Notes to consolidated financial statements
For the years ended December 31, 2011 and 2010 (as adjusted)
(In thousands of Mexican pesos ($) and thousands of U.S. dollars (US$))
2. Basis of presentation
into English for use outside of Mexico. These consolidated financial statements are presented on the basis of Mexican Financial Reporting Standards (MFRS, individually referred to as NIF). Certain accounting practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted in the country of use.
b. Monetary unit of the financial statements - The financial statements and notes as of December 31, 2011 and 2010 and for the years then ended include balances and transactions denominated in Mexican pesos of different purchasing power.
c. Adjustment of financial statements - During 2011, Grupo Carso concluded its analysis of the effects of the spin-off described in Note 1.b.vii. As a result, the final figures of the net assets transferred from the real estate sector to Inmuebles Carso were determined. These effects resulted in revised construction costs of certain properties, which originated an adjustment of $349,533 that decreased the result of discontinued operations as originally presented in the consolidated statement of income of 2010. It is important to mention that the net spun-off assets and the stockholders' equity of Grupo Carso were not modified.
d. Consolidation of financial statements - The consolidated financial statements include the financial statements of the holding company and its subsidiaries presented as a single reporting entity. Significant intercompany balances and transactions have therefore been eliminated from these consolidated financial statements.
e. Translation of financial statements of foreign subsidiaries - To consolidate financial statements of foreign subsidiaries, the accounting policies of the foreign entities are converted to MFRS. Subsequently, if the functional currency of the foreign operation is different from the currency in which transactions are recorded, the financial information is converted from the currency used to record the transactions to the functional currency. Finally, if the functional and reporting currency are different, the financial information is then converted from the functional to the reporting currency considering the following methodologies:
Foreign operations with a functional currency different from the local currency and the reporting currency translate their financial statements from the currency in which transactions are recorded to the functional currency, using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet date for monetary assets and liabilities; 2) historical exchange rates for non-monetary assets and liabilities and stockholders' equity; and 3) the rate on the date of accrual of revenues, costs and expenses, except those arising from non-monetary items that are translated using the historical exchange rate for the related non-monetary item. Translation effects are recorded under comprehensive financing result.
Foreign operations whose functional currency is different from the reporting currency translate their financial statements into Mexican pesos using the following rates: 1) closing rates for assets and liabilities, 2) historical rates for capital and 3) the date of accrual for revenues, costs and expenses. The effects of conversion are recorded in stockholders' equity.
When operating under an inflationary economic environment, the foreign operations translate their financial statements from the currency in which transactions are recorded to the functional currency, using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet date for monetary assets and liabilities; 2) historical exchange rates for non-monetary assets and liabilities and stockholders' equity; and 3) the rate on the date of accrual of revenues, costs and expenses, except those arising from non-monetary items that are translated using the historical exchange rate for the related non-monetary item. Translation effects are recorded under comprehensive financing result. Subsequently, to translate the financial statements from the functional currency to Mexican pesos, they first restate their financial statements in currency of purchasing power as of the date of the balance sheet, using the price index of the country of origin of the functional currency, and subsequently translate those amounts to Mexican pesos using the closing exchange rate in effect at the balance sheet date for all items; translation effects are recorded in stockholders' equity.
The main subsidiaries whose local and/or functional currencies are different from the Mexican peso are:
| Company |
Currency in which transactions are recorded |
Functional currency |
| Cablena, S.A. |
Euro |
Euro |
| Cablena do Brasil, Limitada |
Brazilian real |
Brazilian real |
| Cicsa Colombia, S.A. |
Colombian peso |
Colombian peso |
| Cicsa Dominicana, S.A. |
Dominican peso |
Dominican peso |
| Cicsa Ingeniería y Construcción Chile Limitada, S. de R.L. |
Chilean peso |
Chilean peso |
| Cicsa Perú, S.A.C. |
New Sol |
New Sol |
| Cobre de México, S.A. de C.V. |
Mexican Peso |
US dollar |
| Condumex Inc. |
US dollar |
US dollar |
| Condutel Austral Comercial e Industrial, Limitada |
Chilean peso |
Chilean peso |
| Grupo Sanborns Internacional, S.A. (Chile) |
Chilean peso |
Chilean peso |
| Grupo Sanborns Internacional, S.A. (Panamá) |
Panamanian balboa |
Panamanian balboa |
| Nacel de Centroamérica, S.A. |
Quetzal |
Quetzal |
| Nacel de Honduras, S.A. |
Lempira |
Lempira |
| Nacel de Nicaragua, S.A. |
Cordoba |
Cordoba |
| Nacel de El Salvador, S.A. |
US dollar |
US dollar |
| Procisa Ecuador, S.A. |
US dollar |
US dollar |
| Procisa do Brasil Projetos, Construcoes e Instalacoes, Ltd. |
Brazilian real |
Brazilian real |
| Procosertel, S.A. |
Argentine peso |
Argentine peso |
| Procosertel Uruguay, S.A. |
Uruguayan peso |
Uruguayan peso |
| Sanborns El Salvador, S. A. |
Colon |
Colon |
The balance of the translation effect at December 31, 2011 and 2010 (as adjusted) is $659,602 and $605,899, respectively.
f. Comprehensive income - Represents changes in stockholders' equity during the year, for concepts other than capital contributions, reductions and distributions, and is comprised of the net income of the year, plus other comprehensive income or loss items of the same period, which are presented directly in stockholders' equity without affecting the consolidated statement of income. Other comprehensive income is represented by the effects of translation of foreign operations, and the valuation of financial instruments. Upon realization of assets and settlement of liabilities giving rise to other comprehensive income or loss items, the latter are recognized in the consolidated statements of income.
g. Income from operations - Income from operations is the result of subtracting cost of sales and general expenses from net sales. While NIF B-3, Statement of Income, does not require inclusion of this line item in the consolidated statements of income, it has been included for a better understanding of the Company's economic and financial performance.
h. Reclassifications - Certain amounts in the consolidated financial statements as of and for year ended December 31, 2010 have been reclassified to conform to the presentation adopted for 2011.