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Post-Employment and Other Non-current Employee Benefits | 12 Months Ended
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Dec. 31, 2023
Disclosure of defined benefit plans [abstract] |
Post-Employment and Other Non-current Employee Benefits | Post-Employment and Other Non-current Employee Benefits The Company has various labor liabilities for employee benefits in connection with pension and retirement plans, seniority premiums. Benefits vary depending upon the country where the individual employees are located. Presented below is a discussion of the Company’s labor liabilities in Mexico, which comprise the substantial majority of those recorded in the consolidated financial statements. 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. In Mexico, 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:
Mexico | 2023 | 2022 | 2021
Financial: |  |  |
Discount rate used to calculate the defined benefit obligation and the net interest on the net defined benefit liability (asset) | 10.2 | % | 9.9 | % | 8.0 | %
Salary increase: (Non-Union/Union) | 4.8 | % | 4.8 | % | 4.5 | %
Future pension increase | 3.8 | % | 3.8 | % | 3.5 | %
Biometric: |  |  |
Mortality | EMSSA 2009 (1) | EMSSA 2009 (1) | EMSSA 2009 (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 (for its initials in Spanish) (2) IMSS. Mexican Experience of Instituto Mexicano del Seguro Social (for its initials in Spanish) (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 for each period were taken from a yield curve of the Mexican Federal Government Treasury Bond (known as CETES in Mexico) because there is no deep market in high quality corporate obligations in Mexico. 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
2024 | Ps. 396 | Ps. 88
2025 | 222 | 77
2026 | 253 | 81
2027 | 346 | 88
2028 | 311 | 91
2029 - 2032 | 2,356 | 533
16.2 Balances of the liabilities for post-employment and other non-current employee benefits
| 2023 | 2022
Pension and Retirement Plans: |  |
Vested benefit obligation | Ps. 653 | Ps. 715
Non-vested benefit obligation | 2,091 | 2,196
Accumulated benefit obligation | 2,744 | 2,911
Excess of projected defined benefit obligation over accumulated benefit obligation | 1,284 | 1,288
Defined benefit obligation | 4,028 | 4,199
Pension plan funds at fair value | (1,303) | (1,288)
Net defined benefit liability | Ps. 2,725 | Ps. 2,911
Seniority Premiums: |  |
Vested benefit obligation | Ps. 320 | Ps. 279
Non-vested benefit obligation | 344 | 255
Accumulated benefit obligation | 664 | 534
Excess of projected defined benefit obligation over accumulated benefit obligation | 294 | 392
Defined benefit obligation | 958 | 926
Seniority premium plan funds at fair value | (123) | (128)
Net defined benefit liability | Ps. 835 | Ps. 798
Total post-employment and other non-current employee benefits | Ps. 3,560 | Ps. 3,709
16.3 Trust assets Trust assets consist of fixed and variable return financial instruments recorded at fair value, which are invested as follows:
Type of instrument | 2023 | 2022
Fixed return: |  |
Traded securities | 27 | % | 24 | %
Life annuities | 18 | % | 17 | %
Bank instruments | 5 | % | 5 | %
Federal government instruments | 36 | % | 40 | %
Variable return: |  |
Publicly traded shares | 14 | % | 14 | %
| 100 | % | 100 | %
In Mexico, the regulatory framework for pension plans is established in the Income Tax Law and its Regulations, the Federal Labor Law and the Mexican Social Security Institute Law. None of these laws establish minimum funding levels or a minimum required level of contributions. In Mexico, the Income Tax Law requires that, in the case of private plans, certain notifications must be submitted to the authorities and a certain level of fund assets must be invested in Federal Government instruments, 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 benefit trust. The committee is responsible for determining the investment portfolio and the types of instruments the fund will be invested in. The technical committee is also responsible for verifying 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’s asset investment in related parties to 10% this risk is not considered to be significant for purposes of the Company’s Mexican subsidiaries. In Mexico, the Company’s policy is to