 1, 2011
Advances for inventories		Ps.	47			Ps.	465			Ps.	124
Advertising and promotional expenses paid in advance			284				209				200
Advances to service suppliers			289				220				147
Prepaid insurance			57				47				20
Others			229				145				37
		Ps.	906			Ps.	1,086			Ps.	528

Amortization of advertising and deferred promotional expenses recorded in the consolidated statements of income for the years ended December 31, 2012 and 2011 amounted to Ps. 3,681 and Ps. 4,121 respectively.

F-28

note 10. Investments in Associates and Joint Ventures

Details of the investments accounted for under the equity method at the end of the reporting period are as follows:

		Ownership Percentage																Carrying Amount
Investee		Principal Activity		Place of Incorporation		December 31 2012				December 31 2011				January 1 2011				December 31 2012				December 31 2011				January 1 2011
Compañía Panameña de Bebidas S.A.P.I. S.A. de C.V. (1) (4)		Holding		Panama			50.0	%			50.0	%			—			Ps	756			Ps.	703			Ps.	—
Dispensadoras de Café, S.A.P.I. de C.V. (1) (4)		Services		Mexico			50.0	%			50.0	%			—				167				161				—
Estancia Hidromineral Itabirito, LTDA (1) (4)		Bottling and distribution		Brazil			50.0	%			50.0	%			50.0	%			147				142				87
Jugos del Valle S.A.P.I de C.V. (1) (2)		Beverages		Mexico			25.1	%			24.0	%			19.8	%			1,351				819				603
Holdfab2 Partiçipações Societárias, LTDA (“Holdfab2”) (1)		Beverages		Brazil			27.7	%			27.7	%			27.7	%			205				262				300
SABB – Sistema de Alimentos e Bebidas Do Brasil LTDA (formerly Sucos del Valle do Brasil LTDA) (1) (2) (3)		Beverages		Brazil			19.7	%			19.7	%			19.9	%			902				931				—
Sucos del Valle Do Brasil LTDA (3)		Beverages		Brazil			—				—				19.9	%			—				—				340
Mais Industria de Alimentos LTDA (3)		Beverages		Brazil			—				—				19.9	%			—				—				474
Industria Envasadora de Querétaro, S.A. de C.V. (“IEQSA”) (1) (2)		Canned		Mexico			27.9	%			19.2	%			13.5	%			141				100				67
Industria Mexicana de Reciclaje, S.A. de C.V. (“IMER”) (1)		Recycling		Mexico			35.0	%			35.0	%			35.0	%			74				70				69
Promotora Industrial Azucarera, S.A. de C.V (1) (2)		Sugar production		Mexico			26.1	%			13.2	%			—				1,447				281				—
KSP Participacoes LTDA (1)		Beverages		Brazil			38.7	%			38.7	%			38.7	%			93				102				93
Other Coca-Cola FEMSA:		Various		Various			Various				Various				Various				69				85				75
																		Ps.	5,352			Ps.	3,656			Ps.	2,108

Accounting method:

⁽¹⁾  Equity method.

⁽²⁾  The Company has significant influence due to the fact that it has representation on the board of directors and participates in the operating and financial decisions of the investee.

⁽³⁾  During June 2011, a reorganization of the Coca-Cola FEMSA Brazilian investments occurred by way of a merger of the companies Sucos del Valle Do Brasil, LTDA and Mais Industria de Alimentos, LTDA giving rise to a new company with the name of Sistema de Alimentos e Bebidas do Brasil, LTDA.

⁽⁴⁾  The Company has joint control over this entity’s operating and financial policies.

F-29

As mentioned in Note 4, on May 4, 2012 and December 9, 2011, Coca-Cola FEMSA completed the acquisition of 100% of Grupo FOQUE and Grupo CIMSA. As part of the acquisition of Grupo FOQUE and Grupo CIMSA, the Company also acquired a 26.1% equity interest in Promotora Industrial Azucarera, S.A de C.V.

During 2012 the Company made capital contributions to Jugos del Valle, S.A.P.I. de C.V. for Ps. 469. The funds were mainly used by Jugos del Valle to acquire Santa Clara (a non-carbonated beverage Company).

On March 28, 2011 Coca-Cola FEMSA made an initial investment followed by subsequent increases in the investment for Ps. 620 together with The Coca-Cola Company in Compañía Panameña de Bebidas, S.A.P.I. de C.V. (Grupo Estrella Azul), a Panamanian conglomerate in the dairy and juice-based beverage categories business in Panama. The investment of Coca-Cola FEMSA represents 50% of the equity ownership interests.

Summarized financial information in respect of the significant Company’s associates and joint ventures accounted for under the equity method is set out below.

		December 31, 2012				December 31, 2011				January 1, 2011
Total current assets		Ps.	8,569			Ps.	8,129			Ps.	7,164
Total non-current assets			14,639				12,941				8,649
Total current liabilities			5,340				5,429				2,306
Total non-current liabilities			2,457				2,208				1,433
Total revenue			18,796				18,183
Total cost and expenses			17,776				16,987
Net income			781				1,046

note 11. Property, Plant and Equipment, net

Cost		Land				Buildings				Machinery and Equipment				Refrigeration Equipment				Returnable Bottles				Investments in Fixed Assets in Progress				Leasehold Improvements				Other				Total
Cost as of January 1, 2011		Ps.	2,492			Ps.	8,337			Ps.	22,957			Ps.	8,979			Ps.	2,930			Ps.	2,298			Ps.	459			Ps.	613			Ps.	49,065
Additions			1				131				1,188				1,103				1,236				3,510				5				104				7,278
Additions from business combinations			597				1,103				2,309				314				183				202				—				—				4,708
Transfer of completed projects in progress			23				271				1,829				421				521				(3,113	)			49				(1	)			—
Transfer to/(from) assets classified as held for sale			111				144				(14	)			—				—				—				—				(67	)			174
Disposals			(52	)			(4	)			(1,939	)			(325	)			(901	)			5				(98	)			(160	)			(3,474	)
Effects of changes in foreign exchange rates			141				408				1,147				536				143				76				10				81				2,542
Changes in value on the recognition of inflation effects			91				497				1,150				268				3				50				—				11				2,070
Capitalization of borrowing costs			—				—				17				—				—				—				—				—				17
Cost as of December 31, 2011		Ps.	3,404			Ps.	10,887			Ps.	28,644			Ps.	11,296			Ps.	4,115			Ps.	3,028			Ps.	425			Ps.	581			Ps.	62,380

F-30

Cost		Land				Buildings				Machinery and Equipment				Refrigeration Equipment				Returnable Bottles				Investments in Fixed Assets in Progress				Leasehold Improvements				Other				Total
Cost as of January 1, 2012			Ps.3,404			Ps	10,887			Ps.	28,644			Ps.	11,296			Ps	4,115			Ps.	3,028			Ps.	425			Ps.	581			Ps.	62,380
Additions			97				214				2,262				1,544				1,434				3,838				166				186				9,741
Additions from business combinations			206				390				486				84				18				—				—				—				1,184
Charges in fair value of past acquisitions			57				312				(462	)			(39	)			(77	)			—				(1	)			—				(210	)
Transfer of completed projects in progress			137				210				1,106				901				765				(3,125	)			6				—				—
Transfer to assets classified as held for sale			—				—				(27	)			—				—				—				—				—				(27	)
Disposals			(16	)			(99	)			(847	)			(591	)			(324	)			(14	)			(1	)			(69	)			(1,961	)
Effects of changes in foreign exchange rates			(107	)			(485	)			(1,475	)			(451	)			(134	)			(28	)			(58	)			(41	)			(2,779	)
Changes in value on the recognition of inflation effects			85				471				1,138				275				17				(31	)			—				83				2,038
Capitalization of borrowing costs			—				—				16				—				—				—				—				—				16
Cost as of December 31, 2012		Ps.	3,863			Ps.	11,900			Ps.	30,841			Ps.	13,019			Ps	5,814			Ps.	3,668			Ps.	537			Ps.	740			Ps.	70,382

F-31

Accumulated Depreciation		Land				Buildings				Machinery and Equipment				Refrigeration Equipment				Returnable Bottles				Investments in Fixed Assets in Progress				Leasehold Improvements				Other				Total
Accumulated depreciation as of January 1, 2011		Ps.	—			Ps.	(2,762	)		Ps.	(11,923	)		Ps.	(5,068	)		Ps.	(478	)		Ps.	—			Ps.	(190	)		Ps.	(174	)		Ps.	(20,595	)
Depreciation for the year							(233	)			(1,670	)			(1,033	)			(853	)							(14	)			(47	)			(3,850	)
Transfer (to)/from assets classified as held for sale			—				(41	)			(3	)			—				—				—				—				—				(44	)
Disposals											1,741				154				335								89				67				2,386
Effects of changes in foreign exchange rates			—				(169	)			(512	)			(270	)			(35	)			—				—				(29	)			(1,015	)
Changes in value on the recognition of inflation effects			—				(280	)			(653	)			(202	)			—				—				—				(25	)			(1,160	)
Accumulated depreciation as of December 31, 2011		Ps.	—			Ps.	(3,485	)		Ps.	(13,020	)		Ps.	(6,419	)		Ps.	(1,031	)		Ps.	—			Ps.	(115	)		Ps.	(208	)		Ps.	(24,278	)
Accumulated Depreciation		Land				Buildings				Machinery and Equipment				Refrigeration Equipment				Returnable Bottles				Investments in Fixed Assets in Progress				Leasehold Improvements				Other				Total
Accumulated depreciation as of January 1, 2012		Ps.	—			Ps.	(3,485	)		Ps.	(13,020	)		Ps.	(6,419	)		Ps.	(1,031	)		Ps.	—			Ps.	(115	)		Ps.	(208	)		Ps.	(24,278	)
Depreciation for the year			—				(252	)			(2,279	)			(1,301	)			(1,149	)			—				(25	)			(72	)			(5,078	)
Transfer (to)/from assets classified as held for sale			—				—				12				—				—				—				—				(26	)			(14	)
Disposals			—				138				520				492				200				—				7				1				1,358
Effects of changes in foreign exchange rates			—				200				754				303				(5	)			—				68				(5	)			1,315
Changes in value on the recognition of inflation effects			—				(288	)			(672	)			(200	)			(3	)			—				—				(5	)			(1,168	)
Accumulated depreciation as of December 31, 2012		Ps.	—			Ps.	(3,687	)		Ps.	(14,685	)		Ps.	(7,125	)		Ps.	(1,988	)		Ps.	—			Ps.	(65	)		Ps.	(315	)		Ps.	(27,865	)
As of January 1, 2011		Ps.	2,492			Ps.	5,575			Ps.	11,034			Ps.	3,911			Ps.	2,452			Ps.	2,298			Ps.	269			Ps.	439			Ps.	28,470
As of December 31, 2011			3,404				7,402				15,624				4,877				3,084				3,028				310				373				38,102
As of December 31, 2012		Ps.	3,863			Ps.	8,213			Ps.	16,156			Ps.	5,894			Ps.	3,826			Ps.	3,668			Ps.	472			Ps.	425			Ps.	42,517

During the years ended December 31, 2012 and 2011 the Company capitalized Ps. 16 and Ps. 17, respectively of borrowing costs in relation to Ps. 196 and Ps. 256 in qualifying assets. The rates used to determine the amount of borrowing costs eligible for capitalization were 4.3% and 5.8% effective.

F-32

For the years ended December 31, 2012 and 2011 interest expenses and net foreign exchange losses (gains) are analyzed as follows:

		2012				2011
Interest expense and foreign exchange losses (gains)		Ps.	1,284			Ps.	1,313
Amount capitalized (1)			38				185
Net amount in consolidated statements of income		Ps.	1,246			Ps.	1,128

⁽¹⁾  Amount capitalized in property, plant and equipment and amortized intangible assets.

Commitments related to acquisitions of property, plant and equipment are disclosed in Note 25.

note 12. Intangible Assets

		Rights to Produce and Distribute Coca-Cola Trademark Products				Goodwill				Other Indefinite Lived Intangible Assets				Technology Costs and Management Systems				Development Systems				Other Amortizables				Total
Cost
Balance as of January 1, 2011		Ps.	41,173			Ps.	—			Ps.	11			Ps.	1,152			Ps.	1,389			Ps.	87			Ps.	43,812
Purchases			—				—				85				196				300				48				629
Acquisition from business combinations			11,878				4,515				—				66				3				—				16,462
Transfer of completed development systems			—				—				—				261				(261	)			—				—
Effect of movements in exchange rates			1,072				—				—				30				—				7				1,109
Changes in value on the recognition of inflation effect			815				—				—				—				—				—				815
Capitalization of borrowing cost			—				—				—				168				—				—				168
Balance as of December 31, 2011			54,938				4,515				96				1,873				1,431				142				62,995
Purchases			—				—				6				34				90				105				235
Acquisition from business combinations			2,973				2,605				—				—				—				—				5,578
Changes in fair value of past acquisitions			(42	)			(148	)			—				—				—				—				(190	)
Internally development			—				—				—				—				38				—				38
Transfer of completed development systems			—				—				—				559				(559	)			—				—
Effect of movements in exchange rates			(478	)			—				—				(97	)			(3	)			(3	)			(581	)
Changes in value on the recognition of inflation effects			(121	)			—				—				—				—				—				(121	)
Capitalization of borrowing costs			—				—				—				—				22				—				22
Balance as of December 31, 2012		Ps.	57,270			Ps.	6,972			Ps.	102			Ps.	2,369			Ps.	1,019			Ps.	244			Ps.	67,976
Amortization expense
Balance as of January 1, 2011		Ps.	—			Ps.	—			Ps.	—			Ps.	(588	)		Ps.	—			Ps.	(3	)		Ps.	(591	)
Amortization expense			—				—				—				(187	)			—				(41	)			(228	)
Disposals			—				—				—				2				—				—				2
Effect of movements in exchange rates			—				—				—				(15	)			—				—				(15	)
Balance as of December 31, 2011			—				—				—				(788	)			—				(44	)			(832	)
Amortization expense			—				—				—				(158	)			—				(60	)			(218	)
Disposals			—				—				—				25				—				—				25
Effect of movements in exchange rates			—				—				—				65				—				(3	)			62
Balance as of December 31, 2012		Ps.	—			Ps.	—			Ps.	—			Ps.	(856	)		Ps.	—			Ps.	(107	)		Ps.	(963	)
Balance as of January 1, 2011		Ps.	41,173			Ps.	—			Ps.	11			Ps.	564			Ps.	1,389			Ps.	84			Ps.	43,221
Balance as of December 31, 2011			54,938				4,515				96				1,085				1,431				98				62,163
Balance as of December 31, 2012		Ps.	57,270			Ps.	6,972			Ps.	102			Ps.	1,513			Ps.	1,019			Ps.	137			Ps.	67,013

F-33

During the years ended December 31, 2012 and 2011 the Company capitalized Ps. 22 and Ps. 168, respectively of borrowing costs in relation to Ps. 674 and Ps. 1,761 in qualifying assets. The effective rates used to determine the amount of borrowing costs eligible for capitalization were 4.3% and 5.8%.

For the year ended in December 31, 2012, the amortization of intangible assets is recognized in cost of goods sold, selling expenses and administrative expenses and amounted to Ps. 1, Ps. 56 and Ps. 161, respectively.

For the year ended in December 31, 2011, the amortization of intangible assets is recognized in cost of goods sold, selling expenses and administrative expenses and amounted to Ps. 3, Ps. 59 and Ps. 166, respectively.

The Company’s intangible assets such as technology costs and management systems are subject to amortization until 2023.

Impairment Tests for Cash-Generating Units Containing Goodwill and Distribution Rights

For the purpose of impairment testing, goodwill and distribution rights are allocated and monitored on an individual country basis, which is considered to be the CGU.

The aggregate carrying amounts of goodwill and distribution rights allocated to each CGU are as follows:

In millions of Ps.

		2012				2011
Mexico		Ps.	47,492			Ps.	42,099
Guatemala			299				325
Nicaragua			407				459
Costa Rica			1,114				1,201
Panama			781				839
Colombia			6,387				6,240
Venezuela			3,236				2,941
Brazil			4,416				5,169
Argentina			110				180
Total		Ps.	64,242			Ps.	59,453

Goodwill and distribution rights are tested for impairments annually. The recoverable amounts of the CGUs are based on value-in-use calculations. Value in use was determined by discounting the future cash flows generated from the continuing use of the CGU.

The key assumptions used for the value-in-use calculations are as follows:

• Cash flows were projected based on actual operating results and the five-year business plan. Cash flows for a further five-year were forecasted maintaining the same stable growth and margins per country of the last year base. The Company believes that this forecasted period is justified due to the non-current nature of the business and past experiences.

• Cash flows after the first ten-year period were extrapolated using a perpetual growth rate equal to the expected annual population growth, in order to calculate the terminal recoverable amount.

• A per CGU-specific Weighted Average Cost of Capital (“WACC”) was applied as a hurdle rate to discount cash flows to get the recoverable amount of the units; the calculation assumes, size premium adjusting.

