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Post-Employment and Other Non-current Employee Benefits

12 Months Ended

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 the 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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- Definition

The entire disclosure for employee benefits.

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