invest at least 30% of the fund assets in Mexican Federal Government instruments. Guidelines for the target portfolio have been established for the remaining percentage and investment decisions are made to comply with these guidelines insofar as the market conditions and available funds allow. As of December 31, 2023 and 2022, the average duration of the Pension and Retirement Plan was of 20.1 years and 19.5 years, respectively; and the average duration of the Seniority Premiums Plan was of 16.8 years and 16.8 years, respectively. During the years ended December 31, 2023, 2022 and 2021, the Company did not make significant contributions to the plan assets and does not expect to make material contributions to the plan assets during 2024. 16.4 Amounts recognized in the consolidated income statements and the consolidated statements of changes in equity
| Consolidated income statement | Accumulated OCI
2023 | Current Service Cost | Past Service Cost | (Gain) or Loss on Settlement or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability net of taxes
Pension and retirement plans | Ps. 233 | Ps. 155 | Ps. (126) | Ps. 222 | Ps. 625
Seniority premiums | 87 | 8 | (7) | 75 | 122
Total | Ps. 320 | Ps. 163 | Ps. (133) | Ps. 297 | Ps. 747
| Consolidated Income statement | Accumulated OCI
2022 | Current Service Cost | Past Service Cost | (Gain) or Loss on Settlement or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability net of taxes
Pension and retirement plans | Ps. 246 | Ps. 47 | Ps. (85) | Ps. 141 | Ps. 804
Seniority premiums | 94 | 6 | (9) | 145 | 108
Total | Ps. 340 | Ps. 53 | Ps. (94) | Ps. 286 | Ps. 912
| Consolidated Income statement | Accumulated OCI
2021 | Current Service Cost | Past Service Cost | (Gain) or Loss on Settlement or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability net of taxes
Pension and retirement plans | Ps. 244 | Ps. — | Ps. — | Ps. 197 | Ps. 1,038
Seniority premiums | 84 | — | — | 51 | 202
Total | Ps. 328 | Ps. — | Ps. — | Ps. 248 | Ps. 1,240
Remeasurements of the net defined benefit liability recognized in other comprehensive income are as follows (amounts are net of tax):
| 2023 | 2022 | 2021
Amount accumulated in other comprehensive income as of the beginning of the periods | Ps. 912 | Ps. 1,240 | Ps. 1,173
Recognized during the year (obligation liability and plan assets) | 101 | 124 | 680
Actuarial (gains) losses arising from changes in financial assumptions | (148) | (375) | (550)
Actuarial gains arising from changes in demographic assumptions | (5) | 1 | —
Foreign exchange rate valuation (gain) loss | (101) | (78) | 9
Adjustment from employees transferred | — | — | (72)
Effect on settlement | (12) | — | —
Amount accumulated in other comprehensive income as of the end of the period, net of tax | Ps. 747 | Ps. 912 | Ps. 1,240
Remeasurements of the net defined benefit liability include the following: • The return on plan assets, excluding amounts included in net interest expense. • Actuarial gains and losses arising from changes in demographic assumptions. • Actuarial gains and losses arising from changes in financial assumptions. 16.5 Changes in the balance of the defined benefit obligation for post-employment and other non-current employee benefits
| 2023 | 2022 | 2021
Pension and Retirement Plans: |  |  |
Balance at beginning of year | Ps. 4,199 | Ps. 4,515 | Ps. 4,311
Current service cost | 233 |  | 246 |  | 244 |
Effect of curtailment | (144) |  | (86) |  | — |
Interest expense | 346 |  | 317 |  | 291 |
Actuarial (gains) or losses | (214) |  | (355) |  | 5 |
Foreign exchange (gain) loss | (151) |  | (134) |  | 18 |
Benefits paid | (378) |  | (355) |  | (364) |
Past service cost | 137 |  | 47 |  | 10 |
Business acquisitions | — |  | 4 |  | — |
Balance at end of year | Ps. 4,028 | Ps. 4,199 | Ps. 4,515
Seniority Premiums: |  |  |
Balance at beginning of year | Ps. 926 | Ps. 978 | Ps. 865
Current service cost | 87 |  | 94 |  | 84 |
Effect of curtailment | (14) |  | (9) |  | — |
Interest expense | 88 |  | 76 |  | 62 |
Actuarial (gains) or losses | 29 |  | (97) |  | 74 |
Benefits paid | (166) |  | (128) |  | (107) |
Past service cost | 8 |  | 6 |  | — |
Business acquisitions | — |  | 6 |  | — |
Balance at end of year | Ps. 958 | Ps. 926 | Ps. 978
16.6 Changes in the balance of trust assets
| 2023 | 2022 | 2021