The key assumptions by CGU for impairment test are as follows:

CGU		WACC Real				Expected Annual Long-Term Inflation 2013-2023				Expected Volume Growth Rates 2013-2023
Mexico			5.5	%			3.6	%			2.8	%
Colombia			5.8	%			3.0	%			6.1	%
Venezuela			11.3	%			25.8	%			2.8	%
Costa Rica			7.7	%			5.7	%			2.8	%
Guatemala			8.1	%			5.3	%			4.0	%
Nicaragua			9.5	%			6.6	%			5.1	%
Panama			7.7	%			4.6	%			3.6	%
Argentina			10.7	%			10.0	%			4.2	%
Brazil			5.5	%			5.8	%			3.8	%

F-34

The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal sources (historical data). The Company consistently applied its methodology to determine CGU specific WACC’s to perform its annual impairment testing.

Sensitivity to Changes in Assumptions

The Company performed an additional impairment sensitivity calculation, taking into account an adverse change of a 100 basis point in the key assumptions noted above, and concluded that no impairment would be recorded.

CGU

Change in WACC

Change in Volume Growth CAGR (1)

Effect on Valuation

Mexico

+1.0

%

–1.0

%

Passes by 3.4x

Colombia

+1.0

%

–1.0

%

Passes by 6.2x

Venezuela

+1.0

%

–1.0

%

Passes by 8.1x

Costa Rica

+1.0

%

–1.0

%

Passes by 3.2x

Guatemala

+1.0

%

–1.0

%

Passes by 7.0x

Nicaragua

+1.0

%

–1.0

%

Passes by 4.4x

Panama

+1.0

%

–1.0

%

Passes by 7.5x

Argentina

+1.0

%

–1.0

%

Passes by 103x

Brazil

+1.0

%

–1.0

%

Passes by 12.6x

⁽¹⁾  Compound Annual Growth Rate (CAGR)

note 13. Other Assets

		December 31, 2012				December 31, 2011				January 1, 2011
Agreement with customers, net		Ps.	278			Ps.	256			Ps.	186
Non-current prepaid advertising expenses			78				113				125
Guarantee deposits (1)			947				942				892
Prepaid bonuses			117				97				84
Advances in acquisitions of property, plant and equipment			716				296				226
Share based payments			306				226				208
Other			381				374				233
		Ps.	2,823			Ps.	2,304			Ps.	1,954

⁽¹⁾  As is customary in Brazil, the Company has been required by authorities to collaterize tax, legal and labor contingencies by guarantee deposits.

note 14. Balances and Transactions with Related Parties and Affiliated Companies

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this Note.

The consolidated statements of financial positions and consolidated statements of income include the following balances and transactions with related parties and affiliated companies:

		December 31, 2012				December 31, 2011				January 1, 2011
Balances:
Assets (current included in accounts receivable)
Due from FEMSA and Subsidiaries (see Note 7) (1) (4)		Ps.	379			Ps.	314			Ps.	161
Due from The Coca-Cola Company (see Note 7) (1) (4)			1,835				1,157				1,030
Due from Heineken Company (1)			141				192				116
Other receivables (1)			40				17				18
Assets (non-current included in other non-current financial assets)
Compañía Panameña de Bebidas, S.A.P.I. S.A. de C.V. (5)			828				825				—
		Ps.	3,223			Ps.	2,505			Ps.	1,325

F-35

Liabilities (included in suppliers and other liabilities and loans)		December 31, 2012				December 31, 2011				January 1, 2011
Liabilities (current liabilities)
Due to FEMSA and Subsidiaries (see Note 7.3) (3) (4)		Ps.	1,057			Ps.	753			Ps.	603
Due to The Coca-Cola Company (3) (4)			4,088				2,853				1,911
Due to Heineken Company (3)			235				204				190
Banco Nacional de México, S.A. (2) (6)			—				—				500
Grupo Tampico (6)			7				8				—
Compañía Panameña de Bebidas, S.A.P.I. S.A. de C.V. (5)			—				16				—
Other payables (3)			429				500				198
Liabilities (non-current liabilities)
BBVA Bancomer, S.A. (2) (6)			981				970				961
		Ps.	6,797			Ps.	5,304			Ps.	4,363

⁽¹⁾  Presented within accounts receivable.

⁽²⁾  Recorded within bank loans.

⁽³⁾  Recorded within accounts payable.

⁽⁴⁾  Holding

⁽⁵⁾  Joint venture

⁽⁶⁾  Key personal management

Balances due from related parties are considered to be recoverable. Accordingly, for the years ended December 31, 2012 and 2011, there was no expense resulting from the uncollectibility of balances due from related parties.

Details of transactions between the Company and other related parties are disclosed as follows:

Transactions		2012				2011
Income:
Sales to affiliated parties		Ps.	5,111			Ps.	2,186
Interest income received from Compañía Panameña de Bebidas, S.A.P.I. S.A. de C.V.			58				40
Expenses:
Purchases and other revenue of FEMSA			4,484				3,652
Purchases of concentrate from The Coca-Cola Company			23,886				20,882
Purchases of raw material, beer and operating expenses from Heineken			2,598				3,343
Advertisement expense paid to The Coca-Cola Company			1,052				872
Interest expense and fees paid to BBVA Bancomer, S.A. de C.V. (1)			51				51
Purchases from Jugos del Valle			1,577				1,248
Purchase of sugar from Beta San Miguel			1,439				1,398
Purchase of sugar, cans and aluminum lids from Promotora Mexicana de Embotelladores, S.A. de C.V.			711				701
Purchase of canned products from IEQSA			483				262
Purchases of raw material and operating expenses from affiliated companies of Grupo Tampico			—				175
Interest expense paid to Grupo Financiero Banamex, S.A. de C.V. (1)			—				6
Purchase of plastic bottles from Embotelladora del Atlantico, S.A. (formerly Complejo Industrial Pet, S.A.)			99				56
Purchases of juice and milk powder from Compañía Panameña de Bebidas, S.A.P.I. S.A. de C.V.			—				60
Donations to Instituto Tecnologico y de Estudios Superiores de Monterrey, A.C. (1)			68				37
Interest expense paid to The Coca-Cola Company			24				7
Insurance premiums for policies with Grupo Nacional Provincial, S.A.B. (1)			17				20
Other expenses with related parties			191				83

(1) One or more members of the Board of Directors or senior management of the Company are also members of the Board of Directors or senior management of the counterparties to these transactions.

F-36

The benefits and aggregate compensation paid to executive officers and senior management of the Company were as follows:

		2012				2011
Current employee benefits		Ps.	635			Ps.	426
Termination benefits			13				10
Shared based payments			253				331

note 15. Balances and Transactions in Foreign Currencies

Assets, liabilities and transactions denominated in foreign currencies are those realized in a currency different than the functional currency of each subsidiary of the Company. As of December 31, 2012 and 2011 and as of January 1, 2011, assets, liabilities and transactions denominated in foreign currencies, expressed in Mexican pesos (contractual amounts) are as follows:

		Assets								Liabilities
Balances		Current				Non-current				Current				Non-current
As of December 31, 2012
U.S. dollars			13,379				723				6,304				14,493
Euros			—				—				38				—
As of December 31, 2011
U.S. dollars			5,167				785				1,964				7,199
Euros			—				—				41				—
As of January 1, 2011
U.S. dollars			7,154				20				1,250				6,401
Euros			—				—				245				—

Transactions		Revenues				Purchases of Raw Materials				Interest Expense				Assets Acquisitions				Other
Year ended December 31, 2012
U.S. dollars			307				10,715				254				—				870
Year ended December 31, 2011
U.S. dollars			418				8,753				338				226				623

Mexican peso exchange rates in effect at the dates of the consolidated statements of financial position and at the issuance date of the Company’s consolidated financial statements were as follows:

		December 31,								January 1,				March 14,
		2012				2011				2011				2013
U.S. dollar			13.0101				13.9787				12.3571				12.3967

note 16. Post-Employment and Other Non-current Employee Benefits

The Company has various labor liabilities for employee benefits in connection with pension and seniority 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, Brazil and Venezuela, which comprise the substantial majority of those recorded in the consolidated financial statements.

F-37

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 and seniority premiums, as well as the associated cost for the period, were determined using the following long-term assumptions to non-hyperinflationary countries:

Mexico		December 31 2012				December 31 2011				January 1 2011
Financial:
Discount rate used to calculate the defined benefit obligation			7.10	%			7.64	%			7.64	%
Salary increase			4.79	%			4.79	%			4.79	%
Future pension increases			3.50	%			3.50	%			3.50	%
Biometric:
Mortality			EMSSA82-89	(1)			EMSSA82-89	(1)			EMSSA82-89	(1)
Disability			IMSS-97	(2)			IMSS-97	(2)			IMSS-97	(2)
Normal retirement age			60 years				60 years				60 years
Rest of employee turnover			BMAR2007	(3)			BMAR2007	(3)			BMAR2007	(3)

⁽¹⁾  EMSSA. Mexican Experience of Social Security

⁽²⁾  IMSS. Mexican Experience of Instituto Mexicano del Seguro Social

⁽³⁾  BMAR. Actuary experience

Brazil		2012				2011				2011
Financial:
Discount rate used to calculate the defined benefit obligation			9.30	%			9.70	%			9.70	%
Salary increase			5.00	%			5.00	%			5.00	%
Future pension increases			4.00	%			4.00	%			4.00	%
Biometric:
Disability			IMSS-97	(1)			IMSS-97	(1)			IMSS-97	(1)
Mortality			UP84	(2)			UP84	(2)			UP84	(2)
Normal retirement age			65 years				65 years				65 years
Rest of employee turnover			Brazil				Brazil				Brazil

⁽¹⁾  IMSS. Mexican Experience of Instituto Mexicano del Seguro Social

⁽²⁾  UP84. Unisex mortality table

Venezuela is a hyper-inflationary economy. The actuarial calculations for post-employment benefit (termination indemnity), as well as the associated cost for the period, were determined using the following long-term which are real assumptions (excluding inflation):

Venezuela		December 31 2012
Financial:
Discount rate used to calculate the defined benefit obligation			1.50	%
Salary increase			1.50	%
Biometric:
(1)Mortality			EMSSA82-89
(2)Disability			IMSS-97
Normal retirement age			65 years
Rest of employee turnover			BMAR2007	(3)

⁽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 Bond (known as CETES in Mexico).

F-38

In Brazil 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 fixed long term bonds of Federal Republic of Brazil.

In Venezuela the methodology used to determine the discount rate started with reference to the interest rate bonds of similar denomination issued by the Republic of Venezuela, with subsequent consideration of other economic assumptions appropriate for hyper-inflationary economy. Ultimately, the discount rates disclosed in the table below are calculated in real terms (without inflation).

In Mexico upon retirement, the Company purchases an annuity for senior executives, 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- employment
2013		Ps.	219			Ps.	13			Ps.	37
2014			94				12				27
2015			111				13				21
2016			87				14				18
2017			145				15				17
2018 to 2022			854				102				79

16.2 Balances of the liabilities for post-employment and other non-current employee benefits

		December 31 2012				December 31 2011				January 1 2011
Pension and Retirement Plans:
Vested benefit obligation		Ps.	800			Ps.	586			Ps.	569
Non-vested benefit obligation			849				701				671
Accumulated benefit obligation			1,649				1,287				1,240
Excess of projected defined benefit obligation over accumulated benefit obligation			745				873				396
Defined benefit obligation			2,394				2,160				1,636
Pension plan funds at fair value			(1,113	)			(1,068	)			(774	)
Effect due to asset ceiling			105				127				199
Net defined benefit liability		Ps.	1,386			Ps.	1,219			Ps.	1,061
Seniority Premiums:
Vested benefit obligation		Ps.	13			Ps.	7			Ps.	8
Non-vested benefit obligation			142				81				57
Accumulated benefit obligation			155				88				65
Excess of projected defined benefit obligation over accumulated benefit obligation			71				79				30
Defined benefit obligation			226				167				95
Seniority premium plan funds at fair value			(18	)			(19	)			—
Net defined benefit liability		Ps.	208			Ps.	148			Ps.	95
Post-employment:
Vested benefit obligation		Ps.	36			Ps.	—			Ps.	—
Non-vested benefit obligation			79				—				—
Accumulated benefit obligation			115				—				—
Excess of projected defined benefit obligation over accumulated benefit obligation			479				—				—
Defined benefit obligation			594				—				—
Post-employment plan funds at fair value			—				—				—
Net defined benefit liability		Ps.	594			Ps.	—			Ps.	—
Total post-employment and other non-current employee benefits		Ps.	2,188			Ps.	1,367			Ps.	1,156

F-39

The net defined benefit liability of the pension and retirement plan includes an asset generated in Brazil (the following information is included in the consolidated information of the tables above), which is as follows:

Pension and retirement plans:
Vested benefit obligation		Ps.	193			Ps.	221			Ps.	162
Non-vested benefit obligation			73				34				92
Accumulated benefit obligation			266				255				254
Excess of projected defined benefit obligation over accumulated benefit obligation			47				115				91
Defined benefit obligation			313				370				345
Pension plan funds at fair value			(589	)			(616	)			(595	)
Net defined benefit asset			(276	)			(246	)			(250	)
Effect due to asset ceiling			105				127				199
Net defined benefit asset after asset ceiling		Ps.	(171	)		Ps.	(119	)		Ps.	(51	)

16.3 Trust assets

Trust assets consist of fixed and variable return financial instruments recorded at market value, which are invested as follows:

		December 31				December 31				January 1
		2012				2011				2011
Fixed return:
Traded securities			10	%			2	%			1	%
Life annuities			4	%			4	%			2	%
Bank instruments			3	%			1	%			3	%
Federal government instruments			60	%			80	%			76	%
Variable return:
Publicly traded shares			23	%			13	%			8	%
			100	%			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 Brazil, the regulatory framework for pension plans is established by the Brazilian Social Security Institute (INSS), which indicates that the contributions must be made by the company and the workers.

In Venezuela, the regulatory framework for post-employment benefits is established by the Organic Labor Law for Workers (LOTTT). The organic nature of this law means that its purpose is to defend constitutional rights, and therefore has precedence over other laws.

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 the Federal Government, 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 the monitoring and supervision of the trust beneficiary. 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 plan 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.

F-40

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 Brazil, the investment target is to obtain the consumer price index (inflation), plus six percent. Investment decisions are made to comply with this guideline insofar as the market conditions and available funds allow.

On May 7, 2012, the President of Venezuela amended the Organic Law for Workers (LOTTT), which establishes a minimum level of social welfare benefits to which workers have a right when their labor relationship ends for whatever reason. This benefit is computed based on the last salary received by the worker and retroactive to June 19, 1997 for any employee who joined the Company prior to that date. For employees who joined the Company after June 19, 1997, the benefit is computed based on the date on which the employee joined the Company. An actuarial computation must be performed using the projected unit credit method to determine the amount of the labor obligations that arise. As a result of the initial calculation, there was an amount for Ps. 381 to other expenses caption in the consolidated statement of income reflecting past service costs (See Note 19).

In Mexico, the amounts and types of securities of the Company and related parties included in plan assets are as follows:

		December 31 2012				December 31 2011				January 1 2011
Mexico
Portfolio:
Debt:
BBVA Bancomer, S.A. de C.V.		Ps.	—			Ps.	17			Ps.	—
Grupo Televisa, S.A.B. de C.V.			3				3				—
Grupo Financiero Banorte, S.A.B. de C.V.			8				7				—
Coca-Cola FEMSA, S.A.B. de C.V.			—				2				2
Grupo Industrial Bimbo, S.A.B. de C. V.			3				2				2
Grupo Financiero Banamex, S.A.B. de C.V.			21				—				—
El Puerto de Liverpool			5				—				—
Capital:
Fomento Económico Mexicano, S.A.B de C.V.			1				1				—
Coca-Cola FEMSA, S.A.B. de C. V.			8				5				—
Grupo Televisa, S.A.B. de C.V.			10				—				—
Grupo Aeroportuario del Sureste, S.A.B. de C.V.			8				—				—
Alfa, S.A.B. de C.V.			5				—				—

In Brazil, the amounts and types of securities of the Company and related parties included in plan assets are as follows:

December 31 2012

December 31 2011

January 1 2011

Brazil

Portfolio:

Debt:

HSBC - Sociedad de inversión Atuarial INPC (Brazil)

Ps.

485

Ps.

509

Ps.

461

Capital:

HSBC - Sociedad de inversión Atuarial INPC (Brazil)

104

107

134

During the years ended December 31, 2012 and 2011, 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.

F-41

16.4 Amounts recognized in the consolidated statements of income and the consolidated statement of comprehensive income

		Statement of income																OCI
December 31, 2012		Current Service Cost				Past Service Cost				Gain or Loss on Settlement				Net Interest on the Net Defined Benefit Liability				Remeasurements of the Net Defined Benefit Liability net of taxes
Pension and retirement plans		Ps.	119			Ps.	—			Ps.	—			Ps.	71			Ps.	174
Seniority premiums			22				—				—				11				18
Post-employment			49				381				—				63				71
Total		Ps.	190			Ps.	381			Ps.	—			Ps.	145			Ps.	263
		Statement of income																OCI
December 31, 2011		Current Service Cost				Past Service Cost				Gain or Loss on Settlement				Net Interest on the Net Defined Benefit Liability				Remeasurements of the Net Defined Benefit Liability net of taxes
Pension and retirement plans		Ps.	103			Ps.	—			Ps.	—			Ps.	82			Ps.	139
Seniority premiums			15				—				—				8				(1	)
Total		Ps.	118			Ps.	—			Ps.	—			Ps.	90			Ps.	138

For the years ended December 31, 2012 and 2011, of service cost of Ps. 190 and Ps. 118 has been included in the consolidated statements of income as cost of goods sold, administration and selling expenses.

Remeasurements of the net defined benefit liability recognized in other comprehensive income are as follows:

		December 31 2012				December 31 2011
Amount accumulated in other comprehensive income as of the beginning of the period		Ps.	138			Ps.	132
Recognized during the year (obligation liability and plan assets)			99				67
Actuarial gains and losses arising from changes in financial assumptions			48				—
Changes in the effect of limiting a net defined benefit asset to the asset ceiling			(9	)			(60	)
Foreign exchange rate valuation (gain)			(13	)			(1	)
Amount accumulated in other comprehensive income as of the end of the period		Ps.	263			Ps.	138

Remeasurements of the net defined benefit liability include the following:

• The return on plan assets, excluding amounts included in interest expense.

• Actuarial gains and losses arising from changes in demographic assumptions.

• Actuarial gains and losses arising from changes in financial assumptions.

• Changes in the effect of limiting a net defined benefit asset to the asset ceiling, excluding amounts included in interest expense.

F-42

16.5 Changes in the balance of the defined benefit obligation for post-employment and other non-current employee benefits

		December 31 2012				December 31 2011
Pension and Retirement Plans:
Initial balance		Ps.	2,160			Ps.	1,636
Current service cost			119				103
Interest expense			159				139
Actuarial gains or losses			81				60
Foreign exchange (gain) loss			(69	)			49
Benefits paid			(87	)			(77	)
Acquisitions			31				250
		Ps.	2,394			Ps.	2,160
Seniority Premiums:
Initial balance		Ps.	167			Ps.	95
Current service cost			22				15
Interest expense			11				8
Actuarial gains or losses			24				(2	)
Benefits paid			(12	)			(11	)
Acquisitions			14				62
		Ps.	226			Ps.	167
Post-employment:
Initial balance		Ps.	—			Ps.	—
Current service cost			49				—
Interest expense			63				—
Actuarial gains or losses			108				—
Foreign exchange (gain) loss			(1	)			—
Benefits paid			(6	)			—
Past service cost			381				—
		Ps.	594			Ps.	—

16.6 Changes in the balance of trust assets

		December 31 2012				December 31 2011
Pension and retirement plans:
Initial balance		Ps.	1,068			Ps.	774
Actual return on trust assets			100				40
Foreign exchange (gain) loss			(91	)			5
Life annuities			—				32
Benefits paid			(12	)			(12	)
Acquisitions			48				229
Final Balance		Ps.	1,113			Ps.	1,068
Seniority premiums
Initial balance		Ps.	19			Ps.	—
Actual return on trust assets			(1	)			(1	)
Acquisitions			—				20
Final Balance		Ps.	18			Ps.	19

As a result of the Company’s investments in life annuities plan, management does not expect it will need to make subsequent contributions to the trust assets in order to meet its future obligations.

F-43

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 and the salary 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.

The following table presents the impact in absolute terms of a variation of 1% in the significant actuarial assumptions on the net defined benefit liability associated with the Company’s defined benefit plans:

+1%:
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability (asset)		Current Service Cost				Past Service Cost				Gain or Loss on Settlement				Net Interest on the Net Defined Benefit Liability				Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans		Ps.	103			Ps.	—			Ps.	—			Ps.	64			Ps.	(2	)
Seniority premiums			20				—				—				11				2
Post-employment			34				320				—				52				15
Total		Ps.	157			Ps.	320			Ps.	—			Ps.	127			Ps.	15

Expected salary increase		Current Service Cost				Past Service Cost				Net Interest on the Net defined Benefit Liability				Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans		Ps.	138			Ps.	—			Ps.	90			Ps.	447
Seniority premiums			25				—				14				47
Post-employment			58				511				85				301
Total		Ps.	221			Ps.	511			Ps.	189			Ps.	795

–1%:
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability (asset)		Current Service Cost				Past Service Cost				Gain or Loss on Settlement				Net Interest on the Net Defined Benefit Liability				Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans		Ps.	141			Ps.	—			Ps.	—			Ps.	83			Ps.	508
Seniority premiums			25				—				—				12				46
Post-employment			51				459				—				76				225
Total		Ps.	217			Ps.	459			Ps.	—			Ps.	171			Ps.	779

Expected salary increase		Current Service Cost				Past Service Cost				Net Interest on the Net defined Benefit Liability				Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans		Ps.	105			Ps.	—			Ps.	62			Ps.	61
Seniority premiums			19								10				1
Post-employment			29				280				45				(44	)
Total		Ps.	153			Ps.	280			Ps.	117			Ps.	18

F-44

16.8 Employee benefits expense

For the years ended December 31, 2012 and 2011, employee benefits expenses recognized in the consolidated statements of income are as follows:

		2012				2011
Included in cost of goods sold:
Wages and salaries		Ps.	4,590			Ps.	3,733
Social security costs			603				475
Pension and seniority premium costs (Note 16.4)			43				35
Share-based payment expense (Note 17.2)			7				2
Included in selling and distribution expenses:
Wages and salaries			8,417				7,783
Social security costs			1,210				1,018
Pension and seniority premium costs (Note 16.4)			47				27
Share-based payment expense (Note 17.2)			9				4
Included in administrative expenses:
Wages and salaries			5,877				5,033
Social security costs			462				436
Pension and seniority premium costs (Note 16.4)			51				56
Post-employment benefits other (Note 16.4)			49				—
Share-based payment expense (Note 17.2)			165				115
Included in other expenses:
Post-employment (Note 16)			381				—
Total employee benefits expense		Ps.	21,911			Ps.	18,717

note 17. Bonus Programs

17.1 Quantitative and qualitative objectives

The bonus program for executives is based on complying with certain goals established annually by management, which include quantitative and qualitative objectives and special projects.

The quantitative objectives represent approximately 50% of the bonus, and are based on the Economic Value Added (“EVA”) methodology. The objective established for the executives at each entity is based on a combination of the EVA generated per entity and by our Company and the EVA generated by our parent Company (FEMSA). The qualitative objectives and special projects represent the remaining 50% of the annual bonus and are based on the critical success factors established at the beginning of the year for each executive.

The bonus amount is determined based on each eligible participant’s level of responsibility and based on the EVA generated by the applicable business unit the employee works for. This formula is established by considering the level of responsibility within the organization, the employees’ evaluation and competitive compensation in the market.

The incentive plan target is expressed in months of salary, and the final amount payable is computed based on a percentage of compliance with the goals established every year. The bonuses are recorded as a part of the income statement and are paid in cash the following year. During the years ended December 31, 2012 and 2011 the bonus expense recorded amounted to Ps 375 and Ps. 599, respectively.

17.2 Share-based payment bonus plan

The Company has a stock incentive plan for the benefit of its executive officers. This plan uses as its main evaluation metric the Economic Value Added, or EVA. Under the EVA stock incentive plan, eligible executive officers are entitled to receive a special annual bonus (fixed amount), to purchase FEMSA and Coca-Cola FEMSA shares or options, based on the executive’s responsibility in the organization, their business’ EVA result achieved, and their individual performance. The acquired shares or options are deposited in a trust, and the executives may access them one year after they are vested at 20% per year. The 50% of Coca-Cola FEMSA’s annual executive bonus is to be used to purchase FEMSA shares or options and the remaining 50% to purchase Coca-Cola FEMSA shares or options. As of December 31, 2012 and 2011 and January 1, 2011, no stock options have been granted to employees.

F-45

The special bonus is granted to the eligible employee on an annual basis and after withholding applicable taxes. The Company contributes the individual employee’s special bonus (after taxes) in cash to the Administrative Trust (which is controlled and consolidated by FEMSA), which then uses the funds to purchase FEMSA and Coca-Cola FEMSA shares (as instructed by the Corporate Practices Committee), which are then allocated to such employee.

Coca-Cola FEMSA accounts for its share-based payment bonus plan as an equity-settled share based payment transaction, since it is its parent company, FEMSA, who ultimately grants and settles with shares these obligations due to executives.

At December 31, 2012 and 2011 and January 1, 2011, the shares granted under the Company’s executive incentive plans are as follows:

		Number of shares
Incentive Plan		FEMSA				KOF				Vesting period
2005			177,185				391,660			2006-2010
2006			169,445				497,075			2007-2011
2007			290,880				819,430			2008-2012
2008			1,901,108				1,267,490			2009-2013
2009			1,888,680				1,340,790			2010-2014
2010			1,456,065				1,037,610			2011-2015
2011			968,440				656,400			2012-2016
2012			956,685				741,245			2013-2017
Total			7,808,488				6,751,700

For the years ended December 31, 2012 and 2011, the total expense recognized for the period arising from share-based payment transactions, using the grant date model, was of Ps.181 and Ps.122, respectively.

As of December 31, 2012 and 2011 and January 1, 2011, the asset recorded by Coca-Cola FEMSA in its consolidated statements of financial position amounted to Ps. 306, Ps. 226 and Ps. 208, respectively, see Note 13.

F-46

note 18. Bank Loans and Notes Payables

		Carrying Value at December 31, (1)																								Carrying Value 2012				Fair Value at December 31, 2012				Carrying Value
(In millions of Mexican pesos)		2013				2014				2015				2016				2017				2018 and Thereafter												December 31, 2011				January 1, 2011
Current debt:
Fixed rate debt:
Argentine pesos
Bank loans		Ps.	291			Ps.	—			Ps.	—			Ps.	—			Ps.	—			Ps.	—			Ps.	291			Ps.	291			Ps.	325			Ps.	507
Interest rate			19.2	%			—				—				—				—				—				19.2	%			19.2	%			14.9	%			15.3	%
Mexican pesos
Obligation under finance leases			—				—				—				—				—				—				—				—				18				—
Interest rate			—				—				—				—				—				—				—				—				6.9	%			—
Brazilian reais
Notes payable			—				—				—				—				—				—				—				—				—				36
Interest rate			—				—				—				—				—				—				—				—				—				Various
Variable rate debt:
Colombian pesos
Bank loans			—				—				—				—				—				—				—				—				295				1,072
Interest rate			—				—				—				—				—				—				—				—				6.8	%			4.4	%
U.S. dollars
Bank loans			3,903				—				—				—				—				—				3,903				3,899				—				—
Interest rate			0.6	%			—				—				—				—				—				0.6	%			0.6	%			—				—
Total current debt		Ps.	4,194			Ps.	—			Ps.	—			Ps.	—			Ps.	—			Ps.	—			Ps.	4,194			Ps.	4,190			Ps.	638			Ps.	1,615
Non-current debt:
Fixed rate debt:
Argentine pesos
Bank loans		Ps.	180			Ps.	336			Ps.	13			Ps.	—			Ps.	—			Ps.	—			Ps.	529			Ps.	514			Ps.	595			Ps.	684
Interest rate			18.7				20.7	%			15.0				—				—				—				19.9	%			19.9	%			16.4	%			16.5	%
Brazilian reais
Bank loans			9				9				9				9				9				20				65				60				82				81
Interest rate			4.5	%			4.5	%			4.5	%			4.5	%			4.5	%			4.5	%			4.5	%			4.5	%			4.5	%			4.5	%
Obligation under finance leases			4				4				3				—				—				—				11				11				17				21
Interest rate			4.5	%			4.5	%			4.5	%			—				—				—				4.5	%			4.5	%			4.5	%			4.5	%
U.S. dollars
Yankee Bond			—				—				—				—				—				6,458				6,458				7,351				6,938				6,121
Interest rate			—				—				—				—				—				4.6	%			4.6	%			4.6	%			4.6	%			4.6	%
Obligation under finance leases			—				—				—				—				—				—				—				—				—				4
Interest rate			—				—				—				—				—				—				—				—				—				3.8	%
Mexican pesos
Domestic senior			—				—				—				—				—				2,495				2,495				2,822				2,495				—
Interest rate			—				—				—				—				—				8.3	%			8.3	%			8.3	%			8.3	%			—
Subtotal			193				349				25				9				9				8,973				9,558				10,758				10,127				6,911

F-47

		Carrying Value at December 31, (1)																								Carrying Value 2012				Fair Value at December 31, 2012				Carrying Value
(In millions of Mexican pesos)		2013				2014				2015				2016				2017				2018 and Thereafter												December 31, 2011				January 1, 2011
Variable rate debt: U.S. dollars
Bank loans			195				2,600				5,195				—				—				—				7,990				8,008				251				222
Interest rate			0.6	%			0.9	%			0.9	%			—				—				—				0.9	%			0.9	%			0.7	%			0.6	%
Mexican pesos
Domestic senior notes			—				—				—				2,511				—				—				2,511				2,500				5,501				3,000
Interest rate			—				—				—				5.0	%			—				—				5.0	%			5.0	%			4.8	%			4.8	%
Bank loans			266				1,370				2,744				—				—				—				4,380				4,430				4,392				4,341
Interest rate			5.1	%			5.1	%			5.1	%			—				—				—				5.1	%			5.1	%			5.0	%			5.1	%
Argentine pesos
Bank loans			106				—				—				—				—				—				106				106				130				—
Interest rate			22.9	%			—				—				—				—				—				22.9	%			22.9	%			27.3	%			—
Brazilian reais
Obligation under finance leases			—				—				—				—				—				—				—				—				—				1
Interest rate
Colombian pesos			—				—				—				—				—				—				—				—				—				Various
Bank loans			—				990				—				—				—				—				990				990				936				995
Interest rate			—				6.8	%			—				—				—				—				6.8	%			6.8	%			6.1	%			4.7	%
Obligation under finance leases			185								—				—				—				—				185				186				386				—
Interest rate			6.8	%							—				—				—				—				6.8	%			6.8	%			6.6	%			—
Subtotal			752				4,960				7,939				2,511				—				—				16,162				16,220				11,596				8,559
Total non-current debt			945				5,309				7,964				2,520				9				8,973				25,720				26,978				21,723				15,470
Current portion of non-current debt			945				—				—				—				—				—				945				—				4,902				225
Total non-current debt		Ps.	—			Ps.	5,309			Ps.	7,964			Ps.	2,520			Ps.	9			Ps.	8,973			Ps.	24,775			Ps.	26,978			Ps.	16,821			Ps.	15,245

⁽¹⁾  All interest rates shown in this table are weighted average contractual annual rates.

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For the years ended December 31, 2012 and 2011, the interest expense related to the bank loans and notes payable is comprised as follows and included in the consolidated statement of income under the interest expense caption:

		2012				2011
Interest on debts and borrowings		Ps.	1,603			Ps.	1,497
Finance charges payable under finance leases			21				13
		Ps.	1,624			Ps.	1,510

Coca-Cola FEMSA has the following domestic senior notes: a) issued in the Mexican stock exchange: i) Ps. 2,500 (nominal amount) with a maturity date in 2016 and a variable interest rate and ii) Ps. 2,500 (nominal amount) with a maturity date in 2021 and fixed interest rate of 8.3%; b) issued in the NYSE a Yankee Bond of $500 with interest at a fixed rate of 4.6% and maturity date on February 15, 2020. Propimex, S. de R.L. de C.V. (subsidiary) guaranteed these notes. Presented in Note 29 is supplemental subsidiary guarantor consolidating financial information.

During 2012, Coca-Cola FEMSA contracted the following bilateral Bank loans denominated in U.S. dollars: i) $300 (nominal amount) with a maturity date in 2013 and variable interest rate, ii) $200 (nominal amount) with a maturity date in 2014 and variable interest rate and $400 (nominal amount) with a maturity date in 2015 and variable interest rate.

The Company has financing from different institutions under agreements that stipulate different restrictions and covenants, which mainly consist of maximum levels of leverage and capitalization as well as minimum consolidated net worth and debt and interest coverage ratios. As of the date of these consolidated financial statements, the Company was in compliance with all restrictions and covenants contained in its financing agreements.

F-49

note 19. Other Income and Expenses

		2012				2011
Other income:
Gain on sale of long-lived assets		Ps.	293			Ps.	376
Cancellation of contingencies			76				72
Other			176				237
		Ps.	545			Ps.	685
Other expenses:
Provisions for contingencies from past acquisitions		Ps.	157			Ps.	175
Loss on the retirement of long-lived assets			14				625
Loss on sale of long-lived assets			194				411
Other taxes from Colombia			5				180
Severance payments			342				236
Donations			148				120
Effect of new labor law in Venezuela (LOTTT) (See Note 16) (1)			381				—
Other			256				313
		Ps.	1,497			Ps.	2,060

⁽¹⁾  This amount relates to the past service cost related to post-employment by Ps. 381 as a result of the effect of the change in LOTTT and it is included in the consolidated income statement under the “Other expenses” caption.

note 20. Financial Instruments

Fair Value of Financial Instruments

The Company uses a three-level fair value hierarchy to prioritize the inputs used to measure the fair value of its financial instruments. The three input levels are described as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The Company measures the fair value of its financial assets and liabilities classified as level 2, applying the income approach method, which estimates the fair value based on expected cash flows discounted to net present value. The following table summarizes the Company’s financial assets and liabilities measured at fair value, as of December 31, 2012 and 2011 and as of January 1, 2011:

December 31, 2012

December 31, 2011

January 1, 2011

Level 1

Level 2

Level 1

Level 2

Level 1

Level 2

Derivative financial instrument (asset)

Ps.