Pension and retirement plans: |  |  |
Balance at beginning of year | Ps. 1,288 | Ps. 1,234 | Ps. 1,201
Actual return on trust assets | 41 | 50 | 33
Foreign exchange gain | (4) | — | —
Life annuities | 9 |  | — |  | — |
Benefits paid | — | 4 | —
Plan amendments | Ps. (31) | Ps. — | Ps. —
Balance at end of year | Ps. 1,303 | Ps. 1,288 | Ps. 1,234
Seniority premiums |  |  |
Balance at beginning of year | Ps. 128 | Ps. 133 | Ps. 137
Actual return on trust assets | (5) | (5) | (4)
Balance at end of year | Ps. 123 | Ps. 128 | Ps. 133
As a result of the Company’s investments in life annuities plans, management does not expect the Company will need to make material contributions to the trust assets in order to meet its future obligations. 16.7 Variation in assumptions The Company considers that the relevant actuarial assumptions that are subject to sensitivity are the discount rate and the salary increase rate because they have the most significant impact: • 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 1.0% in the assumptions on the net defined benefit liability associated with the Company’s defined benefit plans for post-employment and other non-current employee benefits. The sensitivity of this 1.0% on the significant actuarial assumptions is based on projected long-term discount rates for Mexico and yield curve projections of long-term Mexican government bonds - CETES:
+1.0% |  |  | Consolidated income statement | Accumulated OCI
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 or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans | Ps. 211 | Ps. 144 | Ps. (118) | Ps. 173 | Ps. 634
Seniority premiums | Ps. 80 | Ps. 7 | Ps. (6) | Ps. 67 | Ps. 117
Total | Ps. 291 | Ps. 151 | Ps. (124) | Ps. 240 | Ps. 751
Expected salary increase | Current Service Cost | Past Service Cost | Gain or Loss on Settlement or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans | Ps. 253 | Ps. 171 | Ps. (134) | Ps. 249 | Ps. 681
Seniority premiums | Ps. 93 | Ps. 9 | Ps. (8) | Ps. 82 | Ps. 143
Total | Ps. 346 | Ps. 180 | Ps. (142) | Ps. 331 | Ps. 824
- 1.0% |  |  | Consolidated income statement | Accumulated OCI
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 or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans | Ps. 250 | Ps. 167 | Ps. (136) | Ps. 261 | Ps. 692
Seniority premiums | Ps. 94 | Ps. 8 | Ps. (7) | Ps. 85 | Ps. 137
Total | Ps. 344 | Ps. 175 | Ps. (143) | Ps. 346 | Ps. 829
Expected salary increase | Current Service Cost | Past Service Cost | Gain or Loss on Settlement or curtailment | Net Interest on the Net Defined Benefit Liability | Remeasurements of the Net Defined Benefit Liability
Pension and retirement plans | Ps. 209 | Ps. 139 | Ps. (116) | Ps. 187 | Ps. 672
Seniority premiums | Ps. 80 | Ps. 7 | Ps. (6) | Ps. 69 | Ps. 115
Total | Ps. 289 | Ps. 146 | Ps. (122) | Ps. 256 | Ps. 787
16.8 Employee benefits expense On April 23, 2021, Mexican government enacted changes to several labor laws in order to regulate labor outsourcing. For the year ended December 31, 2023 t he amount recorded to expense was of Ps. 1,059 compared to Ps.1,069 in 2022. For the years ended December 31, 2023, 2022 and 2021, employee benefits expenses recognized in the consolidated income statements are as follows:
| 2023 | 2022 | 2021
Included in cost of goods sold: |  |  |
Wages and salaries | Ps. 5,204 | Ps. 4,956 | Ps. 4,301
Social security costs | 1,628 | 1,522 | 1,359
Employee profit sharing | 139 | 145 | 57
Pension and seniority premium costs (See Note 16.4) | 24 | 2 | 52
Share-based payment expense (See Note 17.2) | 8 | 6 | 19
Included in selling and distribution expenses: |  |  |
Wages and salaries | 20,090 | 18,403 | 16,627
Social security costs | 5,912 | 5,272 | 4,787
Employee profit sharing | 756 | 862 | 959
Pension and seniority premium costs (See Note 16.4) | 232 | 250 | 235
Share-based payment expense (See Note 17.2) |  | — | 32
Included in administrative expenses: |  |  |
Wages and salaries | 3,090 | 3,250 | 2,788
Social security costs | 750 | 710 | 581
Employee profit sharing | 164 | 62 | 52
Pension and seniority premium costs (See Note 16.4) | 95 | 47 | 41
Share-based payment expense (See Note 17.2) | 311 | 320 | 225
Total employee benefits expense | Ps. 38,403 | Ps. 35,807 | Ps. 32,115

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