—

Ps.

123

Ps.

—

Ps.

345

Ps.

—

Ps.

15

Derivative financial instrument (liability)

Ps.

200

Ps.

208

Ps.

—

Ps.

431

Ps.

—

Ps.

513

Trust assets of labor obligations

Ps.

1,131

Ps.

—

Ps.

1,087

Ps.

—

Ps.

774

Ps.

—

Marketable securities

Ps.

12

Ps.

—

Ps.

330

Ps.

—

Ps.

—

Ps.

—

The Company has no assets or liabilities classified as level 3 for fair value measurement.

F-50

Other Current Financial Assets

		December 31,				December 31,				January 1,
		2012				2011				2011
Restricted cash (1)		Ps.	1,465			Ps.	488			Ps.	394
Derivative financial instruments			58				345				15
		Ps.	1,523			Ps.	833			Ps.	409

⁽¹⁾  As of December 31, 2012 and 2011 and as of January 1, 2011, the Company has restricted cash as collateral against accounts payable in different currencies as follows:

Restricted cash

The Company has pledged part of its short-term deposits in order to fulfill the collateral requirements for the accounts payable in different currencies. As of December 31, 2012 and 2011 and as of January 1, 2011, the fair value of the short-term deposit pledged were:

		December 31, 2012				December 31, 2011				January 1, 2011
Venezuelan bolivars		Ps.	1,141			Ps.	324			Ps.	143
Brazilian reais			183				164				249
Argentinian pesos			—				—				2
Colombian pesos			141				—				—
		Ps.	1,465			Ps.	488			Ps.	394

Other non-current financial assets

		December 31, 2012				December 31, 2011				January 1, 2011
Non-current accounts receivable to Compañía Panameña de Bebidas, S.A.P.I. S.A. de C.V., due 2021		Ps.	828			Ps.	825			Ps.	—
Non-current accounts receivable			32				20				15
Derivative financial instruments			65				—				—
		Ps.	925			Ps.	845			Ps.	15

Other current financial liabilities

		December 31, 2012				December 31, 2011				January 1, 2011
Sundry creditors		Ps.	1,071			Ps.	1,025			Ps.	974
Derivative financial instruments			200				5				17
		Ps.	1,271			Ps.	1,030			Ps.	991

Other non-current financial liabilities

		December 31, 2012				December 31, 2011				January 1, 2011
Derivative financial instruments		Ps.	208			Ps.	426			Ps.	496
Security deposits			268				291				238
		Ps.	476			Ps.	717				734

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20.1 Total debt

The fair value of bank and syndicated loans is calculated based on the discounted value of contractual cash flows whereby the discount rate is estimated using rates currently offered for debt of similar amounts and maturities, which is considered to be level 2 in the fair value hierarchy. The fair value of the Company’s publicly traded debt is based on quoted market prices as of December 31, 2012 and 2011 and as of January 1, 2011, which is considered to be level 1 in the fair value hierarchy (See Note 18).

20.2 Interest rate swaps

The Company uses interest rate swaps to offset the interest rate risk associated with its borrowings, pursuant to which it pays amounts based on a fixed rate and receives amounts based on a floating rate. These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value. The fair value is estimated using formal technical models, the valuation method involves discounting to present value the expected cash flows of interest, calculated from the rate curve of the cash foreign currency, and expresses the net result in the reporting currency. Changes in fair value are recorded in cumulative other comprehensive income until such time as the hedged amount is recorded in the consolidated income statements of income.

At December 31, 2012, the Company has the following outstanding interest rate swap agreements:

						Fair Value
		Notional				(Liability)				Asset
Maturity Date		Amount				Dec. 31, 2012
2013		Ps.	1,287			Ps.	(8	)		Ps.	5
2014			575				(33	)			2
2015			1,963				(160	)			5

At December 31, 2011, the Company has the following outstanding interest rate swap agreements:

						Fair Value
		Notional				(Liability)				Asset
Maturity Date		Amount				Dec. 31, 2011
2012		Ps.	1,600				Ps.(16	)		Ps.	4
2013			1,312				(43	)			—
2014			575				(45	)			2
2015 to 2018			1,963				(189	)			5

The net effect of expired contracts treated as hedges are recognized as interest expense within the consolidated statements of income.

20.3 Forward agreements to purchase foreign currency

The Company has entered into forward agreements to reduce its exposure to the risk of exchange rate fluctuations between the Mexican peso and other currencies.

These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value which is determined based on prevailing market exchange rates to end the contracts at the end of the period. The price agreed in the instrument is compared to the current price of the market forward currency and is discounted to present value of the rate curve of the relevant currency. Changes in the fair value of these forwards are recorded as part of cumulative other comprehensive income net of taxes. Net gain/loss on expired contracts is recognized as part of foreign exchange in the consolidated statements of income.

Net changes in the fair value of forward agreements that do not meet hedging criteria for hedge accounting are recorded in the consolidated statements of income under the caption “market value gain/(loss) on financial instruments”.

At December 31, 2012, the Company had the following outstanding forward agreements to purchase foreign currency:

Maturity Date		Notional Amount				Fair Value Asset Dec. 31, 2012
2013		Ps.	1,118			Ps.	11

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At December 31, 2011, the Company had the following outstanding forward agreements to purchase foreign currency:

Maturity Date		Notional Amount				Fair Value Asset Dec. 31, 2011
2012		Ps.	1,161			Ps.	33

20.4 Options to purchase foreign currency

The Company has entered into a collar strategy to reduce its exposure to the risk of exchange rate fluctuations. A collar is a strategy that limits the exposure to the risk of exchange rate fluctuations in a similar way as a forward agreement.

These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value which is determined based on prevailing market exchange rates to terminate the contracts at the end of the period. They are valued based on the Black & Scholes model, doing a split in the intrinsic and extrinsic value. Changes in the fair value of these options, corresponding to the intrinsic value are initially recorded as part of cumulative other comprehensive income, net of assets. Changes in the fair value, corresponding to the extrinsic value are recorded in the consolidated statements of income under the caption “market value gain/ (loss) on financial instruments,” as part of the consolidated net income. Net gain/(loss) on expired contracts is recognized as part of cost of goods sold.

At December 31, 2012, the Company had the following outstanding collars to purchase foreign currency (composed of a call and a put option with different strike levels with the same notional amount and maturity):

Maturity Date		Notional Amount				Fair Value Asset Dec. 31, 2012
2013		Ps.	982			Ps.	47

At December 31, 2011, the Company had the following outstanding collars to purchase foreign currency (composed of a call and a put option with different strike levels with the same notional amount and maturity):

Maturity Date		Notional Amount				Fair Value Asset Dec. 31, 2011
2012		Ps.	1,901			Ps.	301

20.5 Cross-currency swaps

The Company has contracted for a number of cross-currency swaps to reduce its exposure to risks of exchange rate and interest rate fluctuations associated with its borrowings denominated in U.S. dollars and other foreign currencies. These instruments are recognized in the consolidated statement of financial position at their estimated fair value which is estimated using formal technical models. The valuation method involves discounting to present value the expected cash flows of interest, calculated from the rate curve of the cash foreign currency, and expresses the net result in the reporting currency. These contracts are designated as financial instruments at fair value through profit or loss. The fair values changes related to those cross currency swaps are recorded under the caption “market value gain/(loss) on financial instruments”, net of changes related to the non-current liability, within the consolidated statements of income.

At December 31, 2012, the Company had the following outstanding cross currency swap agreements:

Fair Value

Notional

(Liability)

Asset

Maturity Date

Amount

Dec. 31, 2012

2014

Ps.

2,553

Ps.

(7)

Ps.

53

At December 31, 2011, the Company had the following outstanding cross currency swap agreements:

						Fair Value
Maturity Date		Notional Amount				(Liability) Dec. 31, 2011
2012		Ps.	357			Ps.	(131	)

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20.6 Commodity price contracts

The Company has entered into various commodity price contracts to reduce its exposure to the risk of fluctuation in the costs of certain raw material. These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value based on the market valuations to end the contracts at the closing date of the period. Commodity price contracts are valued by the Company, based on publicly quoted prices in futures market of Intercontinental Exchange. Changes in the fair value were recorded as part of cumulative other comprehensive income, net of taxes.

The fair value of expired commodity price contract was recorded in cost of sales where the hedged item was recorded.

At December 31, 2012, the Company had the following sugar price contracts:

						Fair Value
Maturity Date		Notional Amount				(Liability) Dec. 31, 2012
2013			Ps.1,567			Ps.	(151	)
2014			856				(34	)
2015			213				(10	)

At December 31, 2012, the Company had the following aluminum price contracts:

						Fair Value
Maturity Date		Notional Amount				(Liability) Dec. 31, 2012
2013		Ps.	335			Ps.	(5	)

At December 31, 2011, the Company had the following commodity price contracts:

						Fair Value
Maturity Date		Notional Amount				(Liability) Dec. 31, 2011
2012		Ps.	427			Ps.	(14	)
2013			327				(5	)

20.7 Net effects of expired contracts that met hedging criteria

Type of Derivatives		Impact in Consolidated Income Statement		2012				2011
Interest rate swaps		Interest expense		Ps.	147			Ps.	120
Commodity price contracts		Cost of goods sold			(6	)			(257	)

20.8 Net effect of changes in fair value of derivative financial instruments that did not meet the hedging criteria for accounting purposes

Type of Derivatives		Impact in Consolidated Income Statement		2012				2011
Options to purchase foreign currency		Market value gain (loss) on financial instruments		Ps.	30			Ps.	(6	)
Cross-currency swaps		Market value gain (loss) on financial instruments			—				(95	)

20.9 Net effect of expired contracts that did not meet the hedging criteria for accounting purposes

Type of Derivatives		Impact in Consolidated Income Statement		2012				2011
Options to purchase foreign currency		Cost of goods sold		Ps.	(1	)		Ps.	—
Cross-currency swaps		Market value gain (loss) on financial instruments			(43	)			239

F-54

20.10 Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and commodity prices. The Company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk, and commodity prices risk including:

• Forward Agreements to Purchase Foreign Currency in order to reduce its exposure to the risk of exchange rate fluctuations.

• Cross-Currency Swaps in order to reduce its exposure to the risk of exchange rate fluctuations.

• Commodity price contracts in order to reduce its exposure to the risk of fluctuation in the costs of certain raw materials.

The Company tracks the fair value (mark to market) of its derivative financial instruments and its possible changes using scenario analyses.

The following disclosures provide a sensitivity analysis of the market risks, management considered to be reasonably possible at the end of the reporting period, which the Company is exposed to as it relates to foreign exchange rates and commodity prices, which it considers in its existing hedging strategy:

Forward Agreements to Purchase Foreign Currency		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			(11	%)		Ps.	(122	)		Ps.	—
2011			(15	%)		Ps.	(94	)		Ps.	(53	)
Options to Purchase Foreign Currency		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			(11	%)		Ps.	(82	)		Ps.	—
2011			(15	%)		Ps.	(258	)		Ps.	—
Interest Rate Swaps		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			(50	%)		Ps.	(28	)		Ps.	—
2011			(50	%)		Ps.	(69	)		Ps.	—
Cross Currency Swaps		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			(11	%)		Ps.	(234	)		Ps.	—
2011			(15	%)		Ps	—			Ps.	(74	)
Sugar Price Contracts		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			(30	%)		Ps.	(732	)		Ps.	—
2011			(40	%)		Ps.	(294	)		Ps.	—
Alluminum Price Contracts		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			(20	%)		Ps.	(66	)		Ps.	—

20.11 Interest rate risk

The Company is exposed to interest rate risk because it and its subsidiaries borrow funds at both fixed and variable interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and variable rate borrowings, and by the use of the different derivative financial instruments. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.

F-55

The following disclosures provide a sensitivity analysis of the interest rate risks, management considered to be reasonably possible at the end of the reporting period, which the Company is exposed to as it relates to its fixed and floating rate borrowings, which considers its existing hedging strategy:

Interest Rate Risk		Change in U.S.$ Rate				Effect on Equity				Effect on Profit or Loss
2012			+100 bps			Ps.	—			Ps.	(74	)
2011			+100 bps			Ps.	—			Ps.	(92	)

20.12 Liquidity risk

The Company’s principal source of liquidity has generally been cash generated from its operations. A significant majority of the Company’s sales are on a short-term credit basis. The Company has traditionally been able to rely on cash generated from operations to fund its capital requirements and its capital expenditures. The Company’s working capital benefits from the fact that most of its sales are made on a cash basis, while it’s generally pays its suppliers on credit. In recent periods, the Company has mainly used cash generated operations to fund acquisitions. The Company has also used a combination of borrowings from Mexican and international banks and issuances in the Mexican and international capital markets.

Ultimate responsibility for liquidity risk management rests with the Company’s board of directors, which has established an appropriate liquidity risk management framework for the evaluation of the Company’s short-, medium- and long-term funding and liquidity requirements. The Company manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecasted and actual cash flows and by maintaining a conservative debt maturity profile.

The Company has access to credit from national and international bank institutions in order to face treasury needs; besides, the Company has the highest rating for Mexican companies (AAA) given by independent rating agencies, allowing the Company to evaluate capital markets in case it needs resources.

As part of the Company’s financing policy, management expects to continue financing its liquidity needs with cash from operations. Nonetheless, as a result of regulations in certain countries in which the Company operates, it may not be beneficial or, as in the case of exchange controls in Venezuela, practicable to remit cash generated in local operations to fund cash requirements in other countries. Exchange controls like those in Venezuela may also increase the real price of remitting cash from operations to fund debt requirements in other countries. In the event that cash from operations in these countries is not sufficient to fund future working capital requirements and capital expenditures, management may decide, or be required, to fund cash requirements in these countries through local borrowings rather than remitting funds another country. In addition, the Company’s liquidity in Venezuela could be affected by changes in the rules applicable to exchange rates as well as other regulations, such as exchange controls. In the future management may finance our working capital and capital expenditure needs with short-term or other borrowings.

The Company’s management continuously evaluates opportunities to pursue acquisitions or engage in strategic transactions. The Company would expect to finance any significant future transactions with a combination of cash from operations, long-term indebtedness and capital stock.

See Note 18 for a disclosure of the Company’s maturity dates associated with its non-current financial liabilities as of December 31, 2012.

The following table reflects all contractually fixed and variable pay-offs for settlement, repayments and interest resulting from recognized financial liabilities. It includes expected gross cash outflows from derivative financial liabilities that are in place as per December 31, 2012.

F-56

Such expected net cash outflows are determined based on each particular settlement date of an instrument. The amounts disclosed are undiscounted net cash outflows for the respective upcoming fiscal years, based on the earliest date on which the Company could be required to pay. Cash outflows for financial liabilities (including interest) without fixed amount or timing are based on economic conditions (like interest rates and foreign exchange rates) existing at December 31, 2012.

(In millions of Ps)		2013				2014				2015				2016				2017				2018 and thereafter
Non-derivative financial liabilities:
Notes and bonds		Ps.	619			Ps.	619			Ps.	619			Ps.	3,049			Ps.	498			Ps.	10,260
Loans from banks			5,445				5,683				8,157				10				10				22
Obligations under finance leases			195				4				3				—				—				—
Derivatives financial liabilities			184				76				68				—				—				—

The Company generally makes payments associated with its non-current financial liabilities with cash generated from its operations.

20.13 Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses other publicly available financial information and its own trading records to rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions is spread amongst approved counterparties.

The Company has a high receivable turnover; hence management believes credit risk is minimal due to the nature of its businesses, which have a large portion of their sales settled in cash.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The Company manages the credit risk related to its derivative portfolio by only entering into transactions with reputable and credit-worthy counterparties as well as by maintaining a Credit Support Annex (CSA) that establishes margin requirements. As of December 31, 2012, the Company concluded that the maximum exposure to credit risk related with derivative financial instruments is not significant given the high credit rating of its counterparties.

note 21. Non-Controlling Interest in Consolidated Subsidiaries

An analysis of Coca-Cola FEMSA’s non-controlling interest in its consolidated subsidiaries for the years ended December 31, 2012 and 2011 and as of January 1, 2011 is as follows:

		December 31, 2012				December 31, 2011				January 1, 2011
México		Ps.	2,782			Ps.	2,568	(1)		Ps.	2,114
Colombia			24				21				20
Brazil			373				464				426
		Ps.	3,179			Ps.	3,053			Ps.	2,560

⁽¹⁾  Changes compared to the prior year resulted from the acquisitions of Grupo Tampico and CIMSA (see Note 4).

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The changes in the Coca-Cola FEMSA’s non-controlling interest were as follows:

		December 31, 2012				December 31, 2011
Initial balance		Ps.	3,053			Ps.	2,560
Net income of non controlling interest			565				551
Exchange differences on translation of foreign operations			(307	)			—
Remeasurements of the net defined employee benefit liability			6				8
Valuation of the effective portion of derivative financial instruments, net of taxes			(22	)			(30	)
Acquisitions effects			(7	)			(28	)
Dividends			(109	)			(8	)
Ending balance		Ps.	3,179			Ps.	3,053

Non-controlling cumulative translation adjustment is comprised as follows:

		December 31, 2012				December 31, 2011
Exchange differences on translation of foreign operations		Ps.	(307	)		Ps.	—
Remeasurement of the net defined employee benefit liability			6				8
Valuation of the effective portion of derivative financial instruments, net of taxes			(22	)			(30	)
		Ps.	(323	)		Ps.	(22	)

note 22. Equity

22.1 Equity accounts

As of December 31, 2012, the capital stock of Coca-Cola FEMSA is represented by 2,030,544,304 common shares, with no par value. Fixed capital stock is Ps. 821 (nominal value) and variable capital is unlimited.

The characteristics of the common shares are as follows:

• Series “A” and series “D” shares are ordinary, have unlimited voting rights, are subject to transfer restrictions, and at all times must represent a minimum of 75% of subscribed capital stock;

• Series “A” shares may only be acquired by Mexican individuals and may not represent less than 51% of the ordinary shares.

• Series “D” shares have no foreign ownership restrictions and may not represent more than 49% of the ordinary shares.

• Series “L” shares have no foreign ownership restrictions and have limited voting rights and other corporate rights.

As of December 31, 2012 and 2011 and as of January 1, 2011, the number of each share series representing Coca-Cola FEMSA’s capital stock is comprised as follows:

		Thousands of Shares
Series of shares		December 31, 2012				December 31, 2011				January 1 2011
“A”			992,078				992,078				992,078
“D”			583,546				583,546				583,546
“L”			454,920				409,830				270,906
			2,030,544				1,985,454				1,846,530

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The changes in the shares are as follows:

		Thousands of Shares
		December 31, 2012				December 31, 2011				January 1 2011
Initial shares			1,985,454				1,846,530				1,846,530
Shares issuance			45,090				138,924				—
Final shares			2,030,544				1,985,454				1,846,530

The net income of the Company is subject to the legal requirement that 5% thereof be transferred to a legal reserve until such reserve equals 20% of capital stock at nominal value. This reserve may not be distributed to shareholders during the existence of the Company. As of December 31, 2012 and 2011 and January 1, 2011, this reserve is Ps. 164 for the three years.

Retained earnings and other reserves distributed as dividends, as well as the effects derived from capital reductions, are subject to income tax at the rate in effect at the date of distribution, except for restated shareholder contributions and distributions made from consolidated taxable income, denominated “Cuenta de Utilidad Fiscal Neta” (“CUFIN”).

Dividends paid in excess of CUFIN are subject to income tax at a grossed-up rate based on the current statutory rate. Since 2003, this tax may be credited against the income tax of the year in which the dividends are paid, and in the following two years against the income tax and estimated tax payments. As of December 31, 2012, the Company’s balances of CUFIN amounted to Ps. 165.

For the years ended December 31, 2012 and 2011 the dividends declared and paid per share by the Company are as follows:

Series of shares		December 31, 2012				December 31, 2011
“A”		Ps.	2,747			Ps.	2,341
“D”			1,617				1,377
“L”			1,260				640
		Ps.	5,624	(1)		Ps.	4,358

⁽¹⁾  At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 20, 2012, the shareholders declared a dividend of Ps. 5,625 that was paid in May 2012. Represents a dividend of Ps. 2.77 per each ordinary share.

22.2 Capital management

The Company manages its capital to ensure that its subsidiaries will be able to continue as going concerns while maximizing the return to shareholders through the optimization of its debt and equity balance in order to obtain the lowest cost of capital available. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2012 and 2011.

The Company is not subject to any externally imposed capital requirements, other than the legal reserve (see Note 22.1).

The Company’s finance committee reviews the capital structure of the Company on a quarterly basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. In conjunction with this objective, the Company seeks to maintain the highest credit rating both nationally and internationally and is currently rated AAA in Mexico and BBB in the United States, which requires it to have a debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio lower than 2. As a result, prior to entering into new business ventures, acquisitions or divestures, management evaluates the optimal ratio of debt to EBITDA in order to maintain its high credit rating.

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note 23. Earnings per Share

Basic earnings per share amounts are calculated by dividing consolidated net income for the year attributable to equity holders of the parent by the weighted average number of shares outstanding during the year.

Basic earnings per share amounts are as follows:

		2012												2011
		Per Series “A” Shares				Per Series “D” Shares				Per Series “L” Shares				Per Series “A” Shares				Per Series “D” Shares				Per Series “L” Shares
Consolidated net income		Ps.	6,842			Ps.	4,025			Ps.	3,031			Ps.	5,963			Ps.	3,507			Ps.	1,743
Weighted average number of shares for basic earnings per share (millions of shares)			992				584				439				992				584				290

note 24. Income Taxes

24.1 Income Tax

The major components of income tax expense for the years ended December 31, 2012 and 2011 are:

		2012				2011
Current tax expense:
Current year		Ps.	5,371			Ps.	5,652
Deferred tax expense:			—				—
Origination and reversal of temporary differences			606				7
Utilization of tax losses recognized			297				8
Total deferred tax expense			903				15
Total income tax expense in consolidated net income		Ps.	6,274			Ps.	5,667

2012		Mexico				Foreign				Total
Current tax expense:
Current year		Ps.	3,030			Ps.	2,341			Ps.	5,371
Deferred tax expense:
Origination and reversal of temporary differences			(318	)			924				606
Utilization of tax losses recognized			214				83				297
Total deferred tax expense (benefit)			(104	)			1,007				903
Total income tax expense in consolidated net income		Ps.	2,926			Ps.	3,348			Ps.	6,274

2011		Mexico				Foreign				Total
Current tax expense:
Current year		Ps.	2,011			Ps.	3,641			Ps.	5,652
Deferred tax expense:
Origination and reversal of temporary differences			(132	)			139				7
Utilization/(benefit) of tax losses recognized			(32	)			40				8
Total deferred tax expense (benefit)			(164	)			179				15
Total income tax expense in consolidated net income		Ps.	1,847			Ps.	3,820			Ps.	5,667

Recognized in Consolidated Statement of Other Comprehensive Income (OCI)

Income tax related to items charged or recognized directly in OCI during the year:		December 31, 2012				December 31, 2011
Unrealized gain on cash flow hedges		Ps.	(95	)		Ps.	(15	)
Unrealized gain on available for sale securities			(2	)			3
Remeasurements of the net defined benefit liability			(62	)			3
Total income tax recognized in OCI		Ps.	(159	)		Ps.	(9	)

F-60

Balance of income tax of Other Comprehensive Income (OCI) as of:

Income tax related to items charged or recognized directly in OCI as of year end:		December 31, 2012				December 31, 2011				January 31, 2011
Unrealized gain on cash flow hedges		Ps.	(67	)		Ps.	28			Ps.	48
Unrealized gain on available for sale securities			1				2				—
Remeasurements of the net defined benefit liability			(120	)			(59	)			(68	)
Balance of income tax in OCI		Ps.	(186	)		Ps.	(29	)		Ps.	(20	)

A reconciliation between tax expense and income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method multiplied by the Mexican domestic tax rate for the years ended December 31, 2012 and 2011 is as follows:

		2012				2011
Mexican statutory income tax rate			30	%			30	%
Income tax from prior years			(0.75	)			0.48
Gain on monetary position for subsidiaries in hyperinflationary economies			—				(0.11	)
Annual inflation tax adjustment			0.24				0.99
Non-deductible expenses			0.61				0.97
Non-taxable income			(0.24	)			(0.46	)
Income taxed at a rate other than the Mexican statutory rate			1.59				2.31
Effect of restatement of tax values			(1.04	)			(0.99	)
Effect of change in statutory rate			0.14				(0.03	)
Other			0.67				0.52
			31.22	%			33.68	%

Deferred income tax

An analysis of the temporary differences giving rise to deferred income tax liabilities (assets) is as follows:

		December 31,				December 31,				January 1,
Consolidated Statement of Financial Position		2012				2011				2011				2012				2011
Allowance for doubtful accounts		Ps.	(109	)		Ps	(94	)		Ps.	(65	)		Ps.	(14	)		Ps.	(21	)
Inventories			18				(58	)			26				76				(86	)
Prepaid expenses			(10	)			108				37				(118	)			77
Property, plant and equipment, net			821				925				502				(53	)			148
Investments in associates companies and joint ventures			(3	)			(10	)			(7	)			7				(3	)
Other assets			(304	)			(871	)			(748	)			584				(116	)
Finite useful lived intangible assets			112				146				88				(34	)			53
Indefinite useful lived intangible assets			61				15				(24	)			46				39
Post-employment and other non-current employee benefits			(308	)			(290	)			(243	)			26				(32	)
Derivative financial instruments			(12	)			2				7				(14	)			(5	)
Contingencies			(620	)			(711	)			(703	)			91				(8	)
Employee profit sharing payable			(146	)			(129	)			(78	)			(9	)			(32	)
Tax loss carryforwards			(24	)			(339	)			(346	)			297				8
Cumulative other comprehensive income			(186	)			(29	)			(20	)			—				—
Other liabilities			113				97				105				18				(7	)
Deferred tax expense (income)														Ps.	903			Ps.	15
Deferred income taxes, net			(597	)			(1,238	)			(1,469	)
Deferred tax, asset			(1,576	)			(1,944	)			(1,790	)
Deferred tax, liability		Ps.	979			Ps.	706				321

F-61

The changes in the balance of the net deferred income tax liability are as follows:

		2012				2011
Initial balance		Ps.	(1,238	)		Ps.	(1,469	)
Deferred tax provision for the year			876				20
Change in the statutory rate			27				(5	)
Acquisition of subsidiaries, see Note 4
Effects in equity:			(77	)			218
Unrealized gain on cash flow hedges			(95	)			(17	)
Unrealized gain on available for sale securities			(2	)			5
Cumulative translation adjustment			(17	)			—
Remeasurements of the net defined benefit liability			(62	)			3
Restatement effect of beginning balances associated with hyperinflationary economies			(9	)			7
Ending balance		Ps.	(597	)		Ps.	(1,238	)

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes levied by the same tax authority.

Tax Loss Carryforwards

The subsidiaries in Mexico and Brazil have tax loss carryforwards. The tax effect net of consolidation benefits and their years of expiration are as follows:

		Tax Loss Year Carryforwards
2014		Ps.	2
2015			3
2017			2
2019			1
2020			1
2022 and thereafter			20
No expiration (Brazil)			46
		Ps.	75

The changes in the balance of tax loss carryforwards and recoverable tax on assets are as follows:

		2012				2011
Initial balance		Ps.	1,087			Ps.	1,094
Additions			852				121
Usage of tax losses			(1,813	)			(154	)
Translation effect of beginning balances			(51	)			26
Ending balance		Ps.	75			Ps.	1,087

There are no income tax consequences associated with the payment of dividends in either 2012 or 2011 by the Company to its shareholders.

The Company has determined that undistributed profits of its subsidiaries, joint ventures or associates will not be distributed in the foreseeable future. The temporary differences associated with investments in subsidiaries, associates and joint ventures that have not been recognised, aggregate to Ps. 7,501 (December 31, 2011: Ps. 6,157 and, January 1 2011: Ps. 4,615).

On January 1, 2013 an amendment to the Mexican income tax law became effective. The most important effects in the Company involve changes in the income tax rate, which shall be of 30% in 2013, 29% in 2014, and 28% as of 2015 and thereafter. The deferred income taxes as of December 31, 2012 includes the effect of this change.

F-62

In Colombia, there is a new tax reform (Law 1607) which was enacted on December 26, 2012 and will take effect on fiscal year 2013. The main changes in this legislation include a reduction in the corporate tax rate from 33% to 25% and the introduction of a new income tax (CREE tax) of 9% of taxable income (taxable base) and 8% starting 2016. Tax losses and excess presumptive income, among other items, may not be applied against the CREE tax base. The payable tax for a taxpayer in a given year is the higher of CREE or income tax computed under the Colombian income tax law.

24.2 Other taxes

The operations in Guatemala, Nicaragua, Colombia and Argentina are subject to a minimum tax, which is based primary on a percentage of assets. Any payments are recoverable in future years, under certain conditions.

24.3 Flat-rate business tax (“IETU”)

Effective in 2008, IETU came into effect in Mexico and replaced Asset Tax. IETU essentially work as a minimum corporate income tax, except that amounts paid cannot be creditable against future income tax payments. The payable tax for a taxpayer in a given year is the higher of IETU or income tax computed under the Mexican income tax law. The IETU rate is 17.5%. IETU is computed on a cash-flow basis, which means the tax base is equal to cash proceeds, less certain deductions and credits. In the case of export sales, where cash on the receivable has not been collected within 12 months, income is deemed received at the end of the 12-month period. In addition, unlike the Income Tax Law, which allows for tax consolidation, companies that incur IETU are required to file their returns on an individual basis.

note 25. Other Liabilities, Provisions and Commitments

25.1 Provisions and other liabilities

		December 31, 2012				December 31, 2011				January 1, 2011
Provisions		Ps.	2,134			Ps.	2,284			Ps.	2,153
Taxes payable			244				231				316
Others			929				756				945
Total		Ps.	3,307			Ps.	3,271			Ps	3,414

25.2 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. The following table presents the nature and amount of the loss contingencies recorded as of December 31, 2012 and 2011 and as of January 1, 2011:

		December 31, 2012				December 31, 2011				January 1, 2011
Indirect taxes		Ps.	921			Ps.	925			Ps.	799
Labor			934				1,128				1,134
Legal			279				231				220
		Ps.	2,134			Ps.	2,284			Ps.	2,153

25.3. Changes in the balance of provisions recorded

25.3.1 Indirect taxes

		December 31, 2012				December 31, 2011
Initial balance		Ps.	925			Ps.	799
Penalties and other charges			107				16
New contingencies			—				7
Cancellation and expiration			(124	)			(42	)
Contingencies added in business combinations			117				170
Payments			(15	)			(102	)
Restatement of the beginning balance of subsidiaries in hyperinflationary economies			(89	)			77
Ending balance		Ps.	921			Ps.	925

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25.3.2 Labor

		December 31, 2012				December 31, 2011
Initial balance		Ps.	1,128			Ps.	1,134
Penalties and other charges			189				105
New contingencies			134				122
Cancellation and expiration			(359	)			(261	)
Contingencies added in business combinations			15				8
Payments			(91	)			(71	)
Restatement of the beginning balance of subsidiaries in hyperinflationary economies			(82	)			91
Ending balance		Ps.	934			Ps.	1,128

A roll forward for legal contingencies is not disclosed because the amounts are not considered to be material.

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.

25.4 Unsettled lawsuits

The Company has entered into several proceedings with its labor unions, tax authorities and other parties that primarily involve Coca-Cola FEMSA. These proceedings have resulted in the ordinary course of business and are common to the industry in which the Company operates. Such contingencies were classified by the Company as less than probable, the estimated amount of these lawsuits is Ps. 7,929, 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.

In recent years in its Mexican, Costa Rican 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.

25.5 Collateralized contingencies

As is customary in Brazil, the Company has been required by the tax authorities there to collateralize tax contingencies currently in litigation amounting to Ps. 2,164, Ps. 2,418 and Ps. 2,292 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively, by pledging fixed assets and entering into available lines of credit covering the contingencies.

25.6 Commitments

As of December 31, 2012, the Company has contractual commitments for finance leases for machinery and transport equipment and operating lease for the rental of production machinery and equipment, distribution and computer equipment.

The contractual maturities of the operating lease commitments by currency, expressed in Mexican pesos as of December 31, 2012, are as follows:

		Mexican pesos				U.S. dollars				Other
Not later than 1 year		Ps.	183			$	2			$	94
Later than 1 year and not later than 5 years			812				1				85
Later than 5 years			460				—				—
Total		Ps.	1,455			$	3			$	179

Rental expense charged to consolidated net income was Ps. 1,019 and Ps. 850 for the years ended December 31, 2012 and 2011, respectively.

F-64

Future minimum lease payments under finance leases with the present value of the net minimum lease payments are as follows:

		2012				Present				2011				Present
		Minimum				value of				Minimum				value of
		payments				payments				payments				payments
Not later than 1 year		Ps.	195			Ps.	189			Ps.	252			Ps.	231
Later than 1 year and not later than 5 years			8				7				196				190
Later than 5 years			—				—				—				—
Total minimum lease payments			203				196				448				421
Less amount representing finance charges			7				—				27				—
Present value of minimum lease payments		Ps.	196							Ps.	421

The Company has firm commitments for the purchase of property, plant and equipment of Ps. 27 as December 31, 2012.

25.7 Restructuring provision

Coca-Cola FEMSA recorded a restructuring provision. This provision relates principally to reorganization in the structure of the Company. The restructuring plan was drawn up and announced to the employees of the Company in 2011 when the provision was recognized in its consolidated financial statements. The restructuring of the Company is expected to be completed by 2013 and it is presented in current liabilities within accounts payable caption in the consolidated statement of financial position.

		December 31, 2012				December 31, 2011
Initial balance		Ps.	153			Ps.	230
New			191				46
Payments			(254	)			(74	)
Cancellation			—				(49	)
Ending balance		Ps.	90			Ps.	153

note 26. Information by Segment

The Company’s Chief Operating Decision Maker (“CDOM”) is the Chief Executive Officer. The Company aggregated operating segments into the following reporting segments for the purposes of its consolidated financial statements: (i) Mexico and Central America division (comprising the following countries: Mexico, Guatemala, Nicaragua, Costa Rica and Panama) and (ii) the South America division (comprising the following countries: Brazil, Argentina, Colombia and Venezuela). Venezuela operates in an economy with exchange control and hyper-inflation; and as a result, IAS 29, “Financial Reporting in Hyperinflationary Economies” does not allow its aggregation into the South America segment. The Company is of the view that the quantitative and qualitative aspects of the aggregated operating segments are similar in nature for all periods presented.

F-65

Segment disclosure for the Company is as follows:

2012		Mexico and Central America (1)				South America (2)				Venezuela				Consolidated
Total revenues		Ps.	66,141			Ps.	54,821			Ps.	26,777			Ps.	147,739
Intercompany revenue			2,876				4,008				—				6,884
Gross profit			31,643				23,667				13,320				68,630
Income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method			9,577				7,353				3,061				19,991
Depreciation and amortization (3)			3,037				1,906				749				5,692
Non cash items other than depreciation and amortization (3)			15				150				110				275
Equity in earnings of associated companies and joint ventures			55				125				—				180
Total assets			108,768				40,046				17,289				166,103
Investments in associate companies and joint ventures			4,002				1,349				1				5,352
Total liabilities			42,387				13,161				5,727				61,275
Capital expenditures, net (4)			5,350				3,878				1,031				10,259
2011
Total revenues		Ps.	51,662			Ps.	51,451			Ps.	20,111			Ps.	123,224
Intercompany revenue			2,105				3,920				—				6,025
Gross profit			24,576				22,205				9,750				56,531
Income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method			7,279				6,912				2,603				16,794
Depreciation and amortization			2,053				1,623				543				4,219
Non-cash items other than depreciation and amortization (3)			64				442				106				612
Equity in earnings of associated companies and joint ventures			(15	)			101				—				86
Total assets			86,497				42,550				12,691				141,738
Investments in associate companies and joint ventures			2,217				1,438				1				3,656
Total liabilities			32,123				13,074				3,460				48,657
Capital expenditures, net (4)			4,120				3,109				633				7,862
January 1, 2011		Mexico and Central America (1)				South America (2)				Venezuela				Consolidated
Total assets		Ps.	59,581			Ps.	37,003			Ps.	7,743			Ps.	104,327
Investment in associated companies and joint ventures			812				1,295				1				2,108
Total liabilities			23,722				12,758				2,412				38,892

⁽¹⁾  Central America includes Guatemala, Nicaragua, Costa Rica and Panama. Domestic (Mexico only) revenues were Ps. 57,945 and Ps. 44,560 during the years ended December 31, 2012 and 2011, respectively. Domestic (Mexico only) total assets were Ps. 101,635, Ps. 79,283 and Ps. 53,483 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively. Domestic (Mexico only) total liabilities were Ps. 40,661, Ps. 30,418 and Ps. 22,418 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively.

⁽²⁾  South America includes Brazil, Argentina, Colombia and Venezuela, although Venezuela is shown separately above. South America revenues include Brazilian revenues of Ps. 30,578 and Ps. 31,131 during the years ended December 31, 2012 and 2011, respectively. Brazilian total assets were Ps. 21,955, Ps. 26,060 and Ps. 22,866 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively. Brazilian total liabilities Ps. 6,544, Ps. 6,478 and Ps. 6,625 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively. South America revenues also include Colombian revenues of Ps. 13,973 and Ps. 11,921 during the years ended December 31, 2012 and 2011, respectively. Colombian total assets were Ps. 14,557, Ps. 13,166 and Ps. 11,427 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively. Colombian total liabilities were Ps. 3,885, Ps. 3,794 and Ps. 3,714 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively. South America revenues also include Argentine revenues of Ps. 10,270 and Ps. 8,399 during the years ended December 31, 2012 and 2011, respectively. Argentine total assets were Ps. 3,534, Ps. 3,324 and Ps. 2,710 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively. Argentine total liabilities were Ps. 2,732, Ps. 2,802 and Ps. 2,419 as of December 31, 2012 and 2011 and as of January 1, 2011, respectively.

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⁽³⁾  Includes foreign exchange loss, net; gain on monetary position, net; and market value (gain) loss on financial instruments.

⁽⁴⁾  Includes acquisitions and disposals of property, plant and equipment, intangible assets and other long-lived assets.

note 27. First Time Adoption of IFRS

27.1 Basis for the Transition to IFRS

27.1.1 Application of IFRS 1, First-time Adoption of International Financial Reporting Standards

For preparing the consolidated financial statements under IFRS, the Company applied the mandatory exceptions and utilized certain optional exemptions set forth in IFRS 1, related to the complete retroactive application of IFRS.

27.1.2 Optional exemptions used by the Company

The Company applied the following optional exemptions:

a) Business Combinations and Acquisitions of Associates and Joint Ventures:

The Company elected not to apply IFRS 3 Business Combinations, to business combinations as well as to acquisitions of associates and joint ventures prior to its transition date.

b) Deemed Cost:

An entity may elect to measure an item or all of property, plant and equipment at the Transition Date at its fair value and use that fair value as its deemed cost at that date. In addition, a first-time adopter may elect to use a previous GAAP’s revaluation of an item of property, plant and equipment at, or before, of the Transition Date as deemed cost at the date of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to: (i) fair value; or (ii) cost or depreciated cost in accordance with IFRS, adjusted to reflect, changes in a general or specific price index.

The Company has presented its property, plant, and equipment and its intangible assets at IFRS historical cost in all countries.

In Mexico, the Company ceased to record inflationary adjustments to its property, plant and equipment on December 31, 2007, due to both changes to Mexican FRS in effect at the time, and the fact that the Mexican peso was not deemed to be a currency of an inflationary economy as of that date. According to IAS 29, Financial Reporting in Hyperinflationary Economies, the last hyperinflationary period for the Mexican peso was in 1998. As a result, the Company eliminated the cumulative inflation recognized within long-lived assets for the Company’s Mexican operations, based on Mexican FRS during the years 1999 through 2007, which were not deemed hyperinflationary for IFRS purposes.

In Venezuela this IFRS historical cost represents actual historical cost in the year of acquisition, indexed for inflation in a hyper-inflationary economy based on the provisions of IAS 29.

The Company applied the exemption to not recalculate retroactively the translation differences in the financial statements of foreign operations; accordingly, at the transition date, it reset the cumulative translation effect to retained earnings. The application of this exemption is detailed in Note 27.2.4 (h).

c) Borrowing Costs:

The Company began capitalizing its borrowing costs at the transition date in accordance with IAS 23, Borrowing Costs. The borrowing costs included previously under Mexican FRS were subject to the deemed cost exemption mentioned in b) above.

27.1.3 Mandatory exceptions used by the Company

The Company applied the following mandatory exceptions set forth in IFRS 1, which do not allow retroactive application to the requirements set forth in such standards:

a) Derecognition of Financial Assets and Liabilities:

The Company applied the derecognition rules of IAS 39, Financial Instruments: Recognition and Measurement prospectively for transactions occurring on or after the date of transition. As a result, there was no impact in the Company’s consolidated financial statements due to the application of this exception.

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b) Hedge Accounting:

The Company measured at fair value all derivative financial instruments and hedging relationships designated and documented effectively as accounting hedges as required by IAS 39 as of the transition date. As a result, there was no impact in the Company’s consolidated financial statements due to the application of this exception.

c) Non-controlling Interest:

The Company applied the requirements in IAS 27, Consolidated and Separate Financial Statements related to non-controlling interests prospectively beginning on the transition date. As a result, there was no impact in the Company’s consolidated financial statements due to the application of this exception.

d) Accounting Estimates:

Estimates prepared under IFRS as of January 1, 2011 are consistent with the estimates recognized under Mexican FRS as of the same date.

27.2 Reconciliations of Mexican FRS and IFRS

The following reconciliations quantify the effects of the transition to IFRS:

• Equity as of December 31, 2011 and as of January 1, 2011 (date of transition to IFRS).

• Comprehensive income for the year ended December 31, 2011.

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27.2.1 Effects of IFRS adoption on equity – Consolidated statement of financial position

				As of December 31, 2011																As of January 1, 2011
Current Assets:		Note		Mexican FRS				Adjustments				Reclassifications				IFRS				Mexican FRS				Adjustments				Reclassifications				IFRS
Cash and cash equivalents		a		Ps.	12,331			Ps.	—			Ps.	(488	)		Ps.	11,843			Ps.	12,534			Ps.	—			Ps.	(392	)		Ps.	12,142
Marketable securities					330				—				—				330				—				—				—				—
Accounts receivable, net					8,634				—				(2	)			8,632				6,363				—				—				6,363
Inventories		d			7,573				(9	)			(15	)			7,549				5,007				—				—				5,007
Recoverable taxes		g			1,529				—				686				2,215				1,658				—				369				2,027
Other current financial assets		k			—				—				833				833				—				—				409				409
Other current assets		a, e			1,677				(27	)			(328	)			1,322				874				(36	)			(17	)			821
Total current assets				Ps.	32,074			Ps.	(36	)		Ps.	686			Ps.	32,724			Ps.	26,436			Ps.	(36	)		Ps.	369			Ps.	26,769
Investments in associates and joint ventures					3,656				—				—				3,656				2,108				—				—				2,108
Property, plant and equipment, net		b			41,502				(4,000	)			600				38,102				31,874				(3,911	)			507				28,470
Intangible assets, net		d			70,675				(8,514	)			2				62,163				51,213				(7,992	)			—				43,221
Deferred tax assets		g			451				1,076				417				1,944				345				1,270				175				1,790
Other non-current financial assets		j			—				40				805				845				—				—				15				15
Other non-current assets, net		f			3,250				185				(1,131	)			2,304				2,085				188				(319	)			1,954
Total non-current assets					119,534				(11,213	)			693				109,014				87,625				(10,445	)			378				77,558
Total Assets				Ps.	151,608			Ps.	(11,249	)		Ps.	1,379			Ps.	141,738			Ps.	114,061			Ps.	(10,481	)		Ps.	747			Ps.	104,327
Current Liabilities:
Bank loans and notes payable				Ps.	638			Ps.	—			Ps.	—			Ps.	638			Ps.	1,615			Ps.	—			Ps.	—			Ps.	1,615
Current portion of non-current debt					4,902				—				—				4,902				225				—				—				225
Interest payable					206				—				—				206				151				—				—				151
Suppliers					11,852				—				—				11,852				8,988				—				—				8,988
Accounts payable					3,661				15				—				3,676				3,743				9				—				3,752
Taxes payable		k			2,785				—				686				3,471				1,931				—				369				2,300
Other current financial liabilities		k			1,033				(3	)			—				1,030				993				(2	)			—				991
Total current liabilities					25,077				12				686				25,775				17,646				7				369				18,022
Bank loans and notes payable		j			17,034				(156	)			(57	)			16,821				15,511				(210	)			(56	)			15,245
Post-employment and other non-current employee benefits		c			1,537				(170	)			—				1,367				1,210				(54	)			—				1,156
Deferred tax liabilities		g			3,485				(3,196	)			417				706				1,901				(1,755	)			175				321
Other non-current financial liabilities		k			—				—				717				717				—				(2	)			736				734
Provisions and other non-current liabilities		k			3,695				—				(424	)			3,271				3,912				—				(498	)			3,414
Total non-current liabilities					25,751				(3,522	)			653				22,882				22,534				(2,021	)			357				20,870
Total Liabilities				Ps.	50,828			Ps.	(3,510	)		Ps.	1,339			Ps.	48,657			Ps.	40,180			Ps.	(2,014	)		Ps.	726			Ps.	38,892

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27.2.2 Effects of IFRS adoption on equity – Reconciliation of equity

		Note		As of December 31, 2011				As of January 1, 2011 (Transition Date)
Total Equity under Mexican FRS				Ps.	100,780			Ps.	73,881
Property, plant and equipment, net		b			(4,000	)			(3,911	)
Intangible assets, net		d			(8,514	)			(7,992	)
Post-employment and other long-term employee benefits		c			170				54
Embedded derivative instruments		e			3				2
Share-based payments		f			224				209
Effect on deferred income taxes		g			4,272				3,025
Amortized cost		j			196				210
Other		d			(50	)			(43	)
Total adjustments to equity					(7,699	)			(8,446	)
Total equity under IFRS				Ps.	93,081			Ps.	65,435

27.2.3 Effects of IFRS adoption on consolidated net income – Consolidated Income Statement

				For the year ended December 31, 2011
				Mexican FRS				Adjustments				Reclassifications				IFRS
Net sales		d		Ps.	124,066			Ps.	(1,428	)		Ps.	—			Ps.	122,638
Other operating revenues		k			649				(63	)			—				586
Total revenues					124,715				(1,491	)			—				123,224
Cost of goods sold		b, c, d			67,488				(1,049	)			254				66,693
Gross profit					57,227				(442	)			(254	)			56,531
Administrative expenses		b, c, d			5,184				(104	)			60				5,140
Selling expenses		b, c, d			31,891				(547	)			750				32,094
Other income		k			—				22				663				685
Other expenses, net		k			2,326				17				(283	)			2,060
Interest expense		j			1,736				(7	)			—				1,729
Interest income		j			(601	)			(16	)			—				(617	)
Foreign exchange gain, net		b			(62	)			33				(32	)			(61	)
Gain on monetary position for subsidiaries in hyperinflationary economies		d			155				(94	)			—				61
Market value loss on financial instruments		e			140				(2	)			—				138
Income before income taxes and share of the profit or loss of associates and joint ventures accounted for using the equity method					16,768				112				(86	)			16,794
Income taxes		g			5,599				68				—				5,667
Equity in earnings of associated companies and joint ventures companies		k			—				—				86				86
Consolidated net income					11,169				44				—				11,213
Attributable to:
Equity holders of the parent					10,615				47				—				10,662
Non-controlling interest		i			554				(3	)			—				551
Consolidated net income				Ps.	11,169			Ps.	44			Ps.	—			Ps.	11,213

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27.2.4 Effects of IFRS adoption on consolidated comprehensive Income – Consolidated Statement of comprehensive income

				For the year ended December 31, 2011
		Note		Mexican FRS				Adjustments				IFRS
Consolidated net income				Ps.	11,169			Ps.	44			Ps.	11,213
Other comprehensive income:
Remeasurement of the net defined benefit liability, net of taxes		c			—				(6	)			(6	)
Valuation of the effective portion of derivative financial instruments, net of taxes		e			(3	)			—				(3	)
Unrealized gains on available for sale securities, net of taxes					4				—				4
Exchanges differences on translating foreign operations		h			3,335				738				4,073
Total comprehensive income					14,505				776				15,281
Other comprehensive income, net of taxes					3,336				738				4,074
Consolidated comprehensive income					14,505				776				15,281
Attributable to:
Equity holders of the parent					13,965				787				14,752
Non-controlling interest				Ps.	540			Ps.	(11	)		Ps.	529

Under Mexican FRS, no statement of comprehensive income was prepared; accordingly, the reconciliation originates from consolidated net income under Mexican FRS.

27.2.5 Reconciliation of Consolidated Income Statement

		Note		For the Year ended December 31, 2011
Consolidated Net Income under Mexican FRS				Ps.	11,169
Depreciation of Property, plant and equipment		b			370
Amortization of Intangible assets		d			10
Post-employment and other non-current employee benefits		c			10
Embedded derivatives instruments		e			2
Share-based payments		f			10
Effect on deferred income taxes		g			(68	)
Other inflation effects on assets					(4	)
Amortized cost		j			(16	)
Inflation effects		d			(270	)
Total adjustments to consolidated net income					44
Total consolidated net income under IFRS				Ps.	11,213

27.3 Explanation of the effects of the adoption of IFRS

The following notes explain the significant adjustments and/or reclassifications for the adoption of IFRS:

a) Cash and Cash Equivalents:

For purposes of Mexican FRS, restricted cash is presented within cash and cash equivalents, whereas for purposes of IFRS it is presented in the statement of financial position depending on the term of the restriction.

The transition from Mexican FRS to IFRS did not have a material impact on the consolidated statement of cash flows for the year ended December 31, 2011.

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b) Property, Plant and Equipment:

The adjustments to property, plant and equipment are explained as follows:

		Mexican FRS				Reclassifications				December 31, 2011 Adjustment for the write-off of inflation recognized under  Mexican FRS				Borrowing Cost				Cost under IFRS
Land		Ps.	4,390			Ps.	—			Ps.	(986	)		Ps.	—			Ps.	3,404
Buildings			12,926				—				(2,039	)			—				10,887
Machinery and equipment			34,445				—				(5,801	)			—				28,644
Refrigeration equipment			12,206				—				(910	)			—				11,296
Bottles and cases			4,140				290				(315	)			—				4,115
Leasehold improvements			—				425				—				—				425
Investments in fixed assets in progress			3,006				—				10				12				3,028
Non-strategic assets			78				(78	)			—				—				—
Other long-lived assets			585				78				(82	)			—				581
Subtotal		Ps.	71,776			Ps.	715			Ps.	(10,123	)		Ps.	12			Ps.	62,380
		Accumulated depreciation under Mexican FRS				Reclassifications				December 31, 2011 Adjustment for the write-off of inflation recognized under Mexican FRS				Borrowing Cost				Accumulated depreciation under IFRS
Buildings		Ps.	(4,078	)		Ps.	—			Ps.	593			Ps.	—			Ps.	(3,485	)
Machinery and equipment			(17,493	)			—				4,473				—				(13,020	)
Refrigeration equipment			(7,229	)			—				810				—				(6,419	)
Bottles and cases			(1,272	)			—				241				—				(1,031	)
Leasehold improvements			—				(115	)			—				—				(115	)
Other long-lived assets			(202	)			—				(6	)			—				(208	)
Subtotal			(30,274	)			(115	)			6,111				—				(24,278	)
Property, plant and equipment, net		Ps.	41,502			Ps.	600			Ps.	(4,012	)		Ps.	12			Ps.	38,102
		Mexican FRS				Reclassifications				January 1, 2011 Adjustment for the write-off of inflation recognized under Mexican FRS				Borrowing Cost				Cost under IFRS
Land		Ps.	3,399			Ps.	—			Ps.	(907	)		Ps.	—			Ps.	2,492
Buildings			10,698				—				(2,361	)			—				8,337
Machinery and equipment			27,986				—				(5,029	)			—				22,957
Refrigeration equipment			9,829				—				(850	)			—				8,979
Bottles and cases			2,854				238				(162	)			—				2,930
Leasehold improvements			—				459				—				—				459
Investments in fixed assets in progress			2,290				—				8				—				2,298
Non-strategic assets			189				(189	)			—				—				—
Other long-lived assets			460				189				(36	)			—				613
Subtotal		Ps.	57,705			Ps.	697			Ps.	(9,337	)		Ps.	—			Ps.	49,065
		Accumulated depreciation under Mexican FRS				Reclassifications				January 1, 2011 Adjustment for the write-off of inflation recognized under Mexican FRS				Borrowing Cost				Accumulated depreciation under IFRS
Buildings		Ps.	(3,466	)		Ps.	—			Ps.	704			Ps.	—			Ps.	(2,762	)
Machinery and equipment			(15,740	)			—				3,817				—				(11,923	)
Refrigeration equipment			(5,849	)			—				781				—				(5,068	)
Bottles and cases			(601	)			—				123				—				(478	)
Leasehold improvements			—				(190	)			—				—				(190	)
Other long-lived assets			(175	)			—				1				—				(174	)
Subtotal			(25,831	)			(190	)			5,426				—				(20,595	)
Property, plant and equipment, net		Ps.	31,874			Ps.	507			Ps.	(3,911	)		Ps.	—			Ps.	28,470

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The Company ceased to record inflationary adjustments to its property, plant and equipment on December 31, 2007, due to both changes to Mexican FRS in effect at that time, and the fact that the Mexican peso was not deemed to be a currency of an inflationary economy as of that date. According to IAS 29, Financial Reporting in Hyperinflationary Economies the last hyperinflationary period for the Mexican peso was in 1998. As a result, the Company eliminated the cumulative inflation recognized within long-lived assets for the Company’s Mexican operations, based on Mexican FRS during the years 1999 through 2007, which were not deemed hyperinflationary for IFRS purposes.

1. For the foreign operations, the cumulative inflation from the acquisition date was eliminated (except in the case of Venezuela, which was deemed a hyperinflationary economy) from the date the Company began to consolidate them.

2. For purposes of Mexican FRS, the Company presented leasehold improvements as part of “Other non-current assets”. Such assets meet the definition of property, plant and equipment in accordance with IAS 16, Property, Plant and Equipment, and therefore have been reclassified in the consolidated statement of financial position.

c) Post-employment and other non-current employee benefits:

According to Mexican FRS D-3 Employee Benefits, a severance provision and the corresponding expense, must be recognized based on the experience of the entity in terminating the employment relationship before the retirement date, or if the entity deems to pay benefits as a result of an offer made to employees to encourage a voluntary termination. For IFRS purposes, this provision was eliminated as it does not meet the definition of a termination benefit pursuant to IAS 19 (2011), Employee Benefits. Accordingly, at the transition date, the Company derecognized its severance indemnity recorded under Mexican FRS against retained earnings given that no obligation exists. A formal plan was not required for recording a provision under Mexican FRS. At the transition date and as of December 31, 2011 and January 1, 2011, the Company eliminated the severance provision for an amount of Ps. 497 and Ps. 348, respectively.

IAS 19 (2011), which was early adopted by the Company (mandatorily effective as of January 1, 2013), eliminates the use of the corridor method, which defers the remeasurements of the net defined benefit liability, and requires that those items be recorded directly within other comprehensive income in each reporting period. The standard also eliminates deferral of past service costs and requires entities to record them in earnings in each reporting period. These requirements increased the Company’s liability for post-employment and other non-current employee benefits with a corresponding reduction in retained earnings at the transition date. Based in these requirements, the items pending to be amortized in accordance with Mexican FRS were reclassified to retained earnings at the transition date for Ps.200 and Ps. 95 as of December 31, 2011 and January 1, 2011, respectively in the consolidated statement of financial position.

In Brazil where there is a defined benefit plan, the fair value of plan assets exceeds the amount of the defined benefit obligation of the plan. This surplus has been recorded in the Other Comprehensive Income account in accordance with the provisions of IAS 19 (2011). According to the special rules for that standard, the asset ceiling is the present value of any economic benefits available as reductions in future contributions to the plan. Under Mexican FRS, there is no restriction to limit the asset. At December 31, 2011 and January 1, 2011, the Company reclassified from Post-employment and other non-current employee benefits to other comprehensive income Ps. 127 and Ps. 199, respectively.

d) Elimination of Inflation in Intangible Assets, Contributed Capital and Others:

As discussed above in b), for purposes of IFRS the Company eliminated the accumulated inflation recorded under Mexican FRS for such intangible assets and contributed capital related to accounts that were not generated from operations in hyperinflationary economies.

e) Embedded Derivatives:

For Mexican FRS purposes, the Company recorded embedded derivatives for agreements denominated in foreign currency. Pursuant to the principles set forth in IAS 39, there is an exception for embedded derivatives on those contracts that are denominated in certain foreign currencies, if for example the foreign currency is commonly used in the economic environment in which the transaction takes place. The Company concluded that all of its embedded derivatives fell within the scope of this exception. Therefore, at the transition date, the Company derecognized all embedded derivatives recognized under Mexican FRS.

f) Share-based Payment Program:

Under Mexican FRS D-3, the Company recognizes its stock bonus plan as a defined contribution plan. IFRS requires that such share-based payment plans be recorded under the principles set forth in IFRS 2, Share-based Payments. The most significant difference for changing the accounting treatment is related to the period during which compensation expense is recognized, which under Mexican FRS D-3 the total amount of the bonus is recorded in the period in which it was granted, while in IFRS 2 it is recognized over the vesting period of such awards.

F-73

g) Income Taxes:

The adjustments to IFRS recognized by the Company had an impact in the deferred income tax calculation, according to the requirements set forth by IAS 12. The impact in the Company’s equity as of December 31, 2011 and January 1, 2011 was Ps.4,272 and Ps. 3,025, respectively. The impact in net income for the year ended December 31, 2011 earnings was Ps. 68.

Additionally, the Company reclassified the deferred income taxes and other taxes balances in order to comply with IFRS off-setting requirements. The Company reclassified from recoverable taxes to taxes payable balances an amount of Ps.686 and Ps. 369, and from deferred tax assets to deferred tax liabilities balances an amount of Ps.417 and Ps. 175, as of December 31, 2011 and January 1, 2011, respectively.

h) Cumulative Translation Effects:

The Company decided to use the exemption provided by IFRS 1, which permits it to adjust at the transition date all the translation effects it had recognized under Mexican FRS to zero and begin to record them in accordance with IAS 21 on a prospective basis. The effect was Ps. 1,000 at the transition date, net of deferred income taxes of Ps. 1,887.

i) Retained Earnings and Non-controlling Interest:

All the adjustments arising from the Company’s transition to IFRS at the transition date were adjusted against retained earnings and to the extent applicable also impacted the balance of the non-controlling interest.

j) Effective Interest Rate Method:

In accordance with IFRS, the financial assets and liabilities classified as held to maturity or accounts receivables are subsequently measured using the effective interest rate method.

k) Presentation and Disclosure Items:

IFRS requires additional disclosures than Mexican FRS, which resulted in additional disclosures regarding accounting policies, significant judgments and estimates, financial instruments and capital management, among others. Additionally, the Company reclassified certain items within its consolidated balance sheets and statements of income to conform to the requirements of IAS 1, Presentation of Financial Statements.

note 28. Future Impact of Recently Issued Accounting Standards not yet in Effect:

The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective as of December 31, 2012.

• IFRS 9, Financial Instruments issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. The effective date of IFRS 9 is January 1, 2015.

The standard requires all recognized financial assets that are within the scope of IAS 39 to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at FVTPL) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at FVTPL was recognized in profit or loss.

This standard has not been early adopted by the Company. The Company has yet to complete its evaluation, of whether this standard will have a material impact on its consolidated financial statements.

F-74

On May and June, 2011, the IASB issued new standards and amended some existing standards including requirements of accounting and presentation for particular topics that have not yet been applied in these consolidated financial statements. A summary of those changes and amendments includes the following:

• IAS 28, Investments in Associated Companies and Joint Ventures (referred as IAS 28 (2011)), prescribes the accounting for Investments in associated companies and establishes the requirements to apply the equity method for those investments and investments in joint ventures. The standard is applicable to all the entities with joint control of, or significant influence over, an investee. This standard supersedes the previous version of IAS 28, Investments in associated companies. The effective date of IAS 28 (2011) is January 1, 2013, with early application permitted in certain circumstances, but it must be applied in conjunction with IAS 27 (2011), IFRS 10, IFRS 11 and IFRS 12. This standard has not been early adopted by the Company. The Company has yet to complete its evaluation, of whether this standard will have a material impact on its consolidated financial statements.

• IFRS 10, Consolidated Financial Statements, establishes the principles for the presentation and preparation of consolidated financial statements when an entity controls one or more entities. The standard requires the controlling company to present its consolidated financial statements; modifies the definition about the principle of control and establishes such definition as the basis for consolidation; establishes how to apply the principle of control to identify if an investment is subject to be consolidated. The standard replaces IAS 27, Consolidated and Separate Financial Statements and SIC 12, Consolidation – Special Purpose Entities. The effective date of IFRS 10 is January 1, 2013, with early application permitted in certain circumstances, but it must be applied in conjunction with IAS 27 (2011), IAS 28 (2011), IFRS 11 and IFRS 12.

This standard has not been early adopted by the Company. The Company has yet to complete its evaluation, of whether this standard will have a material impact on its consolidated financial statements.

• IFRS 11, Joint Arrangements, classifies joint arrangements as either joint operations (combining the existing concepts of jointly controlled assets and jointly controlled operations) or joint ventures (equivalent to the existing concept of a jointly controlled entity). Joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities. Joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. IFRS 11 requires the use of the equity method of accounting for interests in joint ventures thereby eliminating the proportionate consolidation method. The determination of whether a joint arrangement is a joint operation or a joint venture is based on the parties’ rights and obligations under the arrangement, with the existence of a separate legal vehicle no longer being the key factor. The effective date of IFRS 11 is January 1, 2013, with early application permitted in certain circumstances, but it must be applied in conjunction with IAS 27 (2011), IAS 28 (2011), IFRS 10 and IFRS 12. This standard has not been early adopted by the Company. The Company has yet to complete its evaluation, of whether this standard will have a material impact on its consolidated financial statements.

• IFRS 12, Disclosure of Interests in Other Entities, has the objective to require the disclosure of information to allow the users of financial information to evaluate the nature and risk associated with their interests in other entities, and the effects of such interests on their financial position, financial performance and cash flows. The effective date of IFRS 12 is January 1, 2013, with early application permitted in certain circumstances, but it must be applied in conjunction with IAS 27 (2011), IAS 28 (2011), IFRS 10 and IFRS 11. This standard has not been early adopted by the Company. The Company has yet to complete its evaluation, of whether this standard will have a material impact on its consolidated financial statements.

• IFRS 13, Fair Value Measurement, establishes a single framework for measuring fair value where that is required by other standards. The standard applies to both financial and non-financial items measured at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, and applies prospectively from the beginning of the annual period in which the standard is adopted. This standard has not been early adopted by the Company. The Company has yet to complete its evaluation of whether this standard will have a material impact on its consolidated financial statements.

note 29. Supplemental Guarantor Information

Consolidating Condensed Financial Information

In its previously issued IFRS consolidated financial statements included in the Company’s 2012 Form 20-F, the Company disclosed consolidating information presenting consolidating condensed statements of financial position as of December 31, 2012, 2011 and January 1, 2011 and condensed consolidating statements of income, other comprehensive income and cash flows for each of the two years in the period ended December 31, 2012 of the Company and “Propimex”. As disclosed in Note 1, Propimex is a 100% owned subsidiary. The Company’s consolidating condensed financial information for the (i) Company; (ii) its wholly-owned subsidiary Propimex (on standalone basis), which is a 100% owned and unconditional guarantor under the Senior Notes as per Note 18; (iii) the combined non-guarantor subsidiaries; iv) eliminations and v) the Company’s consolidated financial statements were disclosed. While such disclosures were made in the IFRS consolidated financial statements included in the Company’s 2012 Form 20-F, it should be noted that Propimex did not have a SEC reporting obligation in relation to its guarantee of the Senior Notes. Rather the subsidiary guarantor disclosures were then made in contemplation of an anticipated bond offering.

F-75

The disclosures presented below are consistent with as those included in the Company’s 2012 Form 20-F, except that subsidiary guarantor disclosures have been expanded to reflect additional subsidiary guarantors anticipated in connection with a filing with the SEC. Those additional guarantors are Comercializadora la Pureza de Bebidas, S. de R.L. de C.V., Controladora Interamericana de Bebidas, S. de R.L. de C.V., Grupo Embotellador CIMSA, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L. de C.V., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V. and Yoli de Acapulco, S.A. de C.V., all of which are 100% owned and are anticipated to be full and unconditional guarantors of the debt to be issued.

These consolidating disclosures are prepared in accordance with IFRS, as issued by the IASB, with the exception that the subsidiaries are accounted for as investments under the equity method rather than being consolidated.

		Parent				Wholly-owned Guarantors Subsidiaries				Combined non-guarantor Subsidiaries				Eliminations				Consolidated Total
		Consolidated Statement of Financial Position As of December 31, 2012
Assets:
Cash and cash equivalents		Ps.	14,394			Ps.	981			Ps.	7,847			Ps.	—			Ps.	23,222
Marketable securities			—				—				12				—				12
Accounts receivable, net			17,306				22,335				43,436				(73,748	)			9,329
Inventories			—				3,885				4,218				—				8,103
Recoverable taxes			1				1,671				1,001				—				2,673
Other current assets and financial assets			32				236				2,290				—				2,558
Total current assets			31,733				29,108				58,804				(73,748	)			45,897
Investments in associates and joint ventures			105,837				41,152				3,446				(145,083	)			5,352
Property, plant and equipment, net			—				15,239				27,278				—				42,517
Intangible assets, net			21,712				38,262				7,039				—				67,013
Other non-current assets			880				954				3,490				—				5,324
Total non-current assets			128,429				95,607				41,253				(145,083	)			120,206
Total assets		Ps.	160,162			Ps.	124,715			Ps.	100,057			Ps.	(218,831	)		Ps.	166,103
Liabilities:
Short-term bank loans and notes payable and current portion of non-current debt		Ps.	4,548				—				785				—				5,333
Suppliers			14				3,060				11,147				—				14,221
Other current liabilities			30,340				44,728				8,676				(73,748	)			9,996
Total current liabilities			34,902				47,788				20,608				(73,748	)			29,550
Bank loans and notes payable			23,372				—				1,403				—				24,775
Other non-current liabilities			239				945				5,766				—				6,950
Total non-current liabilities			23,611				945				7,169				—				31,725
Total liabilities			58,513				48,733				27,777				(73,748	)			61,275
Equity:
Equity attributable to equity holders of the parent			101,649				75,982				69,101				(145,083	)			101,649
Non-controlling interest in consolidated subsidiaries			—				—				3,179				—				3,179
Total equity			101,649				75,982				72,280				(145,083	)			104,828
Total liabilities and equity		Ps.	160,162			Ps.	124,715			Ps.	100,057			Ps.	(218,831	)		Ps.	166,103

F-76

		Parent				Wholly-owned guarantors subsidiaries				Combined non-guarantor subsidiaries				Eliminations				Consolidated Total
		Consolidated Statement of Financial Position As of December 31, 2011
Assets:
Cash and cash equivalents		Ps.	4,046			Ps.	676			Ps.	7,121			Ps.	—			Ps.	11,843
Marketable securities			—								330								330
Accounts receivable, net			16,941				10,853				33,267				(52,429	)			8,632
Inventories			—				3,160				4,389				—				7,549
Recoverable taxes			27				1,315				873				—				2,215
Other current assets and financial assets			37				499				1,619				—				2,155
Total current assets			21,051				16,503				47,599				(52,429	)			32,724
Investments in associates and joint ventures			86,397				39,750				2,332				(124,823	)			3,656
Property, plant and equipment, net			—				12,814				25,288				—				38,102
Intangible assets, net			16,367				38,322				7,474				—				62,163
Other non-current assets			1,090				735				3,268				—				5,093
Total non-current assets			103,854				91,621				38,362				(124,823	)			109,014
Total assets		Ps.	124,905			Ps.	108,124			Ps.	85,961			Ps.	(177,252	)		Ps.	141,738
Liabilities:
Short-term bank loans and notes payable and current portion of non-current debt		Ps.	3,303				7				2,436				—				5,746
Suppliers			13				2,345				9,663				(169	)			11,852
Other current liabilities			14,629				38,439				7,369				(52,260	)			8,177
Total current liabilities			17,945				40,791				19,468				(52,429	)			25,775
Bank loans and notes payable			16,470				—				351				—				16,821
Other non-current liabilities			462				978				4,621				—				6,061
Total non-current liabilities			16,932				978				4,972				—				22,882
Total liabilities		Ps.	34,877				41,769				24,440				(52,429	)			48,657
Equity:
Equity attributable to equity holders of the parent			90,028				66,355				58,468				(124,823	)			90,028
Non-controlling interest in consolidated subsidiaries			—				—				3,053				—				3,053
Total equity			90,028				66,355				61,521				(124,823	)			93,081
Total liabilities and equity		Ps.	124,905			Ps.	108,124			Ps.	85,961			Ps.	(177,252	)		Ps.	141,738

F-77

		Parent				Wholly-owned guarantors subsidiaries				Combined non-guarantor subsidiaries				Eliminations				Consolidated Total
		Consolidated Statement of Financial Position As of January 1, 2011
Assets:
Cash and cash equivalents		Ps.	6,620			Ps.	396			Ps.	5,126			Ps.	—			Ps.	12,142
Accounts receivable, net			15,014				8,487				23,527				(40,665	)			6,363
Inventories			—				1,972				3,035				—				5,007
Recoverable taxes			8				619				1,400				—				2,027
Other current assets and financial assets			95				108				1,027				—				1,230
Total current assets			21,737				11,582				34,115				(40,665	)			26,769
Investments in associates and joint ventures			68,843				27,429				1,965				(96,129	)			2,108
Property, plant and equipment, net			—				7,106				21,364				—				28,470
Intangible assets, net			142				36,512				6,567				—				43,221
Other non-current assets			207				639				2,913				—				3,759
Total non-current assets			69,192				71,686				32,809				(96,129	)			77,558
Total assets		Ps.	90,929			Ps.	83,268			Ps.	66,924			Ps.	(136,794	)		Ps.	104,327
Liabilities:
Short-term bank loans and notes payable and current portion of non-current debt		Ps.	—				—				1,840				—				1,840
Interest payable			136				—				15				—				151
Suppliers			16				1,647				7,325				—				8,988
Other current liabilities			13,684				27,411				6,613				(40,665	)			7,043
Total current liabilities			13,836				29,058				15,793				(40,665	)			18,022
Long-term debt			13,683				—				1,562				—				15,245
Other non-current liabilities			535				741				4,349				—				5,625
Total non-current liabilities			14,218				741				5,911				—				20,870
Total liabilities		Ps.	28,054				29,799				21,704				(40,665	)			38,892
Equity:
Equity attributable to equity holders of the parent			62,875				53,469				42,660				(96,129	)			62,875
Non-controlling interest in consolidated subsidiaries			—				—				2,560				—				2,560
Total equity			62,875				53,469				45,220				(96,129	)			65,435
Total liabilities and equity		Ps.	90,929			Ps.	83,268			Ps.	66,924			Ps.	(136,794	)		Ps.	104,327

F-78

		Parent				Wholly-owned guarantors Subsidiaries				Combined non-guarantor subsidiaries				Eliminations				Consolidated Total
		Condensed consolidating income statements: For the year ended December 31, 2012
Total revenues		Ps.	14			Ps.	58,087			Ps.	106,885			Ps.	(17,247	)		Ps.	147,739
Cost of goods sold			—				29,460				53,125				(3,476	)			79,109
Gross profit			14				28,627				53,760				(13,771	)			68,630
Administrative expenses			166				7,378				5,875				(7,202	)			6,217
Selling expenses			—				14,001				32,791				(6,569	)			40,223
Other expenses, net			45				198				709				—				952
Interest expense (income)			(85	)			2,669				(1,053	)			—				1,531
Foreign exchange gain (loss), net			424				(55	)			(97	)			—				272
Other financing revenues (cost), net			32				(19	)			—				—				13
Income taxes			269				1,961				4,044				—				6,274
Share of the profit of subsidiaries, associates and joint ventures accounted for using the equity method, net of taxes			13,259				7,642				156				(20,877	)			180
Consolidated net income		Ps.	13,334			Ps.	9,988			Ps.	11,453			Ps.	(20,877	)		Ps.	13,898
Attributable to:
Equity holders of the parent		Ps.	13,334			Ps.	9,988			Ps.	10,888			Ps.	(20,877	)		Ps.	13,333
Non-controlling interest			—				—				565				—				565
Consolidated net income		Ps.	13,334			Ps.	9,988			Ps.	11,453			Ps.	(20,877	)		Ps.	13,898
		Parent				Wholly-owned guarantors subsidiaries				Combined non-guarantor subsidiaries				Eliminations				Consolidated Total
		Condensed consolidating income statements: For the year ended December 31, 2011
Total revenues		Ps.	13				44,479				92,846				(14,114	)			123,224
Cost of goods sold			—				22,798				44,982				(1,087	)			66,693
Gross profit			13				21,681				47,864				(13,027	)			56,531
Administrative expenses			146				6,263				5,015				(6,284	)			5,140
Selling expenses			—				10,578				28,258				(6,743	)			32,093
Other (income) expenses, net			(15	)			67				1,323				—				1,375
Interest (income) expenses			(242	)			2,266				(911	)			—				1,113
Foreign exchange (loss) gain, net			(480	)			(49	)			590				—				61
Other financing (cost) revenues, net			(144	)			7				60				—				(77	)
Income taxes			(51	)			945				4,773				—				5,667
Share of the profit of subsidiaries, associates and joint ventures accounted for using the equity method, net of taxes			11,111				6,811				97				(17,933	)			86
Consolidated net income		Ps.	10,662			Ps.	8,331			Ps.	10,153			Ps.	(17,933	)		Ps.	11,213
Attributable to:
Equity holders of the parent		Ps.	10,662			Ps.	8,331			Ps.	9,602			Ps.	(17,933	)		Ps.	10,662
Non-controlling interest			—				—				551				—				551
Consolidated net income		Ps.	10,662			Ps.	8,331			Ps.	10,153			Ps.	(17,933	)		Ps.	11,213

F-79

		Parent				Wholly-owned guarantors Subsidiaries				Combined Non-guarantor Subsidiaries				Eliminations				Consolidated Total
		Condensed consolidating statements of comprehensive income For the year ended December 31, 2012
Consolidated net income		Ps.	13,334			Ps.	9,988			Ps.	11,453			Ps.	(20,877	)		Ps.	13,898
Other comprehensive income:
Unrealized gain on available-for sale securities, net of taxes			(2	)			—				(2	)			2				(2	)
Valuation of the effective portion of derivative financial instruments, net of taxes			(179	)			(292	)			(166	)			436				(201	)
Exchange differences on translation of foreign operations			(2,055	)			(6,264	)			(2,361	)			8,319				(2,361	)
Remeasurements of the net defined benefit liability, net of taxes			(131	)			(25	)			(145	)			176				(125	)
Total comprehensive (loss) income, net of tax			(2,367	)			(6,581	)			(2,674	)			8,933				(2,689	)
Consolidated comprehensive income for the year, net of tax		Ps.	10,967			Ps.	3,407			Ps.	8,779			Ps.	(11,944	)		Ps.	11,209
Attributable to:
Equity holders of the parent		Ps.	10,967			Ps.	3,407			Ps.	8,537			Ps.	(11,944	)		Ps.	10,967
Non-controlling interest			—				—				242				—				242
Consolidated comprehensive income for the year, net of tax		Ps.	10,967			Ps.	3,407			Ps.	8,779			Ps.	(11,944	)		Ps.	11,209
		Parent				Wholly-owned guarantors Subsidiaries				Combined Non-guarantor Subsidiaries				Eliminations				Consolidated Total
		Condensed consolidating statements of comprehensive income For the year ended December 31, 2011
Consolidated net income		Ps.	10,662			Ps.	8,331			Ps.	10,153			Ps.	(17,933	)		Ps.	11,213
Other comprehensive income:
Unrealized gain on available-for sale securities, net of taxes			4				—				4				(4	)			4
Valuation of the effective portion of derivative financial instruments, net of taxes			27				212				(171	)			(71	)			(3	)
Exchange differences on translation of foreign operations			4,073				2,268				1,805				(4,073	)			4,073
Remeasurements of the net defined benefit liability, net of taxes			(14	)			(135	)			(9	)			152				(6	)
Total comprehensive (loss) income, net of tax			4,090				2,345				1,629				(3,996	)			4,068
Consolidated comprehensive income for the year, net of tax		Ps.	14,752			Ps.	10,676			Ps.	11,782			Ps.	(21,929	)		Ps.	15,281
Attributable to:
Equity holders of the parent		Ps.	14,752			Ps.	10,676			Ps.	11,253			Ps.	(21,929	)		Ps.	14,752
Non-controlling interest			—				—				529				—				529
Consolidated comprehensive income for the year, net of tax		Ps.	14,752			Ps.	10,676			Ps.	11,782			Ps.	(21,929	)		Ps.	15,281

F-80

		Parent				Wholly-owned Guarantors Subsidiaries				Combined non-guarantor Subsidiaries				Eliminations				Consolidated Total
		Condensed Consolidated Statements of Cash Flows For the year ended December 31, 2012
Cash flows from operating activities:
Income before income taxes		Ps.	13,603			Ps.	11,949			Ps.	15,497			Ps.	(20,877	)		Ps.	20,172
Non-cash items			(13,855	)			(2,758	)			425				23,640				7,452
Changes in working capital			(32	)			(3,083	)			(859	)			—				(3,974	)
Net cash flows from operating activities			(284	)			6,108				15,063				2,763				23,650
Investing activities:
Acquisitions			(1,221	)			87				20				—				(1,114	)
Proceeds from the sale of marketable securities			—				—				273				—				273
Interest received			1,993				517				4,791				(6,877	)			424
Acquisition of long-lived assets, net			—				(3,278	)			(6,170	)			—				(9,448	)
Acquisition of intangible assets and other investing activities			—				6,735				(4,353	)			(3,037	)			(655	)
Investments in shares			29				(65	)			(433	)			—				(469	)
Dividends received			5,085				1,569				—				(6,654	)			—
Net cash flows (used in) from investing activities			5,886				5,565				(5,872	)			(16,568	)			(10,989	)
Financing activities:
Proceeds from borrowings			11,837				—				4,592				—				16,429
Repayment of borrowings			(3,394	)			(40	)			(5,030	)			—				(8,464	)
Interest paid			(1,761	)			(3,382	)			(3,428	)			6,877				(1,694	)
Dividends paid			(5,625	)			(4,838	)			(1,925	)			6,654				(5,734	)
Acquisition of non-controlling interests			—				—				(6	)			—				(6	)
Other financing activities			3,623				(3,083	)			(1,285	)			274				(471	)
Net cash flows from / (used in) financing activities			4,680				(11,343	)			(7,082	)			13,805				60
Net increase (decrease) in cash and cash equivalents			10,282				330				2,109				—				12,721
Initial balance of cash and cash equivalents			4,046				676				7,121				—				11,843
Effects of exchange rate changes and inflation effects on the balance sheet of cash held in foreign currencies			66				(25	)			(1,383	)			—				(1,342	)
Ending balance of cash and cash equivalents		Ps.	14,394			Ps.	981			Ps.	7,847			Ps.	—			Ps.	23,222

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		Parent				Wholly-owned Guarantors Subsidiaries				Combined non-guarantor Subsidiaries				Eliminations				Consolidated Total
		Condensed Consolidated Statements of Cash Flows For the year ended December 31, 2011
Cash flows from operating activities:
Income before income taxes		Ps.	10,611			Ps.	9,276			Ps.	14,926			Ps.	(17,933	)		Ps.	16,880
Non-cash items			(10,726	)			(3,224	)			(650	)			20,370				5,770
Changes in working capital			(27	)			(2,804	)			(5,926	)			—				(8,757	)
Net cash flows (used in) from operating activities			(142	)			3,248				8,350				2,437				13,893
Investing activities:
Acquisitions			(4,326	)			(3,478	)			3,478				—				(4,326	)
Purchase of marketable securities			—				—				(326	)			—				(326	)
Interest received			2,195				608				4,902				(7,066	)			639
Acquisition of long-lived assets, net			—				(2,262	)			(4,218	)			—				(6,480	)
Acquisition of intangible assets and other investing activities			(671	)			5,231				(1,453	)			(4,191	)			(1,084	)
Investments in shares			(4,327	)			(5,259	)			755				8,211				(620	)
Dividends received			3,605				926				—				(4,531	)			—
Net cash flows (used in) from investing activities			(3,524	)			(4,234	)			3,138				(7,577	)			(12,197	)
Financing activities:
Proceeds from borrowings			5,000				—				1,934				—				6,934
Repayment of borrowings			—				—				(2,733	)			—				(2,733	)
Interest paid			(939	)			(2,955	)			(4,752	)			7,066				(1,580	)
Dividends paid			(4,359	)			(3,186	)			(1,352	)			4,531				(4,366	)
Acquisition of non-controlling interests			—				—				(115	)			—				(115	)
Proceeds from issue of share capital			—				4,344				3,867				(8,211	)			—
Other financing activities			989				2,965				(6,920	)			1,754				(1,212	)
Net cash flows (used in) from financing activities			691				1,168				(10,071	)			5,140				(3,072	)
Net (decrease) increase in cash and cash Equivalents			(2,975	)			182				1,417				—				(1,376	)
Initial balance of cash and cash Equivalents			6,620				396				5,126				—				12,142
Effects of exchange rate changes and inflation effects on the balance sheet of cash held in foreign currencies			401				98				578				—				1,077
Ending balance of cash and cash equivalents		Ps.	4,046			Ps.	676			Ps.	7,121			Ps.	—			Ps.	11,843

note 30. Subsequent Events

Effective January 25, 2013, the Company finalized the acquisition of 51% of Coca-Cola Bottlers Philippines, Inc. (CCBPI) for an amount of $688.5 in an all-cash transaction. As part of the agreement, Coca-Cola FEMSA has an option to acquire the remaining 49% of CCBPI at any time during the seven years following the closing and has a put option to sell its ownership to The Coca-Cola Company any time during year six. The results of CCBPI will be recognized by the Company using the equity method, given certain substantive participating rights of the Coca-Cola Company in the operations of the bottler.

On January 17, 2013, the Company and Grupo Yoli, S.A. de C.V. (“Grupo Yoli”) agreed to merge their beverage divisions. Grupo Yoli beverage division operates mainly in the state of Guerrero, as well as in part of the state of Oaxaca, Mexico. The merger agreement was approved by both Coca-Cola FEMSA’s and Grupo Yoli’s Boards of Directors as well as by The Coca-Cola Company and is subject to the approval of the Comisión Federal de Competencia the Mexican antitrust authority. The transaction will involve the issuance of approximately 42.4 million of the Company’s newly issued series L shares and in addition the Company will assume Ps. 1,009 in net debt. This transaction is expected to be completed during the first semester of 2013.

In February 2013, the Venezuelan government announced a devaluation of its official exchange rates from 4.30 to 6.30 bolivars per U.S. dollar. The exchange rate that will be used to translate the Company’s financial statements to its reporting currency beginning February 2013 pursuant to the applicable accounting rules will be 6.30 bolivars per U.S. dollar. As a result of this devaluation, the balance sheet of the Company’s Venezuelan subsidiary reflected a reduction in shareholders’ equity of approximately Ps. 3,500 which will be accounted for at the time of the devaluation in February 2013.

F-82

On February 26, 2013, the Company’s Board of Directors agreed to propose an ordinary dividend of Ps.2.90 per share to be paid in installments of Ps.1.45 per share on each of May 2, 2013 and November 5, 2013. This dividend was approved at the Annual Shareholders meeting on March 5, 2013.

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